Major European PMI data disappoints ahead of key ECB rate decision

EU Mid-Market Update: Major European PMI data disappoints ahead of key ECB rate decision; EU yields near record low levels

 

Notes/Observations

- Major European PMI data disappoints:

- Markets awaiting the latest round of global monetary stimulus led by the ECB (minimum to see a dovish forward guidance)

Asia:

- Japan PM Abe Adviser Hamada: If Fed acts BOJ may need to do something about the JPY currency (yen); concerned about yen nearing 100 level

- Japan July Preliminary PMI Manufacturing: 49.6 v 49.3 prior (3rd straight contraction)

- China released white paper accusing US of undermining global strategic stability by adjusting its national security and defense strategy; Govt would not renounce use of force to reunify Taiwan; vowed to take all military measures to defeat separatists; to accelerate building cyber capacity. Hong Kong had option of asking for Chinese military's help in maintaining public order

Europe/Mideast:

- incoming UK PM Johnson has said that everyone in his Cabinet must sign up to the possibility of a no deal Brexit, and wanted more than half of his ministers to be Brexiteers.

- France Budget Min Darmanin: Government plans to cut 15,000 civil service jobs

Americas:

- US Trade negotiators to head to China on Monday, July 29th for three days of face to face talks (1st since G20)

- DOJ opens broad new antitrust review of big tech into whether dominant firms are unlawfully preventing competition

Energy:

- Weekly API Oil Inventories: Crude: -11.0M v -1.4M prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.21% at 390.70, FTSE -0.97% at 7,483.35, DAX +0.11% at 12,504.19, CAC-40 -0.46% at 5,592.16, IBEX-35 -0.04% at 9,278.00, FTSE MIB +0.06% at 21,966.50, SMI -0.40% at 9,925.50, S&P 500 Futures -0.33%]

Market Focal Points/Key Themes:

European Indices trade mostly lower this morning following a mixed session in Asia and lower US Equity futures. On the macro front German, French and European prelim manufacturing PMI missed expectations weighing on markets.
On a busy morning for corporate earnings, shares of Deutsche Bank fall over 4% following Q4 results and a wider loss than expected as well as a sharp fall in trading revenue. Aston Martin Lagonda declines over 22% following a profit warnings, with Valmet, Caverion, Sipheon and SEB among other names declining on earnings.
Shares of Daimler trades higher after a rise in Revenue and affirmed outlook; PSA Group also gains on a a Revenue and profit beat, with Covestro, Akzo Nobel, Dassault System, ASM International, Ingenico and Repsol among other names gaining on earnings.
In other news Hugo Boss declines on a secondary offering by holder, while Metro in Germany also declines as the board advises against accepting a €5.8B bid from EP capital.
Looking ahead notable earners include Anthem, Boeing, UPS, AT&T, Catepillar and Boston Scientific among others.

 

Equities

- Consumer discretionary: ITV [ITV.UK] +3% (earnings), Hugo Boss [BOSS.DE] -4% (book offering), Ingenico [ING.FR] +7% (earnings), Kesko [KESKOB.FI] +2% (earnings), Just Group [JUST.UK] -10% (trading update), Clariant [CLN.CH] -4% (CEO resigns)

- Financials: Deutsche Bank [DBK.DE] -5% (earnings)

- Industrials: Daimler [DAI.DE] +1% (earnings; outlook cut), PSA [UG.FR] +1.5% (earnings; outlook cut), Metro [B4B.DE] -3% (Board against offer), Covestro [1COV.DE] +2.5% (earnings), Dassault Systems [DSY.FR] +2% (earnings), Aston Martin [AML.UK] -23% (profit warning), Skanska [SKAB.SE] +2% (earnings)

- Technology: Sopheon [SPE.UK] -22% (trading update)

- Materials: Akzo Nobel [AKZA.NL] +4.5% (earnings)

 

Speakers

- UK Health Min Hancock said to rule out Tory electoral agreement with Brexit party

- South Africa Central Bank (SARB) Gov Kganyago: Country's growth problems fell outside the SARB's reach; Reiterated stance that rate cut had limited impact on GDP

- China Foreign Ministry spokesperson Geng Shuang reiterated opposition to external interference in Hong Kong. Deflected question on why upcoming trade talks with US to resume in Shanghai (not Beijing)

- Iran President Rouhani: Seizure of UK tanker by revolutionary guards was powerful and professional; ready to negotiate but not if negotiations meant surrender. Would not allow chaos in the Persian Gulf and Strait of Hormuz

 

Currencies/ Fixed Income

- EUR: The EUR/USD pair tested 2-month lows around 1.1130 after numerous Preliminary PMI data disappointed for the region. The region had seen some stabilization in PMI data the past few months but was not the case today. The lower level is seen in the 1.111 region which represents the 2 year low, where as if we see strengthening the level to the uppser side is in the region of 1.1280. German Bund yield continues to hover only slightly above all-time lows, a signal that expectations of more stimulus by the ECB.

- GBP: Yesterday the UK Parliament voted as Boris Johnson to become the Head of the Tory leadership Party and the new Prime Minister. The Cable initially sold off making a new weekly low before reversing and trading higher on the day. Before there is any true reversal of this sell off of recent months it will have to break the 1.258 region. Incoming UK PM Johnson said to have mandated that everyone in his Cabinet must sign up to the possibility of a no deal Brexit, and wanted more than half of his ministers to be Brexiteers.

- AUD was softer during the Asian session after Westpac analysts forecasted two more RBA rate cuts by February. Levels to the downside are the 1 month low at 0.6910

 

Economic Data

- (FI) Finland Jun PPI M/M: -1.1% v +0.1% prior; Y/Y: -0.9% v +0.9% prior

- (FR) France July Business Confidence: 105 v 106e; Manufacturing Confidence: 101 v 102e; Production Outlook Indicator: 0 v 3e; Own-Company Production Outlook: 6 v 8e

- (FR) France July Overall Demand Survey: -3 v +3 prior

- (CZ) Czech July Consumer Confidence Index: 4.0 v 2.8 prior; Business Confidence: 11.5 v 11.9 prior; Composite (Consumer & Business Confidence ): 10.0 v 10.1 prior

- (FR) France July Preliminary PMI Manufacturing: 50.0 v 51.7e (4th month without a contraction); PMI Services: 52.2 v 52.8e; PMI Composite: 51.7 v 52.7e

- (DE) Germany July Preliminary PMI Manufacturing: 43.1 v 45.2e (7th month of contraction and lowest since July 2012); PMI Services: 55.4 v 55.3e; PMI Composite: 51.4 v 52.4e

- (EU) Euro Zone July Preliminary PMI Manufacturing: 46.4 v 47.7e (6th month of contraction and lowest since Dec 2012); PMI Services: 53.3 v 53.3e; PMI Composite: 51.5 v 52.2e

- (EU) Euro Zone Jun M3 Money Supply Y/Y: 4.5% v 4.6%e

- (ZA) South Africa Jun CPI M/M: 0.4% v 0.3%e; Y/Y: 4.5% v 4.4%e

- (ZA) South Africa Jun CPI Core M/M: 0.4% v 0.3%e; Y/Y: 4.3% v 4.2%e

- (TW) Taiwan Jun M2 Money Supply Y/Y: 3.1% v 3.4% prior; M1 Money Supply Y/Y: 7.4% v 7.2% prior

- (UK) Jun BBA Loans for Housing: 42.7K v 42.7Ke

 

Fixed Income Issuance

- (IN) India sold total INR170B vs. INR170B indicated in 3-month, 6-month and 12-month bills

 

Looking Ahead

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

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia OFZ bonds auction

- 07:00 (US) MBA Mortgage Applications w/e July 19th: No est v -1.1% prior

- 07:00 (BR) Brazil July FGV Consumer Confidence: No est v 88.5 prior

- 07:00 (UK) Weekly PM Question time in House

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

- 09:00 (BE) Belgium July Business Confidence: -4.9e v -4.9 prior

- 09:00 (CL) Chile Jun PPI M/M: No est v 0.0% prior

- 09:45 (US) July Preliminary Markit Manufacturing PMI: 51.0e v 50.6 prior; Services PMI: 51.8e v 51.5 prior; PMI Composite: No est v 51.5 prior

- 10:00 (US) Jun New Home Sales: 659Ke v 626K prior

- 10:30 (US) Weekly DOE Oil Inventories

- (CO) Colombia Jun Industrial Confidence: No est v 7.1 prior; Retail Confidence: No est v 26.3 prior

- 11:30 (US) Treasury to sell 2-Year Floating Rate Notes

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

- 13:00 (US) Treasury to sell 5-Year Notes