Euro Area PMI data shows signs of stabilization for region; Iran tensions simmer

Notes/Observations

- Focus on Iran after President Trump called for (then retracted) targeted strikes in Iran in retaliation against the downing of US drone

- Euro Area data showing signs of stabilization as major Jun Preliminary European PMI data for France, Germany and Euro Zone beat expectations

- UK Conservative Party entered its final stage with Boris Johnson against Jeremy Hunt

Asia:

- Japan May National CPI Y/Y: 0.7% v 0.7%e; CPI Ex Fresh Food (Core) Y/Y: 0.8% v 0.7% prior

- Japan May Preliminary PMI Manufacturing registered its 2nd straight contraction (49.5 v 49.8 prior)

- China and US negotiating teams could meet as soon as Tues (June 25th)

Europe/Mideast:

- EU leaders agreed to hold another summit related to the EU's top jobs ( including ECB head) on June 30th after failing to make progress at this week's meeting

- EU's Tusk confirmed no candidate to lead the EU Commission had a majority; too early to prejudge names for EU top positions. To have a chance to discuss EU top jobs on sidelines of G20 Osaka summit

- Germany Chancellor Merkel stated that did want a crisis with parliament over issue of top jobs. Wanted to agree a job package with European parliament before the 1st session of parliament

- UK Conservative Party leadership voting results for 5th round saw Gove eliminated; Boris Johnson to face Jeremy Hunt in final party-wide vote in July

- France Stats Agency (INSEE) forecasted 2019 GDP growth at 1.3%

Americas:

- US President Trump reportedly approved Iran attacks on 'handful' of targets such as radar and missile batteries retaliation against Iran's recent downing of an American surveillance drone. Trump said to have pulled back on the decision just hours later on Thursday night

- House Speaker Pelosi: Must remain engaged with allies on Iran and avoid escalation

- US FAA issued an emergency order that prohibited flying in areas over Straight of Hormuz and Gulf of Oman due to heightened tensions

- US Senate passed measure to prohibit certain arms sales to Saudi Arabia; White House expected to veto

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.1% at 386.5, FTSE +0.3% at 7446, DAX +0.3% at 12390, CAC-40 +0.5% at 5562, IBEX-35 +0.8% at 9277, FTSE MIB +0.5% at 21457, SMI -0.5% at 9958, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes: European Indices trade mixed following a slightly weaker session in Asia and lower US index futures, as tensions in Iran weigh. On the corporate front shares of IQE trade over 30% lower in the UK after guiding below expectations; Comet Group declines on a H1 update and stepping down of its CEO, meanwhile Augean gains after guiding ahead of expectations. Elsewhere Nordex gains after extending service agreements for 400MW in the US, whilst Natixis declines a further 3% after a 10% drop as the company confirms €600M outflows at H20 in Q2. On the IPO front Trainline and Fastned both came to market trading sharply above the IPO price. Looking ahead the one notable earner in the US is Carmax.

Equities

- Consumer discretionary: Dominos Pizza [DOM.UK] -4% (in advanced talks to replace CEO - press)

- Materials: Nanoco [NANO.UK] -80% (US customer terminates contract)

- Energy: Nordex [NDX1.DE] +0.9% (Extends service agreements)

- Financials: Deutsche Bank [DBK.DE] +1.6% (Analyst downgrade, Execs expect US regulators to continue to impose restrictions on investment banks), Natixis [KN.FR] -2.4% (Confirms €600M outflows at H2O), Augean [AUG.UK] +5.4% (Raises outlook)

- Healthcare: Comet [COTN.CH] -4.4% (H1 comments, CEO departs)

- Technology: Fastned [FAST.NL] +190% (IPO), Trainline [TRN.UK] +20% (IPO)

Speakers

- ECB's Villeroy (France): France Fin Min Le Maire to head a special task force to study 'stable coin' projects including Facebook's planned Libra

- Italy Dep PM Salvini said to be ready to withdraw from Govt coalition unless it was able to cut taxes for €10B

- Germany Debt Agency cut Q3 issuance plans by €2.0B to €52.5B

- Japan MOF Asakawa (Japan's top currency official) reiterated stance to voice concern if FX rates moved in a way that could not be explained by economic fundamentals. To closely watch markets and act appropriately if there were excessive forex moves. US trade friction, Fed policy and geopolitical risks were likely behind recent FX price action

- US officials said potential action on Iran remained on the table

Currencies/Fixed Income

-USD: The US Dollar index futures continued to find any legs as tensions between Iran and the US bubbled over. Focus on Iran after President Trump called for (then retracted) targeted strikes in Iran in retaliation against the downing of US drone.

-EUR: The Euro currency was hovering around the 1.13 area as regional data was showing signs of stabilization. EMU Flash PMIs were released today and showed France and Germany both beating expectations (Germany still in contraction). The general soft tone of the greenback aiding the Euro sentiment as well to the upside. Look to levels at the downside in the region of the 1.12 handle and to the upside we look at the 3 month high around 1.1350.

-GBP: The Cable traded higher yesterday as it approaches monthly highs in the region of 1.2750. The focus in the UK has been on the Tory leadership race for the PM position. The final 2 are as expected Boris Johnson and Jeremy Hunt. Both look to take the UK out of the EU by the end of October. The recent strength however is more than likely down to USD weakness.

Economic Data

- (NL) Netherlands May House Price Index M/M: 0.4%e v 0.4% prior; Y/Y: 7.2%e v 7.7% prior

- (HU) Hungary Q2 Current Account: +€0.3B v -€0.4B prior

- (FR) France Q1 Final Wages Q/Q: 0.8% v 0.7%e

- (CH) Swiss May M3 Money Supply Y/Y: 3.4% v 3.5% prior

- (MY) Malaysia Mid-Jun Foreign Reserves: $102.6B v $102.3B prior

- (CN) Weekly Shanghai copper inventories (SHFE): 134.8K v 139.6K prior

- (FR) France Jun Preliminary PMI Manufacturing: 52.0 v 50.8e (3rd month of expansion and highest since Sept); PMI Services: 53.1 v 51.6e; PMI Composite: 51.3e v 51.2 prior

- (DE Germany Jun Preliminary PMI Manufacturing: 45.4 v 44.6e (6th straight contraction); PMI Services: 55.6 v 55.2e; PMI Composite: 52.6 v 52.5e

- (EU) Euro Zone Jun Preliminary PMI Manufacturing: 47.8 v 48.0e (5th straight contraction); PMI Services: 53.4 v 53.0e; PMI Composite: 52.1 v 52.0e

- (PL) Poland May Sold Industrial Output M/M: 0.0% v -0.4%e; Y/Y: 7.7% v 7.5%e

- (PL) Poland May PPI M/M: 0.2% v 0.3%e; Y/Y: 1.4% v 1.6%e

- (RU) Russia Narrow Money Supply w/e Jun 14th (RUB): 10.46T v 10.34T prior

- (UK) May Public Finances (PSNCR): +£10.7B v -£6.3B prior; Net Borrowing: £4.5B v £3.2Be; Central Government NCR: +£16.6B v -£9.8B prior; PSNB ex Banking Groups: £5.1B v £4.1Be

- (HK) Hong Kong May CPI Composite Y/Y: 2.8% v 2.8%e

- (HK) Hong Kong Q1 Current Account Balance: $36.6B v $40.4B prior; Overall Balance of Payment (BOP): $33.0B v $24.0B prior

- (ES) Spain Apr Trade Balance: -€1.6B v -€2.4B prior

**Fixed Income Issuance**

- None seen

Looking Ahead

- (EU) European Council meeting (with ECB's Draghi and Coeure in attendance)

- 05:30 (IN) India to sell combined INR170B in 2024, 2029, 2043 and 2049 bonds

- 06:00 (UK) DMO to sell €5.0B in 1-month, 3-month and 6-month bills £0.5B, £2.0B and £2.0B respectively)

- 06:00 (IE) Ireland May PPI M/M: No est v 0.2% prior; Y/Y: No est v -5.9% prior

- 06:45 (US) Daily Libor Fixing

- 07:30 (IN) India Weekly Forex Reserve w/e Jun 14th: No est v $423.6B prior

- 08:00 (PL) Poland Central Bank (NBP) Jun Minutes

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

- 08:00 (IN) India announces upcoming bill issuance (held on Wed)

- 08:30 (CA) Canada Apr Retail Sales M/M: 0.2%e v 1.1% prior; Retail Sales (Ex-auto) M/M: 0.4%e v 1.7% prior

- 09:00 (MX) Mexico Q1 Aggregate Supply and Demand: 1.4%e v 2.7% prior

- 09:45 (US) Jun Markit Preliminary PMI Manufacturing: 50.5e v 50.5 prior; PMI Services: 51.0e v 50.9 prior; PMI Composite: No est v 50.9 prior

- 10:00 (US) May Existing Home Sales: 5.30Me v 5.19M prior

- 11:00 (CO) Colombia Central Bank Interest Rate Decision: expected to leave Overnight Lending Rate unchanged at 4.25%

- 11:00 (EU) Potential sovereign ratings after European close

- 12:00 (US) Fed event in Cincinnati with Brainard and Mester

- 15:00 (CO) Colombia Apr Economic Activity Index (Monthly GDP) Y/Y: 2.2%e v 2.6% prior

- 15:00 (US) Fed's Daly hosts podcast on community economics