Cautious tone characterizes session

Notes/Observations

- Risk-on appetite eases as uncertainty persists over the pace of a recovery from the Covid-19 pandemic.

- German industrial production the latest sign of a rebound as post-lockdown recovery continues

Asia:

- Reserve Bank of Australia (RBA) left Cash Rate Target unchanged at 0.25% and maintains Yield Control at 0.25% (as expected); no surprises in the statement

- Japan May Household Spending fell for a 8th straight month by a record amount (YoY: -16.2% v -11.8%e)

- Japan May Labor Cash Earnings registered its argest annual decline in ~5 years (YoY -2.1% v -1.0%e)

Europe:

- UK Chancellor of the Exchequer (Fin Min) Sunak Summer Statement to announce £3B package of green investment and create thousands of jobs. Could also could introduce a 6 month stamp duty holiday

- EU said to be willing to allow UK to break from Common Fisheries Policy and accept UK demands that post-Brexit fishing opportunities be divided using a scientific method that reflects the number of fish in UK waters

- France Fin Min Le Maire remained in post amid President Macron cabinet reshuffle

Americas:

- Fed Bostic (dove, non-voter in 2020): US recovery might be 'leveling off', activity could be hurt by recent rise in coronavirus infections; Concerned about data on business openings

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -1.01% at 367.46, FTSE -1.19% at 6,211.26, DAX -1.42% at 12,552.35, CAC-40 -1.08% at 5,026.73, IBEX-35 -1.17% at 7,468.00, FTSE MIB -0.34% at 19,964.50, SMI -0.76% at 10,175.18, S&P 500 Futures -0.79%]

Market Focal Points/Key Themes: European indices opened lower across the board and continued to the downside as the session progressed; better performing sectors include consumer discretionary; underperfomers lead by financials; reportedly US judge rejects part of Bayer Roundup settlement; Whitbread announced quarterly rent collections; Reach announces restructuring and job cuts; earnings expected in the upcoming US session include Avanos Medical, Biogen and Paychex

Equities

- Consumer discretionary: Sodexo [SW.FR] -5% (earnings), Whitbread [WTB.UK] -4% (rent collection), Halfords Group [HFD.UK] -8% (earnings)

- Financials: Commerzbank [CBK.DE] +3% (analyst action)

- Healthcare: Bayer [BAYN.DE] -5% (US judge said to reject part of previously announced ~$11.0B settlement related to Roundup)

- Industrials: Manz Automation [M5Z.DE] +9% (order), Renewi [RWL.UK] +5% (trading update)

- Technology: Micro Focus International [MCRO.UK] -8% (earnings)

Speakers

- ECB's Panetta (Italy) Digitization of money could have implications for Euro's global role. A central bank digital currency (cbdc) would have domestic implications for Euro Area in monetary policy, financial stability and payment systems

- ECB SSM official Jocknick: Contemplating whether bank suspensions of dividends and share buyback should be extended beyond Oct

- EU Commission Summer Forecasts cut both the 2020 and 2021 GDP outlook. Cut EU-19 GDP from -7.7% to -8.7% and cut EU-19 GDP from 6.3% to 6.1%

- EU Economic Commissioner Gentiloni (Italy) stated that EU saw a severe risk to economic outlook with risks tilted downside. Recovery to be uneven across member states and creating economic divergence in region. Stressed the need swift agreement on EU Recovery Plan

- Portugal Econ Min Vieira stated that saw some signs of economic activity

- Euro Area said to grant additional €748M post-bailout debt relief for Greece

Currencies/Fixed Income

- US Dollar index recovered from recent 2-week lows aided by persisting uncertainty over the pace of a recovery from the Covid-19 pandemic.

- EUR/USD lower by 0.4% at mid-session to trade at 1.1265. EU Commission cut its GDP outlook for both 2020 and 2021 and stressed the need for an agreement on the Recovery Fund.

Economic Data

- (NL) Netherlands Jun CPI M/M: +0.3% v -0.1% prior; Y/Y: 1.6% v 1.5%e

- (NL) Netherlands Jun CPI EU Harmonized M/M: +0.5% v -0.2% prior; Y/Y: 0.7%v 1.1% prior

- (DE) Germany May Industrial Production M/M: 7.8% v 11.1%e; Y/Y: -19.3% v -16.9%e

- (DK) Denmark May Industrial Production M/M: -3.0% v -4.5% prior

- (RO) Romania Q1 Final GDP (3rd reading) Q/Q: 0.3% v 0.3% prelim; Y/Y: 2.4% v 2.4% prelim

- (ZA) South Africa May Gross Reserves: $52.3B v $53.0Be; Net Reserves: $45.7B v $45.9Be

- (NO) Norway May Industrial Production M/M: -1.0% v -0.7% prior; Y/Y: 3.0% v 5.4% prior

- (NO) Norway May Manufacturing Production M/M: -3.0% v -1.6% prior; Y/Y: -8.2% v -5.1% prior

- (AU) Australia Jun Foreign Reserves: A$61.5B v A$60.8B prior

- (FR) France May Trade Balance: -€7.1B v -€5.5Be

- (FR) France May Current Account Balance: -€8.5B v -€5.8B prior

- (CH) Swiss Jun Foreign Currency Reserves (CHF): 850.1B v 816.5B prior

- (CZ) Czech May Trade Balance (CZK): +1.3B v -8.4Be

- (CZ) Czech May Industrial Output Y/Y: -29.4% v -22.4%e; Construction Output Y/Y: -7.6% v -4.6% prior

- (HU) Hungary May Industrial Production M/M: +15.6% v -30.5% prior; Y/Y: -27.6% v -24.3%e

- (AS) Austria Jun Wholesale Price Index M/M: +1.4% v -0.7% prior; Y/Y: -5.1% v -7.9% prior

- (MY) Malaysia Central Bank (BNM) cut Overnight Policy Rate by 25bps to 1.75% (as expected)

- (MY) Malaysia End-Jun: Foreign Reserves: $103.4B v $102.8B mid-month level

- (SE) Sweden May Private Sector Production M/M: -0.4% v -6.5% prior; Y/Y: -10.0% v -9.4% prior

- (SE) Sweden May Industrial Orders M/M: +4.5% v -14.2% prior; Y/Y: -18.4% v -20.6% prior

- (SE) Sweden May Industry Production Value Y/Y: -15.5% v -16.5% prior; Y/Y: -9.4% v -8.7% prior

- (SE) Sweden Jun Budget Balance (SEK): -56.5B v +10.2B prior

- (UK) Jun Halifax House Price Index M/M: -0.1% v -0.2% prior; 3M/Y: 2.5% v 2.6% prior

- (ZA) South Africa Q2 BER Consumer Confidence: -33 v -22e

- (IT) Italy May Retail Sales M/M: 24.3% v 15.0%e; Y/Y: -10.5% v -17.0%e

- (TW) Taiwan Jun Trade Balance: $4.8B v $4.6Be; Exports Y/Y: -3.8% v -3.7%e; Imports Y/Y: -8.6% v -6.8%e

- (TW) Taiwan Jun CPI Y/Y: -0.8% v -1.0%e; CPI Core Y/Y: 0.1% v 0.1%e; WPI Y/Y: -10.4% v -9.4%e

- (UK) Q1 Unit labour Costs Y/Y: 6.2% v 2.7% prior; Output Per Hour (final) Y/Y: -0.6% v -2.9% prelim

- (SG) Singapore Jun Foreign Reserves: $312.5B v $301.0B prior

- (HK) Hong Kong Jun Foreign Reserves: $445.9B v $442.4B prior

Fixed Income Issuance

- (CY) Cyprus opened its book to sell EUR-denominated 2024 and 2040 bonds

- (RO) Romania opened book to sell USD-denominated 10-year and 30-year bonds

- (EU) EFSF opened its book to sell EUR-denominated 5-year bonds; guidance seen -8bps to mid-swaps

- (ID) Indonesia sold total IDR9.5T vs. IDR7.0T target in 6-month Islamic bills and 2-year, 5-year, 15-year, 20-year and 25-year bonds (sukuk)

- (ES) Spain Debt Agency (Tesoro) sold total €7.02B vs. €6.5-7.5B indicated range in 6-month and 12-month Bills

- (AT) Austria Debt Agency (AFFA) sold total €1.3B vs. €1.38B indicated in 2030 and 2051 RAGB bonds

- (UK) DMO sold £3.75B in 0.125% Jan 2023 Gilts; Avg Yield: -0.034% v +0.021% prior; Bid-to-cover: 2.16x v 2.21x prior; Tail: 0.5bps v 0.3bps prior

Looking Ahead

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)

- 05:30 (ZA) South Africa to sell combined ZAR6.7B in 2026, 2030 and 2048 bonds

- 05:30 (DE) Germany to sell €750M in 0.5% 2030 inflation-linked bunds (Bundei)

- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 6-month bills

- 05:40 (UK) BOE weekly allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)

- 06:30 (UK) DMO to sell £2.25B in 1.25% Oct 2041 Gilts; Avg Yield: % v 0.596% prior; Bid-to-cover: x v 2.11x prior; Tail: bps v 0.4bps prior (Jun 17th 2020)

- 06:30 (EU) ESM to sell €2.0B in 3-Month Bills; Avg Yield: % v -0.5195% prior; Bid-to-cover: x v 4.5x prior (Jun 2nd 2020)

- 06:45 (US) Daily Libor Fixing

- 07:00 (MX) Mexico Jun Vehicle Production: No est v 22.1K prior; Vehicle Exports: No est v 15.1K prior

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)

- 07:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (3-7 years)

- 07:45 (US) Goldman Economist Chain Store Sales

- 08:00 (PL) Poland Jun Official Reserves: No est v $132.8B prior

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

- 08:30 (CL) Chile Jun Trade Balance: No est v $1.4B prior; Total Exports: No est v $5.2B prior; Total Imports: No est v $3.8B prior; Copper Exports: No est v $2.6B prior

- 08:30 (CL) Chile Jun International Reserves: No est v $36.8B prior

- 08:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (7-20 years) - 08:55 (US) Weekly Redbook LFL Sales data

- 09:00 (RU) Russia Jun Official Reserve Assets: $568.0Be v $566.1B prior

- 09:00 (CL) Chile May Nominal Wage M/M: No est v -1.4% prior; Y/Y: No est v 2.6% prior

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:00 (US) Fed's Bostic participates in webinar on Economy

- 09:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (20+ years)

- 10:00 (US) May JOLTS Job Openings: 4.800Me v 5.046M prior

- 10:00 (CA) Canada Jun Ivey Purchasing Managers Index (Seasonally Adjusted): No est v 39.1 prior; PMI (unadj): No est v 42.1 prior

- 10:00 (MX) Weekly Mexico International Reserves

- 10:30 (TR) Turkey Jun Cash Budget Balance (TRY): No est v -9.7B prior

- 10:30 (CA) Canada to sell in 3-month, 6-month and 12-month bills

- 11:30 (US) Treasury to sell $35B in 1-month Cash management Bills

- 12:00 (RU) Russia Q2 Consumer Confidence Index: No est v -11 prior

- 13:00 (NZ) New Zealand Jun QV House Prices Y/Y: No est v 7.7% prior

- 13:00 (US) Treasury to sell $46B in 3-Year Notes

- 14:00 (US Fed's Daly and Barkin participate in NABE Talk on Economy

- 15:00 (AR) Argentina May Industrial Production Y/Y: No est v -33.5% prior; Construction Activity Y/Y: No est v -75.6% prior

- 16:30 (US) Weekly API Oil Inventories

- 19:50 (JP) Japan May Current Account Balance (BOP basis): ¥1.084Te v ¥263B prior; Adjusted Current Account: ¥716.8Be v ¥252.4B prior; Trade Balance (BoP Basis): -¥639.0Be v -¥966.5B prior

- 19:50 (JP) Japan Bank Lending Y/Y: No est v 4.8% prior; Bank Lending (ex-trusts) Y/Y: No est v 5.1% prior

- 21:10 (JP) BOJ Outright Bond Purchase Operation: To buy 1~3 Years; 3~5 Years maturities

- 23:00 (CN) China to sell 2-year and 5-year Upsized Government Bond

- 23:00 (TH) Thailand to sell THB22B in 2029 Bonds