Notes/Observations
Departure of Bannon from the White House has led to speculation that President Trump may be trying to reconnect with the GOP’s tax reform agenda
Focus on the content of the Jackson Hole symposium (**Note: Starts on Thursday)
Overnight
Asia:
North Korea warned that the upcoming US/South Korea military exercises will be ‘adding fuel to the fire’
South Korea President Moon: US/Korea joint drill is a defensive annual drill, not aimed at heightening tensions
Bank of Japan (BoJ) Gov Kuroda said the central bank has methods to avoid adverse effects when it normalizes policy; wants to avoid creating confusion by discussing specifics
Europe:
German Chancellor Merkel: Reiterates view to serve full 4-year term if re-elected; Stands by 2015 decision to open German borders to refugees
German Finance Ministry Aug Report: Reiterates view that monthly data suggested further economic expansion, indicators suggest industrial sector will continue to grow in Q3
German Emnid Poll: Conservative coalition lead continues ahead of Sept elections. CDU/CSU 39% (+1); – SPD 24% (unchanged)
UK Brexit Min Davis: firmly believe early round of negotiations have already demonstrated that many questions around our withdrawal are inextricably linked to our future relationship
UK Brexit Dept: To issue two formal position papers this week along with a batch of proposals for discussions on future relations ahead of upcoming negotiations in October
Fitch raises Greece sovereign rating one notch to B- from CCC; outlook Positive
Americas:
Trump to address US troops and American people on Monday (**Note: VP Pence and Nat Sec Advisor McMaster said to be pushing for increasing US troop strength in Afghanistan
Economic data
(NL) Netherlands July House Price Index M/M: 0.9% v 0.7% prior; Y/Y: 7.6 v 8.0% prior
(JP) Japan July Convenience Store Sales Y/Y: 0.0 v -0.1% prior
(TW) Taiwan July Export Orders Y/Y: 10.5% v 13.0%e
Fixed Income Issuance:
(NO) Norway sold NOK3.0B vs. NOK3.0B in 3-month Bills; Avg Yield: 0.38%; Bid-to-cover: 3.13x
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.2% at 373.4, FTSE -0.5% at 7308, DAX %-0.4 at 12114X, CAC-40 -0.5% at 5088, IBEX-35 -0.1% at 10373, FTSE MIB -0.3% at 21751, SMI +0.3% at 8898, S&P 500 Futures -0.2%]
Market Focal Points/Key Themes:
European Indices trade lower across the board with the exception of the Swiss SMI as the global Geo-Political tensions weigh on a light day for corporate and macro data. M&A activity has dominated headlines this morning, with Fiat Chrysler shares outperforming after Great Wall Motor confirmed interest in company, while Shares of Rathbone Brojhers trade higher after confirming merger talks with Smith and Williamson, elsewhere Maersk Shares trade sharply higher after divesting Maersk Olie Og Gas to Total for $7.5B.
Equities
Consumer discretionary [Fiat Chrysler [FCA.IT] +3.5% (Great Wall motor confirms interest in company), Roulart Media [ROU.BE] -11.7% (Earnings)]
Materials: [Metall Zug [METN.CH] -1.3% (Earnings)]
Industrials: [Maersk [MAERSK.DK] +3.8% (divests Mærsk Olie og Gas A/S to Total S.A. for $7.45bn), Global Ports Holdings [GPH.UK] -8.4% (Earnings)]
Financials: [Rathbone Brothers {RAT.UK] +0.8% (Confirms merger talks)]
Energy: [Interoil Exploration [IOX.NO] -7.2% (Canacol Energy explore strategic alternative with respect to stake)]
Speakers
China Commerce Ministry (MOFCOM): To take all proper measures to ensure interests; expresses strong dissatisfaction on US probe on intellectual property. Urges US to respect facts and multilateral trade principles
China Foreign Ministry spokesperson Hua Chunying stated that US-South Korea military exercises are not conducive to reducing tensions on the Korean Peninsula. Urged an end to vicious escalation on Korean Peninsula
Libya National Oil Company (NOC): Force Majeure declared on loading of Sharara crude from Zawiya oil terminal
Currencies
FX markets saw a quiet start to the week with most focus on the upcoming Jackson Hole conference that begins on Thursday. ECB Chief Draghi will attend the symposium but has a speech in Germany before he departs for the US. Some speculation that ECB announcement of the tapering of its QE program could be a two-step process that is split between the September and October. ECB could make an "announcement in principle" in September, following it up with tapering’s practicalities in October
EUR/USD hovering in the mid-1.17 area.
USD/JPY trading below the 109 neighborhood with the JPY currency remaining firm on safe-haven flows as US/South Korean begin a 10-day military exercise.
Fixed Income
Bund futures trades at 164.40 up 24 ticks as risk assets suffer with European stocks sliding lower and credit spreads widen from the open. Downside targets 163.50 followed by 162.56. To the upside the 164.50 to 165.20 remains key resistance.
Gilt futures trades at 127.92 up 30 ticks as Bunds track Treasuries. A resumption to the upside could eye 128.25 then 128.75. A move back below 126.51 targets 125.97
Monday’s liquidity report showed Friday’s excess liquidity rose to €1.714T from €1.712T and use of the marginal lending facility rose to €157M from €123M prior.
Corporate issuance saw $29B last week with talk that this week could see between $5-10B coming to market, as we enter end of earning season.
Looking Ahead
05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 3-month Bills
06:00 (TR) Turkey to sell 2022 Bonds
06:00 (IL) Israel July Unemployment Rate: No est v 4.5% prior
06:45 (US) Daily Libor Fixing
07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
07:25 (BR) Brazil Central Bank Weekly Economists Survey
08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) July Chicago Fed National Activity Index: 0.10e v 0.13 prior
08:30 (CA) Canada Jun Wholesale Trade Sales M/M: -0.5%e v 0.9% prior
09:00 (BE) Belgium Aug Consumer Confidence: No est v 2 prior
09:00 (FR) France Debt Agency (AFT) to sell combined €4.3-5.5B in 3-month, 6-month and 12-month Bills
09:30 (EU) ECB announces Covered-Bond Purchases
09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
11:30 (US) Treasury to sell 3-Month and 6-Month Bills
16:00 (US) Weekly Crop Progress Report
19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index
21:00 (US) President Trump to address US troops and American people
