China growth concerns continue to weigh on commodities

EU Mid-Market Update: China growth concerns continue to weigh on commodities; Athens Stock Exchanges reopens after a 5-week closure

Notes/Observations

- China July Caixin manufacturing activity contracts for a 5th straight month and hitting a two-year low with less output and fewer new orders; commodity prices remain soft

- No relief for emerging market or commodity-related FX

- Athens Stock Exchange reopens after a 5-week close brought on by the Greek debt crisis; opens 23% lower and on course for worst percentage loss on record (**Note: There are with restrictions for Greek traders)

- Major European Manufacturing PMI data revised higher in final readings

Economic data

- (ID) Indonesia July CPI (miss) M/M: 0.9% v 0.7%e; Y/Y: 7.3% v 7.1%e; CPI Core Y/Y: 4.90.9%e

- (IN) India July PMI Manufacturing: 52.7 v 51.3 prior (21st month of expansion and a 6-month high)

- (RU) Russia July PMI Manufacturing (miss): 48.3 v 48.8e (8th straight month of contraction)

- (SE) Sweden July PMI Manufacturing (beat): 55.2 v 53.5e (23rd month of expansion)

- (NL) Netherlands July Manufacturing PMI: 56.0 v 56.2 prior (25th month of expansion)

- (PL) Poland July PMI Manufacturing (beat): 54.5 v 54.1e (10th month of expansion)

- (TR) Turkey July PMI Manufacturing (beat): 50.1 v 49.4e (moves back into expansion)

- (HU) Hungary July PMI Manufacturing: 50.0 v 55.1 prior (expansion stalls after 23 months of growth)

- (HU) Hungary May Final Trade Balance: €0.5B v €0.5B prelim

- (TR) Turkey July CPI M/M: 0.1% v 0.1%e; Y/Y: 6.8% v 6.8%e; CPI Core Index Y/Y: 7.3% v 7.3%e

- (ES) Spain July Manufacturing PMI (miss): 53.6 v 54.3e ((20th month of expansion but a 9-month low)

- (CZ) Czech Republic July PMI Manufacturing: 57.5 v 56.2e (26th month of expansion and highest since Apr 2011)

- (CH) Swiss July PMI Manufacturing: 48.7 v 50.5e (moves back into contraction for 6 time in last 7 months)

- (IT) Italy July Manufacturing PMI: 55.3 v 53.9e (6th month of expansion and highest since Apr 2011)

- (FR) France July Final Manufacturing PMI (beat): 49.6 v 49.5e (confirms move back into contraction)

- (DE) Germany July Final Manufacturing PMI (beat): 51.8 v 51.5e (confirms 8th straight month of expansion)

- (EU) Euro Zone July Final Manufacturing PMI (beat): 52.4 v 52.2e (confirms 25th straight month of growth)

- (GR) Greece July Manufacturing PMI: 30.2 v 46.9 prior (11th month of contraction and a record low reading)

- (UK) July PMI Manufacturing: 51.9 v 51.5e (29th month of expansion and highest since May)

- (DK) Denmark July PMI Manufacturing Survey: 53.9 v 54.0 prior

- (ZA) South Africa July BER Manufacturing PMI: 51.4 v 51.0e (3rd month of expansion)

Fixed Income Issuance:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.4%, FTSE 100 -0.1% at 6,688, DAX +0.5% at 11,358, CAC-40 +0.3% at 5,095, IBEX-35 +0.4% at 11,228, FTSE MIB +-0.1% at 23,565, SMI +0.5% at 9,471, Athens Stock Exchange -23%, S&P 500 Futures flat at 2,098.50]

- Market Focal Points/Key Themes: European equities open higher following improving economic indicators; Greece opens first time in five weeks, down significantly lead by banks; Piraeus Bank and National Bank of Greece opened down 30%; commodity and auto shares underperform; Rolls Royce largest shareholder ValueAct urged for sale of non-aircraft assets, helping the stock to move higher

By sector:

- Consumer Discretionary [Intertek ITRK.UK +9.4% (raises dividend), Heineken HEIA.NL 3.7% (results above expectations), Trinity Mirror TNI.UK 8.1% (results)]

- Energy [Dragon Oil DGO.UK +9.0% (ENOC raises offer), Abengoa ABG.ES -14.6% (capital increase)]

- Financials [Commerzbank CBK.DE +2.0% (earnings beat)]

- Industrials [Rolls Royce RR.UK +4.5% (potential asset sale), PostNL PNL.NL +7.3% (earnings beat)]

- Materials [Wacker Chemie WCH.DE -1.7% (results disappoint)]

- Telecom [Nokia NOK1V.FI -0.7% (Here sale), Drillisch DRI.DE +6.7% (broker move)]

Speakers

- Greece to extend the short-selling ban that is set to expire on Monday, Aug 3rd

Currencies

- China soft PMI data and continued slide of commodity prices putting additional pressure on currencies exposed to China's economic slowdown and the supply-driven fall in commodity prices

- USD/CAD pair saw the Canadain currency weaken to 10-year lows above 1.3130 as oil prices continued to retreat. The Loonie was always weighed down after Canada PM Harper called for national elections on Oct 19th

- Overall the USD was relatively steady against most major pairs. Markets to continue to assess the employment cost report, which threw Fed Sept rate hike outlook into disarray. US Treasury yield were higher by almost 3bps after Friday's dip.

- EUR/USD fractionally lower at 1.0965

**Fixed Income:

- Bund futures trade at 154.27 down 13 ticks on the day as on the back of slightly better Manufacturing PMI numbers out of Europe. Analysts look for near term resistance at the recent high at 154.49 with a break above looking for a continued move higher to channel resistance at 155.17 followed by an extension to 155.44 the contract high. Downside support is at 153.91 , followed by 153.71, with 153.32 forming the base. Today Italy pays €31.40B in C&R repayments by Italy.

- UK Gilt futures trades 116.999 down 31 ticks on the day after slightly stronger UK manufacturing PMI. Analysts see 116.80 as near term support followed by 116.63, with 116.33 needed to halt the uptrend. To the upside 117.44 as the next target, this could be a sticky area with a firm break signalling 118.14 next, the 200 day moving average.

- Monday's liquidity report showed Friday's excess liquidity rose to €436.5B a rise of €5.7B from €430.8B prior. This was due primarily to a fall of €5.7B in AFs and MonPol portfolios to negative €5.75B. AFs were last negative in March 2012 and occurs when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €138M from €190M prior.

- Corporate Issuance last week was slightly subdued with around $20B coming to market, this week sees analysts estimating deals to be in the $20B range.

- European Supply: This week sees around €13.8B worth of supply with Austria supplying €1.2B in 10y and 29y RAGB on Tuesday, Germany selling €4B Bobl on Wednesday and Thursday sees €4.5-5.5B 8y, 10y, 17y, 45y issuance out of France and €3.6B 3y,5y issuance out of Spain. This week's net cash flow is positive with €31.40B in coupons and redemption's to be repaid by Italy today.

- UK Supply: The DMO looks to sell £3.0B in 10y Gilts this week, with a net cash flow for the week to be negative.

**Political/In the Papers:

- (GR) Greece govt reportedly to seek €24B in the first tranche of bailout aid as part of the €86B program

- Ministers of 12 Pacific nations fail to reach agreement on Trans-Pacific Partnership (TPP)

Looking Ahead

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

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month Bills

- 06:45 (US) Daily Libor Fixing

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

- 08:00 (CZ) Czech July Budget Balance (CZK): No est v 22.6B prior

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

- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming auctions

- 08:00 - (ZA) South Africa July Naamsa Vehicle Sales Y/Y: No est v -4.8% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Jun Personal Income: 0.3%e v 0.5% prior; Personal Spending: 0.2%e v 0.9% prior; Real Personal Spending: 0.0%e v 0.6% prior

- 08:30 (US) Jun PCE Deflator M/M: 0.2%e v 0.3% prior; Y/Y: 0.2%e v 0.2% prior

- 08:30 (US) Jun PCE Core M/M: 0.1%e v 0.1% prior; Y/Y: 1.2%e v 1.2% prior

- 08:50 (FR) France Debt Agency (AFT) to sell combined €5.6-6.8B in 3-month, 6-month and 12-month bills

- 09:00 (BR) Brazil July PMI Manufacturing: No est v 46.5 prior

- 09:00 (MX) Mexico Jun Leading Indicators M/M: No est v -0.05 prior

- 09:00 (SG) Singapore July Purchasing Managers Index: 50.1e v 50.4 prior; Electronics Sector Index: 50.0e v 50.3 prior

- 09:00 (US) Fed's Powell to Take Part in Brookings Panel on Market Structure

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

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

- 09:45 (US) July Final Markit Manufacturing PMI: 53.8e v 53.8 prior

- 10:00 (US) Jun Construction Spending M/M: 0.6%e v 0.8% prior

- 10:00 (US) July ISM Manufacturing: 53.5e v 53.5 prior; Prices Paid: 49.3e v 49.5 prior

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

- 10:00 (MX) Mexico Jun Total Remittances: $2.1Be v $2.2B prior

- 10:30 (MX) Mexico Markit PMI Manufacturing: No est v 52.0 prior

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

- 12:00 (IT) Italy July New Car Registrations Y/Y: No est v 14.4% prior

- 12:00 (IT) Italy July Budget Balance: No est v €12.3B prior

- 13:00 (MX) Mexico July IMEF Manufacturing Index: 52.8e v 53.1 prior; Non-Manufacturing Index: 51.6e v 51.3 prior

- 13:00 (CO) Colombia Central Bank Quarterly Inflation Report

- 14:00 (BR) Brazil July Trade Balance: $2.3Be v $4.5B prior; Total Exports: $18.8Be v $19.6B prior; Total Imports: $16.3Be v $15.1B prior

- 16:00 (US) Crop Condition Report

- 17:00 (CO) Colombia May Economic Activity Index (Monthly GDP) Y/Y: 3.2%e v 3.6% prior

- 19:00 (KR) South Korea July CPI M/M: 0.2%e v 0.0% prior; Y/Y: 0.7%e v 0.7% prior;

- 19:50 (JP) Japan July Monetary Base Y/Y: No est v 34.2% prior

- 21:30 (AU) Australia Jun Trade Balance: -A$3.0Be v -A$2.8B prior

- 21:30 (AU) Australia Jun Retail Sales M/M: 0.4%e v 0.3% prior

- 21:30 (JP) Japan Jun Labor Cash Earnings Y/Y: 0.9%e v 0.7% prior (revised from 0.6%); Real Cash Earnings Y/Y: No est v 0.0% prior (revised from -0.1%)

- 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

- 23:45 (JP) Japan to Sell 10-Year JGB Bonds

- early Tues (AU) RBA Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 2.00%

- early Tues (IN) India Central Bank (RBI) Interest Rate Decision: Expected to leave key rates unchanged