In a mixed session, which has seen Asian stocks ex-Japan broadly higher, the European Stoxx 600 index dropped as much as 0.6% after data Markit PMI data signalled euro-area economy grew in July at its slowest pace in six months while carmakers extended declines on continued concern about antitrust collusion in the industry. Germany’s DAX Index was hardest-hit euro-area benchmark, down as much as 0.8%. Autos continued to be the worst-performing sector on the Stoxx Europe 600 after EU and German regulators said they are studying possible collusion among German automakers. Der Spiegel magazine reported on Friday that BMW, Daimler and Volkswagen may have cooperated for decades on technology...
Concerns have risen that with the Euro trading near its strongest level in 2 years and appreciating 11% against the USD YTD, it may weigh on exporters’ earnings; 1.20 on the EURUSD is being seen a key barrier beyond which European earnings will suffer. As a result, the euro headed for its first decline in three days as data showed the region’s economy cooling at the start of a week packed with earnings results and a Federal Reserve rate decision. Stocks were dragged down for a second day by carmakers amid a collusion probe.
The common currency halted the advance that saw it hit a two-year high after a composite Purchasing Managers’ Index fell in July to a six-month low. Automakers extended a slump as European Union and German authorities said they are studying possible collusion among German producers. Crude fluctuated as an OPEC committee gathers to discuss the progress of supply cuts. Bonds were mixed.
Europe's PMI was closely scrutinized after both German and Eurozone manufacturing missed expectations:
- Flash Eurozone PMI Composite Output Index at 55.8 (56.3 in June), below the 56.2 expected and 6-month low.
- Flash Eurozone Services PMI Activity Index at 55.4 (55.4 in June), below the 55.6 expected. Growth unchanged.
- Flash Eurozone Manufacturing PMI Output Index at 56.9 (58.7 in June). 6-month low.
- Flash Eurozone Manufacturing PMI(3) at 56.8 (57.4 in June). 3-month low...
Meanwhile, in a week heavy on political and monetary events, with several key Trump-related hearings later in the week, as well as the Fed's July decision on deck, earnings from industry bellwethers from Amazon.com Inc. to GlaxoSmithKline Plc are set to provide the latest tests for a bull market that’s propelled the value of global equities to $78 trillion. According to Bloomberg, euro-area manufacturing figures indicate that gross domestic product is expanding at a 0.6 percent quarterly pace, compared with 0.7 percent in the second three months of the year, adding further doubts about the sustainability of the stock rally at a time when the strong euro is weighing on exporters.
In Asia, the MSCI Asia Pacific Index edged higher after rallying over the past two weeks to the highest level in more than 10 years. Japan’s Topix index slid 0.5 percent, after dropping as much as 1 percent earlier in the day. Australia’s S&P/ASX 200 Index lost 0.6 percent. The Shanghai Composite Index advanced 0.4 percent while Hong Kong’s Hang Seng was 0.5 percent higher. India’s Sensex climbed 0.6 percent to a record. The Australian dollar rose 0.6 percent, trading above 79 U.S. cents ahead of a speech by Reserve Bank of Australia Governor Philip Lowe on Wednesday.
The Dollar slumped to a five-week low against the yen on concern a widening probe into possible ties between Russia and U.S. President Donald Trump’s election campaign may derail his growth agenda. Lower U.S. Treasury yields and oil prices spur leveraged selling in the greenback ahead of Jared Kushner’s closed-door meeting with the Senate Intelligence Committee on Monday, according to an Asia-based foreign-exchange trader quoted by Bloomberg. As noted over the weekend, hedge funds and other large speculators were the most bearish on the dollar in more than four years as the Federal Reserve meets this week.
The Polish zloty jumped the most against the euro since May after Poland’s President Andrzey Duda said he’d veto part of an overhaul of the judiciary that’s brought tens of thousands of protesters into the streets across the eastern European nation
In rates, the German government bond yields edged lower after euro zone PMI data also came in below forecasts. The 10-year yield, the benchmark for euro zone borrowing costs, fell to 0.49 percent, down 0.4 basis points and its lowest in more than a week. Yields fell on Friday as the strong euro led investors to question the timing of when the ECB would begin to withdraw its stimulus.
# Market Snapshot;
- S&P 500 futures down 0.1% to 2,466.50
- STOXX Europe 600 down 0.3% to 379.14
- Nikkei down 0.6% to 19,975.67
- Topix down 0.5% to 1,621.57
- Hang Seng Index up 0.5% to 26,846.83
- Shanghai Composite up 0.4% to 3,250.60
- Euro down 0.2% to 1.1644 per US$
- Brent Futures up 0.3% to $48.19/bbl
- Gold spot up 0.1% to $1,256.03
- U.S. Dollar Index up 0.1% to 93.93
# Top Overnight News;
- The Fed will unveil the timing of its balance sheet unwind in September and wait until December to raise interest rates again, according to a Bloomberg survey of 41 economists
- U.K. Trade Secretary Liam Fox will meet his U.S. counterpart in Washington on Monday as Britain seeks a trans-Atlantic trade deal as soon as possible after leaving the EU
- The world is leaning less on its biggest economy to sustain the global recovery, according to the International Monetary Fund. Beneath the global growth figures, the drivers of the recovery are shifting, with the world relying less than expected on the U.S. and U.K. and more on
China, Japan, the euro zone and Canada, according to the Washington-based fund
- The Polish zloty jumped the most against the euro since May after Poland’s President Andrzey Duda said he’d veto part of an overhaul of the judiciary that’s brought tens of thousands of protesters into the streets across the eastern European nation
- U.K.’s Fox in U.S. to Argue for Quick Post- Brexit Trade Deal
- White House Team Differs on Trump Support for Russia Sanctions
- Euro Area Economy Grows at Slowest Pace in Six Months
- OPEC Signals No Big Changes to Supply Deal at Meeting in Russia
- Fed Seen Making September Balance-Sheet Announcement: Survey
- America First No More as IMF Sees U.S. Fading as Growth Engine
- BMW Denies Diesel Cheating as EU, Germany Probe Auto Cartel
- Asda Is Said to Hold No Takeover Interest for B&M: Telegraph
- J&J Picks HIV Vaccine Candidate for Further Testing This Year
- Glaxo’s ViiV, J&J HIV Injection Shown as Effective as Oral Dose
- Blackstone Buys Clarion Events; No Terms
- Ireland to Hire Custodian to Manage Cash From Apple Tax Case
- Monsanto Cites Illegal Off-Label Products in Dicamba Findings
- Diebold Nixdorf Dragged Down by Peer’s Disappointing 3Q Forecast
- HCA in Pact to Buy Hospital From Community Health; No Terms
- Polish President Duda to Veto Part of Judiciary Legislation
- Deutsche Bank, JPMorgan Agree to Settle Yen-Libor Lawsuits
*) Asian stocks traded mixed after quiet weekend news flow and with participants awaiting the upcoming FOMC meeting on Wednesday. ASX 200 (-0.7%) traded negative as energy and financial sectors weighed on the index, whilst Nikkei 225 (-0.6%) also suffered in the red amid a strong JPY. Shanghai Comp. (+0.4%) and Hang Seng (+0.4%) were higher following the PBoes firm liquidity injection of CNY 350b1n, in addition to some Hong Kong banks reducing deposit rates to less than 4% after declines in the CNH HIBOR. Finally, 10yr JGBs were flat with brief pressure seen after the BoJ Rinban announcement, in which it reduced buying of 5yr-10yr JGBs to JPY 470bn from JPY 500bn. PBoC injected CNY 200b1n via 7-day reverse repos and CNY 150bln in 28-day reverse repos. PBoC set CNY mid-point at 6.7410, Prev. 6.7415.
# Top Asian News;
- China Banks That Funded HNA’s Growth Are Said to Halt New Loans
- Mystery Bond Trader Nets $10 Million on Treasury Strangle Gamble
- Singapore Startup Takes Bitcoin Into Real World With Visa
- India Starts Antidumping Investigation on Imported Solar Cells
- No Relief for Lanka Rupee Sliding at Fastest Pace Since 2006
- Exporters Lead Japanese Stock Decline as Yen Holds Gains
*) Broadly a negative start for European equities with weakness stemming from Automakers and Airliners. Germany automakers, BMW, Daimler and Volkswagen softer this morning following reports that the European Union confirmed a probe into alleged price-fixing, while airliners have been dragged lower by Ryanair following the release of their financial results. Elsewhere, lower crude prices, coupled with weaker than expected Eurozone PMI readings has also added to the risk off tone. Credit markets have been supported by safe-haven flow, while peripheral bonds are slightly tighter to bunds this morning. Spanish debt supported from Fitch revising its outlook on Spain to positive, while month-end extensions are aiding OATs, Bonos and BTPs.
# Top European News;
- Saudi Energy Minister: Build-Up in Global Inventories Reversing
- Polish Zloty Jumps Most Since May as President Scraps Court Bill
- Telecom Italia Shares Rise as Board Meets to Approve CEO Exit
- Czech Top Judges Say Polish Judicial Reforms Undermine Democracy
- IMF Cuts U.K. Forecast After Disappointing First- Quarter Growth
# In currenices, it has been a very quiet start to the week with the greenback a fraction firmer, however the bias remains to the downside amid the ongoing US political uncertainty. DXY saw a break below 94.00, hitting a low of 93.82 in Asia, slight attention will be placed on the FOMC decision, as participants look for clarity on the timeline of balance sheet normalisation. Antipodeans (AUD, NZD) were the notable mover overnight with much of the price action seen through the cross as AUD/NZD moved within a whisker of 1.07. RBA speak last week failed to temper the AUD rise with the currency consolidating above 0.7950 and hovering around 2Y highs. Focus will be on RBA. Governor Lowe on Wednesday who may also look to curb the recent surge. EUR sagging this morning having touched lasts week post ECB peak at 1.1684, while softer PMI releases from France and Germany have also added to the EUR easing. EUR slightly south of 1.1650 with bids noted just ahead of Friday's low at 1.1619.
# In commodities, crude prices were softer this morning with both WTI and Brent down initially, amid the OPEC/Non-OPEC monitoring committee meeting the Saudi Energy Minister has stated that there has been no discussion over deeper cuts, however there has been talks over Nigeria and Libya production caps, given their recent increase in output. Gold rangebound after prices briefly touched a 4-week high on the back of a politically. Subsequently the energy complex rebounded however, after the Saudi energy minister made some solemn promises, in which he saw Saudis capping exports at 6.6mmb/d, saying that Nigeria would cut if it reaches output of 1.8mmb/d, and sees a deep cut in Saudi August production.
# Looking at today's busy session, we get the July manufacturing, services and composite flash PMIs for Germany, Eurozone (both of which declined and missed expectations) and the US later this morning. Existing home sales data in the US will also be released....