Israel warns of 'all out war' – Glass half empty for Heineken

EU mid-market update: Israel warns of 'all out war'; Glass half empty for Heineken; Major rate decisions from BoJ, Fed and BoE later in week.

Notes/observations

- Macro picture to take several turns before end of week with BOJ, FOMC and BOE rate decisions. Analysts see BOJ as a ‘live’ meeting with small odds for rate hike. Conversely, market waits for FOMC and BOE to kick off easing, with ECB and BoC already underway. BOE decision is more likely to see a cut, with market pricing 55-60% chance of 25bps cut on Thurs. Fed still predicted to go in Sept, with futures seeing 95% chance of hold on Wed, and 85% chance of 25bps cut in Sept.

- Tensions boiled in Middle East over weekend as Israel vows to hit Hezbollah hard after rocket attack killed children in a soccer field, notes approaching all out war against Hezbollah. Crude is little changed in trade.

- In corporate space, Heineken results highlight weak June and July trading, and with surprisingly large impairment on investment in CR beer, market sold off the sector, dragging Carlsberg down also. Following Abbot verdict and subsequent charge on premature infant formula, Reckitt Benckiser moves to decade lows ahead of their own trials into formula.

- Upcoming earnings before open: Lowes, McDonalds, On Semiconductor, CNA.

- Notable earnings after close: Tilray.

- Asia closed higher with Nikkei outperforming +2.3%. EU indices are -0.3% to +0.8%. US futures are +0.2-0.3%. Gold +0.2%, DXY +0.2%; Commodity: Brent -0.1%, WTI -0.2%; Crypto: BTC +3.2%, ETH +4.6%.

Global conflict/tensions

- Israel vowed to hit back hard at Hezbollah following rocket attack killing 12 on soccer field in Majdal Shams, Golan Heights, including children and teenagers.

- Israel Foreign Min Katz stated that was approaching the moment of an all-out war against Hezbollah and Lebanon after rocket attack in Golan.

Americas

- Venezuela Presidential Election results: Pres Maduro wins with 51.2% of the Presidential vote for his third term - Venezuela Electoral Authority [Exit polls pointed to an opposition win, in disputed election.

- More speculation that President Biden was planning to unveil a proposal for dramatically reforming the Supreme Court; expected to push for a constitutional amendment limiting immunity for presidents and other officeholders (not that any reforms are likely to pass this Congress).

- Former Pres Trump confirmed plan to create a strategic national Bitcoin if elected stockpile.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.2% at 514, FTSE +0.9% at 8,357, DAX +0.1% at 18,443, CAC-40 -0.3% at 7,495, IBEX-35 +0.4% at 11,213, FTSE MIB +0.1% at 3,329, SMI +0.2% at 12,260, S&P 500 Futures +0.2%].

Market focal points/key themes: European indices open higher across the board, but lost gains through the early part of the session; risk-on attitude attributed to expectations of monetary policy easing in the future; among sectors leading the way higher are energy and real estate; lagging sectors include consumer discretionary and materials; pharma subsector and DAX supported following Merk’s raised guidance; oil & gas subsector supported on geopolitical fears; Petrobras makes offer to acquire majority stake in Galp’s Mopane oil field; earnings expected in the upcoming US session include Loews, Piaggio, McDonald’s and Diasorin.

Equities

- Consumer discretionary: Heineken [HEIA.NL] -6.4% (H1 results, specifically on impairment charge); Carlsberg [CARLB.DK] -3.9% (readacross from Heineken earnings).

- Healthcare: Reckitt Benckiser [RKT.UK] -9.4% (related to Abbott verdict on baby formula); Merck [MRK.DE] +3.2% (Q2 results, raises guidance - post close Fri).

- Industrials: Maersk [MAERSKB.DK] +3.2% (FTRintel improved shippers conditions).

- Technology: Pearson [PSON.UK] -3.0% (H1 results, affirms guidance); Philips [PHIA.NL] +9.9% (Q2 results).

Speakers

- Japan PM Kishida stated that would continue to push for wage increases to exceed price increases.

- Japan Economic Council stated that Govt, BOJ should be mindful of weak Yen currency when guiding policy.

Currencies/fixed income

- Big data and decision week in FX with Fed, BOJ and BOE all on the docket coupled with EU GDP and inflation data. Greenback was slightly firmer as Fed was expected keep rates unchanged this week. Focus to be on, any clues on its plans to cut rates later in the year.

- GBP/USD was soft as hopes for a potential BOE rate cut rose to over 50% at this week’s meeting. Pair was at 1.2815 by mid-day.

- EUR/USD at 1.0830 by mid-session with focus on upcoming EU CPI readings and GDP data. Dealers noted that ECB would be looking for more signs price pressure was softening in the economy before it eased again.

- USD/JPY at 153.75 with BOJ in focus with small probability a hike could occur this week. Most BOJ watchers saw the next hike either in September or October.

Economic data

- (FI) Finland July Consumer Confidence: -7.2 v -7.6 prior; Business Confidence: -12 v -14 prior.

- (SE) Sweden Jun GDP Indicator M/M: -0.8% v 0.0%e; Y/Y: 0.0% v -1.1% prior.

- (SE) Sweden Q2 GDP Indicator Q/Q: +0.9% v -0.1% prior; Y/Y: +1.9% v -1.2% prior.

- (SE) Sweden Jun Retail Sales M/M: -0.3% v 0.3% prior; Y/Y: -0.1% v +0.7% prior.

- (FI) Finland May Final Trade Balance: €0.1B v €0.1B prelim.

- (ZA) South Africa Jun M3 Money Supply Y/Y: 4.2% v 4.7% prior; Private Sector Credit Y/Y: 4.3% v 4.0%e.

- (AT) Austria July Manufacturing PMI: 43.1 v 43.6 prior (24th month of contraction).

- (CH) Swiss weekly Total Sight Deposits (CHF): 458.2B v 461.3B prior; Domestic Sight Deposits: 449.5B v 452.9B prior.

- (UK) Jun Net Consumer Credit: £1.2B v £1.3Be; Net Lending: £2.7B v £1.1Be.

- (UK) Jun Mortgage Approvals: 60.0K v 60.3Ke.

- (UK) Jun M4 Money Supply M/M: +0.5% v -0.1% prior; Y/Y: 1.0% v 0.3% prior; M4 (ex-IOFCs) 3-month Annualized: 2.5% v 3.7% prior.

- (BE) Belgium Q2 Preliminary GDP Q/Q: 0.2% v 0.3% prior; Y/Y: 1.1% v 1.3% prior.

Fixed income issuance

- None seen.

Looking ahead

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

- 05:30 (PL) Poland to sell Bonds.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (IL) Israel May Manufacturing Production M/M: No est v 2.3% prior.

- 06:00 (IE) Ireland Q2 Preliminary GDP Q/Q: No est v 0.7% prior; Y/Y: No est v -4.7% prior.

- 06:00 (UK) July CBI Retailing Reported Sales: No est v -24 prior; Total DistributionReported Sales: No est v -9 prior.

- 06:00 (PT) Portugal Jun Retail Sales M/M: No est v 1.4% prior; Y/Y: No est v 4.1% prior.

- 06:00 (IL) Israel to sell ILS2.4B in 2027, 2028, 2029, 2033 and 2035 bonds.

- 06:00 (RO) Romania to sell RON500M in 12-month bills.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 07:30 (BR) Brazil Jun Nominal Budget (Overall) Balance (BRL): -103.4Be v -138.3B prior; Primary Budget Balance: -39.5Be v -63.9B prior; Net Debt to GDP: 62.5%e v 62.2% prior.

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

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement of upcoming issuance.

- 09:00 (FR) France Debt Agency (AFT) to sell €6.2-7.8B in 3-month, 6-month and 12-month bills.

- 10:30 (US) July Dallas Fed Manufacturing Activity: -15.5e v -15.1 prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 13:30 (BR) Brazil Jun Total Federal Debt (BRL): No est v 6.912T prior.

- 19:01 (UK) July BRC Shop Price Index Y/Y: No est v 0.2% prior.

- 19:30 (JP) Japan Jun Jobless Rate: 2.6%e v 2.6% prior; Job-To-Applicant Ratio: 1.24e v 1.24 prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v # prior.

- 21:30 (AU) Australia Jun Building Approvals M/M: -2.5%e v +5.5% prior; Private Sector Houses M/M: No est v 2.1% prior.

- 22:00 (KR) South Korea Jun Retail Sales Y/Y: No est v 8.8% prior; Department Store Sales Y/Y: No est v -0.1% prior; Discount Store Sales Y/Y: No est v -3.1% prior.

- 23:00 (TH) Thailand Central Bank to sell THB55B in 3-month bills.