European stock market, economy and companies update (July 07, 2015)

***Notes/Observations***
- Focus remains on Greece with Eurogroup and EU leaders meeting today following the recent "no' vote in referendum on bailout conditions; chance for Greece to present reform measures
- Greece faces default on July 20th if country misses €3.5B ECB payment


*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
**Equities**
Indices [Stoxx50 -0.1%, FTSE 100 -0.1% at 6,528, DAX -0.2% at 10,871, CAC-40 -0.3% at 4,699, IBEX-35 +0.3% at 10,571, FTSE MIB +0.8% at 21,768, SMI +0.2% at 8,875, Athens Stock Exchange closed, S&P 500 Futures +0.5% at 2,075]

- Market Focal Points/Key Themes: European equity markets open slightly higher following losses on Monday, upcoming eurogroup meeting in focus; Markets later pare gains; Retailer Asos Q3 sales above ests, Marks & Spencer reaffirms outlook ; German companies Prosieben and Axel Springer supported by M&A speculation; Technip weighed down by restructuring measures; Samsung Q2 profits below ests, but shares trade higher; Copper extends sharp declines; Athens Stock Exchange to now stay closed until at least Thursday

By Sector
- Energy [Technip TEC.FR -7.5% (restructuring measures)]
- Technology [Axel Springer SPR.DE +5% (M&A speculation), Canal Plus AN.FR +5% (Vivendi raised offer), ARM Holdings ARM.UK +2.5% (broker commentary), SAP SAP.DE +1.5% (broker commentary)]
- Consumer Discretionary [ProsiebenSAT PSM.DE +2.5% (M&A speculation)]
- Healthcare [Bavarian Nordic BAVA.DK +4% (contract)]
- Industrials [Rolls Royce RR.UK -3% (follow through selling after recent profit warning)]
- Stoxx50 Sectors [Financials +0.7%, Utilities +0.5%, Technology +0.5%, Telecom +0.3%, Consumer Non-Cyclical +0.2%, Energy +0.1%, Basic Materials flat; Consumer Cyclical -0.4%, Industrials -0.3%]

**Speakers**
- ECB released a document outlining its financial risk management. It stressed that ELA must not threaten monetary policy implementation and not present 'obvious' monetary financing concern
- EU's Juncker: Ready to do whatever is needed to reach an agreement with Greece
- EU Parliament President Schulz reiterated view of having Greece stay in the Euro; Grexit could not be the aim. He added that both sides (creditors and Greece) needed to move in negotiations
- S&P sovereign analyst Kraemer: Greece may default on debt payment as early as this week
- Hungary Central Bank said to tighten FX financing requirement for banks; effective Jan 1st 2016. To introduces FX coverage ratio which would limit currency mismatch at 15% of balance sheet
- Russia Econ Min Ulyukayev stated that Oil price decline to affect RUB currency exchange rate; FX depreciation to be temporary. Russian banks held almost no Greek debt but could be affected indirectly. Saw scope for further rate cuts by Russia Central Bank BRICS Development Bank to begin operation in 2016

**Currencies***
- The USD exhibited broad strength in session against major and commodity-related pairs due to concerns over Greek contagion and impact of China's equity market sell-off.
- Market participants awaited the outcome of Tuesday's meeting of euro zone leaders in Brussel. EUR/USD pair weighed by the growing probability of Greece's exit from the euro zone after a "no" vote in Sunday's referendum. EUR/USD was back below the 1.10 level and testing below its post referendum vote low of 1.0970.
- Dealers also noted that bearish commodity FX trade remained a key theme as well. Concerns that global oil demand might slow further as investors digest potential Greek-related bearish growth contagion effects. The AUD/USD hit fresh 6-year lows in the session below 0.7440 level

**Fixed Income:
-Bund futures trade at 152.89 up 74 ticks on the day trading just below highs as the markets continue to be driven by Greek headlines. A break above the highs have analysts targeting initial resistance at 153.35 today's highs followed by 153.79. Beyond this 154.51 provides resistance after which targets 155.34 representing June 1st highs. Bunds traded as low as 152.25 which filled the gap before trading up again, a push below the lows would see analysts targeting initial support at 151.96 which would fill Mondays gap. A break below this would target 151.13 a reversal of the trend.
-The Euribor strip continues to flatten, Jun16-17 Calendar trades now at 11bp a further drop of 1.5bp from yesterday as sources say the ECB have rejected Greece's request for ELA increase.
- Tuesdays' liquidity report showed Monday's excess liquidity rose slightly to €396.8B a rise of €5.0B from €391.8B prior due to a corresponding decrease in AFs. €752M was borrowed in the overnight loan facility a rise from the €597M prior.
-UK Gilt futures trade at 116.43 up 52 ticks near the highs of the day after mixed industrial and manufacturing data out of the UK. The future trades at resistance with analysts citing a close above 116.45 needed to form a new base with 117.26 and 117.91 (May 29th Highs) as next resistance levels. To the downside support moves to 115.82/63, below this should see weakness extend to 115.18, with a break of this resuming the downtrend with a target of 114.45 next.
-The Short sterling strip has flattened slightly in sympathy with the Euribor. Red month onwards are being bought up with the yield on the Jun16Jun17 calendar falling to 61bp having reached 72bp last week. Rate expectations have been pushed back slightly with Mar16 trading at 99.20 having traded at 99.04 prior to the Greek proposal rejection.

**Political/In the Papers:
- (GR) ECB maintained emergency funding (ELA) to Greek banks; haircuts have been adjusted on collateral, ECB reportedly intends to conduct an additional review of the Greek bank situation on Wednesday
- (GR) ECB's Nowotny (Austria): If Greece misses payment, funds will be cut off
- (GR) Greek banking association says banks to be closed in Tues and Wed. ATM withdrawal limit to remain €60/day
- (GR) Many of the Eurogroup members said to be seeking to toughen stance on Greece and consider two options for Greece. 1) Greece applies for a 2-year lending program via the ESM; 2) A potential default under Article 8 of the ESM

**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 Jun SACCI Business Confidence: No est v 86.9 prior
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills
- 05:30 (ZA) South Africa to sell 2030, 2037 and 2048 bonds
- 05:30 (DE) Germany to sell €1.0B in 0.1% Apr I/L 2026 Bundei (linker)
- 05:30 (UK) DMO to sell £1.75B in 3.50% Jan 2045 Gilt
- 06:30 (EU) ESM to sell €1.5B in 3-month Bills
- 06:45 (US) Daily Libor Fixing
- 07:00 (EU) Eurogroup meeting
- 07:00 (RU) Russia announces weekly OFZ bond auction
- 07:00 (BR) Brazil Jun FGV Inflation IGP-DI M/M: 0.7%e v 0.4% prior; Y/Y: 6.2%e v 4.8% prior
- 07:30 (CL) Chile Jun Trade Balance: $0.8Be v $1.0B prior; Total Exports: $5.6Be v $5.4B prior; Total Imports: $4.8Be v $54.4B prior; Copper Exports: No est v $2.9B prior
- 07:30 (CL) Chile Jun International Reserves: No est v $38.7B prior
- 07:45 (US) Chain Store Sales
- 08:00 (PL) Poland Jun Official Reserves: No est v $102.9B prior
- 08:00 (RU) Russia Jun Official Reserve Assets: $366.3Be v $356.8B prior
- 08:00 (CL) Chile May Nominal Wage M/M: No est v -0.2% prior; Y/Y: No est v 6.4% prior
- 08:15 (US) Baltic Dry Bulk Index
- 08:30 (US) May Trade Balance: -$42.7Be v -$40.9B prior
- 08:30 (CA) Canada May Int'l Merchandise Trade: -C$2.6Be v -C$3.0B prior
- 08:55 (US) Weekly Redbook Sales
- 09:00 (MX) Mexico Jun Consumer Confidence Index: 92.4e v 92.0 prior
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:00 (EU) EU Juncker with EU's Tusk in Parliament on EU Summit
- 10:00 (GR) Greece President Pavlopoulos speech
- 10:00 (US) May JOLTS Job Openings: 5.30Me v 5.438M prior
- 10:00 (US) July IBD/TIPP Economic Optimism: 48.9e v 48.1 prior
- 10:00 (UK) Jun NIESR GDP Estimate: No est v 0.6% prior
- 10:00 (HU) Hungary Jun YTD Budget Balance (HUF): No est v -511.1B prior
- 10:00 (MX) Mexico Weekly International Reserves
- 11:30 (US) Treasury to sell 4-Week Bills
- 12:00(EU) EU Leaders meet to discuss outcome of Greece referendum
- 12:00 (US) DOE Short-Term Crude Outlook
- 13:00 (US) Treasury to sell $24.0B in 3-Year Notes
- 15:00 (US) May Consumer Credit: No est v $20.5B prior
- 16:30 (US) Weekly API Oil Inventories
- 17:00 (CO) Colombia May Exports: $3.3Be v $3.2B prior
- 18:00 (NZ) New Zealand Govt 11-Month Financial Statements
- 19:01 (UK) Jun BRC Shop Price Index Y/Y: No est v -1.9% prior
- 19:50 (JP) Japan May Current Account Balance: ¥1.570Te v ¥1.326T prior; Adj Current Account: ¥1.375Te v ¥1.274T prior; Trade Balance: -¥283.3Be v -¥146.2B prior
- 23:00 (CN) China to sell 7-Year Bonds
- 23:35 (JP) Japan to sell 6-Month Bills


**Economic data***
- (AU) RBA left its Cash Rate Target unchanged at 2.00% (as expected)
- (CH) Swiss Jun Unemployment Rate (inline): 3.1% v 3.1%e; Unemployment Rate (Seasonally Adj): 3.3% v 3.3%e
- (DE) Germany May Industrial Production (miss) M/M: 0.0% v 0.1%e; Y/Y: 2.1% v 2.6%e
- (FR) France May YTD Budget Balance: -€63.9B v -€59.8B prior
- (FR) France May Trade Balance (miss): -€4.0B v -€3.6Be
- (CH) Swiss Jun Foreign Currency Reserves (CHF): 516.2B v 515.7Be
- (HU) Hungary May Industrial Production M/M: -0.2% v -0.1% prior; Y/Y: 6.2% v 7.0%e
- (NO) Norway May Industrial Production M/M: +0.7% v -4.9% prior; Y/Y: +4.2% v -3.4% prior
- (NO) Norway May Manufacturing Production M/M: -2.1% v -2.9% prior; Y/Y: -2.6% v +0.2% prior
- (TW) Taiwan Jun Trade Balance (miss): $2.2B v $4.7Be; Exports Y/Y: -13.9% v -6.0%e; Imports Y/Y: -16.1% v -17.6%e
- (UK) May Industrial Production (beat)M/M: +0.4% v -0.2%e; Y/Y: 2.1% v 1.6%e
- (UK) May Manufacturing Production (miss) M/M: -0.6% v +0.1%e; Y/Y: 1.0% v 1.8%e
- (SG) Singapore Jun Foreign Reserves: $253.3B v $250.2B prior

Fixed Income Issuance:
- (AT) Austria Debt Agency (AFFA) sold total €1.32B vs. €1.32B indicated in 2019 and 2025 RAGB Bonds

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