Notes/Observations
- Sino-US relations remain on the front burner; China retaliates for its Houston consulate closure
- Major European PMI data returns to expansion territory (Beats: Germany, Euro Zone; Misses: France)
- UK Jun retail sales data beats expectations putting some hope for a V-shape recovery but analysts note it did represent the entire consumer spending basket
Asia:
- China ordered closure of US consulate in Chengdu (as speculated) in retaliation for Houston consulate’s closure
- Australia July Preliminary PMI Manufacturing registered its 2nd straight expansion (53.4 v 51.2 prior)
Coronavirus:
- Total global cases 15,446,800 (+1.4% d/d); Total deaths: 632.2K (+1.4% d/d)
Americas:
- Republican Senate majority leader Mc’Connell said to have delayed announcement of the next $1.0T stimulus package amid disagreements with the Trump administration; announcement now set to come next week at the earliest
- US Sec of State Pompeo stated that China President Xi had clearly taken actions that considered aggressive and was a true believer in bankrupt totalitarian ideology. China’s military was growing stronger and more menacing. China walked away from promises on Hong Kong and reiterated that Huawei was a true national security threat. He also believed US-China trade deal would be complied with by both sides
- President Trump announced to cancel GOP convention in Jacksonville, FL; timing of a big GOP convention in Florida was not right citing need to protect the American people
- Fed announced yesterday it would broaden the set of firms eligible to serve as counterparties in the Term Asset-Backed Securities Loan Facility (TALF)
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -1.80% at 366.92, FTSE -1.44% at 6,122.03, DAX -1.52% at 10,225.52, CAC-40 -1.65% at 4,950.87, IBEX-35 -1.38% at 7,283.00, FTSE MIB -1.77% at 20,092.50, SMI -1.53% at 10,224.15, S&P 500 Futures -0.37%]
- Market Focal Points/Key Themes: European indices open down across the board and continued lower as the session progressed; negative sentiment attributed to US-China tensions; better performing sectors include energy and utilities; underperforming sectors include technology and health care; Airbus agrees to amend credit agreement with France and Spain over WTO dispute; Frasers latest UK clothing retailer accused of underpaying workers; Centrica announces sale of Direct Energy unit; ECB asks Italy treasury increase in capitalization of Banca Monte dei Paschi; earnings expected in the upcoming US session include Schlumberger, American Express and Verizon
Equities
- Consumer discretionary: Pearson [PSON.UK] -4% (earnings), International Consolidated Airlines [IAG.UK] -2% (agreement with America Express), Lonza Group [LONN.CH] -1.5% (earnings), Electrolux [WLUXB.SE] -5% (earnings), Jungheinrich [JUN3.DE] -5% (analyst action)
- Energy: Centrica [CNA.UK] +20% (earnings; divestment)
- Technology: Signify [LIGHT.NL] +4% (earnings)
- Telecom: Vodafone [VOD.UK] -4% (trading update)
Speakers
- EU Economic Commissioner Gentiloni (Italy): EU recovery fund payments to begin in H2 of 2021; countries could use a tenth in anticipation of the plan’s approval. Bloc would have to approve new resources, such as the digital tax and the CO2 tax, to repay the common debt between 2026 and 2056.
- EU countries said to consider coordinated package to support Hong Kong. Steps could include curbs on police-gear exports and more scholarships
- EU trade chief Hogan urged the US to remove trade penalties over subsidies to Airbus
- Ireland was said to see lack of progress in North Ireland protocol as part of Brexit deal
- Ireland Debt Agency (NTMA) on 2020 issuance: Bond funding seen at upper end of €20-24B range
- Japan PM Abe reiterated view of no need to declare a state of emergency regarding the virus outbreak
- China govt official stated that US Chendu staff harmed China’s national security; US was totally responsible for current bilateral situation
Currencies/Fixed Income
- Risk aversion sentiment dominated the session after China’s foreign ministry told the U.S. embassy to close its consulate in the city of Chengdu. Dealers noted of growing evidence of a new approach toward risk sentiment from currency traders was emerging as the greenback was not participating in safe-haven flows.
- USD remained on the defensive and did not participate in any safe-haven flows in the session. Dealers noted that greenback has been hampered by US handling of the coronavirus pandemic. US has fared far worse compared to other countries with concerns over the growth divergence between the US and the rest of the world. USD poised for its worst month since the beginning of 2018
- GBP seemed to shrug off the latest negative Brexit headlines as dealers seem to assume the UK and EU would agree a trade deal. UK Jun retail sales data beats expectations putting some hope for a V-shape recovery
- Safe haven flows benefitted that JPY currency (yen) it rose to a one-month high against the USD. Pair at 106.30 by mid-session.
- Spot gold continued its bull run and was edging towards the psychological level of $1,900 a troy ounce. The recent spike in US-China tensions is adding some support to gold’s rally
Economic Data
- (FI) Finland Jun PPI M/M: 1.8% v 0.0% prior; Y/Y: -4.4% v -7.1% prior
- (UK) Jun Retail Sales (ex-auto/fuel) M/M: 13.5% v 7.9%e; Y/Y: +1.7% v -3.7%e
- (UK) Jun Retail Sales (includes auto/fuel) M/M: 13.9% v 8.3%e; Y/Y: -1.6% v -5.9%e
- (ES) Spain May Total Mortgage Lending Y/Y: % v -17.8% prior; House Mortgage Approvals Y/Y: % v -18.4% prior
- (ES) Spain Jun PPI M/M: +2.0% v -0.4% prior; Y/Y: -6.1% v -8.8% prior
- (CZ) Czech July Business Confidence: -3.7 v -16.1 prior; Consumer Confidence Index: -10.5 v -13.0 prior; Composite Index (Consumer & Business Confidence): -5.1 v -15.5 prior
- (AT) Austria May Industrial Production M/M: +9.2% v -14.8% prior; Y/Y: -13.5% v -21.3% prior
- (FR) France July Preliminary PMI Manufacturing: 52.0 v 53.0e (2nd month of expansion); PMI Services: 57.8 v 52.4e; PMI Composite: 57.6 v 53.5e
- (DE) Germany July Preliminary PMI Manufacturing: 50.0 v 48.0e (1st non-contraction in 19 months and highest reading since Dec 2018); PMI Services: 56.7 v 50.5e; PMI Composite: 55.5 v 50.2e
- (SE) Sweden Jun PPI M/M: -0.2% v -0.9% prior; Y/Y: -3.8% v -3.8% prior
- (CN) Weekly Shanghai copper inventories (SHFE): 157.7K v 158.7K tons prior
- (EU) Euro Zone July Preliminary PMI Manufacturing: 51.1 v 50.1e (1st expansion in 18 months); PMI Services: 55.1 v 51.0e; PMI Composite: 54.8 v 51.1e
- (IT) Italy July Consumer Confidence Index: 100.0 v 103.3e; Manufacturing Confidence: 85.2 v 86.0e; Economic Sentiment: 76.7 v 66.2 prior
- (RU) Russia Narrow Money Supply w/e July 17th (RUB): 13.08T v 12.98T prior
- (TW) Taiwan Jun M2 Money Supply Y/Y: 5.4% v 4.2% prior; M1 Money Supply Y/Y: 9.9% v 7.8% prior
- (UK) July Preliminary PMI Manufacturing: 53.6 v 52.0e (2nd straight expansion); PMI Services: 56.6 v 51.5e; PMI Composite: 57.1 v 51.7e
- (IS) Iceland July CPI M/M: % v 0.4% prior; Y/Y: % v 2.6% prior
Fixed Income Issuance
- (IN) India sold total INR340B vs. INR300B indicated in 2025, 2034 and 2050 bonds
Looking Ahead
- 05:30 (ZA) South Africa to sell combined ZAR2.0B in I/L 2025, 2046 and 2050 Bonds
- 06:00 (UK) DMO to sell £3.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £2.0B respectively)
- 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: expected to cut 1-Week Auction Rate by 50bps to 4.00%
- 06:45 (US) Daily Libor Fixing
- 07:00 (MX) Mexico May IGAE Economic Activity Index (Monthly GDP) M/M: -1.0%e v -17.3% prior; Y/Y: -20.3%e v -19.9% prior
- 07:00 (BR) Brazil July FGV Consumer Confidence Index: No est v 71.1 prior
- 07:30 (IN) India Weekly Forex Reserve w/e XXX: No est v $516.4B prior
- 08:00 (BR) Brazil Mid-July IBGE Inflation IPCA-15 M/M: 0.5%e v 0.0% prior; Y/Y: 2.4%e v 1.9% prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:00 (RU) Russia Central Bank (CBR) Nabiullina post rate decision press conference
- 08:00 (IN) India announces upcoming bill issuance (held on Wed)
- 08:00 (ES) Spain Debt Agency (Tesoro) upcoming announcement on bond issuance
- 09:00 (BE) Belgium July Business Confidence: -14.0e v -22.9 prior
- 09:00 (CL) Chile Jun PPI M/M: No est v -0.9% prior
- 09:45 (US) Markit July Preliminary PMI Manufacturing: 52.0e v 49.8 prior; PMI Services: 51.0e v 47.9 prior; PMI Composite: No est v 47.9 prior
- 10:00 (US) Jun New Home Sales: 700Ke v 676K prior
- 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Finland Sovereign Debt; S&P on Slovakia, Turkey and Sovereign Debt; Fitch on Czech Republic and Greece Sovereign Deb; Canadian rating agency DBRS on Netherlands Sovereign Debt)
- 13:00 (US) Weekly Baker Hughes Rig Count
