Market movers today
With no significant market movers on the agenda today, the focus will be on new signals from China and the US in the ongoing trade war after Chinese authorities pledged on Friday to impose tariffs on USD60bn of imports from the US in retaliation to US trade restrictions.
In the euro area, the Sentix investor confidence indicator will be released with market consensus expecting a slight increase to 12.6 in August after declining significantly for most of 2018.
The Italian government bond market has been under a lot of pressure in recent weeks given the uncertainty on fiscal policy. On Friday, the Italian government held a meeting on the budget, but so far we have not had any details on the deal, and according to the Italian Minister of Finance, the deal will be published in September.
Selected market news
The Chinese yuan strengthened after the Chinese Central Bank (PBoC) surprised the markets on Friday afternoon by making it more expensive to be short the Chinese yuan. The PBoC will impose a reserve requirement of 20% on some trading of FX forwards. It did this before back in 2015 in order to stabilise the currency. The move has supported the yuan this morning.
The risk of a ‘no deal’ situation is increasing, according to one of the UK ministers in Theresa May’s government. The warning was given by Liam Fox, who is Minister for International Trade in an interview with the Sunday Times. This risk will keep pressure on the GBP going forward.
Sentiment has been mixed in the Asian equity markets this morning as the earnings season continues this week, where the trade conflict between China and the US is weighing on the Chinese equity market, while some of the Asian indices are gaining this morning.
The yield on the 10Y Japanese government bond has been range bound around 10bp this morning, and the 10Y US Treasury closed below 3% ahead of this week’s sale of USD78bn in 3Y, 10Y and 30Y US Treasuries.