Key event day for US with Q2 advance GDP reading and FOMC rate decision

Notes/Observations

- Japan data woes continue with Jun Preliminary Industrial Production worse than expected (M/M: -3.3% v -1.2%e); govt Downgrades assessment of sector

- Key event day for US which including the advance Q2 GDP and FOMC decision

Key Economic Data in session

- (CH) Swiss Jun UBS Consumption Indicator: 2.06 v 1.80 prior

- (FR) France July Consumer Confidence: 86 v 86e

- (ES) Spain Q2 Preliminary GDP Q/Q: 0.6% v 0.5%e; Y/Y: 1.2% v 1.1%e

- (ES) Spain July Preliminary CPI Y/Y: -0.3% v -0.1%e; CPI EU Harmonized Y/Y: -0.3% v -0.1%e

- (DE) Germany July CPI Saxony M/M: 0.4% v 0.2% prior; Y/Y: 0.8% v 0.9% prior

- (SE) Sweden July Consumer Confidence: 99.9 v 102.2e; Manufacturing Confidence: 101.0 v 100.1e; Economic Tendency Survey: 100.4 v 102.0e

- (HU) Hungary Jun Unemployment Rate: 8.0% v 8.3%e

- (CH) Swiss July KOF Leading Indicator: 98.1 v 101.0e

- (AT) Austria Jun PPI M/M: -0.6% v -0.1% prior; Y/Y: +0.1% v -0.9% prior

- (EU) ECB €174M borrowed in overnight loan facility vs. €15M prior; €19.8B parked in deposit facility vs. €21.3B prior - Daily Eurosystem Liquidity Conditions

- (SE) Sweden Q2 Preliminary GDP Q/Q: 0.2% v 0.6%e; Y/Y: 1.9% v 2.4%e

- (SE) Sweden May Non-Manual Workers Wages Y/Y: 2.1% v 2.3% prior

- (DE) Germany July CPI Hesse M/M: 0.1 v 0.4% prior; Y/Y: 0.6 v 0.9% prior

- (NO) Norway May AKU Unemployment Rate: 3.2% v 3.4%e

- (NO) Norway Q2 Industrial Confidence: 8 v 7 prior

- (DE) Germany July CPI Brandenburg M/M: 0.4% v 0.3% prior; Y/Y: 0.9% v 0.9% prior

- (DE) Germany July CPI Bavaria M/M: 0.4% v 0.2% prior; Y/Y: 0.7% v 0.7% prior

- (AT) Bank Austria July Manufacturing PMI: 50.9 v 50.4 prior

- (DE) Germany July CPI North Rhine Westphalia M/M: 0.2% v 0.3% prior; Y/Y: 1.0% v 1.2% prior

- (UK) July Lloyds Business Barometer: 52 v 51 prior

- (PT) Portugal July Consumer Confidence Index: -25.3 v -27.6 prior; Economic Climate Indicator: 0.5 v 0.3 prior

- (BE) Belgium July CPI M/M: 0.2% v 0.1% prior; Y/Y: 0.3% v 0.3% prior

- (EU) Euro Zone July Business Climate Indicator: +0.17 v +0.20e; Consumer Confidence: -8.4 v -8.4e; Economic Confidence: 102.2 v 101.9e; Industrial Confidence: -3.8 v -4.3e; Services Confidence: 3.6 v 4.5e

- (IS) Iceland July Final Trade Balance (ISK): -7.7B v -7.7B prelim

- (CN) China Q2 Current Account: $72.2B v $7.2B prior

Fixed Income:

- (DK) Denmark sold total DKK4.5B in 1-month and 5-month Bills

- (EU) ECB allotted $75M in 7-day USD Liquidity Tender at fixed 0.59% vs. $75M prior (third straight week of allotments)

- (EU) ECB allotted €6.8B in 3-month LTRO tender at fixed 0.15% vs. €11.0Be

- (IT) Italy Debt Agency (Tesoro) sold €1.5B vs. €1.5B indicated in 2.5% Nov 2019 CCTeu (Floating Rate Bond); Avg Yield: 1.12% v 1.24% prior; Bid-to-cover: x v 1.56x prior

- (IT) Italy Debt Agency (Tesoro) sold total €5.5B vs. €5.5B indicated in 5-year and 10-year BTP Bonds

- Sold €3.0B vs. €3.0B indicated range in 1.5% 2019 BTP; Avg Yield: 1.20% (record low) v 1.35% prior; Bid-to-cover: 1.45x v 1.31x prior

- Sold €2.5B vs. €2.5B indicated in 3.75% 2024 BTP; Avg Yield: 2.60%(record low) v 2.81% prior; Bid-to-cover: 1.45x v 1.41x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities***

Indices [Stoxx50 -0.1%, FTSE 100 -0.1% at 6,803, DAX -0.1% at 9,640, CAC-40 -0.3% at 4,350, IBEX-35 +0.2% at 10,920, FTSE MIB flat at 21,083, SMI -0.4% at 8,502, S&P 500 Futures +0.2% at 1,966]

- Market Focal Points/Key Themes: Equity markets open lower ahead of key US event risks (Fed decision, ADP employment change, Q2 advance GDP), Russian stocks rise as EU sanctions were largely in line with speculation, Peugeot rises over 5% after reporting op profit, Airbus rises on better than expected Q2 results, Barclays rises as Q2 revenues in line, Weaker production weighs on Total's results, Portugal's Banco Espirito Santo expected to report results later today

By Sector

- Industrials [Holcim HOLN.CH -4% (Q2 profits below ests), Schneider Electric SU.FR -2% (H1 EBITDA declined); Peugeot UG.FR +5% (reported H1 op profit), Airbus AIR.FR +3% (Q2 results above ests)]

- Financials [Barclays BARC.UK +2% (Q2 revenues in line, reported net profit), BBVA BBVA.ES +1% (H1 profits above ests)]

- Energy [SMA Solar S92.DE -7% (cut outlook), Total FP.FR -2.5% (Q2 production declined)

- Technology [Infineon IFX.DE -4% (Q3 sales below ests)]

- Telecom [KPN KPN.NL +4% (reaffirmed outlook)]

- Utilities [Suez Environmental SEV.FR +2% (H1 profits above ests)]

- Healthcare [Bayer BAYN.DE +1.5% (raised currency adjusted sales forecast)

- Consumer Discretionary [Aer Lingus AERL.UK +2% (Q2 profits rose), Taylor Wimpey TW.UK +1% (H1 profit +64% y/y)]

- Basic Resources/Materials [Eramet ERA.FR +5% (H1 EBITDA rose)]

- Stoxx50 sectors [Energy -1.5%, Technology -0.5%, Industrials -0.5%, Consumer Cyclical -0.3%; Consumer Non-Cyclical +0.4%, Utilities +0.3%, Telecom +0.3%, Financials +0.1%]

Speakers:

- ECB Quarterly Lending Survey noted that credit standards for all categories eased in Q2 (1st easing of standards in 7 years) and net loan demand was positive for all loan categories

- Russia Central Bank comments on EU/US sanctions: Ready to take adequate support measures on its banking sector

- Thailand Finance Ministry cut its 2014 GDP from 2.6% to 2.0% and slashed its export growth forecast from 5.0% to 1.5% . It forecasted 2015 GDP growth at 5.0%. Growth downgrade was due to a bigger than expected Q1 economic contraction

- Philippine Central bank Gov Tetangco: Ready to implement policies to protect CPI targets (**Note: comments ahead of upcoming Interest Rate Decision on Thursday)

Currencies/Fixed Income:

- The USD maintained a steady hand in a busy data-driven European session. US data has recently come in on the strong side. Dealers noting that should the Fed soften its dovish tone further both US front-end yields and USD should move immediately higher. Dealer also added that should the Fed disappoint today the damage for USD would likely remain limited as long as there was continued data strength. The recent round of fresh sanctions against Russia has likely depressed European business sentiment further. EUR/USD continued to hit fresh 8-month lows and tested under the 1.34 handle in the session today.

- The USD/JPY pair stayed above the 102 handle as US 2-year swap rates were breaking higher

- The SEK currency was softer by 0.5% after Swedish 2Q GDP disappointed with EUR/SEK cross moving above 9.24 in trading

- European bond markets paused after its recent rally.

Political/In the Papers:

-IMF issued 2014 global stability report and stated that potential Argentina default would not shake markets; On Russia it stressed that more Russian sanctions could lead to additional spillover effects; Also; a scenario of sharply higher interest rates could combine with weaker growth in emerging markets to reduce global growth by as much as 2 percentage points in the next five years.

-(RU) EU formally agreed to next round of sanctions on Russia with composition of the new including: oil sector, dual use goods, defense, sensitive technology; It now barred EU brokers from trading stock or debt of Russian state banks. (** Note: The measures were largely in line with what was proposed in an EU draft from July 24th)

- (AR) Argentina debt meeting in NY said to have ended at this time - financial press; Argentina's Economy Minister said the meetings will continue tomorrow and remain in motion

Looking Ahead

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

- (DE) EU Ministers of Germany, France and Italy meet in Berlin

- (DE) Germany July CPI Baden Wuerttemberg M/M: No est v 0.3% prior; Y/Y: No est v 0.9% prior

- (BR) Brazil Jun Central Govt Budget Balance (BRL): No est v -10.5B prior

- (PT) Bank of Portugal Bank Lending Survey

- 06:00 (PT) Portugal Jun Industrial Production M/M: No est v -2.2% prior; Y/Y: No est v -0.1% prior

- 06:00 (PT) Portugal Jun Retail Sales M/M: No est v 2.8% prior; Y/Y: No est v 1.6% prior

- 06:00 (IE) Ireland July Live Register Monthly Change: No est v -4.4K prior; Unemployment Rate: No est v 11.6% prior; Register Level: No est v 386.2 prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (US) MBA Mortgage Applications w/e July 25th: No est v 2.4% prior

- 07:00 (ZA) South Africa Jun Electricity Production Y/Y: No est v -1.6% prior; Electricity Consumption Y/Y: No est v -1.0% prior

- 07:00 (BR) Brazil July FGV Inflation IGPM M/M: No est v -0.7% prior; Y/Y: No est v 6.2% prior

- 08:00 (DE) Germany July Preliminary CPI M/M: 0.2%e v 0.3% prior; Y/Y: 0.8%e v 1.0% prior

- 08:00 (DE) Germany July Preliminary CPI Harmonized M/M: 0.2%e v 0.4% prior; Y/Y: 0.8%e v 1.0% prior

- 08:00 (ZA) South Africa Jun Budget Balance (ZAR): +16.0Be v -22.4B prior

- 08:15 (US) July ADP Employment Change: +230Ke v +281K prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Q2 Advance GDP Annualized Q/Q: +3.0%e v -2.9% prior; Personal Consumption: 1.9%e v 1.0% prior

- 08:30 (US) Q2 Advance GDP Price Index: 1.8%e v 1.3% prior; Core PCE Q/Q: 1.9%e v 1.2% prior

- 08:30 (CA) Canada Jun Industrial Product Price M/M: 0.2%e v -0.5% prior; Raw Materials Price Index M/M: +0.6%e v -0.4% prior

- 09:00 (BE) Belgium Q2 Preliminary GDP Q/Q: No est v 0.4% prior; Y/Y: No est v 1.2% prior

- 09:00 (CL) Chile Jun Manufacturing Index Y/Y: 0.9%e v 1.2% prior

- 09:00 (CL) Chile Jun Retail Sales Y/Y: 4.8%e v 4.9% prior

- 09:00 (CL) Chile Jun Total Copper Production: No est v 497.6 tons prior

- 09:00 (CL) Chile Jun Unemployment Rate: 6.4%e v 6.3% prior

- 10:30 (US) DOE weekly Crude Oil Inventories

- 11:30 (US) Treasury to sell $15B in 2-Year Floating Rate Notes

- 13:00 (US) Treasury to sell $29B in 7-Year Notes

- 14:00 (US) FOMC Interest Rate Decision: Expected to leave Interest Rates unchanged at 0.25% and reduce Overall Pace of QE by $10B to $25B; Pace of Govt Bond Purchases: $15B v $20B prior; Pace of MBS Purchases: $10B v $15B prior

- 17:00 (CO) Colombia May Trade Balance: $376.2Me v -$905.6M prior; Total Imports: $5.3Be v $5.5B prior

- 19:05 (UK) July GfK Consumer Confidence: 2e v 1 prior

- (JP) BOJ Policy Board Member Kiuchi speaks with Business leaders