*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- German official clarifies German Chancellor Merkel alleged ‘drop dead’ comments on Eurobonds
- Egan-Jones cuts Germany Sovereign on Tues to A+ from AA- (Note: the 3 majors have Germany at AAA, Outlook stable)
- French 2012 GDP growth to remain sluggish
- Spain Q2 GDP contraction to be worse than Q1
- Greece Pasok Leader Venizelos: Greek recession deepening while reforms stalling
- France, Germany signal guarded response on EU Van Rompuy report that proposes supervision of euro-zone banks be transferred to a European supervisor, possibly ECB
- UK BBA: May Net Mortgage Lending: -£100M v +£500M m/m first decline since records began in 1997
***Equities***
FTSE 100 +0.30% at 5463, DAX +0.10% at 6144, CAC-40 +0.25% at 3020, IBEX-35 +0.60% at 6568, FTSE MIB +0.50% at 13,028, SMI +0.20% at 5968, S&P 500 Futures flat at 1315.25

- Equity indices opened the session broadly higher, tracking yesterday’s gains for US equities. Financials had a positive open, led by Italian banks. Equity markets have since pared gains, following cautious comments from the Bank of Spain regarding the country’s Q2 economic outlook. Resource related companies are broadly lower, tracking the weakness in commodity prices. Overall, European investors are expected to remain cautious ahead of the Thursday/Friday EU summit.
- In Germany, various large companies have issued cautious comments regarding their outlooks. Infineon [IFX.DE] is lower by over 2.5%, after cutting its Q3 sales growth forecast, while Siemens [SIE.DE] is trading lower as the company’s CEO said the firm may have difficulty meeting its earnings targets (cited factors including slowdown in China). In the steel space, Salzgitter [SZG.DE] is lower by over 5%. The company said that it no longer expects to be able to achieve breakeven results for its steel unit this year. Coupled with the weakness in shares of Salzgitter, other German steel companies are also declining (Thyssenkrupp approx. 2% lower, Kloeckner -0.5%). Rhoen-Klinikum [RHK.DE] is trading higher by ~2% (near €21.50), as today is the deadline for shareholders to tender their stakes for Fresenius’ €22.50/share offer for the company. In London, shares of polymer manufacturer Yule Catto [YULC.UK] have declined by over 15%, after the company said that it is continuing to face challenging market conditions. Shares of miners Xstrata [XTA.UK] are Glencore [GLEN.UK] are both trading lower amid concerns that the shareholder votes related to their proposed merger could be delayed. According to a press report, large Xstrata shareholder Qatar Holdings (11% stake) is seeking a higher bid for the company. Standard Chartered [STAN.UK] opened slightly higher after issuing its H1 trading update, but shares have underperformed the other UK banks. Italian Bank Monti Paschi [BMPS.IT] opened the session higher by approx.2% after announcing its 2012-15 business plan and confirming its capital raising plans. In France ADP [ADP.FR] has declined by over 2%, as the company cut its 2015 targets. Belgium-listed computer/printing services company Colruyt [COLR.BE] has advanced by over 8%, as the company reported better than expected FY12 results.

Speakers:
- Spain PM Rajoy commented in parliament that the Gov’t was working on a plan for retail investors with preferred shares. As for the upcoming EU Leader Summit Rajoy noted that he would defend its deficit cuts and reforms an also defend internal market integration. He hoped for “reasonable decisions” to help financing and seek help in easing its borrowing costs. He warned that Spain could not fund itself at current level over the long-term. He would call for both banking and fiscal union at Summit and seek an EIB capital increase. Lastly he called for direct bank recapitalizations from EU rescue funds
- EU’s Van Rompuy stated that he expected to reach common understanding on euro options at Leader Summit according to its invitation Letter. He stressed that Europe needed to send clear message that EU was addressing the crisis in its response
- German official clarified remarks attributed to German Chancellor Merkel that she did NOT reject euro bonds out right but rather there would be no euro bonds prior to the joint budget decisions.
- Czech PM Necas commented that his Govt would not accept EU proposals for deeper integration that have been circulated to date and opposed the weakening of the regulatory role of the central bank
- Bank of Spain (BOS) Monthly Bulletin stated that the economic slowdown intensified in Q2 and contraction seen worse than Q1 reading of -0.3%
- Greece Pasok leader Venizelos commented that the Greek was recession was deepening while reforms were stalling. He called for immediate govt intervention as liquidity was needed
- Germany’s cabinet approved the 2013 budget bill and medium-term fiscal. The 2013 federal expenditures were seen at €302.2B vs. €312.7B expected for 2012. The 2013 federal tax revenues were expected at €259.8B v €252.2B expected for 2012.
- German parliamentary budget committee said to have approved the ESM and fiscal compact bills by a large majority (as expected)
- Institute of International Finance (IIF) Dalara: The EU summit “perhaps most important” since its founding, EU’s future is at stake
- Italy PM Monti won his third of scheduled four confidence votes regarding labor market bill
- South Africa Fin Min Gordhan commented that a weaker ZAR currency was helping the export sector. Oil prices are mitigating the ZAR currency decline

Currencies:
- The EUR remained in a holding pattern ahead of the EU Leader Summit scheduled for Thursday. Various EU Leaders began to fortify their positions ahead of the meeting with different countries heading in different directions. Spain indicated that it was willing to cede any authority necessary to move towards fiscal integration while Germany maintained its stanch stand again Euro bonds with Merkel implying it would not happen over ‘her dead body’.
- Risk aversion still had the upper hand as indicated after the Bank of Spain that Q2 GDP faced severe headwinds.

Political/ In the Papers:
- The German Bundestag (lower house) was said to have planned a special session on July 6th regarding the EU debt crisis. According to the German Press, officials are expected to vote on Spain’s bank aid application, as Germany has to approve a MOU related to Spain.
- Germany may be liable for up to €310B per reports in the German press. A report from the budget committee of the Ministry of Finance noted the total liability for Germany is at €310B, the sum of the maximum volume of credit guaranteed by Germany with the ESM at €285.3B. The share of aid from EU budget of €9.8B, and the first Greek aid package at €15.2B.
- Luxembourg’s parliament ratifies the European Stability Mechanism (ESM). Note that Luxembourg joined Slovakia, Portugal, France, Greece, Slovenia, Netherlands and Finland in ratifying the ESM, which requires 90% of the capital base of the currency bloc to come into effect in July as anticipated.
- German public banks group said to have rejected euro Bonds and Euro-wide deposit guarantees
***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (DE) Germany Jun CPI Baden Wuerttemberg M/M: No est v -0.2% prior; Y/Y: No est v 1.9% prior
- (RO) Romania May Money Supply Y/Y: No est v 12.1% prior
-(FR) France Pres Hollande to have another meeting with German Chancellor Merkel on Wed (Jun 27), ahead of the EU summit on June 28-29
- (ES) Euro-zone finance ministers to hold teleconference on Cyprus and Spain
- (EU) EU Commissioner Rehn with OECD chief Gurria
- (DE) German DIW economic research institute monthly
- 6:00 (UK) Jun CBI Industrial Reported Sales: 15e v 21 prior
- 6:00 (DE) Germany Jun CPI Bavaria M/M: No est v -0.2% prior; Y/Y: No est v 2.3% prior
- 6:30 (DE) German Chancellor to address German parliament on Wednesday, June 27th
- 7:00 (DE) German Fin Min Schaeuble press conference on the 2013 budget bill and medium-term fiscal outlook
- 7:00 (UK) PM question time in House of Commons
- 7:00 (US) MBA Mortgage Applications w/e jun 22nd : No est v -0.8% prior
- 8:00 (EU) Denmark PM Thorning-Schmidt speaks at Brussels Think Tank
- 8:00 (DE) German Chancellor Merkel attends Energy & Water Federation Event: Berlin
- 8:00 (DE) Germany Jun Preliminary Consumer Price Index M/M: 0.0%e v -0.2% prior; Y/Y: 1.8%e v 1.9% prior
- 8:00 (DE) Germany Jun Preliminary CPI EU Harmonized M/M: -0.1%e v -0.2% prior; Y/Y: 2.1%e v 2.2% prior
- 8:30 (CL) Chile Central Bank’s Traders Survey
- 8:30 (US) May Durable Goods Orders: 0.5%e v 0.0% prior (revised from +0.2%); Durables Ex Transportation: 0.7%e v -0.9% prior (revised from -0.60%); Capital Goods Orders Non-defense Ex Aircraft: +1.9%e v -1.9% prior; Capital Goods Shipments Non-defense Ex Aircraft: No est v -1.4% prior
- 9:00 (EU) EU Commissioner for Economics and Monetary Affairs Rehn speaks before the EU Parliament
- 9:00 (CA) Canada May Teranet/National Bank HPI M/ML No est v 0.8% prior; Y/Y: No est v 5.9% prior; House Price index: No est v 150.61 prior
- 10:00 (PT) Portugal PM attends debate in Parliament
- 10:00 (US) May Pending Home Sales M/M: +1.5%e v -5.5% prior; Y/Y: 9.9%e v 14.7% prior
- 10:30 (US) Weekly DOE US Crude Oil Inventories
-11:00 (DE) German Chancellor Merkel attends CDU’s Konrad Adenauer Foundation Event: Berlin
- 11:00 (IT) italy PM Monri with EU Juncker
- 11:00 (US) Fed to purchase $1.50-2.25B in Notes
- 11:30 (BR) Brazil Central Bank weekly currency flows
- 12:00 (IT) Italy PM Monti with EU’s Juncker
- 13:00 (US) Treasury to sell 5-Year Notes
- 15:00 (AR) Argentina May Supermarket Sales Y/Y: No est v 16.0% prior
***Economic Data***
- (DE) Germany May Import Price Index M/M: -0.7% v -0.6%e; Y/Y: 2.2% v 2.3%e
- (FI) Finland Jun Business Confidence: -6 v -9 prior; Consumer Confidence: 5.8 v 12.0 prior
- (DE) Germany Jun CPI Saxony M/M: -0.1% v -0.2% prior; Y/Y: 1.7% v 1.9% prior
- (ES) Spain May Adjusted Real Retail Sales Y/Y: -4.9% v -8.1%e; Real Retail Sales Y/Y: -4.3% v -11.5% prior
- (DE) Germany Jun CPI Brandenburg M/M: 0.1% v -0.2% prior; Y/Y: 1.8% v 2.0% prior
- (DE) Germany Jun CPI Hesse M/M: 0.0% v -0.2% prior; Y/Y: 1.8% v 1.9% prior
- (NO) Norway Apr AKU Unemployment Rate: 3.0% v 3.0%e
- (TW) Taiwan May Leading Index M/M: 0.5% v 0.5% prior; Coincident Index M/M: 1.2% v 1.1% prior
- (IT) Italy Jun Business Confidence: 88.9 v 85.5e
- (UK) May BBA Loans for House Purchase: 30.2K v 33.0Ke
- (IC) Iceland Jun CPI M/M: 0.5% v 0.0% prior; Y/Y: 5.4 v 5.4% prior
- (RO) Romania Central Bank left Interest Rate unchanged at 5.25%; as expected

Fixed Income:
- (IN) India sold total INR150B vs. INR150B indicated in 3-month and 12-month Bills
- (RU) Russia sold RUB13.9B v RUB35.0B indicated in Apr 2017 OFZ Bonds; Yield 8.28%
- (EU) ECB allotted $2.6B in 7-day USD Liquidity Operations at 0.66% vs. $1.6B prior
- (IT) Italy Debt Agency (Tesoro) sold €9.0B vs. €9.0B in 6-month Bills; Avg Yield 2.957% v 2.104% prior (highest since Dec 2011); Bid-to-cover: 1.62x v 1.61x prior
- (EU) ECB allotted €26.2B in 3-Month Tender MRO vs. €25.0Be

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