Greece makes key ECB and IMF payments

EU Mid-Market Update: Greek banks reopen after a 3-week hiatus but capital controls remain; Greece makes key ECB and IMF payments

Notes/Observations

- Gold hits fresh 5-year low after sharp Asia sell-off; tested $1,073/oz

- Greek banks reopen after extended close; capital controls remain in effect; Athens Stock exchange remained closed; Greece still faces implementation risks of bailout conditions; Greek Cabinet reshuffled in preparation for another batch of austerity measures that have to go through parliament this week

Economic data

- (DE) Germany Jun PPI M/M: -0.1% v -0.1%e; Y/Y: -1.4% v -1.4%e

- (NL) Netherlands July Consumer Confidence Index: 4 v 4e

- (EU) Euro Zone May Current Account (Seasonally Adj): €18.0B v €24.0B prior; Current Account NSA (unadj): €3.4B v €22.0B prior

- (TW) Taiwan Jun Export Orders Y/Y: 5.8% v -6.0%e

- (HK) Hong Kong Jun Unemployment Rate: 3.2% v 3.2%e

- (IT) Italy May Current Account Balance: €2.6B v €5.1B prior

Fixed Income Issuance:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +1%, FTSE 100 +0.5% at 6,808, DAX +0.9% at 11,778, CAC-40 +0.9% at 5,172, IBEX-35 +1% at 11,600, FTSE FIB +1.6% at 24,129, SMI +0.6% at 9,502, Athens Stock Exchange closed, S&P 500 Futures +0.1% at 2,121]

- Market Focal Points/Key Themes: European equity markets open mixed, after most indices closed Friday's session lower; Markets later rise amid low volumes; Dearth of news flow related to Greece over the weekend; Drop in gold prices weighs on miners; European M&A (France's Scheinder Electric to acquire UK-listed Aveva; OCI confirms talks with CF Industries; Dutch firm TenCate receives offer); Alstom Q1 sales above ests, Julius Baer H1 profits above ests; Goldman to tap EUR debt market; US morning earnings (Morgan Stanley, Halliburton, Hasbro)

By Sector

- Industrials [TenCate KTC.NL +25% (takeover offer), OCI OCI.NL +8% (confirmed M&A speculation); Volkswagen VOW3.DE -1% (June sales declined)]

- Basic Materials/Resources [SGL Carbon SGL.DE +2.5% (prelim H1 results)]

- Technology [Aveva AVV.UK +25% (takeover offer)]

- Financials [Julius Baer BAER.CH -1% (H1 results in line; no comment on takeover speculation)]

- Stoxx50 Sectors [Technology +1.4%, Energy +1%,Telecom +0.8%, Basic Materials +0.8%, Consumer Non-Cyclical +0.7%, Utilities +0.6%, Industrials +0.6%, Consumer Cyclical +0.4%, Financials +0.4%]

Speakers

- Greece Finance Ministry said to give order for €6.8B in payments to creditors (as expected). Covers today's payments to the ECB and IMF. Greek financial markets to remain closed under otherwise decided by the Finance Ministry

- German Lower House (Bundestag) might see a 2nd special sitting on Greece during the summer break to discuss bailout package

- New Zealand PM Key stated that NZD currency (Kiwi) was weakening faster than expected

- Iran Oil Min Zanganeh: Iranian oil could put downward pressure on prices; only responsibility is to regain market share

**Currencies**

- The EUR/USD continued to face headwinds as Greece still faced implementation risks of bailout conditions. The pair tested 2-month lows at 1.0830 before consolidating.

- The NZD/USD was higher by over 0.7% aided by comments from PM Key that NZD currency (Kiwi) was weakening faster than expected. Pair at 0.6570 just ahead of the NY morning

- Spot gold rebounded $40 from it Asian session lows of 1.073 but remained about 2% off its Friday closing level. Dealers noted that the recently diclosed gold purchase by China PBoC still kept its percentage to around 2% of total reserves (disappointed it would have been higher)

**Fixed Income:

- Bund futures trade at 152.76 up around 11 ticks on the day in a quiet morning. Futures trade near the highs of the day with analysts seeing a break of 152.90 seeing a move to 153.40 followed by July 8th 154.24 high, which also corresponds with the 50% retracement of the April June fall. Downside support remains at 151.61, with a break of 151.30 capping the upward trend.

- UK Gilt futures trades 115.35 down 3 ticks on the day, trading in the middle of the tight 30 ticks range observed over the past few days. Analysts see support moved to 114.68 followed by gap support at 114.41. Beyond this sees a test of the 114.07 low. To the upside the a break of channel resistance at 115.56 targets 115.94 as strong resistance. 116.31 above here would be needed to fill Friday's gap.

- Monday's liquidity report showed Friday's excess liquidity dropped to €420.6B a fall of €0.8B from €421.4B prior. This was due to a slight rise of €0.7B in AFs and MonPol portfolios to €9.7B. Use of the marginal lending facility fell to €112M from €242M prior.

** Weekly Supply**

-Gilts Supply: This week sees an expected 53Y 3.5% Gilt issuance via syndication. Net cash flow for the week will be positive with £3.28B coupon payment to be made on Wednesday.

- US Supply: Thursday sees the Treasury sell a new 10y TIPs for $15.0B. Net cash flow is flat with no coupons or redemption's to be repaid.

- EGB Supply: This week is a quiet week for supply with no supply coming out of Europe.

- Corporate Issuance this week could see some sizable deals come to market, with the rumoured $10B issuance out of Intel expected early this week, as well a large issuance from United Health. Goldman Sachs is also looking to come to market, planning to sell an 8 year EUR denominated bond, with initial pricing talk approx 128bps/midswap. Analysts estimate some $35-40B worth of USD supply coming to market this week.

**Political/In the Papers:

- (DE) German Fin Min Schaeuble: have had difference of opinion with Merkel on Greece; would be willing to resign if forced to go against personal convictions

-(GR) Some ECB council members said to have been surprised by Draghi calling for increase in the Greece ELA - financial press

-(GR) Three week shutdown of Greece banks cost the economy an estimated €3B, not counting lost tourism revenue

- (CN) CSRC said to be in study of stock stabilization fund exit plan - Chinese press: Follow up: CSRC said the speculation is untrue - financial press

Looking Ahead

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

- (EU) EU Foreign Ministers meeting in Brussels

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month Bills

- 06:00 (RO) Romania to sell Bonds

- 06:00 (IL) Israel May Manufacturing Production M/M: No est v -4.1% prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (BR) Brazil July IGP-M Inflation 2nd Preview: 0.7%e v 0.6% prior

- 07:30 (BR) Brazil Central Bank Weekly Economists Survey

- 08:00 (ES) Spain Debt Agency (Tesoro) would announce size of upcoming actions

- 08:00 (IN) India announces details of upcoming bond auction

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (CA) Canada May Wholesale Trade Sales M/M: 0.0%e v 1.9% prior

- 08:50 (FR) France Debt Agency (AFT) to sell combined €6.2-7.4B in 3-month, 6-month and 12-month bills

- 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

- 09:45 (EU) ECB announces Covered-Bond Purchases

- 11:30 (US) Treasuries to sell $48B in 3-Month and 6-Month Bills

- 16:00 (US) Crop Condition Report

- 19:50 (JP) BOJ Minutes for June 18-19 Meeting

- 21:30 (AU) RBA July Meeting Minutes

- 23:00 (TH)Thailand Central Bank to sell 3-month and 6-month Bills

- 23:30 (HK) Hong Kong to sell 3-month and 6-month Bills