ECB day – TSMC raised outlook citing very high demand

EU mid-market update: ECB day; TSMC raised outlook citing very high demand; Trump to deliver RNC address as pressure on Biden's candidacy growth; China Third Plenum communique; Netflix results tonight.

Notes/observations

-ECB expected to leave rates unchanged this morning; Focus will be on any changes in its statement and ECB Chief Lagarde press conference after the decision for any hints for Sept rate cut

-TSMC, world’s biggest chip contract manufacturer and supplier to Apple and Nvidia, reported Q2 earnings, provided strong Q3 view and also raised FY24 Rev and Capex outlook, noting “demand is so high and its customers are doing very well”; In other news in chip sector, Samsung union (~30K workers, about 25% of Samsung total) and Samsung management may resume wage talks as its strike enters into 11th day

-Former Pres Trump set to deliver his keynote RNC address tonight

-White House confirmed Pres Biden tested positive for COVID and experiencing 'mild symptoms'; Pressure on Biden to drop his candidacy seem to be growing as US press reports that former House of Representatives speaker Pelosi reportedly told Pres Biden that polls show that he cannot beat Trump; One Pelosi ally said it was possible she would press Biden publicly to give up his spot atop the Democratic ticket; Note: Axios piece earlier said Biden respects Pelosi's iconic stature, "he would listen to her"; Biden himself yesterday said he would consider stepping down from 2024 race "if he had some medical condition"; The same day, he also mentioned that Kamala Harris is not only a great vice president, but "she could be president of the US”

-China Communist Party Central Committee put communique for Third Plenum meeting; Pledged to build high-level socialist market economic system by 2035 as it is “necessary to give more play to role of market mechanism”; It noted Urban-Rural integrated development is inevitable for China; Reforms put forward at Plenum to be completed by 2029

-Boeing's International Association of Machinists & Aerospace Workers (IAM) District 751 (represents ~31K Boeing workers) in Washington state confirmed that Seattle area factory workers approve strike with vote of >99%; : IAM workers contract expires on Sept 12th

-May-June UK wages and employment data was broadly in line with analysts’ expectations with claimant count rate ticking up

-Former BOJ Dir Hideo Hayakawa overnight said BOJ likely to 'skip' rate hike later this month

-Netflix results tonight will provide color how US tech/consumer sector is doing in current economic environment

- Asia closed mostly higher with KOSPI underperforming at -0.7%. EU indices are -0.5% to +0.8%. US futures are +0.2-0.7%. Gold +0.4%, DXY +0.1%; Commodity: Brent -0.1%, WTI +0.2%; Crypto: BTC +0.8%, ETH +1.5%

Asia

- (CN) China CCP third plenum communique: china to better maintain market order; to build high-level socialist market economic system by 2035; to promote reform in taxation and finance sector - press [**Note: some analysts point out that precise reform plans may be unveiled at upcoming Politburo meeting end-July]

- (JP) Former BoJ Dir Hideo Hayakawa: BOJ likely to 'skip' rate hike later this month; Does NOT think there is a chance of a rate hike in July

-(JP) Bank of Japan (BoJ) accounts data suggests no new intervention on july 17th - Press

- (SG) Singapore Central Bank (MAS) Chief: Core inflation expected to stay on disinflation path; Will ease more significantly in Q4

- (AU) Australia Jun employment change: +50.2K V +20.0KE; unemployment rate: 4.1% V 4.1%E

(KR) Reportedly Samsung union (~30K workers, about 25% of Samsung total) and Samsung management may resume wage talks as its strike enters into 11th day - press

Taiwan

- (TW) Taiwan Premier Cho: To introduce NT$3-4T to invest in major construction and important industries; Fund will be raised from local and overseas markets

Ukraine conflict

- (RU) Russian Deputy Foreign Min Ryabkov: Russia does Not exclude deployment of missiles with nuclear warheads in response to deployment of US missile in Germany

- (EU) NATO Sec Gen Stoltenberg: NATO Command center for Ukraine will be operational in Sept in Germany - press

- (RU) Russia Foreign Min Lavrov: Welcomes J.D. Vance stance on Ukraine, saying 'need to stop pumping Ukraine full of weapons and then the war will end' - UN comments

Europe

- (EU) EU Commission President Von Der Leyen: I will launch clean industry deal to cut emissions and energy prices; Will appoint a Commissioner for Defense; Will focus on building a "True European Defence Union" over next five years - guidelines for next 5 years

- (EU) EU27 Jun New Car Registrations: +4.3% v -3.0% prior

Americas

- (US) Unidos Official: US Pres Biden tests positive for Covid-19, noted that Biden said he could not appear at the Unidos event

- (US) Former House of Representatives speaker Pelosi reportedly told Pres Biden that polls show that he cannot beat Trump; Pelosi said to have told she and other Democratic lawmakers worry that he’s dragging down the party; One Pelosi ally said it was possible she would press Biden publicly to give up his spot atop the Democratic ticket - US press [**Note: Axios piece earlier said Biden respects Pelosi's iconic stature, "he would listen to her"]

- (US) J.D. Vance (R-OH and Trump VP running-mate): Officially accepts Republican nomination for Vice President - speech at Republican National Convention in Milwaukee, WI

- (US) TTN Reminder: International Longshoremen's Association (ILA), which represents 45,000 dockworkers at US East and Gulf Coast ports, last week highlighted a lack of progress in negotiations with the United States Maritime Alliance (USMX) over a new 6-year master contract; Tier1 analysts see the lack of progress heightening the risk for a potential strike in October 2024 [**Note: current ILA contract set to expire on Sept 30th, 2024].

 - (US) Reportedly Sen Menendez (D-NJ) tells allies he intends to resign following convictions - X post.

- (US) Federal Reserve Beige Book: Economic activity maintained a slight to modest pace of growth in a majority of districts this reporting cycle; expectations for the future of the economy were for slower growth over the next six months due to uncertainty around the upcoming election, domestic policy, geopolitical conflict, and inflation.

Energy

-OPEC+ delegates reportedly do Not see oil production hike plan changes at Aug meeting - press

- (US) DOE CRUDE: -4.90M V 0.0ME; GASOLINE: +3.3M V -1.3ME; DISTILLATE: +3.5M V -0.4ME

- (RU) Russia oil and gas Revenue to increase +50% in Juiy to $14B - financial press

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 +0.42% at 517.02, FTSE +0.83% at 8,255.57, DAX +0.20% at 18,480.95, CAC-40 +0.56% at 7,613.03, IBEX-35 +0.75% at 11,188.00, FTSE MIB +0.70% at 34,620.00, SMI -0.40% at 12,281.14, S&P 500 Futures +0.31%].

Market focal points/key themes: European indices open generally higher but faded gains to trade mixed after the first hours of trading; better performing sectors include communication services and energy; sectors inclined to the downside include consumer staples and technology; chip sector helped by TSMC results and raised outlook; media subsector supported following strong results from Publicis; oil & gas subsector gaining following jump in Brent prices; Fortum divests its recycling and waste unit to Summa Equity; Merck to acquire Unity-SC; focus on upcoming ECB rate decision; earnings expected in the upcoming US session include DR Horton, Keycorp, Textron and Blackstone.

Equities

- Consumer discretionary: International Distributions Services [IDS.UK] +0.5% (trading update)

- Materials: Anglo American [AAL.UK] +1.0% (copper production)

- Healthcare: Novartis [NOVN.CH] -2.0% (earnings)

- Industrials: Airbus Group [AIR.FR] +1.0% (Boeing union votes to authorise potential strike when contract expires in Sept), Volvo [VOLVARB.SE] +4.5% (earnings), ABB [ABBN.CH] -5.5% (earnings)

- Technology: ASML [ASML.NL] -0.5% (TSMC earnings, raised outlook; Samsung union and management may resume wage talks), Darktrace [DARK.UK] +1.5% (trading update)

- Telecom: Nokia [NOKIA.FI] -7.5% (earnings), Publicis [PUB.FR] +5.0% (earnings; raised outlook)

Speakers

- BOJ Osaka branch manager: We want to maintain accommodative monetary environment as much as possible; Next monetary policy meeting is extremely important - press

- (SG) Singapore Central Bank (MAS) Chief: Core inflation expected to stay on disinflation path; Will ease more significantly in Q4

- (TW) Taiwan Premier Cho: To introduce NT$3-4T to invest in major construction and important industries; Fund will be raised from local and overseas market

Currencies/Fixed income

Economic data

- (UK) Jun jobless claims change: +32.3K V +50.4K prior; claimant count rate: 4.4% V 4.3% prior.

- (UK) May average weekly earnings 3M/Y: 5.7% V 5.7%E

- (EU) EU Jun New Car Registrations +4.3% v -3.0% prior

- (PL) Poland Jun Sold Industrial Output M/M: 3.2% v 1.8%e; Y/Y: +0.3% v -1.5%e

- (NL) Netherlands Jun Unemployment Rate: 3.6% v 3.7%e

-(EU) Euro Zone May Construction Output M/M: -0.9% v -0.4% prior; Y/Y: -2.4% v -1.5% prior

Fixed income issuance

- (FR) France debt agency (AFT) sells €11.497b vs €9.5-11.5b** indicated in 2027, 2030 and 2032 bonds

- (ES) Spain debt agency (TESORO) sells total €6.45B VS. €5.5-6.5B in 2030, 2034 and 2037 bonds

- (IN) India sells total INR200B vs. INR200B indicated in 3-month, 6-month and 12-month bills

Looking ahead

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

- 05:50 (FR) France Debt Agency (AFT) to sell I/L Bonds (Oatei).

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

- 08:15 (EU) ECB Interest Rate Decision: Expected to leave Key Rates unchanged.

- 08:30 (US) July Philadelphia Fed Business Outlook: No est v X prior.

- 08:30 (US) Initial Jobless Claims: No est v K prior; Continuing Claims: No est v M prior.

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

- 08:45 (EU) ECB Chief Lagarde post rate decision press conference.

- 09:00 (RU) Russia Gold and Forex Reserve w/e July 12th: No est v $B prior.

- 09:00 (ZA) South Africa Central Bank (SARB) Interest Rate Decision.

- 10:00 (US) Jun Leading Index: No est v % prior.

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

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

- 12:00 (CO) Colombia May Economic Activity Index (Monthly GDP) Y/Y: No est v % prior.

- 13:00 (US) Treasury to sell 10-Year TIPS.

- 13:30 (CA) Bank of Canada (BOC) Summary of Deliberations.

- 13:45 (US) Fed's Logan.

- 15:00 (AR) Argentina Jun Trade Balance: No est v $B prior.

- 15:00 (AR) Argentina May Economic Activity Index (Monthly GDP) M/M: No est v % prior; Y/Y: No est v % prior.

- 16:00 (US) May Net Long-Term TIC Flows: No est v $B prior; Total Net TIC Flows: No est v $B prior.

- 18:05 (US) Fed's Daly.

- 19:01 (UK) July GfK Consumer Confidence: No est v X prior.

- 19:30 (JP) Japan Jun National CPI Y/Y: No est v % prior; CPI Ex-Fresh Food (core) Y/Y: No est v % prior; CPI Ex-Fresh Food, Energy (core-core) Y/Y: No est v % prior.

- 19:30 (US) Fed's Bowman.

- (EG) Egypt Central Bank Interest Rate Decision.

- 22:35 (CN) China to sell 20-year special bonds; Avg Yield: % v 2.49% prior; bid-to-cover x v 4.34x prior (May 23rd 2024).

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