Futures Tumble As Dollar Hits Record High; JPM, Morgan Stanley Slide

US futures were already sliding fast as the reality of the Fed’s upcoming 100bps rate hike was fully appreciated by the market, as even Goldman was shocked by the kneejerk move higher yesterday, saying “Does it makes sense for mkt to move higher after a 9.1% print and BOC hiking by 100bps…of course not…but that was max pain trade today and this market seeks max pain.”

Well, this morning the max pain was clearly lower, as US equity futures fell along with stocks in Europe and Asian, while the Bloomberg dollar index rose to a record Thursday, surpassing the record hit during the covid 2020 crash when the Fed launched unlimited swap lines to ease the global dollar crunch…

… after high US inflation hardened expectations for more aggressive Federal Reserve monetary tightening that could trigger a recession.

S&P 500 futures tumbled more than 1%, down almost 200 points since Friday, as the US second-quarter earnings season got underway. All risk assets were lower, as well as gold and oil, while all non-USD currencies are getting steamrolled by the relentless surge in the dollar. 10Y yields dropped to 2.93% after rising just shy of 3.00% overnight. The inversion between two-year and 10-year yields — a potential recession indicator — is the deepest since 2000

But wait there’s more, because while markets are freaking out over soaring inflation, Fed hikes and crashing earnings, Europe is about to enter the 9th circle of hell: France’s Macron warns that citizens and companies will need to reduce energy usage as Germany reports that gas storage is already being withdrawn, even before peak usage in the winter. Meanwhile, Italian bonds and banks are tumbling amid speculation Mario Draghi’s government is about to collapse as coalition partner Five Star threatens to pull out.

Looking at premarket movers, JPMorgan plunged more than 5% in premarket trading after reporting results that missed analyst  expectations. Tesla also dipped after the company’s top artificial-intelligence executive and an architect of its Autopilot self-driving system announced plans to depart the maker of electric vehicles and as Morgan Stanley makes “material” cuts to its forecasts across its auto portfolio. Some other notable premarket movers:

Theravance Biopharma (TBPH US) shares jump as much as 25% in premarket trading after the biotech firm agrees to sell royalty interests in Trelegy Ellipta to Royalty Pharma.
ContraFect (CFRX US) sinks as much as 77% in US premarket trading after the biotech company said that the Data Safety Monitoring Board recommended stopping its Exebacase phase 3 study.
Netflix’s (NFLX US) decision to pick Microsoft (MSFT US) as a technology and sales partner for its new advertising-supported streaming service was a surprise to the industry. Analysts say the move makes sense. Netflix slips 1% in premarket trading, Microsoft -0.9%.

As discussed yesterday, Fed officials will be debating a historic one percentage-point rate hike later this month in an attempt to combat inflation. Markets price in 69% odds that the Fed will raise interest rates by 100 basis points when it meets July 26-27, which would be the largest increase since the Fed started directly using overnight interest rates to conduct monetary policy in the early 1990s. Technology stocks will be in focus as higher rates mean a bigger discount for the present value of future profits, hurting growth stocks with the highest valuations.

A 100 basis points hike is now likely and the “inflation reading should also raise the odds of recession, which we now estimate is likely sooner rather than later and possibly more severe,” said Tiffany Wilding, an economist at Pacific Investment Management Co.

“The market has already priced in the unexpected extreme tightening, so there isn’t that much more the Fed can do to prepare the markets,” said Mehvish Ayub, a senior strategist at State Street Global Advisors. “We need to position portfolios accordingly and expect volatility to continue as it has since the beginning of the year,” she said in an interview with Bloomberg Television.

“It is clear that central banks around the world are laser-focused on fighting the entrenched inflation they helped to create, growth-be-damned,” said Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Ltd. “US markets are pricing in faster Fed tightening, and a recession is on the way imminently.”

In Europe, the Stoxx 50 index slumped 1.2%. DAX outperforms peers, dropping 0.9%, FTSE MIB lags, dropping 2.3%. Miners, energy and telecoms are the worst-performing Stoxx 600 sectors. Here are the biggest European movers:

Ericsson tumbles as much as 12% to the lowest level since March 2020, after a mixed quarterly report with revenue ahead of expectations but margin and earnings missing estimates.
Sabre Insurance plunged more than 30% after warning that everything related to an insurance claim — the car parts, paint, labor and the cost of replacing the vehicle — has risen faster than expected.
Peers Admiral and Direct Line dropped 13% and 7.9%, respectively.
Hugo Boss shares rise as much as 3.2% to the highest since late February after what analysts say was a “blow- out” second-quarter for the luxury apparel firm.
Entain rises as much as 5.2%, rallying after last week’s heavy losses, as the owner of the Ladbrokes and Coral betting brands publishes a video updating on the progress of Enlabs since last year’s acquisition of the firm.
Technogym shares fall as much as 6.8% as Goldman Sachs cuts its PT on the Italian gym-equipment maker on a weaker medium-term growth outlook and low visibility on near- term consumption patterns.
Acciona slumped after newspaper Expansion said the Spanish government is analyzing 16 companies, including renewable unit Acciona Energia, to impose a new windfall profit levy announced earlier in the week.
Storebrand rises as much as 4% in Oslo trading after second-quarter pretax profit beat the average analyst estimate.
SBB posted a surprise pretax loss and the Swedish property company’s stock price tumbled as much as 17%.
SEB shares gain as much as 4.7% in early European trading after the lender posted 2Q earnings that showed higher deposit margins and decent loan growth, Handelsbanken writes in a note.
Hunting’s steep slide since its June 30 trading update offers a good entry point, Berenberg writes in note, upgrading the stock to buy from hold. Hunting shares up as much as 7.1%.

Asian stocks declined, as markets in Singapore and the Philippines fell after surprise monetary tightening by the two Southeast Asian nations, while Chinese bank shares weighed amid a property crisis.  The MSCI Asia Pacific Index dropped as much as 0.6%, with the financials gauge weighing the most on the measure. Ping An Insurance was the single biggest drag, leading a fall among Chinese lenders as home buyers in China refused to pay mortgages on delayed construction projects.    Shares in Singapore and Manila declined after local monetary authorities unexpectedly tightened policy rates to tackle inflation. Their declines helped put a key Southeast Asian equities gauge on track for a bear market. Taiwan’s benchmark rose for a second day after a government support pledge, while Chinese tech firms also climbed.  

The region’s mixed performance comes as investors continue to digest the prospect of a recession on hardened expectations of more aggressive Federal Reserve monetary tightening after sizzling US inflation data. Traders in Asia also are waiting for Friday’s release of China’s second-quarter GDP growth figure.  “Even while central banks in most of the rest of the world are moving in one direction, here in Asia we’ve got a very, very large player doing something different,” said Alexander Treves, head of investment specialists for Asia Pacific equities at JPMorgan Asset Management, referring to China in an interview with Bloomberg TV. “The government has got quite ambitious growth targets for this year and it might be they don’t meet them but they are going to try very, very hard to stimulate in that direction.” The higher-than-expected consumer prices data from the US overnight was “lagged bad news,” according to David Kelly, chief global strategist at J.P. Morgan Asset Management.  “But we do expect lagged good news in the coming months, with energy prices diving lower, food prices cooling and consumer demand stepping back,” Kelly wrote in a note. “This should provide some inflation relief to the Fed and consumers, and hopefully lead sentiment to recover from its record-lows.”

Japanese equities erased earlier losses as the yen weakened after US inflation data hardened expectations of more aggressive Federal Reserve monetary tightening.  The Topix index closed 0.2% higher at 1,893.13 in Tokyo, while the Nikkei 225 advanced 0.6% to 26,643.39. Keyence Corp. contributed the most to the Topix’s gain, increasing 3.5%. Out of 2,170 shares in the index, 1,229 rose and 803 fell, while 138 were unchanged. “The weak yen and continuation of monetary easing in Japan, which is completely different from the situation in the US and Europe, will help to support stock prices,” said Tomo Kinoshita, a global market strategist at Invesco Asset Management. 

Australia’s S&P/ASX 200 index rose 0.4% to close at 6,650.60, climbing for a third session. Miners contributed the most to the benchmark’s gain. EML Payments was the top performer, bouncing back after three days of losses. Lake Resources was the biggest laggard after responding to a short-seller report. Investors also assessed jobs data. Australia’s hiring boom gathered pace in June, sending the unemployment rate to the lowest in almost 50 years and bolstering the case for a supersized interest rate hike next month.  In New Zealand, the S&P/NZX 50 index rose 0.7% to 11,187.97

India’s benchmark equity index erased early gains to close at its lowest level in more than a week as shares of technology firms Infosys and TCS weighed.  The S&P BSE Sensex fell 0.2% to 53,416.15 in Mumbai, while the NSE Nifty 50 Index declined by the same magnitude. Axis Bank was the worst performer on the Sensex, which saw 17 of its 30 member stocks trading lower. India’s biggest technology company TCS fell to the lowest level since March last year, setting the pace for a tech selloff.  India’s headline inflation rose 15.18% compared to last year, which was below estimates for the first time since June 2021.

In FX, the Bloomberg Dollar Spot Index rose by around 0.5% hitting an all time high, as the greenback advanced against all of its Group-of-10 peers. AUD and DKK are the strongest performers in G-10 FX, JPY and CAD underperform. COP (+3%), RUB (+1.4%) lead gains in EMFX. The euro fluctuated, but held above parity. An early decline in the face of widespread dollar demand paused at buy orders from a reserve manager based in Asia seeking to diversify away from the greenback, according to Asia-based FX traders. One-week volatility in euro-dollar rallied as the tenor now captures the next ECB decision on July 21, the same day when a key Russian gas pipeline is scheduled to reopen. German and UK short-end bonds fell, led by the front-end, underperforming on their curves as money markets cranked up ECB and BOE rate-hike wagers for a second day. Investors were dumping Italian assets as political turmoil puts Prime Minister Mario Draghi’s government at risk of collapse and complicates efforts by the European Central Bank to support the market. Swedish 2-year bonds slumped after inflation rose faster than forecast in June. The yen approached 140 per dollar as the currency is decoupling from its close relationship with US bonds amid a broad rally in the dollar.

In rates, the treasuries curve extends Wednesday’s flattening move with 2s10s spread reaching -27bp during European morning, as political turmoil in Italy has investors dumping its bonds. US yields cheaper by up to 5bp in front end and belly of the curve, flattening 2s10s, 5s30s spreads by ~2bp and ~5bp on the day; 10-year yields around 2.95%, cheaper by ~3bp vs Wednesday’s close; Italian bonds underperform by more 20bp in the sector. In front end, investors continue to anticipate front-loaded and aggressive Fed hikes to peak by year-end; swaps price 92bp of hikes into the July policy meeting and 213bp of additional hikes into the December FOMC, where policy rate is expected to peak.  Bund, and gilt curves bear-flatten; UST 2s10s yield-curve inversion deepens. Peripheral spreads widen to Germany with 10y BTP/Bund adding 9.7bps to 209.2bps.

Bitcoin is bid but has reverted below the USD 20k mark once more, despite a brief foray to USD 20.4k initial highs.

In commodities, crude futures decline. WTI trades within Wednesday’s range, falling 2.3% to trade near $94.08. Brent falls 1.9% near $97.66. Most base metals trade in the red; LME nickel falls 5.1%, underperforming peers. Spot gold falls roughly $19 to trade near $1,717/oz. Spot silver loses 1.4% near $19.

To the day ahead now, data releases include the US PPI reading for June and the weekly initial jobless claims. Otherwise, central bank speakers include the Fed’s Waller and the ECB’s Centeno. Earnings releases include JPMorgan Chase and Morgan Stanley. The European Commission will be publishing their latest economic forecasts, and UK Conservative MPs will hold another ballot on their next leader.

Market Snapshot

S&P 500 futures down 0.9% to 3,768.75
MXAP down 0.6% to 154.55
MXAPJ down 0.2% to 510.23
Nikkei up 0.6% to 26,643.39
Topix up 0.2% to 1,893.13
Hang Seng Index down 0.2% to 20,751.21
Shanghai Composite little changed at 3,281.74
Sensex down 0.4% to 53,290.44
Australia S&P/ASX 200 up 0.4% to 6,650.62
Kospi down 0.3% to 2,322.32
STOXX Europe 600 down 0.7% to 409.97
German 10Y yield little changed at 1.24%
Euro down 0.4% to $1.0023
Gold spot down 1.0% to $1,717.77
US Dollar Index up 0.57% to 108.57

Top Overnight News from Bloomberg

The three-month euribor’s seven-year foray in to negative territory ended as money markets prepared for the ECB’s first rate hike in more than a decade
Italy’s Five Star Movement will refuse to back Mario Draghi’s government in a confidence vote on Thursday, raising the prospect that the prime minister offers to resign, potentially leading to an early election. A financial- market crisis focused on Italy might augur the worst turmoil in the history of the euro
Singapore’s central bank unexpectedly tightened monetary policy on Thursday, its second surprise move this year, as rising inflation fanned the risk of economic contraction
China will take further measures to stabilize employment as the country grapples with a flagging economy battered by the Covid-19 pandemic and a crumbling real-estate market
Chinese regulators have been asked to exercise greater caution when it comes to reviewing new overseas spending and investment plans amid concerns among senior leaders that higher US interest rates could spur capital outflows, according to people familiar with the matter
The euro area’s rebound from the pandemic will be weaker than anticipated while inflation will be faster because of Russia’s war in Ukraine, according to draft projections by the European Commission
Central banks across the globe are speeding up interest-rate hikes, seeking to crush an inflation surge partly of their own making. Wednesday saw Canada’s central bank hike a greater-than-expected full percentage point following two half-point moves, South Korea raise by a half point after several quarter-point moves, and New Zealand increase by a half point for a third straight meeting

A more detailed look at global markets courtesy of Newsquawk

Asia-pac stocks mostly traded with cautious gains after the recent hotter-than-expected US inflation data which printed at a fresh 40-year high and spurred hawkish market pricing with Fed Fund Rate futures leaning towards a 100bps Fed rate hike this month. ASX 200 was kept afloat amid strength in the commodity-related sectors although gains were capped as blockbuster jobs data raised the odds for the RBA to deliver a more aggressive 75bps hike at its next meeting. Nikkei 225 outperformed its major counterparts on the back of further currency depreciation. Hang Seng and Shanghai Comp. were initially pressured by weakness in the property sector although the downside in the broader market was cushioned and eventually reversed after recent policy support pledges in which the PBoC said it will step up support for the real economy and deepen interest rate reforms. STI and PSEi were the laggards and traded in the red after both the Monetary Authority of Singapore and the Philippines Central Bank tightened their monetary policies in unscheduled announcements.

Top Asian News

Tokyo is expected to raise the COVID warning to its highest level, according to FNN.
Monetary Authority of Singapore announced to re-centre the mid-point of the SGD NEER policy band up to the prevailing level in an unscheduled meeting, while there was no change to the slope and width of the band. MAS said the move is to help slow the momentum of inflation and that inflation pressures are to remain elevated in months ahead, while it is appropriate to further tighten monetary policy further.
Philippines Central Bank raised its key rates by 75bps to 3.25% in an unscheduled policy decision. Philippines Central Bank Governor said they recognised that a significant further tightening of monetary policy was warranted by sustained broadening price pressures, while they are ready to take further action and said the economy can accommodate further tightening.
Chinese authorities reportedly met with banks regarding the mortgage payment boycott, according to Bloomberg sources

European bourses are pressured across the board, Euro Stoxx 50 -0.8%, but off worst levels while the FTSE MIB -1.9% languishes on domestic turmoil. Sectors are essentially all in the red with Tech giving up its initial TSMC-driven strength and succumbing to risk/yield moves. Stateside, futures are off lows but in-fitting European benchmarks awaiting guidance from the key banking names due to report imminently. TSMC (2330 TT) Q2 (TWD): Net Profit 237bln (exp. 219bln), Revenue 534bln (prev. 372bln YY), Operating Income 262bln (prev. 145bln YY); excess inventory in chip supply will take a few quarters to rebalance; expect capacity to remain tight this year; expects some capex this year to be pushed into next year due to tool supply issues. 2022 Capex closer to the lower end of prior guidance of USD 40-44bln. 2023 will see more of a typical downcycle in chip demand, unlike the large downcycle in 2008. Intel (INTC) has reportedly informed customers it will increase prices on a majority of its microprocessors and peripheral chip products later this year, citing rising costs, via Nikkei; Increases have not been finalized, likely to range from a minimal single-digit increase to over 10% or 20% in some cases, according to sources.

Top European News

The first round of the Conservative leadership ballot saw Sunak, Mordaunt, Truss, Tugendhat, Badenoch, and Braverman make it to the next round, while Hunt and Zahawi were eliminated.
Italy’s 5-Star leader Conte said the party will not participate in the confidence vote on Thursday, according to Reuters.
EU draft report cut 2022 EU GDP forecast to 2.6% from 2.8% and for 2023 to 1.4% from 2.3%.

FX

Yen yields to inevitable further widening in BoJ/Fed policy rates as markets place 2/3 probability on 100bp July FOMC hike; USD/JPY jumps through 139.00 towards October 1998 peak at 139.50, but pares back below 1.48bln option expiry interest at the round number.
DXY rebounds firmly after post-US CPI retreat to set new YTD peak before fading, index tops out at 108.650 vs 108.190 bottom and 107.470 midweek low.
Loonie loses all and more BoC boost as oil tanks, USD/CAD close to 1.3100 compared to Wednesday’s sub-1.2950 trough.
Euro is still defiant above parity vs the Buck but facing Italian political risk via a vote of no confidence.
Aussie underpinned by upbeat labour market report and more speculation that China may lift embargo on coal, UAD/USD holds around 0.6750.
Kiwi flanked by decent option expiry interest either side of 0.6100.
Yuan unable to avoid broad Dollar revival, as CNH slips under 200 WMA circa 6.7330.

Fixed Income

Debt under renewed pressure post-US CPI as 100bp hike odds continue to shorten and keep curves in bear-flattening mode
Bunds down to 151.21 from 153.01 at best, Gilts reverse from 116.05-115.14 and 10-year T-note retreats to 118-10+ from 118-30
Italian bonds underperform awaiting no-confidence vote in PM Draghi’s coalition Government

Commodities

The complex is broadly pressured amid the general risk tone and ongoing USD strength, crude benchmarks lower by over USD 2.00/bbl.
China is said to be mulling ending the Australian coal ban on Russian supply fears, according to Bloomberg.
White House Economic Adviser Rouse said President Biden is focused on getting more oil into the market and his Saudi visit will help get more oil into the market.
Spot gold is dented on the USD move which is far outweighing any possible haven allure thus far; base metals broadly lower.

US Event Calendar

08:30: June PPI Final Demand YoY, est. 10.7%, prior 10.8%; MoM, est. 0.8%, prior 0.8%
08:30: June PPI Ex Food and Energy YoY, est. 8.2%, prior 8.3%; MoM, est. 0.5%, prior 0.5%
08:30: June PPI Ex Food, Energy, Trade YoY, est. 6.6%, prior 6.8%; MoM, est. 0.5%, prior 0.5%
08:30: July Initial Jobless Claims, est. 235,000, prior 235,000; Continuing Claims, est. 1.38m, prior 1.38m

DB’s Jim Reid concludes the overnight wrap

There are just 9 days to go until the happiest day of my life. It’ll be the most expensive too but I’m trying not to dwell on that. However, the final balances were all paid at the weekend, so I’ve figured that in purely accounting terms the wedding is now a sunk cost. For those who’ve been asking, preparation is going well. At long last we finally chose our first dance with less than a month to spare. But there’s still a few more things left on the agenda, including wearing in my new shoes. So if you saw a guy walking to the supermarket yesterday evening in casual summer clothes with oddly formal footwear, that might have been me.

For markets, the agenda yesterday was set by another stronger-than-expected US CPI print, which led to a sizeable reaction across asset classes as investors pondered whether it might lead the Fed to move even more aggressively than anticipated. In terms of the details, there wasn’t much good news at all for those hoping to see signs of weaker price pressures, with the headline CPI reading coming in at a monthly +1.3% in June (vs. +1.1% expected), which is the highest monthly reading since September 2005. There was little respite on core CPI either, which came in at its fastest in a year at +0.7% (vs. +0.5% expected). And on top of that, the Cleveland Fed’s Trimmed-Mean measure (which removes the biggest outliers in either direction) rose to +0.80% on the month, which is the fastest since that series began in 1983, and just shows how broad inflationary pressures have become.

Thanks to the strength of the monthly print, year-on-year CPI rose to its highest level since 1981, at +9.1% (vs. +8.8% expected). And in turn, that’s led to serious speculation among investors that the Fed could hike by 100bps at their next meeting, which would be even faster than the 75bps we saw in June that itself was the biggest hike since 1994. Fed funds futures for the July meeting are pricing in a growing chance of that, with the hike being priced for that meeting going up from +74.5bps on Tuesday to +90.7bps by the close yesterday, to +92.0bps this morning. So that’s noticeably closer to 100bps than 75bps now. We did hear from a few Fed speakers yesterday after the release, including Atlanta Fed President Bostic, who said that “Everything is in play”, whilst Cleveland Fed President Mester referred to the report as “uniformly bad – there was no good news in that report at all”. All eyes will be on the remaining FOMC speakers over the next couple of days and what they have to say about a potential 100bps move. Remember this is also the last chance we’ll get to hear from them ahead of the decision, since the blackout period ahead of their next meeting begins on Saturday.

With investors pricing in an increasingly front-loaded hiking cycle by the Fed, that led to a further bout of yield curve steepening, with the 2yr Treasury yield up +10.6bps to 3.15%, whilst the 10yr yield came down -3.5bps to 2.93%. That left the 2s10s yield curve at an inverted -22.7bps, which is the most inverted that it’s been at any point in this cycle, and this morning it’s inverted even further to -24.9bps, which is the most inverted since 2000. The prospect that the Fed might make a larger than expected move was only bolstered by what then happened in Canada, where the central bank hiked by a surprise +100bps that marked their most rapid increase since 1998. In his statement, BoC Governor Macklem said that “By front-loading interest rate increases now, we are trying to avoid the need for ever higher interest rates down the road”.

After the CPI release came out, the prospect of more aggressive tightening from the Fed sent the Euro down to parity against the dollar for the first time since 2002, hitting an intraday low of $0.9998, although it’s since recovered and is trading this morning at $1.0033. To be fair, the CPI report was merely the catalyst for the final move lower, since the Euro’s decline had been building for some time, not least with the threat of a Russian gas cut-off looming. As our FX strategists have pointed out, parity in itself is more psychologically significant rather than economically significant, but the significant weakening over recent weeks will add to inflationary pressures, and an ECB spokesman said that although the ECB “does not target a particular exchange rate”, they mentioned how “we are always attentive to the impact of the exchange rate on inflation, in line with our mandate for price stability”.

In spite of the turbulence elsewhere, US equities managed to avoid a major slump yesterday, with the S&P 500 recovering from its initial losses of -1.56% to only close -0.45% lower. Meanwhile the NASDAQ (-0.15%) managed to modestly outperform, as did the small-cap Russell 2000 (-0.12%). In Europe however, there was a much weaker performance and the STOXX 600 shed -1.01% along with other indices on the continent, including German’s DAX (-1.16%). Sovereign bond yields also moved higher across much of the Euro Area, with those on 10yr bunds (+1.1bps), OATs (+1.1bps) and BTPs (+2.4bps) all rising on the day.

Overnight in Asia, equity markets have fluctuating this morning with the major indices opening lower before recovering. As we go to press, the Nikkei (+0.70%), the Hang Seng (+0.17%), Shanghai Composite (+0.31%), CSI (+0.44%) and Kospi (+0.10%) are all in positive territory. Meanwhile in Australia, the S&P/ASX 200 (+0.45%) has also gained following the release of strong employment data, with the unemployment rate down to a post-1974 low of 3.5% in June (vs. 3.8% expected). Looking forward however, US equity futures have posted modest losses in early trading with contracts on the S&P 500 (-0.10%) and the NASDAQ 100 (-0.17%) slightly lower. Otherwise overnight, oil prices have rebounded somewhat, with Brent Crude moving just back above $100/bbl.

Here in the UK, we had the first ballot of MPs in the Conservative leadership contest yesterday, which will also decide the country’s next Prime Minister. Of the 8 candidates on the ballot, former Chancellor Rishi Sunak came out on top with 88 votes, followed by trade minister Penny Mordaunt on 67 votes, and Foreign Secretary Liz Truss on 50 votes. At the other end, both former Foreign Secretary Jeremy Hunt and Chancellor Nadhim Zahawi were eliminated for not achieving the 30 votes required, so there are just 6 candidates left now. Today will see another ballot take place, and the candidate with the lowest votes will be eliminated.

Looking at yesterday’s other data, UK GDP grew by +0.5% in May (vs. +0.1% expected), and the decline in April was positively revised to show a -0.2% contraction (vs. -0.3% previously). Separately in the Euro Area, industrial production in May grew by +0.8% (vs. +0.3% expected).

To the day ahead now, and data releases include the US PPI reading for June and the weekly initial jobless claims. Otherwise, central bank speakers include the Fed’s Waller and the ECB’s Centeno. Earnings releases include JPMorgan Chase and Morgan Stanley. The European Commission will be publishing their latest economic forecasts, and UK Conservative MPs will hold another ballot on their next leader.