European stock market, economy and companies update (July 30, 2015)

***Notes/Observations***
- FOMC Statement keeps Sept in mind for potential rate lift-off; Rates to rise after 'some further' job market improvement
- Spain Q2 GDP growth accelerated to 1.0% q/q (as expected)
- German July Unemployment Change rises for 2nd straight month


*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
**Equities**
Indices [Stoxx50 +0.1%, FTSE 100 +0.3% at 6,649, DAX +0.2% at 11,230, CAC-40 +0.4% at 5,031, IBEX-35 -0.5% at 11,224, FTSE MIB +0.2% at 23,304, SMI +0.2% at 9,404, Athens Stock Exchange closed, S&P 500 Futures -0.2% at 2,098]

- Market Focal Points/Key Themes: European equity markets open higher amid recent Fed statement and earnings (Santander, Deutsche Bank, RBS, Nokia, Siemens, Shell, Anheuser-Busch); Markets later pare gains; Upcoming US Q2 GDP data in focus; German and Spanish CPI slow in July

- Earnings Recap [Shell beats ests and confirms Q2 cost cuts; Repsol beats ests; Eni misses ests, raises production forecast; Siemens profits beat ests, margins rise; Beer makers miss ests (Anheuser-Busch and Diageo); Nokia results supported by margins; Deutsche Bank revenues above ests, Santander misses, RBS beats]

By Sector
- Energy [Shell RDSA.UK +2% (Q2 profits above ests); Centrica CAN.UK -1% (cut dividend)]
Industrials [Safran SAF.FR +5.5% (raised outlook), Rolls Royce RR.UK +2% (reaffirmed outlook), BAE Systems BA.UK +1% (H1 results above ests); Renault RNO.FR -6.5% (Q2 sales slow)]
- Technology [Siemens SIE.DE +3% (Q3 profits above ests); Infineon IFX.DE -0.5% (Q3 sales below ests)]
- Telecom [Nokia NOK1V.FI +6.5% (margins above ests), Telefonica TEF.ES +1% (Q2 results in line); BT BT.UK -2.5% (Q1 results below ests)]
- Financials [Generali G.IT +2.5% (Q2 profits above ests), Deutsche Bank DBK.DE +2.5% (Q2 revenues above ests), RBS RBS.UK +2% (Q2 profits above ests); SwissRE SREN.CH -2% (Q2 profits below ests), Santander SAN.ES -0.8% (Q2 profits below ests)]
- Consumer Discretionary [Lufthansa LHA.DE +2.5% (reaffirmed outlook), ProsiebenSAT PSM.DE +2% (Q2 results above ests); JC Decaux DEC.FR -4.5% (organic sales below ests), Anheuser-Busch ABI.BE -4% (Q2 profits below ests)]
- Utilities [EDF EDF.FR +2% (H1 EBITDA rose)]
- Healthcare [Fresenius SE FRE.DE +3% (raised outlook), AstraZeneca AZN.UK +1.5% (Q2 results above ests, raised Rev forecast)]

**Speakers**
- ECB Economic Bulletin reiterated that inflation to remain low in near term and would rise towards the end of the year. Inflation seen picking up in 2016 and 2016 (in line with recent Staff Forecasts). Decline in oil prices was still exerting downside pressure on underlying inflation but should support growth. Policy measures providing support for improvement in borrowing conditions for companies and households. General Council to react to changes in inflation outlook and undesired monetary tightening
- Greece PM Tsipras: Syriza and government were at 'crucial' point and facing a big dilemma, to succumb or go ahead with a compromise we were forced into. Some in Syriza party believe return to Drachma is an option
- Greece govt spokesperson reiterated view that snap elections were not the aim at this time
- German Chancellor Merkel lawmakers said to be preparing motion for State Insolvency rules
- Turkey Central Bank Quarterly Inflation Report had Gov Basci reiterated view to maintain cautious monetary policy stance . Rate corridor and tight liquidity had helped against shocks. Need for rate corridor might diminish. Turkey tweaked higher its 2015 inflation forecast from 6.8% to 6.9% and maintained 2016 forecast at 5.5%
- PBoC to continue to allow differentiated RRR tool to play role
- Opec Sec Gen Al-Badri commented from Moscow that he expected oil prices to stabilize in 2016 fo a long period
- Russia Energy Min Novak: Russia and OPec pursuing the same goals of keeping oil market balanced and stable

**Currencies***
- USD traded firmer in the wake of the FOMC statement which kept September in play for rate lift-off
- Risk appetite had continued to strengthen aided by corporate earnings and continued stabilization in China equity markets. The scenario putting funding currencies including EUR back under selling pressure. The pair at 1.0975 heading into the NY morning. USD/JPY 124.20

**Fixed Income:
- Bund futures trade at 153.82 up 21 ticks on the day underpinned by weaker German Unemployment numbers and supply out of Italy. Analysts look for a break of today's high at 153.91 targeting 154.09 with a break of this seeing a fresh run on July 8th 154.24 high, which also corresponds with the 50% retracement of the April June fall followed by an extension to 155.44. Downside support moves to 153.28, with 153.02 the base, a break of which would make 152.50 the next potential target.
- Italy sold a total €6.15B 5y and 10y BTPs, and 7y CCTeu , the equivalent to around 23k Bunds, or 28k BTP futures. Spain will also repay €27.7 in coupon and redemption payments.
- UK Gilt futures trades 116.33 down 11 ticks on the day, trading at price/gap support. Analysts see this as a corrective pullback with a break of 116.77 to clear the way to 117.17 then 117.32. A break above would would target 117.72, the medium term downtrend. To the downside a break of todays lows at 116.20 sees 115.77 next.
- Thursday's liquidity report showed Wednesday's excess liquidity rose to €420.1B a rise of €12.8B from €407.3B prior. This was due primarily to a fall of €8B in AFs and MonPol portfolios to €14.2B with the remainder attributed to the increased MRO take. Use of the marginal lending facility fell to €4M from €765M prior.
- Corporate Issuance saw deals from Canadian Pacific railways and Banco Sabadell in the region of $1.4B, as well as an up sized $1B offering from Unilever to name a few.
Analysts expecting $20-25B of corporate issuance this week.
- US Month End Extensions are gathering pace, large in the UK, Europe and the US. Estimations are above average for Treasuries (0.10y, v +0.06y avg), with focus on the US Agg index, which is above avg at +0.09y. This is of importance as it is the largest index and the benchmark for both bond and mutual fund managers. European extensions are large with the Eur Agg Treasury extension at +0.12y, with Sterling also above average at +0.08y.

**Political/In the Papers:
- (SA) Reportedly Saudi Arabia to taper oil production after the end of summer, to around 10.3M bpd (OPEC monthly reported Saudi June production of 10.56M bpd)
- (GR) Greece stock exchange official: Market will not reopen on Thurs and unlikely to open on Friday; delayed by technical issues

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- 06:00 (IE) Ireland Q1 GDP Q/Q: 1.8%e v 0.2% prior; Y/Y: 3.7%e v 4.1% prior
- 06:00 (IE) Ireland Q1 Current Account Balance: No est v €3.7B
- 06:00 (PT) Portugal Jun Retail Sales M/M: No est v 0.2% prior; Y/Y: No est v 1.9% prior
- 06:00 (PT) Portugal Jun Industrial Production M/M: No est v 1.2% prior; Y/Y: No est v 3.2% prior
- 06:00 (IL) Israel Jun Unemployment Rate: No est v 5.0% prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (BR) Brazil July FGV Inflation IGPM M/M: 0.7%e v 0.7% prior; Y/Y: 7.0%e v 5.6% prior
- 07:30 (CL) Chile Central Bank Meeting Minutes
- 08:00 (DE) Germany July Preliminary CPI M/M: +0.2%e v -0.1% prior; Y/Y: 0.3%e v 0.3% prior
- 08:00 (DE) Germany July Preliminary CPI EU Harmonized M/M: +0.3%e v -0.2% prior; Y/Y: 0.2%e v 0.1% prior
- 08:00 (RU) Russia Gold and Forex Reserve w/e July 24th: No est v $358.2B prior
- 08:00 (ZA) South Africa Jun Budget Balance (ZAR): +24.0Be v -18.5B prior
- 08:00 (CL) Chile Jun Manufacturing Index Y/Y: -1.9%e v -3.3% prior
- 08:00 (CL) Chile Jun Retail Sales Y/Y: 2.8%e v 3.1% prior
- 08:00 (CL) Chile Jun Total Copper Production: No est v 508.3K tons prior
- 08:15 (US) Baltic Dry Bulk Index
- 08:30 (US) Q2 Advance GDP Annualized Q/Q: +2.5%e v -0.2% prior; Personal Consumption: 2.7%e v 2.1% prior
- 08:30 (US) Q2 Advance GDP Price Index: 1.5%e v 0.0% prior; Core PCE Q/Q: 1.6%e v 0.8% prior
- 08:30 (US) Initial Jobless Claims: 270Ke v 255K prior; Continuing Claims: 2.21Me v 2.207M prior
- 08:30 (US) Weekly USDA Net Export Sales
- 09:30 (BR) Brazil Jun Total Outstanding Loans (BRL): 3.097Te v 3.081T prior; M/M: 5.4%e v 0.7% prior; Personal Loan Default Rate: No est v 5.4% prior
- 10:30 (US) Weekly EIA Natural Gas Inventories
- (BR) Brazil Jun Central Govt Budget Balance (BRL): No est v -8.1B prior
- 13:00 (US) Treasury to sell $29.0B in 7-Year Notes
- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: expected to leave Overnight Rate unchanged at 3.00%
- 17:00 (KR) South Korea Aug Business Manufacturing Survey: No est v 67 prior; Non-Manufacturing Survey: No est v 66 prior
- 19:00 (KR) South Korea Jun Industrial Production M/M: +1.5%e v -1.3% prior; Y/Y: -2.0%e v -2.8% prior
- 19:05 (UK) July GfK Consumer Confidence: No est v 7 prior
- 19:30 (JP) Japan Jun Jobless Rate: 3.3%e v 3.3% prior; Job-To-Applicant Ratio: 1.20e v 1.19 prior
- 19:30 (JP) Japan Jun Overall Household Spending Y/Y: 1.9%e v 4.8% prior
- 19:30 (JP) Japan Jun National CPI Y/Y: 0.3%e v 0.5% prior; CPI Ex Fresh Food Y/Y: 0.0%e v 0.1% prior; CPI Ex Food, Energy Y/Y: 0.4%e v 0.4% prior
- 19:30 (JP) Japan July Tokyo CPI Y/Y: 0.2%e v 0.3% prior; CPI Ex Fresh Food Y/Y: 0.0%e v 0.1% prior; CPI Ex Food, Energy Y/Y: 0.2%e v 0.2% prior
- 20:30 (TW) Taiwan Q2 Preliminary GDP Y/Y: 2.6%e v 3.4% prior
- 21:30 (AU) Australia Q2 PPI Q/Q: No est v 0.5% prior; Y/Y: No est v 0.7% prior
- 23:00 (MX) Mexico Jun YTD Budget Balance (MXN): No est v -180.7B prior


**Economic data***
- (DE) Germany July CPI Saxony M/M: +0.2% v -0.2% prior; Y/Y: 0.3% v 0.5% prior
- (CH) Swiss July KOF Leading Indicator (beat): 99.8 v 90.4e
- (AT) Austria Q2 GDP Q/Q: 0.1% v 0.2% prior; Y/Y: % v 0.1% prior
- (DK) Denmark Jun Gross Unemployment Rate: 4.7% v 4.8% prior
- (ES) Spain Q2 Preliminary GDP Q/Q: 1.0% v 1.0%e; Y/Y: 3.1% v 3.2%e
- (ES) Spain July Preliminary CPI M/M:-1.0 % v +0.3% prior; Y/Y: 0.0% v 0.1%e
- (ES) Spain July Preliminary CPI EU Harmonized M/M: -1.6% v -1.5%e; Y/Y: -0.1% v +0.1%e
- (SE) Sweden Q2 Preliminary GDP (beat) Q/Q: 1.0% v 0.7%e; Y/Y: 3.0% v 2.5%e
- (DE) Germany July Unemployment Change (miss): +9K v -5Ke; Unemployment Claims Rate: 6.4% v 6.4%e
- (NO) Norway Jun Retail Sales (With auto/fuel): 1.0% v 0.9%e
- (NO) Norway Q2 Industrial Confidence: -8 v -3 prior
- (DE) Germany July CPI Brandenburg M/M: 0.2% v 0.0% prior; Y/Y: 0.1% v 0.3% prior
- (DE) Germany July CPI Hesse M/M: 0.2% v 0.1% prior; Y/Y: 0.4% v 0.3% prior
- (DE) Germany July CPI Bavaria M/M: +0.2% v -0.2% prior; Y/Y: 0.3% v 0.5% prior
- (DE) Germany July CPI North Rhine Westphalia M/M: +0.1% v -0.1% prior; Y/Y: 0.2% v 0.3% prior
- Germany July CPI Baden Wuerttemberg M/M: +0.2 v -0.2% prior; Y/Y: 0.2 v 0.2% prior
- (PT) Portugal July Consumer Confidence Index: -19.0 v -20.0 prior; Economic Climate Indicator: 1.4 v 1.3 prior
- (EU) Euro Zone July Business Climate Indicator: 0.39 v 0.19e; Consumer Confidence: -7.1 v -7.1e; Economic Confidence: 104.0 v 103.2e; Industrial Confidence: -2.9 v -3.4e; Services Confidence: 8.9 v 8.0e
- (BE) Belgium July CPI M/M: 0.0% v 0.2% prior; Y/Y: 0.5% v 0.6% prior

Fixed Income Issuance:
- (IT) Italy Debt Agency (Tesoro) sold total €4.388B vs. €3.5-4.5B indicated range in 5-year and 10-year BTP Bonds
- Sold €1.908B v €1.5-2.0B indicated range in 0.7% 2020 BTP Bond; Avg Yield: 0.77% v 1.25% prior; Bid-to-cover: 1.62x v 1.62x prior
- Sold €2.48B v €2.0-2.5B indicated range in 1.50% 2025 BTP Bonds; avg yield 1.83% v 2.35% prior; bid-to-cover: 1.42x v 1.35x prior
- (IT) Italy Debt Agency (Tesoro) sold €1.75B vs. €1.25-1.75B indicated range in Jun 2022 CCTeu; Avg Yield: 0.67% v 1.08% prior; Bid-to-cover: 1.57x v 1.25x prior (Jun 390th 2015)
- (DK) Denmark rejected all bids in 1-month and 4-month Bill auction

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