EU data mixed in session as post-lockdown euphoria was starting to ease

Notes/Observations

- Major European PMI readings mixed in session (Beats: Euro Zone, Germany; Misses: France, UK); Survey suggests post-lockdown euphoria was starting to ease.

- UK retail sales data rose aided by temporary boost to food spending from the Euro 2020 soccer tournament.

- ECB forecasters raised their inflation outlook across the horizon but remaining below the ECB’s 2% symmetrical target.

Asia

- Australia July Preliminary PMI Manufacturing registered its 14th month of expansion (56.8 v 58.6 prior).

- Deputy Sec of State Sherman (#2 at State Dept) to meet with China's Wang Yi on Sun, July 25th.

Coronavirus

- Total global cases 193.4M (+0.3% d/d);total deaths: 4.15M (+0.2% d/d).

- Australia New South Wales (NSW) Premier: Coronavirus situation in parts of Sydney considered national emergency; Would not be able to lift restrictions in Sydney by July 30th.

Europe

- ECB's Weidmann (Germany) and Wunsch (Belgium) were said to oppose the ECB's new rate guidance. Several more members had voiced some objection to the length of commitment to loose monetary policy and lack of clarity. ECB held lengthy discussion on whether inflation overshoot would be intentional or incidental.

- Italy PM Draghi: Domestic economy is doing well, outperforming growth of some EU peers.

Americas

- White House Press Sec Psaki stated that there was clear momentum on infrastructure bill.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 +0.64% at 459.46, FTSE +0.69% at 7,016.45, DAX +0.58% at 15,604.65, CAC-40 +0.76% at 6,530.79, IBEX-35 +0.64% at 8,677.00, FTSE MIB +0.79% at 25,000.50, SMI +0.84% at 12,077.37, S&P 500 Futures +0.41%].

Market Focal Points/Key Themes: European indices open modestly higher across the board; better performing sectors lead by materials and industrials; while underperformers include technology and health care; improved risk sentiment attributed to a return of reflation trading; tech stocks weighed on following disappointing results from Intel; NatWest discloses terms of sale of Irish assets; Ultra Electronics receives offer from Cobham; earnings expected during the upcoming US session include Regions Financial, Honeywell and Slumberger.

Equities

- Consumer discretionary: Stockmann [STCBV.FI] +21% (earnings).

- Financials: Danske Bank [DANSKE.DK] -4% (earnings).

- Industrials: Thales [HO.FR] +1.5% (earnings), Skanska [SKAB.SE] +5% (earnings).

- Technology: Ultra Electronics [UKE.UK] +33% (offer).

- Telecom: Vodafone [VOD.UK] +3% (earnings).

Speakers

- ECB's Villeroy (France) state that the 2% CPI target needed to be 12-18 months away before rate hike. Justified to keep ECB accomodative policy. Would look again at the ECB's asset purchase program this autumn. ECB has three more meetings in 2021.

- ECB's Wunsch (Belgium) noted that dissent on forward guidance should not be dramatized, confirmed he was not comfortable making rate commitment for such a long time.

- ECB Survey of Professional Forecasters raised its inflation and GDP forecasts. Raised its 2021 HICP (EU Harmonized CPI) from 1.6% to 1.9% and 2022 HICP forecast from 1.3% to 1.5%. Raised its 2021 GDP growth from 4.2% to 4.7% (**Note: ECB Jun Staff Forecast is 4.6%) and also raised its 2022 GDP growth outlook from 4.1% to 4.6%.

- EU commented on vaccine passports and that talks with UK were at advance stage. It hoped for vaccine passport with Canada by September and added that discussion with US were not progressing.

- China Foreign Ministry spokesman Zhao Lijian confirmed that US's Sherman to meet with Wang Li.

- China FX Regulator SAFE reiterated stance to keep CNY currency (Yuan) basically stable in 2021. It noted that fX fluctuations reflected uncertainty. Risks were controllable from Fed policy. Expected export growth to slow down in H2 and normalize.

Currencies/ Fixed income

- USD was steady despite a rise in risk appetite. Focus turning to next week’s FOMC rate decision.

- EUR/USD stayed below the 1.18 level as dealers continued to digest the ECB decision. The forward guidance released on Thursday meant that interest rates would stay lower for longer.

- GBP/USD inched higher to test 2-week highs aided by recent data which confirmed the economic recovery was progressing after volatile lockdown month. However, the PMI reading suggested that UK post-lockdown euphoria was starting to ease.

Economic data

- (UK) Jun Retail Sales (ex-auto/fuel) M/M: 0.3% v 0.1%e; Y/Y: 7.4% v 7.6%e.

- (UK) Jun Retail Sales (including auto/fuel) M/M: +0.5% v -0.1%e; Y/Y: 9.7% v 9.5%e.

- (ES) Spain May Total Mortgage Lending Y/Y: 39.5% v 38.7% prior; House Mortgage Approvals Y/Y: 37.4% v 32.1% prior.

- (MY) Malaysia mid-July Foreign Reserves: $111.1B v $111.1B prior.

- (FR) France July Preliminary PMI Manufacturing: 58.1 v 58.3e (8th month of expansion); PMI Services: 57.0 v 58.8e; PMI Composite: 56.8 v 58.4e.

- (DE) Germany July Preliminary PMI Manufacturing: 65.6 v 64.1e (13th month of expansion); PMI Services: 62.2 v 59.5e; PMI Composite: 62.5 v 60.7e.

- (SE) Sweden Jun PPI M/M: 1.5% v 1.3% prior; Y/Y: 9.6% v 7.9% prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 96.1K v 113.6K tons prior.

- (EU) Euro Zone July Preliminary PMI Manufacturing: 62.6 v 62.5e (13th month of expansion); PMI Services: 60.4 v 59.3e; PMI Composite: 60.6 v 60.0e.

- (PL) Poland Jun Unemployment Rate: 5.9% v 6.0%e.

- (RU) Russia Narrow Money Supply w/e July 16th (RUB): 14.25T v 14.15T prior.

- (TW) Taiwan Jun Industrial Production Y/Y: 18.4% v 12.5%e.

- (TW) Taiwan Jun M1 Money Supply Y/Y: 17.4% v 17.4% prior; M2 Money Supply Y/Y: 9.2% v 9.2% prior.

- (UK) July Preliminary PMI Manufacturing: 60.4 v 62.4e(14th straight expansion); PMI Services: 57.8 v 62.0e; PMI Composite: 57.7 v 61.5e.

- (IS) Iceland July CPI M/M: 0.2% v 0.3% prior; Y/Y: 4.3% v 4.3% prior.

Fixed income issuance

- None seen.

Looking ahead

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

- 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2029, 2038 and 2050 Bonds.

- 05:30 (IN) India to sell combined INR260B in 2023, 2031 and 2061 bonds.

- 06:00 (UK) DMO to sell £3.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £1.5B respectively).

- 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to raise 1-Week Key Auction Rate by 7100bps to 6.50%.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (MX) Mexico May Retail Sales M/M: +0.5%e v -0.4% prior; Y/Y: 28.5%e v 30.1% prior.

- 07:00 (IN) India announces upcoming bill issuance (held on Wed).

- 07:30 (IN) India Weekly Forex Reserve w/e July 16th: No est v $611.9B prior.

- 08:00 (BR) Brazil Mid-July IBGE Inflation IPCA-15 M/M: 0.7%e v 0.8% prior; Y/Y: 8.5%e v 8.1% prior.

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

- 08:30 (CA) Canada May Retail Sales M/M: -3.0%e v -5.7% prior; Retail Sales (ex-auto) M/M: -1.5%e v -7.2% prior.

- 09:00 (CL) Chile Jun PPI M/M: No est v 6.3% prior.

- 09:45 (US) July Preliminary Markit PMI Manufacturing: 62.0e v 62.1 prior; PMI Services: 64.5e v 64.6 prior; PMI Composite: No est v 63.7 prior.

- 11:00 (EU) Potential sovereign ratings after European close.

- 13:00 (US) Weekly Baker Hughes Rig Count.