Continued Focus On Various Cornavirus Hot-Spots

Notes/Observations

• German exports rebound in May on higher demand spurred by the lifting of lockdown measures
• China equities extending their recent rally; Shanghai Composite rises for 8th straight session to highest level since Feb 2018

Asia:

• China Jun CPI in-line with YoY at 2.5%
• BOJ quarterly Regional Economic Report (Sakura) again cut its assessment in all 9 regions due to Covid-19 (2nd straight cut)
• BOJ’s Kuroda reiterated stance that would not hesitate to ease further if its needed , economy seen in a severe state- Australia PM Morrison announced end of extradition treaty with Hong Kong.

Coronavirus:

• Total global cases 12,012,720 (+1.8% d/d); Total deaths: 548.9Ke (+1.0% d/d)
• Continued focus on hotspots:
• Australia: Melbourne entering a six-week lockdown; Tasmania extended its state of emergency until end of Aug; Queensland closed border with Victoria
• Japan’s Tokyo reported record high of 220 new cases (prior was 106 and reading have been above the 100 level since July 2nd)
• Hong Kong govt to tighten social distancing; to limit restaurant party sizes to 8 people; effective July 11th (Note: HK local cases was 34 (most since pandemic began)

Europe:

• UK public borrowing to exceed £350B with Sunak stimulus plan
• UK could soften demand for annual negotiations over fishing opportunities. Suggestion being the latest sign that a compromise deal could be found

Americas:

• Fed’s Rosengren (hawk, non-voter) saw more US businesses needing rescue, Main Street lending facility might need to be extended
• Fed’s Bullard (non-voter): still pretty optimistic about outlook despite resurgence in COVID infections. Believed unemployment could be below 8% by end of the year noting that this shock was nothing like previous postwar shocks. Most people could get recalled to jobs in the next 90 days

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.42% at 368.02, FTSE -0.25% at 6,140.50, DAX +1.28% at 12,655.30, CAC-40 +0.25% at 4,993.52, IBEX-35 -0.10% at 7,319.00, FTSE MIB -0.20% at 19,860.50, SMI +0.45% at 10,224.50, S&P 500 Futures -0.09%]
• Market Focal Points/Key Themes: European indices open generally higher, fluctuating modestly in the green as the session progressed; tech companies supported after SAP earnings release yesterday; other better performing sectors include financials and health care; utilities sector lead to the downside; France FinMin sees 2020 GDP -11%; earnings expected during the upcoming US session include Delta Airlines and Walgreens Boots Alliance

Equities

• Consumer discretionary: boohoo.com [BOO.UK] +24% (Initial inspections of Boohoo operations by independent investigator finds no modern slavery offences), Persimmon [PSN.UK] +5% (trading update), PageGroup [PAGE.UK] +1% (trading update)
• Industrials: Rolls-Royce [RR.UK] -7% (trading update)
• Technology: SAP [SAP.DE] +8% (prelim earnings)
• Utilities: National Grid [NG.UK] -3% (statement)

Speakers

• ECB’s Villeroy (France) sent a letter to the French President and reiterated stance that ECB was prepared to be innovative with tools if necessary. He stressed that France should aim to stabilize taxes and not cut them
• UK Chancellor of the Exchequer Sunak (Fin Min): Shape of economic recovery will not be known for some time. Priority was to generate activity in housing market (**Note: in-line with recent summer budget statement). Next stage of reopening plan to come soon
• France Fin Min Le Maire stated that govt maintained its 2020 GDP forecast of -11.0%
• Bank of Italy Monthly Report `Money and Banks’: Bad loans at €71.2B v €71.1B m/m
• German VDMA Engineering association: Many mechanical engineering companies expect sales growth again in 2021
• IFS Institute for Fiscal Studies: UK FY20/21 Budget Deficit could hit £350B
• Hong Kong govt to tighten social distancing; to limit restaurant party sizes to 8 people
• China Foreign Ministry spokesperson Zhao Lijian: ‘Fed up’ with US Sec of State Pompeo’s comments which was making up fake news to smear China

Currencies/Fixed Income

• USD was off its softest levels of the session as market participants continued to weigh stimulus efforts by central banks and governments against concerns about rising coronavirus cases in various hotspots around the globe.
• EUR/USD at 1.1325 after testing above 1.1370 in Asia trading. European Finance Ministers (Eurogroup) to meet later today but the focus appears to be selecting a new chief. German exports orders rebounded in may but did miss expectations
• GBP/USD was approaching the mid 1.26 area as dealers noted the UK fiscal stimulus to prop up the economy post-lockdown did not increase the country’s borrowing needs for the current fiscal year

Economic Data

• (DE) Germany May Current Account Balance: €6.5B v €10.0Be; Trade Balance: €7.1B v €7.0Be; Exports M/M: +9.0% v +14.0%e; Imports M/M: +3.5% v +12.4%e
• (FI) Finland May Preliminary Trade Balance: -€0.3B v +€0.1B prior
• (NO) Norway Q2 House Price Index Q/Q: +1.1% v -0.1% prior
• (DK) Denmark May Current Account Balance (DKK): 13.3B v 16.9B prior; Trade Balance: 9.2B v 8.5B prior
• (JP) Japan Jun Preliminary Machine Tool Orders Y/Y: -32.0% v -52.8% prior
• (CZ) Czech Jun Unemployment Rate: 3.7% v 3.7%e
• (HU) Hungary May Preliminary Trade Balance: +0.2€B v -€0.6B prior
• (SE) Sweden May Household Consumption M/M: +1.2% v -6.6% prior; Y/Y: -9.7% v -10.7% prior
• (CZ) Czech Jun International Reserves: $150.9B v $150.5B prior
• (GR) Greece Apr Unemployment Rate: 15.5% v 14.5% prior

Fixed Income Issuance

• (UK) DMO sold £900M in 0.125% Aug 2041 Inflation-linked Gilts (UKTei); Real Yield: -2.434% v -1.8784% prior; Bid-to-cover: 2.19x
• (IE) Ireland Debt Agency (NTMA) sold total €B vs. €1.0-1.5B indicated range in 2027, 2030 and 2050 IGB Bonds

Looking Ahead

• (UR) Ukraine Jun CPI M/M: 0.1%e v 0.3% prior; Y/Y: 2.0%e v 1.7% prior
• 05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds
• 05:30 (PL) Poland to sell Bonds
• 05:30 (IE) Ireland Debt Agency (NTMA) to sell €1.0-1.5B in 2027, 2030 and 2050 IGB Bonds
• 06:00 (IE) Ireland Jun CPI M/M: No est v -0.5% prior; Y/Y: No est v -0.5% prior
• 06:00 (IE) Ireland Jun CPI EU Harmonized M/M: No est v -0.8% prior; Y/Y: No est v -0.6% prior
• 06:00 (RO) Romania to sell RON300M in 4.15% 2030 Bonds
• 06:45 (US) Daily Libor Fixing
• 07:00 (MX) Mexico Jun CPI M/M: 0.4%e v 0.4% prior; Y/Y: 3.2%e v 2.8% prior; CPI Core M/M: 0.3%e v 0.3% prior
• 07:00 (ZA) South Africa Apr Manufacturing Production M/M: -30.9%e v -1.2% prior; Y/Y: -43.3%e v -5.4% prior
• 07:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (3-7 years)
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:15 (CA) Canada Jun Annualized Housing Starts: 185.0Ke v 193.5K prior
• 08:30 (US) Initial Jobless Claims: 1.38Me v 1.427M prior; Continuing Claims: 1.875Me v 19.290M prior
• 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 July 3rd: No est v $568.3B prior
• 09:00 (EU) European Finance Ministers (Eurogroup) meeting (to elect new chief)
• 09:00 (EU) ECB chief Lagarde
• 09:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (20+ years)
• 10:00 (US) May Final Wholesale Inventories M/M: -1.2%e v -1.2% prelim; Wholesale Trade Sales M/M: +4.5%e v -16.9% prior
• 10:00 (MX) Mexico Central Bank (Banxico) Jun Minutes
• 10:30 (US) Weekly EIA Natural Gas Inventories
• 11:30 (US) Treasury to sell 4-week and 8-week Bills
• 12:00 (US) Fed’s Bostic participates in webinar on fiscal policy
• 12:00 (CA) Canada to sell 10 Year Bonds
• 13:00 (US) Treasury to sell $19B in 30-year bonds
• 18:00 (NZ) New Zealand Govt 11-Month Financial Statements
• 18:45 (NZ) New Zealand Jun Total Card Spending M/M: No est v 80.7% prior; Retail Card Spending M/M: 15.0%e v 78.9% prior
• 19:00 (PE) Peru Central Interest Rate Decision: expected to leave Reference Rate unchanged at 0.25%
• 19:50 (JP) Japan Jun PPI M/M: +0.3%e v -0.4% prior; Y/Y: -2.0%e v -2.7% prior
• 21:00 (PH) Philippines May Trade Balance -$0.6Be v -$0.5B prior; Exports Y/Y: -47.4%e v -50.8% prior; Imports Y/Y: -64.3%e v -65.3% prior
• 21:10 (JP) BOJ Outright Bond Purchase operation for1~3 Years; 5~10 Years and 25 Years~ maturities
• 23:00 (CN) China to sell 3-month bills
• 23:00 (CN) China to sell 30-year Upsized Government Bond
• 23:30 (JP) Japan to sell 3-Month Bills