UK Growth Slows In Month Of May, G20 Meets In Venice

Notes/Observations

• UK May GDP rose for the 4th straight month but missed expectations (M/M: 0.8% v 1.5%e); Concerns that reopening boost was fading fast.
• Various ECB members comment after the Strategy Review that it remained in a situation that justified an easy monetary policy.
• Global government bond yields trade higher, reversing Thursday’s mild drop.
• Spread of the Delta coronavirus variant continues to fuel concerns about the pace of global economic recovery.

Asia

• China Jun CPI data missed expectations (M/M: -0.4% v 0.0%e; YoY: 1.1% v 1.3%e).
• China Ministry of Commerce (MOFCOM) stated that it expected retail sales during its 5-year plan to increase ~5.0% per year and Trade and goods ~2.0%/year.

Europe

• UK Treasury said to have insisted that Brexit settlement has remained within the previous range of £35-39B.

Americas

• Fed’s Daily (non-voter, dove): Delta Variant is a threat to global economic recovery; One threat is that officials prematurely declare victory on coronavirus.
• US said to set to add additional China companies to Blacklist due to human rights issues in Xinjiang and use of surveillance. An announcement could be made as soon as July 9th (Fri). At least 10 additional companies could be added to the list [no specific cos. were mentioned.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +1.5% at 4,049, FTSE +0.8% at 7,084, DAX +1.0% at 15,569, CAC-40 +1.8% at 6,512, IBEX-35 +0.9% at 8,727, FTSE MIB +1.2% at 24,938, SMI +0.6% at 11,999, S&P 500 Futures +0.4%].
• Market Focal Points/Key Themes: European indices open higher across the board and advance into the green as the session progressed (a notable exception being Portugal’s PSI, weighed by EDP); better-performing sectors include industrials and consumer discretionary; underperformers include energy and telecom; Philip Morris makes an offer for Vectura; D’ieteren takes stake in TVH Parts; focus on results of G-20 meeting over the weekend; earnings expected in the upcoming US session include Greenbrier.

Equities

• Consumer discretionary: Alma Media ALMA.FR +7.7% (raises outlook), Beter Bed BBED.NL +5.1% (divestment).
• Energy: Ilika IKA.UK -26.0% (placing), Petroleum Geo-Services PGS.NO +9.7% (trading update).
• Financials: Deutsche Bank DBK.DE +2.0% (analyst action).
• Healthcare: Lysogene LYS.FR +14.8% (FDA fast track designation for LYS-GM101), Synlab SYAB.DE +4.2% (raises outlook).
• Industrials: Daimler DAI.DE +1.5% (diesel settlement), HeidelbergCement HEI.DE +1.1% (analyst action), Vallourec VK.FR +6.1% (analyst action).
• Technology: Ricardo RCDO.UK +1.8% (analyst action).

Speakers

• ECB’s Rehn (Finland) stated that it must prepare for recovery to slow due to the delta variant of the coronavirus. The new ECB inflation target was unambiguous. Goal allowed aims like full employment to be emphasized. The medium-term core inflation outlook of 1.4% was below the new target and justified continued monetary support.
• ECB’s Weidmann (Germany) on Strategy review stated that temporary deviations from 2% symmetrical target could occur. Did not make our monetary policy contingent on targets not met in the past and would not deliberately seek inflation overshoots.
• ECB’s Villeroy (France) reiterated Council’s stance that ECB’s new 2% symmetrical target was not a ceiling. The reiterated stance that remain in a situation that justifies an easy monetary policy.
• EU Economic Commissioner Gentiloni (Italy) stated that he was optimistic about a global tax agreement. Believed that an EU digital tax would not undermine the global deal.
• France Fin Min Le Maire believed could have a groundbreaking agreement on international taxation at G20. Wanted more than 15% as the global minimum corporate tax.
• US Treasury Sec Yellen stated that US was considering a range of policies that could implicit prices on carbon emissions. De-carbonizing economies by mid-century would require significant public investment and difficult economic decisions.
• China Foreign Ministry spokesperson Wang Wenbin stated that govt opposed US acts that limited Chinese companies’ access to indexes.

Currencies/Fixed Income

• USD steady against most major pairs in quiet trading.
• EUR/USD at 1.1840 area in the aftermath of ECB’s Strategic Review that placed asymmetrical 2% inflation target. Dealers did not the target gave the central bank leeway to stick to their ultra-expensive monetary policy for some time to come.
• GBP/USD was initially softer after UK MAY GDP missed expectations (M/M: 0.8% v 1.5%e); Concerns that reopening boost was fading fast. Pair did manage to recoup its data-related losses.

Economic data

• (NL) Netherlands May Manufacturing Production M/M: 1.4% v 0.5% prior; Y/Y: 16.5% v 13.1% prior; Industrial Sales Y/Y: 20.0% v 18.7% prior.
• (FI) Finland May Industrial Production M/M: 2.2% v 1.3% prior; Y/Y: 8.0% v 2.1% prior.
• (UK) May GDP M/M: 0.8% v 1.5%e; GDP 3M/3M: 3.6% v 3.9%e.
• (UK) May Industrial Production M/M: 0.8% v 1.4%e v -1.3% prior; Y/Y: 20.6% v 21.6%e.
• (UK) May Manufacturing Production M/M: -0.1% v +1.0%e; Y/Y: 27.7% v 29.5%e.
• (UK) May Construction Output M/M: -0.8% v +1.0%e; Y/Y: 56.5% v 58.2%e.
• (UK) May Index of Services M/M: 0.9% v 1.6%e; 3M/3M: 3.9% v 4.1%e.
• (NO) Norway Jun CPI M/M: 0.3% v 0.4%e; Y/Y: 2.9% v 2.9%e(6th straight month above target).
• (NO) Norway Jun CPI Underlying M/M: 0.4% v 0.5%e; Y/Y: 1.4% v 1.5%e.
• (NO) Norway Jun PPI (including oil) M/M: 4.6% v 2.8% prior; Y/Y: 37.1% v 29.4% prior.
• (NO) Norway Jun Trade Balance (NOK): 25.0B v 14.4B prior.
• (NO) Norway Q2 House Price Index Q/Q: 2.7% v 3.4% prior.
• (DK) Denmark May Current Account Balance (DKK): 14.6B v 13.7B prior; Trade Balance: 6.0B v 4.8B prior.
• (HU) Hungary May Preliminary Trade Balance: €0.1B v €0.4B prior.
• (TR) Turkey July TCMB Survey of Expectations: Next 12-month Outlook: 12.6% v 12.1% prior.
• (TR) Turkey May Current Account Balance: -$3.1B v -$3.0Be.
• (AT) Austria May Industrial Production M/M: 0.0% v 0.3% prior; Y/Y: 23.4% v 33.8% prior.
• (TH) Thailand end-Jun Foreign Reserves.
• (CN) Weekly Shanghai copper inventories (SHFE): 129.5K v 142.5K tons prior.
• (CZ) Czech Jun Unemployment Rate: 3.7% v 3.9% prior.
• (IT) Italy May Industrial Production M/M: -1.5% v +0.3%e; Y/Y: 21.1% v 24.8%e; Industrial Production NSA (unadj) Y/Y: 24.9% v 80.4% prior.
• (RU) Russia Narrow Money Supply w/e July 2nd (RUB): 14.04T v 14.05T prior.
• (CZ) Czech Jun International Reserves: $165.9B v $169.6B prior.
• (GR) Greece Jun CPI Y/Y: 1.0% v 0.1% prior; CPI EU Harmonized Y/Y: +0.6% v -1.2% prior.
• (GR) Greece May Industrial Production Y/Y: 14.0% v 22.7% prior.
• (IT) Italy Stats Agency (Istat) Monthly Economic Note.
• (HU) Hungary Jun YTD Budget Balance (HUF): -1.705T v -1.313T prior.

Fixed income Issuance

• (IT) Italy Debt Agency (Tesoro) sold €7.5B vs. €7.5B indicated in 12-month Bills; Avg Yield: -0.450% v -0.490% prior; Bid-to-cover: 1.26x v 1.37x prior.

Looking Ahead

• (MX) Mexico Jun Nominal Wages: No est v 4.4% prior.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (IN) India to sell combined INR260B in 2023, 2031, and 2061 bonds.
• 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2029, 2038, and 2046 Bonds.
• 06:00 (PT) Portugal May Trade Balance: No est v -€1.3B prior.
• 06:00 (G7) BOE Gov Bailey with ECB chief Lagarde on a panel on digitalization.
• 06:00 (UK) DMO to sell £B in 1-month, 3-month and 6-month bills (£B, £B, and £B respectively).
• 06:45 (US) Daily Libor Fixing.
• 07:00 (UK) May Visible Trade Balance: -£11.1Be v -£11.0B prior; Overall Trade Balance: -£1.3Be v -£0.9B prior; Trade Balance Non-EU: No est v -£5.6B prior.
• 07:30 (IS) Iceland to sell Apr 2024 RIKB Bonds.
• 07:30 (EU) ECB account of Jun 10th Meeting (Minutes).
• 07:30 (IN) India Weekly Forex Reserve w/e July 2nd: No est v $609.0B prior.
• 08:00 (UR) Ukraine Jun CPI M/M: 0.35e v 1.3% prior; Y/Y: 9.5%e v 9.5% prior.
• 08:00 (IS) Iceland Jun Unemployment Rate: No est v 10.0% prior.
• 08:00 (PL) Poland Central Bank (NBP) Jun Minutes (two decisions ago).
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (IN) India announces upcoming bill issuance (held on Wed).
• 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond issuance.
• 08:30 (CA) Canada Jun Net Change in Employment: +175.0Ke v -68.0K prior; Unemployment Rate: 7.8%e v 8.2% prior; Full Time Employment Change: No est v -13.8K prior; Part Time Employment Change: No est v -54.2K prior; Participation Rate: No est v 64.6% prior; Hourly Wage Rate Y/Y: 0.0%e v -1.4% prior.
• 08:30 (CL) Chile Central Bank Traders Survey (bi-monthly).
• 08:30 (US) Weekly USDA Net Export Sales.
• 09:00 (RU) Russia Q2 Preliminary Current Account Balance: $19.5Be v $23.3B prior.
• 10:00 (US) May Final Wholesale Inventories M/M: 1.1%e v 1.1% prelim; Wholesale Trade Sales M/M: No est v 0.8% prior.
• 11:00 (EU) Potential sovereign ratings after European close (Fitch on Lithuania, Russia sovereign ratings).
• 13:00 (US) Weekly Baker Hughes Rig Count.