EU Market Update: Tailwinds for risk appetite seen in session as European PMI Manufacturing revised higher in most cases


Economic Data

- (IN) India May Trade Balance: -$ v -$16.3Be; Exports Y/Y: -4.2% v +3.2% prior; Imports Y/Y: -7.4% v +3.8% prior

- (RU) Russia Jun Manufacturing PMI: 51.0 v 53.2 prior

- (IN) India Jun Manufacturing PMI: 55.0 v 54.8 prior

- (JP) Japan Jun Vehicle Sales Y/Y: 40.9% v 66.3% prior

- (IE) Ireland Jun NCB Manufacturing PMI: 53.1 v 51.2prior

- (AU) Australia Jun RBA Commodity Price Index Au: 97.5% v 99.1 prior; Commodity Index SDR Y/Y: -10.5% v -10.2% prior

- (SE) Sweden Jun Swedbank PMI Survey: 48.4 v 48.5e

- (PL) Poland Jun Manufacturing PMI: 48.0 v 48.6e; third month of contraction and a 35-month low

- (TR) Turkey Jun Manufacturing PMI: 51.4 v 50.2 prior

- (NO) Norway Jun PMI: 46.3 v 54.6e

- (TR) Turkey Q1 GDP Q/Q: 0.2% v 0.2% prior; Y/Y: 3.0% v 32%e; GDP WDA Y/Y: 2.3% v 4.7% prior

- (ES) Spain Jun Manufacturing PMI: 41.1 v 41.3e, lowest since May 2009)

- (CH) Swiss May Real Retail Sales Y/Y: 6.2% v 0.2% prior

- (CZ) Czech Republic Jun Manufacturing PMI: 49.4 v 47.0e

- (CH) Swiss Jun PMI Manufacturing: 48.1 v 45.0e

- (IT) Italy Jun PMI Manufacturing: 44.6 v 44.6e; (11th consecutive contraction

- (FR) France Jun Final PMI Manufacturing: 45.2 v 45.3e

- (DE) Germany Jun Final PMI Manufacturing: 45.0 v 44.7e

- (EU) Euro Zone Jun Final PMI Manufacturing: 45.1 v 44.8e

- (GR) Greece Jun Manufacturing PMI: 40.1 v 43.1 prior

- (IT) Italy May Preliminary Unemployment Rate: 10.1% v 10.3%e

- (NO) Norway May Credit Indicator Growth Y/Y: 6.7% v 6.7%e

- (UK) Jun PMI Manufacturing: 48.6 v 46.5e

- (EU) Euro Zone May Unemployment Rate: 11.1% v 11.1%e, fresh EMU record high

- (DK) Denmark Jun Danish PMI Survey: 53.0 v 54.0 prior

- (ZA) South Africa Jun Kagiso PMI: 48.2 v 53.6 prior

- (NO) Norway Jun Housing Prices M/M: +0.9%; Y/Y: +7.7%

- (BE) Belgium May Unemployment Rate: 7.2% v 7.4% prior

- (NO) Norway Jun Housing Prices M/M: +0.9%; Y/Y: +7.7%

- (ES) Spain June New Car Registration Y/Y: -12.1% v -8.2% prior

Fixed Income:

- (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 12-month Bills; Yield 1.61%; bid-to-cover: 2.17x

- (NL) Netherlands Debt Agency (DSTA) sold total €2.1B vs. €4.0B indicated in 3-month and 12-month Bills

- Sold €1.08B vs. €2.0e in 3-month Bills; Yield -0.013% v 0.000% prior (record low); Bid-to-cover: 4.44x v 4.43x prior

- Sold €1.03B vs. €2.0e in 12-month Bills; Yield 0.050% v 0.050% prior; Bid-to-cover: 2.70x


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Notes/Observations***

- China official PMI data

- Session saw slight upward revisions the major European PMI Manufacturing data

- Peripheral yields continue to tighter following last week's EU Leader Summit

- Spain 2-year yield moves below 4% for the first time in over a year


Equities

FTSE 100 +0.8% at 5616, DAX +1.0% at 6482, CAC-40 +1.2% at 3235, IBEX-35 -0.1% at 7,094, FTSE MIB +1.1% at 14,433, SMI +0.7% at 6108, S&P 500 Futures at 1360

- European equities continued to move higher following last week's EU Leader Summit agreement on its Roadmap. Various bourses hit two-month highs in the session aided by upward revisions in the European Manufacturing PMI data. There remained headwinds to optimism as the Chinese data PMI reminded of the difficulties in global growth

-In individual stocks:

- Barclays [BARC.UK] The Company confirmed resignation of Chairman Aguis in relation the LIBOR scandal.

- AstraZeneca [AZN.UK] CEO commented that FY12 Guidance range for core EPS unchanged, dividend policy maintained and share repurchase target remained intact. unchanged. Comments followed weekend announcement that Bristol-Myers Squibb and AstraZeneca would enter into collaboration arrangements, based on the framework of the existing diabetes alliance

- Glaxosmithkline [GSK.UK] Releases phase III data for LABA/LAMA in COPD

- WPP [WPP.UK] announced acquisition of Alchemedia; Financial terms not disclosed

- Cranswick Plc [CWK.UK] Announced acquisition of Kingston Foods Ltd, financial terms not disclosed

- SOCO Intl [SIA.UK] Entered into agreement with Lizeroux to acquire 20% interest in SOCO Vietman for $95M in cash

- Cable & Wireless Worldwide [CW.UK] EU Commission was said to be set to clear Vodafone's $1.6B takeover of company without conditions

- Evraz (EVR.UK] Amended covenants in bank facilities maturing in 2015

- Enagas [ENG.ES] China's Stated Grid Corp said to be interested in Enagas and Red Electrica [REE.ES]

- Linde AG confirmed acquisition of Lindecare Holdings for $41.50/shr cash. It saw annual revenues of €2.8B from healthcare after purchase and the deal closing in Q3

- Credit [ACA.FR] National Bank of Greece [NBG] confirmed it was in discussions over Emporiki Bank unit

- Imtech [IM.NL] Acquires two related companies (Polar and SSR) in Finland

- Dr. Reddy's [DRRD.IN]Receives US approval to sell Ibandronate sodium tablets

- NCC AB [NCCB.SE] sold second phase of Alberga in Finland for SEK196M

- Subsea 7 [SUBC.NO] Awarded $400M offshore Norway contract from BG Norge Ltd

- Anglo Platinum [AMS.ZA] issued its H1Trading Statement which guided EPS to decrease by 20% citing lower metal prices achieved and lower sales volumes

Speakers:

- Finnish govt stated that both itself and the Netherlands would block ESM Bond purchases in the secondary market

- French State Auditor released its Public Account audit and summarized that the country needed €6-10B in savings to meet 2012 deficit to GDP target of 4.5%. It also noted that more substantial effort was necessary to meet the 2013 target with €33B in savings suggested to meet 2013 deficit to GDP target of 3%. It forecasted French 2012 GDP growth at 0.4% and at 1.0% in 2013

- ECB Asmussen commented that the Euro area needed to send a clear message that it had understood design flaws and had a plan to correct them. He reiterates the German view that there was no silver bullet to resolve the Euro Zone crisis. Restoring confidence in Euro zone was bigger challenge than resolving Greece as Spain must remove doubts about its banking sector solvency

- ECB Nowotny stated that he shared IMF view that Austria inflation would fall in the foreseeable future

- German Justice Min stated that he was confident that the country's top court would not stop the ESM after the Parliamentary approval on Jun 29th.

- The Austrian Green party has agreed to ratify Europe's permanent bailout fund after completing negotiations with the country's center-coalition government

- Ireland Dep Fin Min stated that the country faced a hard period of negotiations with Euro Zone leaders to cut their banking debt

- China Central Bank (PBoC) reiterated to maintain prudent monetary policy and deepen interest rate and exchange rate reforms

- Japan Senior Vice Fin Min Igarashi commented that it was too early to discuss new stimulus measures and he maintained the view that Japan's economy was in a mild recovery

- Indonesia Central Bank Gov: June inflation data remains in line with 2012 target

Currencies:

- The risk-on sentiment continued to find traction following last week's EU Leader Summit but dealers' were still awaiting specific details on how the Euro Zone would address its problems.

- The session's main focus was on the release of the major European Manufacturing PMI data with several members having the final readings revised slightly higher. Dealers were also looking ahead to key events later in the week that continued to provided a tailwind for risk appetite. The BoE was posed to offer further stimulus, which will come from increased asset purchases, while the ECB could cut rates to historic lows.

- The tightening of the peripheral yields continued in today's session following last week's EU Leader Summit accord. Both Spanish and Italian 10-year yields were almost 20bps lower ahead of the NY morning.

- The EUR/USD recovered its initial losses exhibited during the Asian session to trade around the 1.2670 area just ahead of the NY morning but comments out of Finland reminded that Northern European still had a voice on aid to the region. Finnish govt stated that both itself and the Netherlands would block ESM Bond purchases in the secondary market, which knocked the Euro 30 pips lower

- The GBP was off its worst levels in the session following the better PMI Manufacturing data but faced some headwinds as the country's manufacturing sector contracted for a second straight month in June.

Political/In the Papers:

- The Irish housing market is beginning to see signs of stabilization. According to Irish property site Daft.ie, further the Dublin property asking prices down less than 1% in 2012, with continued declines in the rest of the country with prices down 7% since January. An executive for the site said Dublin appeared much healthier than it has been.

- The Italian press noted that Italy may increase its VAT next year in 2013 by 1% from the current 21%.

A JPMorgan analyst said the Spanish banking sector issues are small relative to the main problem of sovereign overleveraging. The implementation risks around banking union remain high. In Italy, declining popular support for austerity and deepening recession also increase implementation risks, may weigh on growth, and still present a threat to debt sustainability.

- According to reports in the FT, the British weekly gilt auctions will be on hold due to the Olympics. Weekly gilt auctions are to be halted for a four-week period from mid-Jul to mid-Aug

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Looking Ahead

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

- (GR) EU/IMF/ECB Troika to return to Greece

- (CZ) Czech Jun Budget Balance ((CZK): No est v -79.1B prior

- (HU) Hungary Jun PMI: No est v 52.2 prior

- (RO) Romania Jun International Reserves: No est v $37.7B prior

- (RU) Russia Jun Reserve Fund: No est v $60.2B prior; Wellbeing Fund: No est v $85.5B prior

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

- 08:00 (RO) Romania to Sell Bills

- 08:58 (US) Jun Final Markit US PMI Manufacturing: 52.9e v 54.0 prelim

- 09:00 (BR) Brazil Jun PMI Manufacturing: No est v 49.3 pror

- 09:00 (FR) France Debt Agency (ATF) to sell up to €8.3B in 3-month, 6-month and 12-month Bills

- 09:30 (EU) ECB announces weekly settlements in Govt Bond Purchase Progarm

- 10:00 (US) Jun ISM Manufacturing: 52.0e v 53.5 prior; Prices Paid: 45.7e v 47.5 prior

- 10:00 (US) May Construction Spending M/M: 0.2%e v 0.3% prior

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

- 10:00 (MX) Mexico May Remittances: $2.3Be v $2.0B prior

- 11:30 (US) Treasury to sell $30B in 3-Month and $27B in 6-Month Bills

- 12:00 (IT) Italy Jun New Car Registrations Y/Y: No est v -14.3% prior

- 13:00 (MX) Mexico Jun IMEF Manufacturing Index: No est v 54.3 prior; Non Manufacturing Index: No est v 55.0 prior

- 13:00 (IT) Italy Jun Budget Balance: No est v -€4.3B prior; Budget Balance YTD: No est v -€35.1B --

- 13:15 (US) Fed's Williams Speaks in San Francisco

- 14:00 (BR) Brazil Jun Trade Balance: $0.5Be v $2.0B prior; Exports: No est v $23.2B prior; Imports: No est v $20.3B prior

- 21:00 (CN) China Jun Non-Manufacturing PMI: No est v 55.2 prior

- Tues (AU) Australia Central Bank (RBA) Interest Rate Decision: Expected to leave the Cash Target unchanged at 3.50%