Polls show Greeks are split on bailout referendum

Notes/Observations

- Polls showing that Greece citizens are split on bailout referendum; govt continues to sell a "No" as a chance for a better deal

- China Stock Regulator (CSRC) vows to help keep markets stable after Shanghai Composite falls almost 30% from its Jun peak

Economic data

- (IN) India Jun PMI Services: 47.7 v 49.6 prior; PMI Composite: 49.2 v 51.2 prior (2nd consecutive contraction and lowest since Mar 2014)

- (IE) Ireland Jun Services PMI: 63.3 v 61.4 prior; Composite PMI: 60.9 v 60.8 prior (36th month of expansion and highest since Sept 2006)

- (RU) Russia Jun PMI Services: 49.5 v 50.8e; PMI Composite: 49.5 v 51.6 prior

- (SE) Sweden Jun PMI Services: 54.9 v 58.2 prior

- (TR) Turkey Jun CPI (miss)M/M: -0.5% v 0.0%e; Y/Y: 7.5% v 7.8%e v 8.1% prior; CPI Core Index Y/Y: 7.6%e v 7.5% prior

- (ES) Spain Jun Services PMI (miss): 56.1 v 58.4e (20th month of expansion but lowest since Dec)

- (SE) Sweden May Industrial Production (beat) M/M: -0.1% v -0.5%e; Y/Y: % v 2.5%e

- (IT) Italy Jun Services PMI (beat): 53.4 v 52.3e (6th month of expansion and highest since Jun 2014); Composite PMI: 54.0 v 53.3e

- (FR) France Jun Final Services PMI (in line): 54.1 v 54.1e (confirms 5th month of expansion and highest since Aug 2011); Composite PMI: 53.3 v 53.4e

- (DE) Germany Jun Final Services PM (miss)I: 53.8 v 54.2e (confirms 25th month of expansion); Composite PMI: 53.7 v 54.0e

- (EU) Eurozone Jun Final Services PMI (in line): 54.4 v 54.4e (confirms 25th month of expansion and highest since May 2011); Composite PMI: 54.2 v 54.1e

- (NO) Norway Jun Unemployment Rate (in line): 2.8% v 2.8%e

- (UK) Jun Services PMI (beat): 58.5 v 57.5e (30th month of expansion); Composite PMI: 57.4 v 56.7e

- (EU) Euro Zone May Retail Sales M/M: 0.2% v 0.1%e; Y/Y: 2.4% v 2.3%e

Fixed Income Issuance:

- (IN) India sold total INR vs. INR150B indicated in 2023, 2025, 2033 and 2045 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 -0.4% at 3,448, FTSE 100 -0.4% at 6,605, DAX -0.2% at 11,078, CAC-40 -0.4% at 4,813, IBEX-35 -0.7% at 10,770, FTSE MIB -0.4% at 22,531, Athens Stock Exchange closed, S&P 500 Futures flat at 2,068]

- Market Focal Points/Key Themes:

- Equity markets remain slightly offered this morning on the back of light volume. trading is generally cautious ahead of Sundays(July 5th) referendum planned for Greece.

By Sector

- Healthcare [Humana HUM (Confirms merger with AETNA for $37B)]

- Financials [Optimal payments OPAY.UK +12% (issues Trading update)]

- Technology [Ubisense UBI.UK -11% (Issues profit warning)]

- Industrials [Alstom ALO.FR +0.1% (Awarded wind turbine contract in Germany)]

Speakers

- ECB's Constancio (Portugal): ECB had enough tools to deal with fallout from Greek referendum vote; hard to anticipate market reaction; will not speculate on scenarios. ECB could not decide on ELS response at this time. He reiterated Council view that interest rates to stay low for a prolong period. Macroprudential policy must include borrower-based measures

- ECB's Nowotny (Austria) ruled out parallel currency for Greece

- EU's Dombrovskis: Wrong to assume that a "No' vote in Greek referendum would bolster the Syriza govt hand in negotiations. Greece was in a worse position compared to last week but door remained open. Working to keep Greece within EMU and could take several weeks to sort out a third bailout program for Greece

- Greece Fin Min Varoufakis: Domestic banking sector was not insolvent. Greece will stay in the Euro and reiterated view that "No" vote would lead to an agreement with debt relief

- Greece Deputy Foreign Min Tsakalotos: Greece will have an agreement with creditors by Tuesday, July 7th

- Greece made €3.8M coupon payment on a privately held yen-denominated government bond. The bond was not part of the 2012 debt restructuring.

- Sweden Central Bank (Riksbank) Dep Gov AF Jochnick reiterated view that monetary policy is having an effect; underlying inflation is moving higher

- China Stock Regulator (CSRC): China Securities Finance to increase capital from CXNY24B to CNY100B to help keep markets stable and pledge to crack down on market rumors as they are tools for short-sellers to manipulate the market. July IPOs to be below levels seen in Jun (**Note: China Securities Finance manages China's short selling and margin trading)

- Western diplomat says making progress in P5+1 powers and Iran in nuclear talk. Access inside Iran remains a key sticking point in negotiations

Currencies

- The EUR/USD was slightly firmer above the 1.11 handle in thin trading conditions as US markets were closed for holidays and participants awaiting the results of the Greek referendum on the creditors bailout conditions. Polls showing that Greece citizens were split on bailout referendum; govt continued to sell a "No" as a chance for a better deal. Safe haven flows could dominate if outcome of vote seen moving towards a Grexit

Fixed Income

-Bund futures trade at 151.43 up 39 ticks on the day trading off the highs at 151.51 on the back of slight risk off sentiment ahead of the Greek referendum on Sunday. Volumes are very light as the US markets observe independence day holiday. Analysts note initial resistance lies at 151.61 followed by 152.12/22. To the downside support coincides with the 61.8% retracement level at 150.02 then 149.86.

- Friday's liquidity report showed Thursday's excess liquidity dropped to €389.6B a fall of €10.8B from €400.4B due to a corresponding increase in AFs. €722M was borrowed in the overnight loan facility a jump from the €86M prior.

-UK Gilt futures trade at 115.64 up 37 ticks just off the highs on the back of very light volume, totaling less the 20k contracts. Analysts look for resistance at 116.01, with resistance above at 116.41. To the downside support moves to 114.93, followed by 114.41. A break below would test the 114.07 low from 06/26.

**Political/In the Papers:

- (GR) IMF: Comprehensive debt review is needed to return Greece to economic health; Greece would need a loan extension and significant debt write down if primary surplus falls further and reforms are weakened. Greece will need €50B in additional funding between October 2015 and 2018

Looking Ahead

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

- 06:00 (UK) DMO to sell combined £4.0B in 1-month, 3-month and 6-month Bills (£0.5B, 1.5B and £2.0B respectively)

- 06:00 (IS) Iceland to sell 6.25% 2020 Bonds

- 06:30 (EU) EU's Juncker press conference on Presidency for European Council in Luxembourg

- 06:45 (US) Daily Libor Fixing

- 07:30 (IN) India Weekly Forex Reserves w/e Jun 26th: No est v $355.5B prior

- 08:00 (SE) Sweden Central Bank (Riksbank) Floden

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (DE) German Chancellor Merkel

- 09:00 (BR) Brazil Jun PMI Services: No est v 42.5 prior; PMI Composite: No est v 42.9 prior

- 09:00 (MX) Mexico Apr Gross Fixed Investment: No est v 6.6% prior

- 10:00 (MX) Mexico Central Bank Economist Survey

- 11:00 (IT) Italy Stats Agency (ISTAT) Monthly Economic Note

- 17:00 (CO) Colombia Apr Economic Activity Index (Monthly GDP) Y/Y: No est v 2.8% prior

- 17:00 (CO) Colombia Total PPI M/M: No est v 0.0% prior; PPI Domestic M/M: No est v -0.7% prior

Weekend

Sun:

- (GR) Greece referendum on creditors terms