Notes/Observations
- German IFO business climate unexpectedly fell in July for its 1st decline in 2021 due to shortages of materials and virus concerns.
- China govt regulatory crackdown on sectors dented sentiment toward risk assets.
- Corporate earning seasons continues. Companies due to report during the NY morning include Check Point Software, Hasbro, Lennox International, Lockheed Martin, Otis Worldwide, PetMed Express, RPM International.
Asia
- Japan July Preliminary PMI Manufacturing registered its 6th month of expansion (52.2 v 52.4 prior).
- China Industry Ministry (MIIT): To begin a crackdown on illegal internet activities (such as behaviors that violate user rights and endanger data security).
- China Vice Foreign Min Feng stated that had a willingness to deal with US on equal footing; Relationship with the US was in a 'stalemate', now faced difficulties. Wanted to seek common ground, and shelve differences with US. Reiterated stance that US should choose to meet China 'Halfway'. Urged US to correct extremely wrong mindset and extremely dangerous China policy (Reminder: US Deputy Sec of State Sherman to meet with China's Wang Yi with talks expected to be held on Sun and Mon (Jul 25-26th).
- US Dep Sec of State Sherman said to make clear to Chinese officials in upcoming talks that the US welcomed competition with China but wanted a level playing field, guard rails and parameters in their relationship. US officials said that US/China needed responsible ways to manage competition.
Coronavirus
- Total global cases 194.8M (+0.7% vs. Fri); total deaths: 4.18M (+0.6% vs. Fri).
- Tokyo infections top 1,000 for sixth straight day.
- France parliament approved bill aimed at tackling 4th wave of COVID, approved law that requires special virus passes for all restaurants and domestic travel and mandated vaccinations for all health workers.
- German govt said to be considering possible tough restrictions for the unvaccinated or even compulsory shots as the Delta variant spreads in Europe.
Europe
- ECB's Weidmann (Germany) stated that he agrees in principle expansive monetary policy was currently appropriate; Possible over-extension of ECB's low interest rate environment went too far for him.
Americas
- Democrats might remove $20B in funding for a new infrastructure bank after Republicans opposed a provision aimed at boosting workers' wages.
- Senate negotiators said to be finalizing how to pay for the $579B bipartisan infrastructure package. Core group of negotiators planning to present a final version of the deal.
Speakers/Fixed income/FX/Commodities/Erratum
Equities
Indices [Stoxx600 -0.45% at 459.46, FTSE -0.36% at 7,002.45, DAX -0.60% at 15,575.30, CAC-40 -0.53% at 6,534.21, IBEX-35 -0.58% at 8,667.00, FTSE MIB -0.30% at 25,050.50, SMI -0.65% at 12,051.95, S&P 500 Futures -0.36%].
Market Focal Points/Key Themes: European indices open generally lower and remained in the red as the session wore on; better performing sectors include materials and consumer discretionary; while sectors leading to the downside include industrials and technology; further restrictions by Chinese officials on Tencent weigh on tech sector; financials sector supported after ECB declines to extend dividend ban; Vonovia offer for Deutche Wohnen didn’t reach threshold; NewRiver divests Hawthorn; Meyer Burger looking in options to enforce Oxford PV deal; earnings expected during the upcoming US session includes Tesla, Michelin, Lockheed Martin and LVMH.
Equities
- Consumer discretionary: Ryanair [RYA.UK] +3% (earnings; outlook), Science Group [SAG.UK] +10% (earnings).
- Industrials: Koninklijke Philips [PHIA.NL] -3% (earnings; buyback), Faurecia [EO.FR] -4% (earnings).
- Technology: Prosus [PRX.NL] -8% (China's crackdown of Tencent), Meyer Burger Technology [MBTH] -13% (considering legal options to enforce related to Oxford PV).
Speakers
- German IFO Economists: noted that supply problems were weighing on domestic economy in both industry and retail and noted that industry could not produce as much as they would like. Over 60% of industrial companies were reporting shortages; over 40% in retail. Companies were searching for more staff. It forecasted Q2 GDP at 1.3% and Q3 GDP growth at 3.6%.
- Italy Business Lobby Confindustria stated that the domestic economy had a strong rebound in Q2.
- Poland Central Bank's Lon stated that he favored a wait and see approach in monetary policy.
- China Vice Foreign Min Feng stated that he asked US to remove visa restrictions from Communist party members.
Currencies/Fixed income
- USD was steady as equity markets drifted lower in a quiet session. China govt regulatory crackdown on sectors dented risk appetite sentiment. Dealer noted USD near-term outlook might hinge on Fed Chairman Powell's views on the economic outlook mid-week.
- EUR/USD remained below the 1.18 area. German IFO business climate unexpectedly fell in July for its 1st decline in 2021 due to shortages of materials and virus concerns.
- Dealers noted that ECB strategy review remained bullish for sovereign spreads and saw yield moving lower in the session. German 10-year Bund was lower by 3bps to test -0.45%.
Economic data
- (FI) Finland Jun PPI M/M:1.6 % v 2.3% prior; Y/Y: 11.0% v 11.2% prior.
- (ES) Spain Jun PPI M/M: 2.2% v 1.6% prior; Y/Y: 15.4% v 15.2% prior.
- (CZ) Czech July Consumer Confidence Index: -5.3 -2.0 prior; Business Confidence: 11.8 v 16.8 prior; Composite Confidence (Consumer & Business Confidence): 8.4 v 13.0 prior.
- (TR) Turkey July Capacity Utilization: # v 76.6% prior.
- (TR) Turkey July Real Sector Confidence (seasonally adj): 112.1 v 109.8 prior; Real Sector Confidence NSA (unadj): 114.8 v 113.0 prior.
- (DE) Germany July IFO Business Climate: 100.8 v 102.5e; Current Assessment: 100.4 v 101.8e; Expectations Survey: 101.2 v 103.6e.
- (CH) Swiss weekly Total Sight Deposits (CHF): 712.1B v 711.9B prior; Domestic Sight Deposits: 635.5B v 636.5B prior.
- (HK) Hong Kong Jun Trade Balance (HKD): -40.5B v -40.5Be; Exports Y/Y: 33.0% v 26.0%e; Imports Y/Y: 31.9% v 26.1%e.
Fixed income issuance
- None seen.
Looking ahead
- 05:25 (EU) Daily ECB Liquidity Stats.
- 05:30 ((DE) Germany to sell €4.0B in 12-month BuBills.
- 06:00 (IL) Israel Jun Unemployment: No est v 5.5% prior; Unemployment Rate (including Covid): No est v 9.8% prior.
- 06:00 (BE) Belgium Debt Agency (BDA) to sell €2.7-3.1B in 2031, 2034 and 2040 OLO bonds.
- 06:00 (IL) Israel to sell bonds.
- 06:45 (US) Daily Libor Fixing.
- 07:00 (MX) Mexico Jun Unemployment Rate (unadj): No est v 4.0% prior.
- 07:00 (BR) Brazil July FGV Consumer Confidence: No est v 80.9 prior.
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.
- 08:00 (UK) Daily Baltic Dry Bulk Index.
- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).
- 09:00 (BE) Belgium July Business Confidence: No est v 9.8 prior.
- 09:00 (FR) France Debt Agency (AFT) to sell €4.8-6.0B in 3-month, 6-month and 12-month bills.
- 09:45 (EU) ECB weekly QE bond buying update.
- 10:00 (US) Jun New Home Sales: 800Ke v 769K prior.
- 10:30 (US) July Dallas Fed Manufacturing Activity Index: 32.3e v 31.1 prior.
- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.
- 13:00 (US) Treasury to sell 2-Year Notes.
- 15:00 (AR) Argentina May Shop Center Sales Y/Y: No est v 2,513.5% prior; Supermarket Sales Y/Y: No est v 1.2% prior.
- 16:00 (US) Weekly Crop Progress Report.
- 19:00 (KR) South Korea Q2 Preliminary GDP Q/Q: 0.9%e v 1.7% prior; Y/Y: 6.1%e v 1.9% prior.
- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 104.3 prior.
- 19:50 (JP) Japan Jun PPI Services Y/Y: 1.3%e v 1.5% prior.
- 21:30 (CN) China Jun Industrial Profits Y/Y: No est v 36.4% prior.
- 23:30 (HK) Hong Kong to sell 3-month and 6-month Bills.
- 22:35 (JP) Japan to sell 40-year JGB bonds.
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