US CPI day – UK economic data sends mixed signals to new UK Cabinet

EU mid-market update: US CPI day; UK economic data sends mixed signals to new UK Cabinet; Israeli press think Gaza ceasefire deal within reach; Focus on first Q2 season earners and Biden's solo press conference.

Notes/observations

- UK released first pack of economic data under new UK PM Starmer and his cabinet; May’s UK monthly GDP came better than expected, returning to growth, while industrial production missed estimates highlighting the need for new UK officials to boost domestic economy; British pound nearing 1-year high against the US dollar after BOE's Pill comments yesterday.

- June’s US CPI and weekly jobless claims data to provide traders with insights on US economy state.

- CostCo US monthly SSS accelerated from prior month; Q2 earnings season officially commences today with PepsiCo, Delta Air and Conagra Brands to report results in the morning.

- US Pres Biden to meet with Ukrainian Pres Zelenskiy and also give solo press conf at NATO summit this evening; Meanwhile, Sen Peter Welch (D-Vt.) said "for the good of the country, I'm calling on President Biden to withdraw from the race.", becoming the first Senate Democrat to publicly call Biden to exit race after Sen Michael Bennet (D-Colo.) was the first Senate Democrat to publicly criticize Biden's bid yesterday.

- Jerusalem Post published the piece saying ceasefire deal 'within reach,' which would include interim gov't in Gaza.

- Ahead of ECB blackout period until rate decision next week, ECB’s Villeroy said France can't keep widening its deficit; Reminder: the newly elected members of the French parliament will convene by July 18th in accordance with Article 12 of the French Constitution. Focus remains on informal talks regarding any potential coalition between the far-left and centrists.

- Bank of Korea and Malaysia Central Bank both held rates unchanged overnight; Within the Bank of Korea. 2 members were open for cut today versus just 1 at May's meeting.

-  Asia closed higher with Hang Seng outperforming +2.1%. EU indices are +0.2-1.2%. US futures are -0.1-0.0%. Gold +0.2%, DXY -0.1%; Commodity: Brent +0.2%, WTI +0.2%; Crypto: BTC +0.7%, ETH +0.7%.

Asia

- (KR) Bank of Korea (BoK) leaves 7-day repo rate unchanged at 3.50%; as expected; To consider rate cut timing while assessing CPI and financial stability; 2 members were open for cut (v just 1 in May).

- (MY) Malaysia central bank (BNM) leaves overnight policy rate unchanged at 3.00%.

- (CN) China CSRC: Implements concrete measures to limit program trading - Chinese media.

- Ralph Lauren CEO: China is doing very well for Ralph Lauren - tv interview.

Taiwan

- (TW) Taiwan’s Defence Ministry: 56 Chinese aircraft crossed sensitive median line.

Mid-East

-(IL) Jerusalem Post: Ceasefire deal 'within reach,' US official says, which includes interim gov't in Gaza.

Ukraine conflict

-(US) US Pres Biden to meet with Ukrainian Pres Zelenskiy and also give solo press conf at NATO summit around 17:30ET on Thursday.

Europe

*(UK) May monthly GDP M/M: 0.4% V 0.2%E.

*(UK) May industrial production M/M: 0.2% V 0.3%E; Y/Y: 0.4% V 0.6%E.

*(UK) May visible trade balance: -£17.9B V -£16.6BE.

*(DE) Germany May final CPI M/M: 0.1% V 0.1%E; Y/Y: 2.2% V 2.2%E.

-(FR) ECB's Villeroy (France): We will come back toward 2% inflation target; France can't keep widening its deficit.

-Apple settles EU antitrust probe and avoids fine over tap-and-pay tech (as speculated); EU accepts Apple pledge to open up payment tech to rivals - press citing EU's Commission VP Vestager.

-(IT) Citi analysts see Italy to reduce bond sales by €18B in H2 2024 as Italy’s cash deficit has been coming in better than the govt's earlier expectations.

-(UK) Ofwat sets out record £88B upgrade to deliver cleaner rivers and seas, and better services for customers.

- (UK) FCA: overhauls listing rules to boost growth and innovation on UK stock markets; The new rules will apply from 29 July.

-(KN) Kenya President William Ruto said to address nation at ~7:00ET amid anti-tax riots - press.

Americas

-(US) Cleveland Fed’s Inflation Nowcast forecasting June US CPI Y/Y at 3.1% (to be released this morning) v 3.3% in May; Also forecasting July US CPI Y/Y to accelerate again to 3.2%.

-(US) Fed's Cook (voter): US data so far seems consistent with a soft landing; Expects more disinflation without much rise in unemployment.

-(US) Sen Peter Welch (D-Vt.): Biden should withdraw for the good of the country - WaPo [**Note: the first Senate Democrat to publicly call Biden to exit race after Sen Michael Bennet (D-Colo.) was the first Senate Democrat to publicly criticize Biden's bid yesterday].

-(US) Former US Pres Trump said to consider plans to cut US intel sharing with NATO - US press, citing foreign officials informed of Trump's NATO plans.

-CostCo reports June Total SSS +6.9% y/y (ex-gas and FX) v +6.5% prior; US SSS +6.3% (ex-gas and FX) v +5.7% prior; Plans to increase annual membership fees by ~8% (first increase since 2017).

-(US) Tier1 week-to-June 27th US Truckload Demand Indicator at 52.8 v 53.1 prior (below 54 avg freight recession level) [**Note: indicator has 81% correlation in leading ISM by a month].

-(US) Fed futures price 71% chance (v 74% d/d) for a rate cut by Sept 18th's meeting ahead of US CPI and jobless claims data.

-(US) Association of American Railroads weekly rail traffic report for week ending July 6th 421.8K total units, +3.3% y/y.

-(AR) Argentina Pres Milei: Regarding dollarization, Argentina will pick a fixed of floating FX rate when the CPI is near zero - financial press.

Energy

-Pres Biden said to seek 4.5M barrels for SPR.

-IEA Monthly Oil Report (OMR): Iran’s crude oil production rises to six-year high; China oil consumption contracted in Q2.

-International Battery Metals reportedly becomes the first company to commercially produce lithium with version of a direct lithium extraction (DLE) technology, a novel type of filtration technology - press.

AI

-(US) Goldman Sachs analysts: Equity investors are becoming more skeptical about companies that are investing heavily to monetize AI and generate productivity gains; Investors are increasingly concerned about the potential returns to the hyperscalers’ AI investment.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.42% at 518.60, FTSE +0.41% at 8,226.81, DAX +0.11% at 18,437.05, CAC-40 +0.53% at 7,613.64, IBEX-35 +0.21% at 11,094.61, FTSE MIB -0.01% at 34,302.00, SMI +1.10% at 12,278.88, S&P 500 Futures -0.09%].

Market focal points/key themes: European indices open mixed with a bias towards the upside which became a trend after the first hours of trading; markets seen supported by optimism among big tech names; sectors leading the way higher include consumer discretionary and health care; sectors inclined towards the red include energy and communication services; DCC divests stake in Hong Kong and Macau liquid gas business; recruitment firms hit again following disappointing trading update from Hays; focus on release of US CPI later in the day; earnings expected in the upcoming Americas session include Con-Agra Brands, Delta Airlines and PepsiCo.

Equities

- Consumer discretionary: Hays [HAS.UK] +1.0% (trading update; notes activity levels are sequentially stable in ANZ, Asia and the Americas), Galliford Try [GFRD] +7.5% (trading update), Barry Callebaut [BARN.CH] -7.5% (earnings), Jet2 [JET2.UK] +1.0% (earnings).

- Industrials: John Wood Group [WG.UK] -0.5% (trading update).

- Materials: BHP Group [BHP.UK] -0.5% (Nickel West ops and West Musgrave project to be halted from Oct due to oversupply).

- Technology: ams-OSRAM [AMS.CH] +3.0% (Apple said to aims shipping 90M iPhone 16 units in latter half of FY24).

- Utilities: United Utilities [UU.UK] +2.5% (Ofwat draft determinations).

Speakers

- (EU) ECB's Villeroy (France): We will come back toward 2% inflation target; France can't keep widening its deficit.

- (IN) India Govt Official: Commenting on term oil deal with Russia, private refiners are negotiating term deals with Russia - financial press.

- (CZ) Czech Central Bank (CNB) Vice Gov Zamrazilova: Rates at 4% by end-of-year 'quite realistic' - financial press.

Currencies/fixed income

Economic data

- (SE) Sweden Jun PES Unemployment Rate: 3.4% v 3.2% prior.

- (TH) Thailand Jun Consumer Confidence: 58.9 v 60.5 prior.

- (UK) May Monthly GDP M/M: 0.4% V 0.2%e.

- (UK) May Industrial Production M/M: 0.2% V 0.3%e; Y/y: 0.4% V 0.6%e.

- (UK) May Visible Trade Balance: -£17.9B V -£16.6Be.

- (UK) May Index of Services M/M: 0.3% v 0.2%e; 3M/3M: 1.1% v 1.0%e.

- (DE) Germany May Final Cpi M/M: 0.1% V 0.1%e; Y/y: 2.2% V 2.2%e.

- (SE) Sweden Prospera Inflation Expectations Survey.

- (RO) Romania Jun CPI M/M: 0.2% v 0.2%e; Y/Y: 4.9% v 4.8%e.

- (TR) Turkey May Retail Sales Y/Y: 5.8% v 10.2% prior.

- (UK) Bank of England (BoE) Quarterly Bank Liabilities/Credit Conditions Surveys.

Fixed income issuance

- (UK) DMO to sell £3.75B in 4.00% Oct 2031 gilts; AVG yield: 4.074% V 4.218% prior; bid-to-cover: 3.29X V 2.97X prior; tail: BPS 0.3BPS V 1.4BPS prior.

- (IT) Italy debt agency (TESORO) sells total €8.5B VS. €7.25-8.5B indicated range in 3-year, 7-year and 19-year BTP bonds.

- (TW) Taiwan sells 5-year bonds; avg yield: 1.660% v 1.630% prior; bid-to-cover: 2.29x v 1.63x prior.

- (NZ) New Zealand sells total NZ$500M vs. NZ$500M indicated in 2029, 2034 and 2037 bonds.

Looking ahead

- 05:30 (ZA) South Africa May Total Mining Production M/M: No est v 0.8% prior; Y/Y: No est v 0.7% prior; Gold Production Y/Y: No est v -1.7% prior; Platinum Production Y/Y: No est v 16.9% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

- 06:00 (IE) Ireland Jun CPI M/M: No est v 0.5% prior; Y/Y: No est v 2.6% prior.

- 06:00 (IE) Ireland Jun CPI EU Harmonized M/M: No est v 0.6% prior; Y/Y (final): No est v % prelim.

- 07:00 (ZA) South Africa May Manufacturing Production M/M: No est v 5.2% prior; Y/Y: No est v 5.3% prior.

- 08:00 (BR) Brazil CONAB Crop Report.

- 08:00 (BR) Brazil May Retail Sales M/M: No est v 0.9% prior; Y/Y: No est v 2.2% prior.

- 08:00 (BR) Brazil May Broad Retail Sales M/M: No est v -1.0% prior; Y/Y: No est v 4.9% prior.

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

- 08:30 (US) Jun CPI M/M: 0.1%e v 0.0% prior; Y/Y: 3.1%e v 3.3% prior.

- 08:30 (US) Jun CPI (ex-food/energy) M/M: 0.2%e v 0.2% prior; Y/Y: 3.4%e v 3.4% prior.

- 08:30 (US) Jun CPI Index NSA: No est v 314.069 prior; CPI Core Index: No est v 318.140 prior.

- 08:30 (US) Jun Real Avg Hourly Earning Y/Y: No est v 0.8% prior; Avg Weekly Earnings Y/Y: No est v 0.5% 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.

- 09:00 (RU) Russia Q2 Preliminary Current Account: No est v $B prior.

- 09:00 (RU) Russia Gold and Forex Reserve w/e July 5th: No est v $B prior.

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

- 11:00 (MX) Mexico Central Bank Monetary Policy Minutes.

- 11:30 Federal Reserve Bank of Atlanta President Bostic.

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

- 13:00 Federal Reserve Bank of St. Louis President Musalem.

- 13:00 (US) Treasury to sell 30-Year Bond Reopening.

- 14:00 (US) Jun Monthly Budget Statement: No est v -$347.1B prior.

- 17:30 US Pres Biden's solo press conference after the NATO summit on Thursday.

- 18:30 (NZ) New Zealand Jun Manufacturing PMI: No est v 47.2 prior.

- 18:45 (NZ) New Zealand Jun Total Card Spending M/M: No est v -0.9% prior; Retail Card Spending M/M: No est v -1.1% prior.

- 19:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 5.75%.

- 23:30 (JP) Japan to sell 3-month Bills; Avg Yield: % v % prior; bid-to-cover: x v x prior.