USD/JPY teases key 160.00 level, keeping tabs on WEF in China

EU mid-market update: Europe strides higher off back of US tech rally; USD/JPY teases key 160 level; Keeping tabs on WEF in China.

Notes/observations

- Lack of fresh macro catalysts is allowing market to digest the bigger picture. European indices and yields are higher. Expectations remains for BOE to begin cutting in Aug, while pricing for ECB’s second cut is slowly tilting to July, from Sept previously, aided by overnight comments from ECB’s Rehn suggesting rate cuts are possible at every meeting.

- Tech rally from US trade translated over to both Asian and EU technology stocks. Under-performance seen in automobiles after Volkswagen stake in Rivian.

- German GFK Consumer Confidence misses expectations as France Consumer Confidence is in line and Swedish PPI was mixed.

- For politics, European bond traders look ahead to beginning of French vote on Sunday. France/German spreads have remained stable in recent days.

- Asia closed higher with only ASX200 in red -0.7%. EU indices are +0.1-0.7%. US futures are +0.0-0.4%. Gold -0.1%, DXY +0.2%; Commodity: Brent +0.5%, WTI +0.6%; Crypto: BTC +1.0%, ETH +0.9%.

Asia

- Australia May CPI Y/Y: 4.0% v 3.8%e (six-month high); Australia 3-year yield rises above 4.00% after May CPI data, yields rise by >10bps.

- China local government bond issuance might peak in Q3 [inline] – China Securities Journal.

- China Financial Regulator: Will study raising ceiling on concentration ratio of insurance funds investing in venture capital funds.

- Bank of Korea (BOK) Financial Stability Report: Difficult to rule out possibility of growing downward pressure on Korean Won (KRW).

- South Korea Fin Min: Exports expected to recover to record levels in H1.

- New Zealand Treasury Sec: Reiterates recent data point to economic weakness, weak economy poses risks to Treasury's forecast.

- Bank of Thailand (BOT) releases Jun minutes: Committee expressed concerns over the K-shaped economic recovery.

- Malaysia Dep Fin Min Lim Hui Ying: MYR to strengthen by Q4.

- Macquarie analysts see Japanese yen (JPY) may strengthen ~33% to 120 versus US dollar from current 159 level in 18 months or more, if Fed starts cutting aggressively.

Europe

- ECB said to start the next review of its monetary-policy strategy after summer break which could help shape future interest-rate decisions; Plans to present results in H2 2025 - press.

- UK Opposition Labour Leader Starmer (ahead in polls): Targets economic growth of >2.5%.

- Germany July GFK Consumer Confidence: -21.8 v -19.5e.

- Switzerland to apply Basel 3 trading rules from Jan 1st 2025.

- Austria WIFO Think Tank Quarterly Economic Forecasts: Cut both GDP and inflation forecasts.

-NATO allies select Mark Rutte as next Sec General (as expected).

Americas

- SEC Chair Gensler: Spot Ether ETF Approval Process Going 'Smoothly'; Repeats that there's 'significant noncompliance' in crypto.

- Reportedly Former Pres Trump to select VP as early as this week, possibly ahead of Thursday's debate - NBC.

Global conflict/tensions

- North Korea suspected of launching another hypersonic ballistic missile - press.

- South Korea's Incheon airport said to have been disrupted due to North Korean trash balloons - South Korean press.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.40% at 519.76, FTSE +0.57% at 8,292.47, DAX +0.83% at 18,313.15, CAC-40 +0.28% at 7,684.03, IBEX-35 +0.22% at 11,143.83, FTSE MIB +0.04% at 33,722.00, SMI +0.54% at 12,142.60, S&P 500 Futures +0.19%].

Market focal points/key themes: European indices open higher across the board and remained upbeat through the early part of the session; improvement in market sentiment seen from follow-through on strong tech performance in the US yesterday; among sectors leading the way higher are technology and industrials; lagging sectors include materials and utilities; automotive subsector under pressure after Volkswagen announced an investment in Rivian; reportedly multiple investment firms bidding for Rovi’s assets; Alliance and Witan Trusts to merge; earnings expected in the upcoming US session include General Mills, Micron and Blackberry.

Equities

- Consumer discretionary: Deutsche Post [DPW.DE] +2.5% (FedEx results), Deliveroo [ROO.UK] +3.5%, Delivery Hero [DHER.DE} -1.5% (reportedly Doordash held takeover discussions with Deliveroo, but talks have since ended), AO World [AO.UK] +2.5% (earnings).

- Consumer staples: Ahold Delhaize [AD.NL] +0.5% (Walmart sees Q2 as its most challenging comp quarter for the year).

- Financials: BNP Paribas [BNP.FR] +1.0% (French debates).

- Healthcare: Zealand Pharma [ZEAL.DK] -0.5% (upsizes offering).

- Industrials: Volkswagen [VOW3.DE] -0.5% (cuts FY24 Net Cash Flow and Liquidity guidance based on Rivian JV investment).

- Information Technology: ASML [ASML.NL] +2.5% (in sympathy with Nvidia), Atos [ATO.FR] -3.5% (update on financial restructuring plan).

Speakers

- ECB’s Rehn (Finland): Rate moves should be possible at any policy meeting.

- Reserve Bank of Australia (RBA) Asst Gov Kent: Reiterates RBA in no rush to ease - speech on Restrictive Financial Conditions in Australia at the ABA Banking Conference, Melbourne.

- Indonesia Central Bank (BI) Dir Susianto: We are guiding the FX market by ensuring balanced supply and demand.

- Fed's Cook (voter): Rising delinquency rates 'bear watching;' Expects 12-month inflation will roughly move sideways for the rest of this year, with monthly data likely similar to the favorable readings during the second half of last year.

Economic data

-(SG) Singapore May Industrial Production M/M: 1.1% v 1.8%e; Y/Y: 2.9% v 1.4%e.

-(FI) Finland May Unemployment Rate: 10.2% v 9.2% prior.

-(DE) Germany July GFK Consumer Confidence: -21.8 v -19.5e.

-(SE) Sweden May PPI M/M: 0.0% v 0.5% prior; Y/Y: 2.6% v 0.9% prior.

-(HU) Hungary Q1 Current Account: €1.9B v €1.8Be.

-(FR) France Jun Consumer Confidence: 89 v 89e.

-(CH) Swiss Jun UBS Expectations Survey: 17.5 v 18.2 prior.

-(AT) Austria Jun Manufacturing PMI: 43.6 v 46.3 prior (23rd month of contraction).

-(IS) Iceland May Final Trade Balance (ISK): -21.7B v -20.8B prelim.

Fixed income issuance

-Australia sells A$600M vs. A$600M indicated in 3.50% Dec 2034 bonds; Avg Yield: 4.2235% v 3.979% prior; bid-to-cover: 4.22x v 3.11x.

-Thailand sells total THB20.0B in 19-year bonds; Avg Yield 3.2585%, bid-to-cover 2.20x.

-Vietnam Finance Ministry sells VND9.5T vs. VND20.0T indicated in 3-year, 10-year, 15-year and 30-year bonds.

-Philippines sells PHP30.0B vs. PHP30.0B indicated in 20-year bonds; Avg Yield: 6.860% v 6.797% prior, bid-to-cover: 1.70x v 1.67x prior.

-India sells total INR120B vs. INR120B indicated in 3-month, 6-month and 12-month bills.

-UK DMO sells £3.0B vs. £3.0B indicated in 3.75% Jan 2038 Gilts; Avg Yield: 4.134% v 4.067% prior; Bid-to-cover: 3.42x v 3.36x prior; Tail: 0.1bps v 0.2bps prior (Jan 4TH 2024).

-Sweden sells SEK10.0B vs. SEK10.0B indicated in 3-month Bills; Avg Yield: 3.541% v 3.584% prior; Bid-to-cover: 1.70x v 5.11x prior.

-Italy Debt Agency (Tesoro) sells €2.5B vs. €2.5B indicated in 6-month Bills; Avg Yield: 3.685% v 3.648% prior; Bid-to-cover: 1.49x v 1.42x prior (May 29th 2024).

-Norway sells total NOK2.0B vs. NOK2.0B indicated in 2026 and 2039 Bonds.

-Greece Debt Agency (PDMA) sells €600M vs. €500M indicated in 6-month Bills; Avg Yield: 3.44% v 3.55% prior; Bid to cover: 1.97x v 2.31x prior (May 29th 2024).

Looking ahead

- 05:30 (EU) ECB’s Rehn.

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

- 06:00 (EU) ECB’s Panetta.

- 06:00 (UK) Jun CBI Retailing Reported Sales: 0e v 8 prior; Total Distribution Reported Sales: No est v 7 prior.

- 06:40 (EU) ECB’s Lane.

- 07:00 (US) MBA Mortgage Applications w/e Jun 21st: No est v 0.9% prior.

- 07:00 (RU) Russia to sell OFZ Bonds.

- 07:30 (BR) Brazil May Total Outstanding Loans (BRL): No est v 5.894T prior; M/M: No est v 0.2% prior; Personal Loan Default Rate: No est v 5.5% prior.

- 07:45 (EU) ECB’s Kazaks.

- 08:00 (BR) Brazil end-Jun IBGE Inflation IPCA-15 M/M: 0.5%e v 0.5% prior; Y/Y: 4.1%e v 3.9% prior.

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

- 10:00 (US) May New Home Sales: 633Ke v 634K prior.

- 10:00 (BR) Brazil May Total Federal Debt (BRL): No est v 6.70T prior.

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

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

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (RU) Russia May Industrial Production Y/Y: 2.3%e v 3.9% prior.

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

- 14:00 (BR) Brazil May Central Govt Budget Balance (BRL): -58.1Be v +11.1B prior.

- 15:00 (AR) Argentina Q1 Current Account: $1.4Be v -$3.4B prior.

- 15:00 (AR) Argentina Apr Wages M/M: No est v 10.3% prior.

- 17:00 (KR) South Korea July Business Manufacturing Survey: No est v 76 prior; Business Non-Manufacturing Survey: No est v 72 prior.

- 18:00 (NZ) New Zealand Jun ANZ Consumer Confidence: No est v 84.9 prior.

- 19:50 (JP) Japan May Retail Sales M/M: 0.8%e v 0.8% prior (revised from 1.2%); Y/Y: 2.0%e v 2.0% prior (revised from 2.0%); Dept. Store, Supermarket Sales Y/Y: No est v 2.7% prior.

- 21:00 (AU) Australia Jun Consumer Inflation Expectation Survey: No est v 4.1% prior.

- 21:00 (NZ) New Zealand Jun ANZ Business Confidence: No est v 11.2 prior; Activity Outlook: No est v 11.8 prior.

- 21:30 (CN) China May YTD Industrial Profits Y/Y: No est v 4.3% prior; May Industrial Profits Y/Y: No est v 4.0% prior.

- 21:30 (AU) Australia Q1 Job Vacancies Q/Q: No est v -6.1% prior.

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