Mixed EU service PMIs – US holiday to keep markets quiet

EU mid-market update: Mixed EU Service PMIs; US holiday to keep markets quiet; Putin's ratings keep dropping.

Notes/observations

- US cash markets are shut for Independence Day, so expect thinner liquidity and a higher risk of exaggerated or gappy moves into the weekend. S&P futures are firmer despite the closure, and European equities opened higher on firmer Asian trade and a mixed US close. Bonds are steady-to-firmer, the dollar is softer, oil firmer , with gold and bitcoin both higher.

- EU final June services PMIs confirmed a two-speed picture: Spain strong (54.2, highest since Dec-25) and Italy back to expansion (50.2), lifting the Eurozone composite to exactly 50.0, while France (services 46.8, 5th month of contraction) and Germany (48.6) stayed soft despite upward revisions; UK services 48.8 marked a second month of contraction, with ECB and BoE both expected on hold this month. French political and fiscal risk is worth watching - OAT spreads are leading a broader Eurozone widening, Lagarde signaled she could step down early to weigh into the French political +debate, and Fin Min Lescure is targeting a 2027 budget with a ~5% deficit.

- Meta CEO Zuckerberg said to have recently admitted that AI agent development over the last four months has not accelerated as expected, describing the reorganization as messier than ideal and noting that several bets have yet to fully pay off, though he expects meaningful returns from AI investments in the next 3-6 months. Chief AI Officer Wang struck a more bullish tone, stating Meta will deliver an Opus-level coding model “pretty soon” and teasing that people “will like what we have cooking,” while internally claiming the upcoming Watermelon model has already caught up to OpenAI’s GPT-5.5 on key benchmarks.

-Anthropic reportedly tightens China access: it is actively closing loopholes that enabled Chinese firms — including via cloud providers and overseas subsidiaries — to bypass its restrictions and use Claude models. Same time, Alibaba has reportedly banned internal use of Claude Code starting July 10, citing backdoor security risks, amid Anthropic’s recent accusations that Alibaba-linked operators created nearly 25,000 fraudulent accounts and generated 28.8 million Claude interactions (April–June) to extract model capabilities. This escalation comes shortly after Claude Code’s CLI source code was accidentally exposed and Anthropic’s renewed emphasis on Fable 5 cybersecurity safeguards, highlighting growing US-China AI tensions and efforts to prevent unauthorized technology transfer.

- June was the fifth-driest since 1901 for India’s monsoon season, finishing 40% below normal rainfall, but a sharp late-June pickup carried strong momentum into July, with the first two days already 25% above normal as the monsoon advanced into central and northwest India. July is now pivotal — it and August normally deliver 60-65% of the season’s total rain — making the current recovery critical for offsetting the early deficit. While a developing El Niño poses the primary risk of weaker overall rainfall and potential agricultural pressure (given that over half of India’s farmland is rain-fed), supportive factors like the Indian Ocean Dipole and recent gains leave room for a normal season (96-104% of long-term average) rather than a full-blown drought.

- JPY remains on intervention watch. Fin Min Katayama reiterated no change to FX stance and stressed close US–Japan communication and the FX accord - recall Japan has shifted away from pre-telegraphing intervention, aiming instead to catch speculators offside. Chief Cabinet Sec Kihara kept policy squarely with the BOJ. Hawkish undertones persist: Rengo's final survey showed firms offered average wage hikes of 5.01% (v 5.25% y/y).

- Iran situation is improving at the margin but unresolved. Iran reportedly cleared issues for Chinese vessels transiting the Strait of Hormuz but lead negotiator/Parliamentary Speaker Qalibaf warned Iran will resume "appropriate measures" if the US and Israel fail to meet commitments - a reminder that the 60-day final-deal clock runs to Aug 17 (unless extended; Trump signed the "peace deal" Jun 17).

- Ukrainian drone strikes during last week have damaged Russia's refining capacity more severely, including the recent hit on Lukoil-NORSI in Kstovo that targeted the primary AVT-6 unit, disrupting supplies to Moscow from the remaining key plants in Ryazan, Yaroslavl, and the halted Kapotnya refinery. This ongoing campaign is directly affecting export hubs such as Novorossiysk, Russia's largest oil port, where gasoline is now unavailable except for fuel card holders and diesel is strictly limited (like in Crimea). The crisis reveals systemic weaknesses in Russian energy logistics, as repeated attacks on infrastructure turn a major oil exporter into a country grappling with domestic fuel scarcity and mounting economic pressure. State-run VCIOM data indicates Putin's trust rating fell 3.4 points to 73.3% and approval rating dropped 3.5 points to 66.9% in a single week.

- The fastest declines since the Ukraine war began for trust and since 2024 for approval.

- Asia closed higher with KOSPI outperforming +5.8%. EU indices -0.4% to +0.3%. US futures -0.1% to +1.0%. Gold +1.3%, DXY -0.1%; Commodity: Brent +0.2%, WTI -0.1%; Crypto: BTC +0.7%, ETH +5.1%.

Asia

- New Zealand Jun ANZ Consumer Confidence: 91.3 v 86.5 prior.

- Australia Jun Final PMI Services: 50.5 v 49.9 prelim (confirmed a move back into expansion.

- Japan Jun Final PMI Services: 52.2 v 52.5 prelim (confirmed 20th month of expansion).

- China Jun RatingDog PMI Services: 54.1 v 53.0e (40th month of expansion).

- Japan Fin Min Katayama stressed that its FX policy had not changed, that it stood ready to respond appropriately at any time (**Reminder: reports circulated that MOF was shifting its intervention doctrine and it would no longer telegraph intervention first by jawboning.

- South Korea authorities reiterated stance of watching the won currency closely. (**Note: officials have stressed that won weakness was excessive versus fundamentals but saw no dollar liquidity issue, unlike in 1997.

Europe

- UK PM Candidate Burnham (Labour Party) stated that yet to have make any decision on who would be the finance minister. To stick to Labour Manifesto on tax and saw room for tax changes under Labour Manifesto.

Trade

- Canada and the Philippines aimed to finalize a free trade agreement this year while expanding cooperation in energy, defense, labor and migration.

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 +0.01% at 648.34, FTSE -0.29% at 10,622.38, DAX +0.32% at 25,627.88, CAC-40 -0.19% at 8,459.01, IBEX-35 +0.34% at 19,739.65, FTSE MIB +0.22% at 52,541.50, SMI -0.16% at 14,329.80, S&P 500 Futures +0.25%].

Market focal points/key themes: European indices open higher across the board, but moderated gains through the early part of the session; monetary policy outlook seen supporting risk appetite; among sectors leading the way higher are utilities and materials; lagging sectors include consumer discretionary and health care; Renk confirmed offer to acquire David Brown Defense; US closed for holiday; Galp to publish Q2 production figures in the European afternoon.

Equities

- Consumer discretionary: MIPS [MIPS.SE] +15.5% (settles patent infringement).

- Financials: Craneware [CRW.UK] -21.5% (trading update).

- Healthcare: Genfit [GNFT.FR] +12.5% (secures Medicare coverage for NASHnext).

- Industrials: Rheinmetall [RHM.DE] -1.5% (notes impact of F126 frigate program cancellation), Stellantis [STLA.NL] -0.5% (analyst downgrade).

Speakers

- ECB chief Lagarde said not to rule out stepping down before her term ended to weigh in on the French political debate (**Note her term runs until October 2027; French Presidential election in Apr 2027)).

- France Fin Min Lescure stated that was likely to have a budget for 2027; would do everything to make sure budget deficit to GDP was around 5%.

- Bank of England (BoE) Jun Decision Maker Panel (DMP) Survey cut the 1-year ahead CPI from 3.7% to 3.3% (v 3.6%e) while raising the 3-year ahead CPI outlook from 2.8% to 2.9%.

- EU Council Pres Costa stated that EU to approve savings and investment Union this year; Needed to approve EU budget by end of this year.

- Japan Chief Cab Sec Kihara reiterated stance that monetary policy fell under jurisdiction of BOJ. Govt to continue to work closely with BOJ. Closely watching market movements with high sense of urgency and to take appropriate action on FX at all times as needed.

Iranian Parliamentary Speaker Qalibaf (lead negotiator): If US and Israel do not fulfill their commitments, Iran will resume its appropriate measures.

Currencies/fixed income

- USD was softer following a lower threat of Fed tightening in the wake of the soft US June employment report.

- EUR/USD at 1.1450 as better EU PMI Services data provided some additional tailwinds to the USD’s soft tone.

- USD/JPY continues to hit multi-week lows as markets speculated on Japan FX intervention threat. Pair tested 160.50 area before retracing.

- 10-year German Bund yield last at 2.92%, France 10-year Oat at 3.71% and 10-year Gilt yield at 4.78% 10-year Treasury yield: 4.49%; 10-year JGB: 2.76%.

Economic data

- (RU) Russia Jun Services PMI: 48.2 v 48.7 prior; Composite PMI: 48.9 v 49.2 prior.

- (NO) Norway Jun Unemployment Rate: 1.9% v 1.9% prior; Unemployment Rate (seasonally adj): 2.0% v 2.1%e.

- (SE) Sweden Jun PMI Services: 56.6 v 54.2 prior (4th month of expansion); PMI Composite: 57.1 v 55.1 prior.

- (FR) France May Industrial Production M/M: -0.1% v -0.4%e; Y/Y: 3.2% v 2.9%e.

- (FR) France May Manufacturing Production M/M: -1.0% v -0.3%e; Y/Y: 2.5% v 2.6% prior.

- (ES) Spain May Industrial Production M/M: 1.2% v 0.4%e; Y/Y: 3.4% v 1.6%e; Industrial Output NSA (unadj) Y/Y: 0.8% v 4.4% prior.

- (TR) Turkey Jun CPI M/M: 1.0% v 1.0%e; Y/Y: 32.1% v 32.1%e; CPI Core Index Y/Y: 29.8% v 30.1%e.

- (TR) Turkey Jun PPI M/M: 1.8% v 2.8% prior; Y/Y: 28.1% v 28.9% prior.

- (ES) Spain Jun Services PMI: 54.2 v 50.9e (2nd month of expansion ; Composite PMI: 53.3 v 50.9e.

- (ZA) South Africa Jun PMI (whole economy): 50.5 v 49.6 prior (moves back into expansion).

- (CN) Weekly Shanghai Deliverable Copper Inventories (SHFE): 122.7K v 135.7K tons prior.

- (TH) Thailand May Foreign Reserves w/e Jun 26th: $279.3B v $282.6B prior.

- (IT) Italy Jun Services PMI: 50.2 v 50.2e (1st expansion in 4 months); Composite PMI: 50.8 v 50.9e.

- (FR) France Jun Final Services PMI: 46.8 v 47.4 prelim (confirmed 5th month of contraction); Composite PMI: 42.6 v 47.6 prelim.

- (DE) Germany Jun Final Services PMI: 48.6 v 46.8 prelim (confirmed 3rd month of contraction); Composite PMI: 49.5 v 48.0 prelim.

- (EU) Euro Zone Jun Final Services PMI: 49.4 v 48.9 prelim (confirmed 3rd month of contraction); Composite PMI: 50.0v 49.5 prelim.

- (IT) Italy May Retail Sales M/M: 0.2% v 0.2%e; Y/Y: 2.2% v 1.7%e.

- (RU) Russia Narrow Money Supply w/e Jun 26th (RUB): 21.37T v 21.36T prior.

- (UK) Jun Final Services PMI: 48.8 v 48.7 prelim (confirmed 2nd month of contraction); Composite PMI: 49.3 v 49.4 prelim.

- (UK) Jun Official Reserves Changes: -$6.0B v -$0.5B prior.

Fixed income issuance

- (IN) India sold INR340B vs. INR340B indicated in 6.94% May 2036 bonds; Avg Yield: 6.7275%.

Looking ahead

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2033, 2038 and 2046 Bonds.

- 06:00 (IE) Ireland Jun Live Register Monthly Change: No est v +0.6K prior; Live Register Level: No est v 171.8K prior.

- 06:00 (UK) DMO to sell £6.0B in 1-month, 3-month and 6-month bills (£1.0B, £2.0B and £3.0B respectively).

- 06:00 (BE) Belgium Debt Agency (BDA) to sell OLO Bonds through Ori Auction.

- 07:30 (IN) India Forex Reserve w/e Jun 30th: No est v $672.6B prior.

- 08:00 (BR) Brazil May Industrial Production M/M: 0.3%e v 0.7% prior; Y/Y: 1.2%e v 2.7% prior.

- 08:00 (MX) Mexico May Leading Indicators M/M: No est v 0.04 prior.

- 08:00 (MX) Mexico Jun Consumer Confidence: 44.3e v 43.5 prior.

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

- 09:00 (BR) Brazil Jun Services PMI: No est v 50.4 prior; Composite PMI: No est v 49.5 prior.

- 09:00 (IN) India announces upcoming bill issuance (held on Wed).

- 11:00 (EU) ECB's Nagel (Germany), Makhlouf (Ireland), BOE's Bailey in Aix, France.

- 14:00 (BR) Brazil Jun Monthly Trade Balance: $11.0Be v $7.8B prior; Exports $36.4Be v $31.9B prior; Imports: $25.7Be v $24.1B prior.

- 18:00 (CO) Colombia Central Bank Jun Minutes.