UK economy back above its pre-crisis peak

EU Market Update: German IFO survey falls for the 3rd straight month on geo-political concerns; UK economy back above its pre-crisis peak

Notes/Observations

- Japan Jun CPI touch higher than expectations but down from month-ago levels; official stress too early to declare end to deflation (CPI YoY 3.6% v 3.5e)

- German IFO Business Sentiment falls for third straight month over geo-political concerns

- Euro Zone M3 data touch higher than expectations but Private lending fall for the 26th straight month

- UK Q2 GDP YoY reading shows economy back above its pre-crisis peak

Key Economic Data in session

- (SG) Singapore Jun Industrial Production M/M: -0.1% v -0.9%e; Y/Y: +0.4% v -0.9%e

- (UK) Retailer John Lewis reports weekly LFL Partnership sales for week ending July 18th: 7.3% v +5.8% prior

- (RU) Russia Narrow Money Supply w/e July 18th (RUB): No est v 8.21T prior

- (DE) Germany Aug GfK Consumer Confidence: 9.0 v 8.9e; highest since Dec 2006

- (ES) Spain Jun PPI M/M: 0.9% v 0.9% prior; Y/Y: +0.4% v -0.4% prior

- (ES) Spain May Total Mortgage Lending Y/Y: -9.2% v +16.1% prior; House Mortgage Approvals Y/Y: -3.4% v -13.4% prior

- (DK) Denmark Jun Retail Sales M/M: -0.6% v +0.3% prior; Y/Y: -0.8% v +2.1% prior

- (AT) Austria May Industrial Production M/M: -2.2% v +0.7% prior; Y/Y: -2.1% v +0.4% prior

- (TR) Turkey Jun Trade Balance: -$7.9B v -$7.0Be

- (EU) ECB €234M borrowed in overnight loan facility vs. €223M prior; €22.4B parked in deposit facility vs. €21.8B prior - Daily Eurosystem Liquidity Conditions

- (SE) Sweden Jun Household Lending Y/Y: 5.4% v 5.3%e

- (SE) Sweden Jun Retail Sales M/M: 0.5% v 0.4%e; Y/Y: 3.3% v 3.2%e

- (SE) Sweden Jun Trade Balance (SEK): 5.2B v -0.2B prior

- (NL) Netherlands July Producer Confidence Index: 1.2 v 0.5e

- (DE) Germany July IFO Business Climate Survey: 108.0 v 109.4e; Current Assessment Survey: 112.9 v 114.5e; Expectations Survey: 103.4 v 104.4e

- (EU) Euro Zone Jun M3 Money Supply Y/Y: 1.5% v 1.2%e; M3 3-month average: 1.1% v 1.0%e

- (IT) Italy Jun Hourly Wages M/M: 0.1% v 0.1% prior; Y/Y: 1.2% v 1.3% prior

- (CN) Shanghai Futures Exchange (SHFE) Weekly Copper Stockpiles: 102.2K v 108.9K prior

- (TW) Taiwan Jun M2 Money Supply Y/Y: 5.7% v 5.9% prior ; M1 Money Supply Y/Y: 7.5% v 8.1% prior

- (UK) Q2 Advance GDP Q/Q: 0.8% v 0.8%e; Y/Y: 3.1% v 3.1%e

- (UK) May Index of Services M/M: 0.3% v 0.2%e; 3M/3M: 1.0% v 1.0%e

Fixed Income:

- (IN) India sold total INR140B vs. INR140B indicated in 2020, 2024, 2032 and 2042 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities***

Indices [Stoxx50 -0.2%, FTSE 100 flat at 6,826, DAX -0.2% at 9,774, CAC-40 -0.5% at 4,388, IBEX-35 +0.5% at 10,912, FTSE MIB -0.1% at 21,240, SMI -0.3% at 8,615, S&P 500 Futures flat at 1,979]

- Market Focal Points/Key Themes: Equity markets open lower following mixed trading in the US, Russian markets trade lower, European M&A (BritishSky launches bid for Sky Deutschland; Balfour Beatty confirms talks with Carillion), RBS rises on higher H1 profits (driven by cost cutting and lower impairment charges), Vodafone rises on better than expected sales, Spanish banks continue to beat estimates (Caixa Bank), European companies continue to report negative currency impacts (LVMH, Lafarge, Danone, Nexans), Germany IFO below expectations, UK GDP in line, US earnings (Amazon misses expectations), US morning earnings (AON, AbbVie, LyondellBasell, Tyco, Xerox), High yield corporate bond funds continue to see outflows

By Sector

- Telecom [British Sky BSY.UK -2.5% (confirmed approach for Sky Deutschland), Vodafone VOD.UK +2.5% (Q2 sales above ests), Sky Deutschland SKYD.DE +1% (BSkyB confirmed approach)]

- Technology [Nexans NEXS.FR +2% (H1 profits rose)] Financials [RBS RBS.UK +12% (H1 profits rose, drives gains in entire banking sector), Caixabank CABK.ES +2% (results above ests)]

- Consumer Discretionary [LVMH MC.FR -6% (H1 profits declined), TF1 TFI.FR -4% (Q2 op profit declined); Technicolor TCH.FR +4% (raised FCF outlook), Air France AF.FR +4% (Q2 EBITDA above ests, reaffirmed cautious outlook), Pearson PSON.UK +3% (reaffirmed cautious outlook), Luxottica LUX.IT +2% (Q2 op profit above ests)]

- Consumer Staples [Danone BN.FR -1% (H1 results below ests)]

- Industrials [Balfour BBY.UK +10% and Carrillion CLLN.UK +10% (merger talks)]

- Basic Materials/Resources [Lonmin LMI.UK +4% (Q3 production report), African Barrick Gold ABG.UK +2% (reported H1 profit)]

- Energy [Statoil STL.NO -3.5% (Q2 results below ests)]

- Stoxx50 sectors [Consumer Cyclical -1.4%, Utilities -0.6%, Basic Materials -0.6%, Energy -0.5%, Consumer Non-Cyclical -0.2%, Industrials -0.1%, Technology -0.1%; Telecom +0.4%, Financials +0.4%]

Speakers:

- German IFO Economist commented on the weak survey released in session. Scale of drop in climate index surprising but wouldn't call it a change of trend

- South Africa Central Bank (SARB) Gov Marcus reiterated view that monetary policy environment is complicated (refers to growth vs. inflation)

- Japan Chief Cabinet Sec Suga: To be extremely careful on decision to again raise the sales tax and to decide on sales-tax increase to 10% around December

- Ukraine govt appointed Hroisman as acting PM

- Indonesia former-general Prabowo to go ahead with Court challenge to seek revote in up to 6 provinces. He would concede election if court challenge failed but then would plan active opposition to push for his economic reforms

Currencies/Fixed Income:

- The EUR/USD re-approached 8-month lows after a weaker than expected German IFO survey but continued to hold above its 200-week moving average of 1.3426

- The GBP maintained a soft tone and tried to avoid its 8th straight day of losses. UK Q2 Advance GDP data UK economy suggested that the economy was back above its pre-crisis peak but did little to propel the GBP.

Political/In the Papers:

-IMF updated its World Economic Outlook (WEO): Lowers 2014 global growth forecast to 3.4% from 3.7%; lowers forecasts for advanced and emerging market economies; Maintains 2015 Global GDP growth outlook at 4.0% using an updated measurement

-(UR) US State Dept: Have some evidence that artillery is being fired from Russia and into Ukraine territory, directed at Ukraine military forces

Looking Ahead

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

- (BE) Belgium Sovereign Debt Rating Published by S&P

- (EE) Estonia Sovereign Debt Rating May Be Published by Moody's

- (DK) Denmark Sovereign Debt Rating May Be Published by Moody's

- 05:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave One-Week Auction Rate unchanged at 7.50%

- 05:30 (ZA) South Africa to sell I/L Bonds

- 06:00 (EU) ECB announces 3-Year LTRO Repayment

- 06:05 (UK) DMO to sell combined £3.0B in 1-month, 3-month and 6-month Bills

- 06:45 (US) Daily Libor Fixing

- 07:00 (EU) EMA Releases Drug Approvals & Safety Decisions

- 07:00 (BR) Brazil July FGV Consumer Confidence: No est v 103.8 prior

- 07:30 (TR) Turkey July Capacity Utilization: No est v 75.3% prior; Real Sector Confidence: No est v 110.7 prior

- 07:30 (IN) India Forex Reserves

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Jun Durable Goods Orders: +0.5%e v -0.9% prior (revised from -1.0%); Durables Ex Transportation: 0.5%e v 0.0% prior (revised from -0.1%); Capital Goods Shipment (non-defense/ex-aircraft): 1.3%e v 0.5% prior (revised from 0.4%); Capital Goods Orders (non-defense/ex-aircraft): 0.5%e v 0.7% prior; Durables Ex-Defense: No est v 0.6% prior

- 09:00 (BE) Belgium July Business Confidence: -6.5e v -6.2 prior

- 09:00 (MX) Mexico Jun Preliminary Trade Balance: $756.0Me v $131.8M prior

- 09:30 (BR) Brazil Jun Current Account Balance: -$3.9Be v -$6.6B prior; Foreign Direct Investment (FDI): $3.8Be v $6.0B prior

- 10:00 (MX) Mexico Central Bank (Banxico) Monetary Policy Minutes

- 12:00 (FR) France Jun Net Change in Jobseekers: +10.5Ke v +24.8K prior; Total Jobseekers: 2.40Me v 3.389M prior