Notes/Observations
- Brexit Ministers Davis and Baker resign in what could be a fatal blow to PM May’s leadership
- Slight risk appetite as trade war concerns ebb
Asia:
- Asian equities climb as tariffs take a backseat
- Xiaomi stumbled on its debut in Hong Kong, opening for trade below its IPO price
Europe:
- UK Prime Min May: cabinet has agreed to ‘collective position’ on Brexit negotiations with EU; plans to step up preparations for a ‘no deal’ Brexit
- Collective position short lived as Brexit Sec David Davis resigns from govt along with Deputy Steve Baker. Davis claimed “The general direction of policy will leave us in at best a weak negotiating position, and possibly an inescapable one”
- Davis would not encourage a challenge to PM May, will not stand as next leader of Conservative Party, hopes resignation will put pressure on UK Gov to not make further concessions
- GBP and EUR advance against the dollar as GBP shrugs off resignation as isolated decision.
Economic Data:
- (CH) Swiss Jun Unemployment Rate: 2.4% V 2.3%e
- (DE) GERMANY MAY CURRENT ACCOUNT: €12.6B V €19.8BE; TRADE BALANCE: €19.7B V €20.2BE
- (DK) Denmark May Current Account (DKK): 10.5B v 1.4B prior; Trade Balance: 5.3B v 6.0B prior
- (FI) Finland May Preliminary Trade Balance: -€0.3B v +€0.1B prior
- (FR) BANK OF FRANCE (INDUSTRIAL) SENTIMENT: 101 V 100E
- (SE) Sweden July SEB Housing Price Indicator: 13 v 7 prior
- (CZ) Czech May Industrial Output Y/Y: +1.4% v -0.6%e
- (CZ) Czech May National Trade Balance (CZK): 6.9B v 14.5Be
- (CN) China Jun Retail Auto Sales: 1.71M units, -3.7% y/y – PCA
- (TW) Taiwan Jun Trade Balance: $5.2B v $4.9Be
- (CH) SNB Total Sight Deposits for Week Ended July 6th(CHF): 576.0B v 576.4B prior
- (EU) EURO ZONE JUL SENTIX INVESTOR CONFIDENCE: 12.1 V 9.0E
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx50 +0.4% at3,460 , FTSE +0.2% at 7,635, DAX +0.2% at 12,517, CAC-40 +0.5% at 5,403; IBEX-35 +0.3% at 9,933, FTSE MIB +0.4% at 22,007, SMI +0.4% at 8,734, S&P 500 Futures +0.3%]
- Market Focal Points/Key Themes: European stocks open higher across the board; UK stocks unaffected following resignation of Brexit Minister; materials best perfoming; utilities underperforming; light earnings news flow in final week of run up to start of earnings season; Argentina closed for holiday
Equities
- Consumer discretionary: Air France-KLM AF.FR +7.9% (traffic), Mothercare MTC.UK -9.1% (share issue)
- Energy: CGG CGG.FR +4.7% (analyst action), TGS Nopec TGD.NO +7.7% (Prelim results)
- Industrials: Renault RNO.FR -1.9% (sympathy with Nissan), Sequana SEQ.FR +6.3% (asset sale)
- Materials: ArcelorMittal MT.NL +0.9% (analyst action)
- Telecom: Altice ATC.NL +3.1% (analyst action)
Speakers
- (UK) Former UK Brexit Min Davis: Told May on Friday he’d be the Odd man out; took two days to consider whether to resign- radio interview
- (UK) Tory MP Rees-Mogg: Confidence vote in May not immediately in offing; May needs to give up on Chequers proposal on Brexit
- (UK) Labour Party Brexit Spokesperson Keir Starmer: Davis resignation is Vote of no confidence in PM May
Currencies
- The dollar index, fell to a 3-1/2-week low after US jobs data showed slower-than-expected wage growth
- The offshore yuan drove the advance with Asian currencies as investors set aside trade war concerns
Fixed Income
- Bund Futures trade 15 ticks lower at 162.63 following the move in Treasuries. Upside targets 163.25 followed by 163.85, while a return lower targets the 159.75 level.
- Gilt futures trade at 123.31 higher by 2 ticks as markets ponder whether PM May will face a leadership challenge this week. Support continues stands at 121.75 then 120.25, with upside resistance at 123.85 then 124.25.
- Monday’s liquidity report showed Friday’s excess liquidity rose from €1.873T to €1.879T. Use of the marginal lending facility rose from €0M to €50M.
- Corporate issuance saw Lipper fund flows $170.5B inflow; High Yield $1.7B outlflow
Looking Ahead
- 07:00 (BR) Brazil Jun FGV Inflation IGP-DI M/M: 1.7%e v 1.6% prior; Y/Y: 8.1%e v 5.2% prior
- 08:05 (UK) Baltic Dry Bulk Index
- 08:30 (CL) Chile Jun Trade Balance: $B v $0.7Be
- 08:30 (CL) Chile Jun International Reserves: $B v $37.3B prior
- 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.10%
- 09:00 (MX) Mexico Jun CPI M/M: +0.3%e v -0.2% prior; Y/Y: 4.6%e v 4.5% prior, CPI Core M/M: 0.2%e v 0.3% prior
- 15:00 (US) May Consumer Credit: $12.0Be v $9.3B prior
- 16:00 (US) Weekly Crop Progress Report
