– Quiet EU morning session as the US markets are closed for Federal holiday.
– Slowing in US economic momentum cast some doubt over interest rate rise expectations for the Fed.
– While liquidity is reduced, risk appetite has crept back in slightly. Asia closed mixed, with Nikkei225 underperforming at -0.75%. EU indices start positive at 0.25-1.0%, EU bond yields are mixed. Elsewhere Gold +0.1%, BTC +12.1%, ETH +17.5%, DXY -0.25%, Brent -0.7%, WTI -0.3%.
– Germany May PPI reading hits a fresh record high.
– An EU foreign minister meeting resulted in a collection of retorts from various ministers that condemn the activity of Russia over the blocked Black Sea ports in Ukraine, citing its actions as war crimes as fears grow of a global food shortage.
– ECB’s Centeno made comments that the ECB are discussing instruments that allow the market to bring discipline to where it doesn’t seem to exist whenever spreads go beyond the fundamentals of savings.
– Japan released their economic report for June which suggested the economy is picking up. Daily verbal intervention from BOJ Gov Kuroda continues as he reiterated their stance that FX moves must reflect fundamentals.
– CAC40 gains slightly at +0.3% as Macron loses his overall majority in the National Assembly over the weekend.
– FSTE100 also gains +0.7% amid a large railway network strike this week in the UK that commences today. UK Treasury announced buy-now-pay-later regulations.
– In Germany, PPI data confirmed the highest annual pace since 1949 at 33.6% y/y. Econ Min Habeck revealed new measures to cut the usage of natural gas after Russia cut supply last week.
– Looking ahead, an abundance of ECB speakers are expected, including: Muller, Visco, Lagarde, Kazaks, Panetta and Lane. Also expected are BOE’s Mann, BOE’s Haskel and Fed’s Bullard.
– China PBoC left the 1-year and 5-year LPR rates unchanged in Jun (as expected).
– BOJ offered to buy 5-10 year JGBs at fixed rate of 25bps; Opened window to buy unlimited amount of 10-year JGBs at 0.25% [as expected].
– Japan PM Kishida: reiterated stance that BoJ monetary easing should continue.
– ECB’s Rehn (Finland) stated that ECB should limit the rise in the borrowing costs of more indebted euro zone members, but budget concerns should not dictate monetary policy. Outright Monetary Transactions (OMT) could be used to deal with more profound structural economic weakness and debt sustainability problems.
– France President Macron loses absolute majority in parliament (keeps largest bloc). Won 245 seats of 577. 289 needed to retain a majority). Le Pen’s far right to take 89 seats v 8 prior (Prior highest number was 35 in 1986).
– More than 40,000 UK rail workers to walk out from Tuesday, Jun 21st for a 3 day strike. Rail unions have threatened to continue striking until Christmas.
– Fed’s Waller (hawk, voter) stated over the weekend that he would support a 75 bps hike at July meeting if data was as expected. At the stage where Fed had to move rates a lot to get to neutral, then restrictive.
– Treasury Sec Yellen: Pace of inflation was likely to come down in months ahead; Reiterated President Biden reviewing tariff policy on China. Some inherited tariffs served no strategic purpose. US recession ‘was not inevitable.
– Germany Econ Min Habeck unveiled new measures to cut usage of natural gas; To store as much natural gas as possible with a new set of measures, including an increased use of coal power plants.
– US Energy Sec Granholm: Administration was looking into the option of pausing the federal gas tax in order to bring down prices.
Indices [Stoxx600 +0.11% at 403.68, FTSE +0.69% at 7,064.45, DAX +0.62% at 13,207.82, CAC-40 +0.40% at 5,906.14, IBEX-35 +0.70% at 8,202.70, FTSE MIB +0.50% at 21,897.00, SMI -0.16% at 10,434.60, S&P 500 Futures +0.60%].
Market Focal Points/Key Themes: European indices opened modestly higher in light trading, and remained in the green as the session progressed; better performing sectors include energy and consumer discretionary; underperforming sectors include materials and industrials; mining subsector under pressure following idling of blast furnaces in China; Roche makes equity investment in Valneva; US closed for holiday.
– Consumer discretionary: Easyjet [EZJ.UK] -3% (trading update), Deliveroo [ROO.UK] -8% (new CFO).
– Consumer staples: Associated British Foods [ABF.UK] +1% (trading update).
– Energy: Uniper [UN01.DE] -1.5% (Russia gas supplies cut).
– Financials: Euromoney Institutional Investor [ERM.UK] +24% (confirms PE interest).
– ECB’s Centeno (Portugal) noted that inflation in Europe was very imported and there was no way the Euro was at risk. The natural interest rate was an indicator and normalization of policy would be made gradually.
– ECB’s Stournaras (Greece, dove) stated that must maintain focus on medium-term inflation. Monetary policy could afford to be gradual.
– ECB’s Kazaks (Latvia, hawk): Current problem was the speed of market repricing; July and Sept decisions to depend on circumstances. Market should not get carried away with rate hike bets. Had no specific target on spread levels.
– Spain Economy Min Calvino stated that it was positive that ECB had moved swiftly to combat fragmentation risks in EU.
– Russia 1st Dep PM Belousov: Russia is discussing targeting Russian RUB currency (ruble) rate; Floating ruble essentially not working now.
– Russia 2023 budget guidelines said to have no plans to issue Eurobonds during next 3 years; Targeted $19B in net domestic borrowings in 2023. Russian’s budget said to stay in deficit during 2022-2025 period.
– BOJ Gov Kuroda comments following meeting with PM that was important that FX moves reflect fundamentals and would watch FX markets closely. Recent sudden forex moves were undesirable. No particular comments from PM. Hoped to coordinate closely with govt and respond appropriately on FX.
– Japan PM Kishida noted that he discussed concerns over the rapidly weakening JPY currency (Yen) with the BOJ Gov.
– Japan Cabinet Office (Govt) Jun Economic Report: Maintained overall economic assessment that economy is showing signs of picking up.
– USD holding steady after some recent retracement as markets reacted to slowing in US economic momentum which casted some doubt over interest rate rise expectations for the Fed.
– EUR/USD steady at 1.0515 area. ECB speakers continued to talk about its anti-fragmentation objectives. Markets awaiting the ECB design of the program.
– Focus in the UK will be Wed’s inflation data. Dealers noted that UK was beginning the week with surging inflation coupled with labor strikes. Recent monthly GDP data showed the rising risk of recession. All seems reminiscent of the 1970s.
– USD/JPY staying away from recent 24 year lows as Japanese officials continue to tout the G7 rhetoric that FX moves should reflect fundamentals and that they would watch FX markets closely. Pair at 134.75 by mid-session.
– (DE) Germany May PPI M/M: 1.6% v 1.5%e; Y/Y: 33.6% v 33.8%e (Highest annual pace since 1949).
– (TW) Taiwan May Export Orders Y/Y: 6.0% v 1.1%e.
– (CH) Swiss weekly Total Sight Deposits (CHF): 751.8B v 753.1B prior; Domestic Sight Deposits: 661.7B v 753.1B prior.
– (TR) Turkey May Foreign Tourist Arrivals Y/Y: 308.5% v 225.6% prior.
– (GR) Greece Apr Current Account: -€1.6B v -€2.3B prior.
– (EU) Euro Zone Apr Construction Output M/M: -1.1% v +0.1% prior; Y/Y: 3.0% v 3.4% prior.
Fixed income issuance
– None seen.
– 05:00 (SK) Slovakia Debt Agency (Ardal) to sell 2025, 2027, 2030 and 2051 bonds.
– 05:25 (EU) Daily ECB Liquidity Stats.
– 05:30 ((DE) Germany to sell €3.0B in 12-month BuBills.
– 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €3.0B in 3-month and 6-month bills.
– 05:30 (BE) Belgium Debt Agency (BDA) to sell €2.7-3.7B in 2029, 2032 and 2053 OLO bonds.
– 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).
– 06:00 (IL) Israel to sell combined 850M in 2024, 2026, 2032 and 2051 bonds.
– 06:00 (RO) Romania to sell RON500M in 2.5% Oct 2027 Bonds.
– 06:45 (US) Daily Libor Fixing.
– 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).
– 07:25 (BR) Brazil Central Bank Weekly Economists Survey.
– 08:00 (IS) Iceland May Unemployment Rate: No est v 4.5% prior.
– 08:00 (UK) Daily Baltic Dry Bulk Index.
– 09:00 (FR) France Debt Agency (AFT) to sell €4.8-6.0B in 3-month, 6-month, 9-month and 12-month bills.
– 09:00 (EU) ECB’s Lagarde.
– 09:00 (UK) BOE’s Mann.
– 10:00 (PT) ECB’s Centeno (Portugal).
– 11:00 (EU) ECB’s Lagarde.
– 13:00 (IT) ECB’s Panetti (Italy).
– 12:45 (US) Fed’s Bullard.
– 15:30 (IE) ECB’s Lane (Ireland, chief economist).
– 17:00 (NZ) New Zealand Q2 Westpac consumer Confidence: No est v 92.1 prior.
– 20:00 (KR) South Korea Jun 1-20 Exports Y/Y: No est v 24.1% prior; Imports Y/Y: No est v 37.8% prior; Trade Balance: No est v -$4.8B prior.
– 20:00 (AU) RBA Gov Lowe.
– 21:30 (AU) RBA Jun Minutes.
– 22:30 (KR) South Korea to sell KRW600B in 20-Year Bonds.
– 23:00 (TH) Thailand Central Bank to sell THB50B in 3-month Bills.
– 23:35 (JP) Japan to sell 5-Year JGB Bonds.
Tags: #Quiet #start #week #market #closed #holiday