Eurozone Core CPI refuses to decline due to German base effects as headline collapses

Notes/observations

- Euro Zone Jun Core CPI Estimate rises for 1st time in 3 months to 5.4% YoY as headline CPI continues to fall.

- Cooler France prelim Jun CPI reading (following Italy and Spain) and stronger Italy unemployment bolstered case for those who see Central Banks hitting a soft landing, despite increased expectations for further hikes following hawkish speak this week from Sintra conf.

- Further JPY weakening caused USD/JPY to test 145.0 handle overnight, as Japanese officials attempts at verbal intervention fail so far.

- UK Q1 final GDP avoids contraction as Nationwide’s house price index beats estimates but notches decline YoY. In UK domestic news, govt to announce a comprehensive plan, including funding, to tackle NHS crisis amid plethora of doctor strikes.

- Apple on track in pre-market to hit $3.0T market cap at US open.

- Focus turns to upcoming US PPI data in the session.

- Asia closed higher with NZX50 out-performing at +0.9%. EU indices are +0.5-1.0%. US futures are +0.1-0.5%. Gold -0.3%, DXY +0.1%; Commodity: Brent +1.0%, WTI +0.9%, TTF -1.3%; Crypto: BTC +1.3%, ETH +1.5%.

Asia

- China Jun Manufacturing PMI (Govt Official): 49.0 v 49.0e (3rd straight contraction); calls grow for stimulus.

- South Korea May Industrial Production M/M: - +3.2% v -0.9%e; Y/Y: -7.3% v -8.6%e.

- Japan May Jobless Rate: 2.6% v 2.6% prior.

- Japan Jun Tokyo CPI Y/Y: 3.1% v 3.4%e v 3.2% prior; CPI (ex-fresh food) Y/Y: 3.2% v 3.5%e.

- Japan May Preliminary Industrial Production M/M: -1.0%e v +0.7% prior; Y/Y: +4.3%e v -0.7% prior.

- Japan Fin Min Suzuki stated that he saw sudden and one-sided FX moves [**Note: comments after USD/JPY rose above ¥145].

- US and Netherlands to further restrict exports of some Dutch chip equipment to specific facilities in China.

Europe

- BOE’s Tenreyro (dove; dissenter) stated that her vote would be to leave rate unchanged at her final policy meeting.

- UK Jun Lloyds Business Barometer: 37 v 28 prior (13-month high).

Americas

- Fed's Bostic (non-voter) reiterated view that monetary policy has only recently moved into restrictive territory. Did not see cuts in either 2023 or 2024 period. Median FOMC view was for more hikes, but did not fully share that view.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.73% at 459.96, FTSE +0.51% at 7,509.86, DAX +0.80% at 16,074.95, CAC-40 +0.73% at 7,366.37, IBEX-35 +0.72% at 9,578.78, FTSE MIB +0.89% at 28,177.00, SMI +0.77% at 11,256.80, S&P 500 Futures +0.27%].

Market focal points/Key themes: European indices opened generally higher and rose through the early hours of the session; sectors leading the way into the green include real estate and energy; lagging sectors include technology and consumer discretionary; chipmakers under pressure after US and The Netherlands to implment more curbs on exports to China; MJ Gleeson confirms to sell its home portfolio to Carlyle; Air Liquide sells its remaining stake in Hydrogenics to Cummins; earnings expected in the upcoming US session include Constellation Brands.

Equities

- Consumer discretionary: Puma [PUM.DE] +1.5%, Adidas [ADS.DE] +0.5% (sector reaction from Nike earnings/outlook), Sodexo [SW.FR] -1.5% (reports Q3 results), Aperam [APAM.NL] -6.5% (analyst action - cut to underperform at Oddo Securities), Accor [AC.FR] +1.5% (analyst action - raised to Neutral at Goldman Sachs).

- Financials: Grenke [GLJ.DE] +5.5% (analyst action - raised to Buy at Pareto Securities), Bawag [BG.AT] -12.0% (activist investor report).

- Healthcare: Ipsen [IPN.FR] +1.5% (positive results from Phase III ELATIVE trial of elafibranor in patients with primary biliary cholangitis, a rare cholestatic liver disease; Trial met primary endpoint), Ipsen [IPN.FR] +1.5% (positive results from Phase III ELATIVE trial of elafibranor in patients with primary biliary cholangitis, a rare cholestatic liver disease; Trial met primary endpoint).

- Real Estate: Leg Immobilien [LEG.DE] +4.5% (raises outlook).

- Technology: ASML [ASML.NL] -2.5% (weakness from US chip curb speculation; statement on outlook), Fastned [FAST.NL] +6.5% (analyst action - raised to Buy at Jefferies).

- Utilities: Engie [ENGI.FR] +1.5% (raises FY23 guidance).

Speakers

- France said to be pushing back on new EU power reform proposal.

- Czech Central Bank (CNB) Jun Minutes noted that the majority agreed that rates would remain at current or higher levels for longer; Vote to keep policy steady was not unanimous (5-2) with dissenters seeking a 25bps hike.

- Sweden Central Bank (Riksbank) Gov Thedeen stated that inflation risk had risen since April.

- Finland Finance Ministry noted that 2023 Gross borrowings seen at €38.5B and had completed approx 70% of 2023 Long-Term Funding by end 2Q.

- Russia Central Bank said to see CPI above 4.0% in Q3.

- Japan Chief Cabinet Sec Matsuno reiterated to take appropriate steps on excessive FX moves.

Currencies/fixed income

- USD ended the quarter on a steady note. A recent spat of firm US data has increased speculation that the Fed would hike by 25bps at its next meeting in July.

- EUR/USD softer in the session after failing to muster any upside momentum from the recent higher-than-expected German inflation data and recent hawkish ECB commentary.

- USD/JPY moved off its session highs above the 145 level after another round of verbal intervention by Japanese officials.

Economic data

- (NL) Netherlands Jun Preliminary CPI Y/Y: 5.7 % v 6.1% prior.

- (NL) Netherlands Jun Preliminary CPI EU Harmonized M/M: -0.5% v 0.0%e; Y/Y: 6.4% v 6.9%e.

- (NL) Netherlands May Retail Sales Y/Y: 6.3% v 2.9% prior.

- (FI) Finland May Preliminary Retail Sales Volume Y/Y:-2.4 % v -2.5% prior.

- (UK) Q1 Final GDP Q/Q: 0.1% v 0.1% prelim; Y/Y: 0.2% v 0.2% prelim.

- (UK) Q1 Final; Private Consumption Q/Q: 0.0% v 0.0% prelim; Government Spending Q/Q: -1.8% v -2.5% prelim; Gross Fixed Capital Formation Q/Q: 2.4 v 1.3% prelim; Exports Q/Q: -6.9% v -8.1% prelim; Imports Q/Q: -3.8% v -7.2% prelim.

- (UK) Q1 Final Total Business Investment Q/Q: 03.3% v 0.7% prelim; Y/Y: 5.8% v 3.2% prelim.

- (UK) Q1 Current Account Balance: -£10.8B v -£8.5Be.

- (UK) Jun Nationwide House Price Index M/M: +0.1% v -0.2%e; Y/Y: % v -4.0%e.

- (DE) Germany May Retail Sales M/M: +0.4% v-0.0%e; Y/Y: -5.1% v -4.9%e.

- (DE) Germany May Import Price Index M/M: -1.4% v -1.7% prior; Y/Y: -9.1% v -7.0% prior.

- (DK) Denmark May Unemployment Rate: 2.4% v 2.4% prior; Gross Unemployment Rate: 2.8% v 2.8% prior.

- (DK) Denmark Q1 Final GDP Q/Q: 0.6% v 0.2% prelim; Y/Y: 1.7% v 2.4% prelim.

- (ZA) South Africa May M3 Money Supply Y/Y: 10.3% v 10.1%e; Private Sector Credit Y/Y:6.9 % v 6.9%e.

- (SE) Sweden Apr Non-Manual Workers Wages Y/Y: 5.5% v 3.1% prior.

- (CH) Swiss May Real Retail Sales Y/Y: -1.1% v -4.0% prior.

- (HU) Hungary May PPI M/M: -1.6% v -2.0% prior; Y/Y: 11.2% v 15.9% prior.

- (FR) France Jun Preliminary CPI M/M: 0.2% v 0.2%e; Y/Y: 4.5% v 4.6%e.

- (FR) France Jun Preliminary CPI EU-Harmonized M/M: 0.2% v 0.2%e; Y/Y: 5.3% v 5.4%e.

- (FR) France May PPI M/M: -1.4% v -5.2% prior; Y/Y: 5.8% v 7.0% prior.

- (FR) France May Consumer Spending M/M: 0.5% v 0.7%e; Y/Y: -3.6% v -3.6%e.

- (CH) Swiss Q1 Foreign Exchange Transactions (CHF): 32.3B v -27.3B prior.

- (CH) Swiss Jun KOF Leading Indicator: 90.8 v 89.0e.

- (AT) Austria June Preliminary CPI M/M: 0.5% v 0.3% prior; Y/Y: 8.0% v 9.0% prior.

- (AT) Austria May PPI M/M: -1.1% v -1.7% prior; Y/Y: 2.9% v 4.4% prior.

- (CZ) Czech Q1 Final GDP Q/Q: 0.0% v 0.0% prelim; Y/Y: -0.5% v -0.4% prelim.

- (TH) Thailand May Current Account Balance: -$2.8B v -$1.1Be; Overall Balance of Payments (BoP): +$1.0B v -$1.7B prior; Trade Account Balance: $0.1B v $0.1B prior; Exports Y/Y: -5.9% v -4.9% prior; Imports Y/Y: -2.3% v -3.7% prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 68.3K v 60.4K tons prior.

- (DE) Germany June Net Unemployment Change: +28K v +14.0Ke; Unemployment Claims Rate: 5.7% v 5.6%e.

- (ES) Spain Apr Current Account Balance: €1.8B v €5.7B prior.

- (IT) Italy May Unemployment Rate: 7.6% v 7.9%e.

- (NO) Norway Central Bank (Norges) July Daily FX Purchases (NOK): 1.0B v 1.3B prior.

- (NO) Norway June Unemployment Rate: 1.7% v 1.8%e.

- (RU) Russia Narrow Money Supply w/e Jun 23rd (RUB): 17.89T v 17.90T prior.

- (PL) Poland June Preliminary CPI M/M: 0.0% v 0.2%e; Y/Y: 11.5% v 11.8%e.

- (CZ) Czech May M2 Money Supply Y/Y: 7.3% v 7.5% prior.

- (PT) Portugal Jun Preliminary CPI M/M: +0.2% v -0.7% prior; Y/Y: 3.4% v 4.0% prior.

- (PT) Portugal Jun CPI EU Harmonized M/M: +0.4% v -0.4% prior; Y/Y: 4.7% v 5.4% prior.

- (EU) Euro Zone June CPI Estimate Y/Y: 5.5% v 5.6%e; CPI Core Y/Y: 5.4% v 5.5%e; CPI M/M: 0.3% v 0.3%e.

- (EU) Euro Zone May Unemployment Rate: 6.5% v 6.5e.

- (BE) Belgium May Unemployment Rate: 5.7% v 5.6% prior.

- (GR) Greece May Unemployment Rate: 10.8% v 11.3% prior.

- (GR) Greece Apr Retail Sales Value Y/Y: % v -8.7% prior; Retail Sales Volume Y/Y: % v -9.8% prior.

- (IS) Iceland May Final Trade Balance (ISK): -34.1B v -33.9B prelim.

Fixed income issuance

- (IN) India sold total INR330B vs. INR330B indicated in 2028, 2033 and 2053 bonds.

- (IT) Italy Debt Agency (Tesoro) sold total €7.5B vs. €6.25-7.5B in 5-year, 10-year BTP Bonds.

- Sold €3.00B vs. €2.5-3.0B indicated range in 3.80% Aug 2028 BTP bonds; Avg Yield: 3.81% v 3.79% prior; Bid-to-cover: 1.45x v 1.39x prior.

- Sold €3.25B vs. €2.75-3.25B indicated range in 4.35% Nov 2033 BTP; Avg Yield: 4.13% v 4.32% prior, bid-to-cover: 1.37x v 1.43x prior (May 30th 2023).

- Sold €1.25B vs. €1.0-1.25B indicated in 5.0% Aug 2034 BTP bond; Avg Yield: 4.18% v 3.75% prior; Bid-to-cover: 1.68x v 2.73x prior.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2033, 2046 and 2050 Bonds.

- 06:00 (UK) DMO to sell £5.5B in 1-month, 3-month and 6-month bills (£1.0B, £2.0B and £2.5B respectively).

- 06:45 (US) Daily Libor Fixing.

- 07:30 (BR) Brazil May Nominal Budget Balance (BRL): -115.8Be v -25.4B prior; Primary Budget Balance: -46.5Be v 20.3B prior; Net Debt to GDP Ratio: 57.3%e v 57.2% prior.

- 07:30 (IN) India Weekly Forex Reserve w/e Jun 23rd: No est v $596.1B prior.

- 07:30 (IN) India May Eight Infrastructure (Key) Industries: No est v 3.5% prior.

- 08:00 (ZA) South Africa May Trade Balance (ZAR): 6.0Be v 3.5B prior.

- 08:00 (ZA) South Africa May Monthly Budget Balance (ZAR): -18.7Be v -67.5B prior.

- 08:00 (MX) Mexico May Unemployment Rate (unadj): 2.8%e v 2.8% prior.

- 08:00 (BR) Brazil May National Unemployment Rate: 8.3%e v 8.5% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (IN) India announces upcoming bill issuance (held on Wed).

- 08:00 (ES) Spain Debt Agency (Tesoro) announcement on upcoming bond issuance.

- 08:30 (US) May Personal Income: 0.3%e v 0.4% prior; Personal Spending: 0.2%e v 0.8% prior; Personal Spending (PCE): 0.1%e v 0.5% prior.

- 08:30 (US) May PCE Deflator M/M: 0.1%e v 0.4% prior; Y/Y: 3.8%e v 4.4% prior.

- 08:30 (US) May PCE Core M/M: 0.3%e v 0.4% prior; Y/Y: 4.7%e v 4.7% prior.

- 08:30 (CA) Canada Apr GDP M/M: 0.2%e v 0.0% prior; Y/Y: 1.9%e v 1.7% prior.

- 09:00 (RU) Russia Q1 Final Current Account: No est v $18.6B prelim.

- 09:00 (CL) Chile May Retail Sales Y/Y: -11.0%e v -10.7% prior; Commercial Activity Y/Y: No est v -6.3% prior.

- 09:00 (CL) Chile May Manufacturing Production Y/Y: No est v -6.4% prior; Industrial Production Y/Y: No est v -2.0% prior; Total Copper Production: No est v 417.3K prior.

- 09:45 (US) Jun Chicago Purchase Manager’s Index (PMI): 44.4e v 40.4 prior.

- 10:00 (US) Jun Final University of Michigan Confidence: 63.9e v 63.9 prelim.

- 10:30 (CA) Bank of Canada (BoC) Q2 Overall Business Outlook Survey: No est v -1.1 prior; Future Sales Outlook: No est v -18 prior.

- 11:00 (MX) Mexico May Net Outstanding Loans (MXN): No est v 5.62T prior.

- 11:00 (CO) Colombia May National Unemployment Rate: No est v 10.7% prior; Urban Unemployment Rate 10.9%e v 11.1% prior.

- 12:00 (US) USDA Quarterly Grain Stocks Report.

- 13:00 (US) Weekly Baker Hughes Rig Count.

- 14:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 13.25%.

- 15:00 (AR) Argentina Apr Economic Activity Index (Monthly GDP) M/M: No est v 0.1% prior; Y/Y: No est v 1.3% prior.

- 15:00 (AR) Argentina Apr Wages M/M: No est v 10.1% prior.

- 20:00 (KR) South Korea June Trade Balance: -$2.1Be v -$2.1B prior; Exports Y/Y: No est v -15.2% prior; Imports Y/Y: No est v -14.0% prior.