Historic defeat for conservatives expected with UK vote underway

 EU mid-market update: Historic defeat for Conservatives expected with UK vote underway; US celebrates Independence Day; Big Biden interview now Friday primetime.

Notes/observations

- FTSE100 outperforms European peers and Gilts sell off on confidence that UK election predictions are now locked in place. Overall, equity rally continues from weak US ISM Services which contracted for first time since May 2020, supporting bull case for lower rates.

- UK election day is in progress, with latest pre-voting poll putting Labour on track to win as much as 431 seats compared to 100 at most for Conservatives for the first time since Labour party Tony Blair's 179-seat majority in 1997, which began his 13-year rule. Polls close at 17:00 ET (21:00 GMT) with release of exit poll. Official results roll out from 18:00 ET (22:00 GMT) with most councils reporting by 00:00ET (04:00 GMT) on Fri.

- According to first poll after Macron’s center and the left parties formed the anti-far-right pact, Le Pen's National Party projected to win 190-220 seats [289 seats needed for absolute majority] in 2nd election round of French parliamentary elections this Sunday.

- ABC News shifted Biden's Stephanopoulos interview to Friday primetime from Sunday morning slot; The first clip of Biden's interview will air on "World News Tonight with David Muir" Friday evening and then it will be broadcast in its entirety from 20:00 ET; Democratic Rep. Jim Clyburn, a top ally of Joe Biden, said that if the president steps aside from the election, he would expect to see a “mini-primary” ahead of the Democratic National Convention mid-August with Kamala Harris and Democratic governors vying for the top two spots on the party’s ticket.

- Quite session overall for news as US cash and bond trading closed for Independence Day, futures remain open.

- Focus turns to ECB minutes at 07:30 ET and US nonfarm payrolls on Fri.

- Asia closed mixed with ASX200 higher by +1.2%. EU indices are higher by -0.3% to +0.8%. US futures are+0.2% to -0.1%. Gold +0.1%, DXY -0.2%; Commodity: Brent -0.5%, WTI -0.6%; Crypto: BTC -4.9%, ETH -5.3%.

Asia

- China Commerce Ministry (MOFCOM): Anti-dumping probe into EU pork is still ongoing.

-China Pres Xi: Calls on Russia to step up alignment on development and strengthen strategic coordination; We need to defend stability of supply and industrial chains - comments from Kazakhstan.

-China Foreign Ministry: China, Russia and Mongolia vow to maintain regional peace.

- Japan PM Kishida: Japan plans 4-way Summit with South Korea, Australia, New Zealand on the sidelines of next week's NATO meeting in the US - Japanese media, citing officials.

-Reportedly Japan will help Southeast Asia build local-language AI models - Nikkei.

-Philippines Armed Forces Chief: Philippines demands PHP60M compensation from China over the June resupply boat clash in South China Sea.

-Bank of Korea (BOK) Official: Monetary policy targets inflation rate and not cost of living.

Europe

-EU moves ahead with tariffs on China EV Imports, effective July 5th.

-UK PM Sunak has confided to members of his inner circle that he is fearful of losing his Yorkshire constituency at the general election on July 4th - UK Press.

-Le Pen's National Party projected to win 190-220 seats [289 seats needed for absolute majority] in 2nd election round of French parliamentary elections this Sunday - first poll after Macron’s centre and the left parties formed the anti-RN pact.

-Ireland Fin Min Chambers: To present annual budget on Oct 1st.

-ECB’s Centeno (Portugal, dove): Economic policy decisions should be gradual.

-ECB's Stournaras (Greece, dove): Two more rate cuts possible this year; Rates should be restrictive even after two more cuts - press interview.

-Turkey Central Bank (CBRT) Gov Karahan: To maintain tight policy and monitor data; Still have way to go on inflation.

-Basel banking regulator committee agreed to consult on principles or sound management of third-party risk - press.

-Portugal to reintroduce tax breaks for skilled foreigners - FT.

Americas

-FOMC May Minutes: Some officials said need to be ready to respond to unexpected weakness; Several members said might need to raise rates if inflation persists.

-Fed's Goolsbee (non-voter for 2024): 'It takes time' to bring inflation back to 2%; Keeping rates high too long is 'a danger' - BBC interview.

-Reportedly Pres Biden told a confidant that he is considering whether to stay in the race - NYT; Reportedly dozens of House Democrats are considering sending letter to White House demanding Biden withdraw from race - press; Democrat Governors upon meeting Pres Biden: "We have Biden's back".

-Former Pres Trump posted allegedly leaked video of him saying, among other things: "He's quitting the race. I got him out the race, and that means we have Kamala. I think she's going to be better. She's so bad. She's so pathetic."

-Argentina Pres Milei is seeking 'deficit zero' in budget draft by 2025 - press.

- Peru Fin Min Artista: Peruvian economy in May to grow 4.5-5.0% on y/y basis.

-Brazil Fin Min Haddad: Govt can bring forward some planned spending cuts in 2024 to comply with fiscal framework - financial press.

Global conflict/tensions

-IAEA: Zaporizhzhia nuclear plant informed IAEA of several drone strikes in vicinity of site today.

-Hamas: Exchanged 'some ideas' with mediators to end war in Gaza - Statement.

-Israel’s military killed a senior Hezbollah commander in an airstrike in south Lebanon - press.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.45% at 516.98, FTSE +0.71% at 8,229.53, DAX +0.31% at 18,436.05, CAC-40 +0.70% at 7,685.47, IBEX-35 -0.29% at 11,024.32, FTSE MIB +0.76% at 34,101.00, SMI 0.00% at 12,029.70, S&P 500 Futures +0.05%].

Market focal points/key themes: European indices open generally higher but faded some of the gains in early trading; among sectors trending higher are consumer discretionary and industrials; sectors inclined to the downside include utilities and telecom; information technology sector weighed down by Ericsson; Barclays sells its European consumer bank unit to Bawag; focus on release of ECB minutes later in the day; US closed for holiday.

Equities

- Financials: Societe Generale [GLE.FR] +2.5% (French 2nd election round poll), Sabadell [SAB.ES] +1.0% (Chairman letter).

-Industrials: Continental [CON.DE] +10.5% (positive pre-close Q2 analyst update), Victrex [VCT.UK] -5.5% (sales).

-Healthcare: Novo Nordisk [NOVOB.DK] -1.0% (potential link between Ozempic and Wegovy and a serious eye condition revealed in new study), Roche [ROG.CH] -2.0% (negative trial data), Smith & Nephew [SN.UK] +7.0% (stake), Sartorius Stedim Biotech [DIM.FR] +3.0% (analyst action).

-Telecom: Ericsson [ERICB.SE] -2.0% (impairment charge).

Speakers

-ECB’s Centeno (Portugal, dove): Economic policy decisions should be gradual.

-Russia Central Bank (CBR) Dep Gov Zabotkin: Inflation to peak in July; Russia Central Bank to consider 100-200bps hike in July.

-Turkey Central Bank (CBRT) Gov Karahan: To maintain tight policy and monitor data; Still have way to go on inflation.

-Fed's Goolsbee (non-voter for 2024): 'It takes time' to bring inflation back to 2%; Keeping rates high too long is 'a danger' - BBC interview.

-ECB's Stournaras (Greece, dove): Two more rate cuts possible this year; Rates should be restrictive even after two more cuts - press interview.

Economic data

-(CY) Cyprus Jun CPI M/M: -0.1% v 0.6% prior; Y/Y: 2.9% v 2.7% prior.

-(UK) Jun Construction PMI: 52.2 v 54.0e.

-(UK) Jun New Car Registrations Y/Y: 1.1% v 1.7% prior.

-(DE) Germany Jun Construction PMI: 39.7 v 38.5 prior.

-(CZ) Czech May Retail Sales (ex-auto) Y/Y: 4.4% v 5.3%e.

-(CH) Swiss Jun CPI M/M: 0.0% v 0.1%e; Y/Y: 1.3% v 1.4%e; CPI EU Harmonized M/M: -0.1% v +0.3% prior; Y/Y: 1.3% v 1.5% prior; -CPI Core Y/Y: 1.1% v 1.2% prior.

-(DE) Germany May Factory Orders M/M: -1.6% v +0.5%e; Y/Y: -8.6% v -6.1%e.

-(CH) Swiss Jun Unemployment Rate: 2.3% v 2.2%e; Unemployment Rate (seasonally adj): 2.4% v 2.4%e.

-(RU) Russia May Unemployment Rate: 2.6% v 2.6%e.

-(RU) Russia May Real Retail Sales Y/Y: 7.5% v 7.2%e.

Fixed income issuance

-France Debt Agency (AFT) sells €10.5B vs €8.0-10.5B indicated in 2033, 2034, 2053 and 2066 bonds.

-Spain Debt Agency (Tesoro) sells €520M vs. €750M indicated range in 0.7% Nov 2033 inflation-linked bonds (SPGBei).

-Spain Debt Agency (Tesoro) sells €5.906B v €6.00B indicated in 2027, 2031 and 2035 SPGB bonds.

-Japan sells ¥900B vs. ¥900B indicated in 30-year JGB bonds; Avg Yield: 2.1900% v 2.1560% prior, Bid-to-cover: 2.97x v 3.59x prior.

-Thailand Central Bank sells THB40B v THB40B indicated in 6-month bills: Avg Yield 2.50490% v 2.36909% prior ; bid-to-cover: 1.85x v 1.10x prior.

-New Zealand sells total NZ$494M vs. NZ$500M indicated in 2031, 2034 and 2041 bonds.

Looking ahead

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 06:00 (IL) Israel May Chain Store Sales M/M: No est v -3.4% prior.

- 07:00 (RO) Romania sells RON800M in 6-month bills.

- 07:00 (RO) Romania sells RON300M in 7.35% 2031 bonds.

- 07:00 (ZA) South Africa May Electricity Consumption Y/Y: No est v 6.2% prior; Electricity Production Y/Y: No est v 5.7% prior.

- 07:30 (TR) Turkey Jun Real Effective Exchange Rate (REER)c: No est v 61.46 prior.

- 07:30 (EU) ECB Account of Jun Policy Meeting (Minutes).

- 08:00 (MX) Mexico May Leading Indicators M/M: No est v 0.10 prior.

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

- 09:00 (PL) Poland Central Bank Gov Glapinski post rate decision press conference.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 28th: No est v $593.1B prior.

- 09:00 (BR) Brazil Jun Vehicle Production: No est v 166.7K prior; Vehicle Sales: No est v 194.3K prior; Vehicle Exports: No est v 26.8K prior.

- 09:30 (CA) Canada Jun Services PMI: No est v 51.1 prior; Composite PMI: No est v 50.6 prior.

- 10:15 (EU) ECB’s Cipollone.

- 11:00 (CO) Colombia May Exports FOB: No est v $4.4B prior.

- 14:00 (BR) Brazil Jun Trade Balance: No est v $8.5B prior; Imports: No est v $21.8B prior; Exports: No est v $30.3B prior.

- 18:00 (CO) Colombia Central Bank Jun Minutes.

- 19:00 (KR) South Korea May Current Account: No est v -$0.3B prior; Balance of Goods (BoP): No est v $5.1B prior.

- 19:30 (JP) Japan May Household Spending Y/Y: No est v 0.5% prior.

- 21:00 (PH) Philippines Jun CPI M/M: No est v 0.1% prior; Y/Y: No est v 3.9% prior.

- 22:35 (CN) China to sell 30-year special bonds.

- 23:00 (ID) Indonesia Jun Foreign Reserves: No est v $139.0B prior.

- 23:30 (JP) Japan to sell 3-month bills.

- 23:30 (TH) Thailand Jun CPI M/M: No est v 0.6% prior; Y/Y: No est v 1.5% prior; CPI Core Y/Y: No est v 0.4% prior.