Awaiting flash reading of US GDP for Q2

EU mid-market update: Red everywhere as tech triggered sell off tumbles across markets; Accumulation of bad EU earnings; Awaiting flash reading of US GDP for Q2.

Notes/observations

- Heavy sell off traversed across US and Asia sessions into EU trade. Fears over tech and AI being ‘practical and monetizable with defined use cases’ spread into other sectors as swath of major EU names reported weak results, keeping indices firmly in the red. Key results from STMicroelectronics, Nestle, Lloyds, Unilever, AstraZeneca, TotalEnergies, Stellantis, Nissan and Hyundai.

- STMicroelectronics cut outlook citing weakness in Automative chips sector; Nestle trimmed its EPS growth guidance for the first time in years noting that pricing come down faster than expected.

- German July IFO missed across the board, following very weak manufacturing PMI yesterday.

- Macro traders eye up first look of US Q2 GDP figures at 08:30 ET.

- US dollar began selling off at London open as European traders digested weak US July PMI. Japanese yen strengthened overnight as USD/JPY hits >2 month low at 152.2, ahead of BOJ decision next week. Speculation has mounted that BOJ will hike rates.

- The spread between US yields on the 2-year and 10-year bonds is now the least inverted in the past two years due to bond traders' wagers that the Fed will cut rates quicker or by greater amount this year.

- Upcoming earnings before open: American Airlines, Dow Chemical, Abbvie, Hasbro, Honeywell, RTX, NYCB, Southwest, Keurig Dr Pepper, Valero.

- Notable earnings after close: L3Harris, Dexom, Sketchers, Texas Roadhouse, Deckers, Boston Beer, Juniper, LendingTree, Appfolio.

- Asia closed lower with Nikkei underperforming -3.1%. EU indices are -2.1% to -0.9%. US futures are -0.1% to +0.3%. Gold -1.0%, DXY -0.2%; Commodity: Brent -1.1%, WTI -1.2%; Crypto: BTC -3.1%, ETH -8.2%.

Asia

- China PBOC cuts 1-year Medium Term Lending Facility (MLF) by 20bps to 2.30%; Conducted CNY200B; said to signal support and the PBOC's new policy framework.

- South Korea Q2 Advance GDP registered its 1st contraction since Q4, 2022 (Q/Q: -0.2% v +0.1%e; Y/Y: 2.3% v 2.5%e (first contraction since Q4, 2022).

- Japan Jun PPI Services Y/Y: 3.0% v 2.6%e (multi-year high).

- Further speculation BOJ to consider rate hike next week with decision said to be a close call.

- Japan Cabinet Office (Govt) Monthly Report for July maintained its overall economic assessment of seeing a gradual economic recovery despite some weakness.

- Bank of Korea (BOK) maintained its 2024 GDP growth forecast at 2.5% (as per May Staff Projections.

Global conflict/tensions

- US Official noted that a Gaza ceasefire talks appeared to be in closing stages; remaining obstacle to Gaza hostage deal were bridgeable.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -1.48% at 505.72, FTSE -0.87% at 8,082.85, DAX -1.10% at 18,179.35, CAC-40 -1.47% at 7,403.01, IBEX-35 -1.41% at 11,074.04, FTSE MIB -1.91% at 33,813.00, SMI -1.01% at 12,066.90, S&P 500 Futures +0.05%].

Market focal points/key themes: European indices opened lower following heavy selloff in US indices yesterday; healthcare is among better performing sectors following Roche results; lagging sectors include technology and industrials, after STMicro cut outlook and Stellantis reported big drop in Rev and said it mulled price cuts to clear inventory; in other corporate news, major EU fintech Revolut received UK banking license; Nestle cut its EPS outlook for the first time in years after its pricing come down faster than expected; major earnings expected in the upcoming premarket Americas session include American Airlines, Dow Chemical, Abbvie, Hasbro, Honeywell, RTX, NYCB, Southwest and Keurig Dr Pepper.

Equities

- Consumer discretionary: Kering [KER.FR] -6.5% (earnings), Carrefour [CA.FR] -4.0% (earnings), Air France/KLM [AF.FR] +1.0% (earnings; trims outlook).

- Consumer staples: Unilever [UNA.NL] +6.5% (earnings), Nestle [NESN.CH] -4.5% (earnings; cut EPS outlook citing pricing).

- Telecom: BT Group [BT.UK] -3.5% (earnings), Vodafone [VOD.UK] -2.0% (earnings).

- Financials: Lloyds Banking Group [LLOY.UK] -1.5% (earnings; Revolut gets banking license).

- Healthcare: Novo Nordisk [NOVOB.DK] -2.5% (Roche comments on obesity drugs), AstraZeneca [AZN.UK] -3.5% (earnings), Roche [ROG.CH] +3.5% (earnings; comments on obesity pipeline).

- Industrials: Stellantis [STLA.NL] -9.5% (earnings; mulls price cuts), Renault [RNO.FR] -9.0% (earnings; Nissan earnings).

- Technology: Siltronic [WAF.DE] +8.5% (earnings), STMicroelectronics [STM.FR] -10.5% (earnings; SK Hynix outlook).

- Materials: Anglo American [AAL.UK] -1.0% (earnings; Coal unit on track to be divested).

Speakers

- Japan Chief Cabinet Sec Hayashi reiterated govt stance and would not comment on FX moves.

- Thailand Fin Min Pichai commented that upcoming GDP estimates should be better.

Currencies/fixed income

- USD was on softer footing despite some risk aversion sentiment. Focus was on upcoming US GDP data. Some concerns that the greenback could exhibit some additional weakness if US GDP data missed consensus.

- EUR/USD was unfazed by disappoint German IFO data and held around the 1.0850 area by mid-session.

- GBP/USD was just under the 1.29 level. Session saw Gilt yields decline as expectations rose that BOE could begin easing at its Aug 1st policy decision. Dealers current see a 50% chance of a rate cut by the BOE next week.

- JPY currency continued its steep rise of the past 2 weeks. The pair registered another decline of over 100 pips for the 2nd straight session. Overnight implied volatility rose above 14.3% and 10-year JGB yield rose by 2.5bps to 1.095%. Further speculation BOJ would consider another rate hike at its meeting next week with decision said to be a close call.

Economic data

- (SE) Sweden Jun PPI M/M: -0.4% v 0.0% prior; Y/Y: 0.8% v 2.6% prior.

- (SE) Sweden Jun Household Lending Y/Y: 0.7% v 0.7% prior.

- (NO) Norway Jun Trend Unemployment Rate: 4.1% v 4.1% prior.

- (NO) Norway Q2 Industrial Confidence: 3.9 v 0.6 prior.

- (FR) France July Business Confidence: 94 v 99e; Manufacturing Confidence: 95 v 99e; Production Outlook Indicator: -18 v -12e; Own-Company Production Outlook: -5 v +2 prior.

- (TR) Turkey July Real Sector Confidence: 98.7 v 100.5 prior; Real Sector Confidence (unadj): 100.3 v 102.8 prior; Capacity Utilization: 75.9% v 76.3 prior.

- (DE) Germany July IFO Business Climate: 87.0v 89.0e; Current Assessment Survey: 87.1 v 88.5e; Expectations Survey: 86.9 v 89.3e.

- (EU) Euro Zone Jun M3 Money Supply Y/Y: 2.2% v 1.9%e.

- (HK) Hong Kong Jun Trade Balance (HK$): -55.7B v -20.1Be prior; Exports Y/Y: 10.7% v 13.1%e; Imports Y/Y: 9.0% v 4.1%e.

Fixed income issuance

- (IT) Italy Debt Agency (Tesoro) sold €3.5B vs. €3.0-3.5B indicated in new 3.1% Aug 2026 BTP bonds; Avg Yield: 3.10%; Bid-to-cover: 1.50x.

- (IT) Italy Debt Agency (Tesoro) sold total €2.25B vs. €1.5-2.25B in 2029 and 2041 I/L Bonds (BTPei).

Looking ahead

- G20 Finance Minister and Central Bank Gov Meeting July 25-26th.

- 05:30 (ZA) South Africa Jun PPI M/M: -0.2%e v +0.1% prior; Y/Y: 4.5%e v 4.6% prior.

- 05:30 (HU) Hungary to sell HUF32.0B in 2027, 2029 and 2035 bonds (3-year, 5-year and 10-year).

- 05:40 (UK) Bank of England (BoE) 7-day Short Term Repo Operation (STR).

- 06:00 (UK) July CBI Industrial Trends Total Orders: -20%e v -18% prior; Selling Prices: 20%e v 20% prior; Business Optimism: 14%e v 9% prior.

- 06:00 (FR) France Q1 Total Jobseekers: No est v 2.820M prior.

- 06:00 (RO) Romania to sell RON600M in 6.3% Jan 2026 bonds.

- 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to leave Key Rate unchanged at 13.00%.

- 07:00 (CA) Canada July CFIB Business Barometer: No est v 56.3 prior.

- 07:00 (BR) Brazil July FGV Consumer Confidence: No est v 91.1 prior.

- 07:00 (EU) ECB’s Nagel.

- 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision.

- 07:30 (BR) Brazil Jun Current Account: -$2.9Be v -$3.4B prior; Foreign Direct Investment (FDI): $3.3Be v $3.0B prior.

- 08:00 (BR) Brazil mid-July IBGE Inflation IPCA-15 M/M: 0.2%e v 0.4% prior; Y/Y: 4.4%e v 4.1% prior.

- 08:30 (US) Q2 Advance GDP Annualized Q/Q: 2.0%e v 1.4% prior; Personal Consumption: 2.0%e v 1.5% prior.

- 08:30 (US) Q2 Advance GDP Price Index: 2.6%e v 3.1% prior; Core PCE Q/Q: 2.7%e v 3.7% prior.

- 08:30 (US) Initial Jobless Claims: 238Ke v 243K prior; Continuing Claims: 1.868Me v 1.867M prior.

- 08:30 (US) Jun Preliminary Durable Goods Orders: 0.3%e v 0.1% prior; Durables (ex-transportation): 0.2%e v -0.1% prior; Capital Goods Orders (non-defense/ex-aircraft): 0.2%e v -0.6% prior; Capital Goods Shipments (non-defense/ex-aircraft): 0.2%e v -0.6% prior.

- 09:00 (BE) Belgium July Business Confidence: -11.0e v -11.1 prior.

- 09:00 (RU) Russia Gold and Forex Reserve w/e July 19th: No est v $601.3B prior.

- 09:30 (BR) Brazil Jun Tax Collections (BRL): 207.0Be v 203.0B prior.

- 11:00 (US) July Kansas City Fed Manufacturing Activity: -5e v -8 prior.

- 11:00 (EU) ECB’s Chief Lagarde.

- 12:00 (CA) Canada to sell 31-year bonds.

- 13:00 (US) Treasury to sell 7-year bonds.

- 15:00 (AR) Argentina May Wages M/M: No est v 10.2% prior.

- 18:00 (NZ) New Zealand July ANZ Consumer Confidence: No est v 83.2 prior.

- 19:01 (IE) Ireland July Consumer Confidence: No est v 70.5 prior.

- 19:30 (JP) Japan July Tokyo CPI Y/Y: 2.3%e v 2.3% prior; CPI (ex-fresh food) Y/Y: 2.2%e v 2.1% prior; CPI (ex-fresh, food and energy) Y/Y: 1.6%e v 1.8% prior.

- 20:00 (SG) Singapore Monetary Authority (MAS) Quarterly Monetary Policy Statement.

- 20:30 (SI) Singapore Q2 Final URA Private Home Prices Q/Q: No est v 1.1% prelim.

- 23:30 (TH) Thailand June Customs Trade Balance: $0.6Be v $0.7B prior; Exports Y/Y: 2.6%e v 7.2% prior; Imports Y/Y: 2.6%e v -1.7% prior.