Constructive Events Seen For Europe During The Session

Notes/Observations

• EU leaders reach agreement on migration on a voluntary basis; centers will determine genuine migrants, and irregular migrants whom would be turned back.
• German unemployment remains at record low level
• UK Final Q1 GDP data revised slightly higher but overall annual pace the slowest in 4 years
• EU Jun inflation data continued to prove constructive for the ECB game plan
• Indonesia Central Bank delivered an aggressive rate hike to help guard the IDR currency (Rupiah)

Asia:

• PBOC sets USD/ CNY mid-point today at 6.6166 for its weakest onshore fixing since December 13th 2017
• China NDRC said it would properly control the amount of foreign debt, as it noted that some companies overseas borrowing amounts were too large.
• Japan May Jobless Rate: 2.2% v 2.5%e (over 25-year low)

Europe:

• EU leaders said to reach deal on migration with accord including clauses on voluntary hosting of migrants in the EU and reform of asylum system by consensus.
• Italy PM Conte stated that his country was no longer alone after EU summit that reached deal on migration. Italy would decide later whether to set up migrant centers in the country.
• UK PM May reiterated view that she wanted a deal that works for both the UK and EU and sought to accelerate Brexit talks after London published white paper on futures ties with EU in July

Americas:

• Fed Banking Sector Stress test (part 2): 34 out of 35 banks had capital planning processes that met Fed’s expectations. Fed failed Deutsche Bank citing “widespread and critical deficiencies”

Economic Data:

• (ID) Indonesia Central Bank (BI) raised the 7-Day Reverse Repo Rate by 50bps to 5.25% (more than expected
• (DE) Germany May Retail Sales M/M: -2.1% v -0.5%e; Y/Y: -1.6% v +1.9%e
• (DE) Germany May Import Price Index M/M: 1.6% v 0.9%e; Y/Y: 3.2% v 2.4%e
• (DK) Denmark Q1 Final GDP Q/Q: 0.4% v 0.4%e; Y/Y: -0.6% v -0.5% prelim
• (DK) Denmark May Gross Unemployment Rate: 4.0% v 4.0%e; Unemployment Rate (seasonally adj): 3.2% v 3.3%e
• (FI) Finland Apr Final Trade Balance: €0.1B v €0.1B prelim
• (NO) Norway May Retail Sales W/Auto Fuel M/M: 1.8% v 0.3%e
• (ZA) South Africa May M3 Money Supply Y/Y: 5.7% v 6.2%e; Private Sector Credit Y/Y: 4.6% v 4.9%e
• (FR) France Jun Preliminary CPI M/M: 0.1% v 0.1%e; Y/Y: 2.1% v 2.1%e
• (FR) France Jun Preliminary CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: 2.4% v 2.4%e
• (FR) France May PPI M/M: +0.6% v -0.7% prior; Y/Y: 2.9% v 2.3% prior
• (FR) France May Consumer Spending M/M: 0.9% v 0.8%e; Y/Y: -0.2% v +0.1%e
• (CH) Swiss Jun KOF Leading Indicator: 101.7 v 99.7e
• (AT) Austria May PPI M/M: 0.6% v 0.3% prior; Y/Y: 2.4% v 1.4% prior
• (CZ) Czech Q1 Final GDP (3rd reading) Q/Q: 0.5% v 0.4%e; Y/Y: 4.2% v 4.4%e
• (HU) Hungary May PPI M/M: +1.9% v -0.3% prior; Y/Y: 5.3% v 2.7% prior
• (TR) Turkey May Trade Balance: -$7.8B v -$7.7Be
• (CN) Weekly Shanghai copper inventories (SHFE): 264.0K v 255.4K tons prior
• (SE) Sweden May Household Lending Y/Y: 6.6% v 6.7%e
• (SE) Sweden Apr Non-Manual Workers Wages Y/Y: 1.7% v 2.5% prior
• (TH) Thailand May Current Account: $1.0B v $1.5Be; Overall Balance of Payments (BOP): $0.0B v $0.9Be; Trade Account Balance: $2.7B v $0.2B prior; Exports Y/Y: 13.1% v 14.6% prior; Imports Y/Y: 12.7% v 22.7% prior
• (DE) Germany Jun Unemployment Change: -15K v -8K); Unemployment Claims Rate: 5.2% v 5.2%e (rate matches record low)
• (CZ) Czech May M2 Money Supply Y/Y: 5.2% v 4.4% prior
• (NO) Norway Jun Unemployment Rate: 2.2% v 2.2%e
• (NO) Norway Central Bank (Norges) July Daily FX Purchases (NOK): -600M v -750M prior
• (RU) Russia Narrow Money Supply w/e Jun 22nd: 10.16T v 10.18T prior
• (ES) Spain Apr Current Account: -€1.5B v +€0.9B prior
• (UK) Q1 Final GDP (3rd reading) Q/Q: 0.2% v 0.1%e; Y/Y: 1.2% v 1.2%e (slowest annual pace since 2012)
• (UK) Q1 Final Total Business Investment Q/Q: -0.4% v -0.2%e; Y/Y: 2.0% v 2.0%e
• (UK) Q1 Current Account: -£17.7B v -£17.9Be
• (UK) May Mortgage Approvals: 64.5K v 62.3Ke
• (UK) May Net Consumer Credit: £1.4B v £1.5Be; Net Lending: £3.9B v £3.7Be
• (UK) May M4 Money Supply M/M: 0.4% v 0.1% prior; Y/Y: 1.8% v 1.2% prior; M4 ex-IOFC 3-month Annualized: +3.4% v -0.8% prior
• (UK) Apr Index of Services M/M: 0.3% v 0.3%e; 3M/3M: 0.2% v 0.0%e
• (PT) Portugal Jun Preliminary CPI M/M: 0.1% v 0.4% prior; Y/Y: 1.6% v 1.0% prior
• (PT) Portugal Jun Preliminary CPI EU Harmonized M/M: 0.1% v 0.8% prior; Y/Y: 2.0% v 1.4% prior
• (EU) Euro Zone Jun Advance CPI Estimate Y/Y: 2.0% v 2.0%e; CPI Core Y/Y: 1.0% v 1.0%e
• (GR) Greece Apr Retail Sales Value Y/Y: 1.3% v 1.5% prior; Retail Sales Volume Y/Y: 0.8% v 1.2% prior
• 05:00 – (IS) Iceland May Final Trade Balance (ISK): -17.3B v -12.8B prelim

Fixed Income Issuance:

• (IN) India sold total INR120B vs. INR120B indicated in 2022, 2028, 2035 and 2055 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx50 +1.6% at 3,413, FTSE +0.7% at 7,671, DAX +1.5% at 12,354, CAC-40 +1.3% at 5,343; IBEX-35 +1.2% at 9,702, FTSE MIB +1.6% at 21,775, SMI +1.2% at 8,564 , S&P 500 Futures +0.6%]
• Market Focal Points/Key Themes: European indices open higher across the board; risk sentiment supported following agreement with EU28 leaders; Malta and Ukraine closed for holiday; with light earnings news flow, focus is on heavy macro schedule; materials and technology sectors lead gainers; consumer discretionary underperforming; Peru closed for holiday; earnings releases expected in the upcoming US session include Greenbrier and Constellation Brands; European Medicines Agency expected to results of latest CHMP meeting

Equities

• Consumer discretionary: Assystem ASY.FR -5.9%(outlook), Casino Guichard-Perrachon +4.2% CO.FR (analyst action)
• Financials: Caixabank CABK.ES +5.4% (aset sale), Serco SRP.UK -4.9% (outlook)
• Healthcare: Galapagos GLPG.BE -9.1% (study results)
• Industrials: Air Liquide +1.8% AI.FR (acquisition)
• Materials: Clariant +2.2% (SABIC considerign stake boost), DSM +2.5% DSM.NL (analyst action), Eramet ERA.FR +2.8% (facility for MDL holders)
• Technology: Schneider Electric SU.FR +2.0% (partnership)
• Telecom: Claranova CLA.FR +7.9% (buyback), Mediaset MS.IT -4.0% (analyst action)

Speakers

• ECB reportedly considers buying more longer-term bonds from 2019 as part of QE reinvestments to maintain portfolio duration
• EU chief Brexit negotiator Barnier: Progress made on Brexit; huge divergence over Ireland border issue remain
• Spain govt said to seek to raise €6.5B through higher taxes. New govt looked to raise income tax on the highest earners and sought a minimum 15% on corporate tax for multinationals. Also looking to raise tax on diesel fuel
• German CSU official Michelbach: EU leader agreement on migration was a positive signal. Added that the alliance with CDU party in govt had absolute priority (**Note: German Chancellor Merkel had been under pressure to reach a deal on migration issue from Interior Minister Seehofer (head of her Bavarian coalition partner the CSU)
• EU’s Brexit negotiating team said to reject any Brexit deal which allowed the UK to remain in the single market for goods
• Reportedly employees at dozens of leading banks to face a German tax-evasion probe
• Turkey President Chief Adviser Ertem: Central bank is independent; treasury policies to be optimized with the new govt structure. Inflation targeting remained intact
• Indonesia Central Bank Gov Warjiyo pre-rate decision press conference noted that it would keep a front loaded, preemptive monetary policy. Reiterated view to guard IDR currency (Rupiah) to be in line with fundamentals and saw Q2 economic growth improving. Reiterated to continue supporting the market with duel interventions of FX and bonds
• India interim Fin Min Goyal: INR currency (Rupee) volatility due to external factors; no need for knee-jerk response
• Thailand Central Bank: Jun CPI to accelerate due to oil prices and weak THB currency (Baht)
• China PBoC Xu reiterated view that the domestic economy was capable to face external shocks. The deleveraging pressure was mostly on government and state-owned enterprises (SOEs) and that Rapid rise in household leverage ‘preliminarily controlled’.
• Hong Kong Chief Executive Lam: To revise pricing mechanism of subsidized housing
• Russia Energy Min Novak: Could increase oil production in July by 200K bpd in the post OPEC+ agreement

Currencies

• Positive events in Europe caused the USD to move away from recent cycle highs. Focus will turn back to trade as the US prepares to present a list to help remedy the trade environment
• Euro was firmer in the aftermath of the EU leaders finding common ground on a migration plan. The EUR/USD was in the mid-1.16 area as a result with the Euro having its best trading day in a month. The pair has repeatedly held psychological support at the 1.15 handle and remained well contained in the 1.15-1.20 quarterly trading range. Constructive European inflation data also providing some tailwinds for the Euro
• A slight upward revision in UK Q1 GDP QoQ reading helped the GBP currency move away from recent 7-month lows. GBP/USD edging back towards the 1.32 area after probing 1.30 earlier in the week
• Indonesia delivered an aggressive rate hike to help guard the IDR currency and moved its monetary policy stance to tight from neutral. USD/IDR firmer by 0.4% just ahead of the NY morning.

Fixed Income

• Bund Futures trade 8 ticks lower at 162.22 as the curve flattened following the ECB sources report. Upside targets 162.75 followed by 163.25, while a return lower targets the 159.75 level.
• Gilt futures trade at 123.00 lower by 17 ticks after QoQ GDP was revised higher. 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 declined from €1.801T to €1.793T. Use of the marginal lending facility fell from €97M to €30M.
• Corporate issuance saw Charter Communications raise $1.5B secured debt in the primary market

Looking Ahead

• (US) Treasury Dept to release report related to China trade issues
• (BR) Brazil May CNI Capacity Utilization: No est v 78.1% prior
• (MX) Mexico May YTD Budget Balance (MXN): No est v 5.8B prior
• 05:30 (SL) Sri Lanka Jun CPI Y/Y: No est v 4.0% prior
• 05:30 (ZA) South Africa to sell ZAR600M in I/L 2029, 2033 and 2050 bonds
• 06:00 (PT) Portugal May Industrial Production M/M: No est v -3.1% prior; Y/Y: No est v 3.8% prior
• 06:00 (PT) Portugal May Retail Sales M/M: No est v -4.2% prior; Y/Y: No est v 0.7% prior
• 06:00 (UK) DMO to sell combined £4.5B in 1-month, 6-month and 12-month Bills £1.5B, £1.5B and £1.5B respectively)
• 06:45 (US) Daily Libor Fixing
• 07:30 (IN) India Weekly Forex Reserves
• 07:30 (IN) India Apr Eight Infrastructure (key industries) Y/Y: % v 4.7% prior
• 08:00 (BR) Brazil May National Unemployment Rate: 12.6%e v 12.9% prior
• 08:00 (ZA) South Africa May Budget Balance (ZAR): No est v -43.7B prior
• 08:00 (ZA) South Africa May Trade Balance (ZAR): 5.8Be v 1.1B prior
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming issuance
• 08:15 (UK) Baltic Dry Bulk Index
• 08:30 (US) May Personal Income: 0.4%e v 0.3% prior; Personal Spending: 0.4%e v 0.6% prior; Real Personal Spending (PCE): 0.2%e v 0.4% prior
• 08:30 (US) May PCE Core M/M: 0.2%e v 0.2% prior; Y/Y: 1.9%e v 1.8% prior
• 08:30 (US) May PCE Deflator M/M: 0.2%e v 0.2% prior; Y/Y: 2.2%e v 2.0% prior
• 08:30 (CA) Canada Apr GDP M/M: 0.0%e v 0.3% prior; Y/Y: 2.4%e v 2.9% prior
• 08:30 (CA) Canada May Industrial Product Price M/M: 0.9%e v 0.5% prior; Raw Materials Price Index M/M: No est v 0.7% prior
• 09:00 (CL) Chile May Industrial Production Y/Y: 2.4%e v 7.6% prior; Manufacturing Production Y/Y: 2.2%e v 11.8% prior
• 09:00 (CL) Chile May Unemployment Rate: 6.9%e v 6.7% prior
• 09:00 (RU) Russia Q1 Final Current Account: No est v $28.8B prelim
• 09:30 (BR) Brazil May Nominal Budget Balance (BRL): -43.5Be v -26.8B prior; Primary Budget Balance: -12.4Be v 2.9B prior; Net Debt to GDP ratio: 51.4%e v 51.9% prior
• 09:45 (US) Jun Chicago Purchasing Manager: 60.0e v 62.7 prior
• 10:00 (US) Jun Final University of Michigan Confidence: 99.0e v 99.3 prelim
• 10:00 (MX) Mexico May Net Outstanding Loans (MXN): No est v 4.13T prior
• 10:30 (CA) Bank of Canada (BOC) Q2 Senior Loan Officer Survey: No est v -5.2 prior
• 11:00 (CO) Colombia May National Unemployment Rate: No est v 9.5% prior, Urban Unemployment Rate: 10.2%e v 10.7% prior
• 13:00 (US) Weekly Baker Hughes Rig Count data
• 15:00 (AR) Argentina May Industrial Production Y/Y: -2.0%e v +3.4% prior
• 15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 4.25%
• 19:00 (NZ) RBNZ Dep Gov Bascand
• 21:00 (CN) China Jun Official Govt Manufacturing PMI: 51.7e v 51.9 prior; Non-manufacturing PMI: 54.8e v 54.9 prior, Composite PMI: No est v 54.6 prior
• 21:20 (FR) ECB’s Couere (France) in Singapore