Sweden’s Riksbank sticking to its established policy script; keeps both policy and rate path unchanged

ECB expected to keep policy steady; focus on whether ECB provides guidelines on QE taper

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China Aug FX Reserves registers its 7th straight month of increase to $3.0915T



UN Draft resolution has US seeking to freeze the assets of Kim Jong-Un and ban North Korean guest workers. Also continues to seek an oil embargo on North Korea, though Russia has indicated it opposes this move

White House: Trump, China’s Xi condemned N Korea’s latest provocative, destabilizing action. Both leaders committed to achieving denuclearization of Korean peninsula


ECB still not likely to reach decision on QE before the Oct 26th MPC meeting. ECB technical committee said to still be reviewing informal policy proposals for the General Council on various scenarios for size/duration of asset purchase for QE program in 2018

PM’s Office said to be asking leaders of largest UK companies to sign letter of support for May’s Brexit strategy, but many CEOs are refusing

EU to call on UK to find solutions that avoid the creation of hard border with Ireland and guarantee peace on the island

Catalonia Parliament sets binding referendum on independence from Spain for Oct 1


President Trump and Congressional leaders have agreed to pass Harvey aid along with a short term debt limit and govt funding bill (would fund the govt and extend the debt limit through Dec 15th). Both sides want to avoid a default in December

President Trump: military action is not the first choice for dealing with North Korea. Would have to see what happens with N Korea. Had very strong, very frank conversation with China President Xi

Fed Beige Book noted that economic activity expanded at modest pace across all districts. Majority of districts saw limited wage pressures and modest to moderate wage growth.


Weekly API Oil Inventories: Crude: +2.8M v -5.8M prior

Economic data

(NL) Netherlands Aug CPI M/M: 9=0.2 v 0.7% prior; Y/Y: 1.4% v 1.3% prior

(NL) Netherlands Aug CPI EU Harmonized M/M: 0.2% v 0.8% prior; Y/Y: 1.5% v 1.5% prior

(JP) Japan July Preliminary Leading Index: 105.0 v 105.1e; Coincident Index: 115.6 v 115.8e

(DE) Germany July Industrial Production M/M: 0.0% v 0.5%e; Y/Y: 4.0% v 4.6%e

(NO) Norway July Credit Indicator Growth Y/Y: 5.7% v 5.9%e

(NO) Norway July Industrial Production M/M: 0.7% v 0.3% prior; Y/Y: 0.5% v 5.4% prior

(NO) Norway July Manufacturing Production M/M: 1.9% v 0.8%e; Y/Y: 1.4% v 1.1% prior

(FR) France July Trade Balance: -€6.0B v -€4.9B prior

(MY) Malaysia Central Bank (BNM) left its Overnight Policy Rate unchanged at 3.00% (as expected)

(CH) Swiss Aug Foreign Currency Reserves (CHF): 716.7B v 714.9B prior

(UK) Aug Halifax House Prices M/M: 1.1% v 0.2%e; 3M/Y: 2.6% v 2.1%e

(SE) Sweden Central Bank (Riksbank) left its Repo Rate unchanged at -0.50% (as expected); maintained its Repo Rate path

(CN) China Aug Foreign Reserves: $3.0915T v $3.095Te (7th straight month of increase)

(EU) Euro Zone Q2 Final GDP Q/Q: 0.6% v 0.6%e ; Y/Y: 2.3% v 2.2%e

Fixed Income Issuance:

(ES) Spain Debt Agency (Tesoro) sold total €4.57B vs. €3.5-4.5B indicated range in 2022, 2027 and 2033 Bonds

Sold €1.78B in 0.4% Apr 2022 SPGB; Avg yield: 0.213% v 0.233% prior; Bid-to-cover: 1.88x v 1.60x prior

Sold €1.31B in 1.45% Oct 2027 SPGB; Avg yield: 1.54% v 1.649% prior; Bid-to-cover: 1.97x v 1.23x prior

Sold €1.48B in 2.35% July 2033 SPGB; Avg Yield: 2.17% v 2.29% prior; Bid-to-cover: 1.78x v 1.37x prior

(ES) Spain Debt Agency (Tesoro) sold €700M vs. €250-750M in 0.65% Nov I/L 2027 bonds; Real Yield: 0.371%; Bid-to-cover: 1.94x

(FR) France Debt Agency (AFT) sold total €8.999B vs. €8.0-9.0B indicated range in 2027, 2036, 2041 and 2060 Oats

Sold €5.214B in 1.00% May 2027 Oat; Avg Yield: 0.67% v 0.75% prior; Bid-to-cover: 1.99x v 2.15x prior

Sold €1.575B in 1.25% May 2036 Oat; Avg Yield 1.38% v 1.49% prior; Bid-to-cover: 1.76x v 2.23x prior

Sold €1.28B in 4.50% Apr 2041 Oat; Avg yield 1.49% v 1.50% prior; Bid-to-cover: 1.95x v 2.25x prior

Sold €930M in Apr 4% 2060 Oat; Avg yield: 1.84% v 2.17% prior; Bid-to-cover: 2.13x v 1.53x prior



Indices [Stoxx600 flat at 373.8, FTSE flat at 7357, DAX +0.6% at 12283, CAC-40 +0.3% at 5115, IBEX-35 +0.1% at 10140, FTSE MIB -0.4% at 21739, SMI -0.2% at 8839, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes:

European Indices trade mixed with outperfomance in the German Dax, whilst weakness is observed on the FTSE MIB and the Swiss SMI. Markets are trading in a holding pattern ahead of the ECB rate decision later today. In the UK Microfocus continues its momentum higher following on from results from HPE, trading a further 4% higher. Bovis Homes outperforms after results, on the downside Go Ahead Group lags after disappointing results. Elsewhere Altran outperforms following earnings whilst Wendel trades sharply lower.
Looking ahead to the US morning, notable earners include Dell Tech, Conn and Barnes and Noble.


Consumer discretionary [Havelock [HVE.UK] -50% (Profit warning, Go Ahead Grp [GOG.UK] -8.7% (Earnings)]

Financials: [Ashmore [ASHM.UK] -6% (Earnings), ZPG [ZPG.UK] +4.9% (Acquistion), Direct Line [DLG.UK] +3.6% (No reason seen), Wendel [MF.FR] -7% (Earnings)]

Technology: [ Altran [ALT.UK] +4% (Earnings)]

Healthcare: [Circassia [CIR.UK] +15% (Phase III AMPLIFY trial demonstrated a statistically- significant improvement in lung function in patients with COPD)]

Real Estate: [Bovis Home [BVS.UK] +9% (Earnings)]


SwedenCentral Bank (Riksbank) policy statement reiterated that 1st rate hike not seen until mid-2018 but was prepared for more easing if necessary. To change inflation gauge to CPIF and introduce variation band around target; 2% target still applied

Sweden Central Bank (Riksbank) Gov Ingves post rate decision press conference noted that the domestic economy was developing better than expected but too early to make policy less expansionary. SEK currency has strengthened faster than its July forecast

France Constitutional Council said to have approved labor reform process

Norway Stats Agency (SSB) Quarterly forecasts raised 2017 Mainland GDP from 1.9% to 2.0% but cut 2018 Mainland GDP from 2.2% to 2.1%. It also cut 2017 Underlying CPI from 1.7% to 1.6%

Germany Chemical Industry Group (VCI) maintained its 2017 Sales growth at 5.0% and Production growth at 1.5%

Hungary Central bank’s Virag: CPI seen returning to around 2% by end-2017

Ukraine President Poroshenko: 2017 GDP growth seen at 1.8%

Turkey Presidential advisor Ertem: Economy can grow over 5% without creating inflation

Malaysia Central Bank policy statement reiterated that its monetary policy stance remained accommodative and expected headline inflation expected to moderat. MYR currency (Ringgit) had appreciated to better reflect fundamentals. Domestic Demand to remain key driver of growth

China FX Regulator SAFE reiterated to keep forex reserves at reasonable, appropriate level

South Korea Foreign Ministry spokesman: Sanctions on North Korea should inflict pain this time and such practical measures were needed

South Korea President Moon: Warned of another North Korea missile launch possibly as early as this Saturday (national founding day)

North Korea: Will take powerful counter-measures in response to US pressure


EUR/USD was slightly higher ahead of the ECB rate decision. ECB expected to keep policy steady with particular focus on whether the central bank would provide any guidelines on its looming QE taper. No final decision on the next steps is expected until at least the October meeting, suggesting there are many variations of the wind-down being discussed. The pair has been holding above the 1.1820 level keeping the current uptrend intact

Overall FX markets relatively quiet but the USD remained on soft-footing. USD/JPY slightly lower just below the 109 level as Korea remains on the front burner with another NK missile launch possible around the weekend.

Fixed Income

Bund futures trades at 162.28 down 28 ticks, ahead of the ECB rate meeting. Trading has been range bound with immediate support at 162.93, with support lying just below 162.00.

Gilt futures trades at 127.37 down 22 ticks trading towards the session low, with continued downside targeting 126.88, followed by 126.49. A reversal targets 127.83 initially.

Thursday’s liquidity report showed Wednesday’s excess liquidity fell to €1.773T from €1.780T prior. Use of the marginal lending facility rose sharply to €1.04B from €248M.

Corporate issuance continued to see strong flows with $13.3B coming to market via 11 issuers following on from $22B seen yesterday. Notable issuers included Visa $2.5B 3 part offering, Sinopec $3.25B 4 part offering and Bank of Montreal $2.5B 2 part offering.

Looking Ahead

(IL) Israel Aug Foreign Currency Balance: No est v $110.1B prior

(MX) Mexico Aug Vehicle Production: No est v 286.4K prior; Vehicle Exports: No est v 243.1K prior

05:30 (ZA) South Africa July Total Mining Production M/M: +0.8%e v -2.6% prior; Y/Y: +2.0%e v -0.8% prior; Gold Production Y/Y: No est v -3.6% prior; Platinum Production Y/Y: No est v -13.7% prior

05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month bills

05:30 (HU) Hungary Debt Agency (AKK) to sell Floating Bonds

06:00 (IE) Ireland Aug CPI M/M: No est v 0.0% prior; Y/Y: No est v -0.2% prior

06:00 (IE) Ireland Aug CPI EU Harmonized M/M: No est v 0.1% prior; Y/Y: No est v -0.2% prior

06:00 (IE) Ireland Aug Live Registry Monthly Change: No est v -3.0K prior; Live Registry Level: No est v 256.8K prior

06:45 (US) Daily Libor Fixing

07:00 (ZA) South Africa July Manufacturing Production M/M: 0.5%e v 0.0% prior; Y/Y: -0.3%e v -2.3% prior

07:30 (CL) Chile Aug International Reserves: No est v $38.4B prior

07:30 (CL) Chile Aug Trade Balance: $0.1Be v $0.2B prior; Total Exports: $5.8Be v $5.2B prior; Total Imports: $5.6Be v $5.0B prior; Copper Exports: No est v 2.5B prior

07:45 (EU) ECB Interest Rate Decision: ECB expected to keep key rates unchanged; Leave Main Refinance Rate unchanged at 0.00%; Leave Marginal Lending rate unchanged at 0.25%; Leave Deposit Rate unchanged at -0.40%

08:00 (CL) Chile July Nominal Wage M/M: 0.5%e 0.4% prior; Y/Y: 4.4%e v 4.4% prior

08:05 (UK) Baltic Dry Bulk Index

08:00 (PL) Poland Aug Official Reserves: No est v $109.8B prior

08:20 (HU) Hungary Central Bank Gov Matolcsy speaks

08:30 (US) Initial Jobless Claims: 245Ke v 236K prior; Continuing Claims: 1.95Me v 1.942M prior

08:30 (US) Q2 Final Nonfarm Productivity: 1.1%e v 0.9% prelim; Unit Labor Costs: 0.6%e v 0.6% prelim

08:30 (CA) Canada July Building Permits M/M: -1.5%e v +2.5% prior

08:30 (EU) ECB Chief Draghi post rate decision press conference

08:30 (EU) ECB updates Staff Projections

09:00 (MX) Mexico Aug CPI M/M: 0.5%e v 0.4% prior; Y/Y: 6.7%e v 6.4% prior, CPI Core M/M: 0.3%e v 0.3% prior

09:00 (RU) Russia Gold and Forex Reserve w/e Sept 1st: No est v $420.5B prior

10:00 (CA) Canada Aug Ivey Purchasing Managers Index (Seasonally Adj): No est v 60.0 prior

10:30 (US) Weekly EIA Natural Gas Inventories

11:00 (US) Weekly DOE Crude Oil Inventories

12:00 (CA) Canada to sell 3-Year Bonds

12:15 (US) Fed’s Meister on economic outlook and monetary policy

19:00 (US) Fed’s Dudley (voter) on economic outlook and monetary policy


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