Fed's Barkin and Waller may give more clues on rate cuts timing

EU mid-market update: UK Services CPI remains sticky; Fed's Barkin and Waller may give more clues on rate cuts timing; US futures down after press reports about stricter restrictions on chip exports to China amid Trump's comments on Taiwan and ASML earnings.

Notes/observations

- UK CPI remained within BOE’s 2% target for second straight month, but above expectations at annual pace as Core and Services CPI also remained sticky; BOE futures now see less than 30% chance for a rate cut next month versus around 50% pre-CPI, while British pound tests 1.30 against US dollar for the first time in a year; UK markets will also focus on King’s Speech today.

- US Biden administration reportedly warned US allies about potential stricter trade rules related to chip exports to China; White House said to be considering using the most severe trade restrictions available, known as the foreign direct product rule, if Western chip firms continue to service advanced equipment in China; Former Pres Trump’s comments on Taiwan also weigh on global chip names.

- Pres Biden gave interview on Tuesday (to air in full tonight) where he elaborated on conditions which would make him drop out of 2024 race by saying: "If I had some medical condition that emerged, if somebody, the doctors came and said you've got this problem, that problem; There is more to do, and I am reluctant to walk away"; During Biden's another speech yesterday at N.A.A.C.P. conference, he said "Kamala Harris is not only a great vice president; She could be president of the US.”; Former Pres Trump also gave interview ahead of his keynote address at RNC tomorrow, noting the Fed should abstain from cutting rates before Nov; Trump also mentioned he would consider CEO of JPMorgan, Jamie Dimon, to serve as Secretary of the Department of Treasury.

- ASML becomes the first major global chip name to report final Q2 results with strong bookings, but weaker-than-expected Q3 guidance; Shares of ASML are likely trading down on earlier reports of potential US restrictions on China exports and Trump's comments on Taiwan, as ASML has relative high exposure to those regions.

- Roche presented positive early data on oral obesity drug candidate noting its once-daily GLP-1 could potentially be dosed once-daily without regard to meal timing, thereby affording greater dosing flexibility for patients, and also could potentially be used for oral weight maintenance therapy following weight loss induced by injectables.

- JB Hunt during its earnings call noted during June, it did see “a nice seasonal lift” in volume, particularly toward the end of the month; Elsewhere, shipping giant Maersk provided Market Update saying Asian exports are more impacted than Asian imports by the ongoing situation in the Red Sea, however, the disruptions have extended beyond Far East-Europe routes to the entire ocean network.

- Boeing's International Association of Machinists & Aerospace Workers (IAM) District 751 (represents ~31K Boeing workers) to hold "Strike Sanction Vote" today on Wed, July 17th.

- Google-backed Gitlab said to be exploring a sale after attracting acquisition interest, including from Datadog.

-Traders speculate if today’s big drop in USD/JPY is related to another intervention by Japan govt and BOJ.

- Following New Zealand Q2 CPI data, some analysts see RBNZ to cut rates in Nov 2024 v Feb 2025 prior.

- Asia closed mixed with ASX-200 outperforming at +0.7%. EU indices are -1.1-0.0%. US futures are -1.3% to -0.7%. Gold +0.5%, DXY -0.5%; Commodity: Brent -0.1%, WTI +0.1%; Crypto: BTC -0.2%, ETH +0.8%.

Asia

- (ID) Indonesia central bank (BI) leaves BI rate unchanged at 6.25%; as expected.

- (NZ) NEW ZEALAND Q2 CPI Q/Q: 0.4% V 0.5%E; Y/Y: 3.3% V 3.4%E.

- (JP) Japan Outgoing Top FX Diplomat Kanda: If speculators cause excessive moves in FX market we have no choice but to respond appropriately - Japanese press.

- (JP) Japan LDP's Kono: Central Bank (BOJ) needs to raise interest rates to lift Yen - US financial press.

- (CN) US Pres Biden Admin said to issue rule on Chinese connected vehicles in about one month - US press.

-Maersk Market Update: Asian exports are more impacted than Asian imports by the ongoing situation in the Red Sea. However, the disruptions have extended beyond Far East-Europe routes to the entire ocean network.

Taiwan

(US) Former Pres Trump: Taiwan should pay for U.S. protection; Questions whether US has duty to defend Taiwan.

(TW) Taiwan Premier Cho: To hold economic development meeting on Thurs.; The relationship between Taiwan and the US is 'very firm', Taiwan is steadily strengthening its defense spending [responds to comments made by Trump].

Mid-East

(IL) Israeli Military: Half the leadership of the Hamas military wing have been eliminated, approximately 14K fighters killed or captured since the start of the Gaza campaign.

Ukraine conflict

-(UR) EU Council President Michel: Rejects Hungary PM Orban's assertion that EU has pursued pro-war policy, says it's 'quite the opposite' - letter.

-(JP) Japan to contribute $3.3B to Ukraine aid using frozen Russian assets, approx 6% of total G7 package - Japanese press.

Europe

- (UK) Jun CPI M/M: 0.1% V 0.1%E; Y/Y: 2.0% V 1.9%E; Services CPI remains sticky.

- (UK) Jun PPI Iinput M/M: -0.8% V +0.1%E; Y/Y: -0.4% V +1.1%E.

- (UK) BoE futures now price ~30% chance a rate cut in Aug v 50% before UK CPI as Services and Core CPI remain sticky.

- (EU) Eurozone Jun final CPI Y/Y: 2.5% V 2.5%E; core CPI Y/Y: 2.9% V 2.9%E.

(UK) King's Speech today, Wed July 17th to unlock growth and "take the brakes off Britain"; The King’s Speech is expected to unveil over 35 bills and draft bills which will support delivery of the government’s first steps and missions to rebuild Britain.

Americas

- (US) US warns allies of stricter trade rules in China chip crackdown; Biden administration reportedly considering using the most severe trade restrictions available, known as the foreign direct product rule, if Western chip firms continue to service advanced equipment in China - US press, citing sources.

- (US) US Pres Biden on conditions which would make him drop out of 2024 race: If I had some medical condition that emerged, if somebody, the doctors came and said you've got this problem, that problem; There is more to do, and I am reluctant to walk away - preview of interview to be aired on Wed, 22:00ET.

- (US) Former Pres Trump: Fed should abstain from cutting rates before Nov; Would Not seek to remove Fed Chair Powell before his term ends; Would consider CEO of JPMorgan, Jamie Dimon, to serve as Secretary of the Department of Treasury; New tariffs for China between 60-100%, would impose a 10% tariff on imports from other countries.

- (US) TTN Note: During Tue, July 16th speech at N.A.A.C.P. conference, US Pres Biden said "Kamala Harris is not only a great vice president; She could be president of the US.”.

- Fed futures now price 7% (v 15% d/d) chance of 50bps in cuts by Sept's meeting; Now price 98% chance (v 100% d/d) for 25bps rate cut by Sept 18th's meeting ahead of this morning's first Fed's Waller speech since May.

Energy

- (US) Weekly API Crude Oil Inventories: -4.4M v -1.9M prior.

- (RU) Reportedly Russia to extend gasoline exports ban through to Sept/Oct - press.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.54% at 514.50, FTSE -0.21% at 8,147.84, DAX -0.27% at 18,475.45, CAC-40 -0.36% at 7,553.07, IBEX-35 -0.24% at 11,063.74, FTSE MIB -0.04% at 34,355.00, SMI -0.02% at 12,265.46, S&P 500 Futures -0.73%].

Market focal points/key themes: European indices open broadly lower and remained under pressure through the early part of the session; sectors holding on to the green include consumer discretionary and telecom; among sector leading the way lower are technology and health care; tech sector dragged following reports of further restrictions oon chip sales to China; reportedly Gitlab exploring sale; VF to sell Supreme brand to EssilorLuxottica; Allianz confirms offer for majority stake in Income Insurance of Singapore; earnings expected in the upcoming US session include Johnson & Johnson, US Bancorp, Alcoa and United Airlines.

Equities

- Consumer discretionary: Adidas [ADS.DE] +3.5% (raises outlook), EssilorLuxottica [EL.FR] -4.0% (acquires Supreme brand from VFC).

- Financials: HSBC [HSBA.UK] -0.5% (names current CFO as CEO).

- Healthcare: Roche [ROG.CH] +5.0%, Novo Nordisk [NOVOB.DK] -4.0% (Roche positive data on GLP-1 candidate), Bayer [BAYN.DE] -0.5% (trial data), Orexo [ORX.SE] -15.0% (FDA response letter; earnings).

- Industrials: Maersk [MAERSKB.DK] -2.0% (market update).

- Technology: ASML [ASML.NL] -6.5% (earnings; Biden administration mulls more restrictions on chip exports to China; Trump comments on Taiwan).

- Materials: Antofagasta [ANTO.UK] -4.0% (copper production).

Speakers

-(US) US Pres Biden on conditions which would make him drop out of 2024 race: If I had some medical condition that emerged, if somebody, the doctors came and said you've got this problem, that problem; There is more to do, and I am reluctant to walk away.

-(US) Former Pres Trump: Fed should abstain from cutting rates before Nov; Would Not seek to remove Fed Chair Powell before his term ends; Would consider CEO of JPMorgan, Jamie Dimon, to serve as Secretary of the Department of Treasury; New tariffs for China between 60-100%, would impose a 10% tariff on imports from other countries.

-(US) Former Pres Trump: Taiwan should pay for U.S. protection; Questions whether US has duty to defend Taiwan.

- (JP) Japan Outgoing Top FX Diplomat Kanda: If speculators cause excessive moves in FX market we have no choice but to respond appropriately - Japanese press.

-(UK) King's Speech today, Wed July 17th to unlock growth and "take the brakes off Britain"; The King’s Speech is expected to unveil over 35 bills and draft bills which will support delivery of the government’s first steps and missions to rebuild Britain.

- (CN) China Natural Resources Ministry official: To actively promote increased supplies of lithium ores.

- (ID) Indonesia Central Bank (BI) Gov Warjiyo: Uncertainty in global markets remains high - pre-rate decision press conference.

Currencies/fixed income

Economic data

- (UK) Jun CPI M/M: 0.1% V 0.1%e; Y/Y: 2.0% V 1.9%e; Services CPI remains sticky; CPI Services Y/Y: 5.7% v 5.6%e.

- (UK) Jun PPI Input M/M: -0.8% V +0.1%e; Y/Y: -0.4% V +1.1%e.

- (EU) Eurozone Jun final CPI Y/Y: 2.5% V 2.5%E; CORE CPI Y/Y: 2.9% V 2.9%E.

- (NZ) New Zealand Q2 CPI Q/Q: 0.4% V 0.5%E; Y/Y: 3.3% V 3.4%E.

- (CZ) Czech Jun PPI Industrial M/M: -0.3% v -0.2%e; Y/Y: +1.0% v +1.1%e.

- (AT) Austria Jun Final CPI M/M: 0.2% v 0.2% prelim; Y/Y: 3.0% v 3.0% prelim.

-(UK) May ONS House Price Index Y/Y: 2.2% v 1.1% prior.

-(CY) Cyprus Jun CPI Harmonized M/M: 0.4% v 1.2% prior; Y/Y: 3.0% v 3.0% prior.

-(EU) ECB allots $155.4M in weekly 7-day USD Liquidity Tender at 5.58% vs $156.7M prior.

-(PL) Poland July Consumer Confidence: -14.0 v -11.5e.

-(AT) Austria Jun Final CPI M/M: 0.2% v 0.2% prelim; Y/Y: 3.0% v 3.0% prelim.

Fixed income issuance

- (UK) DMO sells £4.0B in 4.125% July 2029 Gilts; AVG yield: 4.023% V 4.083% prior; bid-to-cover: 3.10X V 3.59X prior; tail: 0.9BPS V 0.3BPS prior.

- (TW) Taiwan sells 2-year Certificates of Deposit (NCD): Avg Yield: 1.487%; bid-to-cover: 2.61x.

Looking ahead

- 05:30 (DE) Germany to sell €1.0B in 30-year Bunds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (IE) Ireland May Property Prices M/M: No est v % prior; Y/Y: No est v % prior.

- 06:00 (PT) Portugal Jun PPI M/M: No est v % prior; Y/Y: No est v % prior.

- 07:00 (ZA) South Africa May Retail Sales M/M: No est v % prior; Y/Y: No est v % prior.

- 07:00 (US) MBA Mortgage Applications w/e July 12th: No est v % prior.

- 07:00 (BR) Brazil July FGV Inflation IGP-10 M/M: No est v % prior.

- 07:00 (RU) Russia to sell OFZ Bonds.

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

- 08:30 (CA) Canada May Int’l Securities Transactions (CAD): No est v B prior.

- 08:30 (US) Jun Housing Starts: No est v M prior; Building Permits: No est v M prior; Housing Starts M/M: No est v % prior; Building Permits M/M: No est v % prior.

- 09:15 (US) Jun Industrial Production M/M: No est v % prior; Capacity Utilization: No est v % prior; Manufacturing Production: No est v % prior.

- 09:00 (US) Fed's Barkin (voter).

- 09:35 (US) Fed's Waller (voter).

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:30 (UK) King’s Speech.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (RU) Russia Jun PPI M/M: No est v % prior; Y/Y: No est v % prior.

- 13:00 (US) Treasury to sell 20-Year Bond Reopening.

- 14:00 (US) Federal Reserve Releases Beige Book.

- 19:50 (JP) Japan Jun Trade Balance: No est v ¥B prior; Adjusted Trade Balance: No est v ¥B prior; Exports Y/Y: No est v % prior; Imports Y/Y: No est v % prior.

- 21:00 (CN) China Jun Swift Global Payments (CNY): No est v % prior.

- 21:30 (AU) Australia Jun Employment Change: No est v +39.7K prior; Unemployment Rate: No est v 4.0% prior; Full Time Employment Change: No est v +41.7K prior; Part Time Employment Change: No est v -2.1K prior; Participation Rate: No est v 66.8% prior.

- 23:30 (JP) Japan to sell 12-month Bills.

- 23:35 (JP) Japan to sell 5-year JGB Bonds.