UK elections barely surprise markets ahead of France's 2nd round

EU mMid-market update: UK elections barely surprise markets ahead of France's 2nd round; Samsung numbers help other chip names globally; US jobs report and Biden's big interview in focus.

Notes/observations

- Focus on US June jobs report after ADP and ISM services missed expectations on Wednesday; Analysts indicated range for nonfarm payrolls is 140-220K v 190K current median consensus.

- UK general elections resulted into major Labour party win, but no so-called “supermajority” was reached as some polls indicated, while voter turnout estimated at below 60% v 67% in 2019 (lowest in 20 years); Most analysts agree that UK Labour majority likely provides political stability and possible supply boost, but UK fiscal challenges remain under new incoming UK PM Starmer.

-Yesterday, during remarks made at White House’s Independence Day festivities, US Pres Biden said: "I'm not going anywhere"; ABC News shifted Biden's Stephanopoulos interview to Friday primetime from Sunday morning slot; The first clip of Biden's interview will air on "World News Tonight with David Muir" Friday evening and then it will be broadcast in its entirety from 20:00 ET today.

- More French polls indicate that Le Pen's National Party projected to win much less than 289 seats needed for absolute majority in 2nd election round of French parliamentary elections this Sunday, after Macron’s centerist and the left parties formed the anti-far-right pact.

- German May industrial production missed expectations, suggesting that German industrial sector’s turnaround will take more time.

- Hungary PM Orban may visit Moscow today to meet with Russia Pres Putin; Would be first official trip to Russia and meeting with Putin by any EU leader since the start of the full-scale invasion more than two years ago; Russia Pres Putin on July 4th said "I take Trump's plan to end the war with Ukraine very seriously although Trump has not detailed how exactly he's going to do that; We support the idea and have no doubt that he says it sincerely"; Note: Orban has been one of Trump's closest allies in Europe.

- On corporate front, Samsung Electronics and LG Electronics announced their preliminary figures, beating expectations and helping some chip names premarket, while Apple's supplier Foxconn released its monthly sales numbers and provided with third quarter guidance.

- Asia closed mixed with Hang Seng underperforming -1.3%. EU indices are -0.1% to +0.8%. US futures are +0.1-0.2%. Gold -0.4%, DXY +0.8%; Commodity: Brent +0.1%, WTI +0.1%; Crypto: BTC -5.0%, ETH -6.4%.

Asia

- Japan Fin Min Suzuki said to watch equity and FX trends with sense of urgency.

- Nikkei 225 hit record intraday high of 41,008 (Note: Prior record intraday high of 41,087 on Mar 21st, 2024).

- China seen to have higher bond volatility as PBOC intervenes in bond market - Chinese press.

-Taiwan Central Bank said to have intervened into FX market in recent days, but FX intervention was smaller than in Apr and May.

Europe

- UK Elections: Victorious Labour Leader Starmer: We did it! Promises a 'changed' Labour Party; I don't promise it won't be easy; We have to get moving immediately - statement.

- Outgoing PM Sunak concedes defeat in election, says "I will continue to serve as Member of Parliament"; Calls Labour leader Starmer and offers congratulations as Starmer to become new UK PM - statement.

- Russia Pres Putin on July 4th said "I take Trump's plan to end the war with Ukraine very seriously although Trump has not detailed how exactly he's going to do that; We support the idea and have no doubt that he says it sincerely".

- Germany Coalition said to agree on 2025 budget draft; Germany plans extra 2024 budget with €11B in additional debt - press.

- Norway Energy Min: Natural gas supply to Europe to reach 120Bcm in 2024 (v 109Bcm in 2023).

- European banks reportedly face probes into how good they are at carrying out the stress tests; European Banking Authority pushing for audit of banks’ systems - press.

Americas

-US Pres Biden: "I'm not going anywhere" - remark made during U.S. Independence Day festivities at the White House.

-NHC update on Hurricane Beryl: Min Central Pressure (mb) 971 v 968 d/d; Watches for portions of northeastern Mexico and South Texas will likely be required later today.

Global conflict/tensions

- Israel reportedly sent Mossad chief to Qatar for another Gaza hostage negotiations, which said be showing "new signs of progress".

- US reportedly intervened to stop sale of Congo copper mine to Chinese arms group - FT.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.43% at 519.74, FTSE +0.28% at 8,264.45, DAX +0.90% at 18,619.95, CAC-40 +0.46% at 7,731.07, IBEX-35 -0.04% at 11,062.40, FTSE MIB +0.58% at 34,303.00, SMI +0.14% at 12,106.50, S&P 500 Futures +0.03%].

Market focal points/key themes: European indices open generally higher and advanced through the early part of the session; among sectors leading the way higher are technology and real estate; energy and materials among the few sectors stuck in the red; FTSE indices in London trade only slightly higher as Labour win was largely priced in; oil & gas subsector weighed by Shell disclosing a $2B write-down; Glencore receives regulatory approval to acquiring remaining coal interests from Teck; focus on release of US NFP later in the day; no major earnings are expected in the upcoming Americas session.

Equities

- Consumer Staples: Eurofins Scientific [ERF.UK] +4.0% (mandates EY for additional Independent Audit).

- Financials: Barclays [BARC.UK] +0.5% (UK election results).

- Industrials: Maersk [MAERSKB.DK] -3.5% (Flexport report: Ocean Demand remains strong, but slightly decreased compared to previous weeks), Aixtron [AIXA.DE] +16.5% (cuts outlook. but strong prelim orders figures), Softcat [SCT.UK] -3.5% (analyst action), Varta [VAR1.DE] +19.5% (talks with Porsche).

- Energy: Shell [SHEL.UK] -0.5% (prelim Q2 production; impairments).

-Technology: Infineon [IFX.DE] +2.0% (Samsung and LG preannouncements), Atos [ATO.FR] -2.5% (waiver from the banks under €1.5B term loan).

Speakers

- Japan Fin Min Suzuki said equity prices are determined by the market; weak yen is pushing up cost for imports and having impact on prices; To watch equity and FX trends with sense of urgency.

- Germany Chancellor Scholz confirmed supplementary budget for 2024; Also to sign off on 2025 budget plan at next meeting on July 17th; Germany will stick to NATO 2% goal in 2025 and beyond; Announced extending power price compensation by another 2 years to 2030 and high billion-euro sum planned for housing construction.

- ECB’s Makhlouf (Ireland Central Bank Chief) warned Irish govt measures of overspending may risk ramping inflation.

- Korea FSC (financial regulator) nominee Head Kim sees risks in financial system; Household debt is within 'normal' range.

- Poland Central Bank (NBP) Kotecki said there is no room to cut rates in 2024; To consider cutting rates in H1 2025.

Economic data

- (DE) Germany May industrial production M/M: -2.5% V +0.1%E; Y/Y: -6.7% V -4.3%E.

- (EU) Eurozone may Retail Sales M/M: 0.1% V 0.2%E; Y/Y: 0.3% V 0.2%E.

- (UK) Jun Halifax house prices M/M: -0.2% V -0.1% PRIOR; Y/Y: +1.6% V +1.5% prior.

- (FR) France May industrial production M/M: -2.1% V -0.5%E; Y/Y: -3.1% V -1.1%E.

- (FR) France May trade balance: -€8.0B V -€7.6B prior.

- Italy May Retail Sales M/M: +0.4% v -0.1% prior; Y/Y: +0.4% v -1.7% prior.

- Spain May Industrial Production M/M: -0.1% v 0.0%e; Y/Y: 0.4% v 1.3%e.

- Hungary May Industrial Production M/M: -1.1% v +1.2%e; Y/Y: -4.9% v -2.1%e.

- Norway May Industrial Production M/M: +0.2% v -0.4% prior; Y/Y: 5.9% v 3.4% prior.

- Sweden May GDP Indicator M/M: 0.1% v 0.4%e; Y/Y: -0.2% v 0.0% prior.

- Sweden May Private Sector Production M/M: +0.6% v -0.5% prior; Y/Y: -0.2% v -1.6% prior.

-Sweden Jun Budget Balance (SEK): -40.9B v +31.6B prior.

-Japan May Household Spending Y/Y: -1.8% v 0.3%e [weakest pace since Jan].

-Japan May Preliminary Leading Index CI: 111.1 v 110.9 prior; Coincident Index: 116.5 v 115.2 prior.

-Taiwan Jun CPI Y/Y: 2.4% v 2.3%e.

-Japan Jun Total Reserve Assets: $1.23T v $1.23T prior.

-South Korea May Current Account: +$8.9B v -$0.3B prior (largest surplus since Sep 2021).

-Philippines Jun CPI M/M: 0.0% v 0.2%e; Y/Y: 3.7% v 3.9%e.

- Hong Kong Jun Foreign Reserves: $416.3B v $417.2B prior.

-South Africa Q2 BER Inflation Expectation Survey: Cuts 2024 CPI from 5.4% to 5.3%.

- Thailand Foreign Reserves w/e Jun 28th: $224.3B v $224.7B prior.

-Indonesia Jun Foreign Reserves: $140.2B v $139.0B prior.

-Russia Narrow Money Supply w/e Jun 28th (RUB): 18.15T v 18.25T prior.

-Malaysia end-Jun Foreign Reserves: $113.8B v $114.1B prior.

- FAO Jun World Food Price Index: 120.6 v 120.6 prior.

-Daily 3-month Euribor Fixing: 3.712% v 3.708% prior.

Fixed income issuance

- India sells INR280B vs. INR280B indicated in 2027, 2039 and 2053 bonds.

- China sells 30-year special Treasury Bonds; Avg Yield: 2.4989% v 2.4681% prior.

- Japan sells ¥5.2T in 3-Month Bills; Avg Yield: 0.0032% v 0.0160% prior; bid-to-cover: 3.47x v 3.51x prior.

Looking ahead

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

- 06:00 (IE) Ireland Jun Live Register Monthly Change: No est v -0.6K prior; Live Register Level: No est v 173.2K prior.

- 08:00 (PL) Poland Jun Official Reserves: No est v $207.8B prior.

- 08:00 (PL) Poland Central Bank (NBP) Jun Minutes (2 decisions ago).

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

- 08:30 (US) Jun Change in Nonfarm Payrolls: +190Ke v +272K prior; Private Payrolls: +160Ke v +229K prior; Manufacturing Payrolls: +5Ke v +8K prior.

- 08:30 (US) Jun Unemployment Rate: 4.0%e v 4.0% prior; Underemployment Rate: No est v 7.4% prior; Labor Force Participation Rate: 62.6%e v 62.5% prior.

- 08:30 (US) Jun Average Hourly Earnings M/M: 0.3%e v 0.4% prior; Y/Y: 3.9%e v 4.1% prior; Average Weekly Hours All Employees: 34.3e v 34.3 prior.

- 08:30 (CA) Canada Jun Net Change in Employment: +25.0Ke v +26.7K prior; Unemployment Rate: 6.3%e v 6.2% prior; Full Time Employment Change: No est v -35.6K prior; Part Time Employment Change: No est v +62.4K prior; Participation Rate: 65.4%e v 65.4% prior; Hourly Wage Rate Y/Y: 5.3%e v 5.2% prior.

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

- 09:00 (RU) Russia Jun Official Reserve Assets: No est v $599.0B prior.

- 09:00 (CL) Chile May Nominal Wage Y/Y: No est v 6.4% prior.

- 10:00 (CA) Canada Jun Ivey Purchasing Managers Index (seasonally adj): No est v 52.0 prior.

- 10:30 (TR) Turkey Jun Cash Budget Balance (TRY): No est v +234.7B prior.

- 12:00 (RU) Russia Q1 Final GDP (3rd reading) Y/Y: 5.4%e v 5.4% prior.

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

- 15:00 (AR) Argentina May Industrial Production Y/Y: -15.5%e v -16.6% prior; Construction Activity Y/Y: No est v -37.2% prior.