Swiss and Turkey inflation data continues to climb

Notes/Observations

- Minimal news on a day dictated by the Independence day holiday in the US. Sentiment in general rests firmly in bearish tone as recession fears linger. Markets are likely to coil up this week in preparation for the start of earnings season next week, which will likely indicate the health of the economy and expectations for the rest of the year, with key focus on corporate guidance to provide color on the growth outlook.

- Euro Zone investor confidence missed in headline and sub-components. Germany recorded its first monthly trade deficit since 1991 at -€1.0B. Swiss PMI continued to follow European trend and read higher than expected, with its fastest annual pace in 29 years at 3.4% y/y.

- ECB Muller reiterated the likelihood of a 25bps in July and predicts 50bps in Sept. Germany Econ Min Habeck expressed concern of the possibility Russia continues to suspend gas flow over the Nord Stream 1.

- In general, EU markets are taking a reprieve from the negative undertones, and following Friday's momentum in the US. EU indices are +0.1-0.9% up, yields are also up. Elsewhere Gold +0.3%, BTC +0.7%, ETH -0.6%, DXY -0.1%, Brent -0.5%, WTI -0.6%.

- Germany registered its 1st trade deficit since 1991.

- Spain Jun Unemployed at 2.88M for its lowest since 2008.

- Swiss Jun CPI hits highest level in almost three decades.

- Turkey Jun CPI accelerated for an 13th straight month and its highest annual pace since 1998.

- Looking ahead, expecting news to reduce further as EU closes and US is shut as well as trading volatility and volume to be low. Israel Central Bank Base Rate decision at 09:00 ET, consensus is to hike by 50bps to 1.25%.

Ukraine conflict

- Russia says its military has taken control of Ukraine’s eastern Luhansk region.

Europe

- ECB to discuss blocking banks from multibillion-euro windfall amid higher rates [refers to the central bank's subsidized loan scheme.

- Germany Econ Min Habeck stated that needed to face possibility that Russia would continue to suspend gas flows thru Nord Stream 1 beyond the planned maintenance period.

- Italy PM Draghi to meet 5-Star Movement Conte on Monday, July 4th to try to resolve tensions in govt coalition.

- Italy government said to put together another package to help cushion the impact of high energy prices. Package would extend a cut on fuel taxes to early October.

Americas

- US Dockworker unions stated that West coast operations to continue as normal as dockworkers and employers continued talks; To continue negotiations past July 1st with no contract.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx50 +0.4% at 3,461, FTSE +1.0% at 7,240, DAX +0.1% at 12,823, CAC-40 +0.8% at 5,980, IBEX-35 +0.4% at 8,205, FTSE MIB +0.1% at 21,372, SMI +1.1% at 10,887, S&P 500 Futures -0.7%].

Market Focal Points/Key Themes: European indices open higher across the aboard and remained generally upbeat as the session advanced; better performing sectors include energy and telecom; laggard sectors include real estate and technology; Airbus awarded orders in China; Schneider Electric to divest Russian assets; reportedly Germany considering Lufthansa-like bailout of Uniper; US closed for holiday.

Equities

- Consumer discretionary: AO World AO.UK -13.8% (press report on financial situation); SAS SAS.SE +4.3% (wage talks extension); Elior ELIOR.FR -3.1% (new CEO), Grafton GFTU.UK -6.8% (CEO steps down), Shop Apotehke SAE.DE -11% (analyst action), Pets at Home PETS.UK -10.1% (analyst action).

- Energy: Equinor EQNR.NO +2.6% (analyst action); Trevi TFI.IT +3.9% (updates on orders).

- Industrials: Spirax-Sarco SPX.UK +2.8% (potential acquisition).

- Technology: WANdisco WAND.UK+5.0 % (contract award); ams OSRAM AMS.CH +2.1% (analyst action).

- Utilities: CEZ CEZ.CZ -5.4% (potential windfall tax).

Speakers

- ECB's Muller (Estonia, hawk) reiterated Council stance of a 25bps hike likely in July; Adds that he saw a 50bps hike in Sept; Stagflation was not the most likely scenario.

- ECB's Vasle (Slovenia) stated that effects of Ukraine war was more visible on prices than on growth. Likely to have more rate hikes after Sept during Q4.

- ECB released its Climate-related measures that would be applied on bond program from October; volume to depend on monetary policy goals.

- France President Cabinet reshuffle said to keep Le Maire as Fin Min.

- Czech Central Bank (CNB) Jun Minutes: Chief economist Holub proposed a smaller rate hike; motion opposed by Michl and Dedek.

Currencies/Fixed income

- FX price action was listless in quiet trading with US on holiday.

- EUR/USD was slightly higher as markets look forward to ECB raising interest rates this month. ECB likely to go for an interest-rate increase of 25 basis points as previously guided. EUR/USD not too far from 5-year lows as markets suspect EU region's economy to fall into recession as tightening got underway.

- Focus on Tuesday’s RBA decision where it was expected for the central bank to continue with its tightening for the 3rd straight meeting. AUD/USD at 0.6850 area.

Economic data

- (DE) Germany May Trade Balance: -€1.0B v +€1.6Be; Exports M/M: -0.5% v +0.7%e; Imports M/M: 2.7% v 0.8%e.

- (CH) Swiss Jun CPI M/M: 0.5% v 0.3%e; Y/Y: 3.4% v 3.1%e (5th month above target and fastest annual pace in 29 years); CPI Core Y/Y: 1.9% v 1.7% prior.

- (CH) Swiss Jun CPI EU Harmonized M/M: 0.5% v 0.6% prior; Y/Y: 3.2% v 2.7% prior.

- (ES) Spain Jun Net Unemployment Change: K v -99.5K prior.

- (TR) Turkey Jun CPI M/M: 5.0% v 5.7%e; Y/Y: 78.6% v 80.0%e (13th month of acceleration and (highest annual pace since 2002); CPI Core Index Y/Y: 57.3% v 58.4%e.

- (TR) Turkey Jun PPI M/M: 6.8% v 8.8% prior; Y/Y: 138,3% v 132.2% prior.

- (CH) Swiss weekly Total Sight Deposits (CHF): 748.5B v 748.5B prior; Domestic Sight Deposits: 645.7B v 653.5B prior.

- (BR) Brazil Jun FIPE CPI (Sao Paulo) M/M: 0.3% v 0.2%e.

- (EU) Euro Zone July Sentix Investor Confidence: -26.4 v -20.0e.

- (EU) Euro Zone May PPI M/M: 0.7% v 0.9%e; Y/Y: 36.3% v 36.6%e.

Fixed income issuance

- None seen.

Looking ahead

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

- 05:30 ((DE) Germany to sell combined €6,0B in 3-month and 9-month BuBills.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-3.0B in 3-month and 6-month bills.

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

- 06:00 (IL) Israel to sell bonds.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (MX) Mexico May Leading Indicators M/M: No est v -0.14 prior.

- 07:00 (MX) Mexico Jun Vehicle Domestic Sales: No est v 91.2K prior.

- 07:00 (TR) Turkey to sell Bonds.

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

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

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 09:00 (FR) France Debt Agency (AFT) to sell €4.9-6.1B in 3-month, 6-month, 9-month and 12-month bills.

- 09:00 (IS) Israel Central Bank (BOI) Interest Rate Decision: Expected to raise the Base Rate by 50bps to 1.25%.

- 09:00 (SG) Singapore Jun Purchasing Managers Index (PMI): No est v 50.4 prior; Electronics Sector Index: No est v 50.5 prior.

- 09:30 (CA) Canada Jun Manufacturing PMI: No est v 56.8 prior.

- 10:30 (CA) Canada Q2 Overall Business Outlook Survey: No est v 5 prior; Business Outlook Future Sales: No est v -11 prior.

- 11:00 (DK) Denmark Jun Foreign Reserves: No est v 534.0B prior.

- 17:00 (KR) South Korea Jun Foreign Reserves: No est v $447.7B prior.

- 18:00 (NZ) New Zealand Government 11-Month Financial Statements.

- 19:00 (AU) Australia Jun Final PMI Services: 52.6 prelim; PMI Composite: 52.6 prelim.

- 19:00 (KR) South Korea Jun CPI M/M: 0.5%e v 0.7% prior; Y/Y: 5.9%e v 5.4% prior; CPI Core Y/Y: No est v 4.1% prior.

- 19:30 (JP) Japan May Labor Cash Earnings Y/Y: 1.5%e v 1.3% prior (revised from 1.7%); Real Cash Earnings Y/Y: -1.6%e v -1.7% prior (revised from 1.2%).

- 20:01 (IE) Ireland Jun PMI Services: No est v 60.2 prior; PMI Composite: No est v 57.5 prior.

- 20:30 (JP) Japan Jun Final PMI Services: No est v 54.2 prelim; PMI Composite: No est v 53.2 prelim.

- 20:30 (SG) Singapore Jun PMI (Whole economy): No est v 59.4 prior.

- 21:00 (NZ) New Zealand Jun ANZ Commodity Price M/M: No est v -2.8% prior.

- 21:00 (PH) Philippines Jun CPI Y/Y: 6.0%e v 5.4% prior.

- 21:45 (CN) China Jun Caixin PMI Services: 49.0e v 41.4 prior; PMI Composite: No est v 42.2 prior.

- 23:30 (TH) Thailand Jun CPI M/M: 0.8%e v 1.4% prior; Y/Y: 7.5%e v 7.1% prior; CPI Core Y/Y: 2.4%e v 2.3% prior.

- 23:35 (JP) Japan to sell 10-Year JGB Bonds.