EU Confidence Data Continues To Improve

Notes/Observations

• Confidence data in Europe continued to improve aided by the gradual opening of the economy after the lockdown (both Germany and Italy beat expectations).

Asia:

• Japan Jun Tokyo CPI Y/Y: 0.0% v -0.3%e.
• RBA Gov Lowe Jun 30th (Wed) appearance at the Australian Banking Association (ABA) Banking Conference had been postponed citing the Sydney coronavirus outbreak.

Europe:

• ECB’s Schnabel (Germany) stated that the Euro Zone economy was now at a turning point with incoming indicators being very strong. To everything to avoid ending support too soon but maybe should be more worried about fiscal policy support ended prematurely.
• ECB’s Weidmann (Germany) stated that he saw no need for Germany to suspend its debt break again in 2022. Believed Germany growth forecasts for this and next year were too pessimistic.

Americas:

• President Biden announced a deal on approx. $1.0T infrastructure with a bipartisan group of senators.
• Biden said to face a long march to pass two massive spending bills. Congress to likely to work through its August recess and probably well into the fall.
• Federal Reserve: All 23 banks stayed above minimum capital levels in stress tests; additional restrictions put in place during the COVID event would end.
• Mexico Central Bank (Banxico) raised the Overnight Rate by 25bps to 4.25%.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.03% at 11,989.60, FTSE +0.12% at 7,118.44, DAX -0.16% at 15,564.75, CAC-40 -0.17% at 6,620.07, IBEX-35 -0.25% at 9,051.00, FTSE MIB +0.17% at 25,464.50, SMI -0.03% at 11,989.60, S&P 500 Futures +0.08%].
• Market Focal Points/Key Themes: European indices open mixed and failed to gain direction as the session wore on; better-performing sectors include materials and financials; while sectors among those trending to the downside are industrials and utilities; Finland and Sweden closed for holidays; Nike earnings yesterday support apparel sector; focus on the conclusion of European Council meeting; reportedly Credit Suisse considering a merger with UBS; earnings expected in the upcoming US session include Carmax and Paychex.

Equities

• Consumer discretionary: Adidas [ADS.DE] +5%, Puma [PUM.DE] +2% (Nike earnings and outlook).
• Financials: Credit Suisse [CSGN.CH] +2% (top management is under pressure to present overhaul plan).
• Healthcare: UDG Healthcare [UDG.UK] +1.5% (may get increased offer).
• Technology: Logitech [LOGN.CH] -3% (analyst downgrade).

Speakers

• ECB chief Lagarde stated that she would discuss the recovery of Europe and the need for fiscal policy.
• Eurogroup chief Donohoe (Ireland) stated that was making progress on the banking union but more work is needed.
• Poland Central Bank’s Gartner A 15bps hike could signal the beginning of a gradual, mild normalization of monetary policy and would be a signal of the MPC’s commitment.
• Turkey Fin Min Elvan 2021 GDP growth to be above govt forecasts. To take more measures against inflation if necessary. The country needed lower inflation and FX stability.
• S&P affirmed China sovereign rating at A+; outlook stable.

Currencies/Fixed income

• USD steady but analysts noted better US data later in today’s session could reinforce expectations that inflation would accelerate and the Fed would respond by tightening its policies. Greenback was initially softer after an agreement on US infrastructure spending underpinned risk appetite.
• EUR/USD at 1.1940 in quiet trading.
• GBP faced headwinds after BOE warned on Thursday against premature tightening, GBP/USD back at 1.39 level after testing 1.3850 during Asia.

Economic data

• (DE) Germany July GfK Consumer Confidence: -0.3 v -4.0e.
• (DK) Denmark May Retail Sales M/M: +0.9% v -6.5% prior; Y/Y: 6.4% v 9.7% prior.
• (ES) Spain May PPI M/M: 1.6% v 3.0% prior; Y/Y: 15.3% v 13.0% prior.
• (CN) Weekly Shanghai copper inventories (SHFE): 153.8K v 172.5K tons prior.
• (EU) Euro Zone May M3 Money Supply Y/Y: 8.4% v 8.5%e.
• (IT) Italy Jun Consumer Confidence Index: 115.1 v 112.0e; Manufacturing Confidence: 114.8 v 112.0e; Economic Sentiment: 112.8 v 106.7 prior.
• (TR) Turkey May Foreign Tourist Arrivals Y/Y: 3,038.8% v 3,162.0% prior.
• (RU) Russia Narrow Money Supply w/e Jun 18th (RUB): 14.14T v 14.14T prior.

Fixed income issuance

• (IT) Italy Debt Agency (Tesoro) sold €2.75B vs. €2.25-2.75B indicated range in 0.00% Nov 2022 CTZ; Avg Yield: -0.370% v -0.330% prior; bid-to-cover: 1.58x v 1.45x prior.
• (IT) Italy Debt Agency (Tesoro) sold €1.0B vs. €0.75-1.0B indicated in 0.15% May 2051 Inflation-Linked bonds (BTPei); Real Yield: 0.47% v 0.39%; bid-to-cover: 1.30x v 1.35x prior.

Looking ahead

• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (IN) India to sell combined INR260B in 2023, 2030, and 2061 bonds.
• 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2025, 2038, and 2046 Bonds.
• 06:00 (UK) DMO to sell £2.5B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.5B respectively).
• 06:00 (UK) Jun CBI Retailing Reported Sales: 11e v 18 prior; Total Distribution: No est v 43 prior.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (IN) India announces upcoming bill issuance (held on Wed); to sell combined INR360B in 3-month, 6-month, and 12-month Bills on Jun 30th.
• 07:00 (MX) Mexico Apr IGAE Economic Activity Index (Monthly GDP) M/M: 0.3%e v 2.6% prior; Y/Y: 21.7%e v 0.8% prior.
• 07:00 (BR) Brazil Jun FGV Construction Costs M/M: No est v 1.8% prior.
• 07:30 (IN) India Weekly Forex Reserve w/e Jun 18th: No est v $608.1B prior.
• 07:30 (IS) Iceland to sell 5.0% Nov 2028 RIKB Bonds.
• 08:00 (BR) Brazil mid-Jun IBGE Inflation IPCA-15 M/M: 0.9%e v 0.4% prior; Y/Y: 8.2%e v 7.3% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond issuance.
• 08:30 (US) May Personal Income: -2.5%e v -13.1% prior; Personal Spending: 0.4%e v 0.5% prior; Real Personal Spending (PCE): -0.1%e v -0.1% prior.
• 08:30 (US) May PCE Deflator M/M: 0.5%e v 0.6% prior; Y/Y: 3.9%e v 3.6% prior.
• 08:30 (US) May PCE Core Deflator M/M: 0.6%e v 0.7% prior; Y/Y: 3.4%e v 3.1% prior.
• 08:30 (BR) Brazil May Current Account Balance: $3.9Be v $5.7B prior; Foreign Direct Investment (FDI): $2.5Be v $3.5B prior.
• 10:00 (US) Jun Final University of Michigan Confidence: 86.5e v 86.4 prelim.
• 11:00 (EU) Potential sovereign ratings after the European close.
• 11:35 (US) Fed’s Mester Speaks at Fed Conference on Economic Resilience.
• 13:00 (US) Weekly Baker Hughes Rig Count.
• 13:00 (US) Fed’s Rosengren Discusses Financial Stability.