UK Q2 Advance GDP in-line but shows lackluster growth

Notes/Observations

- Fed decision in focus. Dealers await for clues on whether the Fed might raise rates again this year, and when it will begin paring its massive bond portfolio

- European confidence data mixed (France misses, Italy beats)

- UK Q2 Advance GDP in-line with consensus (QoQ: 0.3%; YoY: 1.7%

- RBA will not be peer-pressured into tightening policy

Overnight

Asia:

- Australia Q2 CPI data softer than expected; Q/Q: 0.2% v 0.4%e; Y/Y: 1.9% v 2.2%e

- Reserve Bank of Australia (RBA) Gov Lowe: RBA does not need to follow other central banks in policy moves. Welcomed a recent pick up in the labour market, although subdued wages and high household debt meant that policy rates would stay lower for longer

- Bank of Japan Deputy Gov Nakaso: Reiterates still long way to go to meet 2% inflation target and will persistently pursue current powerful easing

Europe:

- EU Commissioner Oettinger (Germany): the UK is legally obligated to pay for the current EU budget, and the assumption is that UK payments to continue. UK leaving EU will create €10-12B gap in EU budget after 2020

Americas:

- House of Representatives approved new sanctions bill on Russia, Iran and North Korea (as expected)

- Republicans secured enough votes to begin debate on Healthcare vote

- Senate Republican plan to repeal and replace Obamacare failed to get votes needed for approval (43 in favor and 57 against). Senate rejected the health-bill amendment with the Cruz and Portman plans

- President Trump: Chair Yellen is definitely still in the running for the new Fed Chair term; Economic adviser Cohn and two or three other candidates remain potential

Energy:

- Weekly API Oil Inventories: Crude: -10.2M v +1.63M prior

Economic Data

- (JP) Japan July Small Business Confidence: 50.0 v 49.8e (1st non-contraction in 4 months)

- (SG) Singapore Jun Industrial Production M/M: 9.7% v 3.6%e; Y/Y: 13.1% v 8.5%e

- (CH) Swiss Jun UBS Consumption Indicator: 1.38 v 1.32 prior

- (FR) France July Consumer Confidence: 104 v 108e

- (ES) Spain Jun Adjusted Retail Sales Y/Y: 2.5% v 2.2%e; Retail Sales Y/Y: 2.8% v 3.9% prior

- (DK) Denmark Jun Retail Sales M/M: No est v 0.1% prior; Y/Y: No est v 1.6% prior

- (SE) Sweden Jun Trade Balance (SEK): 4.3B v 1.8B prior

- (IT) Italy July Consumer Confidence Index: 106.7 v 106.3e; Manufacturing Confidence: 107.7v 107.0e; Economic Sentiment: 105.5 v 106.3 prior

- (CH) Swiss July Credit Suisse Survey Expectations: 34.7 v 20.7 prior

- (UK) Q2 Advance GDP Q/Q: 0.3% v 0.3%e; Y/Y: 1.7% v 1.7%e

- (UK) Jun BBA Loans for House Purchase: 40.2K v 40.0Ke

**Fixed Income Issuance:

- (IN) India sold total INR170B vs. INR170B indicated in 3-month and 6-month Bills

- (EU) ECB alloted $35M in 7-day USD Liquidity Tender at fixed 1.65% vs $85M prior

- (IT) Italy Debt Agency (Tesoro)sold €2.0B vs. € 1.5-2.0B indicated range in zero coupon May 2019 CTZ bonds; Avg yield: -0.160% v -0.167% prior; Bid-to-cover: 1.64x v 1.56x prior

- (IT) Italy Debt Agency (Tesoro sold €1.25B vs. €0.75-1.25B indicated range in 1.3% Mar I/L 2028 Bonds (BTPei); Avg Yield: 1.24% v 1.21% prior; Bid-to-cover: 1.39x v 1.67x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx600 +0.5% at 382.8, FTSE 0.6% at 7476, DAX +0.4% at 12306, CAC-40 +0.6% at 5190, IBEX-35 0.3% at 10550, FTSE MIB 0.2% at 21509, SMI +0.7% at 9002, S&P 500 Futures %]

Market Focal Points/Key Themes: European Indices trade higher following generally positive earnings out of Europe. The Swiss SMI, FTSE and CAC outperform with notable gains from PSA Group following strong results and guidance, whilst Daimler trades flat after falling slightly shy of estimates. In the UK ITV, Tullow Oil and Compass group all trade higher following solid results, whilst in Switzerland Lafarge Holcim trades slightly lower after lowering demand outlook and Lonza shares surge following a 15% rise in H1 sales. Looking ahead to the US morning notable earners include Ford, Boeing, Anthem and Thermo Fisher.

Equities

- Consumer discretionary [ ITV [ITV.UK] +2.2% (Earnings)]

- Consumer Staples [Compass Grp [CPG.UK] +1.8% (Earnings) ]

- Materials: [Lonza [LONN.CH] +5.7% (Earnings), LafargeHolcim [LHN.CH] -1.3% (Earnings)]

- Industrials: [PSA Grp [UG.FR] +4.0% (Earnings), Daimler [DAI.DE] +0.4% (Earnings), Thales [HO.FR] +3.5% (Earnings) ]

- Technology: [ST Micro [STM.FR] +1.3% (Earnings), Atos [ATO.FR] +1.9% (Earnings)]

- Telecom: [KPN [KPN.NL] +2.8% (Earnings)]

- Energy: [Tullow Oil [TLW.UK] +3.3% (Earnings)]

Speakers

- Chancellor of Exchequer Hammond (Fin Min): Cannot be complacent on growth and focus on restoring productivity

- Russia Senator Kosachyov: Russia must prepare a "painful" response to US sanctions; there can be no improvement in Russia/US ties after new sanctions, relations to only worsen

- Sweden Alliance (opposition) called for no-confidence vote against three ministers (Defense, Infrastructure and Interior)

- China govt said to be planning rollover of CNY600B in bonds that back the sovereign fund that come due in Aug

Currencies

- USD consolidated its recent losses ahead of the Fed rate decision later today. Dealers await for clues on whether the Fed might raise rates again this year, and when it will begin paring its massive bond portfolio

- The GBP had little reaction as UK Q2 Advance GDP as the data was in-line with consensus. GBP/USD drifted lower towards 1.3010 in the aftermath.

- AUD currency was softer during the Asian session after Australia Q2 core inflation remained well below the 2-3% targeted by the RBA, which meant that rates should be kept on hold for some time. AUD/USD hovering around the 0.79 area, -0.5%

Fixed Income

- Bund futures trade at 161.89 down 28 ticks but still holding the July 20th low of 161.55. Resistance lies near the 162.75 level followed by 163.50. A break of the 160.00 support level could see lows target 159.25 followed by 157.50.

- Gilt futures trade at 125.99 up 28 ticks, with a limited reaction to UK Q2 advance GDP reading Price finds key support at the 125.42 support level. An acceleration lower could test the 122.88 region. Resistance remains the noted 126.51 region, followed by 127.50.

- Wednesday's liquidity report showed use of the marginal lending facility rose to €496M from €250M prior.

- Corporate issuance saw $5.95B come to market via 4 issuers headlined by Codelco $2.75B 2-part senior note offering and Crown Castle $1.75B 2- part senior unsecured note offering.

Looking Ahead

- (CO) Colombia Jun Retail Confidence: No est v 15.3 prior; Industrial Confidence: No est v -8.8 prior

- (BR) Brazil July CNI Consumer Confidence: No est v 100.5 prior

- 05:30 (EU) ECB Long-Term Refinancing Operation Result

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia to sell combined RUB30B in 2020 and 2022 OFZ Bonds

- 07:00 (US) MBA Mortgage Applications w/e July 14th: No est v +6.3% prior

- 08:00 (UK) Baltic Dry Bulk Index

- 08:30 (CL) Chile Central Bank's Traders Survey

- 09:30 (ZA) South Africa 6th summer-crop output forecast

- 10:00 (US) Jun New Home Sales: 615Ke v 610K prior

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

-11:30 (BR) Brazil weekly Currency Flows Weekly

- 11:30 (US) Treasuries to Sell 2-Year Floating Rate Notes

- 13:00 (US) Treasuries to Sell 5-Year Notes

- 14:00 (US) FOMC Interest Rate Decision: Expected to leave Interest Rates unchanged

- 14:30 (US) Fed Chair Yellen post rate decision press conference

- 16:00 (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to cut Selic Target Rate by 100bps to 9.25%