Euro area inflation continues to rise

Notes/Observations

-European manufacturing PMI's clutch onto expansion territory (Beats: Euro Zone France, Spain, Italy Misses: UK Unrevised: Germany) while various CPI reading continued to be hotter than expected
Some unwinding of safe haven flows as the new quarter began for Europe (yesterday's S&P500 closing saw its worst start to the year since 1970 amid global recessionary fears).

-As second half of the year begins, collection of Asian car makers monthly sales show notable declines. Japan responds to Putin's decree to move Sakhalin 2 rights to companies from Russia and confirms an inventory of about 2-3 worth of LNG. It echoes a global issue of energy storage, originating from a variety of sources such as extreme weather and the Ukraine war.

-In general, Asia closed lower while Hang Seng was on holiday. EU indices start into positive territory while bond yields are higher. US futures point higher. Elsewhere Gold -0.7%, BTC +1.4%, ETH +1.6%, DXY +0.2%, Brent +2.0%, WTI +1.8%.

- Looking ahead, expecting minimal news and reduced trading volumes as extended US weekend looms.

- Inflation readings suggest that central bank hawkishness has not peaked yet in drive to move rates above neutral level.

- ECB begins its flexibility in PEPP purchases as of July 1st.

Asia

- Japan Jun Tokyo CPI Y/Y: 2.3% v 2.5%e; CPI (Ex-Fresh Food) Y/Y: 2.1% v 2.1%e v 1.9% prior; CPI (ex-fresh food/energy) Y/Y: 1.0%e v 0.9% prior.

- Japan May Jobless Rate: 2.6% v 2.5%e.

- Japan Q2 Tankan Large Manufacturing Index: 9 v 13e; Outlook Survey: 10 v 13e (**Note: Tankan index measuring firms' inflation expectations hit its highest on record; Large manufacturers' output prices hit its highest since May 1980).

- Japan Jun Final PMI Manufacturing confirms 17th month of expansion (52.7 v 52.7 prelim).

- Australia Jun Final PMI Manufacturing confirms 26th month of expansion (56.2 v 55.8 prelim).

- China Jun Caixin PMI Manufacturing registered its 1st expansion in 4 months and highest since May 2021) (51.7 v 50.2e)..

- Japan FY2021 tax revenue seen at ¥67T (record high). Corporate tax revenues increased due to the recovery in corporate earnings from the pandemic.

Europe

- ECB's Holzmann (Austria, hawk) stated that he would have preferred earlier rate hikes; Reaching CPI target would 'take some time'.

- UK govt reportedly considering VAT cut to address high inflation and help households with cost of living crisis; PM’s Chief of Staff suggesting reducing the headline 20% rate.

Americas

- Atlanta Fed GDPNow cuts Q2 GDP forecast from +0.3% to -1.0%.

Energy

- Russia President Putin signed decree to move Sakhalin 2 rights to companies from Russia.

- Italy PM Dragh stated that was confident that Italy would hit year-end target to fill gas storage at 90% capacity by Nov.

- Freeport LNG terminal delayed its plans for partial restart of operations to Oct 2022 (prior estimate mid-Sept).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 % at #, FTSE % at #, DAX % at #, CAC-40 % at #, IBEX-35 % at #, FTSE MIB % at #, SMI % at #, S&P 500 Futures %].

Market Focal Points/Key Themes: European indices open lower across the board but quickly reversed to trade mostly in the green through the early part of the session; better performing sectors include consumer discretionary and financials; underperforming sectors include technology and health care; tech sector under pressure following following report from Taiwan Semi that orders were down; reportedly Telecom Italia rejects offer from CVC for enterprise services unit; Russia seizes assets of Sakhalin 2 LNG project; Aston Martin confirms potential stake offer from PIF; no major earnings expected during the upcoming US session.

Equities

- Consumer discretionary: Sodexo SW.FR +4.3% (results), La Francaise des Jeux FDJ.FR -7.8% (analyst action).

- Consumer staples:

- Energy: Magnora MAG.NO +6.3% (divestment), Shell SHEL.UK -0.5% (Russia seizes LNG assets).

- Financials: Abrdn ABDN.UK -0.8% (analyst action).

- Healthcare: CVS Group CVSG.UK % (trading update).

- Industrials: Bilfinger GBF.DE % (analyst action)- Materials: Wienerberger WIE.AT +2.8% (trading update).

- Technology: Tobii TOBII.SE +32.3% (contract award).

- Telecom:

Speakers

- EU Commission President Von der Leyen noted that the next step for Ukraine membership is in reach.

- India Fin Min Sitharaman stated that the RBI was in touch with ministry regarding the INR currency (Rupee). Watchful of events on the import front; to assess the oil levy impact every two weeks.

- Japan PM Kishida: LNG supply won't stop immediately from Sakhalin 2.

- Japan Industry Min Haguida stated that country had 2-3 weeks worth of LNG inventories at this time.

Currencies/Fixed income

- USD was mixed as the new quarter began. Focus to remain on the growth front and recession concerns as central bank hawkishness likely had yet to peak in the drive to move rates above neutral level to combat inflation. Session saw some unwinding of safe-haven flows to soften the greenback and yen.

- EUR/USD holding around 1.0450 area. Dealers noted that ECB to begin its flexibility in PEPP reinvestment as of July 1st.

- USD/JPY initially drifted away from recent 24-year highs. Analysts noted BOJ passed up an opportunity to ramp up its policy defenses after it kept JGB purchases unchanged for Q3. Move suggested its concerns of triggering a further weakening of the JPY currency (yen). Unwinding of safe-haven flows did bring some yen softness back by mid-session. Pair at 135.55 by mid-session.

Economic data

- (RU) Russia Jun Manufacturing PMI: 50.9 v 50.0e (2nd straight expansion).

- (AU) Australia Jun Commodity Index: 157.7 v 160.2 prior.

- (SE) Sweden Jun PMI Manufacturing: 53.7 v 54.9 prior (25th month of expansion)

- (AT) Austria Jun Preliminary CPI M/M: 1.4% v 0.8% prior; Y/Y: 8.7% v 7.7% prior.

- (NL) Netherlands Jun Manufacturing PMI: 55.9 v 56.0e (23rd straight expansion).

- (TR) Turkey Jun PMI Manufacturing: 48.1 v 49.2 prior (4th straight contraction).

- (PL) Poland Jun Manufacturing PMI: 44.4 v 47.5e (2nd straight contraction).

- (HU) Hungary Jun Manufacturing PMI: 57.0 v 51.7e (15th straight expansion).

- (HU) Hungary Apr Final Trade Balance: -€0.5B v -€0.5B prelim.

- (ES) Spain Jun Manufacturing PMI: 52.6 v 52.2e (17th month of expansion but lowest since Jan 2021).

- (CH) Swiss Jun PMI Manufacturing: 59.1 v 58.0e (23rd month of expansion).

- (CZ) Czech Republic Jun Manufacturing PMI: 49.0 v 51.0e (1st contraction in 22 months).

- (TH) Thailand Jun Business Sentiment Index: 50.5 v 49.3 prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 66.7K v 57.2K tons prior.

- (IT) Italy Jun Manufacturing PMI: 50.9 v 50.6e (24th month of expansion but lowest since Jun 2020)).

- (FR) France Jun Final Manufacturing PMI: 51.4 v 51.0 prelim (confirmed 19th month of expansion).

- (DE) Germany Jun Final Manufacturing PMI: 52.0 v 52.0 prelim (confirmed 24th month of expansion).

- (EU) Euro Zone Jun Final Manufacturing PMI: 52.1 v 52.0 prelim (confirmed 24th month of expansion).

- (GR) Greece Jun Manufacturing PMI: 51.1 v 53.8 prior (16th month of expansion).

- (NO) Norway Jun PMI Manufacturing: 56.4 v 54.7 prior (22nd month of expansion).

- (NO) Norway Jun Unemployment Rate: 1.6% v 1.6%e.

- (PL) Poland Jun Preliminary CPI M/M: 1.6% v 1.5%e; Y/Y: 15.6% v 15.5%e.

- (RU) Russia Narrow Money Supply w/e Jun 24th (RUB): 14.20T v 14.31T prior.

- (UK) Jun Final Manufacturing PMI: 52.8v 53.4 prelim (confirmed 25th month of expansion).

- (UK) May Net Consumer Credit: £0.8B v £1.3Be; Net Lending: £7.4B v £4.3Be.

- (UK) May Mortgage Approvals: 66.2K v 64.0Ke.

- (UK) May M4 Money Supply M/M: 0.5% v 0.0% prior; Y/Y: 5.1% v 4.9% prior; M4 (ex IOFCs) 3-Month Annualized: 7.0% v 5.1% prior.

- (UK) Jun Final Manufacturing PMI: 53.4 v 53.4 prelim (confirmed 25th month of expansion).

- (UK) May Net Consumer Credit: £B v £1.3Be; Net Lending: £B v £4.3Be.

- 04:30 (UK) May Mortgage Approvals: K v 64.0Ke.

- 04:30 (UK) May M4 Money Supply M/M: % v 0.0% prior; Y/Y: % v 4.9% prior; M4 (ex IOFCs) 3-Month Annualized: % v 5.0% prior.

- (NG) Nigeria Jun PMI Manufacturing: 50.9 v 53.9 prior.

- (EU) Euro Zone Jun CPI Estimate Y/Y: 8.6% v 8.5%e (record high); CPI Core Y/Y: 3.7% v 3.9%e.

- (DK) Denmark Jun PMI Survey: 71.3 v 61.2 prior.

- (ZA) South Africa Jun Manufacturing PMI: 52.2 v 54.8 prior.

- (IT) Italy Jun Preliminary CPI M/M: 1.2% v 0.6%e; Y/Y: 8.0% v 7.4%e.

- (IT) Italy Jun Preliminary CPI EU Harmonized M/M: 1.2% v 0.8%e; Y/Y: 8.5% v 7.9%e.

Fixed income issuance

- (IN) India sells total INR320B vs. INR320B indicated in 2027, 2028, 2036 and 2051 bonds.

Looking ahead

- (DE) German Cabinet presented with draft budget.

- (IT) Italy Jun Budget Balance: No est v €11.7B prior.

- (ZA) South Africa Jun Naamsa Vehicle Sales Y/Y: No est v 2.1% prior.

- (RO) Romania Jun International Reserves: No est v $46.7B prior.

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

- 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2033, 2046 and 2050 Bonds.

- 06:00 (PT) Portugal May Industrial Production M/M: No est v -2.0% prior; Y/Y: No est v -1.8% prior.

- 06:00 (UK) DMO to sell £3.0B in 1-month, 3-month and 6-month bills (£1.0B, £1.0B and £1.0B respectively).

- 06:30 (IT) ECB's Panetti (Italy).

- 06:45 (US) Daily Libor Fixing.

- 07:00 (IN) India announces upcoming bill issuance (held on Wed).

- 07:30 (IN) India Weekly Forex Reserve w/e Jun 24th: No est v $590.6B prior.

- 08:00 (CZ) Czech Jun Budget Balance (CZK): No est v -189.3B prior.

- 08:00 (ES) Spain Debt Agency (Tesoro) announcements on upcoming issuance.

- 08:30 (CL) Chile May Economic Activity Index (Monthly GDP) M/M: -0.4%e v -0.3% prior; Y/Y: 5.0%e v 6.9% prior.

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

- 09:00 (BR) Brazil Jun Manufacturing PMI: No est v 54.2 prior.

- 09:45 (US) Jun Final Manufacturing PMI: 52.4e v 52.4 prelim.

- 10:00 (US) Jun Construction Spending M/M: 0.4%e v 0.2% prior.

- 10:00 (US) Jun ISM Manufacturing: 54.5e v 56.1 prior; Prices Paid: 80.0e v 82.2 prior.

- 10:00 (MX) Mexico May Total Remittances: $4.9Be v $4.72B prior.

- 10:00 (MX) Mexico Central Bank Economist Survey.

- 10:30 (MX) Mexico Jun Manufacturing PMI: No est v 50.6 prior.

- 11:00 (CO) Colombia Jun PMI Manufacturing: No est v 53.9 prior.

- 11:00 (PE) Peru Jun CPI M/M: 0.4%e v 0.4% prior; Y/Y: 8.0%e v 8.8% prior.

- 12:00 (RU) Russia Q1 Final GDP (3rd reading) Y/Y: 3.5%e v 3.5% prelim.

- 12:00 (IT) Italy Jun New Car Registrations Y/Y: No est v -15.1% prior.

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

- 13:00 (MX) Mexico Jun IMEF Manufacturing Index: No est v 50.9 prior; Non-Manufacturing Index: No est v 52.5 prior.

- 14:00 (BR) Brazil Jun Monthly Trade Balance: $10.0Be v $4.9B prior; Exports: $33.0Be v $29.6B prior; Imports: $23.1Be v $24.7B prior.