Brexit Talks Moving Into Focus As Key Deadline Looms Next Month

Notes/Observations

• Recovery in German industrial production slowed in July; focus turns to ECB’s rate decision on Thursday to see if policymakers would introduce yet more stimulus.
• UK said to be prepared for ‘no-deal’ outcome in current Brexit talks with mid-Oct seen as the line-in-the-sand for any agreement
• Taiwan exports surge ahead US. ban on sales to the Huawei comes into effect in mid-Sept

Asia:

• China Aug Trade Balance registered a larger surplus ($58.9B v $49.4Be); Exports Y/Y: 9.5% v 7.5%e; Imports Y/Y: -2.1% v +0.2%e

Coronavirus:

• Total global cases 27,003,973 (+3.0% vs. Fri); death toll 882.1K (+1.7% vs. Fri)

Europe:

• UK PM Johnson expected to warn the EU that if there is no breakthrough Brexit deal by Oct 15th, Britain will accept no deal and ‘move on’
• UK said to be planning new legislation that will override key parts of Brexit Withdrawal Agreement and risks collapsing trade talks with the EU
• UK chief negotiator Frost stated that Britain would not blink in Brexit talks this week and the country would not become a client state of Brussels by accepting restrictions on fishing and vetoes of national law
• Reports that Britain had ramped up Brexit no deal prep with senior UK figures putting the chances of getting a deal at < 20%
• German IFO Institute: German industry sees production increasing slightly in the coming months

Americas:

• US Treasury Sec Mnuchin said he expects a government funding bill to cover US agencies through the beginning of Dec, expected details to be ‘firmed up’ by the end of the week
• Fed’s Powell: today’s jobs reports was a good one; jobs are growing faster than many had expected; the economy will need low interest rates for years Energy:
• Saudi Arabia cut its Oct official selling price for Arab light crude exported to Asia by $1.40/barrel, Price was at a $0.50/barrel discount against the Oman/Dubai price

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 % at #, FTSE +1.24% at 5,871.25, DAX +1.13% at 12,988.30, CAC-40 +1.04% at 5,016.76, IBEX-35 +0.53% at 7,027.00, FTSE MIB +0.97% at 19,578.50, SMI +0.66% at 10,249.84, S&P 500 Futures -0.26%]
• Market Focal Points/Key Themes: European indices open higher across the board; better trading sectors include financials; materials and energy sectors among underperformers; BE Group confirms offer for Ageas; reportedly Sanofi considering spin-off of ingredients unit; quiet session expected with US and Canada closed for holiday

Equities

• Consumer discretionary: Associated British Foods [ABF.UK] +4% (trading update)
• Healthcare: Dechra Pharmaceuticals [DPH.UK] +6% (earnings)
• Technology: Future plc [FUTR.UK] +18% (trading update)
• Materials: Sylvania Platinum [SLP.UK] -8% (earnings)

Speakers

• EU chief Brexit negotiator Barnier expressed concerned over the current negotiation environment as UK sought the best of both worlds. Had no comment regarding financial press reports that UK was planning legislation that could override the Withdrawal Agreement
• UK Govt spokesperson: Working hard to resolve outstanding issues with Northern Ireland protocol; will continue to approach in good faith
• Poland Central Bank’s Lon reiterated stance that sees interest rates seen holding steady under baseline scenario but could cut interest rates again if consumers’ confidence fell sharply

Currencies/Fixed Income

• EUR/USD was little changed in quiet holiday trading. Dealers noted that the recovery in German industrial production slowed in July; focus turns to ECB’s rate decision on Thursday to see if policymakers would introduce yet more stimulus. Recent jawboning by ECB officials over the euro’s rise has helped calm the greenback after its test two year lows in the pair at 1.20 level. Pair at 1.1830 by mid-session.
• GBP was weaker over press reports that UK was be planning new legislation that would override key parts of Brexit Withdrawal Agreement and risks collapsing trade talks with the EU. Talks enter the 8th stage this week with reports that UK PM Johnson to warn the EU that if there was no breakthrough Brexit deal by Oct 15th, Britain would accept no deal outcome and ‘move on’. UK said to see only a 20% change that talks to result in an agreement

Economic Data

• (DE) Germany July Industrial Production M/M: 1.2% v 4.5%e; Y/Y: -10.0% v -7.4%e
• (NO) Norway July Industrial Production M/M: +2.5% v -1.8% prior; Y/Y: 7.4% v 3.1% prior
• (NO) Norway July Manufacturing Production M/M: 1.8% v 0.2% prior; Y/Y: -6.1% v -7.1% prior
• (FI) Finland July Preliminary Trade Balance: -€0.4B v -€0.2B prior
• (ZA) South Africa Aug Gross Reserves: $55.8B v $58.0Be; Net Reserves: $50.5B v $48.5Be
• (DK) Denmark July Industrial Production M/M: -5.6% v +4.0% prior
• (AU) Australia Aug Foreign Reserves: A$59.7B v A$60.0B prior
• (CH) Swiss Aug Foreign Currency Reserves (CHF): 848.3B v 847.0B prior
• (AT) Austria Aug Wholesale Price Index M/M: 0.1% v 0.9% prior; Y/Y: -4.0% v -4.6% prior
• (CZ) Czech July National Trade Balance (CZK): 13.4B v 5.7Be
• (CZ) Czech July Industrial Output Y/Y: -4.9% v -6.8%e; Construction Output Y/Y: -10.4% v -11.5% prior
• (UK) Aug Halifax House Price Index M/M: 1.6% v 1.6% prior; 3M/Y: 5.2% v 3.8% prior (record high)
• (CN) China Aug Foreign Reserves: $3.165T v $3.174Te (5th straight monthly increase)
• (SE) Sweden Aug Budget Balance (SEK): +19.8B v -34.4B prior
• (SE) Sweden Q2 Current Account Balance (SEK): 63.2B v 75.5B prior
• (CH) Swiss weekly Total Sight Deposits (CHF): 702.9B v 701.6B prior; Domestic Sight Deposits: 633.2B v 636.5B prior
• (ZA) South Africa Q3 BER Consumer Confidence: -23 v -30e
• (TW) Taiwan Aug Trade Balance: $6.5B v $6.3Be; Exports Y/Y: 8.3% v 0.8%e; Imports Y/Y: +8.5% v 0.5%e
• (EU) Euro Zone Sept Sentix Investor Confidence: -8.0 v -10.5e
• (SG) Singapore Aug Foreign Reserves: $327.5B v $321.4B prior

Fixed Income Issuance

• (LX) Luxembourg opened its book to sell EUR-denominated 12-year sustainability bond; guidance seen +5bps to mid-swaps

Looking Ahead

• (IL) Israel Aug Foreign Currency Balance: No est v $157.7B prior
• (IT) Bank of Italy Report on Balance-Sheet Aggregates
• (EG) Egypt Aug Net Reserves: No est v $38.3B prior; Gross Official Reserves: No est v $38.3B prior
• (CO) Colombia Aug Consumer Confidence: No est v -32.7 prior
• (MX) Citibanamex Survey of Economists
• 05:30 (DE) Germany to sell €4.0B in 6-month Bubills
• 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 9-month bills
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
• 06:00 (IE) Ireland Q2 GDP Q/Q: No est v 1.2% prior; Y/Y: No est v 5.1% prior
• 06:00 (IE) Ireland Q2 Current Account Balance: No est v -€14.6B prior
• 06:00 (IE) Ireland July Industrial Production M/M: No est v 12.4% prior; Y/Y: No est v 5.1% prior
• 06:00 (IL) Israel to sell 2025, 2029, 2030, 2037 and 2051 bonds (6 tranches)
• 06:00 (RO) Romania to sell RON500M in 3.7% 2024 Bonds
• 06:45 (US) Daily Libor Fixing
• 07:00 (MX) Mexico Jun Gross Fixed Investment: -23.6%e v -39.7% prior
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 07:30 (CL) Chile Aug Trade Balance: No est v $1.2B prior; Total Exports: No est v $5.8B prior; Total Imports: No est v $4.7B prior; Copper Exports: No est v $3.1B prior
• 07:30 (CL) Chile Aug International Reserves: No est v $3.7B prior
• 08:00 (PL) Poland Aug Official Reserves: No est v 13.8B prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (ES) Spain Debt Agency (Tesoro) announcement of size on upcoming issuance
• 08:50 (FR) France Debt Agency (AFT) to sell €4.6-5.8B in 3-month, 6-month and 12-month bills (3 tranches)
• 09:00 (RU) Russia Aug Official Reserve Assets: $590.5Be v $591.8B prior
• 09:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 09:45 (EU) ECB weekly QE bond buying update
• 10:30 (TR) Turkey Aug Cash Budget Balance (TRY): No est v -30.8B prior
• 16:00 (US) Weekly Crop Progress Report
• 19:01 (UK) Aug BRC Sales Like-For-Like Y/Y: No est v 4.3% prior
• 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 90.2 prior
• 19:30 (JP) Japan July Labor Cash Earnings Y/Y: -1.7%e v -2.0% porior (revised from -1.7%); Real Cash Earnings Y/Y: -1.8%e v -2.1% prior (revised from -1.9%)
• 19:30 (JP) Japan July Household Spending Y/Y: -3.7%e v -1.2% prior
• 19:50 (JP) Japan Q2 Final GDP Q/Q: -8.1%e v -7.8% prelim; GDP Annualized Q/Q: -28.5%e v -27.8% prelim; GDP Nominal Q/Q: -7.6%e v -7.4% prelim
• 19:50 (JP) Japan July Current Account Balance (BOP basis): ¥1.886Te v ¥167.5B prior; Adjusted Current Account: ¥1.445Te v ¥1.049T prior; Trade Balance: +¥172.2Be v -¥77.3B prior
• 19:50 (JP) Japan Aug Bank Lending Y/Y: No est v 6.3% prior; Bank Lending (ex-trusts) Y/Y: No est v 6.4% prior
• 21:00 (AU) Australia to sell A$100M in 2.5% 2030 Bonds
• 21:30 (AU) Australia Aug NAB Business Confidence: No est v -14 prior; Business Conditions: No est v 0 prior
• 23:30 (HK) Hong Kong to sell 3-month and 6-month bills
• 23:35 (JP) Japan to sell 5-Year JGB Bonds