Various EU inflation data hints of deflation concerns; risk aversion sentiment resurfaces

Notes/Observations

- Markets focus back to fundamentals with key GDP and inflation data scheduled over the next couple of sessions

- EU inflation data hints of deflation (Spain and many Germany States registered negative YoY readings)

- German 2Q GDP data missed expectations and registered its largest contraction in over four decades

 

Asia:

- Japan Jun Retail Sales beat expectations (M/M: 13.1% v 8.0%e; Y/Y: -1.2% v -5.7%e

- Australia Jun Building Approvals M/M: -4.9% v -2.8%e

 

Coronavirus:

- Total global cases 16,978,206 (+1.9% d/d); total deaths: 666.2K (+1.1% d/d)

- US death toll move beyond the 150K mark

- Australia Victoria Premier announced that face masks were now mandatory across all of the state; Restrictions sent to certain regional areas of the area

- Tokyo Gov seeks to limit hours for bars and karaoke parlors to limit virus spread

- Russia said to be aiming to get approval for first virus vaccine by mid-August; expecting to produce 30M doses in Russia and 170M doses worldwide by end of year

 

Europe:

- Italy Senate voted to approve €25B in extra govt spending

 

Americas:

- FOMC kept policy steady (as expected) with vote being unanimous. Noted economy had picked up in recent months but still below pre-pandemic levels. To keep rates very low until confident economic recovery was underway; would increase asset holdings at the current pace

- Fed's Powell post rate decision po: household spending looks to have recovered to about half of where it was before the pandemic; Concerned about the sharp rise in COVID cases; saw signs that the rise in virus cases was weighing on the economy

- White House Chief of Staff Meadows stated that was not making progress in stimulus talks; now expected extra unemployment benefits to expire

- Senate Leader McConnell stated that was hoping to reach a deal on unemployment benefits by Friday (July 31st)

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -1.31% at 363.04, FTSE -1.59% at 6,035.65, DAX -2.29% at 12,528.35, CAC-40 -0.97% at 4,910.80, IBEX-35 -1.81% at 7,076.00, FTSE MIB -2.06% at 19,468.50, SMI -0.95% at 10,175.49, S&P 500 Futures -0.95%]

Market Focal Points/Key Themes: European indices open mixed and turned negative as the session wore on; negative risk sentiment attributed to increase in coronavirus cases; better performing sectors include consumer discretionary and utilities; underperfomres include financials and telecom; Telefonica divests Costa Rica unit; earnings expected in the upcoming US session include UPS, Cigna, Procter & Gamble, and Eli Lilly

 

Equities

- Consumer discretionary: AB InBev [ABI.BE] +6% (earnings), Hermes [RMS.FR] -3% (earnings)

- Materials: ArcelorMittal [MT.NL] +2% (earnings)

- Energy: Total [FP.FR] +2% (earnings), Royal Dutch Shell [RDSA.NL] -1% (earnings)

- Financials: Credit Suisse [CSGN.CH] +1.5% (earnings)

- Healthcare: Astrazeneca [AZN.UK] +3% (earnings)

- Industrials: Airbus [AIR.FR] +4% (earnings), Volkswagen [VOW3.DE] -4.5% (earnings), Renault [RNO.FR] -3% (earnings), Kion [KGX.DE] -5% (earnings)

- Telecom: Orange [ORA.FR] -3% (earnings)

 

Speakers

- ECB's Villeroy (France): France 2020 GDP could be a tad better than the 10% contraction forecasted

- ECB's Vasiliauskas (Lithuania) stated that he would not rush to discuss additional measures

- ECB Economic Bulletin noted that incoming information since the last monetary policy meeting in early June signaled a resumption of euro area economic activity but remained well below the levels prevailing before the coronavirus (COVID-19) pandemic and the outlook remained highly uncertain

- Japan Cabinet Office updated economic outlook which forecasted FY20/21 GDP (current year) at -4.5% (in-line with speculation)

- Italy govt said to extend its Covid-10 emergency decree from July 31st until Oct 15th

- Tokyo (Japan) Gov Koike noted that virus situation called for immediate action but not realistic to ask businesses to close completely. To ask bars and karoke to limit hours

- Thailand Finance Ministry commented on its outlook and believed the domestic economy had seen its worst in Q2. forecasted 2020 GDP at -8.5% and saw 2021 GDP growth between 4.0-5.0%

- Taiwan Central Bank (CBC) Jun Minutes showed that 1 member believed that no change in policy left room for additional cuts if needed. Another member stated that having ample liquidity at this time meant no cut was necessary

 

Currencies/ Fixed Income

- USD recovered some of its recent steep losses as some risk aversion flows seeped back into market sentiment. Markets focus moved back to fundamentals with key GDP and inflation data scheduled over the next couple of sessions

- EUR/USD was lower by 0.5% to move below 1.1735 level as EU inflation data hinted of deflation (Spain and many Germany States registered negative YoY readings). German 2Q GDP data missed expectations and registered its largest contraction in over four decades

- USD/JPY higher by 0.2% at 105.15 by mid-session

- GBP/USD hovered just under the 1.30 level by mid-session

 

Economic Data

- (NL) Netherlands July Producer Confidence Index: -8.7 v -15.1 prior

- (DK) Denmark Jun Gross Unemployment Rate: 5.5% v 5.6% prior; Unemployment Rate (Seasonally Adj): 5.1% v 5.3% prior

- (FR) France Jun PPI M/M: +0.7 v -0.1% prior; Y/Y: -2.7 v -4.0% prior

- (ES) Spain July Preliminary CPI M/M: -0.9% v -0.7%e; Y/Y: -0.6% v -0.3%e

- (ES) Spain July Preliminary CPI EU Harmonized M/M: -1.6% v -1.0%e; Y/Y: -0.7% v -0.2%e

- (DE) Germany July CPI Saxony M/M: -0.5% v +0.6% prior; Y/Y: 0.2% v 1.0% prior

- (CH) Swiss July KOF Leading Indicator: 85.7 v 75.0e

- (TR) Turkey July Economic Confidence: 82.2 v 73.5 prior

- (AT) Austria Q2 Preliminary GDP Q/Q: -10.7% v -2.4% prior; Y/Y: -12.8% v -2.8% prior

- (AT) Austria Jun PPI M/M: +0.2% v -0.4% prior; Y/Y: -2.1% v -2.6% prior

- (SE) Sweden May Non-Manual Workers Wage Y/Y: 1.5% v 1.8% prior

- (DE) Germany July Net Unemployment Change: -18.0K v +41.0Ke; Unemployment Claims Rate: 6.4% v 6.5%e

- (DE) Germany Q2 Preliminary GDP Q/Q: -10.1% v -9.0%e; Y/Y: -11.7% v -11.5%e; GDP NSA Y/Y: -11.7% v -10.7%e

- 04:00 (DE) Germany July CPI Brandenburg M/M: % v 0.7% prior; Y/Y: % v 1.0% prior

- (DE) Germany July CPI Hesse M/M: -0.4% v +0.6% prior; Y/Y: -0.1% v +0.8% prior

- (DE) Germany July CPI Bavaria M/M: -0.5% v +0.8% prior; Y/Y: 0.0% v 0.8% prior

- (DE) Germany July CPI Baden Wuerttemberg M/M: -0.1% v +0.5% prior; Y/Y: 0.3% v 0.8% prior

- (IT) Italy Jun Preliminary Unemployment Rate: 8.8% v 8.6%e

- (DE) Germany July CPI North Rhine Westphalia M/M: -0.7% v +0.6% prior; Y/Y: -0.2% v +0.9% prior

- (PT) Portugal July Consumer Confidence Index: -28.3 v -33.1 prior; Economic Climate Indicator: -2.9 v -4.3 prior

- (HK) Hong Kong Jun Retail Sales Value Y/Y: -24.8% v -24.0%e; Retail Sales Volume Y/Y: -25.4% v -24.7%e

- (EU) Euro Zone Jun Unemployment Rate: 7.8% v 7.7%e

- (EU) Euro Zone July Economic Confidence: 82.3 v 81.3e; Industrial Confidence: -16.2 v -17.3e; Services Confidence: -26.1 v -24.0e; Consumer Confidence (final): -15.0 v -15.0 advance

- (BE) Belgium Q2 Preliminary GDP Q/Q: -12.2% v -3.5% prior; Y/Y: -14.5% v -2.4% prior

- (BE) Belgium Jun Unemployment Rate: 5.5% v 5.4% prior

 

Fixed Income Issuance

- (DK) Denmark sold total DKK5.6B in 1-month, 3-month, 6-month and 12-month bills

- (IT) Italy Debt Agency (Tesoro) sold total €6.0B vs. €5.0-6.0B indicated range in 5-year and 10-year BTP Bonds

- Sold €2.75B vs. €2.25-2.75B indicated range in 1.85% July 2025 BTP bonds; Avg Yield: 0.46% v 0.68% prior; Bid-to-cover: 1.62x v 1.31x prior (May 29th 2020)

- Sold €3.25B vs. €2.75-3.25B indicated range in 1.65% Dec 2030 BTP; Avg Yield: 1.04% v 1.28% prior; bid-to-cover: 1.38x v 1.60x prior

- (IT) Italy Debt Agency (Tesoro) sold total €1.25B vs. €0.75-1.25B indicated range in Apr 2025 floating rate bonds (CCTeu); Avg Yield: 0.72% v 0.56% prior; Bid-to-cover: 2.55x v 1.74x prior

 

Looking Ahead

- (BE) Belgium July CPI M/M: No est v 0.1% prior; Y/Y: No est v 0.6% prior

- 05:30 (ZA) South Africa Jun PPI M/M: +0.7%e v -0.3% prior; Y/Y: 0.8%e v 0.4% prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds

- 06:00 (IL) Israel Jun Unemployment Rate: No est v 4.2% prior

- 06:00 (PT) Portugal Jun Industrial Production M/M: No est v 2.5% prior; Y/Y: No est v -26.0% prior

- 07:00 (BR) Brazil July FGV Inflation IGPM M/M: 2.2%e v 1.6% prior; Y/Y: 9.2%e v 7.3% prior

- 07:00 (MX) Mexico Q2 GDP Q/Q: -17.0%e v -1.2% prior; Y/Y: -19.4%e v -1.4% prior

- 07:30 (IS) Iceland to sell 6-month bills; Avg Yield: % v 3.181% prior; bid-to-cover: x v 1.02x prior
http://www.lanamal.is/en/treasury-securities/treasury-bills

- 07:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (3-7 years)

- 08:00 (DE) Germany July Preliminary CPI M/M: -0.3%e v +0.6% prior; Y/Y: 0.1%e v 0.9% prior

- 08:00 (DE) Germany July Preliminary CPI EU Harmonized M/M: -0.2%e v +0.7% prior; Y/Y: 0.3%e v 0.8% prior

- 08:00 (ZA) South Africa Jun Budget Balance (ZAR): -23.2Be v -52.4B prior

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

- 08:30 (US) Q2 Advance GDP Annualized Q/Q: -34.8%e v -5.0% prior; Personal Consumption: -34.5%e v -6.8% prior

- 08:30 (US) Q2 Advance GDP Price Index: 0.0%e v 1.4% prior; Core PCE Q/Q: -0.9%e v +1.7% prior

- 08:30 (US) Initial Jobless Claims: 1.43Me v 1.416M prior; Continuing Claims: 16.25Me v 16.197M prior

- 08:30 (US) Weekly USDA Net Export Sales

- 08:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (7-20 years)

- 09:00 (RU) Russia Gold and Forex Reserve w/e July 24th: No est v $574.0B prior

- 09:30 (BR) Brazil Jun Central Govt Budget Balance: -154.8Be v -€126.6B prior

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills

- 12:00 (CA) Canada to sell 3-Year Bonds

- 15:00 (AR) Argentina May Wages M/M: No est v 0.2% prior

- (MX) Mexico Jun YTD Budget Balance: No est v -€148.2B prior

- 18:00 (NZ) New Zealand July Consumer Confidence Index: No est v 104.5 prior

- 19:00 (KR) South Korea Jun Industrial Production M/M: +2.3%e v -6.7% prior; Y/Y: -5.0%e v -9.6% prior

- 19:01 (UK) July Final GfK Consumer Confidence: -26e v -27 prelim

- 19:30 (JP) Japan Jun Jobless Rate: 3.1%e v 2.9% prior; Job-To-Applicant Ratio: 1.15e v 1.2 prior

- 19:30 (JP) Japan Jun Preliminary Industrial Production M/M: +1.0%e v -8.9% prior; Y/Y: -19.3%e v -26.3% prior

- 21:00 (CN) China July Manufacturing PMI: 50.9e v 50.9 prior; Non-manufacturing: 54.5e v 54.4 prior; Composite PMI: No est v 54.2 prior

- 21:10 (JP) BOJ Outright Bond Purchase operation for 5~10 Years; over 25-year maturities

- 21:30 (AU) Australia Jun Private Sector Credit M/M: -0.1%e v -0.1% prior; Y/Y: 3.0%e v 3.2% prior

- 21:30 (AU) Australia Q2 PPI Q/Q: No est v 0.2% prior; Y/Y: No est v 1.3% prior

- 23:00 (CN) China to sell 3-month Bills

- 23:30 (JP) Japan to sell 3-Month Bills