Listless Session In Terms Of Positioning

Notes/Observations

• Incoming BOE MPC member Haskel touts the majority view in Parliamentary testimony
• Treasury Secretary Mnuchin and trade advisor Navarro walk-back hawkish views of investment-restriction plans for China in effort to calm markets

Asia:

• China PBoC may further reduce the Reserve Ratio Requirement (RRR) in H2 by 50-100bps
• China PBoC sets yuan reference rate at 6.5180 v 6.4893 prior (weakest yuan setting since January). China’s sudden currency slide sparks rumors of an anti-Trump policy move
• China President Xi said to have told various CEOs last week that Beijing planned to strike back against punitive American tariffs. “In our culture we punch back”
• RBNZ announces Statement of Intent for July 2018 to June 2021: NZD currency (Kiwi) remains at an elevated level; reiterated policy to remain accommodative for some time – Japan PM Abe: Wants to secure US understanding of reason for BoJ policy; reiterates BoJ monetary policy not aimed at weakening JPY currency (Yen)

Europe:

• ECB’s Couere (France): Expect rates to remain unchanged through the summer 2019 (in-line with Draghi press conference). Confident that inflation would return to close to 2%
• German Chancellor Merkel’s coalition troubles deepen over refugee crisis. Bavaria’s conservatives ramped up pressure on Merkel’s open-door refugee policy
• Britain to announce more details on UK vision for future relationship in a white paper after the June EU Leader Summit
• UK: Parliament voted 415 to 119 in favor of building a new runway at London Heathrow
• SNB’s Maechler: CHF currency remains highly valued; conditions remain fragile
• S&P raised Greece sovereign rating one notch to B+ from B; outlook Stable from Positive

Americas:

• White House Trade Adviser Navarro: we have no plans to impose investment restrictions; recent market selloff was a large overreaction
• Treasury Sec Mnuchin: Statement would be out not specific to China, but to all countries that are trying to steal our technology

Energy:

• CME raised NYMEX Crude Oil Futures maintenance margins by 7.8% to $2,750/contract (effective for Aug), gasoline futures maintenance margins by 3.2% to $3,200/contract (effective for Sept)

Economic Data:

• (DK) Denmark May Retail Sales M/M: 0.9% v 0.4%e; Y/Y: +3.9 v -0.7% prior
• (FI) Finland May Unemployment Rate: 9.3 v 8.6% prior
• (ZA) South Africa Apr Leading Indicator: 105.9 v 106.2 prior
• (SE) Sweden May PPI M/M: 1.4% v 0.6% prior; Y/Y: 6.3% v 4.9% prior
• (UK) May BBA Loans for House Purchases: 39.2K v 38.2Ke
• (HK) Hong Kong May Trade Balance (HKD): -43.2B v -49.1Be; Exports Y/Y: 15.9% v 8.5%e; Imports Y/Y: 16.5% v 11.3%e

Fixed Income Issuance:

• (ES) Spain Debt Agency (Tesoro) opened its book to sell EUR-denominated 10-year bond via syndicate; Guidance revised to +55bps to mid-swaps with order book over €20.5B
• (FR) France Debt Agency (AFT) opened its book to sell EUR-denominated 1.75% Jun 2039 green bond; guidance seen +17bps to French Treasuries
• (ID) Indonesia sold total IDR5.16T in 6-month Islamic Bills, 2-year,4-year,7-year and 15-year Sukuk
• (CH) Switzerland sold CHF355M in 3-month Bills; Yield: -0.864% v -0.861% prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx50 +0.4% at 3,377, FTSE +0.6% at 7,480, DAX +0.3% at 12,308, CAC-40 +0.5% at 5,306; IBEX-35 +0.6% at 9,622, FTSE MIB +0.6% at 21,442, SMI +0.1% at 8,440, S&P 500 Futures flat]
• Market Focal Points/Key Themes: European markets open generally higher but moderated gains though maintaining positive; US talking down trade concerns support equities; light corporate news in the final week of trading before end of second quarter; construction and materials best performing sectors; travel & leisure worst performers; most indices trading higher; Eutelsat announces not interested in takeover of Inmarsat; UK Parliament votes to expand Heathrow; focus on German coalition talks; earnings expected in the upcoming US session include Lennar and Schnitzer Steel

Equities

• Consumer discretionary: Carnival CCL.UK -7.9% (earnings), Carpetright CPR.UK -0.3% (earnings), Elior ELIOR.FR -4.1% (new strategy), Ingenico ING.FR +5.3% (reportedly receives takeover interest), JC Decaux DEC.FR -1.0% (acquisition)
• Consumer staples: Eurofins Scientific ERF.FR +4.6% (outlook)
• Industrials: Andritz ANDR.AT +2.8% (analyst action), Renault RNO.FR +0.9% (analyst action)
• Telecom: Eutelsat ETL.FR +2.9% (not interested in Intelsat), Inmarsat ISAT.UK -7.9% (Eutelsat not interested in takeover)
• Utilities: Engie ENGI.FR +1.2% (not decided on EDP Renovaveis takeover)

Speakers

• ECB’s Hansson (Estonia) reiterated Council view that policy to remain rather expansionary
• BOE appointee Haskel (incoming MPC in Sept): Opportunities for adjusting interest rates appear to be growing but saw risks if raised too quickly . Would be ill-advised to change the inflation target
• Italy Fin Min Tria: Global cooperation was key for the world economy
• Italy Interior Min Salvini (also Dep PM): Govt to seek to reduce taxes for small business
• France Fin Min Le Maire: Cheap nuclear power was a considerable advantage; key to France’s competitiveness
• EU authorized negotiations with WTO on Brexit-related adjustment
• Germany CSU official Dobrindt: Not looking to break up CDU-CSU alliance
• Taiwan Central Bank reiterated its view of its commitment to keep FX market in order and that t FX rate determined by market forces
• India PM Modi stated that saw 2018 GDP at 7.4%. Had taken a number of steps to increase investments. Govt committed to path of fiscal consolidation. Inflation had stayed within target despite rise in oil prices
• Iran President Rouhani reiterated view that would not give into pressure from President Trump. Country to defend its independence and values

Currencies

• Risk aversion tried to subside as US officials talk down trade restrictions on China and this helped the USD to stabilize against the major pairs.
• EUR/USD stalled just above the 1.17 for now as dealers’ noted the monetary policy divergence between the FED and ECB. The pair drifted lower as the session progressed in subdued trade. ECB’s Hansson helped to put some headwinds into the Euro after he noted that its policy would remain rather expansionary
• GBP/USD slightly lower at 1.3260 while USD/JPY was hovering just under the 109.70 area

Fixed Income

• Bund Futures trade 15 ticks lower at 161.98 as yields edge higher as Merkel fights for political future. Upside targets 162.75 followed by 163.25, while a return lower targets the 159.75 level.
• Gilt futures trade at 122.66 lower by 23 ticks after better than expected BBA loans for house purchases data. Support continues stands at 121.75 then 120.25, with upside resistance at 123.85 then 124.25.
• Tuesday’s liquidity report showed Monday’s excess liquidity declined from €1.829T to €1.803T. Use of the marginal lending facility fell from €77M to €74M.
• Corporate issuance saw no deals priced in the primary market

Looking Ahead

• (BR) Brazil Jun CNI Consumer Confidence: No est v 102.2 prior
• 05:30 (ZA) South Africa Q1 Non-Farm Payrolls Q/Q: No est v 0.8% prior; Y/Y: No est v 0.2% prior
• 05.30 (UK) Weekly John Lewis LFL sales data
• 05:30 (UK) BOE’s McCafferty (dissenter) in London
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 05:30 (UK) DMO to sell £2.25B in 1.75% Sept 2037 Gilts
• 05:30 (ZA) South Africa announces to sell combined ZAR2.4B in 2030, 2040 and 2044 bonds
• 06:00 (UK) Jun CBI Retailing Reported Sales: 10e v 11 prior; Total Distribution: No est v 17 prior – 06:45 (US) Daily Libor Fixing
• 07:00 (BR) Brazil Jun FGV Construction Costs M/M: 0.6%e v 0.3% prior
• 07:00 (BR) Brazil Jun FGV Consumer Confidence: No est v 86.9 prior
• 07:00 (BR) Brazil Central Bank (BCB) COPOM Minutes
• 07:45 (US) Weekly Goldman Economist Chain Store Sales
• 08:00 (ES) ECB’s De Guindos (Spain) in Frankfurt
• 08:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)
• 08:05 (UK) Baltic Dry Bulk Index
• 08:55 (US) Weekly Redbook Sales
• 09:00 (US) Apr S&P/ Case-Shiller 20-City M/M: 0.40%e v 0.53% prior; Y/Y: 6.80%e v 6.79% prior; House Price Index (HPI): No est v 208.62 prior
• 09:00 (US) Apr S&P Case-Shiller (overall) HPI Y/Y: No est v 6.53% prior, Overall HPI Index: No est v 198.94 prior
• 09:00 (MX) Mexico May Unemployment Rate: 3.4%e v 3.4% prior; Unemployment Rate (Seasonally adj): 3.4%e v 3.4% prior
• 09:00 (EU) Weekly ECB Forex Reserves
• 10:00 (US) Jun Consumer Confidence: 128.0e v 128.0 prior
• 10:00 (US) Jun Richmond Fed Manufacturing Index: 15e v 16 prior
• 11:30 (US) Treasury to sell 4-Week Bills
• 13:00(US) Treasury to sell 2-Year Notes
• 13:00 (US) Fed’s Bostic (voter, dove) in Alabama
• 13:45 (US) Fed’s Kaplan (dove, non-voter) in Houston
• 15:00 (AR) Argentina Apr Economic Activity Index (monthly GDP) M/M: No est v -0.1% prior; Y/Y: 2.1%e v 1.4% prior
• 15:00 (AR) Argentina Q1 Current Account: -$8.6Be v -$8.7B prior
• 15:00 (AR) Argentina Central Bank (BCRA) Interest Rate Decision: Expected to leave 7-Day Repo Reference Rate unchanged at 40.00%
• 16:30 (US) Weekly API Oil Inventories