European stock market, economy and companies update (July 08, 2015)

***Notes/Observations***
- Lenders give Greece until Sunday to avoid Grexit; Chancellor Merkel not particularly optimistic and EU' Juncker noted that Grexit scenarios prepared in detail
- Chinese equities continue plunge despite more measures to prop up stocks


*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
**Equities**
Indices [Stoxx50 +0.8%, FTSE 100 +0.5% at 6,462, DAX +0.3% at 10,710, CAC-40 +0.8% at 4,641, IBEX-35 +0.7% at 10,429, FTSE MIB +1.4% at 21,253, SMI +0.7% at 8,824, Athens Stock Exchange closed, S&P 500 Futures -1% at 2,052]

- Market Focal Points/Key Themes: European equity markets open slightly higher following sharp declines on Tuesday; Greece's deadline of Thursday to deliver its detailed proposal in focus; French services firm Sodexo cuts sales forecast despite weaker euro; Barclays' CEO to resign; Oil prices continue to move lower amid Chinese equity declines; Hang Seng has biggest daily loss since 2008; Alcoa to report quarterly earnings after US equity close

By Sector
- Industrials [LPKF Laser LPK.DE -11% (cut forecast), BMW BMW.DE -2.5% (broker commentary)]
- Consumer Discretionary [Air France AF.FR +1% (June passenger traffic rose)]
- Financials [Barclays BARC.UK +2.5% (CEO resigned)]
- Technology [Monitise MONI.UK -15% (Visa Europe to cut stake)]
- Stoxx50 Sectors [Consumer Cyclical -2.3%, Technology -0.6%, Basic Materials -0.3%; Energy +0.9% Industrials +0.4%, Telecom +0.4%, Consumer Non-Cyclical +0.3%, Utilities +0.2%, Financials flat]

**Speakers**
- Greece govt to make formal ESM request today (as speculated)
- Greece govt refuted speculation of preparing California style IOUs for payment of State pensions and wages
- Greece PM Tsipras: Critical period for both Greece and Europe; will continue reform efforts. Outcome of Greek referendum vote reinforced mandate for socially just and economically sustainable solution to crisis. "No' vote represented a return to negotiations, not an end. Greek proposal includes credible reforms. Confirmed Greece ESM request to be sent today
- ECB's Noyer (France): Greece economy on verge of 'catastrophe'; Sunday was final deadline for Greece. If no deal by Sunday, Greece economy could 'collapse'. ECB was prepared to face all situations
- ECB's Nowotny (Austria): Saw no negative impact from Greece on Austria's financial stability and Greek crisis had limited impact on wider stability. ECB QE program was meant to divert deflation and this has been successful
- ECB's Visco (Italy): Euro Zone stability could not be put in doubt by a single country. Market tensions had not weakened positive QE effects. Greek crisis might have serious impact if Euro believed reversible
- EU's Moscovici stated that a solution on Greece could be found by Sunday and was closer an agreement compared to a week ago. Europe must not turn its back on Greece. Reiterated view that question of Greek debt is not on the table at this time
- EU's Dombrovskis: Hope Greece govt will deliver the proposals by Thursday
- France Fin Min Sapin: Next 5 days is pivotal for Greece; process begins with its proposals
- BOE held special FPC meeting on Jun 29th to discuss Greece. Reviewed contingency plans, reassessed outlook for financial stability. Monitoring UK current account closely
- BoJ Official Kiuchi stated that he saw little chance of hitting 2% inflation target, even by FY17. Did not see cutting 0.1% interest BoJ pays on excess reserves as a policy option for now. Could not rule out chance of Greece debt crisis triggering financial shock in markets . Slowdown in China's economic growth may hurt Japan's economy for time being
- BOJ said to see Q2 weakness as temporary with no need to amend outlook at next policy meeting
- China Ministry of Finance (MOF): Taken measures to guard market stability; to support State-own enterprises. Pledged not to reduce holdings in Chinese shares during market volatility
- Iran official: Will not show flexibility on imposed red lines in order to reach an agreement with P5+1 powers

**Currencies***
- EUR/USD recovered the 1.1000 handle on news that Greece was given a five-day deadline to come up with creditor-acceptable proposals and avoid bankruptcy (and Grexit). The final deadline to reach an agreement at technical level seems to be Friday and a deal must be reached at a EU Leader summit on Sunday. The session saw EUR/USD buy-stops elected to push the pair above 1.1050 level before consolidating
- The JPY currency benefited from safe-haven flows. Rising volatility for risky assets was having currency implications. The Greek situation and Chinese equity sell-off could slow down expectations that the Fed was preparing for higher interest rates. USD/JPY hitting a 6-week low in session. The USD/JPY pair tested below 121.50

**Fixed Income:
-Bund futures trade at 153.80 down 10 ticks on the day after trading as high as 154.18 earlier in the session. Greek headlines continue to run the show with yields lower across the curve. After breaking resistance at 153.79 yesterday analysts target 154.51 the top of the upward channel as potential resistance, if strength continues 155.34 becomes the next target representing June 1st highs. Analysts look for support at 152.79, with 152.45 next. Below this would see a retest of 152.00.
- Wednesday's liquidity report showed Tuesday's excess liquidity rose slightly to €399B a rise of €2.2B from €396.8B prior due to a €2.16B decrease in AFs and MonPol portfolios with the remainder attributed to a 250M increase in the amount borrowed in the overnight loan facility. Overnight lending rose to €1B from €752M prior.
- UK Gilt futures trades at 117.68 down 11 ticks near the lows of the day after breaching 118 earlier trading as high as 118.15 which was new contract highs. Having broke previous contract highs 118.35 is seen by analysts as resistance, with 118.86 next should strength continue . To the downside support moves to 117.20 followed by 117.00. A break below here should see the 116.45 base hold.
- The Short sterling strip continues to flatten amid the rise in the Gilts. Long end unwind continues with red months in focus. Jun16Jun17 calendar falls a further 5bp from yesterday morning and is trading at 56bp now down over 16bp from 72bp level seen last week.

**Political/In the Papers:
-(GR) German Chancellor Merkel: Greece has until Thursday (July 9th) to deliver a detailed proposal; Conditions for Greek talks were not there yet [as written proposal was not delivered at Summit]; Sunday's summit would decide whether negotiations could be reopen; Rules out debt haircuts for Greece; Haircuts would be illegal under EU treaty; There was no talk of bridge financing or parallel currency for Greece at today's summit; Takes note of Greek plans to request ESM program; Prepared to consider if there is a basis to begin talks.
-(GR) EU's Juncker: A detailed Grexit scenario has already been prepared; Strongly against it, but cannot prevent it if Greece does not meet its obligations; ECB commitments will depend on Greek commitments by Friday morning
- (CN) PBoC issues statement to support stock market stability; To actively assist CSF to obtain adequate liquidity
- (CN) China Securities Finance (CSF) said to seek at least CNY500B to support market - US financial press

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (EU) Eurogroup conference call on Greece request for ESM aid
- (GR) ECB decision on ELA for Greek banking sector
- (IT) Italy Fin Min Padoan at event
- (EU) Eurogroup chief Dijsselbloem in German Lower House of Parliament
- 05:30 (DE) Germany to sell €3.0B in 0.0% Jun 2017 Schatz
- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €0.75-1.0B in 3.875% Feb 2030 OT bond
- 06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: expected to leave Base Rate unchanged at 1.50%
- 06:45 (US) Daily Libor Fixing
- 07:00 (RU) Russia to sell combined RUB15B in OFZ bonds
- 07:00 (US) MBA Mortgage Applications w/e July 3rd: No est v -4.7% prior
- 07:00 (CL) Chile Jun CPI M/M: 0.3%e v 0.2% prior; Y/Y: 4.2%e v 4.0% prior; CPI Ex Food and Energy M/M: 0.2%e v 0.1% prior
- 07:00 (UK) Weekly PM Cameron question time in House of Commons
- 07:30 (UK) Chancellor Osborne Budget Statement to House of Commons
- 08:00 (HU) Hungary Central Bank (NBH) Jun Minutes
- 08:00 (BR) Brazil Jun IBGE Inflation IPCA M/M: 0.8%e v 0.7% prior; Y/Y: 8.9%e v 8.5% prior
- 08:15 (US) Baltic Dry Bulk Index
- 08:30 (CL) Chile Central Bank's Traders Survey
- 08:30 (CA) Canada May Building Permits M/M: -5.0%e v 11.6% prior
- 10:00 (PL) Poland Central Bank Gov Belka post rate decision press conference
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 11:30 (BR) Brazil Jun Commodity Price Index M/M: No est v 0.8% prior; Y/Y: No est v 9.1% prior
- 13:00 (US) Treasury to sell $21B in 10-Year Notes Reopening
- 14:00 (US) Fed's Williams (dove, FOMC voter) in LA
- 15:00 (US) May Consumer Credit: $18.5Be v $20.5B prior
- 18:00 (NZ) New Zealand Jun ANZ Truckometer Heavy M/M: No est v -1.1% prior
- 19:01 (UK) Jun RICS House Price Balance: No est v 34% prior
- 19:50 (JP) Japan May Machine Tool Orders M/M: -4.9%e v +3.8% prior; Y/Y: 16.7%e v 3.0% prior
- 21:30 (CN) China Jun CPI Y/Y: 1.3%e v 1.2% prior
- 21:30 (CN) China Jun PPI Y/Y: -4.6%e v -4.6% prior
- 21:30 (AU) Australia Jun Employment Change: 0.0Ke v 42.0K prior; Unemployment Rate: 6.1%e v 6.0% prior
- 23:35 (JP) Japan to sell 3-Month Bills
- 23:45 (JP) Japan to sell 30-Year JGB Bonds


**Economic data***
- (JP) Japan Jun Bankruptcies Y/Y: -4.7% v -13.2% prior
- (JP) Japan Jun Eco Watchers Current Survey (miss): 51.0 v 53.0e; Outlook Survey: 53.5 v 54.0e
- (FI) Finland May Preliminary Trade Balance: €0.4B v €0.6B prior
- (FR) Bank of France Jun Business Sentiment (miss): 98 v 99e
- (UK) Halifax Jun House Prices (beat) M/M: 1.7% v 0.3%e; 3M/Y: 9.6% v 8.3%e
- (HU) Hungary Jun CPI (inline) M/M: 0.2% v 0.2%e; Y/Y: 0.6% v 0.6%e
- (TR) Turkey May Industrial Production M/M: -2.0% v -0.8%e; Y/Y: 2.4% v 2.9%e

Fixed Income Issuance:
- (GR) Greece Debt Agency (PDMA) sold €1.625B vs. €1.25B indicated in 26-week Bills; Avg Yield: 2.97% v 2.97% prior; Bid-to-cover: 1.3x v 1.3x prior
- (EU) ECB allotted $308M in 7-day USD Liquidity Tender at 0.63% vs. $155M prior (4th week of allotment)
- (CH) Switzerland sold CHF132.4M in 0.5% 2030 bond; Yield: 0.297% vs. 0.295% prior

Contributed by Trade The News