Quiet Start To An Event-Filled Week

Notes/Observations

• Quiet start to week but focus on upcoming US Jun CPI data (Tuesday), Fed Chair Powell’s semi-annual testimony in Congress (Wed); retail sales (Friday).
• Lots of Far East events as well China Q2 GDP (Thursday’s Asian session) and the Bank of Japan (BOJ) policy decision (Asia’s Fri session).
• Concerns that a rapid spread of the Delta variant of coronavirus could potentially undermine the economic rebound.
• Corporate earning season back upon us.

Asia

• Japan May Core Machine Orders beat expectations for its largest increase since Oct 2020 (M/M: 7.8% v 2.4%e; YoY: 12.2% v 6.3%e).
• RBNZ Shadow Board (NZIER) called for RBNZ to tighten policy given the pickup in inflation pressures.

Coronavirus

• UK PM Johnson acknowledged that COVID cases would rise as restrictions were lifted, Expected people to work from home and wear masks after July 19th.
• COVID lockdown in Sydney expected to be extended beyond Friday as cases continued to rise.
• South Korea to enforce its strictest social distancing measures starting Monday (July 12th) for 2 weeks to rein in the resurgence of the new COVID cases in the greater Seoul area.
• Tokyo entered its 4th COVID-19 State of Emergency.

Europe

• G20 Finance Ministers agreed on minimum corporate tax of at least 15%.
• ECB chief Lagarde stated that forward guidance to be reviewed during July 22nd meeting, possible measures for 2022. PEPP may be followed by transition into new format; Must not create anticipation emergency tools near end.
• ECB’s Schnabel (Germany) reiterated stance that do not expect to see ‘excessively high’ inflation; current higher inflation is temporary.

Americas

• US Treasury Sec Yellen stated that expected to finalize tax changes for large firms in 2022, needed to be faster distribution of COVID vaccines globally or economic recovery would be impacted.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.04% at 457.48, FTSE -0.57% at 7,081.45, DAX -0.12% at 15,669.70, CAC-40 -0.39% at 6,503.91, IBEX-35 -0.41% at 8,741.00, FTSE MIB -0.01% at 25,050.50, SMI +0.35% at 12,031.80, S&P 500 Futures -0.23%].
• Market Focal Points/Key Themes: European indices open with a modest upward bias (laggards include CAC and FTSE100) but later traded mixed; improvement in risk sentiment attributed to monetary flexibility and positive study on effects of third covid shot; sectors leading to the upside include utilities and real estate; underperforming sectors include materials and consumer discretionary; Daily Mail confirms considering major reorganization; Tate & Lyle to spin off primary product unit; potential IPO play Flipkart raises $3.6B in funding round; Good Energy rejects offer from Ecotricity; no major earnings expected in the upcoming US session.

Equities

• Consumer discretionary: Daily Mail&General TST [DMGT.UK] +4% (restructuring; offer; special dividend), Quiz [QUIZ.UK] +21% (trading update).
• Consumer staples: Tate & Lyle [TATE.UK] +3% (divestment; special dividend).
• Healthcare: Bayer [BAYN.DE] -1% (drug approval).
• Technology: Atos [ATO.FR] -15% (cuts outlook).

Speakers

• ECB’s De Guindos (Spain) stated that the economic rebound was underway in Europe. Risks to growth as broadly balanced but support remained essential. Could not be complacent to variants of the coronavirus.
• Sweden Central Bank (Riksbank) July Minutes noted that the economic outlook and inflation prospects looked brighter. Recovery underway but pandemic was not over yet. Several members expected inflation to be slightly above target at end for forecast period but was not an argument to make policy less expansionary. ometime before inflation neared 2% target more persistently.
• Sweden Central Bank (Riksbank) Gov Ingves noted in July minutes that expansionary policy to support recovery; too early to remove stimulus in country. GDP rebound looked slightly stronger than expected. Essential to have measures to manage household debt; high levels made domestic economy vulnerable.
• Austria Central Bank raised its 2021 CPI forecast from 2.0% to 2.2% and set 2022 at 2.0%.
• Hungary Fin Min Varga stated that GDP growth was seen above 6.0% even without EU funds.
• Poland Central Bank’s Lon stated that more easing was possible if Delta variant of the virus hit the domestic economy.
• Poland Central Bank (NBP) Quarterly Inflation Report raised its inflation outlook for the horizon period. Raised 2021 CPI from 3.1% to 4.2%, raised 2022 CPI from 2.8% to 3.3% and raised 2023 CPI from 3.2% to 3.4%. It raised the 2021 GDP growth forecast from 4.1% to 5.0% while maintaining the 2022 GDP growth outlook at 5.4%.
• Israel Central Bank Gov Yaron stated that MPC debated whether to stick with inflation target between 1.0-3.0%. Managing pandemic would have been easier if rates and inflation were higher.

Currencies/Fixed Income

• Bond yields were lower in the session as concerns percolated that a rapid spread of the Delta variant of coronavirus could potentially undermine the economic rebound.
• FX markets were quiet but focus on a plethora of events to take place during the week (see above notes/observation section for examples).
• EUR/USD steady at 1.1875.
• GBP/USD at 1.3860 area.

Economic data

• (SE) Sweden July SEB Housing-Price Indicator: 82 v 65 prior.
• (DE) Germany Jun Wholesale Price Index M/M: 1.5% v 1.7% prior; Y/Y: 10.7% v 9.7% prior.
• (DK) Denmark Jun CPI M/M: 0.1% v 0.2% prior; Y/Y: 1.7 v 1.7% prior.
• (DK) Denmark Jun CPI EU Harmonized M/M: 0.1% v 0.3% prior; Y/Y: 1.9% v 1.7% prior.
• (JP) Japan Jun Preliminary Machine Tool Orders Y/Y: 96.6% v 141.9% prior.
• (TR) Turkey May Unemployment Rate: 13.2% v 13.9% prior.
• (IT) Bank of Italy Banks and Money Monthly Statistics: May Gross Non-performing Loans (NPLs): €50.5B v 52.1B prior.

Fixed income Issuance

• None seen.

Looking Ahead

• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 Germany to sell €4.0B in 6-month BuBills.
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).
• 06:00 (PT) Portugal Jun Final CPI M/M: No est v 0.1% prelim; Y/Y: No est v 0.5% prelim.
• 06:00 (PT) Portugal Jun Final CPI EU Harmonized M/M: No est v 0.2% prelim; Y/Y: No est v -0.6% prelim.
• 06:00 (IL) Israel Jun Consumer Confidence: No est v 138 prior.
• 06:00 (IL) Israel to sell bonds.
• 06:00 (TR) Turkey to Sell 16.2% 2023 Bonds.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (ZA) South Africa May Manufacturing Production M/M: +1.2%e v -1.2% prior; Y/Y: 46.8%e v 87.9% prior.
• 07:00 (MX) Mexico May Industrial Production M/M: +0.3%e v -0.2% prior; Y/Y: 36.4%e v 36.6% prior; Manufacturing Production Y/Y: 50.2%e v 52.0% prior.
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey.
• 08:00 (IN) India May Industrial Production Y/Y: 32.0%e v 134.4% prior.
• 08:00 (IN) India Jun CPI Y/Y: 6.6%e v 6.3% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (ES) Spain Debt Agency (Tesoro) announces size details of upcoming issuance.
• 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).
• 08:30 (CL) Chile Central Bank Economist Survey.
• 09:00 (RU) Russia May Trade Balance: $11.3Be v $10.6B prior; Exports: $37.0Be v $36.9B prior; Imports: $26.1Be v $26.3B prior.
• 09:00 (FR) France Debt Agency (AFT) to sell €5.1-6.3B in 3-month, 6-month and 12-month bills.
• 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.
• 13:00 (MX) Mexico Jun Total Formal Job Creation: No est v +39.0K prior.
• 13:00 (US) Treasury to sell 3-Year Notes.
• 13:00 (US) Treasury to sell 10-Year Notes Reopening.
• 16:00 (US) Weekly Crop Progress Report.
• 18:45 (NZ) New Zealand Jun Food Prices M/M: No est v 0.4% prior.
• 19:01 (UK) Jun BRC Sales Like-For-Like Y/Y: No est v 18.5% prior.
• 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 107.8 prior.
• 21:30 (AU) Australia Jun Business Confidence: No est v 20 prior; Business Conditions: No est v 37 prior.
• 23:00 (KR) South Korea May M2 Money Supply M/M: No est v 1.5% prior; “L” Money Supply M/M: No est v 1.8% prior.
• 23:30 (HK) Hong Kong to sell 3-month and 6-month Bills.
• 23:35 (JP) Japan to sell 20-Year JGB Bonds.