Greece PM Tsipras said to consider last minute initiative for an agreement

EU Mid-Market Update: Greece poised to miss IMF loan payment; Greece PM Tsipras said to consider last minute initiative for an agreement.

Notes/Observations

- Risk aversion theme diminished but not abated at this time

- Greece situation continues to overshadow events; country set to default on today's IMF repayment but immediate consequences limited

- Greece PM Tsipras said to consider last minute initiative for an agreement

- China Shanghai Composite ebds positive after registering a 10% intra-day swing; largest since 1997

Economic data

- (JP) Japan May Vehicle Production Y/Y: -16.6% v -7.5% prior (10th straight decline)

- (JP) Japan May Annualized Housing Starts: 912K v 915Ke; Housing Starts Y/Y: 5.8% v 5.5%e

- (DE) Germany May Retail Sales (beat) M/M: 0.5% v 0.0%e; Y/Y: -0.4% v +2.8%e

- (FR) France May Consumer Spending M/M: +0.1% v -0.2%e; Y/Y: 1.8% v 1.5%e

- (CH) Swiss Jun KOF Leading Indicator (miss): 89.7 v 93.7e

- (TR) Turkey May Trade Balance (miss): -$6.8B v -$6.6Be

- (DK) Denmark Q1 Final GDP Q/Q: 0.5% v 0.4%e, Y/Y: 1.7% v 1.7%e

- (CZ) Czech Q1 Final GDP Q/Q: 2.5% v 3.1% prior; Y/Y: 4.0% v 4.2% prior

- (CN) China Q1 Current Account Surplus revised lower from $78.9B to $75.6B

- (DE) Germany Jun Unemployment Change: -1K v -5Ke; Unemployment Rate: 6.4% v 6.4%e

- (IT) Italy May Preliminary Unemployment Rate: 12.4% v 12.3%e

- (UK) Q1 Current Account Balance: -£26.5B v -£24.0Be

- (UK) Q1 Final GDP Q/Q: 0.4% v 0.4%e; Y/Y: 2.9% v 2.5%e

- (UK) Q1 Final Total Business Investment Q/Q: 2.0% v 1.7% prelim; Y/Y: 5.7% v 3.7% prelim

- (EU) Euro Zone Jun Advance CPI Estimate (in line) Y/Y: 0.2% v 0.2%e; CPI Core Y/Y: 0.8% v 0.8%e

- (EU) Euro Zone May Unemployment Rate (in line): 11.1% v 11.1%e

- (GR) Greece Apr Retail Sales Volume Y/Y: -1.9% v +1.0% prior; Retail Sales Value Y/Y: -3.3% v -0.6% prior

- (IT) Italy Jun Preliminary CPI NIC incl. tobacco M/M: 0.1% v 0.1%e; Y/Y: 0.1% v 0.1%e

Fixed Income Issuance:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 -0.6%, FTSE 100 -0.8% at 6,571, DAX -0.7% at 11,007, CAC-40 -0.8% at 4,832, IBEX-35 -0.3% at 10,825, FTSE MIB flat at 22,566, SMI -0.3% at 8,849, Athens Stock Exchange closed, S&P 500 Futures +0.5% at 2,060]

- Market Focal Points/Key Themes: European equity markets open lower following declines on Monday, fluid situation in Greece remains in focus; Only slight losses seen in banking sector vs Monday's declines (BCP BCP.PT -0.6%; BNP BNP.FR -0.6%; Deutsche Bank DBK.DE -0.8%); Markets pare losses amid press speculation that Greece is considering a last minute proposal

By Sector

- Financials [Standard Life SL.UK -1% (broker commentary)]

- Technology [Imagination Technologies IMG.UK +4% (outlook)]

- Industrials [Gerresheimer GXI1.DE -5% (cautious medium-term outlook)]

- Basic Materials/Resources [K+S SDF.DE +2.5% (broker commentary) ]

- Consumer Discretionary [Ocado OCDO.UK -4% (H1 profits below ests); Carpetright CPR.UK +2% (FY profits rose)]

- Stoxx50 Sectors [Energy -1.7%, Consumer Cyclical -1.6%, Industrials -1.4%, Basic Materials -1.4%, Telecom -1.3%, Consumer Non-Cyclical -1.2%, Financials -1.1%, Technology -0.9%, Utilities -0.7%]

Speakers

- Greece PM Tsipras said to consider last minute initiative for an agreement

- German Fin Min Schaeuble: Greece must fulfill conditions to remain in Euro; Europe will do it utmost to defend Euro. Greece has announced it would not pay the IMF (**Note: already confirmed by Greece on Monday). Says Greece cannot destroy the Euro

- France Fin Min Sapin: French borrowing costs have dropped this week; Greece situation has had no impact on domestic banks

- Austria Fin Min Schelling reiterated Greece default was not automatic on IMF payment miss. EU would review the Greek situation aftre Sunday's referendum vote

- Spain PM Rajoy: Would be good for Greece if PM Tsipras lost the upcoming referendum

- Germany Chancellor Merkel Adviser Feld: Contagion risk from Greece was low. Grexit might be a gain for Euro Zone as it would become more homogeneous group

- Russia reiterated Greece has not applied for financial aid

- RBA Gov Stevens: Inflation looks a bit too low globally; No direct comments on monetary policy

- BoJ Gov Kuroda: Want to coordinate with other overseas officials and closely monitor market moves related to Greece

- Japan Cabinet approves govt basic economic and fiscal policy

Currencies

- Risk aversion theme diminished but not abated at this time. Month end and quarter end liquidity conditions were described as 'horrid' by participants. Dealer chatter that one poll showing "No" vote significantly in the lead for Sunday's referendum in Greece

- The EUR/USD retraced some of Monday's unexplainable gains to test 1.1170. ECB so far merely refused to lift ELA assistance to Greece further, which already enforced capital controls and bank closures. Draghi promised to keep ELA running as long as there was a program in place and negotiations continued. Tomorrow (Wed, July 1st) that will not be the case. Euro was off session lows after reports circulated that Greece PM Tsipras was said to consider last minute initiative for an agreement

- The JPY currency end Q2 at 122.20 for its 4th straight quarterly loss. This is the longest yen losing streak since 2006.

Fixed Income:

- Bund futures: trade up 7 ticks at 151.84, down from the highs of the day at 152.41, as rumors circulating indicate that Greek PM Tsiparis is heading to Brussels for a last minute deal. A move back up to yesterdays highs at 152.96/99 would mark the 38.2% retracement of the April/June fall and above this 154.41/50 would mark the next resistance representing the 50% retracement. To the downside, a break below today's lows at 151.84 still targets 151.02 as support then 150.51.

- Tuesdays liquidity report: showed Monday's excess liquidity jumped to the highest level since March 2013.

- UK Gilt futures: trade near the lows at 115.65 up 28 ticks. In what has been a tight range today near term support stands at 115.19 with 114.52 the next target. To the upside near term resistance is just above the highs at 115.99 which is the 50% retracement of the May/June fall, with resistance above at 116.36.

Political/In the Papers:

- (GR) Greece could seek to take legal action to prevent exit from euro zone

-(GR) ECB's Coeure: Eurogroup has determined that creditors have reached limit of what is acceptable in latest Greek offer - French press; ECB's decision not to raise ELA was irreversible; ECB will maintain support to Greek banks until further notice; ECB remains prepared to utilize new extraordinary instruments, as long as they are within its mandate

- (GR) Greece PM Tsipras affirms that Greece will implement the decision made by the people at the referendum; Greece will survive even if it has no bailout program; indicates he will step down if the people vote 'yes' for austerity

Looking Ahead

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

- (GR) Greece bailout extension formally expires

- (IT) Italy Debt Agency (Tesoro) to sell combined €3.0-4.5B in 5-year and 10-year BTP Bonds

- (IT) Italy Debt Agency (Tesoro) to sell €2.0-2.5B in Jun 2022 CCTeu (Floarting rate Bond

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

- 05:30 (BE) Belgium Debt Agency to sell €1.5-1.9B in 3-month and 6-month Bills

- 05:30 (ZA) South Africa to sell 2030, 2032 and 2048 bonds

- 06:00 (PT) Portugal May Retail Sales M/M: No est v 0.8% prior; Y/Y: No est v 3.5% prior - 06:00 (PT) Portugal May Industrial Production M/M: No est v 1.1% prior; Y/Y: No est v 0.5% prior

- 06:00 (IT) Italy May PPI M/M: No est v -0.3% prior; Y/Y: No est v -3.1% prior

- 06:00 (IE) Ireland Jun Unemployment Rate: No est v 9.8% prior

- 06:00 (MY) Malaysia May M3 Money Supply Y/Y: No est v 6.5% prior

- 06:30 (IN) India May Fiscal Deficit (INR): No est v 12.8B prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia announces weekly OFZ bond auction

- 07:00 (UK) BOE's Haldane

- 07:45 (US) Chain Store Sales

- 08:00 (PL) Poland Central Bank (NBP) Jun Inflation Expectations Survey: 0.2%e v 0.2% prior

- 08:00 (ZA) South Africa May Trade Balance (ZAR): -3.2Be v -2.5B prior

- 08:00 (ZA) South Africa May Budget Balance (ZAR): -21.8Be v -41.4B prior

- 08:00 (PL) Poland Q1 Current Account Balance: €2.2Be v -€2.0B prior

- 08:00 (CL) Chile May Unemployment Rate: 6.3%e v 6.1% prior

- 08:00 (CL) Chile May Manufacturing Index Y/Y: -1.0%e v +0.8% prior

- 08:00 (CL) Chile May Retail Sales Y/Y: 2.0%e v 3.3% prior

- 08:00 (CL) Chile May Total Copper Production: No est v 471.4K prior

- 08:00 (BR) Brazil May PPI Manufacturing M/M: No est v 0.3% prior; Y/Y: No est v 5.6% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (CA) Canada Apr GDP M/M: +0.1%e v -0.2% prior; Y/Y: 1.5%e v 1.5% prior

- 08:55 (US) Weekly Redbook Sales

- 09:00 (US) Jun ISM Milwaukee: No est v 47.7 prior

- 09:00 (US) Apr S&P/ CaseShiller 20 City M/M: 0.80%e v 0.95% prior; Y/Y: 5.50%e v 5.04% prior; HPI NSA: No est v 175.2 prior

- 09:00 (US) Apr S&P/ CaseShiller M/M: 1.00% v 0.12% prior; Y/Y: No est v 4.14% prior; HPI NSA: No est v 168.03 prior

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:30 (BR) Brazil May Nominal Budget Balance (BRL): -55.3Be v 11.2B prior; Primary Budget Balance (BRL): -7.0Be v 13.4B prior; Net Debt to GDP Ratio: No est v 33.8% prior

- 09:45 (US) Jun Chicago Purchasing Manager: 50.0e v 46.2 prior

- 10:00 (US) Jun Consumer Confidence Index: 96.7e v 95.4 prior

- 10:00 (MX) Mexico May Net Outstanding Loans (MXN): No est v 2.795T prior

- 10:00 (MX) Mexico Weekly International Reserves

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

- 12:00 (CO) Colombia May Urban Unemployment Rate: No est v 10.5% prior; National Unemployment Rate: No est v 9.5% prior

- 12:00 (US) USDA Quarterly Report

- 12:00 (EU) EU's Juncker speaks at API-IPA conference in Brussels

- 13:00 (US) Fed's Bullard (Non voter)

- 15:00 (AR) Argentina May Construction Activity M/M: No est v 4.2% prior; Y/Y: No est v 10.6% prior

- 15:30 (MX) Mexico May YTD Budget Balance (MXN): No est v -121.6B prior

- 16:30 (US) Weekly API Oil Inventories

- 19:00 (KR) South Korea Jun CPI M/M: 0.1%e v 0.3% prior; Y/Y: 0.7%e v 0.5% prior; CPI Core Y/Y: No est v 2.1% prior

- 19:50 (JP) Japan BOJ Q2 Tankan Large Manufacturer Index: 12e v 12 prior; Outlook Survey: 14e v 10 prior

- 19:50 (JP) Japan BOJ Q2 Tankan Large Non-Manufacturer Index: 22e v 19 prior; Outlook Survey: 1e v 1 prior

- 20:00 (KR) South Korea Jun PMI Manufacturing: No est v 47.8 prior

- 20:00 (KR) South Korea Jun Trade Balance: $8.5Be v 6.3B prior; Exports Y/Y: -2.0%e v -10.9% prior; Imports Y/Y: -10.8%e v 15.4% prior (revised from 15.3%)

- 21:00 (CN) China Jun Manufacturing PMI (Official): 50.4e v 50.2 prior

- 21:00 (CN) China Jun Non-manufacturing PMI: No est v 53.2 prior

- 21:35 (JP) Japan Jun Final PMI Manufacturing: No est v 49.9 prelim

- 21:45 (CN) China Jun Final HSBC PMI Manufacturing: 49.6e v 49.6 prelim

- 22:00 (TW) Taiwan Jun Manufacturing PMI: No est v 49.3 prior

- 22:00 (VN) Vietnam Jun Manufacturing PMI: No est v 54.8 prior

- 23:00 (ID) Indonesia Jun PMI Manufacturing: No est v 47.1 prior

- (ES) Spain May YTD Budget Balance: No est v -€12.0B prior

- (CO) Colombia Q1 Current Account Balance: No est v -$6.4B prior

- (ZA) South Africa Q1 Non-Farm Payrolls Q/Q: No est v 0.5% prior; Y/Y: No est v -0.2% prior