European equities higher

EU Market Update: European equities higher as latest events in the Portuguese banking sector seen as contained

Notes/Observations

- Singapore Q2 Preliminary GDP registers its first contraction in 7 quarters

- BOJ begins two day monetary policy review and ahead of China's Q2 GDP report this week

- Portuguese 10-year yields correcting from the recent sharp rise seen in the wake of contagion fears over Portuguese banks

Key Economic Data in session

- (JP) Japan May Final Industrial Production M/M: 0.7% v 0.5% prelim; Y/Y: 1.0% v 0.8% prelim; Capacity Utilization M/M: -0.7% v -2.2% prelim

- (FI) Finland Jun CPI M/M: +0.1 v -0.2% prior; Y/Y: 0.9% v 0.8% prior

- (IN) India Jun Wholesale Prices Y/Y: 5.4% v 5.8%e (4-month low)

- (HU) Hungary May Final Industrial Production M/M: -1.0% v -1.0% prelim; Y/Y: 9.6% v 9.6% prelim

- (CZ) Czech May Current Account Monthly (CZK): +9.0B v -3.8Be

- (IT) Bank of Italy May Public Finance Supplement: General Government Debt: €2.166T v €2.146T prior

- (EU) Euro Zone May Industrial Production M/M: -1.1% v -1.2%e; Y/Y: 0.5% v 0.5%e

Fixed Income:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities***

Indices [Portugal PSI20 +0.5%, Stoxx50 +0.7%, FTSE 100 +0.8% at 6,742, DAX +0.8% at 9,743, CAC-40 +0.7% at 4,346, IBEX-35 +0.4% at 10,585, FTSE MIB +0.1% at 20,637, SMI +1% at 8,551, S&P 500 Futures +0.3% at 1,968

- Market Focal Points/Key Themes: Equity markets open slightly higher following positive leads from Asia and opening gains in Portuguese bonds, Gains capped as core government bond yields remain near recent lows, Shire rises on improved offer from AbbVie, Shares of Banco Espirito Santo remain volatile, European Corporate bond issuance remains quiet amid events related to Portugal's Espirito Santo, Swedish bank SEB reports better than expected results on lower provisions, Citigroup earnings during the US morning

By Sector

- Healthcare [Shire SHP.UK +2% (AbbVie raised bid)]

- Industrials [Rolls Royce RR.UK +1.5% (agreement related to the A330neo), Airbus AIR.FR +1% (launch of new A330)]

- Consumer Discretionary [Adidas ADS.DE +1% (German World Cup victory), Lindt LISP.CH +1% (acquisition); Huntsworth HNT.UK -18% (profit warning)]

- Financials [Allianz ALV.DE +1.5% (broker commentary), SEB SEBA.SE +1% (Q1 profits above ests)]

- Telecom [Deutsche Telekom DTE.DE +1% (speculation related to T-Mobile USA)]

- Stoxx50 Sectors [Industrials +1%, Financials +0.8%, Energy +0.7%, Telecom +0.6%, Consumer Cyclical +0.6%, Consumer Non-Cyclical +0.5%, Basic Materials +0.5%,Technology +0.3%, Utilities +0.2%]

Speakers:

- Japan PM Abe stated that he was not thinking of dissolving Parliament at this point (**comments follow a recent opposition DPJ party's Taizo Mikazuki victory in a regional elections for Shiga prefecture's governor post)

Currencies/Fixed Income:

- The European session was quiet but did see some risk appetite find some momentum. Portuguese 10-year yields corrected from the sharp rise seen in the wake of contagion fears over the Portuguese banking sector. The relief rally aided the Euro which was higher by 0.2% at 1.3635 area.

- Overall monetary policy to be in focus this week with several of the G10 central banks likely to issue statements (e.g. RBA and BOJ)

Political/In the Papers:

- (DE) S&P affirms AAA Germany rating; outlook Stable (from July 11th)

- (NL) Fitch revises Netherlands outlook to Stable from Negative (from July 11th)

- (GR) Canadian rating agency DBRS raises Greece sovereign rating to B from CCC; outlook to Stable from Negative

- (US) White House Office of Management and Budget (OMB) lowers forecast for FY14 budget deficit to $583B (vs $649B forecast in March); FY15 deficit to $525B (vs $564B prior forecast)

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)

- 05:30 (DE) Germany to sell €2.0B in 6-month BuBills

- 06:00 (TR) Turkey to sell 2019 and 2021 bonds

- 06:00 (IE) Ireland May Trade Balance: No est v €2.9B prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (RO) Romania to sell 2019 Bonds

- 07:30 (BR) Brazil Central Bank Weekly Economists Survey

- 08:00 (IN) India Jun CPI Y/Y: 7.7%e v 8.3% prior

- 08:00 (PL) Poland May Current Account Balance: €0.5Be v €1.0B prior; Trade Balance: 0.4Be v €0.9B prior

- 08:00 (PL) Poland May M3 Money Supply M/M: 0.5%e v 0.6% prior; Y/Y: 5.3%e v 5.3% prior

- 08:00 (ES) Spain Debt Agency (Tesoro) to announce size in upcoming 6-Month and 12-Month Bills

- 08:00 (ES) Spain Debt Agency (Tesoro) to announce size in upcoming bond auction

- 08:15 (US) Baltic Dry Bulk Index

- 08:50 (FR) France Debt Agency (AFT) to sell 3-month, 6-month and 12-month Bills

- 09:00 (BE) Belgium May Trade Balance: No est v €63.5M prior

- 09:00 (CA) Canada Jun Teranet/National Bank HPI M/M: No est v 0.8% prior; Y/Y: No est v 4.6% prior; House Price Index: No est v 162.5 prior

- 09:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

- 11:00 (US) Fed to purchase $1.00-1.25B in Notes

- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills

- 13:00 (EU) ECB Draghi at EU Parliament

- 21:30 (AU) RBA Minutes of July Meeting