Risk appetite regains some composure; focus on numerous meetings this week

Notes/Observations

-Risk on momentum carries over from last weeks close while rate hikes appear to be priced in as investors now balance the prospect of recession against a pausing or reversing in Central Bank direction.

-Nordic economic data continues to show bearish trends as Finland consumer and business confidence misses and Norway retail sales decline.

-In macro, Japan wrestles with a record heatwave as power shortage measures are issued for the 2nd straight day. Energy globally continues to show distress as EU energy commissioner warned of global shortages if nations don't work collectively and save gas.

-UK Parliament to vote on overriding aspects of the Northern Ireland protocol at 09:30 ET while questions will be asked on the 'leveling up' investment plan.

-Geo-political tensions have escalated as North Korea condemned 'aggressive' moves by the US and South Korea and vows for revenge. Separately, the US announced further support of mid-long range missiles for Ukraine.

- The main focus is on the G7 Summit later today, as talk on banning gold imports and Russian price caps on crude have been circulating.

-In general, Asia closed 0.9-2.3% higher. EU starts 0.4-1.1% higher with bond yields notably higher. US futures point to the upside. Elsewhere Gold 0.5%, BTC -0.1%, ETH -1.2%, DXY -0.3%, Brent -0.4%, WTI -0.6%.

-Looking ahead, NATO summit later on in the week, with US Pres Biden attending and topics to include Sweden and Finland NATO bids.

- FYI: ECB rate decision time has changed from 07:45 to 08:15 ET and will be effective from July decision onwards.

- Focus on various meetings this week (Reminder: G7 Leader Summit 26-28th, NATO 29-30th, OPEC 30th, ECB annual conference 27-29th).

Asia

- BOJ June Summary of Opinions noted that CPI YoY change had been ~2.0% due to food and energy changes; Upward pressure on yields likely to stay.

- China PBOC Adviser noted that difficulties remained for 5.5% GDP growth target.

- Australia Treasurer Chalmers noted that inflation problem would get more difficult before it started to ease. RBA forecast of 7% CPI did not seem to be off the mark.

Ukraine conflict

- US expected to announce purchase advanced medium to long range surface to air defense systems NASAMS for Ukraine during the week.

Europe

- G7 leaders' summit, were expected to ban gold imports from Russia, pledge indefinite support to Ukraine, talk about a price cap on crude from Russia; to also discuss forced labor in China and intellectual property theft, and funding alternative to Belt & Road.

- German Chancellor Scholz stated that all leaders of the G7 were concerned about a looming economic crisis as growth slowed and inflation soared.

- Russia defaults on foreign debt for the first time since the 1917 Bolshevik Revolution (grace period ended Jun 26th on $100M in in interest on two bonds (one denominated in USD and another in EURs that were due May 27, Russia says it has funds to pay, sanction were to blame.

- Turkey banking regulator BDDK announced that banks would be banned from extending new local-currency loans to groups with significant dollar and euro holdings.

Americas

- IMF annual assessment of US. Economic policies cut the 2022 GDP growth forecast from 3.7% to 2.9% and also cut the 2023 GDP growth forecast from 2.3% to 1.7%. Believed that Chairman Powell and Sec Yellen had left no doubt as to their commitment to bring inflation back down.

- Fed's Daly (non-voter, dove): Policy was on an expeditious path to neutral by year end; Additional Fed tightening beyond neutral is likely the next step. Saw 75bps in July is where I’m starting because I think that right now.

- Canada Fin Min Freeland noted that it had a path to a soft landing. Believed the measures already in place will help reduce the impact on Canadians.

Energy

- EU Council President Michel confirmed G7 to discuss a mechanism to have cap on services related to Russian oil. To review more details on Russian gold ban and oil price cap.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.77% at 416.12, FTSE +0.74% at 7,261.90, DAX +1.19% at 13,273.83, CAC-40 +0.56% at 6,107.29, IBEX-35 +0.18% at 8,259.00, FTSE MIB -0.18% at 22,084.00, SMI +0.51% at 10,878.80, S&P 500 Futures +0.52%].

Market Focal Points/Key Themes: European indices open higher across the board and rose as the session progressed; all sectors start the day in the green; sectors among those leading to the upside are materials and industrials; slower to rise sectors include consumer discretionary and health care; travel and leisure subsector under pressure after Lufthansa says doesn’t expect flights to return to normal until next year; Ipsen to acquire Epizyme; Centrica withdraws from Bulb acquisition; focus on start of G-7 meeting today; earnings expected during the upcoming US session include Nike.

Equities

- Consumer staples: Hyve Group [HYVE.UK] +5% (trading update).

- Energy: Nordex [NDX1.DE] +10% (placement).

- Healthcare: Ipsen [IPN.FR] -5% (acquires Epizyme).

- Industrials: Kongsberg [KOG.NO] +2.5% (US assistance to Ukraine).

- Technology: Prosus [PRX.NL] +13% (earnings; buyback; sells JD stake), Wise [WISE.UK] +1% (CEO probe).

Speakers

- ECB announced time changes for rate decisions to 8.15 ET (12:15 GMT) beginning from July 21st's meeting (push back by 30 minutes) with the press conference at 08:45 ET (12:45 GMT).

- France Fin Min Le Maire: To cap rise in rent prices at 3.5% for a year. Inflation to continue to rise in coming weeks and seen at 5.0% in 2022. - Inflation to ease in 2023.

- EU Energy Commissioner Simson noted that Russian gas supply to EU was half the level it was last year, could decrease further.

- Germany Econ Min Habeck stated that if Germany tried to fill as gas reserves, it won't just be for domestic use.

- UK Parliament to vote on Govt's bill to override aspects of the Northern Ireland Protocol at 09:30 ET (13:30 GMT).

- South Africa Central Bank (SARB) Gov Kganyago stated that its monetary policy supported economic recovery.

- China market regulator said to examine coal prices between Jun-Sept for price violations.

- BOJ holdings of JGB bonds said to exceed 50% of the total outstanding (record level).

- Iran Foreign Ministry: New round of nuclear talks said to be held during week of Jun 27th. Next round of talks to focus on sanctions and not nuclear issues.

- US G7 statement: noted that it was finalizing plans for a price cap on Russian oil; US to impose blocking sanctions on major Russian state-owned defense enterprises. To commit on a new package of coordinated actions aimed at increasing pressure on Russia over its war in Ukraine.

Currencies/Fixed income

- USD retraced as risk appetite regained some composure as markets reassessed the prospects of aggressive rate hikes. Dealers noted that a sharp rise in inflation expectations had resulted in consumer confidence falling to a record low which would reinforce fears over a sharper slowdown in the US economy.

- EUR/USD probing towards the 1.06 neighborhood.

- GBP/USD moving above the 1.23 area.

- USD/JPY hovering around the 135 handle.

- TRY currency (Lira) firmer for 2nd straight session in aftermath that Turkey banking regulator BDDK announced that banks would be banned from extending new local-currency loans to groups with significant dollar and euro holdings.

Economic data

- (FI) Finland May PPI M/M: 4.4% v 2.4% prior; Y/Y: 31.7% v 29.2% prior.

- (FI) Finland Jun Consumer Confidence: -14.3 v -11.6 prior; Business Confidence: 10.0 v 14.0 prior.

- (NO) Norway May Retail Sales M/M: -0.9% v -1.3% prior.

- (ES) Spain May PPI M/M: 0.9%e v 1.3% prior; Y/Y: 43.6% v 44.5% prior.

- (TW) Taiwan May Monitoring Indicator: 28 v 28 prior.

- (CH) Swiss weekly Total Sight Deposits (CHF): 748.5B v 751.8B prior; Domestic Sight Deposits: 653.5B v 661.7B prior.

- (HK) Hong Kong May Trade Balance (HKD): -36.7B v -31.5Be; Exports Y/Y: -1.4% v +4.3%e; Imports Y/Y: 1.3% v 4.8%e.

Fixed income issuance

- (NO) Norway sold NOK vs. NOK2.0B indicated in 3-month Bills; Avg Yield: 1.45%; bid-to-cover: 2.88x.

Looking ahead

- (EU) ECB begin 3-day Forum on Central Banking in Sintra.

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

- 05:30 (DE) Germany to sell combined €6.0B in 6-month and 12-month BuBills.

- 05:30 (EU) European Commission to sell €2.5B in 0.00% July 2026 NextGeneration Bonds (NGEU).

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (IL) Israel May Unemployment Rate: No est v 3.5% prior; Unemployment Rate (including Covid Effect): No est v 4.7% prior.

- 06:00 (IL) Israel to sell combined ILS850M in 2024, 2026, 2031 and 2032 bonds.

- 06:00 (RO Romania to sell RON500M in 3.25% 2026 Bonds.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (IS) Iceland to sell 3-month and 6-month Bills.

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 07:00 (MX) Mexico May Trade Balance: -$1.6Be v -$1.9B prior.

- 07:00 (BR) Brazil Jun FGV Construction Costs M/M: 3.4%e v 1.5% prior.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

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

- 08:30 (US) May Preliminary Durable Goods Orders: 0.1%e v 0.5% prior; Durables (Ex-Transportation): 0.3%e v 0.4% prior; Capital Goods Orders (non-defense/ex-aircraft): 0.1%e v 0.4% prior; Capital Goods Shipments (non-defense/ex-aircraft): 0.2%e v 0.8% prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €4.5-5.7B in 3-month, 6-month, 9-month and 12-month bills.

- 10:00 (US) May Pending Home Sales M/M: -3.9%e v -3.9% prior; Y/Y: No est v -11.5% prior.

- 10:30 (US) Jun Dallas Fed Manufacturing Activity Index: -6.5e v -7.3 prior.

- 10:30 (US) Weekly DOE Oil Inventories (delay from last week).

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

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

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

- 16:00 (US) Weekly Crop Progress Report.

- 23:00 (TH) Thailand Central bank to sell THB50B in 3-month Bills.

- 23:35 (JP) Japan to sell 2-Year JGB Bonds.