Risk Appetite Holds Onto Into US Payroll Data

Notes/Observations

• Risk-on appetite continues to receive a boost from coronavirus vaccine trials
• Focus to the US June non-farm payrolls (brought forward a day due to July 4th holiday)

Asia:

• Australia May Trade Balance (A$): 8.0B v 9.0Be

Coronavirus:

• Total global cases 10,668,410 (+2.1% d/d); total deaths: 515.7K (+1.0% d/d)
• Tokyo found over 100 additional coronavirus cases; to set up a coronavirus task force

Europe:

• Ireland Fin Min Donohoe said to warn against an EU only digital tax

Americas:

• FOMC Jun Minutes: Officials agreed on need for more analysis of yield curve control
• US Fed Bullard (non-voter): Risk of financial crisis remained and reiterated warning of wave of bankruptcies without public health measures
• US House of Representatives passed China sanctions by unanimous consent in response to new Hong Kong law, the bill to go back to the Senate which has already passed a similar measure
• US House of Representatives approved a $1.5T infrastructure package (233-to-188 vote) to boost spending on roads, bridges, public transit and rail (Note: White House and Senate Republicans opposed the measure)
• US said to be planning to hold G7 Leader Summit between Aug 31st – Sept 1st

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +1.25% at 365.70, FTSE +0.97% at 6,217.88, DAX +2.04% at 12,510.75, CAC-40 +1.75% at 5,013.21, IBEX-35 +2.66% at 7,420.00, FTSE MIB +2.10% at 19,737.50, SMI +0.42% at 10,131.91, S&P 500 Futures +0.76%]
• Market Focal Points/Key Themes: European indices open higher across the board and continued higher as the session progressed; financial sector leading to the upside; underperforming sectors include energy and healthcare; airlines supported as UK reportedly will lift travel ban; Wirecard trades lower after reports Softabank will terminate partnership; focus on upcoming employment data from US, released early due to holiday tomorrow; earnings expected in upcoming US session include AT&T and Nielsen Holdings

Equities

• Consumer discretionary: AB Foods [ABF.UK] +7% (trading update), Ryanair [RYA.UK] +4% (pay cut deal; traffic data)
• Healthcare: Abivax [ABDX.FR] +9% (trial data)
• Industrials: Meggitt [MGGT.UK] +8% (trading update), Koninklijke BAM Groep [BAMNB.NL] -12% (profit warning), DS Smith [SMDS.UK] -7% (earnings)
• Technology: Wirecard [WDI.DE] -30% (Softbank plans to end partnership with Wirecard)

Speakers

• Netherlands PM Rutte reiterated stance that upcoming negotiations on EU Recovery Fund will be difficult
• EU Economic Commissioner Gentiloni (Italy): Reform and investment plan should focus on modernization
• EU Commission President Von der Leyen said to be planning to hold talks on EU recovery package with various EU officials on Wed, July 8th. Negotiations include European Parliament President Sassoli, European Council President Michel and German Chancellor Merkel
• EU Council President Michel on proposal for compromise on €750B for recovery fund. To keep size of recovery fund at €750B but to propose a reduced budget for the 2021-27 period
• Ukraine said to postpone issuance of USD-denominated bond (**Reminder: On July 1st Ukraine Central Bank Gov Smoliy resigned citing political pressure)
• Japan Chief Cabinet Suga reiterated stance that current coronavirus situation did not require emergency declaration currently. Confirmed over 100 new cases in Tokyo
• China Commerce Ministry (MOFCOM) spokesperson: To study new measures to support Hong Kong economy
• China Foreign Ministry spokesperson Zhao Lijian: Strongly opposes US sanctions regarding Hong Kong
• NIH’s Fauci stated that the Oxford covid-19 vaccine was ahead but cautioned that the world needed more than 1 vaccine. US was facing serious situation with the pandemic; country never got virus under control before re-opening

Currencies/ Fixed Income

• USD was softer against the major European FX pairs on continued optimism over a potential Covid-19 vaccine. Marlets will look to the release of US payroll data for proce action. Dealers noted a slew of FX option expirations after the data release that could prompt volatility.
• EUR/USD higher by 0.4% to probe the 1.13 level for 1-week highs. Focus remains on the upcoming negotiations of the EU Recovery Fund.
• GBP/USD rse for the 3rd straight session to retest the 1.25 level. Brexit negotiation continue with focus on a Friday press conference with chief negotiator Barnier on progress

Economic Data

• (CH) Swiss Jun CPI M/M: 0.0% v 0.1%e; Y/Y: -1.3% v -1.2%e; CPI Core Y/Y: -0.8% v -0.6%e
• (CH) Swiss Jun CPI EU Harmonized M/M: -0.1% v -0.2% prior; Y/Y: -1.3% v -1.0% prior
• (ES) Spain Jun Net Unemployment Change: +5.1K v -113.0Ke
• (HU) Hungary Apr Final Trade Balance: -€0.6B v +€0.2B prelim
• (IT) Italy May Preliminary Unemployment Rate: 7.8% v 7.9%e
• (BR) Brazil July FIPE CPI (Sao Paulo) M/M: 0.4% v 0.3%e
• UN Jun FAO World Food Price Index: :93.2 v 91.1; Y/Y: +2.3% v -1.9% prior (1st rise in 5 months)
• (EU) Euro Zone May Unemployment Rate: 7.4% v 7.7%e
• (EU) Euro Zone May PPI M/M: -0.6% v -0.4%e; Y/Y: -5.0% v -4.6%e
• (BE) Belgium May Unemployment Rate: 5.4% v 5.3% prior
• (CY) Cyprus Jun CPI M/M: -0.4% v -0.1% prior; Y/Y: -2.0% v -1.5% prior
• (ZA) South Africa Q1 Current Account Balance (ZAR): +70B v -31Be; Current Account to GDP ratio: +1.3% v -0.7%e

Fixed Income Issuance

• (ES) Spain Debt Agency (Tesoro) sold total €5.85B vs. €5.0-6.0B indicated range in 2025, 2027 and 2030 SPGB Bonds
• Sold €1.96B in 0.0% Jan 2025 SGPB bonds; Avg Yield: -0.153 v -0.075% prior; Bid-to-cover: 1.79x v 2.14x prior
• Sold €1.78B in 0.8% July 2027 SPGB; Avg yield: 0.146% v 0.620% prior; Bid-to-cover: 1.58x v 1.42x prior
• Sold €1.963B in 1.25% Oct 2030 SPGB; Avg Yield: 0.451% v 0.528% prior; Bid-to-cover: 2.06x v 3.94x prior
• (ES) Spain Debt Agency (Tesoro) sold €893M vs. €0.75-1.25B indicated range in 1.00% Nov 2030 inflation linked bonds (SPGBi); Real Yield: -0.361% v -0.720% prior; Bid-to-cover: x v 1.94x prior
• (FR) France Debt Agency (AFT) sold €11.748B vs. €10.25-11.75B indicated range in 2030, 2034, 2039 and 2054 Bonds
• Sold €5.554B in 0.00% Nov 2030 Oat; Avg Yield: -0.09% v 0.07% prior; Bid-to-cover: 2.73x v 1.91x prior (Jun 4th 2020)
• Sold€2.205B in 1.25% May 2034 Oat; Avg Yield: 0.11% v -0.09% prior; Bid-to-cover: 2.14x v 1.88x prior (Mar 5th 2020)
• Sold €1.618B in 1.75% Jun 2039 green Oat; Avg Yield: 0.31% v 0.51% prior; Bid-to-cover: 2.51x v 1.90x prior (Apr 2nd 2020)
• Sold€2.371B in 0.75% May 2052 Oat; Avg Yield: 0.64% v 0.79% prior; Bid-to-cover: 1.82x v 2.16x prior
• (UK) DMO sold £3.5B in 0.625% Jun 2025 Gilts; Avg Yield: -0.033% v +0.037% prior; bid-to-cover: 2.53x v 2.55x prior

Looking Ahead

• 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds
• 06:00 (IE) Ireland Jun Live Register Monthly Change: No est v +8.9K prior; Live Register Level: No est v 226.4K prior
• 06:30 (UK) DMO to sell £2.0B in 4.5% Sept 2034 Gilts
• 06:45 (US) Daily Libor Fixing
• 07:00 (MX) Mexico May Leading Indicators M/M: No est v -0.76 prior
• 07:00 (MX) Mexico Jun Vehicle Domestic Sales: No est v 42.0K prior
• 07:00 (ZA) South Africa May Electricity Production Y/Y: No est v -22.8% prior; Electricity Consumption Y/Y: No est v -23.3% prior
• 07:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (3-7 years)
• 08:00 (BR) Brazil May Industrial Production M/M: +6.7%e v -18.8% prior; Y/Y: -22.0%e v -27.2% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Jun Change in Nonfarm Payrolls: +3.058Me v +2.51M prior; Change in Private Payrolls: +3.00Me v +3.094M prior; Change in Manufacturing Payrolls: +438Ke v +225K prior
• 08:30 (US) Jun Unemployment Rate: 12.5%e v 13.3% prior; Underemployment Rate: No est v 21.2% prior; Labor Force Participation Rate: 61.2%e v 60.8% prior
• 08:30 (US) Jun Average Hourly Earnings M/M: -0.7%e v -1.0% prior; Y/Y: 5.3%e v 6.7% prior; Average Weekly Hours: 34.5e v 34.7 prior
• 08:30 (US) Initial Jobless Claims: 1.35Me v 1.480M prior; Continuing Claims: 19.00Me v 19.522M prior
• 08:30 (US) May Trade Balance: -$53.3Be v -$49.4B prior
• 08:30 (CA) Canada May Int’l Merchandise Trade (CAD): -3.0Be v -3.3B prior
• 08:30 (CA) Canada May MLI Leading Indicator M/M: No est v -2.8% prior
• 08:30 (CL) Chile Central Bank Meeting Minutes
• 08:30 (US) Weekly USDA Net Export Sales
• 08:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (7-20 years)
• 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 26th: No est v $567.8B prior
• 09:00 (LX) ECB’s Mersch (Luxembourg)
• 09:30 (CA) Canada Jun Manufacturing PMI: No est v 40.6 prior
• 09:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (20+ years)
• 10:00 (US) May Factory Orders: +8.6%e v -13.0% prior; Factory Orders (ex-transportation): No est v -8.5% prior
• 10:00 (US) Final Durable Goods Orders: 15.8%e v 15.8% prelim; Durables (ex-transportation): 4.0%e v 4.0% prelim; Capital Goods Orders (non-defense/ex-aircraft): 2.3%e v 2.3% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v 1.8% prelim
• 10:30 (US) Weekly EIA Natural Gas Inventories
• 11:00 (DK) Denmark Jun Foreign Reserves (DKK): No est v 455.8B prior
• 11:30 (US) Treasury to sell 4-week and 8-week bills
• 13:00 (US) Treasury to sell 3-Year Notes
• 13:00 (US) Weekly Baker Hughes Rig Count data
• 13:00 (DE) ECB’s Schnabel (Germany)
• 17:00 (KR) South Korea Jun Foreign Reserves: No est v $407.3B prior
• 18:30 (AU) Australia Jun AiG Performance of Construction Index: No est v 24.9 prior
• 19:00 (AU) Australia Jun Final PMI Services: No est v 53.2 prelim; PMI Composite: No est v 52.6 prelim
• 19:01 (UK) Jun Final GFK Consumer Confidence: -29e v -30 prelim
• 20:01 (IE) Ireland PMI Services: No est v 23.4 prior; PMI Composite: No est v 25.7 prior
• 20:30 (JP) Japan Jun Final PMI Services: No est v 42.3 prelim; PMI Composite: No est v 37.9 prelim
• 20:30 (SG) Singapore Jun PM: No est v 27.1 prior
• 21:30 (AU) Australia May Retail Sales M/M: +16.3%e v -17.7% prior
• 21:45 (CN) China Caixin Jun PMI Services: 53.0e v 55.0 prior; PMI Composite: No est v 54.5 prior
• 23:30 (TH) Thailand Jun CPI M/M: 0.4%e v 0.0% prior; Y/Y: -3.1%e v -3.4% prior; CPI Core Y/Y: 0.0%e v 0.0% prior
• 23:30 (JP) Japan to sell 3-Month Bills
• (AR) Argentina Jun Government Tax Revenue (ARS): No est v 499.5B prior
• (AR) Argentina Central Bank Survey