ECB begin a two-day forum in Sintra Portugal

EU mid-market update: ECB begin a two-day forum in Sintra Portugal; Russia drops criminal charges against Wagner.

Notes/Observations

- Appearances from BoE and ECB members at Sintra conf in focus as market looks for any color or guidance for upcoming rate decisions and expected peak rates. ECB chief Lagarde and Kazaks so far have reiterated hawkish tones due to stubborn core inflation and potential wage-price spiral with emphasis on raising rates after next meeting in July.

- Fed Chair Powell to speak at Sintra on Wed, June 28th.

- On the Russian mutiny saga, Russian Security Service (FSB) dropped criminal cases over Wagner mutiny, seemingly in response to Wagner group preparing to hand over heavy military to Russian Defense Ministry.

- Upcoming at 09:00-10:00 ET, US house price data and new home sales. Consensus for a decline YoY in prices as monetary policy lag is expected to have more of an affect.

- Asia closed mostly higher with Hang Seng out-performing at +1.9%. EU indices are -0.2% to +0.1%. US futures are +0.1-0.3%. Gold +0.1%, DXY -0.1%; Commodity: Brent -0.1%, WTI -0.1%, TTF +0.6%; Crypto: BTC -0.1%, ETH -0.9%.

Asia

- China Premier Li Qiang expressed confidence that country would likely to achieve annual 2023 GDP growth target of ~5.0%.

- China PBOC set its Yuan reference rate: 7.2098 v 7.2056 prior (**Note: weakest level since Nov 10, 2022).

- Reports circulated of FX intervention by China State-owned Banks in the offshore FX markets to support the CNY currency (Yuan).

Europe

- ECB's Simkus (Lithuania) noted that at least one more rate hike was needed. Expected one more hike in July and would not be surprised to discuss another one in Sept.

- Reports circulated that ECB members believing that a July rate hike was increasingly seen as not enough; Eurosystem insiders saw a decent chance for another hike in Sept.

- IMF Dep Managing Dir Gopinath reiterates stance that ECB and peers must continue to raise interest rates further despite risks of weaker economic growth.

- UK June BRC Shop Price Index Y/Y: 8.4% v 9.0% prior [matches the lowest since Feb; below the 3-month avg of 8.7%].

Americas

- Treasury Sec Yellen said to be planning a trip to China in early July for the first high-level economic talks (**Note: Biden administration executive order that would regulate and potentially cut off certain US investments in China said to be almost done and could be launched as soon as late July).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.04% at 452.86, FTSE +0.01% at 7,454.37, DAX -0.13% at 15,791.95, CAC-40 -0.02% at 7,182.98, IBEX-35 +0.21% at 9,293.27, FTSE MIB +0.14% at 27,280.00, SMI -0.02% at 11,139.90, S&P 500 Futures +0.19%].

Market focal points/key themes: European indices open generally higher, but lost momentum through the first hours of trading; better performing sectors include consumer discretionary and financials; among lagging sectors are telecom and health care; reportedly Poste Italiane looking to sell part of its Logistics hub; focus on release of US Durable Goods Orders later in the day; earnings expected in the upcoming Americas session include TD Synnex, Walgreens Boots Alliance, and Schnitzer Steel.

Equities

- Consumer discretionary: JD Sports [JD.UK] -5.0% (AGM update; Positive trends have continued through June in the Group's businesses in the UK, Europe and Asia Pacific, but were offset by 'some softening' in North America), Accor [AC.FR] +1.0% (raises FY23 RevPar - CMD presentation), Kering [KER.FR] +1.5% (acquires Creed, no terms disclosed).

- Utilities: Utility Warehouse [TEP.UK] +11.0% (earnings).

- Healthcare: UCB [UCB.BE] -2.5% (receives FDA approval for Rystiggo for treatment of adults with generalized myasthenia gravis), Bayer [BAYN.DE] +0.5% (starts phase 3 study of new contrast agent gadoquatrane).

- Industrials: Aston Martin Lagonda Global Holdings [AML.UK] -4.5% (CMD; affirms FY24/25 financial targets, provides new ones), Robit [ROBIT.FI] -18.0% (cuts outlook citing weakening of the market in construction industry, especially in Europe and Asia).

- Technology: Wise [WISE.UK] +18.5% (earnings; outlook), Prosus NV [PRX.NL] +10.0% (reports FY23; intention to remove the cross-holding structure with Naspers).

- Telecom: BT Group [BT.A.UK] -4.0% (analyst action - cut to sell at UBS).

Speakers

- ECB Chief Lagarde prepared speech at the Singra forum reiterates Council plan to raise rates in July as inflation is too high for too long. She stressed that rates to stay elevated and in restrictive territory as long as necessary. Unlikely that would reach peak rates in the near future.

- ECB's Kazaks (hawk, Latvia) noted that ECB would likely keep raising interest rates after July meeting. Believe that rates would need to be raised past July but magnitude would be data dependent.

- BOE’s Dhingra (dovish dissenter) noted that MPC was focusing on services and core services. Wages were responding to inflation with a lag.

- German Federal Finance agency on Q3 debt issuance plan. Scaled back planned debt sales in Q3 by €14B.

- Russia Security Service confirmed to drop criminal cases over Wagner mutiny; Russia Defense Ministry said Wagner group was preparing to hand over heavy military equipment to Russia officials.

- Thailand Central Bank noted that FX volatility was being driven by external factors. To further relax rules to encourage capital outflows.

- Malaysia Central Bank stated that it would intervene in FX to curb excessive volatility.

Currencies/fixed income

- USD was maxed against the major pairs in the session as participants focus on upcoming data releases.

- ECB began a two-day forum in Sintra Portugal what saw members stress the need for more rate hikes at the July meeting and Sept decision to be data-dependent.

- Various Far East Central Banks hinted of excessive volatility in the currency markets. China said to have used State banks to intervene while Thailand and Malaysia stated of action to curb excessive price moves.

- USD/JPY drifting higher towards the 144 area as divergent central bank policy weighed upon the yen.

Economic data

- (FI) Finland June Consumer Confidence: -8.8 v -8.8 prior; Business Confidence: -16 v -12 prior.

- (SE) Sweden May Trade Balance (SEK): -0.3B v -3.6B prior.

- (SE) Sweden May PPI M/M: -1.7% v -1.0% prior; Y/Y: -2.1% v +1.3% prior.

- (HU) Hungary Q1 Current Account: -€0.6B v -€0.5Be.

- (TW) Taiwan May Unemployment Rate: 3.5% v 3.6%e.

- (IT) Italy June Consumer Confidence: 108.6 v 105.5e; Manufacturing Confidence: 100.3 v 101.0e; Economic Sentiment: 108.3 v 108.6 prior.

- (HK) Hong Kong May Trade Balance (HKD): -26.4B v -33.5Be; Exports Y/Y: -15.6% v -11.2%e; Imports Y/Y: -16.7% v -10.4%e.

Fixed income issuance

- (ID) Indonesia sold total IDR14.0T vs. IDR15.0T target in bills and bond.

- (NL) Netherlands Debt Agency (DSTA) sold €1.685B vs. €1.0-2.0B indicated range in 3.00% Jan 2054 DSL bonds; Avg Yield: 2.589% v 2.362% prior.

- (UK) DMO sold £1.5B in new 0.75% Nov 2033 Inflation-linked Gilts (UKTi); Real Yield: 0.602%; bid-to-cover: 2.33x.

- *(IT) Italy Debt Agency (Tesoro) sold €2.5B vs. €2.0-2.5B indicated range in 3.40% Mar 2025 BTP bonds; Avg Yield: 3.71% v 3.61% prior; bid-to-cover: 1.60x v 1.55x prior.

- (IT) Italy Debt Agency (Tesoro) sold €1.75B vs. €1.25-1.75B indicated range in 1.50% May 2029 inflation-linked bonds (BTPei); Real Yield: 1.59% v 1.70% prior; bid-to-cover: 1.49x v 1.31x prior.

Looking ahead

- (EG) Egypt Q1 GDP Constant Q/Q: No est v 1.1% prior.

- (CO) Colombia May Retail Confidence: No est v 11.1 prior; Industrial Confidence: No est v -5.9 prior.

- 05:15 (CH) Switzerland to sell 12-month Bills.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (CA) Bank of Canada (BOC) Dep Gov Kozicki in Sintra.

- 05:30 (ZA) South Africa Q1 Non-Farm Payrolls Q/Q: No est v 0.5% prior; Y/Y: No est v -0.9% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2031, 2035 and 2037 bonds.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 07:00 (BR) Brazil Central Bank (BCB Jun Minutes.

- 07:00 (BR) Brazil June FGV Construction Costs M/M: No est v 0.4% prior.

- 07:00 (NO) Norway Central Bank (Norges) Gov Bache in Sintra.

- 07:00 (DE) ECB’s Schnabel (Germany) in Sinta.

- 08:00 (MX) Mexico May Trade Balance: -$1.1Be v -$1.5B prior.

- 08:00 (BR) Brazil mid-June IBGE Inflation IPCA-15 M/M: 0.0%e v 0.5% prior; Y/Y: 3.4%e v 4.1% prior.

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

- 08:30 (US) May Preliminary Durable Goods Orders: -0.8%e v +1.1% prior; Durables (ex-transportation): 0.0%e v -0.3% prior; Capital Goods Orders (non-defense/ex-aircraft): 0.1%e v 1.3% prior; Capital Goods Shipments (non-defense/ex-aircraft): 0.2%e v 0.5% prior.

- 08:30 (CA) Canada May CPI M/M: 0.4%e v 0.7% prior; Y/Y: 3.4%e v 4.4% prior; CPI Core-Trim Y/Y: 3.9%e v 4.2% prior; CPI Core-Median Y/Y: 4.0%e v 4.2% prior; Consumer Price Index: 157.1e v 156.4 prior.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 (US) Apr FHFA House Price Index M/M: 0.5%e v 0.6% prior.

- 09:00 (US) Apr S&P/Case-Shiller House Price Index (20-City) M/M: 0.35%e v 0.45% prior; Y/Y-2.60%e v -1.15% prior; House Price Index (Overall) Y/Y: No est v 0.66% prior.

- 10:00 (US) May New Home Sales: 675Ke v 683K prior.

- 10:00 (US) June Consumer Confidence: 104.0e v 102.3 prior.

- 10:00 (US) June Richmond Fed Manufacturing Index: -12e v -15 prior.

- 10:30 (US) June Dallas Fed Services Activity: No est v -17.3 prior.

- 13:00 (US) Treasury to sell 5-Year Notes.

- 16:30 (US) Weekly API Oil Inventories.

- 17:00 (KR) South Korea June Consumer Confidence: No est v 98 prior.

- 21:30 (AU) Australia May CPI Y/Y: 6.1%e v 6.8% prior; CPI (ex-volatile items) Y/Y: No est v 6.5% prior.

- 21:30 (CN) China May Industrial Profits Y/Y: No est v -18.2% prior; YTD Y/Y: No est v -20.6% prior.

- 22:00 (KR) South Korea May Retail Sales Y/Y: No est v 4.0% prior; Department Store Sales Y/Y: No est v 2.5% prior; Discount Store Sales Y/Y: No est v 3.3% prior.