The Road Towards Recovery As Both UK And German Data Misses Expectations

Notes/Observations

• UK May GDP data misses expectations; disappointing first step on the road to recovery
• Risk aversion sentiment holding on as concerns linger over the resurgence of coronavirus and increase in US-China tensions

Asia:

• (CH) China Jun Trade Balance: $46.2B v $58.4Be; Exports Y/Y: +0.5% v -2.0%e; Imports Y/Y: +2.7% v -9.0%e; Commerce Ministry reiterated stance that remained committed to implement US Trade deal
• Singapore Q2 Advance GDP official entered into a technical recession for 1st time since Q1 2009 (Q/Q: -41.2% v -35.9%e; Y/Y: -12.2% v -10.5%e) South Korea President Moon announced ‘new deal’ plan (as expected) of total KRW160T investment expected by 2025 (govt to finance KRW116T of this amount)

Coronavirus:

• Total cases 13,070,590 (+1.5% d/d); Total deaths: 572.4K (+0.7% d/d)
• California Gov Newsom: closed indoor activities in bars and restaurants
• US: extending border restrictions with Mexico/Canada until Aug 21st Sending extra medical task forces to Texas/California to help with virus response

Europe:

• UK govt said to be preparing to change course on Huawei’s role in UK’s 5G network

Americas:

• President Trump advisers said to have ruled out ending Hong Kong dollar peg as punishment for new China security law

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -1.3% at 365.5, FTSE -0.6% at 6,140, DAX -1.5% at 12,600 , CAC-40 -1.7%at 4,970, IBEX-35 -1.5% at 7,315, FTSE MIB -1.2% at 19,773, SMI -0.8% at 10,216, S&P 500 Futures +0.4%]
• Market Focal Points/Key Themes: European indices open broadly lower remaining depressed as the session wore on; all sectors in the read, but least negative sectors are energy and telecom; sectors leading to the downside include technology and consumer discretionary; reportedly EssilorLuxottica to sell EU stores; Lidl announces plans to open further 100 stores in UK; earnings expected in the upcoming US session include JP Morgan, Gastenal, Wells Fargo and Citigroup

Equities

• Consumer discretionary: HelloFresh HFG.DE +0.8% (results), Ocado OCDO.UK -2.1% (results), Swatch UHR.CH +0.2% (results)
• Energy: Ceres Power CER.UK -7.1% (placing)
• Financials: Partners Group PGHN.CH -1.0% (results), Avanza Bank Holdings AZA.SE +13.1% (results)
• Healthcare: Clinigen Group CLIN.UK -11.3% (Prelim results)
• Industrials: Airbus AIR.FR -1.6% (new lease orders), Atlantia ATL.IT +1.7% (Italian government requirements on Autostrade), Halma HLMA.UK -5.5% (results), Hexagon HEXAB.SE +2.4% (analyst action)
• Technology: Zoo Digital ZOO.UK +3.7% (results)

Speakers

• ECB Q2 Lending Survey: Credit standards for households tightened in quarter while those for businesses remained favorable. Surge in loan demand reflected emergency liquidity needs
• UK Office of Budget Responsibility (OBR, fiscal watchdog): forecasted 2020 GDP -12.4% under baseline scenario.with budget deficit widening between 13-21%. Likely there would be need to raises tax revenues and/or reduce spending to put finances on a sustainable path
• German ZEW commented that it expected to see a gradual increase in GDP in H2 and early 202. Outlook for German economy largely remained unchanged compared to the prior month
• China Foreign Ministry spokesperson Zhao Lijian announced that China would impose sanctions on Lockheed Martin [LMD] noting that US comments on South China neglected the facts (*Reminder: On Monday, July 13th US declared ‘most’ of China’s maritime claims in South China as illegal)

Currencies/Fixed Income

• Safe haven flows aided the USD in the session as concerns lingered over the resurgence of coronavirus in various global hotspots coupled with an increase in US-China tensions
• GBP/USD was softer after UK May GDP data missed expectations and put a damper on the first step towards the road to recovery as lockdown measures eased. Office of Budget Responsibility (OBR, fiscal watchdog) forecasted 2020 GDP -12.4% under baseline scenario. GBP/USD lower by 0.3% during the session at 1.2515
• EUR/USD was little changed at 1.1345 area as German ZEW Survey came in slightly below expectations

Economic Data

• (FI) Finland Jun CPI M/M: 0.2% v 0.0% prior Y/Y: 0.0% v -0.2% prior
• (DE) Germany Jun Final CPI M/M: 0.6% v 0.6%e; Y/Y: 0.9% v 0.9%e
• (DE) Germany Jun Final CPI EU Harmonized M/M: 0.7% v 0.7%e; Y/Y: 0.8% v 0.8%e
• (UK) May Monthly GDP M/M: 1.8% v 5.5%e; 3M/3M: -19.1% v -17.5%e
• (UK) May Industrial Production M/M: 6.0% v 6.5%e; Y/Y: -20.0% v -20.4%e
• (UK) May Manufacturing Production M/M: 8.4% v 7.8%e; Y/Y: -23.8% v -24.0%e
• (UK) May Construction Output M/M: 8.2% v 15.0%e; Y/Y: -39.7% v -34.6%e
• (UK) May Index of Services M/M: 0.9% v 4.8%e; 3M/3M: -18.9% v -16.9%e
• (UK) May Visible Trade Balance: -£2.8B v -£8.2Be; Overall Trade Balance: +£4.3B v -£-0.6Be; Trade balance Non-EU: +£0.7B v -£3.0Be
• (CH) Swiss Jun Producer and Import Prices M/M: +0.5% v -0.5% prior; Y/Y: -3.5% v -4.5% prior
• (IN) India Jun Wholesale Prices (WPI) Y/Y: -1.8% v -2.4%e
• (ES) Spain Jun Final CPI M/M: 0.5% v 0.5%e; Y/Y: -0.3% v -0.3%e
• (ES) Spain Jun Final CPI EU Harmonized M/M: 0.4% v 0.4%e; Y/Y: -0.3% v -0.3%e
• ES) Spain Jun CPI Core M/M: 0.1% v 0.1% prior; Y/Y: 1.0% v 1.1% prior
• (SE) Sweden Jun CPI M/M: 0.6% v 0.4%e; Y/Y: 0.7% v 0.5%e; CPI Level: 336.84 v 336.22e
• (SE) Sweden Jun CPIF M/M: 0.6% v 0.4%e; Y/Y: 0.7% v 0.5%e ;
• (SE) Sweden Jun CPIF (ex-energy) M/M: 0.4% v 0.1%e; Y/Y: 1.3% v 1.1%e
• (CZ) Czech May Current Account Balance (CZK): +4.2B v -4.0Be
• (DE) Germany July ZEW Current Situation Survey: -80.9 v -65.0Be; Expectations Survey: 59.3 v 60.0e
• (EU) Euro Zone Jul ZEW Expectations Survey: 59.6 v 58.6 prior
• (EU) Euro Zone May Industrial Production M/M: 12,4% v 15.0%e; Y/Y: -20.9% v -18.9%e

Fixed Income Issuance

• (ID) Indonesia sold total IDR22.0T vs. IDR20.0T target in bills and bonds
• (NL) Netherlands Debt Agency (DSTA) sold €2.96B vs. €1.5-3.0B indicated range in 0% 2027 DSL Bonds; Avg Yield: -0.478% v -0.382% prior
• (ES) Spain Debt Agency (Tesoro) sold total €3.1B vs. €2.5-3.5B indicated range in 3-month and 9-month bills
• (UK) DMO sold £3.25B in 0.125% Jan 2026 Gilts; Avg Yield: -0.017% v +0.031% prior; Bid-to-cover: 2.32x v 2.28x prior; Tails: 0.4bps v 0.4bps prior

Looking Ahead

• OPEC Monthly Oil Report
• (PT) Bank of Portugal Jun ECB financing to Portuguese Banks: No est v €21.2B prior
• (PL) Poland Central Bank (NBP) Interest Rate Decision to leave its Base Rate unchanged at 0.10%
• (IT) Italy Debt Agency (Tesoro) to sell €8.5-10.0B in 3-year and 7-year and 20-year BTP Bonds
• 05:30 (ZA) South Africa May Total Mining Production M/M: +16.0%e v -34.1% prior; Y/Y: -32.5%e v -47.3% prior; Platinum Production Y/Y: No est v -62.0% prior; Gold Production Y/Y: No est v -59.6% prior
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 05:30 (ZA) South Africa to sell combined ZAR6.6B in 2026. 2030 and 2048 bonds
• 05:30 (BE) Belgium Debt Agency (BDA) to sell €2.4-2.8B in 3-month and 12-month bills
• 05:40 (UK) BOE weekly allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)
• 06:00 (US) Jun NFIB Small Business Optimism: 97.8e v 94.4 prior
• 06:30 (UK) DMO to sell £3.0B in 0.375% Oct 2030 Gilts
• 06:30 (EU) ESM to sell Ç1.5B in 12-Month Bills;
• 06:45 (US) Daily Libor Fixing
• 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
• 07:30 (UK) House of Commons possible statements
• 07:45 (US) Weekly Goldman Economist Chain Store Sales
• 07:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (3-7 years)
• 08:00 (PL) Poland May Current Account Balance: €0.8Be v €1.2B prior; Trade Balance: +€0.2Be v €0B prior; Exports: €15.8Be v €1.4B prior; Imports: €15.9Be v €13.8B prior
• 08:00 (IS) Iceland Jun Unemployment Rate: No est v 13.0% prior
• 08:00 (BR) Brazil May Economic Activity Index (Monthly GDP) M/M: +4.5%e v -9.7% prior; Y/Y: -11.7%e v -15.1% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Jun CPI M/M: +0.5%e v -0.1% prior; Y/Y: 0.6%e v 0.1% prior
• 08:30 (US) Jun CPI (ex-food/energy) M/M: 0.1%e v -0.1% prior; Y/Y: 1.1%e v 1.2% prior
• 08:30 (US) Jun CPI Index NSA: 257.706e v 256.4 prior; CPI Core Index SA: 265.884e v 265.4 prior
• 08:30 (US) Jun Real Average Hourly Earnings Y/Y: No est v 6.4% prior; Real Average Weekly Earnings Y/Y: No est v 7.3% prior
• 08:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (7-20 years)
• 08:55 (US) Weekly Redbook LFL Sales data
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (20+ years)
• 11:30 (US) Treasury to sell 52-Week Bills
• 14:00 (US) Fed’s Brainard
• 14:30 (US) Fed’s Bullard
• 15:00 (AR) Argentina May Capacity Utilization: No est v 42.0% prior
• 16:30 (US) Weekly API Oil Inventories
• 17:00 (KR) South Korea Jun Export Price Index M/M: No est v 0.6% prior; Y/Y: No est v -8.2% prior;
• 17:00 (KR) South Korea Jun Import Price Index M/M: No est v 4.2% prior; Y/Y: No est v -12.8% prior
• 19:00 (KR) South Korea Jun Unemployment Rate: 4.5%e v 4.5% prior
• 20:30 (AU) Australia July Westpac Consumer Confidence Index: No est v 93.7 prior
• 23:00 (KR) South Korea May M2 Money Supply M/M: No est v 1.1% prior; “L” Money Supply M/M: No est v 0.7% prior;
• 23:00 (KR) South Korea Jun Bank Lending to Households (KRW): No est v 920.7T prior
• 21:30 (KR) South Korea Central Bank to sell KRW 2.2T in 2-Year Bond
• 23:00 (CN) China to sell 1-year Government Bond and 10-year Special Government Bond
• 23:00 (TH) Thailand Central Bank to sell THB20B in 2038 Bonds
• (JP) Bank of Japan (BOJ) Interest Rate and Policy Decision: Expected to leave Interest Rate on Excess Reserves (IOER) unchanged at -0.10%; Expected to maintain its policy framework of “QQE with Yield Control” around 0.00%; Expected to maintain asset purchases at annual pace of ‘unlimited’