Risk appetite still trying to find some footing despite concerns lingering over a possible second wave

Notes/Observations

- Concerns linger regarding a resurgence in the coronavirus; US reported more than 30K new cases for two days straight over the weekend

- Risk appetite still trying to find some footing as markets believe that economic activity appeared to have bottomed out due to relaxation of the lockdown restrictions and forceful fiscal and monetary measures over the past few months

- China draft on a proposed national security law would allow Beijing to override Hong Kong's independent legal system

- Various govts said to look at ways to prompt domestic demand vis tax cuts (UK, Italy mentioned)

 

Asia:

- China released a draft Hong Kong Security Law: China would set up a national security office in Hong Kong that would collect and analyze intelligence and deal with criminal cases related to national security

- China Securities Regulator suggested that there could be more cooperation with the US in the area of corporate audits

- RBA Gov Lowe reiterated stance that still had measures to use; Not at a point where AUD currency was a problem but would like to it lower at some point;. Stressed that now was not the time to change monetary policy framework

- New Zealand Central Bank Shadow Board reiterated stance that it favored further QE over negative official cash rate (OCR) [Reminder: RBNZ is due to hold its next official cash rate (OCR) decision on June 24th

 

Coronavirus:

- Total global cases over 9M (+5.5% from Fri); death toll 467.7K (+3.2% from Fri)

- World Health Organization (WHO) said globally new coronavirus cases rose by 183K on Sunday, Jun 21st

- WHO's Tedros: coronavirus pandemic is accelerating

- Germany Public Health RKI Institute: Estimate the R-number for speed of virus reproduction at 1.79 v 0.69 prior

 

Europe:

- EU Leaders said to end summit without consensus on recovery plan (as expected)

- EU Council President Michel to hold a virtual summit with China Premier Li Keqiang and President Xi Jinping (Note: 1st formal talks since accusations Beijing had spread disinformation about the coronavirus)

- Italy PM Conte said to considering sales tax reduction. - Govt concerned about consumer spending which remains weak even after lockdown has eased

- New German constitutional court judge said to believe ECB bond dispute could be resolved

- UK Chancellor of the Exchequer (Fin Min) Sunak expected to announce an emergency cut to VAT

- PM Johnson expected to announce review of 2 meter rule on Tuesday, Jun 23rd

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.21% at 366.22, FTSE +0.04% at 6,295.20, DAX +0.12% at 12,345.70, CAC-40 +0.14% at 4,986.52, IBEX-35 -0.02% at 7,413.00, FTSE MIB +0.27% at 19,672.50, SMI +0.01% at 10,267.75, S&P 500 Futures +1.00%]

Market Focal Points/Key Themes: European indices open broadly lower across the board but reversed to trade mixed later in the session; Energy sector leading to the downside; better performing sectors include consumer discretionary and financials; Lufthansa bailout negotiations continue; Goodwin awarded long term contract; Reportedly IAG might have to split out subsidiary airlines to gain government support; Lufthansa removed from DAX, replaced by Deutsche Wohnen; events expected in upcoming US session include presentation by Apple

 

Equities

- Consumer discretionary: Carrefour [CA.FR] +3% (analyst action), Lufthansa [LHA.DE] -6% (CEO comments)

- Financials: Saga [SAGA.UK] +3% (trading update)

- Industrials: Goodwin [GDWN.UK] +25% (awarded order)

- Technology: Wirecard [WDI.DE] -35% (€1.9B missing likely "doesn't exist")

 

Speakers

- BOE's Bailey in an Op ed article reiterated MPC stance that balance sheet should shrink before rates rise. Risks from money markets need to be examined after vulnerabilities arose

- ECB’s De Guindos (Spain) stated that the recent stimulus package presented by Germany was positive. Germany had financial wiggle room to quickly react to crisis. Pandemic bond buying scheme (PPEP) to align with capital key

- Germany Fin Min Scholz: Moving away from the damage control phase to one focusing on economic recovery. Saw a resolution on German Constitutional Court ruling on Bundesbank QE bond buying without any drama. Expressed confidence that EU would find a solution for the recovery fund

- Italy Dep Fin Min Castelli: govt planning tax cut for hardest hit sectors of economy. Areas said to include restaurants and tourism, clothing and cars. Measures could be effective as soon as Jan. 1st 2021 and remain valid for two years

 

Currencies/ Fixed Income

- USD was softer against the major FX pairs and commodity-related currencies. Despite renewed concerns over a possible 2nd wave of the coronavirus outbreak, market believe that economic activity appeared to have bottomed out due to relaxation of the lockdown restrictions and forceful fiscal and monetary measures over the past few months

- EUR/USD higher by 0.4% at 1.1225; USD/JPY hovering just under the 107 handle

- GBP/USD pair saw cable outperform as EU-China met on the trade front for talks

 

Economic Data

- (NL) Netherlands Jun Consumer Confidence Index: -27 v -31 prior

- (NL) Netherlands Apr Consumer Spending Y/Y: -17.4 v -6.4% prior

- 02:00 (NL) Netherlands May House Price Index M/M: 0.8% v 0.7%; Y/Y: 7.7% v 7.3% prior

- (DK) Denmark Jun Consumer Confidence Indicator: -3.1 v -3.0e

- (HU) Hungary Q1 Current Account Balance: €0,0B v €0.2Be

- (CH) Swiss M3 Money Supply Y/Y: 2.5% v 2.0% prior

- (TR) Turkey Jun Consumer Confidence: 62.6 v 59.5 prior

- (MY) Malaysia Mid-Jun: Foreign Reserves: $102.7B v $102.9B prior

- (TR) Turkey May Foreign Tourist Arrivals Y/Y: -99.3% v -99.3% prior

- (CH) Swiss Weekly Total Sight Deposits (CHF): 680.1B v 679.5B prior; Domestic Sight Deposits: 598.9B v 600.3B prior

- (PL) Poland May Retail Sales M/M: 14.5% v 11.2%e; Y/Y: -8.6% v -13.3%e; Real Retail Sales Y/Y: -7.7% v -11.7%e

- (TW) Taiwan May Unemployment Rate: 4.2% v 4.2%e

- (HK) Hong Kong Q1 Current Account Balance: -$9.0B v +$41.7Be; Overall Balance of Payments (BOP): +$25.8B v -$10.28 prior

- (HK) Hong Kong May CPI Composite Y/Y: 1.5% v 1.6%e

- (IS) Iceland May Wage Index M/M: % v 3.3% prior; Y/Y: % v 6.8% prior

 

Fixed Income Issuance

- None seen

 

Looking Ahead

- (UR) Ukraine Central Bank Jun Minutes (no set time)

- (MX) Citibanamex Survey of Economists

- 05:30 (SL) Sri Lanka May National CPI (NCPI) Y/Y: No est v 5.9% prior

- 05:30 (DE) Germany to sell combined €8.0B in 6-month and 12-month Bubills

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.5-3.0B in 2024, 2030 and 2057 OLO Bonds

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.5-4.5B in 6-month and 12-month bills

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

- 06:00 (UK) Jun CBI Industrial Trends Total Orders: -50e v -62 prior; Selling Prices: No est v -20 prior

- 06:00 (IE) Ireland May PPI M/M: No est v -1.8% prior; Y/Y: No est v -6.1% prior

- 06:00 (IL) Israel Apr Manufacturing Production M/M: No est v 0.2% prior

- 06:00 (IL) Israel May Unemployment Rate: No est v 3.30% prior

- 06:00 (IL) Israel to sell

- 06:00 (RO) Romania to sell RON500M 4.15% 2028 Bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)

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

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

- 08:30 (US) May Chicago Fed National Activity Index: No est v -16.74 prior

- 08:50 (FR) France Debt Agency (AFT) to sell €7.3-8.5B in 3-month, 6-month and 12-month bills (3 tranches)

- 09:45 (EU) ECB weekly QE bond buying update

- 10:00 (US) May Existing Home Sales: 4.15Me v 4.33M prior

- 10:00 (EU) Euro Zone Jun Advance Consumer Confidence: -15.0e v -18.8 prior

- 11:00 (CA) Bank of Canada (BOC) Gov Macklem

- 11:30 (US) Treasury to sell 13-week and 26-week bills

- 16:00 (US) Weekly Crop Progress Report

- 17:00 (KR) South Korea May PPI M/M: No est v -0.7% prior; Y/Y: No est v -1.50% prior

- 18:30 (US) Fed’s Kashkari

- 19:00 (AU) Australia Jun Preliminary PMI Manufacturing: No est v 44.0 prior; PMI Services: No est v 26.9 prior; PMI Composite: No est v 28.1 prior

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 97.5 prior

- 20:30 (JP) Japan Jun Preliminary PMI Manufacturing: No est v 38.4 prior; PMI Services: No est v 26.5 prior; PMI Composite: No est v 27.8 prior

- 23:00 (TH) Thailand to sell combined THB70B in 3-month and 6-month bills

- 23:30 (HK) Hong Kong to sell 3-month and 6-month bills