UK Jun retail sales disappoints

EU Market Update: Major European PMI data beats expectations; UK Jun retail sales disappoints

Notes/Observations

- New Zealand Central Bank (RBNZ) raised its Official Cash Rate for the 4th straight time by 25bps to 3.50% but signals pause for rest of 2014

- South Korea Q2 Preliminary GDP touch below expectations (Q/Q: 0.6% v 0.7%e); Govt announces major stimulus which increases public spending by KRW11.7T

- Japan Jun Trade Balance: -¥822.2B v -¥642.9Be with exports registering their 2nd straight decline

- Japan July Preliminary Manufacturing PMI: 50.8 v 51.5 prior

- China July Preliminary HSBC Manufacturing PMI hits an 18-month high (52.0 v 50.7 prior); Shanghai Composite to 3-month highs

- Major European PMI data beats expectations for July (exception being France Manufacturing PMI again)

- UK Jun Retail Sales data disappoints (ex-auto MoM -0.1% v +0.3%e)

- EU Ambassadors meet in closed-door meeting to discuss more sanctions on Russia

Key Economic Data in session

- (FI) Finland Jun PPI M/M: 0.3% v 0.2% prior; Y/Y: -0.6 v -1.1% prior

- (FI) Finland Jun Preliminary Retail Sales Volume Y/Y: -1.7% v -0.5% prior

- (FR) France July Preliminary Manufacturing PMI: 47.6 v 48.0e (3rd straight contraction and lowest reading since Dec 2013; Services PMI: 50.4 v 48,2e (first expansion in three months

- (ES) Spain Q2 Unemployment Rate: 24.5% v 24.9%e (two-year low)

- (CZ) Czech July Business Confidence: 10.1 v 11.1 prior; Consumer Confidence Index: -2.3 v -2.8 prior

- (EU) ECB €223M borrowed in overnight loan facility vs. €300M prior; €21.8B parked in deposit facility vs. €22.7B prior - Daily Eurosystem Liquidity Conditions

- (DE) Germany July Preliminary Manufacturing PMI: 52.9 v 51.9e (13th straight month of growth); Services PMI: 56.6 v 54.5e (14th straight month of expansion and highest since Jun 2011)

- (SE) Sweden Jun Unemployment Rate: 9.2% v 9.0%e; Unemployment Rate (Seasonally Adj): 8.0% v 7.9%e

- (SE) Sweden Jun PPI M/M: -0.1% v +1.1% prior; Y/Y: 2.3% v 2.8% prior

- (EU) Euro Zone July Preliminary Manufacturing PMI: 51.9 v 51.7e; Services PMI: 54.4 v 52.7e

- (IT) Italy May Retail Sales M/M: -0.7% v +0.2%e (largest monthly decline since Oct 2012); Y/Y: -0.5% v +1.0%e

- (UK) Jun Retail Sales Ex Auto M/M: -0.1% v +0.3%e; Y/Y: 4.0% v 4.6%e

- (UK) Jun Retail Sales (Incl Auto) M/M: 0.1% v 0.3%e; Y/Y: 3.6% v 3.9%e

- (HK) Hong Kong Jun Trade Balance (HKD): -43.1B v -49.0Be; Exports Y/Y: 11.4% v 6.6%e; Imports Y/Y: 7.6% v 5.2%e

- (IT) Italy July Consumer Confidence Index: 104.6 v 105.2e (four month low)

Fixed Income:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities***

Indices [FTSE 100 +0.2% at 6,808, DAX +0.4% at 9,789, CAC-40 +0.6% at 4,404, IBEX-35 +1.3% at 10,795, FTSE MIB +1.2% at 21,072, SMI +0.5% at 8,649, S&P 500 Futures +0.1% at 1,983]

- Market Focal Points/Key Themes: Equity markets open lower amid heavy day for corporate earnings, Peripheral indices outperform amid tighter debt spreads, Roche rises on better than expected profits, Weaker sales weigh on BASF, Technip declines on margin outlook, Retailer Kingfisher declines on sales drop, Spanish banks report better than expected results amid rise in net interest income (Sabadell, Bankiter), Danske Bank raised outlook, China PMI above expectations, European PMIs (France Mixed, Germany above ests), US morning earnings (Caterpillar, GM, Ford, Potash)

By Sector

- Financials [Danske Bank DANSKE.DK +4% (raised outlook), Sabadell SAB.ES +3% (H1 results above ests), Bankinter BKT.ES +1.5% (H1 results above ests)]

- Healthcare [Roche ROG.CH +1% (H1 profits above ests)

- Technology [Logitech LOGN.CH +9% (Q2 results above ests, raised outlook), Dassault Systems DSY.FR +5% (Q2 results above ests)]

- Telecom [Nokia NOK1V.FI +6% (Q2 results above ests, raised outlook)]

- Industrials [Technip TEC.FR -6% (cautious margin outlook), BASF BAS.DE -1.5% (Q2 results below ests)]

- Consumer Discretionary [Tomtom TOM2.NL +4% (raised outlook); Kingfisher KGF.UK -6% (10-week sales declined), Easyjet EZJ.UK -3.5% (guidance below ests), Unilever ULVR.UK -0.8% (Q2 sales below ests)]

- Energy [Repsol REP.ES +1% (Q2 profits above ests)]

- Stoxx50 Sectors[Financials +0.6%, Industrials +0.4%, Energy +0.4%, Utilities +0.3%, Consumer Cyclical +0.3%, Consumer Non-Cyclical flat; Technology -0.7%, Basic Materials -0.5% (despite better China PMI data)]

Speakers:

- SNB Jordan reiterated that currency cap remains a central policy tool for the foreseeable future

- France PM Valls reiterates the views that EMU growth remained too weak and that the Euro currency was too strong and too expensive

- Turkey Central Bank quarterly inflation report noted that the FX effect on inflation started to ease in Q2 and was expected to slow in coming period. Q1 deterioration in inflation trend has halted and domestic demand conditions was supportive of inflation outlook. Central Bank has begun measured rate cuts but overall policy remains tight

- Norway Justice Minister confirmed it received a concrete terror threat regarding individuals linked to Syria and could occur within a few days (no specific target mentioned)

- Russia Defense Ministry: Denies Ukraine claims that missiles that brought down the two Ukrainian fighter jets were fired from inside Russia

- German govt thinks EU could issue new sanctions on Russia by the end of the month

- EU said to be weighing far-reaching sanctions against Russia with sanctions to be considered at meeting today. It could include proposal to ban all European buying of any new debt or stock issued by Russian banks and propose stopping Russian banks from using LSE/European markets to raise funds from non-Europeans.

- EU diplomat: Proposal for sanctions includes ban on purchases of debt and shares issued by Russian banks bit not Russia Govt debt

Currencies/Fixed Income:

- The Major European PMI data helped the EUR currency move off recent lows. Markets were looking for modest corrections in today's data. The EUR/USD moved off 8-month lows as it held above its 200-week moving average of 1.3426 to trade at 1.3480 just ahead of the NY morning

- The GBP currency weakened for the 7th straight session after Jun retail sales data came in below expectations. GBP/USD dipped to test 1.7015 in the aftermath of the data release

- NZD/USD was down 0.%to trade below $0.86 after RBNZ Gov Wheeler noted "exchange rate level was unjustified and unsustainable and there was potential for a significant fall

Political/In the Papers:

- ECB's Weidmann (Germany): OMT program blurs role of economic and monetary policy - Handelsblatt - (US) IMF lowers United States GDP forecast to 1.7% from 2%, cites weak Q1; expects growth to accelerate this year and affirms be above 3% in 2015 - RBNZ: "Prudent for period of assessment before further hikes"; Domestic economy appears to be adjusting to tightening

Looking Ahead

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

- (RU) EU Ambassadors meet to discuss Russian sanctions

- (UR) Ukraine Energy Min Prodan meets EU counterpart Oettinger

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 2018, 2019 and 2025 bonds

- 06:00 (IE) Ireland Jun Property Prices M/M: No est v 2.3% prior; Y/Y: No est v 10.6% prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (RO Romania to sell 2018 Bonds

- 07:00 (RU) Russia Gold and Forex Reserve w/e Jul 18th: No est v $476.7B prior

- 07:30 (BR) Brazil Central Bank (BDB) COPOM Monetary Policy Meeting Minutes

- 07:30 (TR) Turkey July Capacity Utilization: No est v 75.3% prior; Real Sector Confidence: No est v 110.7 prior

- 08:00 (BR) Brazil Jun Unemployment Rate: 5.1%e v No prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Initial Jobless Claims: 307Ke v 302K prior; Continuing Claims: 2.51Me v 2.507M prior

- 08:30 (US) Weekly USDA Net Export Sales

- 09:00 (MX) Mexico May Economic Activity Index Y/Y: 2.0%e v 0.5% prior

- 09:00 (CL) Chile Jun PPI M/M: No est v 1.7% prior

- 09:45 (US) July Preliminary Markit Manufacturing PMI: 57.5e v 57.3 prior

- 10:00 (US) Jun New Home Sales: 475Ke v 504K prior

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 11:00 (US) July Kansas City Fed Manufacturing Activity: 6e v 6 prior

- 11:00 (US) Treasury 2-year, 5-year and 7-year refunding announcement

- 11:00 (US) Fed to purchase $2.00-2.50B in Notes

- 11:15 (BR) Brazil to sell 2015 and 2016 Bills

- 13:00 (US) Treasury to sell $15B in 10-Year TIPS

- 15:00 (AR) Argentina May Economic Activity Index M/M: No est v 0.6%prior; Y/Y: No est v -0.5% prior

- 17:00 (KR) South Korea July Consumer Confidence: No est v 107.0 prior

- 19:30 (JP) Japan Jun National CPI Y/Y: 3.5%e v 3.7% prior; CPI Ex Fresh Food Y/Y: 3.3%e v 3.4% prior; CPI Ex Food, Energy Y/Y: 2.3%e v 2.2% prior

- 19:30 (JP) Japan July Tokyo CPI Y/Y: 2.8e v 2.2% prior; CPI Ex Fresh Food Y/Y: 2.7%e v 2.8% prior; CPI Ex Food, Energy Y/Y: 2.0%e v 2.0% prior

- (BR) Brazil Jun Total Federal Debt (BRL): No est v 2.122T prior

- (JP) BOJ Gov Kuroda in Thailand