Soft PMIs give 'data dependent' ECB another reason to cut rates again

EU mid-market update: Soft PMIs give 'data dependent' ECB another reason to cut rates again; Record triple witching for US indices/options.

Notes/observations

- European flash PMIs for June were surprisingly weak. All components for Euro Zone, Germany and France missed estimates. Latest risks see French firms concerned over upcoming elections. PMIs weighed on Euro. UK PMI was mixed, manufacturing holding up while services missed estimates for lowest reading since Nov 2023. Reminder some BOE members yesterday noted a reduced concern about services inflation.

- EU bond rally from an increase in ECB rate cut expectations, seeing yields drop 5-10bps in mid-term maturities for France, Germany and Italy. Peripheral yields declining as well.

- NVDA shares fall premarket ahead of record “Triple witching” expiration event; Traders also circulating interview by OpenAI Chief Technology Officer Mira Murati published on June 20th where she hinted that next big ChatGPT update with "PhD level of intelligence" for specific tasks to be released in around year and a half , which seems seems to be at higher-end of prior speculated timeline of 9 months to over 1 year.

- Political theme remains at the core for catalysts in Europe with UK and French elections in next ~2 weeks.

- Asia closed lower with Hang Seng -1.5%. EU indices are -0.3% to -0.8%. US futures are -0.1% to -0.3%. Gold +0.3%, DXY +0.1%; Commodity: Brent -0.3%, WTI -0.3%; Crypto: BTC -3.1%, ETH -3.6%.

Asia

- Japan May National CPI Y/Y: 2.8% v 2.9%e; CPI ex-fresh food (core) Y/Y: 2.5% v 2.6%e (Above BOJ target for 26 straight months); CPI Ex-Fresh Food, Energy (core-core) Y/Y: 2.1% v 2.2%e (slowest annualized pace since Dec 2022).

- Japan Jun Preliminary Manufacturing PMI: 50.1 v 50.4 prior; Services PMI: 49.8 v 53.8 prior; Composite PMI: 50.0 v 52.6 prior.

- Japan govt said to reduce amount of additional sale of super-long (15.5-39 years) JGBs in Aug and to boost issuance of existing JGBs with remaining maturities of five to 15.5 years in both Aug and Sept.

- Japan confirms imposes fresh sanctions on China-based co's. related to Ukraine war - Press.

- Japan METI / Japan Econ Min Saito: More companies are asking for price hikes to cover labor costs - Japanese press.

- Japan PM Kishida to resume utility and gasoline subsidies [inline] - Japan press.

- Australia Jun Preliminary PMI Manufacturing was lowest in three months at 47.5. Services lowest in three months at 51.0 and composite lowest in five months at 50.6.

- China MOFCOM: EU actions may trigger a trade war.

- Former China PBOC official Sheng Songcheng confirmed conditions are ripe for PBOC to trade bonds in the secondary market, expects the process to be gradual – SCMP.

- India said to be considering tax cuts as part of $6B consumer boost in budget - press.

Europe

- UK Jun GfK Consumer Confidence was highest since Nov 2021 at -14.

- Poland Central Bank (NBP) Maslowska reiterates hopes for rate cut conditions in 2025, both rate cuts and hikes are possible.

- Russia govt eases requirement for mandatory FX sales by major exporters; Russia exporters are now allowed to deposit into their accounts 60% of FX received from exports (v at least 80% prior) - press.

- France Fin Min Le Maire: Don't underestimate promise to reduce public spending - Ecofin meeting in Luxembourg.

Americas

- Canada said to be preparing tariff plan against Chinese EV's - financial press.

- Fed: Normal operations for Federal Reserve payment services FedACH.

- US Treasury Sec Yellen: US tariffs on China overcapacity are highly strategic - Speaking in Atlanta.

Global conflict/tensions

- In Mar, US and China held first informal nuclear talks in 5 years – financial press.

- North Korea soldiers again crossed border on Thurs; South Korea military again fired warning shots – South Korea press.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.49% at 516.38, FTSE -0.33% at 8,245.53, DAX -0.35% at 18,173.55, CAC-40 -0.39% at 7,641.19, IBEX-35 -0.80% at 11,071.49, FTSE MIB -0.75% at 33,424.00, SMI -0.62% at 12,036.30, S&P 500 Futures -0.22%].

Market focal points/key themes: European indices open lower across the board and remained downbeat through the early part of the session amid weaker-than-expected flash PMIs releases from France, Germany and EU; among sectors leading the way lower are Construction & Materials and Banks ; materials; Healthcare sector trending positive in the wake of Zealand Pharma data on its next-gen weight-loss compound petrelintide; on corporate front, shares of German battery maker Varta trade lower over 4% after it joined several other European mid-caps in cutting outlook this week; on M&A front, shares of Britvic in London trade sharply higher after it confirmed rejection of the second Carlsberg offer; STMicroelectronics announced new series of buybacks and trade slightly lower; earnings expected in the upcoming US session include FactSet Research.

Equities

- Consumer discretionary: Britvic [BVIC.UK] +10.5% (confirms rejecting new Carlsberg offer), Wizz Air [WIZZ.UK] -4.5% (analyst action), Informa [INF.UK] +1.0% (trading update).

- Financials: Santander [SAN.ES] -1.5% (potential deal with Amazon on financing options in EU).

- Technology: STMicroelectronics [STM.FR] -1.5% (new share buybacks).

- Healthcare: Zealand Pharma [ZEAL.DK] +22.0% (data on its next-gen weight-loss compound petrelintide).

- Industrials: Varta [VAR1.DE] -4.5% (cut outlook; noted further significant deterioration in the market environment for energy storage systems, especially in Q2).

Speakers

- Japan top FX diplomat Kanda: FX intervention has been effective; Will take proper action on FX if needed - press.

- BOJ Dep Gov Uchida: Reiterates domestic economy is recovering moderately, although with some weak signs.

- BOJ Gov Ueda: Decided to cut JGB buying to let market decide yields; Reiterates watching FX for impact on pricing and growth.

- Japan Chief Cab Sec Hayashi: Reiterates addition of Japan to US currency monitoring list does not mean that Japan's FX policy is a problem - Japanese press.

- Former Fed official Bullard: US growth outlook remains 'robust'; expects the pace of rate cuts will be 'slow'.

Economic data

- (IN) India Jun Preliminary PMI Manufacturing: 58.5 v 57.5 prior; PMI Services: 60.4 v 60.2 prior; PMI Composite: 60.9 v 60.5 prior.

- (FR) France May Retail Sales Y/Y: -1.4% v -0.2% prior.

- (UK) May Retail Sales (ex auto/fuel) M/M: 2.9% v 1.8%e; Y/Y: +1.2% v -0.7%e; Retail Sales (including auto/fuel) M/M: 2.9% v 1.8%e; Y/Y: +1.3% v -0.6%e.

- (UK) May Public Finances (PSNCR): +£18.1B v -£5.2B prior; PSNB (ex-banking groups): £15.0B v £15.5Be; Net Borrowing: £14.1B v £14.5Be; Central Govt NCR: £24.6B v £18.3B prior.

- (HU) Hungary Apr Average Gross Wages Y/Y: 13.5% v 13.9% prior.

- (TH) Thailand May Customs Trade Balance: +$0.7B v -$1.0Be; Exports Y/Y: 7.2% v 2.0%e; Imports Y/Y: -1.7% v -0.2%e.

- (FR) France Jun Business Confidence: 99 v 99e; Manufacturing Confidence: 99 v 99e; Production Outlook Indicator: -11 v -8e; Own-Company Production Outlook: 4 v 2e.

- (CH) Swiss May M3 Money Supply Y/Y: -0.6% v -0.9% prior.

- (ES) Spain Apr Home Sales Y/Y: +24.0% v -19.3% prior.

- (FR) France Jun Preliminary Manufacturing PMI: 45.3 v 46.8e; Services PMI: 48.8 v 49.9e; Composite PMI: 48.2 v 49.4e.

- (TH) Thailand May Foreign Reserves w/e Jun 14th: $225.3B v $223.8B prior.

- (DE) Germany Jun Preliminary Manufacturing PMI: 43.4 v 46.4e; Services PMI: 53.5 v 54.4e; Composite PMI: 50.6 v 52.7e.

- (EU) Euro Zone Jun Preliminary Manufacturing PMI: 45.6 V 47.9E (lowest print since Dec 2023, below all estimates); Services PMI: 52.6 v 53.4e; Composite PMI: 50.8 v 52.5e.

- (RU) Russia Narrow Money Supply w/e Jun 14th (RUB): 18.29T v 18.24T prior.

- (UK) Jun Preliminary Manufacturing PMI: 51.4 v 51.1e; Services PMI: 51.2 v 53.0e; Composite PMI: 51.7 v 53.0e.

- (HK) Hong Kong May CPI Composite Y/Y: 1.2% v 1.1% prior.

- (HK) Hong Kong Q1 Current Account: $101B v $70.7B prior; Balance of Payments (BoP): -$35.5B v -$9.1B prior.

Fixed income issuance

- India sells INR230B vs. INR230B indicated in 2029 and 2073 bonds.

- France Debt Agency (AFT) announces upcoming issuance; To sell €6.0-7.2B in 3-month, 6-month and 12-month bills on Mon, Jun 24th (3 tranches).

Looking ahead

- 06:00 (IE) Ireland May PPI M/M: No est v 0.8% prior; Y/Y: No est v 3.8% prior.

- 05:30 (IN) India to sell combined INR230B in 2029 and 2073 bonds.

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2031, 2038 and 2050 Bonds.

- 06:00 (UK) DMO to sell £6.5B in 1-month, 3-month and 6-month bills (£0.5B, £2.5B and £3.5B respectively).

- 07:00 (NL) Netherland Debt Agency (DSTA) Q3 auction calendar.

- 07:30 (IN) India Forex Reserve w/e June 14th: No est v $655.8B prior.

- 07:30 (IN) India announces upcoming bill issuance (held on Wed).

- 08:00 (MX) Mexico Apr IGAE Economic Activity Index (Monthly GDP) M/M: -0.2%e v +0.3% prior; Y/Y: +3.5%e v -1.3% prior.

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

- 08:30 (CA) Canada Apr Retail Sales M/M: +0.7%e v -0.2% prior; Retail Sales (ex-auto) M/M: +0.6%e v -0.6% prior.

- 08:30 (CA) Canada May Industrial Product Price M/M: 0.4%e v 1.5% prior; Raw Materials Price Index M/M: -0.6%e v +5.5% prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:45 (US) Jun Preliminary S&P Manufacturing PMI: 51.0e v 51.3 prior; Services PMI: 54.0e v 54.8 prior; Composite PMI: 53.5e v 54.5 prior.

- 10:00 (US) May Existing Home Sales: 4.10Me v 4.14M prior- 10:00 (US) May Leading Index: -0.3%e v -0.6% prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

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

- 15:30 (US) Fed's Barkin.