EU leaders debate whether further sanctions are needed on Russia

Notes/Observations

-EU debate whether new sanctions should be imposed against Russia (prior have been narrowly targeted and spared Russia's economy)

- China to restart RMBS sales to boost housing market after 6-year halt; property developers enjoying strong gains

- Euro continues probing the lower end of its 7-week range

Key Economic Data in session

- (JP) Japan May All Industry Activity Index M/M: 0.6% v 0.6%e

- (JP) Japan May Final Leading Index CI: 104.8 v 107.7 prelim; Coincident Index: 111.3 v 111.1 prior

- (JP) Japan Jun Supermarket Sales Y/Y: -2.8% v -2.2% prior

- (CH) Swiss Jun Trade Balance (CHF): 1.4B v 2.8Be; Real Exports M/M: +5.6 v -6.4% prior; Real Imports M/M: +10.8% v -1.6% prior

- (FI) Finland Jun Unemployment Rate: 9.2% v 10.7% prior

- (JP) Japan Jun Convenience Store Sales Y/Y: -1.9% v -0.8% prior

- (ZA) South Africa May Leading Indicator: 99.6 v 99.5 prior

- (EU) ECB €702M borrowed in overnight loan facility vs. €701M prior; €29B parked in deposit facility vs. €22.7B prior - Daily Eurosystem Liquidity Conditions

- (UK) Jun Public Finances (PSNCR): £11.8B v £8.5B prior; PSNB ex Interventions: £11.4B v £10.5Be prior; Public Sector Net Borrowing: £9.5B v £9.4Be

- (EU) Euro Area (EU-18) Q1 Government Debt to GDP Ratio: 93.9% v 92.7% q/q

Fixed Income:

- (EU) EFSF opened its book to sell €4.0B in 30-year bonds via syndicate; guidance seen at +32bps over mid-swaps with order book over €5.0B

- (ES) Spain Debt Agency (Tesoro) sold total €2.51B vs. €1.5-2.5B indicated range in 3-Month and 9-Month Bills

- Sold €641M in 3-month Bills; Avg Yield: 0.127% v 0.110% prior; Bid-to-cover: 4.48x v 3.79x prior

- Sold €1.87B in 9-month Bills; Avg Yield: 0.205% v 0.307% prior; Bid-to-cover: 3.21x v 2.43x prior

- (EU) ECB allotted €97.9B in 7-Day Main Refinancing Tender at 0.15% vs. €95.0Be

- (CH) Switzerland sold CHF673.7M in 3-month Bills; Yield: -0.127% v -0.127% prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities***

Indices [Stoxx50 +0.9%, FTSE 100 +0.8% at 6,778, DAX +0.8% at 9,684, CAC-40 +0.4% at 4,335, IBEX-35 +1% at 10,599, FTSE MIB +0.9% at 20,603, SMI +0.4% at 8,551, S&P 500 Futures +0.2% at 1,970]

- Market Focal Points/Key Themes: Equity markets open higher as Russian markets retrace some of the prior session's losses, Credit Suisse reports mixed results (profit weighed down by settlement, Revenues supported by fixed income and equity underwriting), Actelion rises on higher outlook, Publicis declines on weaker sales, Chipmakers terminate merger (Dialog Semi and AMS AG), Swatch expects negative currency impact to ease in H2, EU Foreign Ministers meeting on Ukraine, US morning earnings [Dupont, Verizon, Travelers, UTX, Lockheed Martin, Harley Davidson, Comcast, Coca-Cola, McDonalds], Upcoming US CPI data, European corporate high yield bond markets remain quiet

By Sector

- Financials [Credit Suisse CSGN.CH -1.5% (Q2 loss wider than expected)]

- Healthcare [Actelion ATLN.CH +2% (raised outlook)]

- Industrials [Panalpina PWTN.CH -4% (Q2 sales declined), Royal Mail RMG.UK -3% (outlook warning)]

- Consumer Discretionary [Publicis PUB.FR -5% (Q2 sales below ests, cautious outlook)]

- Basic Materials/Resources [Petropavlovsk POG.UK +8% (H1 production +4%), Acerinox ACX.ES +4% (Q2 profits above ests)]

- Technology [ARM Holdings ARM.UK +1% (Q2 results above ests)]

- Stoxx50 Sectors [Energy +1.5%, Industrials +0.9%, Telecom +0.5%, Basic Materials +0.5%, Utilities +0.4%, Financials +0.4%, Consumer Cyclical +0.1%, Consumer Non-Cyclical +0.1%; Technology -0.1%]

Speakers:

- EU's Ashton: Expect strong debate at today's foreign minister meeting regarding any new sanctions on Russia

- German Foreign Min Steinmeier: Russian sanctions were not a remedy

- BOE Dep Gov Bailey: No secret that MPC is talking about the domestic housing market and have to consider indebtedness of households

- India Fin Min Jaitley: Govt concerned with States fiscal health and discipline and continuing with steps to reduce the current account deficit; making effort to maintain deficit at containable level

- Indonesia ex-general Prabowo rejected the Presidential elections results and quits the process saying the process violated the constitution (**Note: Comments came ahead of the formal election results that would declare Jakarta governor Joko Widodo as the winner)

Currencies/Fixed Income:

- The EUR/USD continued to exhort pressure on the downside as it probed the lower end of its 7-week range. EU foreign ministers debated about more sanctions against Russia was one factor in its price action. Significant stops said to be building below the 1.3477 area which would mark a fresh 2014 low.

- The JPY currency weakened to 5-day low as the Nikkei225 Index returned after an extended weekend. Japan's Cabinet Office trimmed its FY15 GDP growth outlook citing effects from the recent sales tax hike.

- Currency markets will see a plethora of inflation data coming out which could cement views on various central bank policies

Political/In the Papers:

- (JP) Japan Cabinet Office (govt) updated its FY14 Economic Forecasts which cut its Real GDP forecast from 1.4% to 1.2% citing effects from the recent sales tax increase

- (CN) PBoC did not conduct open market operations (OMO) in today's session (1st halt after 6 drains)

- (LY) Libya National Oil Co. (NOC) reportedly reaches deal with protesting security guards to allow Brega oil port to reopen on Tuesday, July 22nd

Looking Ahead

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

- (EU) EU Foreign Ministers press conference folloing meeting in Brussels on Russia and possible sanctions

- (CZ) Czech Central Bank Gov Singer speaks at OMFIF

- 05:30 (BE) Belgium Debt Agency to sell up to €2.0B in 2024 and 2026 Bonds

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills

- 05:30 (UK) DMO to sell £3.25B in 2.75% 2024 Gilts

- (ZA) South Africa to sell 2030, 2041 and 2044 bonds

- 06:00 (UK) July CBI Industrial Trends Total Orders: 8e v 11 prior; Selling Prices: 4e v 3 prior; Business Optimism: 30e v 33 prior

- 06:00 (TR) Turkey to sell 2015 Zero Bonds

- 06:30 (EU) ESM to sell € in 6-month Bills

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia announces upcoming Bond issuance plans

- 07:45 (US) Weekly ICSC Chain Store Sales

- 08:00 (BR) Brazil July IBGE Inflation IPCA-15 M/M: 0.2%e v 0.5% prior; Y/Y: 6.6%e v 6.4% prior

- 08:00 (HU) Hungary Central Bank (NBH) Interest Rate Decision: Expected to cut Base Rate by 10bps to 2.20%

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Jun CPI M/M: 0.3%e v 0.4% prior; Y/Y: 2.1%e v 2.1% prior

- 08:30 (US) Jun CPI Ex Food and Energy M/M: 0.2%e v 0.3% prior; Y/Y: 2.0%e v 2.0% prior

- 08:30 (US) Jun CPI NSA: 238.535e v 237.9 prior; CPI Core Index SA: 238.227e v 237.776 prior

- 08:55 (US) Weekly Redbook Retail Sales

- 09:00 (US) May FHFA House Price Index M/M: 0.2%e v 0.0% prior

- 09:00 (MX) Mexico May Retail Sales Y/Y: +1.0%e v -0.4% prior

- 09:00 (EU) Weekly ECB Forex Reserves: No est v €212.9B prior

- 09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement

- 10:00 (US) July Richmond Fed Manufacturing Index: 5e v 3 prior

- 10:00 (US) Jun Existing Home Sales: 4.99Me v 4.89M prior

- 10:00 (MX) Mexico Weekly International Reserves

- 11:30 (US) Treasury to sell 4-Week and 52-Week Bills

- 16:30 (US) Weekly API Oil Inventories

- 17:00 (CO) Colombia May Trade Balance: $411.4Me v -$905.6M prior; Total Imports: $5.3Be v $5.5B prior

- 17:00 (KR) South Korea Q2 FDI: No est v 49.1% prior

- 21:30 (AU) Australia Q2 CPI Q/Q: 0.5%e v 0.6% prior; Y/Y: 3.0%e v 2.9% prior

- 21:30 (JP) BOJ Dep Govr Nakaso speaks with Business Leaders

- (AR) Argentina July Consumer Confidence Index: No est v 41.9 prior

- (MX) Mexico Banamex Survey of Economists