Main catalyst from earnings as ECB decision set up to be a dud

EU Mid-Market Update: Main catalyst from earnings as ECB decision set up to be a dud; More significant events next week; Intel reports after close.

Notes/observations

- Bullish appetite continues surging, with US futures rising higher after the close as earnings supported confidence. Tailwinds from US-Japan trade deal. Notable exception for Tesla, down ~6% in premarket after Musk warns of potentially tough quarters ahead as EV incentives disappear (Elephant in Room: Investor caution about his return to politics with ‘American Party’).

- Earnings also dictating flows in Europe, after key names Deutsche Bank, Roche, BNP, Nestle, STMicroelectronics, Lloyds, Vodafone, BT and TotalEnergies reported.

- Flash PMI readings for Germany, France and Eurozone were mostly in line, with little impact on bond yields or EUR, but UK saw a weak services reading, weighing down GBP (sterling); Other economic data saw German GFK miss consensus.

- Focus ahead on ECB rate decision but most expect it to be uneventful, will be looking for color on tariff impact, or commentary on Fed independence.

- Upcoming US premarket earnings: BFH, BX, CX, CNP, CNX, DOV, FLEX, GPI, HON, LHX, NDAQ, R, TSCO, TXT, UNP, VC, VLO.

- Asia closed mixed with Nikkei225 outperforming +1.7%. EU indices +1.1% to -0.1%. US futures -0.3% to +0.3%. Gold -0.6%, DXY +0.2%; Commodity: Brent +0.9%, WTI +1.0%; Crypto: BTC +0.6%, ETH -0.6%.

Asia

- Australia July Preliminary PMI Manufacturing: 51.6 v 50.6 prior (7th month of expansion).

- Japan July Preliminary PMI Manufacturing: 48.8 v 50.1 prior (moved back into contraction).

- South Korea Q2 Advance GDP (1st of 3 readings) Q/Q: 0.6% v 0.5%e ; Y/Y: 0.5% v 0.4%e.

- South Korea July Manufacturing Business Survey: 91.9 v 94.4 prior; Non-Manufacturing Business Survey: 88.7 v 87.4 prior

- China Jun Swift Global Payments (CNY): 2.9% v 2.9% prior.

- RBNZ Chief Economist Conway reiterated tariffs would mean weaker global economy and global demand. Ready to adjust cash rate as needed. Reiterated stance of scope to lower rates further, if inflation continued to moderate.

- RBA Gov Bullock noted that a measured, gradual approach to monetary policy easing was appropriate.

Americas

- Trump visit to the Federal Reserve construction site.

Trade

- China President Xi meet with EU Commission chief Von der Leyen.

- EU and US are closing in on a trade deal that would impose 15 per cent tariffs on European imports.

- UK and India said ready to announce trade agreement next week, including EVs, textiles and whisky.

- US and South Korea have discussed creating a fund to invest in American projects as part of a trade deal.

- Trump suggested that he would not go below 15%. To have straight simple tariffs of between 15 and 50%; mostly will be charging straight tariffs to most of the rest of the world.

- Treasury Sec Bessent noted that the US would evaluate the implementation of the trade agreement every quarter.

- Brazil Pres Lula said to propose talks to 'expand and amplify' Brazil-Mexico trade deal.

Energy

- Iran said to host a delegation from the UN atomic agency (IAEA) in the next few weeks.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.66% at 553.84, FTSE +0.99% at 9,151.65, DAX +1.13% at 24,489.70, CAC-40 +0.35% at 7,878.25, IBEX-35 +1.65% at 14,288.77, FTSE MIB -0.10% at 40,655.00, SMI -0.14% at 12,057.14, S&P 500 Futures +0.08%]

Market Focal Points/Key Themes: European indices opened higher across the board and remained upbeat through the early part of the session; progress on trade deals seen supporting risk appetite; among sectors leading to the upside are telecom and financials; lagging sectors include materials and real estate; telecom sector supported following BT results, appointment of CFO; reportedly Sidara cuts bid for John Wood after FCA probe; reportedly Santander considering bid for Athlon unit of Mercedes Benz; earnings expected in the upcoming US session include Honeywell, Michelin, Carrefour and Intel.

Equities

- Consumer staples: Nestle [NESN.CH] -4.0% (earnings).

- Energy: TotalEnergies [TTE.FR] -1.5% (earnings).

- Financials: Deutsche Bank [DBK.DE] +5.5% (earnings), BNP Paribas [BNP.FR] +1.5% (earnings).

- Healthcare: Roche [ROG.CH] +1.0% (earnings).

- Industrials: Dassault Systemes [DSY.FR] -2% (earnings).

- Technology: STMicroelectronics [STM.FR] -9.5% (earnings; SK Hynix comments on the industry).

- Telecom: Nokia [NOKIA.FI] +0.5% (final results).

Speakers

- Japan Trade Negotiator Akazawa noted that govt always focused on investment in US trade talks; Trade deal in line with Japan's interests. Had no discussion with Pres Trump or US officials about how to implement this deal.

- China Foreign Ministry spokesperson noted that govt was willing to cooperate with others on rare earth exports.

Currencies/fixed income

- USD was consolidating some recent softness during the session. Unwinding of safe-haven flows due to optimism on various US trade agreements.

- EUR/USD at 1.1760 area as ECB was widely expected to hold policy rates at its meeting later today amid the US-EU trade deal uncertainty. Focus was on whether the ECB provided clues about future rate decisions and any comments on the euro's recent strength. PMI readings for July had little impact on price action.

- GBP/USD drifted lower after the July Services PMI reading missed consensus. GBP/USD at 1.3545 by mid-session.

- USD/JPY at 146.50 by mid-session with continued focus on the political landscape. Yen soft in session as more reports that PM Ishiba’s resignation was seen as inevitable, a decision could come in Aug.

- 10-year German Bund yield at 2.67% and 10-year Gilt yield at 4.64%. 10-year Treasury yield: 4.40%.

Economic data

- (EU) Euro Zone Jun EU27 New Car Registrations: -7.3% v +1.6% prior.

- (FI) Finland Jun PPI M/M: No est v -1.3% prior; Y/Y: No est v -2.0% prior.

- (DE) Germany Aug GfK Consumer Confidence: -21.5 v -19.3e.

- (NO) Norway Jun Trend Unemployment Rate: 4.8%t v 4.7% prior.

- (NO) Norway Q2 Industrial Confidence: 0.9 v 3.4 prior.

- (FR) France July Business Confidence: 96 v 96e; Manufacturing Confidence: 96 v 97e.

- (ES) Spain Q2 Unemployment Rate: 10.3% v 10.6%e.

- (ES) Spain Jun PPI M/M: +3.2% v -0.8% prior; Y/Y: +0.8% v -0.1% prior.

- (CZ) Czech July Consumer Confidence: 104.1 v 100.8e; Business Confidence: 98.8 v 99.9e.

- (FR) France July Preliminary Manufacturing PMI: 48.4 v 48.5e (30th month of contraction); Services PMI: 49.7 v 49.6e.

- (DE) Germany July Preliminary Manufacturing PMI: 49.2 v 49.5e (37th month of contraction); Services PMI: 50.1 v 50.0e.

- (EU) Euro Zone July Preliminary Manufacturing PMI: 49.8 v 49.8e (37th month of contraction); Services PMI: 51.2 v 50.6e.

- (UK) July Preliminary Manufacturing PMI: 48.2 v 48.0e (10th straight contraction); Services PMI: 51.2 v 52.9e.

- (IS) Iceland July CPI M/M: 0.3% v 0.8% prior; Y/Y: % v 4.2% prior.

Fixed income issuance

- (IT) Italy Debt Agency (Tesoro) sold €2.75B vs. €2.25-2.75B indicated range in 2.10% Aug 2027 BTP bonds; Avg Yield: 2.11% v 2.12% prior; Bid-to-cover: 1.67x v 1.49x prior.

- (IT) Italy Debt Agency (Tesoro) sold €1.5B vs. €1.25-1.5B indicated range in 1.10% Aug 2031 I/L Bonds (BTPei); Real Yield: 1.13% v 1.21% prior; bid-to-cover: 1.51x v 1.46x prior.

Looking ahead

- (AR) Argentina July Consumer Confidence: No est v 45.6 prior.

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell combined HUF55.0B in 3-year, 5-yerar and 10-year bonds.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

-06:00 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

- 06:00 (UK) July CBI Industrial Trends Total Orders: -28e v -33 prior; Selling Prices: 20e v 19 prior; Business Optimism: -25e v -33 prior.

- 06:00 (RO) Romania to sell combined RON600M in 2030 and 2038 bonds.

- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to cut One-Week Repo Rate by 250bps to 43.50%.

- 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to leave Key Rate unchanged at 15.50%.

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

- 08:15 (EU) ECB Interest Rate Decision: Expected to leave Key Rates unchanged. - Expected to leave Deposit Rate unchanged at 2.00%; Expected to leave Main 7-Day Refinancing Rate unchanged at 2.15%; Expected to leave Marginal Lending Facility unchanged at 2.40%.

- 08:30 (US) Initial Jobless Claims: 226Ke v 221K prior; Continuing Claims: 1.95Me v 1.956M prior.

- 08:30 (US) Jun Chicago Fed National Activity Index: -0.15e v -0.28 prior.

- 08:30 (CA) Canada May Retail Sales M/M: -1.0%e v +0.3% prior; Retail Sales (ex-auto) M/M: -0.3%e v -0.3% prior.

- 08:30 (CL) Chile Central Bank Traders Survey.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:45 (EU) ECB chief Lagarde post rate decision press conference.

- 09:00 (RU) Russia Gold and Forex Reserve w/e July 18th: No est v $685.3B prior.

- 09:00 (CL) Chile Jun PPI M/M: No est v 0.4% prior.

- 09:45 (US) July Preliminary S&P Manufacturing PMI: 52.7e v 52.9 prior; Services PMI: 53.0e v 52.9 prior; Composite PMI: 52.8e v 52.9 prior.

- 10:00 (US) Jun New Home Sales: 650Ke v 623K prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (US) July Kansas City Fed Manufacturing Activity: 0e v -2 prior.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 10-year Bonds.

- 13:00 (US) Treasury to sell 10-Year TIPS.

- 15:00 (AR) Argentina May Wages M/M: No est v 3.4% prior.

- 19:01 (UK) July GfK Consumer Confidence: -20e v -18 prior.

- 19:30 (JP) Japan July Tokyo CPI Y/Y: 3.0%e v 3.1% prior; CPI (ex-fresh food) Y/Y: 3.0%e v 3.1% prior; CPI (ex-fresh food/energy) Y/Y: 3.1%e v 3.1% prior.

- 19:50 (JP) Japan Jun PPI Services Y/Y: 3.2%e v 3.3% prior.

- 20:30 (SG) Singapore Q2 Final URA Private Home Prices Q/Q: No est v 0.5% prio.

- 23:30 (JP) Japan to sell 3-Month Bills.