Notes/Observations
- BOJ firmly sticking to its zero target for 10-year JGB yields ahead of Tuesday’s rate decision.
- High expectations for US Q2 GDP with some speculation of a 5% print
Asia:
- BOJ again conducted a Fixed-rate JGB Bond purchase operation (2nd operation this week)
- Japan Finance Ministry (MOF): Confirms Masatsugu Asakawa to remain as FX Chief for 4th year; Shigeaki Okamoto named as new top bureaucrat for the Finance Ministry
- China Official stated that the Govt had a plan to retaliate against increases in US tariffs regardless of the volume of goods targeted
Europe:
- Italy Dep PM Di Maio (5-Star party leader): reiterated stance that euro and NATO memberships were not up for discussion. Did not believe that Finance Minister Tria would leave the Govt
- EU Chief Brexit Negotiator Barnier: EU would not delegate the application of its customs policy (ruled out allowing the UK to collect customs duties on its behalf); rejected UK white paper proposal on customs union
- Brexit Min Raab stated that was closer to an agreement in key areas; UK/EU would meet again in mid August and continue to weekly discussions to clear away all the obstacles that line our path to a strong deal in October
Americas:
- White House Econ Adviser Kudlow: Number on US GDP growth due on Friday ‘will be big’ (Reminder: On July 23rd Fox’s Gasparino: White House to tout nearly 5% GDP growth for Q2 on Friday)
- President Trump stated that he believed the GDP numbers tomorrow would be terrific. “Someone predicted today that Q2 GDP would be 5.3%, but I don’t think that’s going to happen. Will be happy if there is a ‘4’ in front of it; 3.9 or 3.8% will be ok”
Economic Data:
- (FR) France Q2 Advance GDP Q/Q: 0.2% v 0.3%e; Y/Y: 1.7% v 1.9%e
- (DE) Germany Jun Import Price Index M/M: 0.5% v 0.3%e; Y/Y: 4.8% v 4.5%e
- (FI) Finland July Business Confidence: 14 v 14 prior; Consumer Confidence: 22.0 v 23.0 prior
- (FR) France Jun Consumer Spending M/M: 0.1% v 0.6%e; Y/Y: 0.3% v 0.7%e
- (ES) Spain Jun Adjusted Retail Sales Y/Y: 0.1% v 0.3%e; Retail Sales (unadj): +0.6% v -0.1% prior
- (ES) Spain May House Mortgage Approvals Y/Y: 7.3% v 34.2% prior; Total Mortgage Lending Y/Y: -1.7% v +26.1% prior
- (HU) Hungary Jun Unemployment Rate: 3.6% v 3.7%e
- (CN) Weekly Shanghai copper inventories (SHFE): 197.1K v 211.3K tons prior
- (SE) Sweden Jun Retail Sales M/M: -1.8% v 0.0%e; Y/Y: 0.2% v 3.1% prior
- (SE) Sweden Jun Trade Balance (SEK): -0.5B v -5.4 prior
- (AT) Austria July Manufacturing PMI: 56.8 v 56.6 prior (30th month of expansion)
- (IT) Italy Jun PPI M/M: 0.3% v 1.0% prior; Y/Y: 3.2% v 2.7% prior
Fixed Income Issuance:
- (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 6-month bills; Avg Yield: 0.066% v 0.092% prior ; Bid-to-cover: 1.8x v 1.98x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.1% at 391.1, FTSE +0.2% at 7681 DAX +0.3% at 12846, CAC-40 +0.0% at 5480, IBEX-35 +0.9% at 9866, FTSE MIB +0.3% at 21,932, SMI +0.1% at 9153, S&P 500 Futures flat]
- Market Focal Points/Key Themes: European Indices push higher once again continuing the positive momentum, with largely positive earnings helping fuel sentiment. Earnings from Amazon after the close yesterday helped set the tone with a big EPS beat, while profits did slightly miss the mark. In Europe shares of Carrefour rises sharply following results, with Reckitt Benckiser, LafargeHolcim, BT, Engie and Danone are among other names rising following results and guidance. BASF declines after missing its EBIT forecast, with Kering declining the most in two years after Gucci Q2 LFL sales missed estimates. Elsewhere BHP shares trade higher after selling its US shale assets to BP for just shy of $11B. Looking ahead notable earners include Merck, Colgate, Philips 66, Goodyear, Abbvie, Exxon and Chevron among others.
Movers
- Consumer Discretionary Carrefour [CA.FR] +9.8% (Earnings), L’Oreal [OR.FR] -3.5% (Earnings), Kering [KER.FR] -6.6% (Earnings)
- Consumer staples Danone [BN.FR] +1.9% (Earnings)
- Material Lafarge Holcim [LHN.CH] +3.0% (Earnings), BHP [BHP.AU] +3.7%, BP [BP.UK] -0.8% (Divests shale assets to BP)
- Healthcare Reckit Benckiser [RB.UK] +7.0% (Earnings)
- Financials Flow Traders [FLOW.NL] -11% (Earnings)
- Industrials BASF [BAS.DE] -2.8% (Earnings)
- Telecom SES [SESG.FR] +8.1% (Earnings), BT [BT.A.UK] +3.5% (Earnings) -Energy Engie [ENGI.FR] +2.2% (Earnings)
Speakers
- Italy Interior Min Salvini (also Dep PM): Italy budget law would set fundamentals for a flat tax
- South Africa Central Bank (SARB) Gov Kganyago reiterated view that policy stance remained accommodative. Current stance remaineds appropriate given the state of the economy and would look through the 1st round of inflation effects
- Bank of Korea (BoK) Gov Lee: See a need to adjust interest rates should inflation target be kept near 2% and if economy grows at potential growth rate
- Indonesia Central Bank official Hendarsah stated that it had again intervened in FX market
- Russia Energy Min Novak: OPEC+ to maintain the plan of no more thn 1M bpd boost; did agree back in Jun to review supply situation again in Sept
Currencies
- USD was firmer on high expectations for upcoming US Q2 GDP with some speculation of a 5% print.
- FX focus was on next week’s BOJ policy meeting on Tuesday and could prove to be significant for the JPY currency (yen) as some analysts believe that BOJ could opt to raise the 10-year government bond yield target from 0.0% to 0.1%. The consensus remained that the BOJ would keep its policy steady after the central bank again conducted a Fixed-rate JGB Bond purchase operation (2nd operation this week) to keep the Yield Control target around 0.00%.
- EUR/USD was listless in the aftermath of the ECB policy decision with the pair remaining stuck in the tight 1.16-1.17 range it has been in for weeks
Fixed Income
- Bund Futures trades at 162.00 little changed in the post-European Central Bank meeting environment, even as the central bank stopped short of providing details on reinvestments. A move back above 162.75 would target 163.47 then 163.63, with a move below 161.75 targeting 161.45 then 160.45.
- Gilt futures trades at 123.06 down 12 ticks following the move in Treasuries with continuing upside targeting 124.18 then 124.44, with a move lower seeing initial support at 123.23 then 122.85.
- Friday’s liquidity report showed Thurssday’s excess liquidity rose from €1.817T to €T. Use of the marginal lending facility rose from €73M to €M.
- Corporate issuance saw 3 high-grade issuers raise $1.7B in the primary market . For the week ended July 25th Lipper fund flows reported IG funds show outflows of $0.6B, with US-based domestic equity funds attracting $474M in a second straight week of inflows.
Looking Ahead
- 05:30 (PL) Poland to sell Bonds
- 05:30 (IN) India to sell combined INR100B in 2023, 2028, 2035 and 2045 bonds
- 05:30 (ZA) South Africa to sell ZAR600M in I/ L 2022, 2033 and 2050 bonds
- 06:00 (IE) Ireland Jun Retail Sales Volume M/M: No est v 0.1% prior; Y/Y: No est v 4.3% prior
- 06:00 (UK) DMO to sell €5.0B in 1-month, 3-month and 6-month bills (£1.0B, £2.0B and £2.0B respectively)
- 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave Key Rate unchanged at 7.25%
- 06:45 (US) Daily Libor Fixing
- 07:00 (BR) Brazil July FGV Inflation IGPM M/M: 0.5%e v 1.9% prior; Y/Y: 8.2%e v 6.9% prior
- 07:30 (IN) India Weekly Forex Reserves
- 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) Q2 Advance GDP Annualized (1st reading) Q/Q: 4.2%e v 2.0% prior; Personal Consumption: 3.0%e v 0.9% prior
- 08:30 (US) Q2 Advance GDP Price Index: 2.3%e v 2.2% prior; Core PCE Q/Q: 2.2%e v 2.3% prior
- 09:00 (MX) Mexico Jun Trade Balance: -$0.3Be v -$1.6B prior
- 09:30 (BR) Brazil Jun Total Outstanding Loans (BRL): No est v 3.11T prior; M/M: No est v 0.5% prior, Personal Loan Default Rate: No est v 5.0% prior
- 10:00 (US) July Final University of Michigan Confidence: 97.1e v 97.1 prelim
- 11:00 (CO) Colombia Jun National Unemployment Rate: No est v 9.7% prior; Urban Unemployment Rate: 10.3%e v 10.1% prior
- 11:00 (EU) Potential sovereign ratings after the EU close (Cyprus and Netherlands Sovereign Debt to Be Rated by Moody’s; Sweden Sovereign Debt to be rated by Fitch – 13:00 (US) Weekly Baker Hughes Rig Count data
- 13:30 (BR) Brazil Jun Central Govt Budget Balance (BRL): No est v -11.0B prior
- 15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 4.25%
