RANsquawk's  Instablog

The macro-markets across Europe look set to remain choppy among thin volumes, as the summer holiday-effect is expected to become instilled within trade. Price action across the European asset classes looks set to remain driven by the political picture this week, as data is on the lighter-end and exasperated participants continue to look towards the full ratification of the ESM as the next sign of a step forward from Europe's leaders. Last week saw little reprieve for the left-leaning governments, as Spanish PM Rajoy outlined a fairly aggressive set of budget measures totaling EUR 65bln, providing further evidence that austerity is still king. Partisan themes among Europe's governing bodies took a slight blow last week as Italian PM Monti confirmed that he is not looking for another term in office, removing one of Rajoy and French President Hollande's key partners in the anti-austerity drive against German Chancellor Merkel. Commentary from Merkel this week could also play a strong role, as she continues to face resistance from her supporters on the perceived handouts to Europe's laggard economies, with the Bundestag recalling a special vote on Spanish aid this week.

The Spanish government are set to receive a fresh sign from the markets on their confidence towards the troubled economy this Thursday, as they look to sell 10-year bonds, however, with a yet-undisclosed quantity of issuance, the Spanish treasury could take the step of restraining supply in order to pick-up bids for the individual securities. The auction comes following last week's budget announcements and so will provide some feedback on participants' perception of the fiscal measures.

Data from the US this week comes in the form of advance retail sales numbers for June, which are expected to see a very modest lift from the summer pick-up in consumption, followed by inflation figures on Tuesday, not expected to be particularly influential, as the Fed's inflation outlook remains low down the list of their economic priorities. This data is likely to be overshadowed by Fed Chairman Bernanke's semi-annual testimony, set to take place over Tuesday and Wednesday this week on top of the release of the Fed's beige book. The publication is likely to offer some serious insight into the Fed's upcoming policy decisions, especially in the light of continually disappointing non-farm payroll reports.

From Europe this week, data is light, however the German ZEW survey on Tuesday will likely be eyed, with analysts expecting the index to remain heavily weighed by the headwinds of Eurozone confidence, which is due to continue to undermine Germany's strong regional performance, as firm factory orders and industrial production figures have shown over the past few weeks.

UK participants can look forward to a fairly busy week, as CPI numbers on Tuesday are expected to confirm that the country is facing no remote upwards pressure on prices, paving the way for the BoE to fill in the demand-gap with asset purchases. This is swiftly followed by the BoE's minutes on Wednesday, likely to paint a fairly clear picture that the board were firmly in favour of additional QE at their last rate-setting meeting. An important feature of the release will be whether there was any bias towards boosting Gilt purchases beyond GBP 50bln, as this will provide insight on whether the MPC are to continue their purchase programme in the upcoming months. Another feature of meeting that may garner interest is whether the members tossed up the possibility of any extra-unconventional policies, as members have highlighted their uncertainty towards the diminishing returns of further QE in an uphill struggle against the Eurozone drag.

On the equity front, US earnings season is set to well and truly get underway this week, as the US banks are set to report, following JP Morgan's release. Elsewhere, Google and Microsoft are to update shareholders on their performance towards the tail end of the week.