German IFO survey shows economy is picking up speed

Notes/Observations

- German Jun IFO Survey beats consensus and optimistic on growth outlook ahead.

- Focus on BOE policy decisions and potential signals on tapering.

- ECB Bulletin reiterated that preserving favorable financing conditions over the pandemic period remained essential.

Asia:

- BOK Gov Lee stated that normalization should begin this year. CPI expected within the 2.0% target during 2022. Rate hike and normalization was not tightening as the current interest rate level were very accommodating.

- China PBoC increased its short-term cash injection for the first time since March to soothe market concerns about liquidity conditions ahead of the quarter-end. PBOC injected CNY30B with reverse repurchase contracts which ended Beijing’s practice of adding CNY10Bper day.

- US said to be poised to bar some solar products made in China’s Xinjiang region to counter alleged human rights abuses against the country’s ethnic Uyghur Muslims.

Americas:

- Treasury Sec Yellen Reiterates believes inflation is transitory due to supply bottlenecks; inflation will go back to normal after this year. Defaulting on national debt should be regarded as unthinkable.

- Senators-White House negotiators agree on an infrastructure 'framework' of $1.2T. US Senate Infrastructure framework said to have been revised to $559B in new spending. Lawmakers were expected to meet with President Biden on Thurs. (Jun 24th). (House leader Pelosi and Senate Maj leader Schumer said not yet to endorse the proposal).

- Fed's Bostic (FOMC voter, hawk) noted that the Fed was close to meeting the standard for bond-buying tapering; it was fully appropriate to debate taper prospects; tapering decision could be in 3 to 4 months; Saw two additional rate hikes in 2023 and had moved forward expectation of the first-rate hike to late 2022.

- Fed's Bowman (voter) noted that high inflation might take 'some time' to ease and would situation closely and adjust policy views as needed.

Energy:

- Saudi Arabia Oil Min Abdulaziz stated that OPEC+ had a role in containing inflation; We should be cautious but that did not preclude taking action.

- US negotiators said to be prepared to return to indirect talks with Iran on the nuclear deal in Vienna as early as next week.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 +0.71% at 456.30, FTSE +0.20% at 7,088.15, DAX +0.74% at 15,570.55, CAC-40 +0.90% at 6,609.99, IBEX-35 +1.32% at 9,072.00, FTSE MIB +0.79% at 25,276.50, SMI +0.38% at 11,943.43, S&P 500 Futures +0.46%].

Market Focal Points/Key Themes: European indices open higher across the board and advanced into the green as the session progressed; sectors leading to the upside include consumer discretionary and financials; energy and materials sectors among the underperformers; St Modwen receives increased offer from Blackstone; Wise confirms listing on LSE; ABM offloads energy loan portfolio; reportedly JD Sports looking to take a majority stake in Deporvillage in Spain; focus on upcoming BOE decision; earnings expected during the upcoming US session include Curevac, Nike and Blackberry.

Equities

- Consumer discretionary: Fiskars Group [FSKRS.FI] +4% (raises outlook).

- Financials: Crest Nicholson [CRST.UK] +3% (earnings).

- Industrials: Vitec Group [VTC.UK] +12% (trading update), Siemens [SIE.DE] -2% (CMD update), John Wood [WG.UK] -2% (trading update).

Speakers

- ECB Economic Bulletin noted that the economy was gradually reopening as the coronavirus (COVID-19) pandemic situation improved and vaccination campaigns made significant progress. Reiterated that preserving favorable financing conditions over the pandemic period remains essential to reduce uncertainty and bolster confidence.

- German Chancellor Merkel noted that could be cautiously optimistic on the pandemic in Europe; arrivals from variant virus areas must be better coordinated.

- Czech Central Bank Dep Gov Nidetzky saw more rate hikes if the economy developed as forecast.

- German IFO Economists noted the domestic economy was picking up speed and saw Q2 GDP growth of 1.3% and Q3 growth at 3.6% q/q. Conditions in retail had improved by more than any time since the 1990 reunification. Exports expectations had risen. Many companies wanted to raise prices due to rising input costs.

-BOJ Gov Kuroda reiterated its overall assessment that the domestic economy was picking up as a trend but highly uncertain due to pandemic impact. Reiterated stance to continue with its powerful easing. CPI has seen hovering around 0% in the near term but expected to gradually increase afterward. BOJ to continue to support corporate funding as it would likely remain under stress.

- Japan Cabinet Office (Govt) Jun Economic Report maintained its overall economic assessment of seeing further weakness in parts of the economy.

- Philippines Central Bank Policy Statement reiterated the stance to continue with accommodative policy for as long as necessary as the sustained monetary policy support should help recovery. Inflation to settle in the upper end of the range in 2021 and ease to mid-point of the target in 2022-23 period.

- China Foreign Ministry spokesperson Zhao Lijian reiterated the stance that the US must correct its practice of protectionism. China to protect the rights and interests of its companies. China played by the WTO rules.

- China Commerce Ministry (MOFCOM): Studying revising foreign investment negative list.

Currencies/Fixed Income

- FX price action saw narrow ranges.

- EUR/USD steady at 1.1930 despite another round of decent data out of Europe. German Jun IFO Survey beat consensus and was optimistic on the growth outlook ahead. ECB Bulletin reiterated that preserving favorable financing conditions over the pandemic period remained essential. The 1.20 level remains key resistance.

- GBP steady with cable at 1.3970. The focus was on BOE rate decisions and any potential signal on tapering. Overall markets expect MPC to refrain from taking any significant shift in guidance at this juncture.

Economic data

- (NL) Netherlands Q1 Final GDP Q/Q: -0.8% v -0.5%e; Y/Y: -2.4% v -2.8%e.

- (FI) Finland May PPI M/M: 2.3% v 0.5% prior; Y/Y: 11.2% v 8.7% prior.

- (FR) France Jun Business Confidence: 113 v 110e (highest since July 2007); Manufacturing Confidence: 107 v 108e; Production Outlook Indicator: 27 v 20e; Own-Company Production Outlook: 18 v 18e.

- (ES) Spain Q1 Final GDP Q/Q: -0.4% v -0.5%e; Y/Y: -4.2% v -4.3%e.

- (CZ) Czech Jun Consumer Confidence Index: -2.0 v -4.5 prior; Business Confidence: 16.8 v 11.6 prior; Composite Index (Consumer & Business): 13.0 v 8.4 prior.

- (TR) Turkey Jun Real Sector Confidence (seasonally adj): 109.8 v 107.1 prior; Real Sector Confidence NSA (unadj): 113.0 v 110.3 prior.

- (TR) Turkey Jun Capacity Utilization: 76.6% v 75.3% prior.

- (SE) Sweden May PPI M/M: 1.3% v 1.7% prior; Y/Y: 7.9% v 5.6% prior.

- (DE) Germany Jun IFO Business Climate Survey: 101.8 v 100.7e; Current Assessment Survey: 99.6 v 97.9e; Expectations Survey: 104.0 v 103.6e.

- (PL) Poland May Unemployment Rate: 6.1% v 6.1%e.

- (PH) Philippines Central Bank (BSP) left the Overnight Borrowing Rate unchanged at 2.00% (as expected) Left the Standing Overnight Deposit Facility Rate unchanged at 1.50%.

- (TW) Taiwan May M2 Money Supply Y/Y: 9.2% v 8.8% prior; M1 Money Supply Y/Y: 17.7% v 17.7% prior.

Fixed income Issuance

- (IT) Italy Debt Agency (Tesoro) opened the book to sell new Apr 2029 Floating Rate Note (CCTeu) via syndicate; guidance has seen +70bps to 6-month Euribor.

Looking Ahead

- (EU) EU leaders begin a two-day meeting in Brussels.

- (AR) Argentina Jun Consumer Confidence Index: No est v 35.4 prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell debt.

- 05:50 (HU) Hungary Central Bank One-Week Deposit Rate tender.

- 05:30 (ZA) South Africa May PPI M/M: 0.3%e v 0.7% prior; Y/Y: 7.4%e v 6.7% prior.

- 06:00 (CA) Canada Jun CFIB Business Barometer: No est v 66.2 prior.

- 06:00 (RO) Romania to sell RON800M in 12-month Bills.

- 06:00 (RO) Romania to sell 2.5% 2027 Bonds.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (UK) Bank of England Bank (BOE) Interest Rate Decision: Expected to leave Interest Rates unchanged at 0.10% and maintain Total Asset Purchases at £895B (Gilt Purchase Target at £875B and Corporate Bond Target at £20B).

- 07:00 (BR) Brazil Central Bank (BCB) Quarterly Inflation Report (QIR).

- 07:00 (BR) Brazil Jun FGV Consumer Confidence: No est v 76.2 prior.

- 07:00 (MX) Mexico May Unemployment Rate (unadj): 4.5%e v 4.7% prior.

- 07:30 (EU) ECB's Panetta (Italy).

- 08:00 (PL) Poland May M3 Money Supply M/M: +0.6%e v -0.1% prior; Y/Y: 9.2%e v 11.2% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Q1 Final GDP Annualized Q/Q: 6.4%e v 6.4% prelim; Personal Consumption: 11.4%e v 11.3% prelim.

- 08:30 (US) Q1 Final GDP Price Index: 4.3%e v 4.3% prelim; Core PCE Q/Q: 2.5%e v 2.5% prelim.

- 08:30 (US) May Preliminary Durable Goods Orders: +2.8%e v -1.3% prior; Durables (ex-transportation): 0.7%e v 1.0% prior; Capital Goods Orders (non-defense/ex-aircraft): 0.6%e v 2.2% prior; Capital Goods Shipments (non-defense/ex-aircraft): 0.8%e v 0.9% prior.

- 08:30 (US) May Advance Goods Trade Balance: -$87.5Be v -$85.2B prior.

- 08:30 (US) May Preliminary Wholesale Inventories M/M: 0.8%e v 0.8% prior; Retail Inventories M/M: -0.5%e v -1.6% prior.

- 08:30 (US) Initial Jobless Claims: 380Ke v 412K prior; Continuing Claims: 3.46Me v 3.518M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 18th: No est v $604.8B prior.

- 09:00 (BE) Belgium Jun Business Confidence: 8.6e v 6.5 prior.

- 09:00 (CL) Chile May PPI M/M: No est v 1.0% prior.

- 09:30 (US) Fed’s Bostic and Harker on Monetary Policy Panel.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (US) Jun Kansas City Fed Manufacturing Activity: 24e v 26 prior.

- 11:00 (US) Fed’s Williams participates in a moderated discussion.

- 11:30 (DE) ECB's Schnabel (Germany).

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 13:00 (US) Fed’s Bullard on Outlook for Economy and Monetary Policy.

- 13:00 (US) Fed's Kaplan.

- 13:00 (US) Treasury to sell 7-Year Notes.

- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Rate unchanged at 4.00%.

- 15:00 (AR) Argentina Apr Shop Center Sales Y/Y: No est v 59.7% prior; Supermarket Sales Y/Y: No est v -8.8% prior.

- 15:00 (AR) Argentina Q1 Unemployment Rate: No est v 11.0% prior.

- 16:30 (US) Fed releases Bank Stress Rest Results.

- 17:00 (KR) South Korea July Business Manufacturing Survey: No est v 97 prior; Non-Manufacturing Survey: No est v 81 prior.

- 18:45 (NZ) New Zealand May Trade Balance (NZD): No est v 0.4B prior; Exports: No est v 5.4B prior; Imports: No est v 5.0B prior.

- 19:00 (EU) ECB chief Lagarde at EU Summit.

- 19:01 (UK) Jun GfK Consumer Confidence: -7e v -9 prior.

- 19:30 (JP) Japan Jun Tokyo CPI Y/Y: -0.3%e v -0.4% prior; CPI (ex-fresh food) Y/Y: -0.1%e v -0.2% prior; CPI (ex-fresh food/energy) Y/Y: -0.1%e v -0.1% prior.

- 22:30 (JP) Japan to sell 3-Month Bills.