European stock market, economy and companies update (August 05, 2015)

***Notes/Observations***
- Significant data misses likely required to prevent an early September Fed rate hike; pre-committing could weigh on risk appetite
- UK 'super Thursday' release of BOE rate decision, minutes and quarterly inflation report awaited for rate guidance
- European Services PMI data comes in mix (Germany, Euro Zone, Spain, Russia all beat; while UK, Italy miss expectations)
- Swiss July CPI YoY reading of -1.3% hits a new cycle low and keep SNB on alert


*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
**Equities**
Indices [Stoxx50 +0.9%, FTSE 100 +0.3% at 6,706, DAX +1.0% at 11,572, CAC-40 +1.0% at 5,161, IBEX-35 +0.7 at 11,228, FTSE MIB +0.8% at 23,662, SMI +0.1% at 9,486, Athens Stock Exchange -2%, S&P 500 Futures +0.1 at 2,089.0]

- Market Focal Points/Key Themes: European equities open higher following commentary from Fed members leading dealers to consider an interest rate rise next month; oil continued higher supporting energy stocks; focus turning to NFP at end of week and "super Thursday" tomorrow; Greek equities continue to underperform with bank shares opening down 7.9%

By Sector:
- Consumer discretionary [Beiersdorf BEI.DE +2.2% (results)]
- Financials [ING INGA.NL -2.9% (results), Societe Generale GLE.FR +7.5% (results, higher capital buffers), Legal & General LGEN.UK +2.2% (results), Mediobanca MB.IT +2.5% (results)]

**Speakers**
- EU's Juncker: Greek talks making satisfactory progress; confident of an possible agreement with Greece's creditors
- Greece Ruling Party Parliamentary spokesperson: Seek a bailout agreement to secure 1st tranche of €25B; do not want a bridge loan
- IMF could decide on CNY currency (Yuan) inclusion into SDR basket in Oct. Review on possible inclusion of yuan to be conducted according to scheduled timetable. Decision expected to be made at IMF Board meeting in late Oct but could be postponed if more information is needed
- Thailand Central Bank voted 7-0 to keep policy steady in session. It reiterates that current policy was appropriate for the economy and would remain accommodative. It saw 2015 GDP growth lower than forecast with more downside risk seen
- China Foreign Min Wang: Non-regional countries should refrain from actions that might escalate situation in South China Sea

**Currencies**
- USD maintained a firm tone after Tuesday commentary from Fed's Lockhart (moderate, FOMC voter) that it could be appropriate to raise rates in Sept. Fed funds futures now implying a 48% probability of hiking in September, rising from 38% earlier in the week
- EUR/USD just shy of hitting fresh 2-week lows and trading at 1.0855 just ahead of the NY morning.
- GBP remained quiet ahead of the inaugural BoE ' super Thursday', which will bring the August policy announcement, the instant release of the accompanying minutes, the August Quarterly Inflation Report. GBP/USD at 1.5580 by mid-session
- Commodities received support on speculation that China might be preparing a fiscal stimulus program. CRB index has rebounded from its recent 12-year lows

**Fixed Income:
- Bund futures trade at 154.22 down 34 ticks on the day, as better services PMI data out of Europe added to the risk on sentiment. After the rejection at 155 yesterday, and the break below 154.09, momentum sees 153.67 with 153.25 providing the base. To the upside a break of 154.45 would see a possible test at yesterdays highs at 155.09 followed by 155.44 the June high. A continuation at this point would target 155.79.
Germany will be coming to market with the sale of €4.0B worth of 5 year Bobls, bring the equivalent of 16K Bund futures or 24K Bobl futures worth of supply.
- UK Gilt futures trades 117.07 down 34 ticks on the day off the lows after weaker Services PMI pared some of the earlier moves. Analysts look for gap support to be filled at 117.41 before targeting 117.75 resistance followed by target 118.14 next, the 200 day moving average. To the downside a break of the lows could target 116.65, followed by 116.33 gap support.
- Wednesday's liquidity report showed Tuesday's excess liquidity rose to €471.7B a rise of €5.8B from €465.9B prior. This was due primarily to a fall of €5.8B in AFs and MonPol portfolios to negative €40.9B the lowest since December 2011. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €70M from €92M prior.
- Corporate Issuance saw HSBC coming to market with a $2.7B offering, which accounted for the bulk of the $6.5B IG offerings yesterday. As we approach the back end of the year, IG issuance has been strong with global acquisition-related DCM volume reaching $290.0B in 2015, almost triple the $106.8B issued in 2014 YTD, with the Americas accounting for over 80% of this at $241.7B YTD. This week sees analysts estimating deals to be in the $20B range.

**Political/In the Papers:
- (GR) EU Spokeswomen: Encouraged by progress in Greek bailout talks; First disbursement to Greece for Aug 20 'ambitious but realistic'
- (IN) India said to consider making exports of surplus sugar mandatory. Mandatory export rule could be introduced from the start of the next crop year on Oct. 1st

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- 05:30 (ZA) South Africa July Sacci Business Confidence: No est v 84.6 prior
- 05:30 (DE) Germany to sell €4.0B in 0.25% Oct 2020 BOBL
- 06:00 (PT) Portugal Q2 Unemployment Rate: No est v 13.7% prior
- 06:00 (IE) Ireland July Unemployment Rate: No est v 9.7% prior
- 06:00 (IE) Ireland Jun Industrial Production M/M: No est v -6.9% prior; Y/Y: No est v -3.6% prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (RU) Russia to sell OFZ Bonds
- 07:00 (US) MBA Mortgage Applications w/e July 31st: No est v 0.8% prior
- 07:30 (CL) Chile Jun Economic Activity Index (Monthly GDP) M/M: 0.5%e v 0.0% prior; Y/Y: 2.5%e v 0.8% prior
- 08:00 (HU) Hungary Central Bank July Minutes
- 08:15 (US) July ADP Employment Change: +215Ke v +237K prior
- 08:15 (US) Baltic Dry Bulk Index
- 08:30 (US) Jun Trade Balance: -$43.0Be v -$41.9B prior
- 08:30 (CA) Canada Jun Int'l Merchandise Trade: -C$2.9Be v -C$3.3B prior
- 08:30 (US) Treasury announces size of upcoming 3-year, 10-year and 30-year bonds
- 09:00 (BR) Brazil PMI Services: No est v 39.9 prior; PMI Composite: No est v 41.0 prior
- 09:45 (US) July Final Markit Services PMI: 55.2e v 55.2 prelim; Composite PMI: No est v 55.2 prelim
- 10:00 (US) July ISM Non-Manufacturing Composite: 56.2e v 56.0 prior
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 11:30 (BR) Brazil Weekly Currency Flows
- 12:00 (CA) Canada to sell 2-Year Bonds
- 15:00 (MX) Mexico Banamex Survey of Economists
- 17:00 (CO) Colombia Jun Exports: $3.3Be v $3.4B prior
- 20:00 (CO) Colombia July CPI M/M: 0.1%e v 0.1% prior; Y/Y: 4.4%e v 4.4% prior
- 21:30 (AU) Australia July Employment Change: +10.0Ke v +7.3Kprior; Unemployment Rate: 6.1%e v 6.0% prior
- 23:35 (JP) Japan to sell 3-Month Bills


**Economic data***
- (IN) India July PMI Services: 50.8 v 47.7 prior (1st growth in 3 months); PMI Composite: 52.0 v 49.2 prior
- (RU) Russia July PMI Services (beat): 51.6 v 49.2e (moves back into expansion); PMI Composite: 50.9 v 49.5 prior
- (SE) Sweden July PMI Services: 56.6 v 54.9 prior
- (ES) Spain Jun House transactions Y/Y: 17.0% v 6.0% prior
- (CZ) Czech Jun Retail Sales Y/Y: 11.1% v 7.6%e; Retail Sales ex Auto Y/Y: 6.9% v 5.4% prior
- (HU) Hungary Jun Retail Sales Y/Y: 6.2% v 5.3%e
- (ES) Spain July Services PMI (beat): 59.7 v 55.8e (21st month of expansion and a 3-month high); Composite PMI: 58.3 v 55.9e
- (CH) Swiss July CPI (miss) M/M: -0.6% v -0.4%e; Y/Y: -1.3% v -1.0%e
- (CH) Swiss July CPI EU Harmonized M/M: -0.2% v +0.2% prior; Y/Y: -0.8% v -0.6% prior
- (ZA) South Africa July PMI Services: 48.9 v 49.2 prior
- (TH) Thailand Central Bank (BoT) left its Benchmark Interest Rate unchanged at 1.50% (as expected)
- (IT) Italy July Services PMI (miss): 52.0 v 53.0e (7th month of expansion but lowest since March); Composite PMI: 53.5 v 53.8e
- (FR) France July Final Services PMI (inline): 52.0 v 52.0e (confirms 6th month of expansion); Composite PMI: 51.5 v 51.5e
- (DE) Germany July Final Services PMI (beat): 53.8 v 53.7e (confirms 26th straight month of expansion); Composite PMI: 53.7 v 53.4e
- (EU) Euro Zone July Final Services PMI (beat): 54.0 v 53.8e (confirms 25th straight month of expansion); Composite PMI: 53.9 v 53.7e
- (IT) Italy Jun Industrial Production M/M: -1.1% v -0.3%e; Y/Y: +2.9% v -0.1% prior; Industrial Production WDA Y/Y: -0.3% v +1.4%e
- (UK) July Services PMI (miss): 57.4 v 58.0e (31st month of expansion but lowest since May); Composite PMI : 56.6 v 56.9e
- (EU) Euro Zone Jun Retail Sales (miss) M/M: -0.6% v -0.2%e; Y/Y: 1.2% v 2.0%e
- (NO) Norway July House Prices M/M: -0.3%, Y/Y: 6.8%

Fixed Income Issuance:
- (IN) India sold total INR140B vs. INR140B indicated in 3-month and 12-month Bills
- (EU) ECB allotted $228M in 7-day USD Liquidity Tender at fixed 0.63% vs. $308M prior
- (SE) Sweden sold total SEK4.0B vs. SEK4.0B indicated in 2022 and 2023 bonds
- (GR) Greece Debt Agency (PDMA) sold €812M vs. €625M indicated in 26-week bills; Avg Yield: 2.97% v 2.97% prior; Bid-to-cover: 1.3x v 1.3x prior

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