Notes/Observations
German July IFO survey hits another post-German reunification high; Business Climate: 116.0 v 114.9e)
Earnings season shifting into higher gear
Fed meeting in focus
New BOJ members hold 1st press conference and show that are a team player (rhetoric in-line with Kuroda stance)
Overnight
Asia:
BOJ June 15th and 16th Monetary Policy Meeting Minutes: Japan’s economy had been turning toward a moderate expansion. Many members agreed to keep policy easy since their 2% inflation target remains distant. Premature exit communication may confuse the market
Japan PM Abe adviser Hamada: BOJ Kuroda should be appointed for second term
Europe:
Swiss National Bank (SNB) chief Jordan reiterated CHF currency (Franc) was still significantly overvalued and that it still had room to maneuver with the balance sheet, if necessary
Americas:
White House Advisor Kushner: all my actions were proper and I did not collude with Russia; does not know of anyone else in campaign who did so
Fitch affirmed Canada sovereign rating at AAA; outlook Stable
Economic Data
(DE) Germany Jun Import Price Index M/M: -1.1% v -0.7%e; Y/Y: 2.5% v 2.9%e
(FI) Finland Jun Unemployment Rate: 8.9% v 10.7% prior
(NO) Norway Q2 Industrial Confidence: 3.8 v 1.5 prior
(FR) France July Business Confidence: 108 v 106e; Manufacturing Confidence: 109 v 108e
(FR) France Jun PPI M/M: -0.4% v -0.6% prior; Y/Y: 1.4 v 2.2% prior
(ES) Spain Jun PPI M/M: 0.1% v 0.1% prior; Y/Y: 3.2 v 5.2% prior
(ZA) South Africa May Leading Indicator: 95.8 v 95.8 prior
(SE) Sweden Jun PPI M/M: -0.8% v 0.0% prior; Y/Y: 4.8% v 7.2% prior
(DE) Germany July IFO Business Climate: 116.0 v 114.9e (post-German reunification high); Current Assessment: 125.4 v 123.8e, Expectation Survey: 107.3 v 106.5e
(PL) Poland Jun Unemployment Rate: 7.1% v 7.1%e
Fixed Income Issuance:
(GR) Greece Debt Agency (PDMA) opened its book to sell EUR-denominated 5-year notes (Maturity in Apr 2022); yield guidance seen 4.875% (**Note: 1st tap in markets since 2014)
(ID) Indonesia sold total IDR21.1T vs. IDR15T target in 5-year, 10-year and 15-year Bonds
(ZA) South Africa sold total ZAR2.65B vs. ZAR2.65B indicated in 2023, 2030 and 2040 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -+0.5% at 381.0, FTSE +0.8% at 7433, DAX +0.3% at 12248, CAC-40 +0.6% at 5159, IBEX-35 +1.1% at 10556, FTSE MIB +0.7% at 21478, SMI +0.6% at 8955, S&P 500 Futures flat]
Market Focal Points/Key Themes: European Indices trade higher across the board led higher bu the Spanish Ibex and the FTSE100, which is rebound after sharp falls yesterday. Sentiment was further boosted following strong IFO reading for July marking a post reunification high. Earnings continue to be at the forefront with stong results from Randstad, Luxittoica and Logitech, whilst Lindt and Akzo Nobel trade lower after missing estimates. In the M&A space Jimmy Choo trades sharply higher after a take over approach by Michael Kors, whilst Refresco trades lower after acquiring Cott Corp Beverage Manufacturing business. Looking ahead notable earners include McDonald’s, Dupont, United Technologies, Caterpillar and General Motors.
Equities
Consumer discretionary [Jimmy Choo [CHOO.UK] +17% (To be acquired by Michael Kors) , Luxottica [LUX.IT] +2% (Earnings), Lindt [LISP.CH] -1.5% (Earnings, cuts outlook), Intertrust [INTER.NL] -20% (Cuts outlook)]
Consumer Staples [Refresco [RFRG.NL] -1.9% (Acquisition) ]
Materials: [Akzo Nobel [AKZA.NL] -0.8% (Earnings)]
Financials: [Randstad [RAND.NL] +7% (Earnings) , Virgin Money [VM.UK] -6.6% (Earnings)]
Technology: [Dassault Systems [DSY.FR] +1.0% (Earnings), Logitech [LOGN.CH] +1.5% (Earnings)]
Speakers
ECB’s Mersch (Luxembourg): Reiterates Council view that Monetary accommodation is still required as cost pressures remain subdued- German IFO Economists noted that sentiment among business was euphoric and never more satisfied with situation. EUR exchange rate was no impediment to economy
EU’s Moscovici: Positive that Greece was returning to the bond market; country was at a turning point. Country had made significant effort to fix its deficits and would successfully conclude its bailout program. Greece must continue with reform efforts while creditors must respect the debt relief measures from the latest Eurogroup meeting
China PBOC reiterated view that monetary policy to be prudent and neutral; to strengthen economic controls. To strictly regulate financial trading. Reiterated to keep appropriate growth in money and credit supply; to keep basic liquidity stable. Reiterated to steadily promote CNY currency (Yuan) internationalization and keep the basic exchange rate stable
BOJ’s Kataoka (new member) inaugural press conference stated that he would help achieve the 2% inflation target and do whatever it take. Would make efforts through monetary policy to achieve the 2% inflation target and that BOJ policy was not only looking at rates or quantity
BOJ’s Suzuki (new member) inaugural press conference stated that domestic economy was improving. Lots of headwinds had contributed to low price growth thus taken longer than expected to ward off deflationary mindset
Currencies
FX markets still saw the USD on soft footing ahead of Wed’s FOMC rate decision.
EUR/USD near fresh 2-year highs aided by another stellar performance by the German IFO survey. The recent optimism in Euro Area growth was highlighted by the Business Climate Survey which rose to another post-German reunification high. Pair around 1.1650 just ahead of the NY morning.
USD/JPY hit 5-week lows below 110.85 before rebounding. The two new BOJ Board members (Kataoka and Suzuki) showed that they are a team player under Kuroda and helped the pair regain a foothold above the 111 level. **Note: The two new BOJ members replace Kiuchi and Sato (dissenters). Believed the incoming members on the BOJ board to bolster the camp of proponents for quantitative easing
Fixed Income
Bund futurestrade at 162.37 down 7 ticks after German business sentiment surged to a record high in July. Resistance lies near the 162.75 level followed by 163.50. A break of the 160.00 support level could see lows target 159.25 followed by 157.50.
Gilt futures trade at 126.38 lower by 4 ticks ahead of the DMO’s 2047 Gilt auction. Price finds key support at the 125.42 support level. An acceleration lower could test the 122.88 region. Resistance remains the noted 126.51 region, followed by 127.50.
Tuesday’s liquidity report showed use of the marginal lending facility rose to €250M from €196M prior.
Corporate issuance saw $3.4B come to market via 3 issuers headlined by Cox Communications Inc $2.6B 3-part senior note offering and Colgate-Palmolive $0.5B senior note offering.
Looking Ahead
(AR) Argentina July Consumer Confidence: No est v 42.0 prior
(NG) Nigeria Central Bank Interest Decision:
(PT) Portugal YTD Budget Report
(NG) Nigeria Central Bank Interest Rate Decision; Expected to leave Interest Rates unchanged at 14.00%
05.30 (UK) Weekly John Lewis LFL sales data
05:30 (ZA) South Africa Q2 Unemployment Rate: 27.7%e v 27.7% prior
05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender
05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills
05:30 (UK) DMO to sell £2.5B in 1.5% 2047 conventional Gilts
06:00 (UK) July CBI Industrial Trends Total Orders: 12e v 16 prior, Selling Prices: 20e v 23 prior, Business Optimism: 0e v 1 prior
06:45 (US) Daily Libor Fixing
07:00 (BR) Brazil July FGV Construction Costs M/M: 0.2%e v 1.4% prior
07:00 (BR) Brazil July FGV Consumer Confidence: No est v 82.3 prior
07:30 (TR) Turkey July Real Sector Confidence (Seasonally Adj): No est v 108.8 prior; Real Sector Confidence (unadj): No est v 112.4 prior
07:30 (TR) Turkey July Capacity Utilization: No est v 79.0% prior
07:45 (US) Weekly Goldman Economist Chain Store Sales
08:00 (UK) Baltic Dry Bulk Index
09:00 (US) May S&P/Case-Shiller 20-City M/M: 0.30%e v 0.28% prior; Y/Y: 5.80%e v 5.67% prior; House Price Index (HPI): No est v 197.19 prior, Case-Shiller (overall) HPI Y/Y: No est v 5.50% prior, House Price Index (HPI): No est v 188.50 prior
09:00 (US) May FHFA House Price Index M/M: 0.5%e v 0.7% prior
09:00 (MX) Mexico May Retail Sales M/M: -0.3%e v +1.2% prior; Y/Y: 3.4%e v 1.4% prior
09:00 (BE) Belgium July Business Confidence: -2.0e v -2.0 prior
09:00 (RU) Russia announces weekly OFZ bond auction
10:00 (US) July Consumer Confidence: 116.0e v 118.9 prior
10:00 (US) July Richmond Fed Manufacturing Index: 7e v 7 prior
11:00 (BR) Brazil to sell I/L 2022, 2026, 2035 and 2055 Bonds
11:30 (US) Treasury to sell 4-Week Bills
12:00 (FR) France Jun Net Change in Jobseekers: No est v 22.3K prior; Total Jobseekers: No est v 3.494M prior
13:00 (US) Treasury to sell 2-Year Notes
13:00 (UK) BOE Haldane (chief economist) in London
15:00 (AR) Argentina Jun Trade Balance: -$0.4Be v -$0.6B prior
15:00 (AR) Argentina May Economic Activity Index (Monthly GDP) M/M: No est v 0.0% prior; Y/Y: 3.2%e v 0.6% prior
