PMI Services data mixed and showing some stagnation in Europe

Notes/Observations

- China July HSBC Services PMI: hits lowest since records began in 2005 (50.0 vs. 53.1 prior); China's progress in rebalancing its economy has been limited

- Australia Jun Trade Balance registers its 3rd consecutive deficit (-A$1.7B vs. -A$2.0Be)

- European Services PMI data comes in mixed (UK beats, Germany revised up, France steady Euro Zone revised down and Italy misses).

Key Economic Data in session

- (AU) RBA left its Rate Target unchanged at 2.50%; as expected

- (IN) India July Services PMI: 52.2 v 54.4 prior; 3rd month of expansion

- (RU) Russia July Services PMI: 49.7 v 49.5e; 5th month of contraction

- (IN) India Central bank (RBI) left Key Rates unchanged (Repurchase Rate unchanged at 8.00% for its 3rd straight pause in policy) but cut the SLR by 50bps to 22.00% %

- (CH) Swiss Q2 UBS Real Estate Bubble Index: 1.24 v 1.22 prior

- (SE) Sweden July PMI Services 60.1 v 54.6 prior

- (CZ) Czech Jun Retail Sales Y/Y: 8.2% v 4.5%e

- (HU) Hungary Jun Retail Sales Y/Y: 3.8% v 4.8%e

- (EU) ECB €0.0M borrowed in overnight loan facility vs. €45M prior; €35.9B parked in deposit facility vs. €44.1B prior - Daily Eurosystem Liquidity Conditions

- (ZA) South Africa July Services PMI: 46.4 v 49.5 prior; 4th month of contraction and lowest since series began

- (ES) Spain July Services PMI: 56.2 v 55.2e v 54.8 prior; 9th straight month of expansion

- (IT) Italy July Services PMI: 52.8 v 53.6e ; 4th month of expansion

- (FR) France July Final Services PMI: 50.4 v 50.4e; confirms first expansion in three months

- (DE) Germany July Final Services PMI: 56.7 v 56.6e ; confirms 14th straight month of growth and highest since Jun 2011

- (EU) Euro Zone July Final Services PMI: 54.2 v 54.4e; confirms 12th straight month of growth and highest since May 2011

- (BR) Brazil July FIPE CPI Monthly: 0.2% v 0.2%e

- (TW) Taiwan July Foreign Reserves: $423.7B v $423.5B prior

- (UK) July Services PMI: 59.1 v 58.0e; 19th month of expansion and highest since Nov

- (EU) Euro Zone Jun Retail Sales M/M: 0.4% v 0.5%e; Y/Y: 2.4% v 1.4%e (largest annual rate since Mar 2007)

Fixed Income:

- (AT) Austria Debt Agency (AFFA) sold total €1.1B vs. €1.1B indicated in 2019 and 2024 RAGB bonds

- (CH) Switzerland sold CHF529.2M in 3-month Bills; Yield: -0.087% v -0.127% prior

- (GR) Greece Debt Agency (PDMA) sold €812.5M vs. €625M indicated in 26-week Bills; Avg Yield 2.02% v 2.05% prior; Bid-to-cover: 3.03x v 2.66x prior

- (EU) ECB allotted €107.9B in 7-Day Main Refinancing Tender at fixed 0.15% vs. €110Be (Prior €133.3B with 162 bids)

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities***

Indices [Stoxx50 flat, FTSE 100 +0.5%, DAX +0.6% at 9,213, CAC-40 +0.7% at 4,246, IBEX-35 flat at 10,489, FTSE MIB flat at 20,386, SMI +0.9% at 8,379, S&P 500 Futures flat at 1,932]

- Market Focal Points/Key Themes: Equity markets open higher amid earnings (BMW, Credit Agricole, Deutsche Post) and gains in US equities, Peripheral indices lag, Russia's MICEX trades lower, BMW and Toyota beat quarterly estimates and reaffirm outlooks, Credit Agricole rises as adj profit above ests, Deutsche Post profits above ests despite negative fx impact, Vivendi receives offer from Telefonica for Brazil's GVT, Another profit warning weighs on Bilfinger Berger, Tier 1 firm cautious on Greek banks, Unicredit results expected during US morning, European Services PMI mixed

By Sector

- Industrials [Deutsche Post DPW.DE +3% (Q2 profits above ests), BMW +3% (Q2 profits above ests); Bilfinger SE GBF.DE -12% (profit warning), Meggitt MGGT.UK -6% (cautious outlook), UPM UPM1V.FI -3% (Q2 results below ests)]

- Financials [Credit Agricole ACA.FR +4% (Q2 adj profit above ests), Standard Life SL.UK +2.5% (H1 profits and AUM rose)]

- Consumer Discretionary [Pendragon PDG.UK +5% (sharp rise in H1 profits), Aggreko AGK.UK +3% (reaffirmed outlook), Vivendi VIV.FR +3% (offer for GVT); InterContinental Hotels IHG.UK -1.5% (H1 profits and sales declined)]

- Telecom [Telefonica TEF.ES -1.5% (offer for GVT)]

- Technology [Axel Springer SPR.DE +5% (Q2 results above ests)] Stoxx50 Sectors [Consumer Non-Cyclical +1.2%, Telecom +1%, Utilities +0.6%, Energy +0.6%, Basic Materials +0.5%, Financials +0.4%, Industrials +0.2%, Consumer Cyclical flat; Technology -0.1%]

Speakers:

- Bank of England (BoE)'s Haldane commented that the danger of financial risks might be moving from banks to non-banks. He saw a risk for more frequent and larger swings in asset prices originating from insurers and funds.

- ECB published its quarterly report on single resolution mechanism (SSM): Governance was 'fully operational'

- Turkey Econ Min Zeybekci commented that the country needed a reasonable interest rate level and reiterates view that high interest rates cause cost inflation. Lower interest rates would spur manufacturing

- India Central bank Gov Rajan stated after the RBI rate decision that it would maintain the 2015 inflation target at 8.00% but added that risk to 2016 inflation target remained on the upside. He reiterates his view that there would be room to cuts rates if disinflation proceeded and would not hold rates high any longer than necessary

Currencies/Fixed Income:

- Data showing some stagnation in Europe after European Services PMI data came in mixed (Germany revised up, France steady Euro Zone down. The EUR/USD remained well contained within recent ranges but did hit session lows after Italy PMI missed expectations. Overall the dealer sentiment remains to use any setback in the USD to establish fresh shorts in the EUR/USD pair. EUR/GBP cross selling wighed upon the outright Euro sentiment.

- The GBP/USD hit session highs and continued to rebound from last week lows after its PMI Services data beat expectations. The GBP had been hampered after recent moderation in leading UK indicators recently

- AUD currency appeared to be vulnerable following the much weaker-than-expected Chinese services sector PMI but AUD/USD was steady during the Europen morning at 0.9340 area

Political/In the Papers:

- (FR) Moody's: France's fiscal strategy targets competitiveness challenges, but carries implementation risks; cuts growth forecast for 2014 and 2015

- (PT) Banco Espirito Santo [BES.PT]: ISDA finds that the Espirito Santo financial unit situation is considered a bankruptcy event

- National Institute of Economic and Social Research (NIESR) amended its 2014 and 2015 GDP growth forecasts. It raised the 2014 GDP forecast from 2.9% to 3.0% and trimmed the 2015 GDP forecast from 2.4% to 2.3%

Looking Ahead

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

- (MX) Mexico Banamex Survey of Economists

- (ZA) South Africa to sell combined ZAR2.35B in 2030, 2032 and 2044 bonds

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills

- 05:30 (BE) Belgium Debt Agency to sell combined €2.0B in 3-Month and 6-Month Bills

- 06:00 (PT) Portugal Q2 Unemployment Rate: No est v 15.1% prior

- 06:00 (TR) Turkey to sell 2024 Fixed Bonds

- 06:30 (EU) ESM to sell €1.5B in 3-month bills

- 06:45 (US) Daily Libor Fixing

- 07:45 (US) Weekly ICSC Chain Store Sales

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (CL) Chile Jun Economic Activity M/M: 0.1%e v 0.6% prior; Y/Y: 2.0%e v 2.3% prior

- 08:55 (US) Weekly Redbook Retail Sales

- 09:00 (MX) Mexico July Consumer Confidence Index: 93.0e v 91.0 prior

- 09:00 (BR) Brazil July Services PMI: No est v 51.4 prior; Composite PMI: No est v 49.9 prior

- 09:00 (EU) Weekly ECB Forex Reserves:

- 09:45 (US) July Final Markit Services PMI: 60.8e v 61.0 prelim; Composite PMI: No est v 60.9 prelim

- 10:00 (US) July ISM Non-Manufacturing Composite: 56.5e v 56.0 prior

- 10:00 (US) Jun Factory Orders: +0.6%e v -0.5% prior

- 10:00 (US) Possible Jun Durable Goods revisions

- 10:00 (US) Aug IBD/TIPP Economic Optimism: 47.3e v 45.6 prior

- 10:00 (BR) Brazil Jun CNI Capacity Utilization: No est 80.7% prior

- 11:30 (US) Treasury to sell 4-Week Bills

- 10:00 (MX) Mexico Weekly International Reserves

- 16:30 (US) Weekly API Oil Inventories

- (US) Kansas Holds Primary Elections

- (US) Michigan Holds Primary Elections

- (US) Missouri Holds Primary Elections

- (US) Washington Holds Primary Elections