Already anxious investors await US payroll data

Notes/Observations

- Mix Chinese PMI data overnight China July Manufacturing PMI (govt official): 51.7 v 51.4e; (5th consecutive rise and an 27-month high (Apr 2012); China July Final HSBC Manufacturing PMI: 51.7 v 52.0e (18-month high)

- Major European Manufacturing PMI readings mixed

- USD was the best-performing G10 currency in July

- Already anxious investors await US payroll data after rough day for any investment class on Thursday

Key Economic Data in session

- (PE) Peru July CPI M/M: 0.4% v 0.4%e; Y/Y: 3.3% v 3.3%e; Wholesale Price Index M/M: % v -0.2% prior

- (JP) Japan July Vehicle Sales Y/Y: +0.6% v -0.7% prior; (1st increase in 4-months)

- (IE) Ireland July Manufacturing PMI: 55.4 v 55.3 prior; 14 straight months of expansion and highest since April

- (IN) India July Manufacturing PMI: 53.0 v 51.5 prior; 8 straight months of expansion and highest in 17 months

- (RU) Russia July Manufacturing PMI: 51.0 v 48.9e; first expansion in 9 months and highest since Oct

- (UK) Retailer John Lewis reports weekly LFL Partnership sales for week ending July 25th: +6.9% v +7.3% prior

- (SE) Sweden July PMI Manufacturing: 55.2 v 54.9e; 11th straight monthly expansion

- (AU) Australia July Commodity Index Y/Y: -12.1% v -11.0% prior; Commodity Index AUD: 92.1 v 93.1 prior

- (TH) Thailand July CPI M/M: -0.1% v +0.1%e; Y/Y: 2.2% v 2.4%e; CPI Core Y/Y: 1.8% v 1.7%e

- (NL) Netherlands July Manufacturing PMI: 53.5 v 52.6e; 12th straight month of expansion

- (NO) Norway July Manufacturing PMI: 50.6 v 50.0e; first expansion in three months

- (HU) Hungary July Manufacturing PMI: 56.7 v 51.7 prior; 12th straight month of expansion and record high reading

- (TR) Turkey July Manufacturing PMI: 48.5 v 48.8 prior; 2nd straight contraction

- (PL) Poland July Manufacturing PMI: 49.4 v 50.5e; first contraction in 13 months

- (HU) Hungary May Final Trade Balance: € v €419.2M prelim

- (RU) Russia Narrow Money Supply w/e July 25th (RUB): No est v 8.30T prior

- (EU) ECB €189M borrowed in overnight loan facility vs. €17M prior; €20.2B parked in deposit facility vs. €21.6B prior - Daily Eurosystem Liquidity Conditions

- (ES) Spain July Manufacturing PMI: 53.9 v 54.5e; 8th straight month of expansion (moves off 7-year highs)

- (CZ) Czech Republic July Manufacturing PMI: 56.5 v 54.8e; 15th straight month of expansion

- (IT) Italy July Manufacturing PMI: 51.9 v 52.5e; 13th straight month of growth but lowest reading since Nov 2013

- (FR) France July Final Manufacturing PMI: 47.8 v 47.6e; confirms third straight month of contraction and lowest since Dec 2013

- (DE) Germany July Final Manufacturing PMI: 52.4 v 52.9e; 13th straight month of expansion and highest since April

- (EU) Euro Zone July Final Manufacturing PMI: 51.8 v 51.9e ; confirms 13th straight month of expansion

- (GR) Greece July Manufacturing PMI: 48.7 v 49.4 prior (second month of contraction and lowest since Oct)

- (NO) Norway July Unemployment Rate: 3.0% v 3.0%e

- (CN) Shanghai Futures Exchange (SHFE) Weekly Copper Stockpiles: 108.4K v 102.2K prior

- (UK) July PMI Manufacturing: 55.4 v 57.2e; 17th straight month of expansion but lowest since July 2013

- (ZA) South Africa July Kagiso Manufacturing PMI: 45.9 v 45.0e ; 4th straight contraction

- (DK) Denmark July PMI Survey: 50.7 v 51.3 prior

Fixed Income:

- (IN) India sold total INR140B vs. INR140B indicated in 2020, 2024 and 2043 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities***

Indices [Stoxx50 -1%, FTSE 100 -1% at 6,662, DAX -1.7% at 9,237, CAC-40 -1%at 4,197, IBEX-35 -1.7% at 10,527, FTSE MIB -1% at 20,344, SMI closed, S&P 500 Futures -0.4% at 1,917]

- Market Focal Points/Key Themes: Equity markets open mostly lower following Thursday's losses and ahead of US payrolls data, Equities and core bonds decline, Spain's IBEX continues to underperform on weakness in banking sector amid Argentina concerns and wider debt spreads (PMI below ests), Russian equities decline, SocGen reports better than expected results on lower costs, ArcelorMittal cuts outlook, Iliad declines after approach for T-Mobile, French automakers decline as July new car registrations drop, Euro Zone and UK PMI below ests, High yield bond fund outflows continued this week and issuance remains quiet

By Sector

- Financials [Man Group EMG.UK -4% (cautious outlook), BBVA BBVA.ES -1% (follow-through selling), SocGen GLE.FR -1% (reported Q2 results, tracks weakness in banking sector); Axa CS.FR +1% (H1 profits above ests)]

- Basic Materials/Resources [Arkema AKE.FR -17% (Q2 results below ests), ArcelorMittal MT.NL -4.5% (cut FY outlook)]

- Energy [Areva AREVA.FR -12% (reported net loss, cut forecast), Fuchs Petrolub FPE.DE -10% (cut outlook)]

- Industrials [Vinci DG.FR -8% (cut outlook), Finmeccanica FNC.IT -2% (reported Q2 net loss)]

- Telecom [Iliad ILD.FR -9% (approach for T-Mobile); Belgacom BELG.BE +5% (raised outlook), DTE.DE +2% (offer for T-Mobile)]

- Consumer Discretionary [International Consolidated Airlines IAG.UK +2% (reported Q2 profit)]

- Healthcare [Smith & Nephew SN.UK +1.5% (Q2 sales above ests, reaffirmed outlook)]

- Stoxx50 sectors [Industrials -2%, Utilities -1.5%, Consumer Cyclical -1%, Technology -1%, Basic Materials -1%, Financials -0.9%, Consumer Non-Cyclical -0.6%, Telecom -0.5%, Energy -0.2%]

Speakers:

- Reports circulated that Russia was indicating there was high demand for customers to move into HKD currency on fears that Russian banks could be shut out of US funding market

- Israel official: Hamas has violated 72-hour cease-fire agreement (**Note: went into effect at 01:00 ET/05:00 GMT today)

- Hungary ruling Fidesz party said to meet in Sept to discuss FX loans

- NDRC: China to further reduce manufacturing overcapacity

Currencies/Fixed Income:

- USD was the best-performing G10 currency in July and bullishness to be extended

- Bounces have remained muted for the Euro as deflationary forces appear to be strongly intact despite the Jun ECB measures. Dealers noting that the EUR/USD pair remained very much in bear-trend mode (have seen eleven lower lows over the last 14 trading days). The Euro exchange rate remains a potential tool to fight off deflation risk

- The GBP/USD pair maintained a soft tone with it probing below its 100-day moving average at 1.6859 after softer PMI Manufactuiring data. Cable's recent 1-year bull trend being challenged. Dealers noted that a move below could trigger a more medium-term bearish signal,

- USDJPY has maintained the bullish breakout, with pullbacks remaining limited. Dealers note that JPY seemed poised to weaken further in anticipation of renewed BoJ policy action after a spat of weak economic data in Japan

Political/In the Papers:

- (AR) Argentina President Fernandez: Argentina must defend interests of nation; remains open to negotiations; offering to pay holdouts under previous 2010 swap terms

- AR) Argentina Econ Min Kicilloff: Reiterates view that Argentina is not violating bond contracts

- (AR) Fitch lowered Argentina's sovereign rating to "Restricted Default" from "C"

- (AR) Moody's revised lowered Argentina's sovereign outlook to negative

- (IL) Israelis and Palestinians agreed to 72 hour (3-day) unconditional humanitarian truce in Gaza (began at 01:00 ET/05:00 GMT today) but some reports of sporadic breaks in truce

Looking Ahead

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

- (SK) Slovakia Sovereign Debt Rating published by S&P, Moody's

- (GR) Greece Sovereign Debt Rating May Be Published by Moody's

- (RO) Romania July International Reserves: No est v $34.4B prior

- (RU) Russia July Sovereign Wealth Fund Balances: Reserve Fund: No est v $87.3B prior; Wellbeing Fund: No est v $87.9B prior

- (ZA) South Africa July Naamsa Vehicle Sales Y/Y: -6.0%e v -2.3% prior

- (IT) Italy July Budget Balance: No est v €7.7B prior

- 05:30 (ZA) South Africa to sell I/L 2025, 2038 and 2046 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

- 07:30 (IN) India Forex Reserves w/e July 18th: No est v $317.9B prior

- 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bonds to sell at auction

- 08:00 (BR) Brazil Jun Industrial Production M/M: -2.3%e v -0.6% prior; Y/Y: -7.9%e v -3.2% prior

- 08:00 (CZ) Czech July Budget Balance (CZK): No est v +1.5B prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) July Change in Nonfarm Payrolls: +230Ke v +288K prior; Change in Private Payrolls: +227Ke v +262K prior; Change in Manufacturing Payrolls: +15Ke v +16K prior

- 08:30 (US) July Unemployment Rate: 6.1%e v 6.1% prior; Underemployment Rate: No est v 12.1% prior; Change in Household Employment: No est v +407K prior; Labor Force Participation Rate: No est v 62.8% prior

- 08:30 (US) July Average Hourly Earnings M/M: 0.2%e v 0.2% prior; Y/Y: 2.2%e v 2.0% prior; Average Weekly Hours: 34.5e v 34.5 prior

- 08:30 (US) Jun Personal Income: 0.4%e v 0.4% prior; Personal Spending: 0.4%e v 0.2% prior

- 08:30 (US) Jun PCE Deflator M/M: 0.2%ev 0.2% prior; Y/Y: 1.7%e v 1.8% prior

- 08:30 (US) Jun PCE Core M/M: 0.2%e v 0.2% prior; Y/Y: 1.4%e v 1.5% prior

- 09:00 (BR) Brazil July Manufacturing PMI: No est v 48.7 prior

- 09:30 (CA) Canada July RBC Manufacturing PMI: No est v 53.5 prior

- 09:45 (US) July Final Markit Manufacturing PMI: 56.5e v 56.3 prelim

- 09:55 (US) July Final University of Michigan Confidence: 81.8e v 81.3 prelim

- 10:00 (US) July ISM Manufacturing: 56.0e v 55.3 prior; Prices Paid: 58.5e v 58.0 prior

- 10:00 (US) Jun Construction Spending M/M: 0.5%e v 0.1% prior

- 10:00 (MX) Mexico Jun Total Remittances: No est v $2.1B prior

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

- 10:30 (MX) Mexico July HSBC Manufacturing PMI: No est v 51.8 prior

- 11:00 (AR) International Swaps and Derivatives Association (ISDA)

- 12:00 (IT) Italy July New Car Registrations Y/Y: No est v 3.8% prior

- 13:00 (MX) Mexico July IMEF Manufacturing Index: 50.9e v 50.3 prior; Non-Manufacturing Index: 50.5e v 50.3 prior

- 14:00 (BR) Brazil July Monthly Trade Balance: $0.8Be v $2.4B prior; Total Exports: $23.3B v $20.5B prior; Total Imports: $22.4Be v $18.1B prior

- 17:00 (US) July Domestic Vehicle Sales: 13.27Me v 13.25M prior; Total Vehicle Sales: 16.75Me v 16.92M prior

- 21:00 (CN) China July Non-manufacturing PMI: No est v 55.0 prior