Improvement seen in Greek data

EU Market Update: Improvement seen in Greek data as it achieves primary surplus and Q2 GDP contraction less than anticipated

Notes/Observations

- China said to covertly support important cities and region coupled with reports that while the State Council would continue to lower RRR for medium and small financial institutions; Shanghai and Hang sang equities rise approx 2% to multi-month highs

- Japan's 2Q Preliminary GDP comes in below expectations (q/q 0.6% v 0.9%e); debate on whether growth strong enough to whether coming sales tax hike

- Greece registers July YTD Primary Surplus; opens talk of more possible debt relief

- German 6-month BuBill auction was barely technically covered

- Key events in week: Euro zone, France and Germany Q2 GDP data on Wed, UK unemployment data. Euro area gradually moving out of recession

- Focus moves from "Great Rotation" to the "Great Vacation" during the dog days of summer

Economic Data

- (JP) Japan Jun Final Industrial Production M/M: -3.1% v -3.3% prelim; Y/Y: -4.6 v -4.8% prelim; Capacity Utilization M/M: -2.3 v 2.3% prelim

- (JP) Japan July Preliminary machine Tool Orders Y/Y: -12.1% v -12.4% prior; 15th consecutive decline

- (FR) France Jun Current Account Balance: -€1.4B v -€3.5B prior

- (ES) Spain Jun House transactions Y/Y: -5.5% v -3.7% prior

- (TR) Turkey Jun Industrial Production M/M: +1.4% v -0.6% prior; Y/Y: 4.2% v 1.0% prior

- (CH) Swiss Jun Real Retail Sales Y/Y: 2.3% v 1.5% prior

- (NL) Netherlands Jun Trade Balance: €3.5B v €4.6B prior

- (IN) (IN) India July Trade Balance: -$12.3B v -$12.2B prior; Imports Y/Y: -6.2% v -0.4% prior; Exports Y/Y: +11.6% v -4.6% prior

- (CZ) Czech Jun Current Account (CZK): -3.2BB v -1.1Be

- (IT) I Bank of Italy June Public Finance Supplement: General Government Debt: €2.075T v €2.075T prior (remains at record high levels)

- (UK) UK Jun Mortgages: 55.4K, +1.1% m/m; +15.7% y/y - CML

- (GR) Greece Q2 Advance GDP Y/Y: -4.6% v -49.%e

Fixed Income:

- (IT) Italy Debt Agency (Tesoro) sold €7.5B vs. €7.5B indicated in 12-month Bills; Avg Yield: 1.053% v 1.078% prior; Bid-to-cover: 1.49x v 1.56x prior

- (DE) Germany sold €3.51B in 6-month BuBills; Avg Yield: +0.0218% v -0.0035% prior; Bid-to-cover: 1.2x v 1.7x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities***

Indices:

[EuroStoxx50 -0.5%, FTSE 100 -0.30% at 6,565, DAX -0.60% at 8,289, CAC-40 -0.25% at 4066, IBEX-35 -0.20% at 8,715, FTSE MIB -0.50% at 17,104, SMI +0.10% at 7,985, S&P 500 Futures -0.40% at 1,679; Overall European equity markets are mostly lower, as the DAX has underperformed.]

- Focal Points for Markets: [Weaker than expected Japan Q2 GDP, rise in core government bond yields, Equity gains in Shanghai on renewed stimulus speculation, euro zone Q2 GDP data for later this week, better than expected Greek Q2 GDP]

By Sector:

- Financials: [Deutsche Boerse DB1.DE -3% (broker commentary); Delta Lloyd DL.NL +2% (broker commentary), Prudential PRU.UK +4% (H1 results above ests, raised dividend); Overall European banks are mixed, as Spanish financials lag; EuroStoxx Financials index -0.2%]

- Basic Resources: [Fresnillo FRES.UK +1% (higher silver prices); ThyssenKrupp TKA.DE -1.5% (capital raise speculation); Overall, renewed stimulus talk out of China and higher silver prices have supported resource related companies. EuroStoxx Basic Resources index flat]

- Industrials:[Impreglio +3% IPG.IT (contract award), Bilfinger Berger GBF.DE +2% (Q2 results above ests), Technip TEC.FR +1.5% (contract award); Automakers underperform the overall market (BMW -1%, Peugeot -1.4%); EuroStoxx Industrial index -0.4%]

- Healthcare: Morphosys MOR.DE +4% (closed on alliance with Celgene), Roche ROG.CH +1% (renewed speculation that firm is not interested in Alexion); Sanofi -1% SAN.FR (concerns about bribery probe in China)]

- Telecom: [QSC +10% QSE.DE (Q2 results above ets); Telekom Austria TKA.AT -2% (Q2 EBITDA below ests)]

- Utilities [RWE RWE.DE and E.ON EOAN.DE -0.70% (the companies report Q2 figures later this week); EuroStoxx Utilities index -1%]

Speakers:

- Italy may cut up to 200K jobs in the public sector in producing savings of up to €2.0B

- EU Commission said to be considering 5 measures to reduce the cost of Greece debt

- German Fin Ministry refutes press speculation and sees no change needed to current aid plan to Greece at the moment

- IMF calls for formal warnings for Spain autonomous regions which stray too far from their budget deficit goals

- Hungary Finance Ministry stated that it had prepaid its outstanding balance of $2.2B in IMF loan (as previously indicated)

- Turkey Econ Min Caglayan cuts 2013 GDP growth forecast to slightly above 3.0% vs. 4.0% target.

- Russia Econ Min Ulyukayev: No reason to revise 2.4% GDP forecast

- Japan Vice Fin Min Obuchi: To make a judgment on the sales tax hike after reviewing various data including GDP

- India Fin Min Chidambaram: Invest concerns on currenct account deficit is reflected on INR currency; To take steps for compression of gold demand and oil imports

Currencies/Fixed Income:

- FX markets began the week on a quiet tone with the USD on supportive footing in early European trade. Dealers were looking ahead to Wednesday's key with Euro zone, France and Germany Q2 GDP data and UK unemployment data all set for release. It should confirm that the Euro area was gradually moving out of recession.

- The EUR/USD contained within recent ranges and near 1,33 as the NY morning approached

- The JPY currency reversed its earlier gains after the disappointment in the Japan Q2 GDP. USD/JPY pair drifting back towards 97 area after testing below 96 in Asia.

Political/In the Papers:

- The German press reported that the Bundesbank expects creditors will have to agree on new Greece bailout in early 2014.

- (EU) European banks will need to rid themselves of €3.2T in assets within the next 5 years to comply with Basel III - FT: Cites analysis from RBS

- (GR) Greece expected to have achieved a primary budget surplus of €2.5B for Jan-July v deficit €3.1B target

- Japan's Q2 preliminary GDP annualized q/q came in at 2.6% v 3.6%e. Japan PM Abe's adviser Honda said the Q2 GDP indicates conditions are not appropriate for sales tax hike.

- (CN) China State Council: govt issues statement on financial support for small companies; to ensure loan growth is not below avg levels, to cut financing costs; To continue the lower Reserve Requirement Rate (RRR) for small and micro companies.

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)

- 06:00 (PT) Portugal July CPI M/M: -0.1%e v +0.1% prior; Y/Y: 0.8%e v 1.0% prior

- 06:00 (PT) Portugal July CPI EU Harmonized M/M: -0.1%e v+ 0.1% prior; Y/Y: 0.8%e v 1.2% prior

- 06:00 (IL) Israel to sell Bonds

- 06:00 (RO) Romania to sell T-Bills

- 06:00 (TR) Turkey to sell 2018 and 2023 bonds

- 06:00 (NO) Norway to sell Bills

- 06:30 (US) Daily Libor Fixing

- 07:30 (BR) Brazil Central Bank Weekly Economists Survey

- 08:00 (PL) Poland Jun Current Account Balance: €220Me v €574M prior; Trade Balance: €234Me v €113M prior; Exports: €12.8Be v €12.4B prior; Imports: €12.5Be v €12.3B prior

- 08:00 (IN) India July CPI Y/Y: 9.7%e v 9.9% prior

- 08:00 (IN) India Industrial Production Y/Y: -1.1%e v -1.6% prior

- 08:50 (FR) France Debt Agency (AFT) to sell combined €8.0B in 3-month, 6-month, and 12-month bills

- 09:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender at fixed 0.50%

- 09:30 (EU) ECB announces prior settlements in SMP program to offset bond purchases

- 11:00 (US) Fed to purchase $1.25-1.75B in Notes

- 11:30 (US) Treasury to sell combined $55B in 3-Month and 6-Month Bills

- 12:00 (US) World Agricultural Supply & Demand Estimates (WASDE)

- 14:00 (US) July Monthly Budget Statement: -$94.5B v -$69.6B prior

- 19:50 (JP) Bank of Japan (BOJ) July 10-11 meeting minutes