Risk aversion flows continue, Riksbank delivers a 50bps rate hike

Notes/Observations

- Risk aversion flows dominate as renewed concerns percolate over higher rates causing a global recession (numerous Jun confidence registering levels only seen in economic recessions).

- Inflation data continuing to tick higher; Central bankers have signaled they will do whatever it takes to combat inflation by raising interest rates.

- Focus turns to US personal income and spending data to assess the likelihood of a recession.

- NATO summit continues and OPEC meeting in Austria scheduled to begin. No central bank speakers are expected in the session, likely due to ending of ECB Sintra yesterday.

- Asia closed mixed with ASX down -2.0% and Shanghai +1.1%. EU indices start sharply lower by -1.5-2.5% with bond yields lower. Most notably DAX and German 10Y underperforming. Elsewhere Gold -0.1%, BTC -4.1%, ETH -7.3%, DXY 0.00%, Brent +0.2%, WTI +0.2%.

Asia

- South Korea May Industrial Production M/M: 0.1% v 0.5%e; Y/Y: 7.3% v 4.0%e.

- Japan May Preliminary Industrial Production M/M: -7.2% v -0.3%e; Y/Y: -2.8% v +4.2%e.

- China Jun Manufacturing PMI (Govt Official) registered its 1st expansion in 4 months (50.2 v 50.5e).

Ukraine conflict

- Russia President Putin stated that would respond in kind if NATO set up infrastructure in Finland and Sweden, could not rule out tensions would emerge with both countries over their joining NATO.

Americas

- Democratic negotiators reportedly considering scaling back minimum corporate tax levels to win support of Sen Manchin (D-WV).

Energy

- EU's Mora (coordinator of Iran nuclear talks) tweeted that indirect talks between US and Iran had ended and did not meet 'hoped-for progress'.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -1.5% at 407.5, FTSE -1.6% at 7,196, DAX -2.2% at 12,723, CAC-40 -2.1% at 5,904, IBEX-35 -1.3% at 8,082, FTSE MIB -1.8% at 21,449, SMI -1.3% at 10,673, S&P 500 Futures -1.3%].

Market focal points/Key themes: European indices open lower across the board and remained lower as the session wore on; all sectors start the day in the red; better performing sectors include telecom and utilities; sectors leading to the downside include industrials and technology; automotive subsector under pressure following report MAN would raise prices due to higher raw materials costs; WPP acquires Bower House; Frasers takes stake in MySale; Equinor divests its stake in the North Platte to Shell; focus on OPEC+ meeting and conclusion of NATO meeting; earnings expected in the upcoming US session include Walgreens, Constellation Brands and Micron.

Equities

- Consumer discretionary: Air France-KLM AF.FR -2.2% (analyst action, potential leadership changes).

- Energy: Seabird Exploration -20.6% (asset sale), Uniper UN01.DE -17.8% (withdraws outlook).

- Healthcare: Sanofi SAN.FR -2.8% (study halt), Renalytics RENX -1.5% (results).

- Industrials: Implenia IMPN.CH +9.5% (raises guidance), Capital CAPD.UK +3.3% (awarded contract).

- Technology: SAP SAP.DE -1.6% (analyst action).

Speakers

- ECB's Enria (SSM chief): Gradual rise in interest rates is beneficial for banking sector on the whole. He cautioned that banks might be affected by adverse macroeconomic developments.

- Germany Econ Min Habeck stated that gas storage sites currently about 60% full.

- France Fin Min Le Maire stated that EU could implement the global minimum tax without Hungary's participation.

- Sweden Central Bank (Riksbank) Policy Statement noted that the Key Rate to be raised further and be close to 2% in early 2023. Prepared to raise policy rate faster if needed to ensure inflation returns to target. Inflation expected to fall back during 2023 and be close to 2% target from 2024. Reduced H2 bond purchases to SEK18.5B from prior SEK37B.

- Sweden Central Bank (Riksbank) Gov Ingves post rate decision press conference noted that inflation was way too high and broadening.

- Bank of France Dep Gov Goulard noted that risks to a domestic macroeconomic downturn was high.

- Italy govt said to be preparing a new aid package for energy up to €8.0B.

- Russia said to have withdrawn troops from Snake Island in Black Sea as a gesture of good will. Withdrawal did not hinder UN efforts to organize a corridor for agricultural products from Ukraine.

- Bank of Japan (BOJ) announced its bond purchases for July-Sept period and left both the amounts and frequencies of operations unchanged in quarter.

- Thailand Central Bank commented that economic recovery to become more clear in Q2.

- China Commerce Ministry (MOFCOM) commented that US adding Chinese companies to trade blacklist over supporting Russia severely disrupted international trade rules.

Currencies/Fixed income

- Risk aversion flows dominated in trading with safe-haven flow in focus as renewed worries about higher rates leading to a global recession. Dealers noted that central bankers had signaled they would do whatever it takes to combat inflation by raising interest rates. The USD was the main bebficiary of the flows. Focus turning to upcoming US personal spending and consumption expenditure data to assess the likelihood of a recession. Overall the global scenario appears to be creating a dilemma for central bankers dealing with the fastest inflation experienced in decades with slowing of economic growth.

- EUR/USD trading at 1.0430 by mid-session. Dealers noted that ECB appeared to unlikely surprise the market with any aggressive rate hike in July.

- GBP/USD steady at 1.2150 and trying to snap a 3-day losing streak.

- The price action for the quarter saw Asian currencies having their worst quarter since the 1997 Asian flu crisis.

- USD/JPY within striking distance of fresh 24-year highs. Pair at 136.30 by mid-session. BOJ announced its bond purchases for July-Sept period and left both the amounts and frequencies of operations unchanged in quarter.

Economic data

- (NL) Netherlands May Retail Sales Y/Y: 0.1% v 8.5% prior.

- (FI) Finland May House Price Index M/M: -0.8% v +0.6% prior; Y/Y: 1.5% v 3.0% prior.

- (FI) Finland May Preliminary Retail Sales Volume Y/Y: -5.1% v -2.2% prior.

- (DE) Germany May Retail Sales M/M: 0.6% v 0.5%e; Y/Y: +0.4% v -1.8%e.

- (DE) Germany May Import Price Index M/M: 0.9% v 1.5%e; Y/Y: 30.6% v 31.5%e.

- (UK) Q1 Final GDP Q/Q: 0.8% v 0.8% prelim; Y/Y: 8.7% v 8.7% prelim.

- (UK) Q1 Final Private Consumption Q/Q: 0.6% v 0.6% prelim; Government Spending Q/Q: -1.3% v -1.7% prelim; Gross Fixed Capital Formation Q/Q: 3.8% v 5.4% prelim; Exports Q/Q: -4.4% v -4.9% prelim; Imports Q/Q: 10.4% v 9.3% prelim.

- (UK) Q1 Final Total Business Investment Q/Q: -0.6% v -0.5% prelim; Y/Y: 8.3% v 8.5% prelim.

- (UK) Q1 Current Account: -£51.7B v -£39.8Be.

- (UK) Jun Nationwide House Price Index M/M: 0.3% v 0.5%e; Y/Y: 10.7% v 10.8%e.

- (FI) Finland Apr Final Trade Balance: -€1.0B v -€0.9B prelim.

- (SE) Sweden Apr Non-Manual Workers’ Wages Y/Y: 3.0% v 2.7% prior.

- (ZA) South Africa May M3 Money Supply Y/Y: 7.3% v 7.5% prior; Private Sector Credit Y/Y: 5.3% v 5.6%e.

- (DK) Denmark May Unemployment Rate: 2.1% v 2.1% prior; Gross Unemployment Rate: 2.5% v 2.5% prior.

- (DK) Denmark Q1 Final GDP Q/Q: -0.5% v -0.1% prelim; Y/Y: 6.2% v 6.7% prelim.

- (CH) Swiss May Real Retail Sales YoY: -1.6% v -5.5% prior.

- (FR) France Jun Preliminary CPI M/M: 0.7% v 0.7%e; Y/Y: 5.8% v 5.7%e (record high).

- (FR) France Jun Preliminary CPI EU Harmonized M/M: 0.8% v 0.9%e; Y/Y: 6.5% v 6.5%e.

- (FR) France May PPI M/M: -0.1% v 0.0% prior; Y/Y: 27.3% v 27.9% prior.

- (FR) France May Consumer Spending M/M: 0.7% v 0.2%e; Y/Y: -3.4% v -3.6%e.

- (AT) Austria May PPI M/M: 0.4% v 1.4% prior; Y/Y: 20.9% v 21.6% prior.

- (CZ) Czech Q1 Final GDP (3rd reading) Q/Q: 0.9% v 0.9% prelim Y/Y: 4.9% v 4.8% prelim.

- (HU) Hungary May PPI M/M: 2.6% v 2.9% prior; Y/Y: 32.3% v 28.8% prior.

- (CH) Swiss Jun KOF Leading Indicator: 96.9 v 96.3e.

- (CH) Swiss Q1 Foreign exchange transactions (CHF): 5.7B v 12.6B prior.

- (TR) Turkey May Trade Balance: -$10.6B v -$10.7Be.

- (HU) Hungary Central Bank raises One Week Deposit Rate by 50bps to 7.75% (**Note: matches level of Base Rate).

- (TH) Thailand May Current Account: -$3.7B v -$3.0Be; Overall Balance of Payments (BOP): -$2.1B v -$6.5B prior; Trade Account Balance: $2.0B v $1.1B prior; Exports Y/Y: +11.3% v +6.6% prior; Imports Y/Y: +23.3% v +19.1% prior.

- (SE) Sweden Central Bank (Riksbank) raised Repo Rate by 50bps to 0.75% (as expected).

- (DE) Germany Jun Net Unemployment Change: +133.0K v -5.0Ke (1st rise since Apr 2021); Unemployment Claims Rate: 5.3% v 5.0%e.

- (ES) Spain Apr Current Account: -€0.5B v €0.3B prior.

- (IT) Italy May Unemployment Rate: 8.1% v 8.4%e.

- (NO) Norway Central Bank (Norges) July Daily FX Purchases (NOK): 1.5B v 1.5B prior.

- (CZ) Czech May M2 Money Supply Y/Y: 6.2% v 5.6% prior.

- (HK) Hong Kong May Retail Sales Value Y/Y: -1.7% v +8.4%e; Retail Sales Volume Y/Y: -4.9% v +8.0%e.

- (EU) Euro Zone May Unemployment Rate: 6.6% v 6.8%e.

- (BE) Belgium May Unemployment Rate: 5.5% v 5.3% prior.

- (IS) Iceland May Final Trade Balance (ISK): -28.3B v -28.3B prelim.

- (IT) Italy May PPI M/M: +0.3% v -0.3% prior; Y/Y: 42.7% v 44.1% prior.

Fixed income issuance

- (IT) Italy Debt Agency (Tesoro) sold total €6.0B vs. €5.0-6.0B indicated range in 5-year and 10-year BTP Bonds.

- Sold €4.0B vs. €3.5-4.0B indicated range in 2.65% Dec 2027 BTP bonds; Avg Yield: 2.74% v 2.16% prior; Bid-to-cover: 1.40x v 1.57x prior (May 31st 2022 under the 1.10% Apr 2027).

- Sold €2.0B vs. €1.5-2.0B indicated range in 2.50% Dec 2032 BTP; Avg Yield: 3.47% v 3.10% prior; bid-to-cover: 1.62x v 1.59x prior.

- (IT) Italy Debt Agency (Tesoro) sold €1.0B vs. €0.75-1.0B indicated range in 0.65% Apr 2029 Floating Rate Note (CCTeu); Avg Yield: 0.58% v 0.08% prior; Bid-to-cover: 1.86x v 1.63x prior.

Looking ahead

- OPEC+ Monthly meeting.

- (MX) Mexico May YTD Budget Balance (MXN): No est v -13.0B prior.

- (AR) Argentina Jun Consumer Confidence: No est v 36.3 prior.

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

- 05:30 (ZA) South Africa May PPI M/M: 1.4%e v 1.8% prior; Y/Y: 14.0%e v 13.1% prior.

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

- 06:00 (PT) Portugal Jun Preliminary CPI M/M: No est v 1.0% prior; Y/Y: No est v 8.0% prior.

- 06:00 (PT) Portugal Jun CPI EU Harmonized M/M: No est v 1.0% prior; Y/Y: No est v 8.1% prior.

- 06:00 (PT) Portugal May Retail Sales M/M: No est v -3.0% prior; Y/Y: No est v 4.6% prior.

- 06:00 (CZ) Czech Republic to sell CZK5.0B in 1-month Bills; Avg Yield: % v 6.45% prior.

- 06:30 (IN) India May Fiscal Deficit (INR): No est v 74.9B prior.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (CA) Canada Jun CFIB Business Barometer: No est v 61.6 prior.

- 07:00 (MX) Mexico Apr Gold Production: No est v 7.0K kilograms prior; Silver Production: No est v 353.7K kilograms prior; Copper Production: No est v 41.2K prior.

- 07:30 (IN) India May Eight Infrastructure (key) Industries: No est v 8.4% prior.

- 08:00 (ZA) South Africa May Trade Balance (ZAR): 26.3Be v 15.5B prior.

- 08:00 (ZA) South Africa May Monthly Budget Balance (ZAR): -19.0Be v -45.2B prior.

- 08:00 (BR) Brazil May National Unemployment Rate: 10.2%e v 10.5% prior.

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

- 08:30 (US) May Personal Income: 0.5%e v 0.4% prior; Personal Spending: 0.4%e v 0.9% prior; Real Personal Spending (PCE): -0.2%e v +0.7% prior.

- 08:30 (US) May PCE Deflator M/M: 0.7%e v 0.2% prior; Y/Y: 6.4%e v 6.3% prior.

- 08:30 (US) May PCE Core Deflator M/M: 0.4%e v 0.3% prior; Y/Y: 4.8%e v 4.9% prior.

- 08:30 (US) Initial Jobless Claims: 229Ke v 229K prior; Continuing Claims: 1.32Me v 1.315M prior.

- 08:30 (CA) Canada Apr GDP M/M: 0.3%e v 0.7% prior; Y/Y: 4.9%e v 3.5% prior.

- 08:30 (BR) Brazil May Nominal Budget Balance (BRL): -64.0Be v -41.0B prior; Primary Budget Balance: -25.1Be v 38.9B prior; Net Debt to GDP Ratio: 58.3%e v 57.9% prior.

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

- 09:00 (CL) Chile May Manufacturing Production Y/Y: 4.3%e v 1.7% prior; Industrial Production Y/Y: -1.2%e v -3.6% prior; Copper Production: No est v 421.7K prior.

- 09:00 (CL) Chile May Retail Sales Y/Y: -6.0%e v +19.9% prior; Commercial Activity Y/Y: No est v 12.6% prior.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 24th: No est v $582.3B prior.

- 09:00 (RU) Russia Q1 Final Current Account No est v $58.2B prelim.

- 09:45 (US) Jun Chicago Purchase Managers’ Index (PMI): 58.0e v 60.3 prior.

- 10:00 (MX) Mexico May Net Outstanding Loans (MXN): No est v 4.98T prior.

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

- 11:00 (CO) Colombia May National Unemployment Rate: No est v 11.2% prior; Urban Unemployment Rate: 10.3%e v 11.1% prior.

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

- 12:00 (CA) Canada to sell 2 Year Bonds.

- 12:00 (US) USDA Quarterly Grain Stocks Report.

- 13:00 (NZ) New Zealand Jun Corelogic House Prices Y/Y: No est v 15.3% prior.

- 14:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to raise Overnight Lending Rate by 150bps to 7.50%.

- 15:00 (AU) Australia Jun Corelogic House Price Index M/M: No est v - 0.3% prior.

- 15:00 (AR) Argentina Apr Economic Activity Index (Monthly GDP) M/M: +0.4%e v -0.7% prior; Y/Y: 7.0%e v 4.8% prior.

- 15:00 (AR) Argentina Apr Wages M/M: No est v 7.4% prior.

- 18:00 (NZ) New Zealand Jun ANZ Consumer Confidence Index: No est v 82.3 prior; M/M: No est v -2.5% prior.

- 18:45 (NZ) New Zealand May Building Permits M/M: No est v -8.5% prior.

- 19:00 (AU) Australia Jun Final PMI Manufacturing: No est v 55.8 prelim.

- 19:30 (JP) Japan Jun Tokyo CPI Y/Y: 2.5%e v 2.4% prior; CPI (Ex-Fresh Food) Y/Y: 2.1%e v 1.9% prior; CPI (ex-fresh food/energy) Y/Y: 1.0%e v 0.9% prior.

- 19:30 (JP) Japan May Jobless Rate: 2.5%e v 2.5% prior; Job-To-Applicant Ratio: 1.24e v 1.23 prior.

- 19:50 (JP) Japan Q2 Tankan Large Manufacturing Index: 13e v 14 prior; Outlook Survey: 13e v 9 prior; Large All-industry Capex: 8.3%e v 2.2% prior.

- 19:50 (JP) Japan Q2 Tankan Large Non-Manufacturing Index: 13e v 9 prior; Large Non-Manufacturing Outlook Survey: 16e v 7 prior.

- 19:50 (JP) Japan Q2 Tankan Small Manufacturing Index: -6e v -4 prior; Small Manufacturing Outlook Survey: -5e v -5 prior.

- 19:50 (JP) Japan Q2 Tankan Small Non-Manufacturing Index: -2e v -6 prior; Small Non-Manufacturing Outlook Survey: -2e v -10 prior.

- 20:00 (KR) South Korea Jun Trade Balance: -$4.3Be v -$1.7B prior; Exports Y/Y: 3.8%e v 21.3% prior; Imports Y/Y: 22.0%e v 32.0% prior.

- 20:01 (IE) Ireland Jun PMI Manufacturing: No est v 56.4 prior.

- 20:30 (SG) Singapore Q2 Preliminary URA Private Home Prices Q/Q: No est v 0.7% prior.

- 20:30 (JP) Japan Jun Final PMI Manufacturing: No est v 52.7 prelim.

- 20:30 (KR) South Korea Jun PMI Manufacturing: No est v 51.8 prior.

- 20:30 (TW) Taiwan Jun PMI Manufacturing: No est v 50.0 prior.

- 20:30 (PH) Philippines Jun PMI Manufacturing: No est v 54.1 prior.

- 20:30 (ID) Indonesia Jun PMI Manufacturing: No est v 50.8 prior.

- 20:30 (TH) Thailand Jun PMI Manufacturing: No est v 51.9 prior.

- 20:30 (MY) Malaysia Jun PMI Manufacturing: No est v 50.1 prior.

- 20:30 (VN) Vietnam Jun PMI manufacturing: No est v 54.7 prior.

- 21:45 (CN) China Jun Caixin PMI Manufacturing: 50.2e v 48.1 prior.

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