EU Mid-Market Update: European Services PMI firmer; Bond yields under pressure following various central bank commentary
Notes/Observations
European Services PMI generally positive, UK Services PMI lowest since Feb
UK Bonds leading European bonds lower after hawkish comments from BoE Saunders overnight
North Korea tensions continue after South Korea and the US carried out joint missile drills in response to North Koreas Ballistic missile launch
Overnight
Asia:
(KR) North Korea leader Kim Jong Un: Will not put nuclear and ICBM on negotiating table until US abandons its hostile policy against North Korea
(KR) South Korea’s Joint Chiefs of Staff (JCS): missile units of South Korea and the US carried out joint ballistic missile drills in the East Sea at 7 am local time (2200 GMT on Tuesday) in response to the North Korea’s repeated ballistic missile provocations
(CN) Xinhua Op Ed discusses recent liquidity conditions in China; suggests the PBoC’s recent suspensions of open market operations was indicative of abundant liquidity with no manifestation of a June-end liquidity crunch this year
Thailand keeps interest rates unchanged at 1.5% as expected
Europe:
European Services PMI generally positive, Germany, France and Spain beat, Italy misses. Germany new business marked lowest reading since Sep 2016.
UK Services PMI slightly misses consensus and was lower from the prior month with economists noting momentum in the UK economy is slowing.
ECB’s Couere says has not discussed changing policy yet noting they may come but hasn’t happened yet
Overnight BoE Saunders said households should prepare for rates to go higher at some point; if rates do go up it will be in context of economy doing OK and unemployment being low and probably falling
Oil
IEA Chief Birol: Expects oil market to rebalance in H2 2017 under current conditions
(RU) Russia said to oppose any deeper production cuts at ministerial meeting on July 24 in St Petersburg
Economic Data
(DE) GERMANY JUN FINAL SERVICES PMI: 54.0 V 53.7E
(FR) FRANCE JUN FINAL SERVICES PMI: 56.9 V 55.3E (confirms 12 months of expansion)
(ES) SPAIN MAY SERVICES PMI: 58.3 V 56.5E (44rd month of expansion)
(IT) ITALY JUN SERVICES PMI: 53.6 V 54.6% (13TH MONTH OF EXPANSION)
(EU) EURO ZONE JUN FINAL SERVICES PMI: 55.4 V 54.7E
(EU) EURO ZONE MAY RETAIL SALES M/M: 0.4% V 0.4%E; Y/Y: 2.6% V 2.3%E
(SE) SWEDEN MAY INDUSTRIAL PRODUCTION M/M: 2.1% V 1.0%E; Y/Y: 8.0% V 5.0%E
(IE) IRELAND JUN SERVICES PMI: 57.6 V 59.5 PRIOR
(TH) THAILAND CENTRAL BANK (BOT) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 1.50%; AS EXPECTED
(SE) SWEDEN JUN PMI SERVICES: 57.3 V 58.3E
Fixed Income Issuance:
Non seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 -0.2% at 3,479, FTSE +0.1% at 7,362, DAX +0.1% at 12,448, CAC-40 +0.2% at 5,185, IBEX-35 flat at 10,567, FTSE MIB -0.4% at 20,949, SMI -0.3% at 8,940, S&P futures flat ]
Market Focal Points/Key Themes: European stocks open broadly flat and slipped slightly as the session moved on; risk sentiment improving slightly despite ongoing concerns over North Korea; trading remains thin before US returns to market after holiday; oil price doesn’t manage to support energy stocks; homebuilders and materials stocks the best performers; gold rose slightly, but not enough to support precious metals miners; attention shifting to Fed minutes to be released later today;
Equities
Consumer discretionary [Persimmon PSN.UK +3.3% (results), Topps Tiles TPT.UK -2.7% (earnings), Adidas ADS.DE +4.3% (analyst action), Booker Group BOK.UK +2.8% (trading update)]
Financials [Banca Cargie CRGI.IT +9.4% (continuation of trade)]
Healthcare [Ion Beam IBAB.BE -22.3% (cuts outlook)]
Industrials [Safran SAF.FR +1.4% (analyst action)]
Materials [SIG Plc SHI.UK +3.9% (trading update)]
Speakers
(EU) ECB Coeure: Has not discussed changing policy; discussion may come but hasn’t happened yet
(ES) Spain PM Rajoy: Hopes world economy will grow 3.5% this year
Currencies
EURUSD saw weakness after comments from ECB officials but quickly pared losses with support found at 1.1317. The underlying downtrend continue with a move above 1.1360 needed to signal a move back higher.
GBPUSD resume its downtrend with a 4 month low PMI reading helping weigh on Sterling. Dealers not resistance at 1.2950 level while support lies at 1.2835-40.
Fixed Income
Bund futures trade lower following the lead from Gilts as more hawkish commentary out of the UK puts pressure on Yields whilst comments from ECBs Coeure kept the Bund in check. Support lies initially at Monday low at 161.52.
Wednesday’s liquidity report showed Tuesday’s excess liquidity rose to €1.647T a rise of €3B from €1.644T prior. Use of the marginal lending facility fell to €124M from €315M prior.
Corporate issuance non seen
Looking Ahead
07:00 (US) MBA Mortgage Applications w/e Jun 30th: No est v % prior
08:00 (HU) Hungary Central Bank (NBH) Jun Minutes
08:15 (UK) Baltic Dry Bulk Index
08:30 (CL) Chile May Economic Activity (Monthly GDP) M/M: 1.0 v 0.9% prior; Y/Y: 1.7 v 0.1% prior
08:55 (US) Weekly Redbook Sales
09:00 (BR) Brazil Jun PMI Services: No est v 49.2 prior, PMI Composite: No est v 50.4 prior
09:00 (MX) Mexico Apr Gross Fixed Investment: -5.9 v 3.9% prior
09:00 (MX) Mexico Jun Consumer Confidence: 88.0e v 86.8 prior
10:00 (US) May Factory Orders: -0.5%e v -0.2% prior, Factory Orders (Ex transportation): No est v 0.1% prior
10:00 (US) May Final Durable Goods Orders: -1.0%e v -1.1% prelim; Durables Ex Transportation: No est v +0.1% prelim, Capital Goods Orders (Non-defense ex aircraft): No est v 0.0% prelim, Capital Goods Shipments (Non-defense/ex-aircraft): No est v % prelim, Durables Ex-Defense: No est v % prelim
11:00 (CO) Colombia May Exports: $2.9Be v $2.6B prior
14:00 (US) FOMC Minutes from Jun 14th Meeting
16:30 (US) Weekly API Oil Inventories
