Wednesday, July 29, 2015

Europe Mid-Market Update

- Risk aversion has receded over the past 24 hours
- Fed Statement in focus in regards to 1st potential rate hike heading either towards September or delaying the move into December

Economic data
- (JP) Japan July Small Business Confidence: 49.3 v 46.9 prior
- (DE) Germany Aug GfK Consumer Confidence (in line): 10.1 v 10.1e 
- (CH) Swiss Jun UBS Consumption Indicator: 1.68 v 1.62 prior
- (FR) France July Consumer Confidence (miss): 93 v 94e  
- (SE) Sweden July Consumer Confidence (miss): 96.4 v 98.9e; Manufacturing Confidence (beat): 103.7 v 101.5e; Economic Tendency: 102.7 v 101.6 prior
- (ES) Spain Jun Adjusted Retail Sales Y/Y: 2.3% v 3.6%e; Retail Sales Y/Y: 3.8% v 1.8% prior- 03:00 (HU) Hungary Jun Unemployment Rate: % v 7.0%e  
- (NO) Norway May AKU Unemployment Rate: 4.3% v 4.3%e  
- (UK) Jun Net Consumer Credit (beat): £1.2B v £1.1Be; Net Lending: £2.6B v £2.0Be  
- (UK) Jun Mortgage Approvals (beat): 66.6K v 66.0Ke 
- (UK) Jun M4 Money Supply M/M: -0.5% v +0.5% prior; Y/Y: -0.3% v +0.5% prior; M4 Ex IOFCs 3M Annualized: 3.8% v 4.3% prior

Fixed Income Issuance:

- (IN) India sold total INR140B in 3-month and 6-month Bills
- (EU) ECB allotted $308M in 7-day USD Liquidity Tender at fixed 0.63% vs. $358 prior
- (IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 6-month Bills; Avg Yield: 0.007% v 0.060% prior; Bid-to-cover: 1.79x v 1.58x prior  



Indices [Stoxx50 +0.2%
, FTSE 100 +0.6% at 6,594, DAX +0.1% at 11,181, CAC-40 +0.3% at 4,990, IBEX-35 flat at 11,246, FTSE MIB -0.3% at 23,248, SMI +0.6% at 9,333, Athens Stock Exchange closed, S&P 500 Futures +0.1% at 2,089]

- Market Focal Points/Key Themes: Equity markets open higher, adding to Tuesday's gains, with later today US Fed decision in focus; Shanghai Composite closes higher by 3.4%

- Earnings Recap [Schneider Electric cuts revenue forecast; Volkswagen cuts FY deliveries target; Peugeot reports H1 profit; Bayer beats ests and reaffirms FY earnings outlook, amid positive fx impact; Barclays Q2 profits above ests; LVMH H1 sales above ests; Total Q2 profits above ests; 

By Sector

- Consumer Discretionary
 [LVMH MC.FR +3% (H1 sales above ests), British American Tobacco BATS.UK+2.5% (H1 profits above ests, raised dividend), Sky SKY.UK +1.5% (FY results rose)]
- Financials [Quintain Estates QED.UK +22% (takeover offer), Man Group EMG.UK +4% (H1 profits rose), Barclays BARC.UK +3.5% (Q2 profits above ests); EFG International EFGN.CH -15% (net new money declined)]
- Industrials [Italcementi IT.IT +47% (takeover offer), Peugeot UG.FR +3% (H1 profit); HeidelbergCement HEI.DE -3% (acquisition), Volkswagen VOW3.DE -1.5% (cut FY15 deliveries target), Linde LIN.DE -1.5% (cut sales forecast), Schneider Electric SU.FR -1% (cut sales forecast)]
- Technology [Atos ATO.FR +2% (raised free cash flow target)]
- Telecom [Numericable NUM.FR +6% (reported Q2 profit), Altice ATC.NL +4% (Q2 profits rose), KPN KPN.NL +2.5% (Q2 results above ests)]
- Energy [Total FP.FR +1% (Q2 profits above ests); Saipem SPM.IT -8% (H1 net loss)]
- Healthcare [Bayer BAYN.DE +3.5% (Q2 results above ests)]
- Basic Materials/Resources [Antofagasta ANTO.UK -1.5% (cut copper production forecast)]


- EU's Moscovici:
 Greece negotiations starting well; Grexit was behind us. Trans-Atlantic Trade and Investment Partnership (TTIP) might not be completed by end of US President Obama's term. Grexit is behind us
- Bavaria PM Seehofer (CSU party chief): Grexit would create utter chaos but would have to accept the situation if reforms not implemented
- Russia Central Bank: To suspend purchases of forex for its reserves from July 28th due to market volatility (**Reminder: On May 14th Russia Central Bank stated that it would purchase FX to boost reserves in amount $100-200M per day. Move not to support the RUB currency (Ruble))
- Thailand Fin Min Sommai reiterated view that rate cut would not help the economy but Gov t spending would clearly lend support beginning in Q4
- China Fin Min Lou Jiwei reiterated govt view of facing downward economic pressure 


- USD putting in a mixed performance ahead of the Fed statement on Wed.
 There is concern that recent Greece and China troubles might put the Fed off any immediate rate hike. Dealers noting that a sign of early hike might come with a relatively dovish and reassuring statement. Yellen's Fed should have no incentive to diverge from her recent semi-annual testimony to Congress as the data has been mixed. 
- EUR/USD steady at 1.1060 
- GBP/USD consolidated recent gains. Dealers took not of an IMF comment that pound sterling currency was between 5-15%above the level consistent with fundamentals and desirable policy settings" at the end of 2014. Pair at 1.5617 just ahead of the NY morning
- Emerging market currencies have traded at multi-year lows against the greenback in recent weeks on monetary policy divergence theme

Fixed Income:

- Bund futures
 trade at 153.76 down 8 ticks on the day in light trading as markets await the FOMC decision. Analysts look for a break of today's high at 153.92 targeting 154.09 to fill today's gap 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.
- UK Gilt futures trade 116.82 up 12 ticks on the day, closing yesterday's gap. Analysts see a break of today's highs of 116.86 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 Fridays gap support at 116.25 held as expected, a break below this sees 115.77 next.
- Wednesday's liquidity report showed Tuesday's excess liquidity fell to €407.3B a fall of €2.4B from €409.7B prior. This was due primarily to a rise of €2.4B in AFs and MonPol portfolios to €22.2B. Use of the marginal lending facility rose to €765M from €310M prior.
- Corporate Issuance was active yesterday with roughly $10B in deals to be priced, with $8B coming from financial institutions such as Amex, BMO, RF and GS. This morning has seen another big name coming to market with IBM to sell GBP-denominated 7-year bond. 
Analysts expecting $20-25B of corporate issuance this week

Political/In the Papers: 

- (BR) S&P lowered Brazil sovereign outlook to Negative from Stable; affirms BBB- rating
- (NZ) RBNZ Gov Wheeler: Further policy easing "likely" to be required; Further NZD currency (Kiwi) depreciation is necessary

Looking Ahead
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- 06:00 (UK) July CBI Industrial Reported Sales: 29e v 29 prior
- 06:00 (RO) Romania to sell Bills  
- 06:45 (US) Daily Libor Fixing
- 07:00 (RU) Russia to sell OFZ Bonds  
- 07:00 (US) MBA Mortgage Applications w/e July 24th: No est v +0.1% prior
- 07:00 (IE) Ireland July Consumer Confidence Index: No est v 102.8 prior
- 07:30 (ZA) South Africa Q2 Unemployment Rate: 26.5%e v 26.4%prior
- 08:00 (BR) Brazil Jun PPI Manufacturing M/M: No est v 0.2% prior; Y/Y: No est v 6.1% prior
- 08:15 (US) Baltic Dry Bulk Index
- 10:00 (US) Jun Pending Home Sales M/M: 0.9%e v 0.9% prior; Y/Y: 11.1%e v 8.3% prior
- 10:30 (US) Weekly DOE Crude Oil Inventories 
- 11:30 (US) Treasury to sell $15B in 2-Year Floating Rate Notes 
- 13:00 (US) Treasury to sell $35B in 5-Year Notes
- 14:00 (US) FOMC Interest Rate Rate Decision: expected to leave policy unchanged 
- 18:00 (BR) Brazil Central Bank (BCB) Interest Rate Decision:
 Expected to raise Selic Target Rate by 50bps to 14.25%
- 18:45 (NZ) New Zealand Jun Building Permits M/M: No est v 0.0% prior
- 19:50 (JP) Japan Jun Preliminary Industrial Production M/M: +0.3%e v -2.1% prior; Y/Y: +1.3%e v -3.9% prior
- 20:30 (AU) RBA Gov Stevens in Sydney 
- 22:30 (SG) Singapore Q2 Unemployment Rate: No est v 1.8% prior
- 23:35 (JP) Japan to sell 3-Month Bills  

Wednesday's poster of the day

Asia Mid-Session Update

Economic Data

- (JP) JAPAN JUN RETAIL SALES M/M: -0.8% V -0.9%%E; RETAIL TRADE Y/Y: 0.9% (3-month low) V 1.1%E 
- (KR) South Korea Jun Department Store Sales y/y: -11.9% v +3.1% prrior; Discount store sales y/y: -10.2% v +0.5% prior 

Index Snapshot (as of 04:00 GMT)

- Nikkei225 -0.2%, 
- S&P/ASX +1.0%, 
- Kospi +0.6%, 
- Shanghai Composite -0.2%, 
- Hang Seng +0.1%, 
- Sept S&P500 -0.1% at 2,085

Commodities/Fixed Income

- Aug gold flat at $1,096/oz, Sept crude oil -0.3% at $47.85/brl, Sept copper +0.9% at $2.42/lb
- (US) API Petroleum Inventories: Crude -1.9M v 0e 
- (CN) China MOF sells 3-yr bonds, avg yield at 2.7941% 
- USD/CNY: PBoC sets yuan mid point at 6.1150 v 6.1154 prior setting; Strongest yuan setting since July 13th 
- (JP) BOJ offers to buy ¥375B in 1-3yr JGBs, ¥425B in 3-5yr JGBs, ¥240B in 10-25 yr JGBs and ¥140B in JGBs with maturity over 25-yr 
- (AU) Australia MoF (AOFM) sells A$500M in 3.75% 2037 Bonds; avg yield: 3.4350%; bid-to-cover: 2.42x 

Market Focal Points/FX

- Asian indices are trading mixed but with more upbeat overtones, as US markets finally broke a string of 5 straight losing sessions with resounding gains. Overall volatility is relatively subdued across asset classes, with the next 48 hours to reveal a policy update out of the FOMC as well as the initial US GDP print for Q2.

- Shanghai Composite oscillated between gains and losses in the opening morning session, rising over 1.5% in the opening minutes, falling by as much as 1.1%, and finally entering its break down 0.2%.  Outsized leverage fanning that volatility continued to subside, with total margin debt falling for the 3rd straight day to CNY1.38T v CNY1.43T yesterday - also the lowest level in over 4 months. China MoF remarked H2 CPI growth will be moderate and 2015 would remain around 2%, well below 3.0% official target. PBoC also remained active in supporting sentiment, with reports the central bank has encouraged foreign investors - including global central banks, sovereign wealth funds and foreign financial institutions - to invest in interbank market.

- Among USD majors, NZD/USD was most active as it spiked over 60pips above $0.6730 on less dovish than anticipated comments from RBNZ Governor Wheeler. He said further policy easing is "likely" to be required - a less resolute position than anticipated by investors pricing in well over 50bps in cuts from the current 3.00% cash rate. Indeed, Westpac reaffirmed its view that New Zealand cash rates will be cut by another 100bps to 2.00%. In other USD majors, USD/JPY fell about 30pips toward 123.30, EUR/USD was up above 25pips above 1.1080, and AUD/USD was flat ahead of tomorrow's Australia housing data and comments from RBA's Stevens.


US equities / ADRs:
- BWLD: Reports Q2 $1.12 v $1.25e, R$426.4M v $430Me; +8.9% afterhours
- PNRA: Reports Q2 $1.61 v $1.63e, R$677M v $681Me; +8.0% afterhours

- CTXS: Reports Q2 $1.00 v $0.82e, R$796.8M v $792Me; Commences Strategic Alternatives for GoTo Family of Products; CEO resigns; +3.8% afterhours
- GILD: Reports Q2 $3.15 v $2.64e, R$8.24B v $7.36Be; +3.4% afterhours
- ESRX: Reports Q2 $1.44 v $1.41e, R$25.4B v $26.0Be; +1.6% afterhours
- APC: Reports Q2 +$0.01 adj v -$0.53e, R$2.64B v $2.57Be; +0.9% afterhours
- SPWR: Reports Q2 $0.18 v $0.14e, R$376.7M v $621.1M y/y; -0.2% afterhours
- AFL: Reports Q2 $1.50 v $1.52e, R$5.29B v $5.34Be; -2.1% afterhours
- X: Reports Q2 -$0.79 v -$0.68e, R$2.90B v $3.06Be; -4.1% afterhours
- AKAM: Reports Q2 $0.57 v $0.58e, R$541M v $541Me; -10.4% afterhours
- TWTR: Reports Q2 $0.07 v $0.05e, R$502M v $487Me; Raises FY 15 guidance; -11.3% afterhours
- YELP: Reports Q2 -$0.02 v $0.01e, R$139.9M v $134Me; -16.6% afterhours

Notable movers by sector:
- Consumer discretionary: Goodman Group GMG.AU +0.9% (divestment speculation); Air China Ltd 601111.CN -7.2% (H1 guidance, private placement); SK Networks 001740.KR +1.6% (Q2 result); Phoenix Satellite Television Holdings 2008.HK -5.3% (H1 guidance)
- Financials: Xinhu Zhongbao Co 600208.CN +0.5% (H1 result); Bank of Nanjing Co 601009.CN +1.2% (H1 result, private placement)
- Industrials: Fanuc LTD 6954.JP -11.9% (Q1 result); Hitachi Construction Machinery 6305.JP -1.0% (Q1 result); Hitachi Metals 5486.JP +4.6% (Q1 result); Murata MFG 6981.JP -3.4% (Q1 result speculation); Xinyi Glass Holding 868.HK +2.9% (H1 result, spin-off); China Aviation Optical-Electrical Technology 002179.CN+5.6% (H1 result)
- Technology: Tokyo Electron Ltd 8035.JP -11.3% (Q1 result); Toshiba Corporation 6502.JP -2.2% (speculation that more executives to resign); Beijing Orient National Communication Science & Technology Co 300166.CN+0.4% (private placement)
- Materials: Sandfire Resources SFR.AU -2.7% (Q4 result); Independence Group IGO.AU +0.5% (Q4 result); Mincor Resources MCR.AU -8.3% (Q3 result); Kobe Steel 5406.JP -2.2% (Q1 result); Daido Steel 5471.JP-6.4% (Q1 result); Huaxin Cement 600801.CN +5.2% (H1 guidance); Yueyang Forest & Paper Co 600963.CN-3.4% (H1 result); Chongqing Iron & Steel 601005.CN +1.2% (Chairman to resign)
-Energy: Tonengeneral Sekiyu 5012.JP +2.2% (raises H1 guidance); Xinyi Solar 968.HK +3.6% (H1 result)

all things bonds

30 minute atr

240 minute atr

daily atr

daily pivots

weekly pivots

upside extensions

downside retracements

regression channels

support and resistance

On the economic calendar:-

07:00 MBA Mortgage Applications
10:00 Pending Home Sales (Consensus 1.0% v Prior 0.9%)
10:30 EIA Petroleum Status Report
11:30 2 Year FRN Note Auction
13:00 5 Year Note Auction
14:00 FOMC Meeting Announcement