Ongoing concerns about the risks of a global recession
– Markets opened on risk appetite but reversed sharply, with the USD index rising while EU bond indices and yields fell. Catalyst likely started with the prospect of Biden cutting Chinese import tariffs, but reality set in with the lack of positive news and the upcoming earnings season is expected to disappoint across the board.
– The European Services PMI maintained its expansion territory in Spain, Italy, Germany, France and the Eurozone, but new orders and activity components were weak.
– The UK also saw an expansion in the services PMI, but new car registrations were notable as they recorded the worst June since 1996 at -24.3%y/y. The UK remains in the spotlight as the BOE’s Financial Stability Report is due later, along with comments from BOE member Tenreyro.
– The AUD continues to lose strength after the expected 50 basis point rise in the cash rate target overnight.
– Overall, Asia closed up +0.0-1.0% with mixed Asian bond yields. EU indices fell, currently -0.6 to 1.1% with bond yields falling. US futures contracts in the red. Elsewhere, Gold +0.1%, BTC +3.9%, ETH +8.4%, DXY +0.8%, Brent -0.4%, WTI +0.7%.
– The Reserve Bank of Australia (RBA) raised its cash rate target by 50 basis points to 1.35% (as expected). Should take further steps in the process of normalizing monetary conditions. The magnitude and timing of future interest rate hikes should be guided by data and an assessment of the outlook for inflation and the labor market.
– South Korea’s June CPI data posted its fastest annual pace since November 1998 (Y/Y: 6.0% vs. 5.9%e).
– China Jun Caixin PMI Services records its 1st expansion in 4 months (54.5 v 49.0e).
– Japan Jun Final PMI Services: 54.0 v 54.2 prelim (confirmed 3rd month expansion).
– Australia Jun Final PMI Services: 52.6 vs. 52.6 prelim (confirmed 5th month of expansion).
– Chinese Vice Premier Liu He holds talks with US Treasury Secretary Yellen on economy and global supply chain; The discussion was considered “constructive”. Expressed concern about possible tariff dismantling, paying attention to possible dismantling.
– China plans to set up a 500 billion yuan infrastructure fund and issue local government special bonds early in 2023 during the fourth quarter.
– ECB’s De Guindos (Spain, neutral): reiterates that the extent of the interest rate hike in September will depend on the updated medium-term inflation outlook.
– Nagel (Germany), member of the ECB, said he opposed the fragmentation plan and underlined the importance of fighting high inflation during the ad hoc meeting on June 15.
– Norway Lederne Oil and Gas Union: Confirms strike in Norwegian oil sector has started.
clues [Stoxx600 -0.6% at 406.9, FTSE -1.4% at 7,134, DAX -1.1% at 12,634, CAC-40 -1.2% at 5,884, IBEX-35 -0.7% at 8,102, FTSE MIB -0.8% at 21,168, SMI -0.7% at 10,809, S&P 500 Futures -0.7%].
Market Focal Points/Key Themes: European indices opened higher across the board, but quickly reversed course to trade lower across the board; improvement in risk appetite attributed to expectation of US tariff cut on China, but reversal later after macro data release; the best performing sectors are technology and manufacturing; energy and utilities among those trending lower; oil and gas sub-sector under pressure after strike announcement at Equinor; Czechia and Slovakia closed for holidays; Valora will be acquired by FEMSA; German utilities react to Uniper bailout talks; AstraZeneca acquires TeneoTwo; no major earnings expected in the upcoming US session.
– Discretionary consumption: Valora VALN.CH +50.3% (tender offer), AB InBev ABI.BE +1.1% (analyst action), Sainsbury’s SBRL.UK +1.0% (trade update ), Prosieben SAT1 PSM.DE -9.1% (analyst share), SAS SAS.SE -12.7% (US Chapter 11 files).
– Basic consumption: Bakkafrost BAKKO.NO -1.8% (trade update).
– Energy: Uniper UN01.DE +5.7% (bailout talks).
– finance: Equivalent to FFX.UK Group +8.5% (trade update).
– Health care: DBV Technologies DBV.FR +7.6% (analyst share).
– Technology: Basler BSL.DE +2.7% (participation in distribution activities).
– European Securities and Markets Authority (ESMA): Stress test on the resilience of the clearing house system.
– German Association of HDE Retailers: Rising inflation massively affects buyers. Maintain nominal growth in 2022 at 3.0%.
– german government supposed to create a tool to pass gas costs on to all consumers.
– Russia Dep President of the Security Council Medvedev (former president) said that Japan’s proposal to cap Russian oil prices would cause global oil prices to rise, perhaps to $300-400/barrel.
– Peskov, Russian government spokesman said that there is no decision yet on the request for payment in RUB (Ruble) for LNG.
– The USD on solid ground at the start of the new month/quarter. Session summed up by an alternation of concerns about rising interest rates and fears of recession. Further monetary policy tightening is expected as inflationary pressures do not subside in line with central bank expectations. Flows into safe havens dominated the session.
– EUR/USD close to 20-year lows as the pair tested 1.0350 during the session. Continued ECB rate hike expectations are offset by continued rise in US bond yields.
– USD/JPY is moving away from recent 24-year highs as the yen received safe-haven flows.
– (RU) Russia Jun Services PMI: 51.7 vs. 49.0e (1st expansion in 5 months); Composite PMI: 50.9 versus 48.2 before.
– (SE) Sweden Jun Services PMI: 62.8 versus 67.8 before (25th month of expansion); Composite PMI: 60.3 vs. 64.2 before.
– (FR) France May Industrial production H/M: 0.0% vs. 0.0%e; Y/Y: -0.4% v +0.3%e.
– (FR) France May H/M manufacturing output: 0.8% vs. 0.3%e; Y/Y: 2.2% versus 1.7%e.
– (ES) Spain Jun Services PMI: 54.0 vs. 53.5e; Composite PMI: 53.6 vs. 53.6e.
– (ZA) South Africa June PMI (entire economy): 52.5 vs. 50.7 before.
– (IT) Italy June Services PMI: 51.6 vs. 51.5e (5th month of expansion); Composite PMI: 51.3 vs. 50.6e.
– (FR) France Jun Final Services PMI: 53.9 vs. 54.4 prelim(confirmed 15th consecutive expansion); Composite PMI: 52.5 vs. 52.8 prelim.
– (DE) Germany June final services PMI: 52.4 vs. 52.4 preliminary(confirmed 6th consecutive expansion); Composite PMI: 51.3 vs. 51.3 prelim.
– (EU) Eurozone final June services PMI: 53.0 v 52.8 prelim (confirmed 15th consecutive expansion); Composite PMI: 52.0 v 51.9 prelim.
– (UK) Jun New Car Registrations Y/Y: -24.3% vs. -20.6% before.
– (IT) Italy Q1 budget deficit/GDP ratio since the beginning of the year: 9.0% against 7.2% previously.
– (TW) Taiwan’s foreign reserves in June: 549.0 billion dollars against 548.9 billion dollars previously.
– (UK) June final services PMI: 54.3 vs. 53.4 preliminary (confirmed 16th consecutive expansion); Composite PMI: 53.7 vs. 53.1 preliminary.
– (United Kingdom) Changes in official reserves for June: -1.3 billion dollars against -0.4 billion dollars previously.
Issuance of fixed income securities
– (IDENTIFIER) Indonesia total sold IDR13.8T against target IDR15.0T in bills and bonds.
– (ES) Spanish Debt Agency (Tesoro) sold a total of 5.32 billion euros against 4.5 to 5.5 billion euros in the indicated range in 6 month and 12 month bills.
– (UK) BMD sold £2.0 billion in July 2051 1.25% gilts; Average return: 2.531% compared to 2.040% before; bid-to-cover: 2.24xv 2.91x front; Tail: 0.4 bps versus 0.2 bps forward.
– (TO) AAustrian Debt Agency (AFFA) sold a total of 1.495 billion euros against 1.495 billion euros indicated in the RAGB bonds 2028 and 2032.
– 05:25 (EU) Daily ECB liquidity statistics.
– 05:30 (United Kingdom) Report on the financial stability of the BOE.
– 05:30 (DE) Germany to sell €500m 0.1% April 2033 I/L bonds (Bundei).
– 05:30 (HU) The Hungarian Debt Agency (AKK) will sell 3-month bonds.
– 05:30 (BE) The Belgian Debt Agency (BDA) will sell 3 and 6 month bonds.
– 05:30 (EU) ECB allocation under the 7-day Main Refinancing Tender (MRO).
– 05:30 (ZA) South Africa will sell combined bonds of ZAR 3.9 billion in 2035, 2040 and 2048.
– 06:00 (IL) Israel May Chain Store Sales Y/Y: No east vs. 1.4% prior.
– 06:00 Press conference on the financial stability of the BOE.
– 06:30 (EU) The ESM will sell billions of euros in 3-month bills.
– 06:45 (US) Libor daily fixing.
– 07:00 (TR) Turkey will sell bonds.
– 07:00 (MX) Mexico June Consumer Confidence: 43.9ev 44.2 before.
– 07:30 (TR) Turkey Jun Real Effective Exchange Rate (REER): No is v 55.62 before.
– 08:00 (BR) Brazil May Industrial Production M/M: 0.6%ev 0.1% before; Y/Y: +1.0%ev -0.5% before.
– 08:00 (UK) Daily Baltic Dry Bulk Index.
– 08:30 (CA) Canada May Building Permits M/M: -1.3%ev -0.6% before.
– 09:00 (BR) Brazil services PMI in June: no east v 58.6 ahead; Composite PMI: no est v 58.0 before.
– 10:00 a.m. (US) May Factory Orders: 0.5%ev 0.3% forward; Factory orders (excluding transport): no est v 0.3% before.
– 10:00 a.m. (US) May Final durable goods orders: 0.7%ev 0.7% prelim; Durable goods (excluding transport): 0.7%ev 0.7% prelim; Capital goods orders (excluding defence/ex-aircraft): 0.5%ev 0.5% prelim; Capital goods shipments (non-defence/ex-aircraft): No est v 0.8% prelim.
– 11:30 a.m. (US) The Treasury will sell 13-week and 26-week bills.
– 12:30 p.m. (UK) BOE’s Tenreyro.
– 4:00 p.m. (US) Weekly crop progress report.
– 6:00 p.m. (CO) May Minutes of the Central Bank of Colombia.
– 8:00 p.m. (CO) Colombia June CPI M/M: 0.5%ev 0.8% before; Y/Y: 9.7%ev 9.1% before.
– 20:00 (CO) Colombia June Core CPI M/M: no east v 0.7% ahead, Y/Y: no east v 6.5% ahead.
– 8:30 p.m. (HK) Hong Kong June PMI (overall economy): no est v 54.9 ahead.
– 9:10 p.m. (JP) BOJ bond purchase operation; buy maturities of 1-3 years, 3-5 years and 10-25 years.