Notes/Observations
European Equities trade higher seeing follow through from positive payrolls data out of the US on Friday
G20 Meeting over the weekend look to steps to reduce global overcapacity of steel
Overnight
Asia:
Japan govt cut its assessment of machinery orders for the first time since September 2016after May orders fell 3.6% m/m and only rose 0.6% y/y
PM Abe is looking to reshuffle his cabinet after according to Yomiuri poll Japan PM Abe approval rating fell to 36% from 49% in June (lowest reading since being in office)
China CPI falls slightly m/m, whilst PPI was in line with views
Cosco Shipping confirmed it will acquire Orient Overseas for HK$78.67/shr in a HK$49.2B deal.
Europe:
G20 Meeting in Hamburg over the weekend reiterated to fight protectionism and secure free trade. New elements include to agree by November steps to reduce global overcapacity of steel and in a first ever dissent: 19 members affirmed the Paris accord with the US (dissenter) saying it will help other countries "access and use fossil fuels more cleanly and efficiently.
German trade surplus rises in May following strong exports
EuroZone Sentix investor confidence dipped slightly from the prior month but came ahead of expectations
ECB ‘s Praet over the weekend noted Eurozone inflation will take a long time to rise back to target, with the reflation process being a long one.
Economic Data
(DE) GERMANY MAY CURRENT ACCOUNT: €17.3B V €15.4BE; TRADE BALANCE: €22.0B V €18.7BE
(FR) BANK OF FRANCE MAY BUSINESS SENTIMENT: 103 V 106E
(EU) EURO ZONE JULY SENTIX INVESTOR CONFIDENCE: 28.3 V 28.1E
(NO) NORWAY JUN CPI M/M: 0.4% V 0.2%E; Y/Y: 1.9% V 1.7%E
Fixed Income Issuance:
Non seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATU
Equities
Indices [Stoxx50 +0.4% at 3,475, FTSE +0.3% at 7,374, DAX +0.6% at 12,464, CAC-40 +0.2% at 5,158, IBEX-35 -0.3% at 10,460, FTSE MIB +0.6% at 21,147, SMI +0.7% at 8,944, S&P futures +0.1%]
Market Focal Points/Key Themes: European markets opened higher and continued to remain positive as trading progressed; exception was Spain, being dragged down by Almirall, reportedly Congress to look into Popular Bank case; risk sentiment improved after major risk events of the weekend are over; consumer discretionary sector lead gains; energy stocks weighed on by weakness in oil prices; potential merger of Chinese container companies impacted shipping and port companies, as analyst see deal supportive of shipping prices, but negative to port administrators
Equities
Consumer discretionary [Air France AF.FR +0.9% (traffic), Remy Cointreau RCO.FR -0.6% (analyst action)]
Consumer staples [CHR Hansen CHR.DK +0.6% (analyst action)]
Energy [Norsk Hydro NHY.NO +0.5% (acquisition)]
Healthcare [Almirall ALM.ES -25.4% (cuts outlook), Stada Arzneimittel SAZ.DE +1.4% (raised offer), Cellnovo CLNV.FR +2.1% (financing agreement)]
Industrials [Orkla ORK.NO +2.4% (divestment), Carillion CLLN.UK -32.1% (cuts outlook)]
Speakers
(UK) UK PM May’s Deputy Green: Confident can get repeal bill through parliament
Currencies
GBPUSD resumes its downtrend after a spate of weaker data last week with the pair dropping to a 10 day low. Dealers not immediate support at 1.2860 with a break targets support at 1.2840-50.
EURUSD remains above 1.14, with option barriers noted at 1.14 and 1.1450. Trading remains in a holding pattern, EURJPY has pared early gains but remains above 130.10 with upside tarts at 130.29 followed by 130.71.
Fixed Income
Bund futures trade at 160.82 up 29 ticks as volumes spike after taking out Friday’s high of 160.73. Resistance lies near the 161.50 level followed by 162.10. A break of the 160.00 support level could see lows target 159.25 followed by 157.50.
Gilt futures trade at 125.25 higher by 11 ticks following the move with Bunds and Treasuries. The focus this week is on the syndication of 0.125% 2056 gilt linker on Tuesday. Price finds key support at the 124.42 support level. An acceleration lower could test the 122.88 region. Resistance remains the noted 126.00 region, followed by 126.72.
Monday’s liquidity report showed Friday’s excess liquidity rose to €1.6646T a gain of €0.6B from €1.664T prior. Use of the marginal lending facility fell to €148M from €187M prior.
Corporate issuance saw $5.75B issued last week in a shortened holiday week. Next week’s forecast is $15-20B
Looking Ahead
15:00 (US) May Consumer Credit: No est v $8.2B prior
16:00 (US) Weekly Crop Progress Report
