Euro Area PMI Data Suggest That Q2 GDP Growth Will Rebound

Notes/Observations

• Major European Jun PMI data mixed but remaining in expansion territory to help paint a picture that Q2 activity has rebounded (Manufacturing missing for France, Germany while Services and Composite beat across the board)
• OPEC bi-annual meeting expected to be the most contentious in years; official start delayed as Saudi-Iran minister meet privately

Asia:

• Japan Jun Preliminary Manufacturing PMI: 53.1 v 52.8 prior; first time since August 2016, new export orders declined
• Japan May National CPI Y/Y: 0.7% v 0.6%e; CPI (ex-fresh food (Core) Y/Y: 0.7% v 0.7%e
• Japan ruling LDP party said to plan leadership election on Sept 20th

Europe:

• BOE Gov Carney’s annual Mansion House speech: preparing for new global financial system
• Greece creditors agree on debt relief package (as speculated). Agreement said to include 10-year extension of EFSF loan and a 10-year deferral on interest and amortization. Greece to receive €15B as its final bailout disbursement leaving the country with €24.1B cash buffer as its exit bailout program. Greece to have independence form market borrowing for some 22 month
• IMF Lagarde: Debt relief measures announced today to improve Greece’s medium-term debt prospects, mitigate refinancing risks. IMF to examine the sustainability of Greece’s debt starting next week (Jun 25th) and remain ‘fully engaged’ in supporting Greece. IMF fund will not join the expiring €86B bailout as the time “has run out”,
• Germany BDI Industry Body: UK is heading for a ‘disorderly exit’ from the EU

Americas:

• Fed Bank Stress Test Results: All 36 banks exceed minimum capital requirements. most severe hypothetical scenario projects $578B in total losses for the 35 participating bank holding companies during the nine quarters tested.
• Mexico Central Bank (Banxico) raised its Overnight Rate by 25bps to 7.75% (as expected)
• Some Trump administration officials reportedly pushing to resume trade talks ahead of China implementing tariffs on July 6th; advisers still at odds over strategy

Energy:

• OPEC and its allies said to have reached a preliminary agreement in the face of strong opposition from Iran. OPEC and its allies look to increase oil output by 1.0M barrels a day, (analysts estimates that the actual increase would be lower (more likely in a range between 600-800K bpd).

Economic Data:

• (NL) Netherlands Q1 Final GDP Q/Q: 0.6% v 0.5%e; Y/Y: 2.8% v 2.8%e
• (FR) France Q1 Final GDP Q/Q: 0.2% v 0.2%e; Y/Y: 2.2% v 2.2%e
• (FR) France Q1 Final Wages Q/Q: 0.7% v 0.7% prelim
• (FR) France Jun Preliminary Manufacturing PMI: 53.1# v 54.0e (21st month of expansion), Services PMI: 56.4 v 54.3e, Composite PMI: 55.6 v 54.2e
• (DE) Germany Jun Preliminary Manufacturing PMI: 55.9 v 56.3e (42nd month of expansion and lowest since Dec 2016), Services PMI: 53.9 v 52.2e, Composite PMI: 54.2 v 53.4e
• (CN) Weekly Shanghai copper inventories (SHFE): 255.4K v 253.0K tons prior
• (EU) Euro Zone Jun Preliminary Manufacturing PMI: 55.0 v 55.0e (59th straight month of growth but lowest since Dec 2016), Services PMI: 55.0 v 53.8e, Composite PMI: 54.8 v 53.9e
• (RU) Russia Narrow Money Supply w/e Jun 15th: 10.18T v10.06 T prior
• (TW) Taiwan May Unemployment Rate: 3.7% v 3.7%e
• (HK) Hong Kong Q1 Current Account: $16.3B v $16.0B prior; Overall Balance of Payments (BoP): $73.8B v $73.5B prior

Fixed Income Issuance:

• None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.5% at 382.8, FTSE +0.5% at 7597, DAX +0.4% at 12556, CAC-40 +0.7% at 5353, IBEX-35 +0.8% at 9781, FTSE MIB +1.0% at 21891, SMI +0.8% at 8523, S&P 500 Futures +0.5%]
• Market Focal Points/Key Themes: European Indices trade higher across the board following prelim PMI data out of Europe, ahead of the OPEC meeting in Vienna. News flow has been light, with Hornbach trading lower after lower y/y profit, while Airbus trades higher after providing commentary regarding Brexit. In the M&A BPER trading higher after Unipol acquired a further stake in the company, NN Group sold its Dutch residential real estate portfolio for €1.5B, while Hispania Activos Inmobiliaros trades higher after Alzette raised its offer for the company. In the Healthcare space Nanobiotix rises sharply after positive topline data in soft tissue sarcoma. Looking ahead notable earners include Blackberry and Carmax.

Movers

• Consumer Discretionary Hornbach [HBH.DE] -2.4% (Earnings)
• Financials Deutsche Beteiligungs [DBAN.DE] -2.0% (Bafin tax probe), Hispania Activos [HIS.ES] +3.2% (Raised bid from Alzette), BPER [BPE.IT] +7% (Unipol raises stake)
• Healthcare Nonobiotix [NANO.FR] +47% ( positive phase II/III topline data in soft tissue sarcoma with NBTXR3), Santhera Pharma [SANN.CH] +4.0% (UK’s MHRA renews Early Access to Medicines Scheme Scientific Opinion for Santhera’s Raxone)

Speakers

• Italy League party official Borghi (league, budget committee): Euro exit plan is not part of govt policy but did noted that monetary sovereignty would solve many of Italy’s problems
• EU’s Dombrovskis: Greece debt relief agreement ensures the country return to financial stability
• South Africa Fin Min Nene: have little fiscal room to maneuver. Needed to build fiscal buffers to deal with any potential crisis
• Saudi and Iran oil ministers said to have held private talks before today’s closed-door OPEC session
• China Stats Bureau Official Ning reiterated view that domestic economy still faces uncertainties

Currencies

• USD continued to move off the recent cycle highs against the European pairs
• EUR/USD high higher by almost 0.5% to test 1.1670 area as the Major European PMI survey helped to dispel concerns of a prolong slowdown in the region and paint a picture of Q2 activity after the weakness in Q1.
• GBP built upon Thursday’s hawkish hold to teat its highest level in over a week around the 1.33 area. GBP benefited as three out of nine BOE policymakers, including its chief economist, voted to increase rates
• On the emerging market front analysts noted that it was difficult to predict how the lira and local assets may react after Turkey’s parliamentary and presidential elections on Sunday.

Fixed Income

• Bund Futures trade 34 ticks lower at 161.88 as Euro Zone PMIs offer further stabilization for the euro. Upside targets 162.25 followed by 162.75, while a return lower targets the 158.75 level.
• Gilt futures trade at 122.75 lower as the British pound extends the post-BOE rally to erase this week’s loss. Support continues stands at 121.75 then 120.25, with upside resistance at 123.85 then 124.25.
• Friday’s liquidity report showed Thursday’s excess liquidity fell from €1.840T to €1.820T. Use of the marginal lending facility rose from €83M to €97M.
• Corporate issuance saw issuers face strong headwinds amid supply deluge; for the week ending Jun20th Lipper fund flows reported equity fund outflows of $1.3B vs outflows of $9.7B in the prior week

Looking Ahead

• OPEC bi-annual meeting in Vienna
• (UR) Ukraine May Industrial Production M/M: No est v -5.0% prior; Y/Y: No est v 3.0% prior
• 05:30 (ZA) South Africa to sell ZAR600M in I/L 2025, 2033 and 2050 bonds
• 06:00 (IE) Ireland May PPI M/M: No est v -0.8% prior; Y/Y: No est v -4.0% prior
• 06:00 (UK) DMO to sell combined £4.0B in 1-month, 6-month and 12-month Bills £1.0B, £1.5B and £1.5B respectively)
• 06:45 (US) Daily Libor Fixing
• 07:30 (IN) India Weekly Forex Reserves
• 08:00 (PL) Poland May M3 Money Supply M/M: 0.7%e v 0.2% prior; Y/Y: 5.9%e v 5.7% prior
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:15 (UK) Baltic Dry Bulk Index
• 08:30 (CA) Canada May CPI M/M: 0.4%e v 0.3% prior; Y/Y: 2.6%e v 2.2% prior, CPI Core- Common Y/Y: 1.9%e v 1.9% prior, CPI Core- Median Y/Y: 2.1%e v 2.1% prior, CPI Core- Trim Y/Y: 2.1%e v 2.1% prior, Consumer Price Index: 133.9e v 133.3 prior
• 08:30 (CA) Canada Apr Retail Sales M/M: 0.0%e v 0.6% prior; Retail Sales Ex Auto M/M: +0.5%e v -0.2% prior
• 09:00 (BE) Belgium Jun Business Confidence: 0.0e v 0.2 prior
• 09:00 (CL) Chile May PPI M/M: No est v 0.2% prior
• 09:00 (MX) Mexico Apr IGAE Economic Activity Index (monthly GDP) Y/Y: +4.6%e v -0.8% prior
• 09:45 (US) Jun Preliminary Markit Manufacturing PMI: 56.1e v 56.4 prior, Service PMI: 56.5e v 56.8 prior, Composite PMI: No est v 56.6 prior
• 13:00 (US) Weekly Baker Hughes Rig Count data
• 15:00 (CO) Colombia Apr Economic Activity Index (Monthly GDP) Y/Y: 2.7%e v % prior