Week Begins With Some Volatility In Far East Equities

Notes/Observations

• Sparse macro-economic calendar in session.
• Global markets trying to shake off some initial risk aversion sentiment that swept Asian markets.

Asia:

• Ugandan Olympian in Tokyo has tested positive for coronavirus upon entry for Olympic games (Note: Athlete had received the AstraZeneca vaccine).
• China PBoC Monthly Loan Prime rate (LPR) Setting left both the 1-year and 5-year rates unchanged (14th consecutive month of steady rates).
• Australia Trade Min Tehan stated that would appeal to the WTO on China anti-dumping duties on wine.
• Guangdong Province, China (accounts for 10% of the economic output of China) experiencing electricity shortages and has asked factories to cut their power usage.
• Speculation that China’s counterintelligence chief Dong Jingwei defected to the US in Feb (if true would be the highest defection ever).

Europe:

• ECB chief Lagarde noted that the weekend retreat of ECB members made good progress in shaping strategy on inflation and climate goals.
• ECB’s Holzmann (Austria) reiterates Council’s stance that projections for inflation to taper off beyond 2021 suggest there is no occasion to raise interest rates.
• ECB’s Panetta (Italy) noted that a digital euro would protect consumer privacy, a key aim was to combat the spread of digital coins created by other nations and companies.
• UK Jun Rightmove House Prices registered its largest gain for this time of the year since 2015 (M/M: 0.8% v 1.8% prior).
• France far-right party of Marine Le Pen performed weaker than expected in the first round of regional elections, leaving the other parties in a strong position in next weekend’s vote.
• Fitch affirmed UK sovereign rating at AA-; outlook revised to Stable from Negative.

Energy:

• Iran and western officials have temporarily halted talks over discarded nuclear deal after Raisi was elected president (harsh critic of the west). Parties said to have taken a break to allow participants to talk to their capitals. No specific time when talks would resume.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.05% at 451.82, FTSE -0.02% at 7,015.85, DAX +0.20% at 15,479.20, CAC-40 -0.05% at 6,565.59, IBEX-35 -0.22% at 9,011.00, FTSE MIB -0.07% at 25,201.50 , SMI -0.12% at 11,926.49, S&P 500 Futures +0.36%].
• Market Focal Points/Key Themes: European indices open lower across the board but later recovered to trade mixed; better-performing sectors include health care and real estate; sectors leading to the downside include materials and financials; Greece and Ukraine closed for holiday; Auto1 moved up to MDax; Siltronic moved down to SDax; CNH to acquire Raven Industries; UK retailers higher following speculation equity firms looking to take over Morrison’s; Kerry to acquire Niacetno major earnings expected during the upcoming US session.

Equities

• Consumer discretionary: WM Morrison Supermarkets [MRW.UK] +30% (rejects offer; Amazon, Apollo set to bid), Vivendi [VIV.FR] +1% (confirms to divests 10% stake in Universal Music Group), Capita plc [CPI.UK] +6% (divestment; trading update), Prosus [PRX.NL] -2% (earnings).
• Industrials: CNH Industrial [CNH.IT] -1.5% (acquistion of Raven Industries).

Speakers

• UK Business Sec Kwarteng noted that covid restrictions were unlikely to be eased before July 19th.
• Sweden PM Lofven loses confidence vote in parliament.
• Poland Central Bank member Kochalski stated that he saw 2021 CPI just slightly above 4.0% level.
• Poland Central Bank’s Lon stated that should see signs of decrease of inflationary pressures in H2.
• Tokyo Olympics said to allow Up to 10,000 Japanese spectators at each event.
• BOJ said to purchase ¥70.1B in ETFs (1st such purchase of ETFs since Apr 21st) following a 3.3% slump in Nikkei.
• Iran Foreign Ministry spokesperson stated that the next round of nuclear talks in Vienna would likely to be the last one.

Currencies/Fixed Income

• USD began the week continued to benefit from diverging views between the Fed and ECB. Some weakness in Far East equities prompted some safe-haven flows into the greenback.
• EUR/USD tested 1.1850 as the prospect of a move toward monetary policy tightening in the US while the Euro Zone retained its ultra-accommodative policy.
• GBP/USD moved off its Asian session lows of 1.3787. The focus was on Thursday’s BOE rate decision. Markets believe the MPC could take a more hawkish view with inflation now over the target level.
• USD/JPY dipped to 109.71 after reports that a Ugandan Olympian in Tokyo had tested positive for coronavirus upon entry for the Olympic games despite having received the AstraZeneca vaccine.

Economic data

• (HU) Hungary Q1 Current Account Balance€0.5B v : €0.5Be.
• (CH) Swiss M3 Money Supply Y/Y: 4.1% v 4.9% prior.
• (TW) Taiwan May Export Orders Y/Y: 34.5% v 42.1%e.
• (CH) Swiss weekly Total Sight Deposits (CHF): 712.2B v 711.0B prior; Domestic Sight Deposits: 631.4B v 630.8B prior.
• (PL) Poland May Sold Industrial Output M/M: -0.8% v -1.5%e; Y/Y: 29.8% v 30.4%e.
• (PL) Poland May PPI M/M: 0.8% v 0.5%e; Y/Y: 6.5% v 5.9%e.
• (BE) Belgium Jun Consumer Confidence Index: 8 v 4 prior (highest since Mar 2001).

Fixed income Issuance

• None seen.

Looking ahead

• (EU) Daily ECB Liquidity Stats.
• 05:30 ((DE) Germany to sell a combined €6.0B in 6-month and 12-month BuBills.
• 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month bills.
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).
• 06:00 (IL) Israel May Unemployment Rate: No est v 5.4% prior; Unemployment Rate (including Covid Effect): No est v 10.6% prior.
• 06:00 (IL) Israel to sell 2024, 2026, 2031, 2037 and 2047 bonds.
• 06:30 (PT) ECB’s Centeno (Portugal).
• 06:45 (US) Daily Libor Fixing.
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).
• 08:30 (US) May Chicago Fed National Activity Index: 0.70e v 0.24 prior.
• 08:30 (EU) ECB chief Lagarde.
• 09:00 (FR) France Debt Agency (AFT) to sell €5.3-6.5B in 3-month, 6-month and 12-month bills.
• 09:30 (US) Fed’s Bullard on the economic outlook.
• 09:45 (EU) ECB weekly QE bond-buying update.
• 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (3-7 years).
• 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.
• 10:15 (EU) ECB chief Lagarde in European Parliament.
• 15:00 (US) Fed’s Williams at a banking conference.
• 16:00 (US) Weekly Crop Progress Report.
• 17:00 (KR) South Korea May PPI Y/Y: No est v 5.6% prior.
• 17:00 (NZ) New Zealand Q2 Consumer Confidence: No est v 105.2 prior.
• 18:01 (NL) Netherlands May House Price Index M/M: No est v 0.9% prior; Y/Y: No est v 11.5% prior.
• 19:01 (IE) Ireland Jun Consumer Confidence Index: No est v 85.8 prior.
• 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 111.0 prior.
• 22:30 (KR) South Korea to sell KRW800B in 20-Year Bonds.
• 23:00 (NZ) New Zealand May Credit Card Spending M/M: No est v 2.7% prior; Y/Y: No est v 87.4% prior.
• 23:00 (TH Thailand Central Bank to sell THB60B in 3-month bills.
• 23:30 (HK) Hong Kong to sell 3-month and 6-month bills.
• 23:35 (JP) Japan to sell 5-Year JGB Bonds.