Busy week ahead: as Q2 earnings season ramps up with a focus on Financials and Technology. There are also several significant economic reports from the US and China.\r\nTuesday, 15-Jul: Fed Chair Janet Yellen Congressional testimony, which will continue on Wednesday. Earnings include GS, JPM, and INTC.\r\nWednesday, 16-Jul: China Q2 GDP and US June PPI and industrial production. Earnings include BAC and SNDK.\r\nThursday, 17-Jul: US June permits and starts. Earnings include IBM.\r\nFriday, 18-Jul: Earnings include GE, HON and JCI.\r\n \r\no M&A activity provides support:\r\n§ Shire is now willing to recommend a revised AbbVie offer, which values the company at $53B. Perrigo has reportedly hired an investment bank to explore a sale. Mylan to acquire Abbot’s branded generics business for $5.3B. URS agreed to be acquired by Aecom for $6B. Whiting Petroleum will acquire Kodiak Oil & Gas in $3.8B deal, which will create the biggest Bakken shale producer. Lindt & Spruengli will acquire Russell Stover.\r\no Citi earnings were well received:\r\n§ Q2 core EPS was better than expected, driven by better than expected revenue, improved operating margin and better credit. ICG revenue was better than expected as FICC and IB overshadowed weak equities trading. Residential MBS litigation overhang was removed with the $7B DoJ settlement.\r\no Fed could tighten earlier than expected:\r\n§ The WSJ’s Hilsenrath wrote that debate is intensifying at the Fed about when to raise rates. San Francisco Fed President John Williams, who is considered dovish, commented that the Fed could “safely start the process of normalization a touch earlier” than previously expected. Williams has in the past said that he expected initial tightening in 2H of 2015. However, he also stressed that he still sees slack in the economy. Hawks have also become more vocal about wanting earlier rate increases. Fed Chair Janet Yellen will be speaking with Congress on Tuesday and Wednesday and any comments regarding increasing inflation or an improving jobs outlook will be closely reviewed for any signs of a shift to a less dovish position.\r\no Conflict in eastern Ukraine could escalate:\r\n§ Kommersant, citing a Kremlin source, reports that Russia is considering air strikes in Ukraine. This follows Russia’s accusation that Ukraine fired artillery into its territory killing a civilian, which Ukraine denies. Ukrainian officials also said that approximately 100 military vehicles crossed the border from Russia and that Russian officers are fighting alongside separatists. NATO believes that Russia has been building up forces on the border again and estimates that Russia has 10-12K troops in the area.\r\no No progress on forming new government in Iraq:\r\n§ Iraq’s parliament made no progress on forming a new government over the weekend and postponed meetings until Tuesday. The largest immediate problem is PM Al-Maliki continues to seek a third term, which faces strong opposition from Sunnis and Kurds. IS insurgents attacked the town of Dhuluiya, which is only 45 miles north of Baghdad, while the Iraqi army claimed to have retaken the towns of Sadur and Nawdal. Bomb attacks also hit Baghdad and surrounding towns.\r\no India inflation lower than expected:\r\n§ Inflation measurements for June fell month over month and were below expectations. However, the poor start to the monsoon season could still trigger substantial food price inflation. It is possible that rainfall and related plantings could be worse than the drought year of 2009.\r\n§ CPI +7.31% y/y vs consensus +7.95% and prior month +8.28%.\r\n§ WPI +5.43% y/y vs consensus +5.80% and prior month 6.01%.