Headlines:
- Germany July flash manufacturing PMI 49.2 vs 50.6 expected
- France July flash services PMI 52.1 vs 52.7 expected
- Eurozone July flash services PMI 50.6 vs 52.0 expected
- Euro sinks as German PMI data points to contraction in activity
- Bond yields slide as euro area PMI data sounds recession alarm bells
- 10-year German bund yields fall to seven-week lows
- ECB's de Cos: We will see about September, we are data dependent
- ECB's Kažimír: It is possible to expect 25 or 50 bps rate hike in September
- ECB's Villeroy: Frontloading rate hikes does not mean terminal rate will be higher
- UK July flash services PMI 53.3 vs 53.0 expected
- UK June retail sales -0.1% vs -0.3% m/m expected
Markets:
- JPY leads, EUR lags on the day
- European equities higher; S&P 500 futures down 0.2%
- US 10-year yields down 10.7 bps to 2.801%
- Gold up 0.5% to $1,727.63
- WTI crude down 1.6% to $94.79
- Bitcoin up 1.9% to $23,558
Just a day after the ECB decided to raise rates, leading indicators in Europe started to flash recession signals with the PMI data suggesting that the Eurozone economy contracted in the month of July. Soaring prices and energy costs are to blame as demand conditions deteriorated. The worst part? Things look set to intensify in the months ahead with a gas crisis looming.
The euro tumbled on the headlines with EUR/USD falling from 1.0200 to 1.0130 before finding some footing to stick around 1.0150-60 levels, though still down 0.6% on the day currently.
The dollar caught a bid as risk sentiment also retreated slightly before some pushing and pulling is leaving the greenback more mixed now. GBP/USD also fell from 1.1985 to 1.1915 but the lows held at the 200-hour moving average once again.
Meanwhile, AUD/USD dropped from 0.6920 to 0.6895 before pulling itself up to 0.6940 at the moment, with European stocks recovering after the earlier drop on the PMI data.
However, bond yields sank hard with 10-year German bund yields dropping by nearly 19 bps to 1.03% - its lowest in seven weeks - while 10-year Treasury yields are also seen down by nearly 11 bps to 2.80% on the day.
That weighed on USD/JPY as the pair fell from 137.60 to 136.90 now as we look towards US trading.
