Consolidation mode in quiet trading, focus on corporate earnings

Notes/Observations

- RBA was deemed hawkish as it kept its planned bond tapering for Sept despite recent virus lockdowns.

Asia

- RBA Left Cash Rate Target unchanged at 0.10% and maintained its 3-year Yield Target at 0.10% (both as expected). Reiterated its forward guidance that conditions to raise rates would not be met before 2024 at the earliest. Kept its taper plan for bond purchases but to remain flexible. The economy was still expected to grow strongly next year.

- Japan July Tokyo CPI Y/Y: -0.1% v +0.1%e v 0.0% prior; CPI (ex-fresh food) Y/Y: 0.1% v 0.0%e.

- South Korea July CPI remained above target for the 4th month and matched the fastest annual pace in almost a decade (Y/Y: 2.6% v 2.4%e).

- Japan Fin Min Aso noted that Japan's fiscal situation was deteriorating but should return to normal once vaccinations proceeded; Not considering additional extra budget at this point.

- Reserve Bank of New Zealand (RBNZ) might restrict high leverage mortgages to 10% of lending, effective Oct 1st.

Europe

- UK PM Johnson said to have canceled plans for an "amber" COVID watch list after Cabinet was vehemently against and worried about canceled vacations to the UK as a result.

- German CDU Wirtschaftsrat Business Group Sec General Steiger: Rising inflation was a troubling signal, ECB rates policy is a threat to the Euro.

Americas

- Treasury Sec Yellen's letter to Congress noted the US would meet statutory debt limit on Aug 1st; Treasury to begin implementing special measures by Aug 2nd to extend debt deadline.

- Fed's Waller (hawk, voter): Personal opinion is that Fed could make an announcement on taper in Sept; If we get 800K to 1M new jobs in next two jobs reports we will have regained 85% of jobs lost, which is 'significant further progress'.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 +0.22% at 465.48, FTSE +0.29% at 7,101.95 , DAX +0.08% at 15,580.45, CAC-40 +0.76% at 6,726.51, IBEX-35 -0.02% at 8,757.00, FTSE MIB +0.16% at 25,392.50, SMI +0.19% at 12,193.68, S&P 500 Futures +0.35%].

Market Focal Points/Key Themes: European indices open mixed and failed to gain direction as the session wore on; sectors leading to the upside include energy and financials; while sectors leading to the downside include technology and materials; energy sector supported following BP outlook; Sanofi to acquire Translate Bio; Smiths to sell medical unit; earnings expected during the upcoming US session include Blue Apron, Under Armour Eli Lilly and Lyft.

Equities

- Consumer discretionary: Domino's Pizza [DOM.UK] +2% (earnings).

- Energy: BP [BP.UK] +3% (earnings; buyback).

- Financials: Societe Generale [GLE.FR] +5% (earnings), Generali [G.IT] -1.5% (earnings), Standard Chartered [STAN.UK] +1.5% (earnings)

- Healthcare: Sanofi [SAN.FR] +1% (acquires Translate Bio).

- Industrials: Maersk [MAERSKB.DK] +1% (prelim earnings), BMW [BMW.DE] -4% (earnings), Stellantis [STLA.IT] +5% (earnings).

- Technology: TeamViewer [TMV.DE] -4% (earnings), Infineon [IFX.DE] -2% (earnings).

- Telecom:

Speakers

- Iran's incoming President Raisi stated that would take steps to lift US sanctions.

- China city of Beijing to ban train passengers from 23 regions to combat the spread of coronavirus. Regions included Zhengzhou, Nanjing, Yangzhou, Shenyang, and Dalian and were labeled with higher Covid-19 risks after a number of infections were found.

Currencies/Fixed Income

- FX market was relatively quiet in dull trading on Tuesday. Dealers noted that the recent bipartisan US infrastructure bill helped to aid risk appetite and keep the greenback on the defensive for now.

GBP/USD was back above the 1.39 level with a focus on Thursday’s BOE rate decision. Dealers believe that BOE will signal that it was signal that it’s in no hurry to cut its Gilt purchase program from the current £875B levels. Also aiding the GBP currency was the likely reopening of borders in Thursday's UK travel restrictions review which was seen as improving the recovery story.

- AUD currency was firmer after the RBA noted it would push ahead with its plan to start tapering bond purchases in September. Dealers noted that decision came as a hawkish surprise and had anticipated that RBA to delay taper plans in response to the negative impact from the latest round of lockdowns.

Economic data

- (AU) Australia July Commodity Index: 142.3 v 131.1 prior.

- (CH) Swiss Q3 SECO Consumer Confidence: +7.8-5.3e.

- (ES) Spain July Net Unemployment Change: -197.8K v -166.9K prior.

- (TR) Turkey July CPI M/M: 1.9% v 1.6%e; Y/Y: 19.0% v 18.6%e; CPI Core Index Y/Y: 17.2% v 17.7%e.

- (TR) Turkey July PPI M/M: 2.5% v 1.7%e; Y/Y: 44.9% v 43.9%e.

- (BR) Brazil July FIPE CPI M/M: 1.0% v 0.9%e.

- (EU) Euro Zone Jun PPI M/M: 1.4% v 1.4%e; Y/Y: 10.2% v 10.3%e.

Fixed income Issuance

- (ID) Indonesia sold a total IDR34.0T vs. IDR33.0T target in bills and bonds
v 2.14x prior.

- (UK) DMO sold £2.0B in 1.25% July 2051 Gilts; Avg Yield: 0.972% v 1.274% prior; bid-to-cover: 2.41x v 2.24x prior; Tail: 0.5bps v 0.2bps prior.

- (AT) Austria Debt Agency (AFFA) sold a total €1.495B vs. €1.495B indicated in 2025 and 2031 RAGB bonds.

- Sold €805M in 0% Apr 2025 RAGB Bonds; Avg Yield: -0.742% v -0.596% prior; bid-to-cover: 2.05x v 2.42x prior.

- Sold €690M in 0% Feb 2031 RAGB Bonds; Avg Yield: -0.271% v -0.059% prior; bid-to-cover: 2.08x.

Looking Ahead

- (US) July Total Vehicle Sales data during the session.

- (EG) Egypt July Gross Official Reserves: No est v $40.6B prior; Net Reserves: No est v $40.6B prior.

- 05:15 (CH) Switzerland to sell 3-month Bills.

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

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

- (BE) Belgium Debt Agency (BDA) to sell 3-month bills; Avg Yield: % v -0.672% prior; Bid-to-cover: x v 4.41x.

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

- 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2030, 2040 and 2048 bonds.

- 06:30 (EU) ESM to Sell Up to €1.5B in 3-month Bills.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (MX) Mexico Jun Leading Indicators M/M: No est v 0.27 prior.

- 07:00 (MX) Mexico July Consumer Confidence: No est v 44.5 prior.

- 08:00 (BR) Brazil Jun Industrial Production M/M: 0.3%e v 1.4% prior; Y/Y: 12.3%e v 24.0% prior.

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

- 08:30 (CA) Canada Jun MLI Leading Indicator M/M: No est v 1.4% prior.

- 08:30 (CL) Chile Central Bank Traders Survey.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 (EU) Weekly ECB Forex Reserves.

- 09:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 09:30 (CA) Canada July Manufacturing PMI: No est v 56.5 prior.

- 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (20+ years).

- 10:00 (US) Jun Factory Orders: 1.0%e v 1.7% prior; Factory Orders (ex-transportation): No est v v 0.7% prior.

- 10:00 (US) Jun Final Durable Goods Orders: 0.8%e v 0.8% prelim; Durables (ex-transportation): No est v 0.3% prelim; Capital Goods Orders (non-defense/ex-aircraft): No est v 0.5% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v 0.6% prelim.

- 10:00 (MX) Mexico Weekly International Reserve data.

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

- 11:00 (DK) Denmark July Foreign Reserves (DKK): No est v 458.4B prior.

-14:00 (US) Fed’s Bowman at Fed Conference.

- 16:30 (US) Weekly API Oil Inventories.

- 17:00 (KR) South Korea July Foreign Reserves: No est v $454.1B prior.

- 18:00 (CO) Colombia Central Bank July Minutes.

- 18:45 (NZ) New Zealand Q2 Employment Change Q/Q: 0.7%e v 0.6% prior.

- 18:45 (NZ) New Zealand Q2 Unemployment Rate: 4.4%e v 4.7% prior.

- 19:00 (AU) Australia July Final PMI Services: No est v 44.2 prelim; PMI Composite: No est v 45.2 prelim.

- 20:30 (JP) Japan July Final PMI Services: No est v 46.4 prelim; PMI Composite: No est v 47.7 prelim.

- 20:30 (SG) Singapore July PMI (whole economy): No est v 50.1 prior.

- 20:30 (HK) Hong Kong July PMI (whole economy): No est v 51.4 prior.

- 21:00 (NZ) New Zealand July Commodity Price Index: No est v 0.8% prior.

- 21:00 (AU) Australia to sell A$800M in 1.75% 2032 Bonds.

- 21:10 (JP) BOJ Outright Bond Purchase Operation in 1~3 Years and 10~25 Years maturities.

- 21:30 (AU) Australia Jun Final Retail Sales M/M: -1.8%e v -1.8% prelim; Q/Q: 0.8%e v 0.5% prior.

- 21:30 (KR) Bank of Korea (BOK) to sell KRW2.2T in 2-year Bonds.

- 21:45 (CN) China July Caixin PMI Services: 50.5e v 50.3 prior; PMI Composite: No est v 50.6 prior.

- 23:00 (CN) China to sell 3-year and 7-year Upsize Bonds.

- 23:00 (TH) Thailand Govt to sell THB13B in 2042 Bonds.