Awaiting Fed Chair Testimony In Congress

Notes/Observations

• Markets await testimony from Fed Chair Powell for further guidance on the recent surprise shift in the central bank’s policy outlook.

Asia:

• China’s May purchases of US goods totaled $10B (lowest since Oct 2020) and possibly signaling that the Phase 1 trade deal between US and China might be hitting a snag.
• Bank of Korea (BOK) Financial Stability Report noted that it faced larger mid-to-long term financial risks. Property prices overpriced is relative to the economy.
• North Korea Kim Yo Jong (leader Kim’s sister) stated that US had the wrong expectation of North Korea; US might interpret the situation to seek comfort for itself.

Europe:

• UK had formally started talks to join 11 nations’ trans-Pacific trading bloc.
• UK to relax travel restrictions starting in Aug, citizens who have had both doses of the Covid-19 vaccine could start more quarantine-free travel.
• Jeffrey Donaldson seeking to be the next leader of Northern Ireland DUP, pledging to put pressure on UK to ditch post-Brexit trade rules for the province agreed with the EU.

Americas:

• Fed Chair Powell prepared testimony to House released and noted that inflation had increased notably in recent months but expected to drop back towards Fed’s goals. Fed to do everything it can to support the economy for as long as it takes to complete recovery.
• Fed’s Williams (FOMC voter) noted that the economy had not improved enough to pare policy stimulus.
• White House Press Sec Psaki stated that President Biden to have discussions on an infrastructure bill.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.19% at 454.38, FTSE +0.26% at 7,082.76, DAX -0.31% at 15,555.15, CAC-40 -0.08% at 6,597.11, IBEX-35 -0.20% at 9,034.00, FTSE MIB -0.56% at 25,254.50, SMI -0.51% at 11,934.12, S&P 500 Futures -0.12%].
• Market Focal Points/Key Themes: European indices open mixed with a positive bias but slipped to trade modestly lower later in the session; sectors moving to the upside include energy and financials; sectors under pressure include technology and health care; energy sector buoyed as crude prices reach 32-month high; travel and leisure stocks supported after reports UK could ease quarantine rules for travelers; Aston Martin initiates legal action against Nebula Project; reportedly EssilorLuxottica considering ending offer for GrandVision; no major earnings scheduled for the upcoming US results.

Equities

• Consumer staples: National Express [NEX.UK] +3% (trading update; acquisition).
• Materials: Kingspan [KGP.UK] +5% (trading update).
• Financials: Morses Club [MCL.UK] +9% (trading update).
• Healthcare: Sanofi [SAN.FR] -1% (Sanofi and Translate Bio initiate Phase 1 clinical trial of mRNA Influenza vaccine), Transgene [TNG.FR] -6% (placement).
• Industrials: DS Smith [SMDS.UK] -2% (earnings).

Speakers

• ECB’s Kazimir (Estonia) stated that saw no reason to change its accommodative policy settings as it was helping the recovery.
• G20 Draft communique said to call for G20 leaders to complete the OECD technical work in July so a deal can be implemented by October.
• Germany Chancellor Merkel noted that the domestic economy came through the crisis relatively well but added that State support used during the pandemic must be an exception. State support used during the pandemic must be an exception and noted that Govt aid for companies could end in most cases. Needed new form of cooperation between State and companies as Germany needed to spend gigantic sums in the coming years. Stress the need for solid finances and getting public finances back in order in the coming years.
• German Finance Ministry commented on Q3 Funding Calendar and would sell a total of €122B in bills and bonds in the quarter. To sell €62B in bonds (amount increase by €2.0B) and sell €60B in bills.
• Poland Central Bank official Sura stated that it was too early to raise the Base Rate at the July policy meeting.
• Russia said to be considering proposing an OPEC+ output increase at the upcoming meeting hike next week as it saw a global oil supply deficit in the medium term.

Currencies/Fixed Income

• Markets await testimony from Fed Chair Powell for further guidance on the recent surprise shift in the central bank’s policy outlook. The prepared text showed he still believed the inflationary factors were transitory.
• EUR/USD holding around the 1.19 level after recent weakness as traders were now predicting an earlier-than-expected timeframe for raising interest rates after last week’s FOMC.
• Bond yields drifter slightly higher after the recent technical pullback in the reflation trade.

Economic data

• (NL) Netherlands Jun Consumer Confidence Index: -3 v -9 prior.
• (NL) Netherlands Apr Consumer Spending Y/Y: +9.4 v -0.4% prior.
• (FI) Finland May Unemployment Rate: 9.6% v 9.0% prior.
• (UK) May Public Finances (PSNCR): £21.7B v £33.5B prior; Net Borrowing: £23.6B v £24.3Be; Central Government NCR: £23.9B v £30.5B prior; PSNB (ex-banking groups): £24.3B v £25.5Be.
• (DK) Denmark Jun Consumer Confidence Indicator: 2.3 v 2.8 prior.
• (JP) Japan May Final Machine Tool Orders Y/Y: 141.9% v 140.7% prelim.
• (MY) Malaysia mid-Jun Foreign Reserves: $111.0B v $110.9B prior.
• (ZA) South Africa Apr Leading Indicator: 125.8 v 121.4 prior.
• (TR) Turkey Jun Consumer Confidence: 81.7 v 77.3 prior.
• (SE) Sweden May Unemployment Rate: 9.8% v 9.4% prior; Unemployment Rate (seasonally adj): 9.1% v 8.8%e; Trend Unemployment Rate: 9.1% v 9.1% prior.
• (IT) Italy Apr Industrial Sales M/M: 3.3% v 1.7% prior; Y/Y: 105.1% v 37.9% prior.
• (PL) Poland May Real Retail Sales M/M: 8.2% v 6.4%e; Y/Y: 13.9% v 11.4%e; Retail Sales Y/Y: 19.1% v 15.7%e.
• (PL) Poland May Construction Output Y/Y: 4.7% v 1.5%e.
• (HK) Hong Kong Q1 Current Account Balance: $59.8B v $31.2B prior; Overall Balance of Payments (BOP): $8.2B v $233.5B prior.
• (HK) Hong Kong May CPI Composite Y/Y: 1.0% v 1.1%e.

Fixed income Issuance

• (ES) Spain Debt Agency (Tesoro) opened its book to sell EUR-denominated 10-year bond via syndicate guidance seen +10bps to SPGB.
• (ID) Indonesia sold a total IDR30.0T vs. IDR30.0T target in bills and bonds.
• (NL) Netherlands Debt Agency (DSTA) sold €1.96B vs. €1.0-2.0B indicated in 4% Jan 2037 DSL Bonds; Avg Yield: 0.142% v 0.850% prior.
• (CH) Switzerland sold CHF848.5M in 3-month Bills; Avg Yield: -0.770% v -0.770% prior.

Looking Ahead

• (IL) Israel May Leading ‘S’ Indicator M/M: No est v 0.3% prior.
• 05:15 (FI) ECB’s Rehn (Finland) in Finnish Parliament Hearing.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
• 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2032, 2035, and 2040 bonds.
• 06:00 (UK) Jun CBI Industrial Trends Total Orders: 16e v 17 prior; Selling Prices: 40e v 38 prior.
• 06:00 (IE) Ireland May PPI M/M: No est v 0.4% prior; Y/Y: No est v -7.0% prior.
• 06:00 (TR) Turkey to sell 2023 and 2026 bonds.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (BR) Brazil Central Bank (BCB) Jun Copom Minutes.
• 08:00 (HU) Hungary Central Bank Interest Rate Decision: Expected to raise Base Rate by 30bps to 0.90%; Expected to leave Overnight Deposit Rate unchanged at -0.05%.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) May Philadelphia Fed Non-Manufacturing Index: No est v 36.9 prior.
• 08:30 (UR) Ukraine Q1 Final GDP Q/Q: No est v -1.1% prelim; Y/Y: -2.0%e v -2.0% prelim.
• 08:55 (US) Weekly Redbook LFL Sales data.
• 09:00 (EU) Weekly ECB Forex Reserves.
• 09:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).
• 09:00 (HU) Hungary Central Bank (MNB) Gov Matolcsy post rate decision statement.
• 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (20 years+).
• 10:00 (US) May Existing Home Sales: 5.72Me v 5.85M prior.
• 10:00 (US) Jun Richmond Fed Manufacturing Index: 18e v 18 prior.
• 10:00 (EU) Euro Zone Jun Advance Consumer Confidence: -3.1e v -5.1 prior.
• 10:00 (MX) Mexico Weekly International Reserve data.
• 10:00 (IE) ECB’s Lane (Ireland, chief economist.
• 10:30 (US) Fed’s Mester on Monetary Policy.
• 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills.
• 11:00 (CO) Colombia Apr Trade Balance: -$1.5Be v -$1.3B prior ; Total Imports: $4.7Be v $4.9B prior.
• 11:00 (US) Fed’s Daly at event.
• 13:00 (US) Treasury to sell 2-Year Notes.
• 13:30 (DE) ECB’s Schnabel.
• 15:00 (AR) Argentina May Trade Balance: $2.0Be v $1.5B prior.
• 15:00 (AR) Argentina Q1 Current Account Balance: +$0.3Be v -$1.4B prior.
• 16:30 (US) Weekly API Oil Inventories.
• 19:00 (AU) Australia Jun Preliminary PMI Manufacturing: No est v 60.4 prior; PMI Services: No est v 58.0 prior; PMI Composite: No est v 58.0 prior.
• 20:30 (JP) Japan Jun Preliminary PMI Manufacturing: No est v 53.0 prior; PMI Services: No est v 46.5 prior; PMI Composite: No est v 48.8 prior.
• 21:10 (JP) BOJ Outright Bond Purchase Operation; to buy maturities in 1~3 Years and 5~10 Years range.
• 21:30 (AU) Australia May Preliminary Merchandise Trade.
• 23:15 (AU) RBA’s Ellis in Adelaide.
• 23:30 (TH) Thailand May Customs Trade Balance: $1.0Be v $0.2B prior; Exports Y/Y: 33.5%e v 13.1% prior; Imports Y/Y: 53.4%e v 29.8% prior.