German ZEW Survey shows signs that suggested German growth in 2014 would be weaker

EU Market Update: German ZEW Survey shows signs that suggested German growth in 2014 would be weaker than previously thought

Notes/Observations

- Abatement in geopolitical tensions continues despite power struggle in Iraq. Russian convey into Ukraine said to meets humanitarian criteria

- German Aug ZEW Survey falls to lowest level since Dec 2012 on geo-political concerns (44.3 vs. 54.0e)

Key Economic Data in session

- (JP) Japan Jun Final Industrial Production M/M: -3.3% v -3.3% prelim; Y/Y: 3.1% v 3.2% prelim; Capacity Utilization M/M: -3.3% v -0.7% prelim

- (FR) France Jun Current Account Balance: -€7.4B v -€3.3B prior

- (HU) Hungary July CPI M/M: +0.2% v -0.1% e; Y/Y: +0.1% v -0.1%e

- (EU) ECB €154M borrowed in overnight loan facility vs. €17.0M prior; €22.2B parked in deposit facility vs. €30.6B prior - Daily Eurosystem Liquidity Conditions

- (SE) Sweden July CPI M/M: -0.3% v -0.4%e; Y/Y: 0.0% v -0.1%e; CPI Level: 313.67 v 313.36e

- (SE) Sweden July CPI CPIF M/M: -0.2% v -0.3%e; Y/Y: 0.6% v 0.6%e

- (IT) Italy July CPI (Incl tobacco) M/M: -0.1% v -0.1% prelim; Y/Y: 0.1% v 0.1% prelim

- (IT) Italy July CPI Harmonized M/M: -2.1% v -2.1% prelim; Y/Y: 0.0% v 0.0% prelim;

- (DE) Germany Aug ZEW Current Situation Survey: 44.3 v 54.0e (lowest since Dec 2012); Expectations Survey: 23.7 v 17.0e

- (EU) Euro Zone Aug ZEW Expectations Survey: 23.7 v 48.1 prior

- (CY) Cyprus July CPI Harmonized M/M: -0.3% v +0.7% prior; Y/Y: 0.9% v 0.0% prior

Fixed Income:

- (IT) Italy Debt Agency (Tesoro) sold €7.0B vs. €7.0B indicated in 12-month Bills; Avg Yield: 0.279% (record low) v 0.387% prior; Bid-to-cover: 1.83x v 1.71x prior

- (GR) Greece Debt Agency (PDMA) sold €1.3B vs. €1.0B indicated in 13-week Bills ; Avg Yield: 1.75% v 1.75% prior; Bid-to-cover: 2.61x v 2.35x prior

- (EU) ECB allotted €108.2B in 7-Day Main Refinancing Tender at fixed 0.15% vs. €105Be

- (CH) Switzerland sold CHF604.7M in 3-month Bills; Yield: -0.087% v -0.087% prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities***

Indices [Stoxx50 -0.2%, FTSE 100 flat at 6,631, DAX -0.4% at 9,143, CAC-40 -0.4% at 4,179, IBEX-35 +0.7% at 10,258, FTSE MIB +0.5% at 19,563, S&P 500 +0.2% at 1,936]

- Market Focal Points/Key Themes: Equity markets open mostly lower following Monday's gains, German earnings disappoint (Henkel, Leoni, GFK, Biotest), Henkel warns H2 results to be hurt by Russia, Danish retailer Pandora raises outlook, ZEW data raises concerns about Germany's H2 growth

By Sector

- Healthcare [Rhoen-Klinikum RHK.DE -1% (share placement)]

- Consumer Discretionary [GFK GFK.DE -4% (cut outlook); Just Eat JE.UK +7% (H1 profits rose sharply), Galencia GALN.CH +4% (H1 results above ests, upbeat outlook), Evotec EVT.DE +2% (Q2 results rose), Ladbrokes LAD.UK +2% (reaffirmed outlook)]

- Industrials [Henkel HEN3.DE -3% (cautious commentary on Russia outlook), Leoni LEO.DE -2.5% (Q2 results below ests); Pandora PNDORA.DK +8% (raised outlook)]

- Financials [Hargreaves HL.UK -3% (broker commentary); Serco SRP.UK +4% (new CEO), Prudential PRU.UK +2% (raised dividend)]

- Stoxx50 sectors [Energy -1%, Basic Materials -0.8%, Consumer Non-Cyclical -0.8%, Industrials -0.4%, Telecom -0.2%, Financials -0.1% Utilities -0.5%; Technology +0.2%, Consumer Cyclical flat]

Speakers:

- Ukraine Foreign Ministry Ambassador: Russian aid convoy on its way to eastern Ukraine met the criteria required by the Ukraine govt. The criteria required included no military convoy, crossing borders through approved checkpoints, distribution of aid by Red Cross

- Red Cross stated that it had not been contacted by Russia regarding aid to Ukraine. Russian convoy violated rules on humanitarian aid. Russia needed to provide a list of the aid provided and who it's being provided to

- IEA Monthy Oil Report trimmed its 2014 and 2015 oil demand growth forecasts citing lower-than-expected deliveries in the Q2 and the IMF's weaker outlook for economic growth. Huge rises in oil production from North America was keeping oil markets increasingly well supplied. Situation in several key oil producing countries "remained more at risk than ever", supplies were ample and the Atlantic Basin was even reported to be facing a glut.

Currencies/Fixed Income:

- EUR/USD was drifting lower with sell stops said to be clustered below 1.3330 recent cycle low in the pair. All eyes remained on the German ZEW investor sentiment survey. The reading came in below expectations but the pair managed to hold above the key 1.3330 level for the time being despite signs that suggested German growth in 2014 would be weaker than previously thought

- USD/JPY was slightly firmer at 102.26 although Japanese exporter selling interest was reported around 102.50

- GBP/USD pair was a tad lower (1.6770 area) but the focus was on Wed's release of the quarterly inflation report. Sterling would likely need the support of a hawkish interpretation of the report to have a chance of recovering recent losses

Political/In the Papers:

- (ES) Spain govt said to have eased regional budget constraints; delayed repayments on €16.6B in rescue loans; cut rate on €48.8B of debt to 1.0% from 5.2% prior

Looking Ahead

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

- (PT) Bank of Portugal Data on Banks

- (CO) Colombia Central Bank Economists Survey

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

- 05:30 (BE) Belgium Debt Agency to sell combined €2.2B in 3-Month and 12-Month Bills

- 05:30 (UK) DMO to sell £2.25B in 4.75% 2030 Gilts

- 06:00 (TR) Turkey to sell 2015 Zero Bonds; Yield: % v 8.33% prior; bid-to-cover: x v 2.79x prior

- 06:00 (IL) Israel July Trade Balance: No est v -$1.5B prior

- 06:00 (PT) Portugal July CPI M/M: No est v 0.1% prior; Y/Y: No est v -0.4% prior

- 06:00 (PT) Portugal July CPI EU Harmonized M/M: -0.1%e v +0.1% prior; Y/Y: -0.2%e v -0.2% prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia announces upcoming OFZ Bond auction

- 07:30 (US) July NFIB Small Business Optimism: 96.0e v 95.0 prior

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

- 08:00 (IN) India July CPI Y/Y: 7.4%e v 7.3% prior

- 08:00 (IN) India Jun Industrial Production Y/Y: 5.6%e v 4.7% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (CL) Chile Central Bank's Economist Survey

- 08:55 (US) Weekly Redbook Retail Sales

- 09:00 (EU) Weekly ECB Forex Reserves:

-10:00 (US) Jun JOLTS Job Openings: 4.55Me v 4.635M prior

- 10:00 (MX) Mexico Weekly International Reserves

- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month Bills

- 11:00 (UR) Ukraine to sell 2-Year, 5-year and 7-year Bonds

- 11:00 (US) Fed to Purchase $0.95-1.15B in Notes

- 11:15 (BR) Brazil to sell I/L 2019, 2023, 2030, 2040 and 2050 Bonds

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

- 12:00 (US) DOE Short-Term Crude Outlook

- 12:00 (US) WASDE Corp Report

- 13:00 (US) Treasury to sell $27B in 3-Year Notes

- 14:00 (US) July Monthly Budget Statement: -$100.0Be v +$70.5B prior

- 16:30 (US) Weekly API Oil Inventories

- 19:00 (KR) South Korea July Unemployment Rate: No est v 3.6% prior

- 19:50 (JP) Bank of Japan (BOJ) July 14-15 meeting minutes

- 19:50 (JP) Japan Q2 Preliminary GDP Q/Q: -1.8%e v +1.6% prior; GDP Q/Q Annualized: -7.0%e v +6.7% prior; Nominal GDP Nominal Q/Q: 0.0%e v 1.4% prior

- (US) Connecticut Holds Primary Elections

- (US) Minnesota Holds Primary Elections

- (US) Wisconsin Holds Primary Elections