World awaits Biden decision on presidential bid

EU mid-market update: Fears from French political pivot are alleviated as exit polls show narrower lead for National Rally; World awaits Biden decision on presidential bid.

Notes/observations

- French political risk premiums unwind as 1st round exit polls show Le Pen’s National Rally party (far-right) leading by less than expected, putting absolute majority in doubt. CAC-40 surges higher and spread between French/German 10-year narrows. Credit Default Swaps (CDS) pricing in major French banks falls, but traders still assess the chance of emergence of coalitions aiming to beat Le Pen’s party in second round and also a possibility of hung parliament in France until next presidential elections in 2027.

- Remaining on political theme, Pres Biden seen to be under voter and media pressure to withdraw his reelection bid but reportedly his family and senior democrats are pushing him to continue.

- For economic data, manufacturing PMI readings out of most of Europe were mostly inline, with tiny upwards revisions for France, Germany and Euro Zone final figures. Notable mentions to Norway and Hungary, which contracted for 1st time in 8 months and 6 months respectively. German state CPI readings indicated that the national reading later on at 08:00ET might come below consensus, with largest component North Rhine Westphalia at 2.2% YoY.

- On corporate front, Boeing confirmed to acquire Spirit AeroSystems for $37.25/shr in all-stock deal.

- Looking further ahead, ECB Sintra Conf begins today and continues until Wed. On Thurs, US holiday and UK election vote and results.

- Asia closed higher with Shanghai outperforming at +0.9%. EU indices are +0.4-1.5%. US futures are +0.1-0.2%. Gold 0.0%, DXY -0.3%; Commodity: Brent +0.4%, WTI +0.4%; Crypto: BTC +2.2%, ETH +2.7%.

Asia

- China June Manufacturing PMI (Govt Official): 49.5 v 49.5e (2nd straight contraction); Caixin PMI Manufacturing: 51.8 v 51.5e(Highest since May 2021 and the 8th month of expansion).

- China changes rare earths regulations; Rules that rare earths belong to state with reach over entire supply chain; effective from Oct 1st - Nikkei.

- Chinese mutual funds have reportedly asked bond brokers to lower trading fees - press.

- Japan Q2 Tankan Large Manufacturing Index: 13 v 11e; Large Manufacturing Outlook: 14 v 11e (Large manufacturers sentiment worsens for first time in 16 quarters, lowest level since Dec 2023).

- South Korea govt lowers loan cap for people with low credit scores - press.

- Reformist candidate Masoud Pezeshkian leads Iran Presidential election in early count, garnering 42% of the vote in a four way race; Runoff election set for July 5th if no one candidate gets 50% - press.

Europe

- French Parliament Snap Election (1st round) Official Exit Polls: Le Pen's Right-wing National Rally party seen coming first and getting 240-310 seats (289 needed for absolute majority), Left-wing Popular Front alliance seen getting 76-200 seats, Macron's Renaissance party seen getting 60-138 seats.

- First round of French parliamentary snap elections currently records ~60% turnout v ~34.2% (highest in 40 years).

- One of far-left French leaders Melenchon: Would withdraw his candidates if they are in third place to beat the Le Pen's National Rally.

- Right-wing National Rally (RN) leader Marine Le Pen: French people have practically wiped-out Macron's camp; Hoping to have things in place so that Bardella becomes PM.
France Fin Min Le Maire: Doing all we can to ensure far-right National Rally Party does not get absolute majority.

- EU would not rush to reopen Brexit talks with Labour party - UK Press, citing sources in Brussels.

Americas

- On Saturday, Biden told attendees at Gov. Phil Murphy's Red Bank, New Jersey home that he didn’t have a great debate night, “but I’m going to be fighting harder.” [Note: on Friday after debates, Biden said “I would not be running again if I didn’t believe with all my heart and soul I can do this job”].

- Pres Biden was expected to discuss the future of his re-election campaign with family at Camp David on Sunday, June 30th; According to one person, Biden would ultimately listen to only his wife in key future decisions - NBC News.

- Pres Biden's family reportedly urged him to stay in the race; Reportedly members of Pres Biden’s family privately trashed his top campaign advisers at Camp David this weekend urging him to fire them; No immediate expectations Biden to follow through on that advice - Politico.

- Former Fox News Host Bill O'Reilly's X post from Sunday, June 30th: The decision has been made that the President Biden will quit the campaign; White House doesn't yet know how or when to make the announcement; Stay close [*Note: Bill O'Reilly disclosed none of his sources].

- Fed Mester's (hawk) term ends today (Jun 30th); To be replaced by Beth Hammack, effective Aug 31st.

Global conflict/tensions

- Reportedly US military bases in Europe were put on a heightened state of alert level "Charlie" over the weekend.

- Iran warns that if Israel attacks Lebanon with full scale military aggression, "an obliterating war will ensue".

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.47% at 513.80, FTSE +0.42% at 8,198.42, DAX +0.49% at 18,322.75, CAC-40 +1.42% at 7,585.30, IBEX-35 +0.82% at 11,033.00, FTSE MIB +1.31% at 33,590.00, SMI +0.41% at 12,035.51, S&P 500 Futures +0.07%].

Market Focal Points/Key Themes: European indices open higher across the board; all sectors start the day in the green; boost to risk appetite being attributed to relief over the first round of parliamentary elections in France, with the CAC outperforming to the upside, but slightly cutting gains as traders assess the possibility of hung parliament in France until next presidential elections in 2027; sectors leading the way higher are real estate and financials; among lagging sectors are communication services and technology; French construction sector among the best performers, buoying the index as a whole; on corporate front, shares of Airbus trading higher in Paris after Boeing confirmed to purchase Spirit AeroSystems in all stock deal while Spirit to continue to negotiate in good faith to enter into definitive agreements for Airbus to acquire certain Spirit assets that serve Airbus programs; no major earnings expected in the upcoming US session.

Equities

- Materials: Anglo American [AAL.UK] -2.5% (suspends production at Grosvenor steelmaking coal mine), Wacker Chemie [WCH.DE] -2.5% (analyst action).

-Information Technology: Atos [ATO.FR] +2.5% (agreement reached on financial restructuring terms between the Company and a group of banks and bondholders; Significant milestone towards reaching a final restructuring agreement by July), RTX [RTX.DK] -21.5% (cut outlook).

-Industrials: Airbus [AIR.FR] +2.5% (Boeing confirms to purchase Spirit AeroSystems in all stock deal; Spirit to continue to negotiate in good faith to enter into definitive agreements for Airbus to acquire certain Spirit assets that serve Airbus programs).

-Financials: Societe Generale [GLE.FR] +5.0%, Deutsche Bank [DBK.DE] +2.5% (results of 1st round of French elections; French-German yields spread narrows).

Speakers

- Turkey Fin Min Simsek: Aims to ensure stability in nominal exchange rate in medium and long term.

- Argentina Econ Min Caputo: No abrupt peso devaluation is coming.

Economic data

-(ZA) South Africa Jun Manufacturing PMI: 45.7 v 43.8 prior (2nd straight contraction).

-(GR) Greece May Unemployment Rate: 10.6% v 10.7% prior.

-(NG) Nigeria Jun Manufacturing PMI: 50.1 v 52.1 prior.

-(UK) May M4 Money Supply M/M: -0.1% v 0.0% prior; Y/Y: 0.3% v 0.6% prior; M4 (ex-IOFCs) 3-month Annualized: 3.6% v 4.5% prior.

-(UK) May Net Consumer Credit: £1.5B v £1.5Be; Net Lending: £1.2B v £1.5Be.

-(UK) May Mortgage Approvals: 60.0K v 60.5Ke.

-(UK) Jun Final Manufacturing PMI: 50.9 v 51.4e (confirms 2nd straight expansion).

- New Orders: 50.9 v 51.3 prior.

-(DE) Germany Jun CPI Baden Wuerttemberg M/M: 0.1% v 0.2% prior; Y/Y: 1.9% v 2.1% prior.

-(DE) Germany Jun CPI Brandenburg M/M: 0.1% v 0.0% prior; Y/Y: 2.6% v 2.9% prior.

-(DE) Germany Jun CPI North Rhine Westphalia M/M: 0.1% v 0.0% prior; Y/Y: 2.2% v 2.5% prior.

-(DE) Germany Jun CPI Saxony M/M: 0.1% v 0.1% prior; Y/Y: 2.8% v 3.1% prior.

-(DE) Germany Jun CPI Hesse M/M: 0.1% v 0.0% prior; Y/Y: 1.8% v 1.9% prior.

-(DE) Germany Jun CPI Bavaria M/M: 0.2% v 0.1% prior; Y/Y: 2.7% v 2.7% prior.

-(CH) Swiss Weekly Total Sight Deposits (CHF): 452.0B v 451.8B prior.

-(GR) Greece Jun Manufacturing PMI: 54.0 v 54.9 prior (17th month of expansion).

-(NO) Norway Jun PMI Manufacturing: 47.7 v 51.7 prior (1st contraction in 8 months).

-(EU) Euro Zone Jun Final Manufacturing PMI: 45.8 v 45.6e (confirms 24th straight contraction).

-(DE) Germany Jun Final Manufacturing PMI: 43.5 v 43.4e (confirms 24th straight contraction).

-(FR) France Jun Final Manufacturing PMI: 45.4 v 45.3e (confirms 17th straight contraction).

-(HU) Hungary Jun Manufacturing PMI: 49.4 v 51.6e (1st contraction in 6 months).

-(IT) Italy Jun Manufacturing PMI: 45.7 v 44.3e (3rd straight contraction).

-(TH) Thailand Jun Business Sentiment Index: 48.7 v 48.0 prior.

-(CZ) Czech Jun Manufacturing PMI: 45.3 v 46.5e (25th straight contraction).

-(CH) Swiss Jun PMI Manufacturing: 43.9 v 45.5e (18th straight contraction and below all estimates).

-(ES) Spain Jun Manufacturing PMI: 52.3 v 52.9e (5th straight expansion).

-(TR) Turkey Jun Manufacturing PMI: 47.9 v 48.4 prior (3rd straight contraction).

-(PL) Poland Jun Manufacturing PMI: 45.0 v 44.9e (26th straight contraction).

-(SE) Sweden Jun PMI Manufacturing: 53.6 v 54.0e (4th straight expansion).

-(CH) Swiss May Real Retail Sales Y/Y: 0.4% v 2.5%e.

-(HU) Hungary Apr Final Trade Balance: €1.8B v €1.3Be.

-(UK) Jun Nationwide House Price Index M/M: +0.2% v -0.1%e; Y/Y: 1.5% v 1.2%e.

-(SE) Sweden Apr Non-Manual Worker Wages Y/Y: 4.7% v 5.1% prior.

-(RU) Russia Jun Manufacturing PMI: 54.9 v 54.4 prior (26th straight expansion).

-(JP) Japan Jun Consumer Confidence: 36.4 v 36.4e.

-(NL) Netherlands Jun Manufacturing PMI: 50.7 v 52.5 prior (3rd straight expansion).

-(IN) India Jun Final PMI Manufacturing: 58.3 v 58.5 prelim (36th straight expansion).

-(HK) Macau Jun (COP) Casino Rev Y/Y: 16.4% v 17.5%e.

-(NL) Netherlands May Retail Sales Y/Y: 2.9% v 2.2% prior.

-(ID) Indonesia Jun CPI M/M: -0.1% v 0.1%e; Y/Y: 2.5% v 2.7%e.

-(CN) China Jun Caixin PMI Manufacturing: 51.8 v 51.5e(Highest since May 2021 and the 8th month of expansion).

-(SG) Singapore Q2 Prelim URA Private Home Prices Q/Q: 1.1% v 1.4% prior.

-(PH) Philippines Jun PMI Manufacturing: 51.3 v 51.9 prior (10th month of expansion).

-(ID) Indonesia Jun PMI Manufacturing: 50.7 v 52.1 prior (33rd month of expansion).

-(VN) Vietnam Jun PMI Manufacturing: 54.7 v 50.3 prior (3rd month of expansion).

-(MY) Malaysia Jun PMI Manufacturing: 49.9 v 50.2 prior (second straight expansion).

-(TH) Thailand Jun PMI Manufacturing: 51.7 v 50.3 prior (second straight expansion).

-(TW) Taiwan Jun PMI Manufacturing: 53.2 v 50.9 prior (Third month of expansion).

-(KR) South Korea Jun PMI Manufacturing: 52.0 v 51.6 prior (2nd straight expansion).

-(JP) Japan Jun Final Manufacturing PMI: 50.0 v 50.1 prelim (Confirms 2nd straight expansion).

-(IE) Ireland Jun PMI Manufacturing: 47.4 v 49.8 prior (4th month of contraction).

-(KR) South Korea Jun Trade Balance: $8.0B v $5.7Be.

-(JP) Japan Q2 Tankan Large Manufacturing Index: 13 v 11e; Large Manufacturing Outlook: 14 v 11e (Large manufacturers sentiment worsens for first time in 16 quarters, lowest level since Dec 2023).

-(AU) Australia Jun Final PMI Manufacturing: 47.2 v 47.5 prelim (lowest since 2020 and confirms 5th month of contraction).

-(CN) China June Manufacturing PMI (Govt Official): 49.5 v 49.5e (2nd straight contraction).

-(VN) Vietnam June Trade Balance: $2.9B v $1.7Be.

-(VN) Vietnam May CPI Y/Y: 4.3% v 4.4% prior.

Fixed income issuance

-Philippines sells total PHP20.0B vs. PHP15.0B indicated in 3-month, 6-month and 12-month bills.

-Thailand Central Bank sells THB40B in 6-month bills: Avg Yield 2.36909%; bid-to-cover: 1.10x.

Looking ahead

- 05:30 (DE) Germany to sell €3.0B in 6-month BuBills.

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

- 06:00 (IE) Ireland Jun Preliminary CPI EU Harmonized Y/Y: No est v 2.0% prior.

- 06:00 (IL) Israel to sell ILS3.45B in 2027, 2028, 2029, 2033, 2034 and 2035 bonds and linkers.

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

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

- 08:00 (DE) Germany Jun Preliminary CPI M/M: 0.2%e v 0.1% prior; Y/Y: 2.3%e v 2.4% prior.

- 08:00 (DE) Germany Jun Preliminary CPI EU Harmonized M/M: 0.2%e v 0.2% prior; Y/Y: 2.5%e v 2.8% prior.

- 08:15 (EU) ECB’s Nagel.

- 08:00 (CZ) Czech Jun Budget Balance (CZK): No est v -210.4B prior.

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

- 08:30 (CL) Chile May Economic Activity Index (Monthly GDP) M/M: No est v -0.3% prior; Y/Y: 2.5%e v 3.5% prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.6-7.2B in 3-month, 6-month and 12-month bills.

- 09:00 (BR) Brazil Jun Manufacturing PMI: No est v 52.1 prior.

- 09:45 (US) Jun Final Manufacturing PMI: 51.7e v 51.7 prelim.

- 10:00 (US) Jun ISM Manufacturing: 49.1e v 48.7 prior; Prices Paid: 55.8e v 57.0 prior.

- 10:00 (US) May Construction Spending M/M: +0.2%e v -0.1% prior.

- 11:00 (PE) Peru Jun CPI M/M: 0.1% v -0.1% prior; Y/Y: 2.3%e v 2.0% prior.

- 11:00 (MX) Mexico May Total Remittances: $5.7B v $5.4B prior.

- 11:00 (MX) Mexico Central Bank Economist Survey.

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

- 12:00 (IT) Italy Jun New Car Registrations Y/Y: No est v -6.6% prior.

- 14:00 (MX) Mexico Jun IMEF Manufacturing Index : No est v 49.8 prior; Non-Manufacturing Index : No est v 50 prior.

- 15:00 (EU) ECB Chief Lagarde.

- 16:00 (US) Weekly Crop Progress Report.

- 18:00 (NZ) New Zealand NZIER Business Opinion Survey.

- 18:45 (NZ) New Zealand May Building Permits M/M: No est v -1.9% prior.

- 19:00 (KR) South Korea Jun CPI M/M: 0.1%e v 0.1% prior; Y/Y: 2.6%e v 2.7% prior; CPI Core Y/Y: 2.2%e v 2.2% prior.

- 19:01 (UK) Jun BRC Shop Price Index Y/Y: 0.5%e v 0.6% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 6.1 prior.

- 19:50 (JP) Japan Jun Monetary Base Y/Y: No est v 0.9% prior.

- 21:30 (AU) Reserve Bank of Australia (RBA) Jun Minutes.