[MARKET ANALYSIS] Fixed makes a limited recovery as Brent retreates from USD 100/bbl, Flash PMIs for July are yet to capture the recent extension

A contained start for most benchmarks as Brent held at just over USD 100/bbl throughout APAC trade and into the European morning. Thereafter, as energy pulled back from highs taking Brent down to a USD 98/bbl handle, yields followed suit and by extension fixed lifted. At most, USTs to a 108-07 peak, notably shy of Thursday’s 108-15 best and while firmer by c. five ticks today, it remains near enough a full point lower WTD. Ahead, we have Flash PMIs which will help to inform the debate around the Fed tightening this year or not, though as we have seemingly seen with the EZ figures it is perhaps too early for the energy resurgence to be fully visible in the flash data.  Bunds lifted to a 124.35 peak around the cash equity open, spurred by the mentioned energy move and as the German Cabinet reshuffle was relatively limited and as expected. Since, a kneejerk lower occurred on the French flash figures before more pronounced pressure after the German and EZ metrics. Albeit, energy continues to trim and and the c. 10 tick pullback has unwound, with Bunds back at highs and firmer by over 20 ticks. Moving to Gilts, the morning’s stronger than expected Retail Sales were overshadowed by the mentioned pullback in energy and as such Gilts opened on the front foot by 17 ticks and have since extended another 30 to a 86.36 peak, where it remains. On the morning’s data, the EZ PMIs were firmer across the board aside from France’s Manufacturing. Commentary was encouraging and pointed to a rebound after a “largely stagnant” Q2 (reminder, Flash Prelim. EZ GDP next week) and cost pressures “cooling sharply”. However, the survey period only runs until the 22nd of July, and as such misses out on around USD 6/bbl of additional Brent upside if we assume that day’s USD 95.63/bbl close was captured, but equally the open that session was USD 91.50/bbl which may more closely align with the responses being provided, and would equate to around USD 10/bbl of upside being missed out on since. A similar point can be made for the UK Flash PMIs and also the DMP. As such, the Final reads will draw more scrutiny than usual to see how respondents' views changed once the energy extension to over USD 100/bbl was accounted for.