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Notes/Observations
-European economic data continues to miss expectations as Spain GDP and mortgage lending, Hungary wages, Turkey capacity and confidence, Czech confidence, Italy confidence, Germany IFO survey and UK retail sales all came in worse than forecasted.
-As Finland and Sweden markets close for Midsummer's Eve holiday, the UK and Germany take focus with light macro news.
-UK PM Johnson comments that he must do more for the cost of living as he recognizes the conservative party by-election defeats in key districts, Tiverton and Honiton.
-Germany IFO Survey missed consensus in business climate and expectations while Chancellor Scholz reiterated they must do more to diversify away from Russian gas as the economy ministry plans to transform suspended Nord Stream 2 pipeline into a LNG terminal.
-Energy levels remain a significant focus for sentiment as Belgium PM declared that EU countries need to collectively buy energy to avert a winter crisis. They join Germany, Netherlands, UK, China and Australia with recent commentary on gas storage levels and concerns of blackouts.
-In general Asia closed higher as bond yields withdrew. EU indices start 0.2-2.0% higher with bond yields lower. US Futures point higher. Elsewhere Gold -0.1%, BTC +2.2%, ETH +5.4%, DXY -0.2%, Brent +1.1%, WTI +1.2%.
-Looking ahead, a quiet Friday session expected.
Asia
– Japan May National CPI Y/Y: 2.5% v 2.5% prior; CPI Ex-Fresh Food (Core) Y/Y: 2.1% v 2.1% prior.
Europe
– ECB's Kazimir (Slovakia, hawk): ECB to likely hike 25bps in July and 50bps in Sept; Rate hikes are data dependent. ECB rate may be at 1.5-2% in a year.
– EU leaders granted Ukraine candidate status in its effort to gain EU membership (as expected). **Note: Path to membership could take over a decade.
– UK Jun GfK Consumer Confidence: -41 v -40e (record low).
– Conservative Party Chairman Dowden resigns following recent by-elections results (Liberal Democrat Spokesman stated that by-elections in Tiverton and Honiton appeared to be a 'clear win' (as expected); BBC says Labour Party won the Wakefield special election).
Americas
– Fed bank stress test results: All banks passed this year's stress tests. All 34 large US banks passed stress testing.
– Mexico Central Bank (Banxico) raised Overnight Rate by 75bps to 7.75% (as expected).
Energy
– OPEC+ reportedly set to reconfirm plans for Aug oil output hike of 648K bpd at meeting next week (prior 648K in July).
Speakers/Fixed income/FX/Commodities/Erratum
Equities
Indices [Stoxx600 +1.12% at 406.92, FTSE +1.10% at 7,097.42, DAX +0.70% at 13,003.10, CAC-40 +1.33% at 5,961.64, IBEX-35 % at #, FTSE MIB +0.59% at 21,743.00, SMI +2.06% at 10,669.17, S&P 500 Futures +0.67%].
Market Focal Points/Key Themes: European indices open generally higher and advanced into the green as the session progressed; sectors among those trending higher are utilities and health care; laggard sectors include consumer discretionary and industrials; Finland, Sweden and Baltics closed for holiday; reportedly BMP receives multiple bids for its insurance unit; Barclays acquires KMC; Essentra sells its packaging unit to Mayr-Melnhof; Lamprell receives takeover offer from Blofeld; Pfizer announces investment in Valneva; focus on release of CHMP decisions later in the day; earnings expected in the upcoming US session include CarMax and Carnival.
Equities
– Consumer discretionary: Deutsche Post DHL [DPW.DE] +1% (Fedex results and outlook comments), TUI [TUI1.DE] -3% (CEO resigns; new CFO).
– Energy: Lamprell [LAM.UK] -79% (offer; cash update).
– Healthcare: GlaxoSmithKline [GSK.UK] +2%, Sanofi [SAN.FR] +1.5% (study on vaccine), Basilea Pharmaceutical [BSLN.CH] +5% (approval), UCB [UCB.BE] -7% (cuts outlook).
Speakers
– German Chancellor Scholz stated that was well prepared for challenges linked to fossil fuels imports from Russia and needed to accelerate efforts to diversify from Russian gas.
– UK PM Johnson noted that he would listen to what people were saying, in particular to the difficulties people facing over the cost of living.
– Germany Fin Min Lindner said to provide domestic energy industry with several billion euros over the next two years.
– Belgium PM De Croo commented ahead of the EU Leader Summit that EU countries needed to collectively buy energy to avert a winter crisis.
– German IFO Economists noted that concerns in domestic economy were getting bigger although bottlenecks had improved slight in industry and retail.
– German Economy Ministry reportedly considers plan to transform suspended Nord Stream 2 pipeline into connection for LNG terminal in Baltic Sea.
– BOJ Dep Gov Amamiya reiterated that BOJ would conduct monetary easing to support economy and until price target was achieved in a sustained and stable manner, along with wage increases. Paying close attention to FX developments and watching for impact on the economy and prices.
Currencies/Fixed income
– USD was slightly lower in relatively quiet trade as the end of the week approached. Dealers again noted of concerns about a growth slowdown due to aggressive Federal Reserve tightening. There remained a risk that the US economy could drop into recession.
– EUR/USD around 1.0540 by mid-session.
– European bond yields began the session by falling approx 5bps in the core and 3bps in the periphery area as data continued to highlight the risk of recession. The yields did managed to crawl back to little changed by mid-session.
Economic data
– (NL) Netherlands Q1 Final GDP Q/Q: 0.4% v 0.0% prelim; Y/Y: 6.7% v 7.0% prelim.
– (UK) May Retail Sales (ex-auto/fuel) M/M: -0.7% v -0.9%e; Y/Y: -5.7% v -5.0%e.
– (UK) May Retail Sales (including auto/fuel) M/M: -0.5% v -0.7%e; Y/Y: -4.7% v -4.5%e.
– (NO) Norway May Credit Indicator Growth Y/Y: 4.8% v 4.8% prior.
– (FR) France Q1 Final Wages Q/Q: 1.1% v 1.1% prelim.
– (ES) Spain Q1 Final GDP Q/Q: 0.2% v 0.3% prelim; Y/Y: 6.3% v 6.4% prelim.
– (ES) Spain Apr Total Mortgage Lending Y/Y:7.5 % v 20.1% prior; Mortgage Approvals Y/Y: 4.5% v 18.0% prior.
– (CZ) Czech Jun Business Confidence: 15.9 v 20.3 prior; Consumer Confidence: -32.0 v -31.0 prior; Composite Index (Consumer & Business Confidence): 6.3 v 10.0 prior.
– (HU) Hungary Apr Average Gross Wages Y/Y: 15.2% v 17.5% prior.
– (TR) Turkey Jun Real Sector Confidence (seasonally adj): 104.6 v 107.0 prior; Real Sector Confidence NSA (unadj): 106.4 v 109.4 prior.
– (TR) Turkey Jun Capacity Utilization: 77.6% v 78.0% prior.
– (CN) Weekly Shanghai copper inventories (SHFE): 57.2K v 55.2K tons prior.
– (DE) Germany Jun IFO Business Climate Survey: 92.3 v 92.8e; Current Assessment Survey: 99.3 v 99.0e; Expectations Survey: 85.8 v 87.4e.
– (IT) Italy Jun Consumer Confidence: 98.3 v 103.0e; Manufacturing Confidence Index: 110.0 v 108.5e; Economic Sentiment: 113.6 v 111.0 prior.
– (RU) Russia Narrow Money Supply w/e Jun 17th (RUB): 14.31T v 14.29T prior.
– (PL) Poland May Unemployment Rate: 5.1% v 5.1%e.
– (TW) Taiwan May M1 Money Supply Y/Y: 8.5% v 9.8% prior; M2 Money Supply Y/Y: 7.9% v 8.1% prior.
– (CN) China Q1 Final Current Account: $88.9B v $89.5B prelim.
Fixed income issuance
– (IN) India sold total INR300B vs. INR330B indicated in 2024, 2029, 2032 and 2061 bonds.
– (IT) Italy Debt Agency (Tesoro) sold €4.0B vs. €3.5-4.0B indicated range in new 1.75% May 2024 BTP Bonds; Avg Yield: 1.63% v 0.77% prior; bid-to-cover: 1.58x v 1.89x prior.
Looking ahead
– 05:25 (EU) Daily ECB Liquidity Stats.
– 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2033, 2038 and 2046 Bonds.
– 06:00 (UK) DMO to sell £2.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £1.0B respectively).
– 06:45 (US) Daily Libor Fixing.
– 07:00 (BR) Brazil Jun FGV Consumer Confidence: No est v 75.5 prior.
– 07:00 (MX) Mexico Apr IGAE Economic Activity Index (Monthly GDP) M/M: 0.9%e v 0.3% prior; Y/Y: 1.3%e v 0.4% prior.
– 07:30 (IN) India Weekly Forex Reserve w/e Jun 17th: No est v $596.5B prior.
– 07:30 (AU) RBA' Gov Lowe-Panel Discussion.
– 07:30 (ES) ECB’s De Guindos (Spain) on panel.
– 07:30 (IN) India announces upcoming bill issuance (held on Wed).
– 07:30 (IS) Iceland canceled planned Bond auction.
– 08:00 (BR) Brazil mid-Jun IBGE Inflation IPCA-15 M/M: 0.7%e v 0.6% prior; Y/Y: 12.0%e v 12.2% prior.
– 08:00 (UK) Daily Baltic Dry Bulk Index.
– 08:30 (US) Weekly USDA Net Export Sales.
– 08:30 (UK) BOE's Huw Pill (chief economist).
– 09:00 (BE) Belgium Jun Business Confidence: No est v 1.8 prior.
– 09:00 (CL) Chile May PPI M/M: No est v 2.1% prior.
– 09:45 (UK) BOE's Haskel.
– 10:00 (US) June Final University of Michigan Confidence: 50.2e v 50.2 prelim.
– 10:00 (US) May New Home Sales: 590Ke v 591K prior.
– 11:00 (EU) Potential sovereign ratings after European close.
– 13:00 (US) Weekly Baker Hughes Rig Count.
– 16:00 (US) Fed’s Daly.
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