Slew of EU inflation and GDP data fails to inspire the euro

Notes/Observations

- Risk appetite finding some legs as market participants rethink their views on FED rate hike pace after recent Q2 US GDP contraction. CME futures indicate a 50% chance of a pause in the hiking cycle at the Dec meeting, with an 85% chance by Feb 23. Growth assets have favored well since Powell's comments and FOMC decision on Wed.

- EU inflation and GDP data beat consensus in session (GDP: Beats: Euro Zone, France, Spain; Miss Germany ); (CPI: Euro Zone France, Spain, Portugal all rose vs. month ago levels).

- Germany lags on data as prelim GDP misses estimates and avoids contraction at 0%, unemployment net change rises MoM.

- Ongoing turmoil in China's property sector has reignited concerns about its recovery.

- Japan battles with continued elevated covid cases as PM Kishida rules out prospects of restrictions.

- Asia closed mixed with Hang Seng underperforming at -2.3% and NZX50 outperforming at +1.5%. EU indices build on earnings momentum at +0.6-1.7%, bond yields are also higher. US futures are in the green. Safe haven: Gold +0.6%, DXY -0.4%; Commodity: Brent +2.3%, WTI +2.3%, UK Nat Gas +19.7%; Speculative: BTC +4.5%, ETH +6.0%.

Asia

- South Korea Jun Industrial Production M/M: +1.9% v -0.8%e; Y/Y: 1.4% v 2.1%e.

- Japan July Tokyo CPI Y/Y: 2.5% v 2.4%e; CPI (Ex-Fresh Food) Y/Y: 2.3% v 2.2%e.

- Japan Jun Jobless Rate: 2.6% v 2.5%e.

- Japan Jun Retail Sales M/M: -1.4% v +0.2%e; Y/Y: 1.5% v 2.8%e.

- BOJ Summary of Opinions reiterated stance that was appropriate to continue with the current monetary easing.

- Japan Jun Preliminary Industrial Production M/M: 8.9% v 4.2%e; Y/Y: -3.1% v -7.1%e.

- Australia Q2 PPI Q/Q: 1.4% v 1.6% prior; Y/Y: 5.6% v 4.9% prior.

- China President Xi stated that US and China should maintain communications at all levels, and work together to get the world out of recession risk; Biden agreed to keep in touch.

Americas

- White House stated that President Biden told Xi that US policy on Taiwan had not changed. US strongly opposed unilateral efforts to change status quo or undermine peace and stability across Taiwan Strait. Discussed a range of issues including climate change and health security.

- US Treasury Sec Yellen reiterated that economy remained resilient, economy at full employment. Did see significant slowdown in growth. Saw some signs that inflation was likely to come down in the days ahead.

Energy

- OPEC+ Aug 3rd meeting reportedly will keep oil output steady or raise output slightly in Sept; Will likely discuss a 'modest output increase'.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.80% at 436.24, FTSE +0.61% at 7,390.40, DAX +0.67% at 13,371.15, CAC-40 +1.21% at 8,182.50, IBEX-35 % at #, FTSE MIB +1.62% at 22,288.00, SMI +0.47% at 11,181.61, S&P 500 Futures +0.56%].

Market Focal Points/Key Themes: European indices open higher across the board and advanced into the green as the session progressed; sectors leading to the upside include consumer discretionary and financials; lagging sectors include health care and consumer staples; CAC supported followed Renault’s results; luxury subsector supported following results from Hermes; banking subsector supported by earnings from NatWest; EDP Renovaveis acquires Kronos Solar; earnings expected in the upcoming US session include Intesa Sanpaolo, Chevron, Abbvie and Procter & Gamble.

Equities

- Consumer discretionary: L'Oreal [OR.FR] +3% (earnings), Hermes [RMS.FR] +9% (sales).

- Energy: Engie [ENGI.FR] -0.5% (earnings).

- Financials: Natwest [NTW.UK] +7% (earnings), BNP Paribas [BNP.FR] +3.5% (earnings), Standard Chartered [STAN.UK] +3.5% (earnings), BBVA [BBVA.ES] +4.5% (earnings).

- Healthcare: Astrazeneca [AZN.UK] -1.5% (earnings).

- Industrials: Renault [RNO.FR] +5.5% (earnings; raises outlook), Aston Martin Lagonda Global Holdings [AML.UK] -0.5% (earnings), Leonardo [LDO.IT] -7% (earnings), Vinci [DG.FR] +3.5% (earnings).

- Telecom: Vivendi [VIV.FR] -3% (earnings).

Speakers

- ECB's De Guindos (Spain, neutral) depreciation of Euro currency had been one of the factors behind the high inflation. Main factor to guide decisions would be the evolution of inflation.

- Hungary PM Orban stated that could expect a deal on additional Russian gas supplies to be signed in the summer.

- Hungary Central Bank Dep Gov Virag reiterated that aim of policy was to fend off second round CPI impacts; to continue with decisive step-by-step rate hikes.

- Poland PM Morawiecki stated that too early to declare that inflation was retreating.

Currencies/Fixed income

- USD retraced after the US went into a technical recession. Growth concerns had driven US yields sharply lower and such data made market participants rethink their views on FED rate hike pace.

- EUR/USD saw a slew of inflation and GDP data during the session. Currency initially received a lift from some verbal intervention after ECB member De Guindos noted that the depreciation of Euro currency had been one of the factors behind the high inflation. Euro tested 1.0254 at one point. However, upside momentum waned after the German GDP came in below consensus. Pair at 1.0210 by mid-session.

- GBP/USD back above 1.22 with focus on Bank of England meeting next week with markets seeing another 50bps hike taking place.

- USD/JPY sharply lower as US yields fall. Pair at 132.80. The yen was on pace for its best weekly gain in 4 months.

Economic data

- (NL) Netherlands Jun Retail Sales Y/Y: 0.7% v 0.1% prior.

- (FI) Finland Jun House Price Index M/M: -0.3% v -0.5% prior; Y/Y: 1.2% v 1.6% prior.

- (FI) Finland Jun Preliminary Retail Sales Volume Y/Y: -4.5% v -4.3% prior.

- (FR) France Q2 Preliminary GDP Q/Q: 0.5% v 0.2%e; Y/Y: 4.2% v 3.7%e.

- (FR) France Jun Consumer Spending M/M: +0.2% v -0.9%e; Y/Y: -4.4% v -4.9%e.

- (DE) Germany Jun Import Price Index M/M: 1.0% v 1.0%e; Y/Y: 29.9% v 29.9%e.

- (FI) Finland Jun Final Trade Balance: -€1.2B v -€1.2B prelim.

- (SE) Sweden Jun Unemployment Rate: 8.6% v 8.5% prior; Unemployment Rate (seasonally adj): 7.7% v 7.7%e; Trend Unemployment Rate: 7.6% v 7.7% prior.

- (SE) Sweden May Non-Manual Workers’ Wages Y/Y: 2.9% v 3.0% prior.

- (NO) Norway Jun Retail Sales M/M: 0.0% v -0.9% prior.

- (DK) Denmark Jun Unemployment Rate: 2.2% v 2.1% prior; Gross Unemployment Rate: 2.5% v 2.5% prior.

- (ZA) South Africa Jun M3 Money Supply Y/Y: 8.3% v 7.6%e; Private Sector Credit Y/Y: 7.5% v 5.9%e.

- (CH) Swiss Jun Real Retail Sales YoY: +1.2% v -1.3% prior.

- (FR) France July Preliminary CPI M/M: 0.3% v 0.3%e; Y/Y: 6.1% v 6.0%e.

- (FR) France July Preliminary CPI EU Harmonized M/M: 0.3% v 0.2%e; Y/Y: 6.8% v 6.7%e.

- (ES) Spain Q2 Preliminary GDP Q/Q: 1.1% v 0.4%e; Y/Y: 6.3% v 5.5%e.

- (ES) Spain July Preliminary CPI M/M: -0.2% v -0.3%e; Y/Y: 10.8% v 10.6%e.

- (ES) Spain July Preliminary CPI EU Harmonized M/M: -0.5% v -0.8%e; Y/Y: 10.8% v 10.5%e; CPI Core Y/Y: 6.1% v 5.5% prior.

- (CH) Swiss July KOF Leading Indicator: 90.1 v 95.2e.

- (AT) Austria Q2 GDP Q/Q: 0.5% v 1.5% prior; Y/Y: 4.7% v 8.7% prior.

- (AT) Austria July Preliminary CPI M/M:0.8 % v 1.4% prior; Y/Y: 9.2% v 8.7% prior.

- (AT) Austria Jun PPI M/M: 0.9% v 0.4% prior; Y/Y: 20.8% v 20.9% prior.

- (CZ) Czech Q2 Advance GDP (1st reading) Q/Q: +0.2% v -0.4%e; Y/Y: 3.6% v 3.3%e.

- (HU) Hungary Jun PPI M/M: 3.1% v 2.6% prior; Y/Y: 35.0% v 32.3% prior.

- (TR) Turkey Jun Trade Balance: -$8.2B v -$8.2Be.

- (CN) Weekly Shanghai copper inventories (SHFE): 37.0K v 50.3K tons prior.

- (DE) Germany July Net Unemployment Change: +48.0K v +17.0Ke; Unemployment Claims Rate: 5.4% v 5.4%e.

- (TW) Taiwan Q2 Advance GDP (1st reading) Y/Y: 3.1% v 3.2%e.

- (DE) Germany Q2 Preliminary GDP Q/Q: 0.0% v 0.1%e; Y/Y: 1.4% v 1.7%e; GDP NSA (unadj) Y/Y: 1.5% v 1.8%e.

- (IT) Italy Q2 Preliminary GDP Q/Q: 1.0% v 0.3%e; Y/Y: 4.5% v 3.7%e.

- (ES) Spain May Current Account: +€2.9B v -€0.5B prior.

- 04:00 (NO) Norway July Unemployment Rate:1.7 % v 1.6% prior.

- 04:00 (NO) Norway Central Bank (Norges) Aug Daily FX Purchases (NOK) 1.5B v 1.5B prior.

- 04:00 (PL) Poland July Preliminary CPI M/M: 0.4% v 0.5%e; Y/Y: 15.5% v 15.6%e.

- 04:00 (CZ) Czech Jun M2 Money Supply Y/Y: 5.3% v 6.3% prior.

- 04:00 (RU) Russia Narrow Money Supply w/e July 22nd (RUB): 14.36T v 14.40T prior.

- (TR) Turkey Jun Foreign Tourist Arrivals Y/Y: %145.0 v 314.0% prior.

- (UK) Jun Net Consumer Credit: £1.8B v £1.0Be; Net Lending: £5.3B v £5.5Be.

- (UK) Jun Mortgage Approvals: 63.7K v 65.0Ke.

- (UK) Jun M4 Money Supply M/M: -0.3% v +0.6% prior; Y/Y: 4.1% v 5.1% prior; M4 (ex IOFCs) 3-Month Annualized: 2.8% v 6.9% prior.

- (PT) Portugal Q2 Preliminary GDP Q/Q: -0.2% v -0.3%e; Y/Y: 6.9% v 7.4%e.

- (PT) Portugal July Preliminary CPI M/M: 0.0% v 0.8% prior; Y/Y: 9.1% v 8.7% prior.

- (PT) Portugal July Preliminary CPI EU Harmonized M/M: 0.0% v 1.1% prior; Y/Y: 9.4% v 9.0% prior.

- (HK) Hong Kong Jun Budget Balance (HKD) -44.0B v -38.3B prior.

- (EU) Euro Zone July CPI Estimate Y/Y: 8.9% v 8.7%e (record high); CPI Core Y/Y: 4.0% v 3.9%e.

- (EU) Euro Zone Q2 Advance GDP Q/Q (1st Reading): 0.7% v 0.2%e; Y/Y: 4.0% v 3.4%e.

- (IT) Italy July Preliminary CPI M/M: 0.4% v 0.5%e; Y/Y: 7.9% v 8.1%e.

- (IT) Italy July Preliminary CPI EU Harmonized M/M: -1.1% v -0.9%e; Y/Y: 8.4% v 8.8%e.

- (GR) Greece May Retail Sales Value YoY: -4.2% v +10.1% prior; Retail Sales Volume YoY: 5.1% v 18.8% prior.

- (IS) Iceland Jun Final Trade Balance (ISK): -17.9B v -19.1B prelim.

Fixed income issuance

- (IN) India sold total INR320B vs. INR320B in 2027, 2028, 2036 and 2051 bonds.

Looking ahead

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

- 05:30 (SL) Sri Lanka July CPI Y/Y: No est v 54.6% prior.

- 05:30 (ZA) South Africa to sell combined ZAR1.2B in 2029, 2038 and 2050 I/L Bonds.

- 06:00 (IT) Italy Jun PPI M/M: No est v 0.3% prior; Y/Y: No est v 42.7% prior.

- 06:00 (PT) Portugal Q2 Unemployment Rate: No est v 5.9% prior.

- 06:00 (PT) Portugal Jun Retail Sales M/M: No est v 1.4% prior; Y/Y: No est v 2.1% prior.

- 06:00 (UK) DMO to sell £3.5B in 1-month, 3-month and 6-month bills (£1.0B, £1.5B and £1.0B respectively).

- 06:30 (IN) India Jun Fiscal Deficit (INR): No est v 129.1B prior.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (MX) Mexico Q2 Preliminary GDP Q/Q: 0.9%e v 1.0% prior; Y/Y: 1.5%e v 1.8%prior.

- 07:00 (MX) Mexico May Gold Production: No est v 6.3K prior; Silver Production: No est v 351.8K prior; Copper Production: No est v 40.2K prior.

- 07:30 (IN) India Weekly Forex Reserve w/e July 22nd: No est v $572.7B prior.

- 07:30 (IN) India announces upcoming bill issuance (held on Wed).

- 08:00 (IN) India Jun Eight Infrastructure (key) Industries: No est v 18.1% prior.

- 08:00 (ZA) South Africa Jun Monthly Budget Balance (ZAR): +81.0Be v -17.1B prior.

- 08:00 (ZA) South Africa Jun Trade Balance (ZAR): 21.2Be v 28.3B prior.

- 08:00 (BR) Brazil Jun National Unemployment Rate: 9.3%e v 9.8% prior.

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

- 08:30 (US) Q2 Employment Cost Index (ECI): 1.2%e v 1.4% prior.

- 08:30 (US) Jun Personal Income: 0.5%e v 0.5% prior; Personal Spending: 0.9%e v 0.2% prior; Personal Spending (PCE): 0.0%e v -0.4% prior.

- 08:30 (US) Jun PCE Deflator M/M: 0.9%e v 0.6% prior; Y/Y: 6.8%e v 6.3% prior.

- 08:30 (US) Jun PCE Core Deflator M/M: 0.5%e v 0.3% prior; Y/Y: 4.7%e v 4.7% prior.

- 08:30 (CA) Canada May GDP M/M: -0.2%e v +0.3% prior; Y/Y: 5.4%e v 5.0% prior.

- 08:30 (BR) Brazil May Nominal Budget Balance (BRL): -73.0Be v -41.0B prior; Primary Budget Balance: -30.0Be v 38.9B prior; Net Debt to GDP Ratio: No est v 57.9% prior.

- 09:00 (CL) Chile Jun Manufacturing Production Y/Y: -3.0%e v +3.5% prior; Industrial Production Y/Y: -2.2%e v +1.8% prior; Copper Production: No est v 480.3K prior.

- 09:00 (CL) Chile Jun Retail Sales Y/Y: -5.5%e v -5.6% prior; Commercial Activity Y/Y: No est v -1.3% prior.

- 09:45 (US) July Chicago Purchase Manager’ Index (PMI): 55.0e v 56.0 prior.

- 10:00 (US) July Final University of Michigan Confidence: 51.1e v 51.1 prelim.

- 10:00 (MX) Mexico Jun Net Outstanding Loans (MXN): No est v 5.04T prior.

- 11:00 (CO) Colombia Jun National Unemployment Rate: No est v 10.6% prior; Urban Unemployment Rate: 10.7%e v 11.0% prior.

- 11:00 (EU) Potential sovereign ratings after European close.

- 13:00 (US) Weekly Baker Hughes Rig Count.

- 14:00 (CO) Columbia Central Bank Interest Rate Decision: Expected to raise Overnight Lending Rate by 150bps to 9.00%.

- 15:00 (AR) Argentina May Wages M/M: No est v 5.0% prior.

Sat

- 21:30 (CN) China July Manufacturing PMI (Govt Official): 50.4e v 50.2 prior; Non-manufacturing PMI: 54.0e v 54.7 prior; Composite PMI: No est v 54.1 prior.