Notes/Observations

- Euro Area Jun Preliminary PMI data mixed but remaining in expansionary territory (Beats: Germany, Euro Zone, UK; Misses: France); price action subdued markets were anticipating an improving economic outlook as virus restrictions eased.

- Another emerging European Central bank expected to deliver a hawkish hike (Czech seen raising rates by 25bps; following Hungary’s move on Tuesday).

Asia:

- Australia Jun Preliminary PMI Manufacturing registered its 13th month of expansion (58.4 v 60.4 prior.

- Japan Jun Preliminary PMI Manufacturing registered its 5th month of expansion (51.5 v 53.0 prior).

- RBA Assist Gov Ellis noted that the aim of policy settings was to support a return to full employment and inflation consistent with the target.

- BOJ April Meeting Minutes (two meetings ago) reiterated the stance that the domestic economy likely to recover ahead, supported by increased external demand.

Coronavirus:

- UK Govt expected to get rid of mask requirements and social distancing on July 19th, given the trend of lower COVID cases.

Europe:

- EU/UK officials said to be close to a truce in Brexit trade dispute involving checks on goods going into Northern Ireland.

- UK PM Johnson reportedly has no plans to grant a Scottish independence referendum before the 2024 election.

- UK Shadow MPC calling on BOE to cancel the final £50B of QE due to signs of rising inflation and robust growth.

- Turkey Central Bank (CBRT) Gov Kavcioglu pledged to protect TRY currency (Lira) and was in talks with 4 counterparts for new swap deals and way adjust required reserve rules after discussions.

Americas:

- Fed Chair Powell's testimony noted that Fed would wait for actual inflation as the trigger for any rate increase; would not raise rates preemptively or in response to very strong employment.

- US President Biden said to be pushing for high-level meetings with China officials. Biden discussed meetings between US Sec of State Blinken and China Foreign Min Wang for next week at the G20 meeting.

Energy:

- Weekly API Crude Oil Inventories: -7.2M v -8.5M prior.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 -0.32% at 454.94, FTSE +0.05% at 7,093.50, DAX -0.59% at 15,543.80, CAC-40 -0.53% at 6,576.58, IBEX-35 -0.16% at 9,039.00, FTSE MIB -0.16% at 25,275.50 , SMI -0.31% at 11,944.97, S&P 500 Futures +0.01%].

Market Focal Points/Key Themes: European indices open generally lower, but later turned to trade mixed; better-performing sectors include materials and technology; underperformers led by telecom and consumer discretionary; Swiss Re cuts stake in Phoenix; Heineken increases stake in India’s United Breweries; earnings expected during the upcoming US session include IHS Markit, Winnebago and KB Home.

Equities

- Consumer discretionary: Pernod-Ricard [RI.FR] +3% (raises outlook).

- Financials: Bank of Ireland [BIRG.IE] -5% (govt sells stake), Berkeley Group [BKG.UK] -1% (earnings).

- Healthcare: Abivax [ABVX.FR] +12% (positive trial results).

Speakers

- ECB's de Guindos (Spain) stated that he expected to see very significant H2 growth in the region.

- Italy PM Draghi noted that recent data suggested domestic GDP growth to exceed forecasts. Pick-up in inflation seen as transitory but did warrant attention. Believed that fundamental suggested maintaining an expansionary fiscal stance. Faster growth to help to reduce the debt burden.

- German Chancellor Merkel's Cabinet said to back the 2022 net borrowing at €100B (in line with recent press speculation).

- Sweden NIER Think Tank updated its forecasts which raised both its growth and inflation outlook. Raised 2021 GDP growth forecast from 3.7% to 4.4% and 2022 GDP growth forecast from 3.4% to 3.5%. It raised the 2021 CPIF from 1.8% to 1.9% and 2022 CPIF from 1.5% to 1.7%.

- Russia Central Bank Zabotkin (Monetary Policy Chief): Neutral rate is seen higher than the 5.0-6.0% range. Inflation expectations were key for the neutral rate.

- Poland Central Bank member Zyzynski stated that he would not consider a symbolic hike at this time.

- Thailand Central Bank Policy Statement reiterated to preserve policy space for the appropriate time and continue to prioritize the economy. It saw vaccine procurement and rollout as key to recovery and prepared to use appropriate tools when needed. THB currency (baht) was weaker than regional peers; to monitor FX.

- Thailand Central bank updated its Staff Forecasts which cut 2021 GDP growth from between 3.0% to 1.8% citing lower tourist arrivals. It also cut its 2022 GDP growth from 4.7% to 3.9%. It maintained both 2021 and 2022 Headline CPI at 1.2%.

Currencies/Fixed Income

- USD drifting away from recent highs after Fed Chair Powell testified on Tuesday and played down inflation risks. The greenback had strengthened following the hawkish surprise from the Fed last week.

- EUR/USD was slightly higher as PMI readings remained in expansionary territory. Overall price action was muted as markets had anticipated an improving economic outlook as virus restrictions eased in Europe in recent weeks. Dealers noted that the pair could face some steep resistance at the 1.20 level as ECB would unlikely send any strong message on stimulus reduction despite the better data in the region.

- GBP/USD was edging back towards the 1.40 area ahead of Thursday’s BOE decision. GBP currency aided by the hawkish rumor that QE could be reduced in the aftermath that the Shadow MPC was calling on BOE to cancel the final £50B of QE due to signs of rising inflation and robust growth.

- CZK currency (koruna) appreciated for the third consecutive day as the Czech Central Bank was expected to begin a tightening cycle.

Economic data

- (TH) Thailand Central Bank (BoT) left the Benchmark Interest Rate unchanged at 0.50% (as expected).

- (FR) France Jun Preliminary PMI Manufacturing: 58.6 v 59.0e (7th month of expansion); PMI Services: 57.4 v 59.5e; PMI Composite: 57.1 v 59.0e.

- (DE) Germany Jun Preliminary PMI Manufacturing: 64.9 v 63.0e (12th month of expansion); PMI Services: 58.1 v 55.7e; PMI Composite: 60.4 v 57.6e.

- (EU) Euro Zone Jun Preliminary PMI Manufacturing: 63.1 v 62.3e (12th month of expansion); PMI Services: 58.0 v 58.0e; PMI Composite: 59.2 v 58.8e.

- (ZA) South Africa May CPI M/M: 0.1% v 0.1%e; Y/Y: 5.2% v 5.2%e (3rd straight month with the annual pace within target).

- (ZA) South Africa May CPI Core M/M: 0.0% v 0.0%e; Y/Y: 3.1% v 3.2%e.

- (PL) Poland Jun Consumer Confidence: -14.8 v -11.8e.

- (TW) Taiwan May Industrial Production Y/Y: 16.5% v 13.1%e.

- (UK) Jun Preliminary PMI Manufacturing: 64.2 v 64.0e (13th straight expansion); PMI Services: 61.7 v 62.8e; PMI Composite: 61.7 v 62.5e.

- (IS) Iceland May Wage Index M/M: 0.4% v 0.3% prior; Y/Y: 7.5% v 7.4% prior.

Fixed income Issuance

- (SI) Slovenia opened it book to sell EUR-denominated 10-year sustainability bonds via syndicate; guidance saw +15bps to mid-swaps.

- (IN) India sold a total INR360B vs. INR360B indicated in 3-month, 6-month, and 12-month bills.

- (SE) Sweden sold SEK15.0B vs. SEK15.0B indicated in 3-month bills; Avg Yield: -0.2013% v -0.1867% prior; Bid-to-cover: 2.03x v 2.40x prior.

- (UK) DMO sold £400M in 0.125% Nov 2065 Inflation-linked Gilts; Real Yield: -1.981% prior; Bid-to-cover: x v 2.35x prior.

Looking Ahead

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

- 05:30 (DE) Germany to sell €2.5B in 0% May 2036 Bunds.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:30 (ZA) South Africa announces details of the next bond auction (held on Tuesdays).

- 06:00 (IE) Ireland May Unemployment Rate: No est v 5.8% prior.

- 06:00 (RU) Russia to sell 2029 and 2041 OFZ Bond auction.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (US) MBA Mortgage Applications w/e Jun 18th: No est v 4.2% prior.

- 07:00 (MX) Mexico Apr Retail Sales M/M: -0.4%e v +3.6% prior; Y/Y: 31.2%e v 2.5% prior.

- 07:00 (UK) Weekly PM Question time in House.

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

- 08:30 (US) Q1 Current Account Balance: -$206.2Be v -$188.5B prior.

- 08:30 (CA) Canada Apr Retail Sales M/M: -5.0%e v +3.6% prior; Retail Sales (ex-auto) M/M: -4.5%e v +4.3% prior.

- 08:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to raise 2-Week Repurchase Rate by 25bps to 0.50%.

- 09:00 (US) Fed’s Bowman at Fed Conference on Economic Resilience.

- 09:45 (US) Jun Preliminary Markit PMI Manufacturing: 61.5e v 62.1 prior; PMI Services: 70.0e v 70.4 prior; PMI Composite: No est v 68.7 prior.

- 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (7-20 years).

- 10:00 (US) May New Home Sales: 867Ke v 863K prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:00 (US) Fed’s Bostic discusses Systemic Racism.

- 11:30 (US) Treasury to sell 2-year FRN.

- 12:00 (CA) Canada to sell 30-year bonds.

- 12:00 (RU) Russia May Industrial Production Y/Y: 10.5%e v 7.2% prior.

- 12:00 (EU) ECB’s Lagarde at event.

- 13:00 (US) Treasury to sell 5-Year Notes.

- 15:00 (AR) Argentina Q1 GDP Q/Q: 2.3%e v 4.5% prior; Y/Y: +2.4%e v -4.3% prior.

- (CO) Colombia May Industrial Confidence: No est v -5.1 prior; Retail Confidence: No est v 25.6 prior.

- 16:30 (US) Fed’s Rosengren on Economy.

- 17:00 (KR) South Korea Jun Consumer Confidence: No est v 105.2 prior.

- 19:50 (JP) Japan May PPI Services Y/Y: 1.5%e v 1.0% prior.

- 23:00 (TH) Thailand Central Bank to sell THB30B in 2-year.

- 23:30 (TH) Thailand May Customs Trade Balance: $0.8Be v $0.2B prior; Exports Y/Y: 33.5%e v 13.1% prior; Imports Y/Y: 53.7%e v 29.8% prior.

- 23:35 (JP) Japan to sell 20-Year JGB Bonds.

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