Market movers today
Financial markets will continue to focus on developments in Turkey, which over the past week have had significant ramifications for other emerging market and G10 currencies.
A first estimate of German Q2 GDP data is out today, which we and consensus expect to show only a modest growth rebound to 0.4% q/q. Although the preliminary print will not bring any component breakdown, we will st ill get some insights into the growth drivers in Q2 and will look out for evidence of headwinds from the external side. The second estimate for euro area Q2 GDP figures is also due to be released, with a risk towards a slight upward revision to 0.4% q/q.
It will be interesting to see whether German ZEW expectations show some signs of stabilisation in August , in line with other sentiment indicators such as Ifo and PMI lately.
The final July HICP figures for Germany, France and Spain are also on the agenda and will give insights into any possible revisions to Friday’s final euro area print .
The UK labour market report for June is also due out . We estimate the unemployment rate (3M average) fell from 4.2% to 4.1%, while average weekly earnings have risen in quite a stable manner at 0.2% m/m in recent months and we believe the trend continued in June. This would leave the annual growth rate (3M average) unchanged at 2.7% y/y.
In Scandinavia, Danish Q2 GDP data is also due (see next page).
Selected market news
It was another day of the Turkish lira saga as contagion spread to some developed and emerging markets. Markets stayed in wait -and-see mode yesterday expecting encouraging measures from the Turkish authorities to support the TRY. While the Turkish central bank provided some relief in liquidity, giving local banks an additional USD6bn of FX, it did not arrange the repoauction or announce other supportive measures. Markets closed disappointed, pushing the TRY 8% lower against the USD. Some calm spread throughout FX markets this morning, as USD/TRY settled around the 6.90 level, but we expect market volatility to continue in coming days, also because the US has warned there will be no negotiations until the detained American pastor is released. Some emerging market central banks also intervened to support their currencies yesterday.
US equity futures are expected to be slightly in the green this morning, as Asian shares rebounded despite Chinese data for industrial product ion, retail sales and fixed asset investments coming in slightly weaker than expected this morning. Fixed asset investments especially declined notably in H1 18 and grew at the slowest pace since 1999. This a result of the gradual financial tightening of the authorities and supports our view of a moderate slowdown in China ahead.
