Notes/Observations
- Major European PMI Manufacturing data beats across the board (France, Germany; and Euro Zone all above consensus); ECB now pre-committed on hold almost regardless of incoming data
- Turkey Central Bank rate decision today seen as a litmus test for its independence from President Erdogan
- China’s State Council unveiled pro-active measures to aid growth
- Trade wars continue to dominate the macro narrative; awaiting Wednesday’s meeting between US President Donald Trump and President of the EU Commission, Jean-Claude Juncker
Asia:
- Japan July Preliminary PMI Manufacturing hits a 1 ½ year low (51.6 v 53.0 prior) with new orders growing at weakest pace since Sept 2016
- China State Council agreed that a more proactive fiscal policy will be pursued; will focus on introducing deeper tax and non-tax fee cuts. China Monetary Policy to keep loose bias in H2
- China foreign ministry spokesman Shuang reiterated stance that China had no desire to boost its exports through competitive devaluation
Europe:
- BOE’s Broadbent: Not sure if whether would vote for rate hike in Aug. Reiterates MPC view that QE unwinding won’t start until rates were higher
- UK government said to cancel cap related to public sector pay by forcing other Depts to make savings. Raises of up to 3.5% given approval (biggest increases in a decade), but most public sector workers would get increases below inflation rate
- White Paper on Brexit plan would give ministers more power to block foreign takeovers of domestic firms on a national security basis
- Russian hackers said to have been able to access the networks of certain utilities in the US in 2017
Americas
- Fox’s Gasparino: White House to tout nearly 5% GDP growth for Q2 on Friday
Economic Data:
- (FI) Finland Jun PPI M/M: 0.7 v 1.2% prior; Y/Y: 6.2 v 4.9% prior
- (FI) Finland Jun Unemployment Rate: 6.7 v 9.3% prior
- (NO) Norway Q2 Industrial Confidence: 9.2 v 6.8 prior
- (FR) France July Business Confidence: 106 v 107e; Manufacturing Confidence: 108 v 110e, Production Outlook Indicator: 10 v 13e; Own-Company Production Outlook: 22 v 25e
- (FR) France July Business Survey Overall Demand: 6 v 17 prior
- (FR) France July Preliminary Manufacturing PMI: 53.1 v 52.5e (22nd month of expansion), Services PMI: 55.3 v 55.7e, Composite PMI: 54.5 v 54.9e
- (ZA) South Africa May Leading Indicator: 105.9 v 105.9 prior
- (CZ) Czech July Business Confidence: 15.4 v 17.0 prior; Consumer Confidence: 9.3 v 10.5 prior, Composite (Consumer & Business) Confidence: 14.2 v 15.7 prior
- (DE) Germany July Preliminary Manufacturing PMI: 57.3 v 55.5e (43rd month of expansion), Services PMI: 54.4 v 54.5e, Composite PMI: 55.2 v 54.8e
- (EU) Euro Zone July Preliminary Manufacturing PMI: # v 54.7e (60th month of expansion), Services PMI: 54.4 v 55.1e prior, Composite PMI: 54.3 v 54.8e
- (PL) Poland Jun Unemployment Rate: 5.9% v 5.9%e
Fixed Income Issuance:
- (EU) ESM opened book to sell 5-year notes via syndicate; guidance seen -18bps to mid-swaps; order book over €4.0B
- (ZA) South Africa sold total ZAR2.4B vs. ZAR2.4B indicated in 2040, 2044 and 2048 bonds
- (ID) Indonesia sold total IDR4.81T vs. IDR target in 6-month Islamic Bills, 2-year, 4-year, 7-year and 15-year Project-based Sukuk (PBS)
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.9% at 388.2, FTSE +0.7% at 7710, DAX +1.4% at 12718, CAC-40 +0.9% at 5424, IBEX-35 +0.7% at 9794, FTSE MIB +1.1% at 21,893, SMI +0.4% at 8992, S&P 500 Futures +0.2%]
- Market Focal Points/Key Themes: European Indices trade higher across the board breaking out from earlier tight range with generally strong Manufacturing PMI data and upbeat earnings from European names helping support the market. PSA Group outperforms trading higher by over 10% on strong first half results, with UBS, Randstad, AMS and Fevertree among other risers after earnings. Elsewhere AMS share rise sharply after results, with the Q3 guidance easing concerns over Apple supply chain. Shares of clothing brand Superdry is a notable decliner after its founder sold over a 6% stake in the company. Looking ahead notable earners include Eli Lilly, Lockheed Martin, Verizon, United Technologies and 3M.
Movers
- Consumer Discretionary PZ Cussons [PZC.UK] -3% (Earnings), Superdry [SDRY.UK] -7% (Founder sells 6.7% stake)
- Healthcare Sartorius Stedim [DIM.FR] +2.4% (Earnings)
- Financials UBS [UBSG.CH] +2.6% (Earnings), Randstad [RAND.NL] +4.0% (Earnings)
- Industrials PSA Group [UG.FR] +9.5% (Earnings)
- Technology AMS [AMS.CH] +9.4% (Earnings), Ebiquity [EBQ.UK] -22% (Guidance)
- Consumer Staples Fevertree [FEVR.UK] +9% (Earnings)
- Energy Norsk Hydro [NHY.NO] +2.4% (Earnings)
Speakers
- EU Trade Min Malmstrom: To try to de-escalate trade tensions with US
- Italy’s Dep PM DI Maio (5-Star party leader): Gov to discuss delay to Coop banking reform this week
- Bank of Spain: Banking sector loan criteria a bit in Q2
- Turkey President Erdogan: To continue operations along borders until all terrorists are removed
- Japan LDP Policy Chief Kishida was not expected to run for leadership of the ruling party in the elections that were expected on Sept 20th
- North Korea appeared to have begun dismantling part of Sohae station, a key rocket launch site
Currencies
- EUR/USD reversed its initial losses in the session as the major PMI Manufacturing data beat expectations. The Euro upside was hampered in its belief that ECB remained pre-committed on hold almost regardless of incoming data at this time.
- USD/JPY holding above the 111 level in the session as dealers debate the prospect of a possible tweaking in BOJ policy next week. Political considerations could pressure the central bank to take action at the July meeting, as a policy decision at the Sept meeting could influence the Liberal Democratic Party’s leadership elections. Consensus expectations still analysts believing the BOJ to keep the same outline of its current policy at its next meeting despite complaints from banks
- GBP/USD was steady around the 1.31 level as BOE member Broadbent stated that he was not sure if whether he would vote for rate hike in Aug.
- PBoC set the yuan at the weakest since July 2017. China foreign ministry spokesman Shuang: China had no desire to boost its exports through competitive devaluation. The C NY weakened by almost 0.5% from the Asian open to test above 6.8225 level (**Insight: China re-pegged the USD/CNY back in July 2008 at roughly 6.82 level during the financial crisis and removed the peg in June 2010)
Fixed Income
- Bund Futures trades at 162.04 up 6 ticks after Germany’s economic rebound persisted, driven by an expansion in manufacturing. A move back above 162.50 would target 163.47 then 163.63, with a move below 161.75 targeting 161.45 then 160.45.
- Gilt futures trades at 123.17 down 4 ticks on the day consolidating the recent run up, with continuing upside targeting 124.18 then 124.44, with a move lower seeing initial support at 123.23 then 122.85.
- Tuesday’s liquidity report showed Monday’s excess liquidity rose from €1.806T to €1.809T. Use of the marginal lending facility climbed from €65M to €100M.
- Corporate issuance saw 5 high-grade issuers on Monday.
Looking Ahead
- (NG) Nigeria Central Bank Interest Rate Decision: Expected to leave Interest Rate unchanged at 14.00%
- (PT) Bank of Portugal Bank Lending Survey
- 05.30 (UK) Weekly John Lewis LFL sales data
- 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 £2.75B in 1.00% Apr 2024 Gilts
- 05:30 (ZA) South Africa announces to sell combined ZAR2.4B in 2040, 2044 and 2048 bonds
- 06:00 (UK) July CBI Industrial Trends Total Orders: 8e v 13 prior; Selling Prices: 15e v 13 prior; Business Optimism: -6e v -4 prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (BR) Brazil July FGV Consumer Confidence: No est v 82.1 prior
- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to raise One-Week Repo Rate by 100bps to 18.75%
- 07:45 (US) Weekly Goldman Economist Chain Store Sales
- 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.90%, leave Overnight Deposit Rate unchanged at -0.15%
- 08:00 (UK) Baltic Dry Bulk Index
- 08:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)
- 08:55 (US) Weekly Redbook Sales
- 09:00 (US) May FHFA House Price Index M/M: 0.3%e v 0.1% prior
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:00 (CL) Chile Jun PPI M/M: No est v 2.5% prior
- 09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement
- 09:45 (US) July Preliminary Markit Manufacturing PMI: 55.1e v 55.4 prior, Services PMI: 56.5e v 56.5 prior, Composite PMI: No est v 56.2 prior
- 10:00 (US) July Richmond Fed Manufacturing Index: 18e v 20 prior
- 11:30 (US) Treasury to sell 4-Week Bills
- 13:00 (US) Treasury to sell 2-Year Notes
- 15:00 (AR) Argentina May Economic Activity Index (monthly GDP) M/M: No est v -2.7% prior; Y/Y: -2.2%e v -0.9% prior
- 16:30 (US) Weekly API Oil Inventories
