EUROZONE DATA: Jul Flash PMIs: EZ Services Strength Driven By ex-France/Germany
The Eurozone-wide July flash composite PMI reached its highest level in 11 months at 51.0, above the 50.7 consensus and 50.6 prior. The "rest of the Eurozone" (ex-France and Germany) appears to have driven the strength, particularly in the services sector. While not necessarily pushing back on expectations for one more 25bp ECB cut this cycle, signs of a continued gradual recovery in EZ activity suggests a deposit rate below 1.75% may not be warranted just yet.
Manufacturing was in line with expectations at 49.8 (vs 49.5 prior), a 36-month high like the German print earlier today. We estimate the Germany/France manufacturing PMI at 49.0, up from 48.8 prior for a seventh consecutive increase. Meanwhile the ex-Germany/France manufacturing PMI is estimated at 50.8, the highest since February 2023 and up from 50.4 prior).
Services was more notably stronger-than-expected at 51.2 (vs 50.6 cons, 50.5 prior). With the French and German prints broadly in line with consensus, this suggests a significant contribution from other Eurozone members. We estimate the Germany/France services PMI at 49.9 (vs 49.7 prior), with the ex-Germany/France reading at 53.4 (vs 51.9 prior).
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EGB OPTIONS: Schatz Put Ladder
DUQ5 107.30/107.20/107.00 broken p ladder, bought for 1.75 in 4k.
EGB FUNDING UPDATE: E15bln increase in bond issuance, E4bln in Bubill issuance.
Highlights by maturity:
- 7-year Bund: E8bln (over half the increase): As we expected there will be a new 7-year Bund with a maturity of Nov-32. This has two auctions in the quarter of E4bln each (in August and November).
- Schatz: E2bln increase: Reopenings increased to E5bln in August (from E4bln) with two September reopenings of E4.5bln rather than E4.0bln
- 10-year Bund: E2.5bln increase: New issue increased to E6bln (from E5bln) with three reopenings of E5.0bln rather than E4.5bln
- 15-year: E2.0bln increase: Expanding to E2.5bln each
- 30-year: E0.5bln increase for the July auction to E2.5bln
MIDEAST: Ceasefire At Risk As Israel Def Min Orders Retaliatory Tehran Strikes
Ynet reports comments from Israeli Defence Minister Israel Katz: "I instructed the IDF to respond forcefully to Iran's violation of the ceasefire with powerful strikes against regime targets in the heart of Tehran. In light of the complete violation of the ceasefire declared by the US President by Iran and the launch of missiles towards Israel, and in accordance with the Israeli government's policy as determined to respond forcefully to any violation - I have instructed the IDF, in coordination with the Prime Minister, to continue the intense activity to attack Tehran to thwart regime targets and terrorist infrastructures in Tehran, in continuation of the activity that took place yesterday."
- The longevity of the ceasefire could depend on whether any upcoming Israeli strike proves the last action of the conflict, or whether Iran in turn again fires missiles at Israel. Despite Trump's assurances overnight and the apparent acceptance of the terms by both Israel and Iran, the situation remains febrile and at risk of further deterioration.
- Comes as head of Iran's Atomic Energy Organisation, Mohammad Eslami claims that “We’ve taken necessary measures and are assessing the damaged areas. Plans for revival [of nuclear facilities] were pre-arranged, and our current strategy ensures no disruption to production and services."
