EUROPEAN EQUITY OPEN: Indices start the week on the back foot following soft China CPI data; BoE chief Bailey at Mansion House later today

EUROPEAN OPEN: Stocks start the week on the back foot after consumer prices data out of China disappointing expectations overnight, which is reigniting fears of disinflation in the world’s second largest economy. There is more CPI data due this week, with the US reporting its latest metrics on Wednesday. In the UK, a survey of recruiters alluded to cooling labour market conditions, which may place less pressure on the BoE ahead; Governor Bailey is due to address Mansion House later today; Hunt will set out City reforms to drive UK growth and investment, and will laud a deal with pension groups that could unlock GBP 50bln, according to some reports. Elsewhere, US Treasury Secretary Yellen had direct talks with officials in her visit to China; some progress was made, but there are disagreements, while China expressed concerns about US sanctions, though both sides aim to deepen economic ties and maintain communication.

TODAY’S AGENDA:

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  EUROPEAN DAY AHEAD: The docket is thin on Monday. Riksbank meeting minutes will be released after the open. The July Sentix index is expected to edge lower in July. On the speaker’s front, BoE Governor Bailey (Neutral) will deliver his annual address to the Mansion House.


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  US DAY AHEAD: Employment trends data for June, Wholesale Sales data for May (and revisions to inventories); the NY Fed’s survey of consumer expectations will help add colour to expectations surrounding Wednesday US CPI data. Towards the close, consumer credit stats for May will be published. On the speaker's slate, Fed's Barr (Voter, Neutral) will speak on Banking Supervision & Regulation, Fed's Daly (2024 Voter, Neutral) will speak on policy, Fed's Mester (2024 Voter, Hawk) and Bostic (2024 Voter, Neutral) will speak on "National and Metro Atlanta Economies".


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  WEEK AHEAD: US CPI, rate decisions from the BoC, RBNZ, BoK, meeting minutes from the ECB and Riksbank Minutes, as well as a batch of key UK data are all due this week. Our week ahead briefing can be accessed here. The US corporate reporting season gets underway at the tail-end of the week, when big banks will begin publishing their numbers.


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  RECAP – APAC SESSION (OVERNIGHT): Asia-Pac stocks mostly positive, gains limited as China's soft inflation data analysed. ASX 200 down (-0.3%), rangebound due to mixed sectors. Nikkei 225 down (-0.2%), rebounds late. Hang Seng up (+0.8%), Shanghai Comp up (+0.2%). Tech sector boosts HK; Chinese inflation misses estimates. Yellen mentions progress in China ties.


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  RECAP – WALL STREET (FRIDAY): Stocks on Wall Street fluctuated on Friday, with earlier gains eroding as the day progressed. Dollar weakened, benefiting cyclical assets. Commodity prices rose, except for natural gas. Fed rate hike expectations and outlook unchanged. CPI data awaited.


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  RECAP - CHINA CPI: China CPI -0.2% M/M (prev. -0.2%) in June, and was unchanged Y/Y (exp. 0.2%, prev. 0.2%). PPI eased to -5.4% Y/Y in June (exp. -5.0%, prev. -4.6%). Pantheon Macroeconomics said weak consumer demand was leading to low inflation in China. PM expects consumer inflation to remain subdued in the second half, and policymakers may focus on targeted stimulus for industry and technology upgrades rather than significant consumer support.

STOCK SPECIFICS:

• Our full European equity briefings for July 10th can be accessed here and here.


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  COMMUNICATIONS: BT (BT/ LN) investors are on high alert for Deutsche Telekom (DTE GY) takeover. Vodafone (VOD LN) threatens investment cut if its Three merger is blocked.


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  CONSUMER CYCLICAL: Kering (KER FP) Acquires fragrance brand Creed for EUR 3.5bln. Marks and Spencer (MKS LN) CEO is unhappy with Ocado's performance. Boohoo (BOO LN) takes Revolution row to junior market regulator. Renault (RNO FP) CEO said a “Chinese Storm” is looming over the growing European EV sector.


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  CONSUMER STAPLES: Pernod Ricard (RI FP) downgraded to Hold from Buy at HSBC. dsm-firmenich (DSFIR NA) initiated Buy at Goldman Sachs.


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  ENERGY: TotalEnergies (TTE FP) expands gas partnership with Sonatrach, extends to renewables. Gaztransport et Technigaz (GTT FP) upgraded to Outperform at BNP Paribas. Eni (ENI IM) delivered the first gas cargo to the liquified natural gas terminal at the port of Piombino on Saturday.


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  FINANCIALS: Deutsche Bank (DBK GY) wins Lufthansa frequent-flyer credit card deal. Barclays (BARC LN) hired Birchenough from Wells Fargo (WFC) as the new co-head of Global BioPharma Investment Banking. Saudi National Bank wanted to increase its stake in Credit Suisse (CS) to around 40% from 9.88%, but was prevented by the Swiss regulators. UniCredit (UCG IM) said it was ending a non-life insurance venture with UnipolSai (US IM).


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  HEALTHCARE: GSK's (GSK LN) Arexvy authorised as first RSV vaccine for older adults.


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  INDUSTRIALS: Of note for Defence Names, UK Banks are being probed for closing military contractor accounts.


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  MATERIALS: Rio Tinto (RIO LN) exec notes that China's real estate issue impacts economy, but long-term outlook positive. Boliden (BOL SS) upgraded to Overweight at Barclays.


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  REAL ESTATE: HSBC downgrades British Land (BLND LN), Land Securities (LAND LN), Derwent London (DLN LN), Primary Health (PHP LN), Safestore Holdings (SAFE LN), Segro (SGRO LN), Assura (AGR LN), Big Yellow Group (BYG LN). Wihlborgs Fastigheter (WIHL SS) reports H1 financials with reduced net and increased operating and rental revenue.


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  TECH: SES Imagotag (SESL FP) rejects Gotham City's allegations, confirms alignment of China JV sale terms.


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  UTILITIES: Severn Trent's (SVT LN) Thames Water secures GBP 750mln equity funding.

10 Jul 2023 - 08:10- Data- Source: Newsquawk