Blockbuster earnings week concludes ahead of BoJ, BoE and US jobs report next week

EU mid-market update: Blockbuster earnings week concludes ahead of BOJ, BOE and US jobs report next week; Olympics to get under way.

Notes/observations

- Risk appetite seen to be picking up after a soft week that focused on critical earnings from US and EU mega cap stocks that (for the most part) indicated weakness of demand and cuts to guidance.

- After strong Q2 flash reading of US GDP, Personal Consumption and Core PCE yesterday, market awaits US Jun Core PCE Price Index and Personal Income/Spending at 08:30ET. Remain in Fed blackout period that prevents Fed speakers from commenting.

- Pricing now sees just over 50% chance of Bank of England (BOE) rate cut next Thurs, Aug 1st. However, analysts are split in what is being seen as a close call.

- Paris Olympics kicks off with opening ceremony tonight. Disruption from vandals, protestors and terrorist threats are subduing attendance, with arsonists causing train disruption for ~1M people this morning.

- Asia mixed with Nifty50 outperforming +1.6%. EU indices are -0.2% to +0.9%. US futures are +0.5-1.1%. Gold +0.4%, DXY 0.0%; Commodity: Brent -0.3%, WTI -0.4%; Crypto: BTC +4.4%, ETH +2.4%.

Asia

- Japan July Tokyo CPI Y/Y: 2.2% v 2.3%e; CPI (ex-fresh food) Y/Y: 2.2% v 2.2%e.

- Singapore Monetary Authority (MAS) Quarterly Monetary Policy Statement maintained its prevailing rate of application of the S$NEER policy band (**Note: 4th straight decision to maintain its tight monetary policy stance).

- Japan Outgoing Top FX Diplomat Kanda noted that Japan told G20 members that excessive currency volatility had a negative impact on the economy.

Global conflict/tensions

- US State Dept spokesperson: US does not believe that the Russian and Chinese bombers intercepted by US and Canadian fighter jets near Alaska posed a security threat.

- Israel said to be seeking changes to a plan for a Gaza truce and the release of hostages by Hamas, complicating a final deal.

Europe

- UK Chancellor of the Exchequer (Fin Min) Reeves to disclose a £19B shortfall in public finances.

Americas

- Treasury Sec Yellen at G20 reiterated belief in a market-determined exchange rate; Higher US rates induced capital influx and boosted USD.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.50% at 511.20, FTSE +0.92% at 8,262.00, DAX +0.15% at 18,331.35, CAC-40 +0.85% at 7,489.88, IBEX-35 -0.20% at 11,123.00, FTSE MIB +0.19% at 33,835.00, SMI +0.10% at 12,124.08, S&P 500 Futures +0.76%].

Market focal points/key themes: European indices open mostly higher across the board ahead of US PCE Deflator data later today; among sectors leading the way higher are Personal & Household Goods and Oil & Gas; lagging sectors include Chemicals and Tech; on corporate front, luxury retail name Hermes shares are trading higher after reporting sales and giving reassuring comments during earnings call; DAX underperforming other indices as Thyssenkrupp and BASF both trade lower after their results; UK banking name NatWest is trading higher after earnings and report that new UK Labor govt set to lean toward institutional sale for NatWest shares; earnings expected in the upcoming US session include 3M, Centene, Bristol-Myers Squibb, Booz Allen Hamilton and Colgate-Palmolive.

Equities

- Consumer discretionary: Hermes [RMS.FR] +5.0% (sales).

- Energy: Eni [ENI.IT] +3.5% (earnings) - Financials: Natwest [NWG.UK] +7.5% (earnings; new UK govt to lean toward institutional sale for NatWest shares).

- Industrials: Thyssenkrupp [TKA.DE] -8.5% (guidance cut - post close), BASF [BAS.DE] -2.5% (earnings) - Technology: ams-OSRAM [AMS.CH] +14.5% (earnings), Capgemini [CAP.FR]  -10.5% (earnings; cuts Rev outlook), Mercedes-Benz [MBG.DE] +0.5% (earnings) - Materials: Wacker Chemie [WCH.DE] -0.5% (earnings).

Speakers

- Japan MOF reportedly wants BOJ to cut bond purchases gradually and to consider bank capacity in bond plan.

- Turkey Central Bank (CBRT) Dep Gov Akcay stated that a rate cut was not on the agenda at the moment; easing too early could reignite inflation. Easing to begin only after a significant and permanent drop in monthly inflation trend.

- Taiwan Central Bank (CBC) Jun Minutes noted that the decision was unanimous to keep rates unchanged.

Currencies/fixed income

- USD price action was quiet with focus on the upcoming US PCE data later in the session favored measure of inflation.

- EUR/USD steady at 1.0850 area. ECB Jun Consumer Expectation Survey was little change and provided little insight on ECB rate path.

- GBP/USD at 1.2870 with focus on next week’s BOE rate decision and an expected close vote whether to cut or hold. 

- USD/JPY was hovering around 154 level. Dealers noted that the yen currency had strengthened recently and reversed some of its excessive weakness against the USD. Speculation of a possible Bank of Japan rate increase at next week's meeting has helped lift the yen. G20 officials continued to stress that FX should be market driven and reflect fundamentals.

Economic data

- (FI) Finland Jun House Price Index M/M: -0.8% v +0.8% prior; Y/Y: -3.3% v -3.1% prior.

- (SE) Sweden Jun Unemployment Rate: 9.4% v 8.7% prior; Unemployment Rate (seasonally adj): 8.2% v 8.5%e; Trend Unemployment Rate: 8.3% v 8.3% prior.

- (SE) Sweden Jun Trade Balance (SEK): 8.7B v 10.4B prior.

- (NO) Norway Jun Retail Sales (ex-a1.2% v 0.3% prior; Y/Y: 3.6% v 3.0% prior.

- (DK) Denmark Jun Retail Sales M/M: -0.1% v +0.7% prior; Y/Y: 0.8% v 2.6% prior.

- (HU) Hungary Jun Unemployment Rate: 4.2% v 4.3%e.

- (FR) France July Consumer Confidence: 91 v 90e.

- (ES) Spain Q2 Unemployment Rate: 11.3% v 11.4%e.

- (ES) Spain Jun Adjust Retail Sales Y/Y: 0.3% v 0.1% prior; Retail Sales (unadj) Y/Y: -1.5% v +0.4% prior.

- (TH) Thailand Gross International Reserves w/e July 19th: $227.7B v $227.8B prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 301.2K v 309.2K tons prior.

- (EU) ECB Jun Consumer Expectation Survey: 1-year CPI Expectations: 2.8% v 2.8% prior; 3-Year CPI Expectations: 2.3% v 2.3% prior.

- (IT) Italy July Consumer Confidence: 98.9 v 98.7e; Manufacturing Confidence: 87.6 v 87.3e; Economic Sentiment: 94.2 v 94.5 prior.

- (RU) Russia Narrow Money Supply w/e July 19th (RUB): 18.39T v 18.35T prior.

- (TW) Taiwan Jun M2 Money Supply Y/Y: 6.3% v 6.0% prior; M1 Money Supply Y/Y: 5.2% v 5.0% prior.

- (IT) Italy Jun Hourly Wages M/M: 1.2% v 0.3% prior; Y/Y: 3.6% v 3.0% prior.

Fixed income issuance

- (IN) India sold total INR350B vs. INR350B indicated in 2029, 2039 and 2064 bonds.

- (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 6-month Bills; Avg Yield: 3.518% v 3.685% prior; Bid-to-cover: 1.46x v 1.49x prior.

Looking ahead

- (BR) Brazil Jun Central Govt Budget Balance (BRL): -37.1Be v -61.0B prior.

- (BR) Brazil Jun Total Federal Debt (BRL): No est v 6.912T prior.

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

- 05:30 (ZA) South Africa to sell ZAR1.0B in I/L 2031, 2043 and 2058 Bonds.

- 06:00 (UK) DMO to sell £6.5B in 1-month, 3-month and 6-month bills (£0.5B, £2.5B and £3.5B respectively).

- 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to raise One-Week Auction Rate by 200bps to 18.00%.

- 07:00 (BR) Brazil July Construction Costs M/M: 0.8%e v 0.9% prior.

- 07:30 (BR) Brazil Jun Total Outstanding Loans (BRL): No est v 5.555T prior; M/M: No est v 0.7% prior; Personal Default Rate: No est v 5.6% prior.

- 07:30 (IN) India Forex Reserve.

- 07:30 (IN) India announces upcoming bill issuance (held on Wed).

- 08:00 (MX) Mexico Jun Trade Balance: $0.7Be v $2.0B prior.

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

- 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond issuance.

- 08:30 (US) Jun Personal Income: 0.4%e v 0.5% prior; Personal Spending: 0.3%e v 0.2% prior; Real Personal Spending (PCE): 0.3%e v 0.3% prior.

- 08:30 (US) Jun PCE Price Index M/M: 0.1%e v 0.0% prior; Y/Y: 2.4%e v 2.6% prior.

- 08:30 (US) Jun Core PCE Price Index M/M: 0.2%e v 0.1% prior; Y/Y: 2.5%e v 2.6% prior.

- 10:00 (US) July Final University of Michigan Confidence: 66.4e v 66.0 prelim.

- 11:00 (US) July Kansas City Fed Service Activity Index: No est v 2 prior.

- 13:00 (US) Weekly Baker Hughes Rig Count.

- 21:30 (CN) China Jun Industrial Profits Y/Y: No est v 0.7% prior.