More EU confidence data stoked worries about an economic slowdown

Notes/Observations

- Markets for the most part are risk off, as price action whipsaws between conflicting CPI readings from Germany and Spain. As sentiment looks to find an agreeable theme, traders are following bearish momentum from yesterdays US and Asia closes combined with very hot Spanish CPI at over 10% y/y.

- German regions all read below estimates with majority component Westphalia showing its first decline in CPI M/M since Nov 21. Positive outlook was outweighed however, by high Spain CPI and misses in Spain retail sales, Sweden household lending and consumer confidence, Turkey consumer confidence, Swiss expectations survey and South Africa consumer confidence.

- ECB Simkus, Holzmann and FED Mester provided color to future rate decisions. Simkus and Holzmann reiterated 50bps hike in Sept is highly likely. Mester now vouches for 75bps per meeting and to end year at 4%.

- Underlying stress in sovereign energy supplies continues to show. Japan issues power shortage measures for 4th straight day due to unseasonably hot weather. UK warns it will cut energy exports to Netherlands and Belgium if domestic requirement dictates.

- In general, Asia closed 0.2-2.1% lower. EU starts 0.4-1.1% lower with bond yields lower. US futures are flat. Elsewhere Gold -0.2%, BTC -5.4%, ETH -8.3%, DXY +0.1%, Brent -0.3%, WTI -0.2%.

Asia

- Japan May Retail Sales M/M: 0.6% v 1.0%e; Y/Y: 3.6% v 4.0%e.

- Australia May Retail Sales M/M: 0.9% v 0.4%e.

- China Q4 Beige Book: Weak domestic orders and expanding inventories indicate the presumed second-half improvement will be unpleasantly modest.

- BOJ Gov Kuroda stated that the domestic economy had not been much affected by the global inflationary trend so monetary policy would continue to be accommodative.

Ukraine conflict

- Finland President Niinisto stated that Turkey had agreed to support Finland and Sweden membership of NATO.

- Turkish President's office stated that it had secured a pledge for concrete steps over the extradition of those charged with terrorism in NATO deal with Sweden and Finland; An intelligence sharing mechanism to be established to fight terrorism.

Europe

- UK Jun BRC Shop Price Index Y/Y: 3.1% v 2.8% prior.

- Scotland First Min Sturgeon formally announced plans for a new referendum on Scotland independence for October 19, 2023.; Called on UK PM Johnson to allow an independence vote and was ready to negotiate terms.

- UK PM's office stated that PM Johnson continued to think it was not the time for a referendum; Decision had been taken by the Scottish First Minister and its now for the Supreme Court to consider.

- France Finance Ministry cut its 2022 GDP growth forecast from 4.0% to 2.5%; Saw avg annual inflation rate at 5.0% in 2022.

- ECB said to consider whether to announce the size and duration of their upcoming bond-buying scheme. ECB staff preparing different options including how many of its details, such as firepower and duration, should be made public.

Energy

- Weekly API Crude Oil Inventories: -3.8M v +5.6M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.84% at 412.70, FTSE -0.51% at 7,285.87, DAX -1.31% at 13,057.85, CAC-40 -0.70% at 6,043.69, IBEX-35 -1.24% at 8,214.74, FTSE MIB -1.07% at 21,865.00, SMI -0.49% at 10,756.40, S&P 500 Futures +0.05%].

Market Focal Points/Key Themes: European indices open lower across the board but recovered a bit as the session progressed; better performing sectors include energy and financials; sectors leading to the downside include industrials and real estate; oil & gas subsector supported after crude reached two-week high; TGS makes offer for Magseis; Eurazeo to sell remaining state in Trader Interactive; focus on NATO and OPEC meetings later in the day; earnings expected during the upcoming US session include Bed Bath & Beyond; General Mills and Schnitzer.

Equities

- Consumer discretionary: H&M [HMB.SE] +6% (earnings; cuts store opening outlook), Lookers [LOOK.UK] +4% (trading update).

- Financials: Eurazeo [RF.FR] -1.5% (divestment).

- Healthcare: Grifols [GRF.ES] -8.5% (potential placement).

- Industrials: Maersk [MAERSKB.DK] +0.5% (CEO interview).

Speakers

- ECB's Simkus (Lithuania) stated that 50bps rate hike in Sept was very likely but also sought 50bps as an option in July.

- ECB's Holzmann (Austria, hawk): ECB could move in 25-50bps steps after Sept's meeting.

- Germany Finance Ministry on budget planning saw a return of debt brake in 2023; net new borrowing envisioned at €17.2B.

- NATO Sec Gen Stoltenberg: Alliance to respond in a unified way to all threats and challenges; to have 300K troops ready by 2023.

- South Africa Central Bank (SARB) Gov Kganyago stated that a 50bps rate hike in July was not off the table as it could not wait for second-round CPI effects to occur.

- Russia Central Bank (CBR) Gov Nabiullina reiterated stance that would cut rates as inflation slowed. Did not see risks of deflation spiral, prices were just correcting.

- Russia Fin Min Siluanov stated that was open to further easing of capital controls; FX currency was toxic, but looking at possibility of buying FX of friendly countries.

- Russia Econ Min Reshetnikov stated that the country had deflation in June; Domestic demand remained low.

- China President Xi stated that the domestic development to be more self-reliant and wanted it to be sound in 2022.

- China said to offer subsidies to refiners if oil price hit ceiling. Would not raise fuel prices when crude exceeds cap.

- China PBOC Q2 survey: 57.9% of bankers believe monetary policy is appropriate (prior was 70.5%).

- US President Biden confirmed was enhancing force posture in Europe; To enhance rotational Baltics deployments.

- Fed's Mester (FOMC voter, hawk) stated that wanted to see US rates above 4% in 2023; currently advocating 75bps hike. Rate rises were very necessary to get inflation down. Domestic labor market is incredibly tight, but we are not in a wage-price spiral.

Currencies/Fixed income

- FX market saw some choppiness as EU inflation data painted cloudy picture. next policy moves offered no fresh insight on the path for European interest rates at the ECB's annual forum.

- EUR/USD probed blow 1.05 after German State of North Rhine Westphalia came in below the consensus expectations for the national reading and clouded the aggressiveness of the planned Sept ECB rate hike. A hotter Spanish readings tilted the pendulum in the other direction. Focus turned to the French inflation reading due out on Thursday and the ECB advance CPI estimate on Friday. Various EU confidence data stoked worries about an economic slowdown.

Economic data

- (DE) Germany Jun CPI North Rhine Westphalia M/M: -0.1% v +0.9% prior; Y/Y: 7.5% v 8.1% prior.

- (NL) Netherlands Jun Producer Confidence: 8.1 v 9.9 prior.

- (SE) Sweden May Household Lending Y/Y: 6.5% v 6.8% prior.

- (ES) Spain Jun Preliminary CPI M/M: 1.8% v 0.5%e; Y/Y: 10.2% v 8.8%e (highest annual pace since 1985); CPI Core Y/Y: 5.5% v 4.9% prior.

- (ES) Spain Jun Preliminary CPI EU Harmonized M/M: 1.8% v 0.8%e; Y/Y: 10.0% v 8.7%e.

- (ES) Spain May Adjusted Retail Sales Y/Y: 1.4% v 2.0%e; Retail Sales (unadj) Y/Y: 2.8% v 3.3% prior.

- (SE) Sweden Jun Consumer Confidence: 65.5 v 71.3 prior; Manufacturing Confidence: 120.6 v 125.0 prior; Economic Tendency Survey: 105.9 v 108.0e.

- (TR) Turkey Jun Economic Confidence: 93.6 v 96.7 prior.

- (EU) Euro Zone May M3 Money Supply Y/Y: 5.6% v 5.8%e.

- (DE) Germany Jun CPI Hesse M/M: 0.0% v 1.0% prior; Y/Y: 8.1% v 8.4% prior.

- (DE) Germany Jun CPI Bavaria M/M: 0.2% v 1.0% prior; Y/Y: 7.9% v 8.1% prior.

- (DE) Germany Jun CPI Brandenburg M/M: 0.0% v 1.5% prior; Y/Y: 8.0% v 8.5% prior.

- (DE) Germany Jun CPI Baden Wuerttemberg M/M: 0.1% v 0.9% prior; Y/Y: 7.1% v 7.4% prior.

- (CH) Swiss Jun Expectations Survey: -72.7 v -52.6 prior.

- (ZA) South Africa Q2 BER Consumer Confidence: -25 v -13 prior.

- (PT) Portugal Jun Consumer Confidence: -31.8 v -32.4 prior; Economic Climate Indicator: 1.9 v 2.0 prior.

- (DE) Germany Jun CPI Saxony M/M: 0.0% v 1.1% prior; Y/Y: 7.7% v 8.0% prior.

- (EU) Euro Zone Jun Economic Confidence: 104.0 v 103.0e; Industrial Confidence: 7.4 v 4.7e; Services Confidence: 14.8 v 12.5e; Consumer Confidence (final): -23.6 v -23.6 advance.

- (IS) Iceland Jun CPI M/M: 1.4% v 0.8% prior; Y/Y: 8.8% v 7.6% prior.

Fixed income issuance

- (DK) Denmark sold total DKK4.28B in 3-month and 6-month bills.

- (IN) India sold total INR330B vs. INR330B indicated in 3-month, 6-month and 12-month bills.

Looking ahead

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

- 05:30 (EU) ECB allotment in 3-month LTRO (prior €43.5M with 5 bids recd).

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

- 06:15 (DE) ECB’s Schnabel (Germany).

- 06:15 (US) Fed’s Mester.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (US) MBA Mortgage Applications w/e Jun 24th: No est v 4.2% prior.

- 07:00 (BR) Brazil Jun FGV Inflation IGPM M/M: 0.7%e v 0.5% prior; Y/Y: 10.8%e v 10.7% prior.

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

- 08:00 (DE) Germany Jun Preliminary CPI M/M: 0.4%e v 0.9% prior; Y/Y: 7.9%e v 7.9% prior.

- 08:00 (DE) Germany Jun Preliminary CPI EU Harmonized M/M: 0.4%e v 1.1% prior; Y/Y: 8.8%e v 8.7% prior.

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

- 08:30 (US) Q1 Final GDP Annualized (3rd reading) Q/Q: -1.5%e v -1.5% prelim; Personal Consumption: 3.1%e v 3.1% prelim.

- 08:30 (US) Q1 Final GDP Price Index: 8.1%e v 8.1% prelim; Core PCE Q/Q: 5.1%e v 5.1% prelim.

- 08:30 (UK) BOE Gov Bailey.

- 09:00 (CL) Chile May Unemployment Rate: 8.1%e v 7.7% prior.

- 09:00 (EU) ECB chief Lagarde.

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

- 11:00 (EU) ECB chief Lagarde (closing remarks at Sintra).

- 12:00 (RU) Russia May Real Retail Sales Y/Y: -10.0%e v -9.7% prior.

- 12:00 (RU) Russia May Unemployment Rate: 4.2%e v 4.0 % prior.

- 12:00 (RU) Russia Apr Real Wages Y/Y: 0.5%e v 3.6% prior.

- 12:00 (RU) Russia Q2 Consumer Confidence Index: No est v -21 prior.

- 12:00 (RU) Russia May Industrial Production Y/Y: -3.0%e v -1.6% prior.

- 12:00 (CA) Canada to sell 30 Year Bonds.

- 13:05 (US) Fed’s Bullard.

- 17:00 (KR) South Korea July Business Manufacturing Survey: No est v 87 prior; Non-Manufacturing Survey: No est v 86 prior.

- 19:00 (KR) South Korea May Industrial Production M/M: +0.5%e v -3.3% prior; Y/Y: 4.0%e v 3.3% prior.

-19:01 (UK) Jun Lloyds Business Barometer: No est v 38 prior.

- 19:50 (JP) Japan May Preliminary Industrial Production M/M: -0.3%e v -1.5% prior; Y/Y: +4.2%e v -4.9% prior.

- 21:00 (NZ) New Zealand Jun ANZ Business Confidence: No est v -55.6 prior; Activity Outlook: No est v -4.7 prior.

- 21:30 (CN) China Jun Manufacturing PMI (Govt Official): 50.5e v 49.6 prior; Non-manufacturing PMI: 50.5et v 47.8 prior; Composite PMI: No est v 48.4 prior.

- 21:30 (AU) Australia May Private Sector Credit M/M: 0.6%e v 0.8% prior; Y/Y: 8.6%e v 8.6% prior.

- 22:00 (SG) Singapore May M2 Money Supply Y/Y: No est v 3.9% prior; M1 Money Supply Y/Y: No est v 7.3% prior.