Markets Await Friday’s US Payrolls For Any Fireworks In Volatility

Notes/Observations

• US markets closed for July 4th holiday
• Spain and France issue bonds at record low yields

Asia:

• China PBoC Open Market Operation (OMO) skipped the operation for the 9th consecutive; Net drains CNY30B v drain CNY40B prior
• China State Council: China to support the pilot free trade zones in undertaking more experiments with reform and opening up, and refine policy incentives for cross-border e-commerce to facilitate more innovative models in foreign trade
• South Korea Fin Min Hong stated that economic conditions had changed, Japan’s curbs were obvious economic retaliation; BoK to make appropriate rate decision while considering changes in economic conditions Australia May M/M: 0.1% v 0.2%e

Europe/Mideast:

• Former UK Chancellor George Osborne said to be considering putting himself forward to replace Christine Lagarde at IMF

Americas:

• USTR Official: Trump Admin is scheduling ‘principal-level’ call between US and China trade negotiators for week of July 8th
• White House Econ Adviser Kudlow: next round of face-to-face China-US trade talks will take place ‘soon’. Would not lift existing tariffs during China trade talks

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.01% at 392.54, FTSE -0.07% at 7,603.75, DAX +0.06% at 12,624.16, CAC-40 -0.08% at 5,614.15, IBEX-35 -0.37% at 9,359.80, FTSE MIB +0.42% at 21,996.50, SMI -0.24% at 10,049.50, S&P 500 Futures -0.07%]
• Market Focal Points/Key Themes: Equities European Indices trade roughly flat following a slightly stronger session in Asia. U.S. stock exchanges to be closed on Thursday due to Independence Day celebrations, while S&P 500 September’19 futures currently trade few points below remarkable 3,000 mark. On the corporate front shares of retail giant Associated British Foods trade 1% higher on revenue growth and maintained outlook. U.K. housebuilding company Persimmon declines 2% on earnings and some H2 insights. European low-cost airlines Norwegian Air trade almost 5% higher after better-than-expected June load factor. On the M&A front, both Metso and Outotec trade sharply higher in Finland on news that companies decided to merge in all-stock transaction, forming new entity ‘Metso Outotec’ afterwards. Elsewhere, OSRAM Licht rise in Germany after it confirmed binding takeover offer from Bain-Carlyle consortium.
• Consumer discretionary: Persimmon [PSN.UK] -2% (earnings), Associated British Foods [ABF.UK] +1% (sales), Norwegian Air [NOR.NO] +4.5% (load factor)
• Financials: Commerzbank [CBK.DE] -1% (analyst action)
• Healthcare: Curetis [CURE.NL] +15% (patent), Oasmia Pharmaceutical [OMAX.DE] +9% (Business advisory board)
• Industrials: Metso [METSO.FI] +4%, Outotec [OTE1V.FI] +19% (merger), Wacker Neuson [WAC.DE] -1% (major shareholder sold stake), Yit [YTY1V.FI] +2% (divests unit)
• Technology: OSRAM Licht [OSR.DE] +3% (confirms bid)

Speakers

• ECB’s Lane (Ireland, chief economist): European productivity had been lackluster
• ECB’s De Guindos (Spain): Need yo improve the enhance countercyclical use of macroprudential tools
• India’s Economic Survey noted that growth was expected to pick up as macroeconomic conditions continued to be stable; reforms remained on course. Saw both upside and downside risks seen to economy in FY19/20
• India Chief Economic Adviser (CEA) Subramanian: To maintain current fiscal path that was previously laid out
• China Commerce Ministry (MOFCOM) spokesman Gao Feng: confirmed that trade teams from both China and US were in communications. Stressed that tariffs must be removed for a trade deal with US.
• China Foreign Ministry spokesperson Geng Shuang reiterated govt stance that China will not engage in competitive currency devaluation
• Iran Intelligence Min Alavi stated that the country could consider talks with US only if sanctions lifted and Supreme Leader Khamenei permitted it

Currencies/Fixed Income

• The July 4th holiday in the State kept market participation at a low.
• USD was little changed but fractionally lower. Dealers attributed the slight retracement to Trump tweet that US should match China and Europe at their “big currency manipulation game’ US non-farm payroll data on Friday was seen as pivotal whether the Fed would shift to rate cuts as soon as it meets later this month.

Economic Data

• (NL) Netherlands Jun CPI M/M: -0.1% v -0.1% prior; Y/Y: 2.7% v 2.4% prior
• (NL) Netherlands Jun CPI EU Harmonized M/M: -0.1% v -0.3% prior; Y/Y: 2.7% v 2.3% prior
• (CH) Swiss Jun CPI M/M: 0.0% v -0.1%e; Y/Y: 0.6% v 0.5%e; CPI Core Y/Y: 0.7% v 0.6% prior
• (CH) Swiss Jun CPI EU Harmonized M/M: +0.2% v -0.2% prior; Y/Y: 0.7% v 0.5% prior
• (HU) Hungary May Retail Sales Y/Y: 2.6% v 7.1% prior
• (DE) Germany Jun Construction PMI: 50.0 v 51.4 prior
• (SE) Sweden Jun Average House Prices (SEK): 3.000M v 2.975M prior
• (UK) Jun New Car Registrations Y/Y: -4.9% v -4.6% prior
• (EU) Euro Zone May Retail Sales M/M: -0.3% v +0.3%e; Y/Y: 1.3% v 1.6%e
• (IS) Iceland Jun Preliminary Trade Balance (ISK): -22.8B v -16.4B prior

Fixed Income Issuance

• (ES) Spain Debt Agency (Tesoro) sold total €3.46B vs. €3.0-4.0B indicated range in 2026, 2029 and 2048 bonds
• Sold €480M in 1.95% Apr 2026 SPGB bond; Avg Yield: -0.105% (record low) v +0.848% prior; Bid-to-cover: 3.24x v 2.38x prior
• Sold €1.50B in 0.60% Oct 2029 SPGB; Avg Yield: 0.839% (record low) v 0.936% prior, bid-to-cover: 1.22x v 1.32x prior
• Sold €1.48B in 2.7% Oct 2048 SPGB; Avg Yield: 1.165% (record low) v 2.362% prior; Bid-to-cover: 1.19x v 1.50x prior
• (ES) Spain Debt Agency (Tesoro) sold €400M vs. €250-750M indicated range in 0.15% Nov 2023 inflation-linked bonds (SPGBei;Bonoei); Real Yield: -1.037% v -0.730% prior; Bid-to-cover: 4.00x v 4.85x prior
• (FR) France Debt Agency (AFT) sold total €B vs. €8.5-10.0B indicated range in 2029, 2034 and 2050 bonds
• Sold €4.972B in 0.50% May 2029 Oat; Avg Yield: -0.12% v +0.14% prior; Bid-to-cover: 1.9x v 2.55x prior
• Sold €2.05B in 1.25% May 2034 Oat; Avg Yield: 0.23% v 0.78% prior; Bid-to-cover: 2.22x v 2.29x prior
• Sold €2.974B in 1.50% May 2050 Oat; Avg Yield: 0.80% v 1.16% prior; Bid-to-cover: 1.47x v 1.63x prior

Looking Ahead

• (RO) Romania Central Bank (NBR) Interest Rate Decision: expected to leave Interest Rates unchanged at 2.50%
• (RU) Russia Jun Light Vehicle Car Sales Y/Y: -3.0%e v -6.7% prior
• 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)
• 06:00 (IE) Ireland Jun Live Register Monthly Change: No est v -3.5K prior; Live Register Level: No est v 190.9K prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (ZA) South Africa May Electricity Production Y/Y: No est v 1.8% prior; Electricity Consumption Y/Y: No est v 1.6% prior
• 07:00 (MX) Mexico Jun Consumer Confidence Index: 107.9e v 108.1 prior
• 07:30 (TR) Turkey Jun Real Effective Exchange Rate (REER): No est v 69.79 prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• (BR) Brazil Jun Vehicle Production: No est v 275.8K prior; Vehicle Sales: No est v 245.4K prior; Vehicle Exports: No est v 42.1K prior
• 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 28th: No est v $510.2B prior
• 09:15 (SE) Sweden Central Bank (Riksbank) Dep Gov Floden in Visby
• 11:00 (BR) Brazil to sell LTN 2021 bonds
• 13:00 (SE) Sweden Fin Min Andersson speech
• 15:00 (AR) Argentina May Industrial Production Y/Y: No est v -8.8% prior; Construction Activity Y/Y: No est v -7.5% prior