USD Begins New Quarter On Firm Footing

Notes/Observations

• Major European PMI Manufacturing remained in expansionary territory (Beats: Euro Zone, Germany. France, Spain; Misses: UK; in-line: Italy).
• Continued concern over the spread of the highly contagious Delta variant of the coronavirus which threatened the global reopening narrative.
• BOE Gov Bailey warned against over-reaction to rising UK inflation.
• Focus on OPEC+ meeting today, US Payroll data on Fri (tomorrow).

Asia

• Australia Jun Final PMI Manufacturing confirmed its 12th month of expansion and a record high: 58.6 v 58.4 prelim.
• China Jun Caixin PMI Manufacturing registered its 14th month of expansion (51.3 v 51.9e).
• Japan Jun Final PMI Manufacturing confirmed its 5th straight expansion (52.4 v 51.5 prelim).
• Japan Q2 Tankan Large Manufacturing Index: 14 v 16e; Outlook Survey: 13 v 18e.
• South Korea Jun Trade Balance: $4.4B v $4.9Be; Exports Y/Y: 39.7% v 33.8%e; Imports Y/Y: 40.7% v 33.6%e.
• Australia May Trade Balance: A$9.7B v A$10.5Be.
• Japan Chief Cabinet Sec Kato refuted speculation and stated that the gov’t was considering extra budget or economic measures at this time. Would judge whether to compile additional stimulus package with eye on economic outlook and people’s livelihoods.
• Japan FY20/21 Tax Rev >¥60T to a record high and above the ¥55.1T Govt forecasts. Sales tax receipts were over ¥20T for the 1st time.
• South Korea formally proposed KRW33T extra budget (as speculated).

Europe

• Ireland Central Bank Quarterly Report raised 2021 and 2022 GDP growth forecast. Raised 2021 GDP growth forecast from 5.9% to 8.3% and 2022 GDP growth forecast from 4.7% to 5.4%.
• Britain said to be set to get an exemption for financial services from new global rules on taxing multinational firms.
• Turkey Central Bank (CBRT) raises FX reserve Requirement ratios by 200bps.

Americas

• Big tech companies said to be lobbying moderate Democrats and set on fighting new regulations that could lead to the dissolution of big tech firms.

Energy

• OPEC+ said to likely make a small increase in oil production at its scheduled meeting later today (Thus, July 1st). Russia said to see current oil price of ~$75/barrel as a sign of overheating, prompting them to support a further increase in production by OPEC+.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.66% at 455.82, FTSE +1.02% at 7,109.18, DAX +0.84% at 15,662.05, CAC-40 +0.75% at 6,556.73, IBEX-35 +1.17% at 8,924.00, FTSE MIB +0.94% at 25,338.50, SMI +0.18% at 11,962.01, S&P 500 Futures +0.21%].
• Market Focal Points/Key Themes: European indices open generally higher and stayed broadly in the green as the session advanced; sectors leading to the upside consumer discretionary and financials; while indutrials and real estate among underperforming sectors; AG Gruppen and Aker solutions to merge offshore decom operations; Partners group acquires minority stake in Apex; earnings expected in the upcoming US session include Walgreens Boots and McCormick.

Equities

• Consumer discretionary: Associated British Foods [ABF.UK] +4% (trading update), Villeroy & Boch [VIB3.DE] +7% (raises outlook), JD Sports Fashion [JD.UK] +2% (trading update), Sodexo [SW.FR] +5% (Q3 sales), H&M [HMB.SE] -2% (earnings).
• Energy: Nordex [NDX1.DE] -11% (rights issue).
• Technology: Micro Focus International [MCRO.UK] -4% (earnings).

Speakers

• ECB chief Lagarde was in EU Parliament and noted that the rapid progress in vaccination campaigns had reduced the probability of severe scenarios but uncertainty remained due to mutations of the virus.
• ECB’s de Cos (Spain) noted that it was unclear how Euro consumers would spend their savings.
• ECB said to hold special meeting on strategy review on Tuesday, July 6th (**Reminder: On June 22nd ECB Strategy Review said to be in the final stages but policymakers said to be some way apart on its new inflation strategy.
• BOE Gov Bailey reiterated stance that inflation uptick seen as transitory; should not overreact to the temporary rise in CPI. Shift towards services consumption would curb prices and that supply chain bottlenecks should be temporary.
• Sweden Central Bank (Riksbank) policy Statement reiterates its forward guidance that the Repo Rate to remain at current level in coming years. To continue to purchase assets within the window of SEK700B. Envelop to be fully utilized by end-2021; size of holding to be maintained until at least end-2022. Reiterated stance that was possible to cut the Repo Rate or make monetary policy more expansionary if confidence in the inflation target were under threat.
• UK Chancellor of the Exchequer Sunak (Fin Min) stated that a Brexit deal on finance equivalence had not happened.
• Germany Health Min Spahn stated that the Delta variant of the virus set to account for 70-80% of all cases in Germany in July.

Currencies/ Fixed income

• USD aided by recent data out of the US and concerns over the virus variant impact on global reopening. Dealers noted the stronger greenback endorsing the Fed’s data-dependent approach thus raising the prospect of tighter monetary policy. Friday’s US non-farm payrolls highly anticipated following the recent ADP employment data.
• Euro at 3-month low as pair tests below 1.1840 in the session. Euro could not find any upside momentum despite continued better economic data from the region.
• GBP/USD tested below 1.38 level for 2 1/2 month lows after BOE Gov Bailey warned against over-reaction to rising UK inflation.

Economic data

• (DE) Germany May Retail Sales M/M: 4.2% v 4.6%e; Y/Y: -2.4% v -1.0%e.
• (RU) Russia Jun PMI Manufacturing: 49.2 v 51.7e (1st contraction in 6 months).
• (SE) Sweden Jun PMI Manufacturing: 65.8 v 66.0 prior.
• (CH) Swiss Jun CPI M/M: 0.1% v 0.2%e; Y/Y: 0.6% v 0.7%e; CPI Core Y/Y: 0.3% v 0.3%e.
• (CH) Swiss Jun CPI EU Harmonized M/M: 0.0% v 0.2% prior; Y/Y: 0.5% v 0.3% prior.
• (CH) Swiss May Real Retail Sales Y/Y: 2.8% v 37.7% prior.
• (NL) Netherlands Manufacturing PMI: 68.8 v 68.8e (11th straight expansion).
• (HU) Hungary Jun Manufacturing PMI: 54.7 v 55.0e (3rd straight expansion).
• (PL) Poland Jun PMI Manufacturing: 59.4 v 57.1e (11th straight expansion and a record high).
• (TR) Turkey Jun PMI Manufacturing: 51.3 v 49.3 prior (moves back into expansion).
• (ES) Spain Manufacturing PMI: 60.4 v 59.6e (5th month of expansion and highest since Apr 1998).
• (SE) Sweden Central Bank (Riksbank) left the Repo Rate unchanged at 0.00% (as expected).
• (CH) Swiss Jun PMI Manufacturing: 66.7 v 69.3e (11th straight expansion).
• (CZ) Czech Republic Jun PMI Manufacturing: 62.7 v 62.1e (10th straight expansion and record high).
• (TH) Thailand Jun Business Sentiment Index: 46.5 v 43.0 prior.
• (IT) Italy Jun Manufacturing PMI: 62.2 v 62.2e (12th month of expansion).
• (FR) France Jun Final PMI Manufacturing: 59.0 v 58.6e (confirmed 7th month of expansion).
• (DE) Germany Jun Final PMI Manufacturing: 65.1 v 64.9e (confirmed 12th month of expansion).
• (EU) Euro Zone Jun Final PMI Manufacturing: 63.4 v 63.1e (confirmed 12th month of expansion).
• (GR) Greece Jun Manufacturing PMI: 58.6 v 58.0 prior (4th month of expansion).
• (NO) Norway Jun PMI Manufacturing: 60.8 v 58.5 prior (10th month of expansion).
• (IT) Italy May Preliminary Unemployment Rate: 10.5% v 10.7%e.
• (UK) Jun Final PMI Manufacturing: 63.9 v 64.2e (confirms 13th straight expansion).
• (EU) Euro Zone May Unemployment Rate: 7.9% v 8.0%e.
• (BE) Belgium May Unemployment Rate: 6.5% v 6.7% prior.
• (IT) Italy Q1 YTD Budget Deficit to GDP Ratio: 13.1% v 9.5% prior.
• (DK) Denmark Jun PMI Survey: 62.1 v 63.1 prior (4th straight expansion).
• (ZA) South Africa Jun Manufacturing PMI: 57.4 v 56.5e (14th month of expansion).

Fixed income Issuance

• (ES) Spain Debt Agency (Tesoro) sold total €4.739B vs. €4.0-5.0B indicated range in to sell 2026, 2028 and 2050 bonds.
• Sold €1.878B in 0.0% Jan 2026 SPGB bonds; Avg Yield: -0.245% v -0.247% prior; bid-to-cover: 1.99x v 1.60x prior.
• Sold €1.652B in 1.40% July 2028 SPGB bonds; Avg yield: 0.036% v 0.024% prior, Bid-to-cover: 1.80x v 2.20x prior.
• Sold €1.209B in 1.00% Oct 2050 SPGB Avg Yield: 1.404% v 1.405% prior; bid-to-cover: 1.56x v 1.25x prior.
• (ES) Spain Debt Agency (Tesoro) sold €547M vs. €250-750M indicated range in 0.70% Nov 2033 inflation-linked bonds (SPGBi); Real Yield: -0.739% v -0.802% prior; Bid-to-cover: 1.77x v 1.58x prior (May 6th 2021).
• (FR) France Debt Agency (AFT) sold total €10.92B vs. €10.0-11.0B indicated range in 2030, 2031, 2036 and 2040 Bonds.
• Sold €2.794B in 0.00% Nov 2030 Oat; Avg Yield: +0.03% v -0.07% prior; Bid-to-cover: 2.38x v 2.05x prior (Mar 4th 2021).
• Sold €4.176B in 0.0% Nov 2031 Oat; Avg Yield: 0.13% v 0.16% prior; Bid-to-cover: 2.14x v 1.98x prior (Jun 3rd 2021).
• Sold €2.203B in 1.25% May 2036 Oat; Avg Yield: 0.42% v 0.05% prior; Bid-to-cover: 2.45x v 2.71x prior (Feb 4th 2021).
• Sold €1.999B in 0.50% May 2040 Oat; Avg Yield: 0.62% v 0.62% prior; bid-to-cover: 2.33x v 2.51x prior (May 6th 2021).
• (UK) DMO sold £3.5B in 0.25% Jan 2025 Gilt; Avg Yield: +0.281% v -0.049% prior; bid-to-cover: 2.34x v 2.25x prior; Tail: 0.1bps v 0.4bps prior.

Looking ahead

• OPEC+ meeting.
• (IT) Italy Jun Budget Balance: No est v -€15.1B prior.
• (ZA) South Africa Jun Naamsa Vehicle Sales Y/Y: +28.1%e v 197.8% prior.
• (RO) Romania Jun International Reserves: No est v $42.8B prior.
• (US) Total Vehicle Sales to be released in session.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (NL) ECB’s Elderson (Netherlands, SSM member).
• 06:45 (US) Daily Libor Fixing.
• 07:00 (ZA) South Africa May Electricity Production Y/Y: No est v 25.6% prior; Electricity Consumption Y/Y: No est v 25.7% prior.
• 07:30 (US) Jun Challenger Job Cuts: No est v K prior; Y/Y: No est v -93.8% -prior.
• 08:00 (CZ) Czech Jun Budget Balance (CZK): No est v -255.0B prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Initial Jobless Claims: 386Ke v 411K prior; Continuing Claims: 3.34Me v 3.390M prior.
• 08:30 (CL) Chile May Economic Activity Index (Monthly GDP) M/M: +1.2%e v -1.4% prior; Y/Y: 17.3%e v 14.1% prior.
• 08:30 (US) Weekly USDA Net Export Sales.
• 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 25th: No est v $595.1B prior.
• 09:00 (BR) Brazil Jun PMI Manufacturing: No est v 53.7 prior.
• 09:30 (BR) Brazil May Total Formal Job Creation: +150.0Ke v +120.9K prior.
• 09:45 (US) Jun Markit Final PMI Manufacturing: 62.6e v 62.6 prelim.
• 10:00 (US) Jun ISM Manufacturing: 61.0e v 61.2 prior; Prices Paid: 86.0e v 88.0 prior.
• 10:00 (US) May Construction Spending M/M: 0.4%e v 0.2% prior.
• 10:00 (MX) Mexico May Total Remittances: $4.1Be v $4.1B prior.
• 10:00 (MX) Mexico Central Bank Economist Survey.
• 10:30 (MX) Mexico Jun PMI Manufacturing: No est v 47.6 prior.
• 10:30 (US) Weekly EIA Natural Gas Inventories.
• 11:00 (CO) Colombia PMI Manufacturing: No est v 46.7 prior.
• 11:00 (PE) Peru Jun CPI M/M: 0.2%e v 0.3% prior; Y/Y: No est v 2.5% prior.
• 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.
• 12:00 (IT) Italy Jun New Car Registrations Y/Y: No est v 43.0% prior.
• 13:00 (MX) Mexico Jun IMEF Manufacturing Index: 51.8e v 52.3 prior; Non-Manufacturing Index: 53.8e v 53.6 prior.
• 14:00 (BR) Brazil Jun Trade Balance: $11.0Be v $9.3B prior; Total Exports: $29.1Be v $27.0B prior; Total Imports: $18.3Be v $17.7B prior.
• (AR) Argentina Jun Government Tax Revenue (ARS): No est v 862.5B prior.
• 15:00 (UK) BOE Gov Bailey at Mansion House.
• 18:00 (NZ) New Zealand Jun Consumer Confidence Index: No est v 114 prior.
• 19:00 (KR) South Korea Jun CPI M/M: 0.0%e v 0.1% prior; Y/Y: 2.5%e v 2.6% prior; CPI Core Y/Y: 1.4%e v 1.5% prior.
• 19:50 (JP) Japan end-Jun Monetary Base: No est v ¥651.0T prior.
• 21:30 (AU) Australia May Home Loans Value M/M: 1.8%e v 3.7% prior.