China reiterates stance that Pelosi trip was a provocation and sovereignty infringement

EU Mid-Market Update: Various EU PMI Services data generally revised higher; China reiterates stance that Pelosi trip was a provocation and sovereignty infringement.

Notes/Observations

- Assets in general are mixed this morning after a risk off move in yesterdays US session following comments from Fed members that reiterated focus on bringing inflation down and played down recession concerns.

- European Services PMI data was also mixed, showing expansion in Spain, France, Eurozone and UK. 1st contractions in over 6 months for Germany and Italy.

- Nord Stream 1 returns to spotlight after Siemens Energy, who makes the turbine, declared they are unable to ship the turbine to Russia despite it being ready. German Chancellor Scholz reiterated there are no technical issues for increasing the flows and warned to expect further supply cuts to Europe.

- Following US House Speaker Pelosi's comments about supporting Taiwan and hinting at an imminent trade agreement with Taiwan, China has warned that the trip was used for political capital and vowed to follow through on counter-measures. Pelosi is expected to depart Taiwan in the next hour.

- UK leadership race shows Truss 34 votes ahead of Sunak according to a UK Times poll. The vote has been delayed after a hack was discovered by GCHQ. Postal vote to be conducted and could take until Aug 11st to arrive.

- Asia closed mixed with NZX outperforming at +1.5%. EU indices are between -0.2% and +0.4% with bond yields higher. US futures are just in the green. Safe haven: Gold -0.5%, DXY 0.0%; Commodity: Brent -1.5%, WTI -1.4%, Copper -0.7%; Speculative: BTC +2.1%, ETH +4.3%.

- Looking ahead, earnings expected in US premarket from: ABC, BWA, CVS, DISH, ETR, EXPI, JLL, NI, ODP, OMI, PPL, SMG, UA,.

Asia

- New Zealand Q2 Unemployment Rate: 3.3% v 3.1%e.

- China July Caixin PMI Services registered its 2nd straight expansion and highest since Apr 2021 (55.5 v 54.0e).

- Japan July Final PMI Services confirmed 4th month of expansion (50.3 v51.2 prelim).

- Australia July Final PMI Services confirmed 6th month of expansion: 50.9 v 50.4 prelim.

- Australia Q2 Retail Sales Q/Q: 1.4% v 1.2%e.

Taiwan

- US House Speaker Pelosi: Trip was to make clear that we would not abandon Taiwan, discussed trade possibilities with Taiwan. While respecting out One China Policy, our solidarity with Taiwan was more important than ever.

- China's Vice Foreign Minister Xie Feng summoned US Ambassador to China to protest against Pelosi’s visit to Taiwan.

- China has banned all deals with any Taiwan companies.

- China People's Liberation Army (PLA) to conduct joint military exercises. The drills, could be larger in scale than in the 1996 crisis.

- White House spokesperson Kirby: US anticipated Chinese announcements about military drills; China had positioned itself to take further steps.

Americas

- Fed’s Bullard (voter, hawk) stated that the Fed was committed to inflation target; Fed and ECB might be able to achieve relatively soft landings if execution was done well, disinflate in an orderly manner. Rate path was more data dependent than it had been until now. Fed needed to get into more restrictive rates territory, want rates at 3.75-4.00% by end of the year.

- Fed's Mester (FOMC voter, hawk) stated that had yet to see inflation cool 'at all' yet; Did not believe we're in a recession.

- Fed's Evans (dove, non-voter) noted that a 50bps at Sept meeting was reasonable but 75bps could be OK; Doubtful 100bps hike was called for.

- Fed's Daly (non-voter, dove) stated that its work on inflation was 'nowhere near almost done'; Fed needed to make good on commitment to raise rates. Looking at incoming jobs and CPI data to decide if we could downshift the rate hikes or continue at the current pace.

Energy

- Weekly API Crude Oil Inventories: +2.2M v -4.0M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.03% at 435.94, FTSE -0.03% at 7,407.00, DAX +0.04% at 13,454.10, CAC-40 +0.18% at 6,421.42, IBEX-35 +0.43% at 8,131.50, FTSE MIB +0.17% at 22,388.00, SMI -0.25% at 11,090.30, S&P 500 Futures +0.20%].

Market Focal Points/Key Themes: European indices open mixed but later drifted higher through the early part of the session; sectors among those leading to the upside are technology and real estate; while underperforming sectors include industrials and telecom; Tod’s to acquire Deva Finance; preliminary report from UK CMA won’t object to Avast-Norton merger; Spanish government approves RR’s takeover of ITP Aero; earnings expect during the upcoming US session include Telecom Italia, Dish Network, AmerisourceBergen and BorgWarner.

Equities

- Consumer discretionary: Just Eat Takeaway.com [JET.UK] +0.5% (earnings), Hugo Boss [BOSS.DE] +2.5% (earnings).

- Financials: Societe Generale [GLE.FR] +0.5% (earnings), Commerzbank [CBK.DE] +0.5% (earnings), Axa [AXA.DE] +5% (earnings).

- Industrials: Maersk [MAERSKB.DK] +0.5% (final earnings; outlook comments), BMW [BMW.DE] -5% (earnings; cuts deliveries outlook).

- Technology: Avast [AVST.UK] +42% (UK CMA approves merger), TeamViewer [TMV,DE] -3% (earnings; adjusts outlook).

- Real Estate: Unibail-Rodamco-Westfield [URW.NL] +1.5% (to increase energy savings).

Speakers

- German Chancellor Scholz stated that Turbine for Nord Stream 1 was ready and saw no reason for it not to be transported to Russia.

- China Foreign Ministry Spokesperson Hua Chunying stated that Pelosi is looking for political capital with Taiwan visit. Reiterated stance that trip was a provocation and sovereignty infringement. China would do what its says on countermeasures.

- US official stated that China might be using the Pelosi trip as an excuse to ratchet up tensions on Taiwan. Nothing unprecedented or unusual about Speaker Pelosi's trip to Taiwan as she reaffirmed the "One China" policy.

- Kazakhstan Energy Ministry stated that OPEC+ might need to raise output to meet demand; Current oil prices at $100/bbl were above the preferred corridor of $60-80/bbl.

Currencies/Fixed income

- USD saw some of its Tuesday gains retrace as various European PMI services data beat expectations. USD saw gains on Tuesday after various Fed speak damped speculation that the central bank could shift away from raising interest rates amid US recession fear.

- GBP/USD hovered around the 1.22 level ahead of Thursday’s BOE rate decision. Markets expect the BOE to raise interest rates by 50 basis points to help combat inflation. Dealers added that BOW would like to see a stronger pound currency to aid its battle against high inflation.

Economic data

- (DE) Germany Jun Trade Balance: €6.4B v €0.2Be; Exports M/M: 4.5% v 1.0%e; Imports M/M: 0.2% v 1.3%e.

- (RU) Russia July Services PMI: 54.7 v 51.9e (2nd straight expansion); PMI Composite: 52.2 v 50.4 prior.

- (CH) Swiss July CPI M/M: 0.0% v -0.1%e; Y/Y: 3.4% v 3.4%e; CPI Core Y/Y: 2.0% v 2.0%e.

- (CH) Swiss July CPI EU Harmonized M/M: 0.1% v 0.5% prior; Y/Y: 3.3% v 3.2% prior.

- (SE) Sweden July PMI Services: 58.8 v 60.0e; PMI Composite: 57.2 v 59.9 prior.

- (TR) Turkey July CPI M/M: 2.4% v 2.6%e; Y/Y: 79.6% v 80.2%e; CPI Core Index Y/Y: 61.7% v 61.3%e.

- (TR) Turkey July PPI M/M: 5.2% v 6.8% prior; Y/Y: 144.6% v 138.3% prior.

- (HU) Hungary Jun Retail Sales Y/Y: 4.5% v 8.3%e.

- (ES) Spain July Services PMI: 53.8 v 52.0e (6th straight expansion); Composite PMI: 52.7 v 51.5e.

- (ZA) South Africa July PMI (whole economy): 52.7 v 50.5e (6th straight expansion).

- (IT) Italy July Services PMI: 48.4 v 50.1e (1st contraction in 6 months); Composite PMI: 47.7 v 49.7e.

- (FR) France July Final Services PMI: 53.2 v 52.1 prelim (confirmed 16th straight expansion); PMI Composite: 51.7v 50.6 prelim.

- (DE) Germany July Final Services PMI: 49.7 v 49.2 prelim (confirmed 1st contraction in 7 months); PMI Composite: 48.1 v 48.0 prelim.

- (EU) Euro Zone July Final Services PMI: 51.2 v 50.6 prelim (confirmed 16th month of expansion); PMI Composite: 49.9 v 49.4 prelim.

- (IT) Italy Jun Retail Sales M/M: -1.1% v +2.0% prior; Y/Y: 1.4% v 6.8% prior.

- (UK) July Final Services PMI: 52.6 v 53.3 prelim (confirmed 17th month of expansion but lowest since Feb 2021); PMI Composite: 52.1 v 52.8 prelim.

- (UK) July Official Reserves Changes: $0.0B v -$1.3B prior.

- (EU) Euro Zone June Retail Sales M/M: -1.2% v 0.0%e; Y/Y: -3.7% v -1.7%e.

- (EU) Euro Zone Jun PPI M/M: 1.1% v 1.0%e; Y/Y: 35.8% v 35.7%e.

Fixed income issuance

- (IN) India sold total INR330B vs. INR330B indicated in 3-month, 6-month and 12-month bills.

- (DK) Denmark sold total DKK3.43B in 2024 and 2031 DGB bonds.

- (SE) Sweden sold SEK7.5B vs. SEK7.5B indicated in 3-month Bills; Avg Yield: 1.043% v 0.6755% prior; Bid-to-cover: 1.96x v 2.09x prior.

Looking ahead

- OPEC+ monthly meeting.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell €1.5B in 1.0% May 2038 Bunds.

- 05:30 (GR) Greece Debt Agency (PDMA) to sell €625M in 13-week Bills.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (EU) EU Commission to sell combined €3.0B in 3-month and 6-month bills.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (US) MBA Mortgage Applications w/e July 29th: No est v -1.8% prior.

- 07:00 (MX) Mexico July Vehicle Domestic Sales: No est v 90.4K prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Treasury Quarterly Refunding Announcement.

- 09:00 (BR) Brazil July Services PMI: No est v 60.8 prior; Composite PMI: No est v 59.4 prior.

- 09:45 (US) July Final S&P/Markit Services PMI: 47.0e v 47.0 prelim; PMI Composite: No est v 47.5 prelim.

- 10:00 (US) July ISM Services Index: 53.5e v 55.3 prior.

- 10:00 (US) Jun Factory Orders: 1.2%e v 1.6% prior; Factory Orders (ex-transportation): No est v 1.7% prior.

- 10:00 (US) June Final Durable Goods Orders: 1.9%e v 1.9% prelim; Durables (ex-transportation): No est v 0.3% prelim; Capital Goods Orders (non-defense/ex-aircraft): No est v 0.5% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v 0.7% prelim.

- 10:30 (US) Weekly DOE Oil Inventories.

- 10:30 (US) Fed's Bullard.

- 10:30 (US) Fed's Harker.

- 11:15 (US) Fed's Daly.

- 11:45 (US) Fed's Barkin.

- 14:30 (US) Fed's Kashkari.

- 17:30 (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to raise Selic Target Rate by 50bps to 13.75%.

- 20:01 (IE) Ireland July PMI Services: No est v 55.6 prior; PMI Composite: No est v 52.8 prior.

- 21:30 (AU) Australia Jun Trade Balance (A$): 14.0Be v 16.0B prior; Exports M/M: 0%e v 9% prior; Imports M/M: 3%e v 6% prior.

- 23:30 (TH) Thailand July Consumer Confidence: No est v 41.6 prior; Economic Confidence: No est v 35.7 prior.

- 23:35 (JP) Japan to sell CPI Linked 10-Year Bonds.