Eurozone PMI data generally improves as virus restrictions relax
Remarks / Observations
- Euro zone June Preliminary PMI data mixed but remaining in expansionary territory (beats: Germany, euro zone, United Kingdom; failures: France); Price action Moderate markets were anticipating an improving economic outlook as virus restrictions eased.
- Another emerging European central bank expects a hawkish hike (the Czech Republic saw rates rise 25bp; following Hungary’s decision on Tuesday).
- Australia June Preliminary PMI Manufacturing recorded its 13th month of expansion (58.4 vs. 60.4 previously.
- Japan June The preliminary manufacturing PMI index recorded its 5th month of expansion (51.5 vs. 53.0 previously).
- RBA Assist Gov Ellis noted that the goal of the policy settings was to support a return to full employment and inflation on target.
- The minutes of the April BOJ meeting (two meetings ago) reiterated the position that the domestic economy should recover, supported by increased external demand.
- The UK government is expected to get rid of mask and social distancing requirements on July 19, given the downward trend in COVID cases.
- EU and UK officials are said to be close to a truce in the Brexit trade dispute involving checks on goods entering Northern Ireland.
- British Prime Minister Johnson apparently has no plans to grant a referendum on Scottish independence before the 2024 election.
- UK Shadow MPC calling on BOE to cancel QE £ 50bn due to signs of rising inflation and robust growth.
- Central Bank of Turkey (CBRT) Governor Kavcioglu pledged to protect the TRY (Lira) currency and was in talks with 4 counterparts for new swap deals and to adjust reserve requirement rules after the talks.
- The testimony of Fed Chairman Powell noted that the Fed would wait for real inflation as the trigger for any rate hikes; would not increase rates preventively or in response to a very high employment rate.
- US President Biden has said he is pushing for high-level meetings with Chinese officials. Biden discussed meetings between U.S. Secretary of State Blinken and China Foreign Min Wang for next week at the G20 meeting.
- Weekly API crude oil inventories: -7.2 M against -8.5 M previously.
Speakers / Fixed income / FX / Commodities / Erratum
- Indices [Stoxx600 -0.32% at 454.94, FTSE +0.05% at 7,093.50, DAX -0.59% at 15,543.80, CAC-40 -0.53% at 6,576.58, IBEX-35 -0.16% at 9,039.00, FTSE MIB -0.16% at 25,275.50 , SMI -0.31% at 11,944.97, S&P 500 Futures +0.01%].
- Market Focal Points / Key Themes: European indices generally open lower, but then turned into mixed trading; the best performing sectors include materials and technology; underperformers led by telecommunications and consumer discretionary; Swiss Re reduces its stake in Phoenix; Heineken increases its stake in United Breweries in India; the expected benefits for the next US session include IHS Markit, Winnebago and KB Home.
- Consumer discretionary: Pernod-Ricard [RI.FR] + 3% (raises the outlook).
- Finance: Bank of Ireland [BIRG.IE] -5% (the government sells its stake), Berkeley Group [BKG.UK] -1% (gains).
- Health: Abivax [ABVX.FR] + 12% (positive test results).
- The ECB’s De Guindos (Spain) said he expected very significant growth in the second half of the year in the region.
- Italian Prime Minister Draghi noted that recent data suggested that national GDP growth would exceed expectations. The pick-up in inflation is considered transitory but deserves attention. Believed that the fundamentals suggested maintaining an expansionary fiscal policy. Faster growth to help reduce the debt burden.
- German Chancellor Merkel’s cabinet has said it supports the 2022 net borrowing at 100 billion euros (in line with recent press speculation).
- Sweden NIER Think Tank has updated its forecast which raised both its growth and inflation outlook. Increase 2021 GDP growth forecast from 3.7% to 4.4% and 2022 GDP growth forecast from 3.4% to 3.5%. He raised the CPIF 2021 from 1.8% to 1.9% and the CPIF 2022 from 1.5% to 1.7%.
- Central Bank of Russia Zabotkin (Head of Monetary Policy): Neutral rate is above 5.0-6.0% range. Inflation expectations were decisive for the neutral rate.
- Central Bank of Poland member Zyzynski said he would not consider a token hike at this time.
- The Central Bank of Thailand’s policy statement reiterated to preserve the policy space for the appropriate time and continue to prioritize the economy. He viewed the procurement and deployment of vaccines as the key to recovery and prepared to use the right tools when needed. The THB (baht) currency was weaker than its regional peers; to monitor the effects.
- Thailand’s central bank has updated its staff forecast which slashed GDP growth in 2021 from 3.0% to 1.8%, citing a drop in tourist arrivals. It also reduced its GDP growth in 2022 from 4.7% to 3.9%. He kept the 2021 and 2022 headline CPI at 1.2%.
Currency / Fixed Income
- The dollar moves away from recent highs after Fed Chairman Powell testified on Tuesday and downplayed inflation risks. The greenback had strengthened following the Fed’s hawkish surprise last week.
- EUR / USD was slightly higher as PMI readings remained in expansionary territory. Overall price action was subdued as markets had anticipated an improving economic outlook as virus restrictions eased in Europe in recent weeks. Brokers noted that the pair may face strong resistance at the 1.20 level as the ECB is unlikely to send any strong message about reducing the stimulus despite better data in the region.
- GBP / USD moved closer to the 1.40 area ahead of the BOE’s decision on Thursday. Currency GBP aided by hawkish rumor that quantitative easing could be reduced following Shadow MPC asking BOE to reverse the £ 50bn of quantitative easing due to signs of rising l inflation and robust growth.
- The currency CZK (krone) appreciated for the third day in a row as the Czech Central Bank was expected to enter a tightening cycle.
- (TH) The Central Bank of Thailand (BoT) left the benchmark interest rate unchanged at 0.50% (as expected).
- (FR) France June Preliminary Manufacturing PMI: 58.6 v 59.0e (7th month of expansion); PMI services: 57.4 against 59.5e; Composite PMI: 57.1 against 59.0e.
- (DE) Germany June Preliminary manufacturing PMI: 64.9 vs. 63.0th (12th month of expansion); Services PMI: 58.1 against 55.7e; Composite PMI: 60.4 against 57.6e.
- (EU) Euro zone June preliminary manufacturing PMI: 63.1 against 62.3th (12th month of expansion); PMI services: 58.0 v 58.0e; Composite PMI: 59.2 against 58.8e.
- (ZA) South Africa May CPI M / M: 0.1% vs. 0.1% e; Y / Y: 5.2% against 5.2% e (3rd consecutive month with the annual rate in the target).
- (ZA) South Africa May CPI Core M / M: 0.0% vs. 0.0% e; Y / Y: 3.1% against 3.2% e.
- (PL) Poland June Consumer confidence: -14.8 vs. -11.8e.
- (TW) May industrial production of Taiwan Y / Y: 16.5% vs. 13.1% e.
- (UK) June Preliminary PMI Manufacturing: 64.2 v 64.0th (13th consecutive expansion); Services PMI: 61.7 vs. 62.8e; Composite PMI: 61.7 vs. 62.5e.
- (IS) Iceland May M / M wage index: 0.4% vs. 0.3% previously; Y / Y: 7.5% against 7.4% previously.
Issue of fixed income securities
- (SI) Slovenia opened its portfolio to sell EUR denominated 10 year durable bonds through a syndicate; forecasts saw + 15bps at mid-swaps.
- (IN) India sold a total of INR360B against INR360B shown in the 3 month, 6 month and 12 month invoices.
- (SE) Sweden sold SEK 15.0 billion against SEK 15.0 billion shown in the 3-month invoices; Average return: -0.2013% against -0.1867% previously; Bid-to-cover: 2.03xv 2.40x front.
- (UK) DMO sold £ 400million in 0.125% inflation-indexed gilts in November 2065; Real return: -1.981% previously; Bid-to-cover: xv 2.35x front.
- 5:25 am (EU) Daily liquidity statistics from the ECB.
- 05:30 (DE) Germany will sell 2.5 billion euros in 0% Bunds in May 2036.
- 05:30 (HU) The Hungarian Debt Agency (AKK) sells 12-month bonds.
- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).
- 06:00 (IE) Ireland May Unemployment rate: No is v 5.8% before.
- 06:00 (UK) Russia will auction OFZ 2029 and 2041 bonds.
- 6:45 am (US) Daily Libor correction.
- 7:00 am (US) MBA mortgage applications w / e June 18: none is 4.2% v before.
- 07h00 (MX) Mexico Apr Retail sales M / M: -0.4% ev + 3.6% before; Y / Y: 31.2% ev 2.5% before.
- 07:00 (UK) Weekly PM House Question Time.
- 08:00 (UK) Daily Baltic Dry Bulk Index.
- 8:30 a.m. (United States) First quarter current account balance: – $ 206.2 compared to – $ 188.5 before.
- 08:30 (CA) Canada Apr Retail sales M / M: -5.0% ev + 3.6% before; Retail sales (excluding auto) M / M: -4.5% ev + 4.3% before.
- 08:30 (CZ) Czech Central Bank (CNB) decision on interest rates: Expected to increase 2-week redemption rate by 25bp to 0.50%.
- 9:00 a.m. (US) Fed Bowman at the Fed Economic Resilience Conference.
- 9:45 am (US) Jun Preliminary Markit PMI Manufacturing: 61.5 ev 62.1 forward; PMI services: 70.0ev 70.4 before; Composite PMI: No earlier version than version 68.7.
- 9.45am (UK) BOE purchases £ 1.147 billion as part of the Gilt APF (7-20 year) deal.
- 10:00 am (US) New home sales in May: 867Ke v 863K before.
- 10:30 a.m. (US) DOE Weekly Oil Inventories.
- 11:00 a.m. (US) Fed’s Bostic discusses systemic racism.
- 11:30 am (US) The Treasury will sell 2-year FRN.
- 12:00 (CA) Canada will sell 30-year bonds.
- 12:00 (UK) Russia May Industrial production Y / Y: 10.5% ev 7.2% before.
- 12:00 (EU) Lagarde from the ECB at the event.
- 1:00 p.m. (United States) The Treasury will sell 5-year notes.
- 3:00 p.m. (AR) Argentina GDP Q1 Q / Q: 2.3% ev 4.5% before; Y / Y: + 2.4% in EV -4.3% before.
- (CO) Colombia May Industrial confidence: No is v -5.1 before; Retail Trust: No earlier version than version 25.6.
- 4:30 p.m. (US) Fed’s Rosengren on the economy.
- 17:00 (KR) South Korea Jun Consumer confidence: no est v 105.2 before.
- 19:50 (JP) Japan May PPI Y / Y services: 1.5% ev 1.0% before.
- 11:00 p.m. (TH) The Central Bank of Thailand will sell THB 30 billion in 2 years.
- 11:30 p.m. (TH) Thailand May Customs trade balance: $ 0.8 against $ 0.2 million previously; Y / Y exports: 33.5% ev 13.1% before; Y / Y imports: 53.7% ev 29.8% before.
- 11:35 p.m. (JP) Japan to sell 20-year JGB bonds.