Ukraine, Gaza situations stay in focus

EU Market Update: Ukraine, Gaza situations stay in focus; EU Leaders threaten harsher sanctions against Russia

Notes/Observations

- Clashes in Gaza continue with Israeli ground offensive continuing

- EU to discuss more sanctions against Russia at its Tuesday Foreign Minister meeting as evidence mounts that missile supplied from Russia downed Malaysian jet

Key Economic Data in session

- (DE) Germany Jun PPI M/M: 0.0% v 0.0%e; Y/Y: -0.7% v -0.7%e

- (CH) Swiss Jun M3 Money Supply M3 Y/Y: 4.0% v 8.1% prior

- (EU) ECB €701M borrowed in overnight loan facility vs. €444.0M prior; €22.7B parked in deposit facility vs. €22.8B prior - Daily Eurosystem Liquidity Conditions

- (CH) SNB Sight Deposits for week ended July 18th (CHF): 308.5B v 306.3B prior

- (NL) Netherlands Jun House Price Index M/M: +0.3% v -0.1% prior; Y/Y: 2.2 v 1.4% prior

- (TW) Taiwan Jun Export Orders Y/Y: 10.6% v 6.6%e; fastest pace in 17 months

- (IT) Italy May Industrial Sales M/M: -1.0% v -0.1% prior; Y/Y: 0.1% v 2.2% prior

- (IT) Italy May Industrial Orders M/M: -2.1% v 3.8% prior; Y/Y: -2.5% v +2.3%e

- (IL) Israel Jun Leading 'S' Indicator M/M: 0.1% v 0.2% prior

- (GR) Greece May Current Account Balance: -€0.3B v +€0.2Be

- (HK) Hong Kong Jun CPI Composite Y/Y: 3.6% v 3.6%e

Fixed Income:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 -0.5%, FTSE 100 -0.3% at 6,731, DAX -0.7% at 9,652, CAC-40 -0.4% at 4,317, IBEX-35 -0.4% at 10,485, SMI -0.1% at 8,503, S&P 500 Futures -0.2% at 1,968]

- Market Focal Points/Key Themes: European equity markets open mixed following negative leads from Asia and amid weakness in Russian equities, Italian and German markets underperform, Tesco rises despite profit warning as new CEO named, Philips and Julius Baer rise on better than expected profits, UK homebuilders decline after drop in the July Rightmove Housing price index, European high yield corporate bond market starts week on quiet note

By Sector

- Consumer Discretionary [Tesco TSCO.UK +2.5% (new CEO)]

- Financials [Julius Baer BAER.CH +6% (H1 results above ests)]

- Technology [Philips PHIA.NL +0.5% (Q2 profits above ests)]

- Telecom [KPN KPN.NL +2% (new CFO)]

- Stoxx50 Sectors [Consumer Cyclical -1.2%, Industrials -1.2%, Financials -1%, Basic Materials -0.9%, Consumer Non-Cyclical -0.5%, Energy -0.3%Telecom -0.1% ;Utilities +0.3%, Technology +0.2%]

Speakers:

- Swiss Central Bank (SNB) reaches 3-year bilateral swap agreement with China PBoC for up to CHF21B (CNY150B)

- South Africa Fin Min Nene reiterated the view that the domestic economy was performing below potential with wounds self-inflicted and domestically oriented. Weak growth to undermine budget deficit targets

- Ukraine PM Yatsenyuk: To transfer coordination of investigation to western partners led by the Netherlands; wants comprehensive probe into downing of Malaysian Airline flight 17

Currencies/Fixed Income:

- FX technical levels remained in focus following last Fridays; tests in the EUR/USD and GBP/USD pairs but no sustained breakout just yet.

- EUR/USD pair tested and slightly breached the lower end of the trading range at the 1.3500 level at the end of last week, which also coincides with the two-year ascending channel. The pair managed to hold above the pivotal Jan low of 1.3477 before consolidating. Some analysts noted that Geopolitical events could leave EUR currency vulnerable as EU foreign ministers prepare to meet on Tuesday to discuss/decide on any further sanctions against Russia. Yield differentials also hinting that the Euro could come under fresh pressure with German 10-year yields probing fresh historically low levels

Political/In the Papers:

- (DE) Fitch affirmed Germany sovereign rating at AAA; outlook Stable

- (UK) BOE reportedly responded to rumors and indicated that Governor Carney had not given any recent media interview that was to be released following rumors that that Carney had given an interview perceived to be dovish

- (UK) UK July Rightmove House Prices registered its first decline in 7 months (M/M: -0.8% vs. +0.1% prior (**Insight: the decline in MoM would be seen as a welcome relief for the BoE amid worries about an overheating housing market)

- (RU) European Union has reportedly moved closer to implementing sanctions on some organizations in Russia in response to issues in Ukraine - press; First list of targeted companies to be released by month end.

- (IR) Iran comes to agreement with P5+1 powers for extension of nuclear talks for up to 6 months (in line with speculation)

Looking Ahead

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

- (CN) China President Xi Jinping vists South America and Cuba

- (IT) Italy Senate to vote on constitutional reform

- (PT) Portugal May Current Account Balance: No est v -€164.2M prior

- (SK) Slovakia Debt Agency (ARDAL) to sell Bonds

- (IL) Israel to sell 2016, 2017, 2019 and 2024 bonds

- 06:00 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-Month and 6-Month Bills

- 06:45 (US) Daily Libor Fixing

- 07:00 (RO) Romania to sell 2021 Bonds

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

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

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Jun Chicago Fed National Activity Index: 0.18e v 0.21 prior

- 08:55 (FR) France Debt Agency (AFT) to sell combined €6.4-7,6B in 3-month, 6-month and 12-month Bills

- 09:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender at fixed 0.15%

- 11:00 (US) Fed to purchase $1.00-1.25B in Notes

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

- 19:25 (AU) RBA's Debelle speaks on panel in Sydney

- 23:00 (AU) RBA's Stevens speaks in Sydney