Brexit Negotiations Resume

Notes/Observations

• Brexit talks back in focus as UK-EU chief negotiators meet in Brussels

Asia:

• RBA Aug Minutes: Reiterated view that saw no strong case for a near term move in interest rates, next move likely to be up if progress was made on employment and inflation
• Australia PM Turnbull wins leadership vote for ruling Liberal Party by a vote of 48 to 35

Europe:

• Moody’s: Extending review of Italy’s sovereign rating until the end of Oct at the latest to get better visibility on policy direction

Americas:

• President Trump: Not thrilled with what Fed Chief Powell is doing so far should be more accommodating. To continue to criticize the Fed if it continued to raise rates. Asked about Fed independence, says believed Fed was ‘doing what was right for the country’. China and Europe were manipulating their currencies. Had no time frame for ending China trade dispute, did not anticipate much coming from China trade talks this week

Economic Data:

• (NL) Netherlands Aug Consumer Confidence Index: 21 v 23 prior
• (NL) Netherlands Jun Consumer Spending Y/Y: 2.8% v 1.9% prior
• (CH) Swiss July Trade Balance (CHF): 2.3B v 2.6B prior; Real Exports M/M: -1.4% v -0.1% prior; Real Imports M/M: -1.4% v -0.3% prior; Watch Exports Y/Y: 6.6% v 12.1% prior
• (FI) Finland July Unemployment Rate: 6.5% v 6.7% prior
• (NL) Netherlands July House Price Index M/M: 0.9% v 0.7% prior; Y/Y: 9.0% v 8.9% prior
• (JP) Japan July Final Machine Tool Orders Y/Y: 13.1% v 13.0% prelim
• (CH) Swiss July M3 Money Supply Y/Y: 2.4% v 2.3% prior
• (ZA) South Africa Jun Leading Indicator: 107.1 v 105.9 prior
• (MY) Malaysia Mid-Aug Foreign Reserves: $104.2B v $104.5B prior
• (UK) July Public Finances (PSNCR): -£19.2B v +£13.4B prior; Net Borrowing: -£2.9B v -£2.0Be; Central Government NCR: -£13.8B v +£13.6B prior; PSNB (ex-Banking Groups): -£2.9B v -£1. 1Be
• (HK) Hong Kong July CPI Composite Y/Y: 2.4% v 2.4%e

Fixed Income Issuance:

• (ES) Spain Debt Agency (Tesoro) sold total €1.755B vs. €1.0-2.0B indicated range in 3-month and 9-month bills
• (IN) India sold total INR180B vs. INR180B indicated in 3-month, 6-month and 12-month bills

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.2% at 383.9, FTSE 0.0% at 7590, DAX +0.6% at 12388, CAC-40 +0.5% at 5406, IBEX-35 +0.6% at 9526, FTSE MIB +1.0% at 20687, SMI +0.2% at 9074 S&P 500 Futures +0.1%]
• Market Focal Points/Key Themes: European Indices trade higher following a positive session in Asia overnight and marginally higher US futures. On the earnings front mining giant BHP Biliton reported mixed results which sees shares slightly lower. In Switzerland, Komax and Huber + Suhner trade sharply higher after results while Implenia trades sharply lower after cutting its outlook. In the UK John Wood outperforms following upbeat earnings, with home builder Persimmon and retailer Game digital trading higher after trading updates. In the US Home builder Toll Brother reported a beat on the top and bottom line and narrowed its full year outlook. Looking ahead notable earners include retailers TJX and Kohls.

Movers

• Consumer Discretionary Game digital [GMD.UK] +1.6% (Trading update)
• Consumer Staples Bakkafrost [BAKKO.NO] -4.2% (Earnings)
• Materials BHP [BLT.UK] -1.5% (Earnings)
• Industrials Komax [KOMN.CH] +14% (Earnings), Huber + Suhner [HUBN.CH] +11% (Earnings), Implenia [IMPN.CH] -9% (Earnings), Atlantia [ATL.IT] +3.3% (Rebound), John Wood Group [WG.UK] +6.0% (Earnings)
• Financials Jyske Bank [JYSK.DK] +1.1% (Earnings)

Speakers

• German CDU official Hardt (Merkel ally): Neither Germany nor Europe are manipulating its currency
• Greece PM Tsipras: Bailouts have ended for the country and now able to decide our own fate
• Japan and China said to be considering a ¥3T currency swap *(**Reminder On May 2nd reports circulated that Japan and China would examine plan to revive bilateral currency swap agreement (prior agreement was not renewed in 2013)
• Thailand PM Prayuth: General elections were likely to be held on Feb 24th, 2019 (**Insight: Thailand’s military has been in charge since the 2014 coup)
• China PBoC Dep Gov Zhu Hexin reiterated view to maintain a proactive and flexible policy with reasonable and ample liquidity
• China Commerce Ministry (MOFCOM): To improve govt support for steel companies
• South Korea Trade Min Kim: To sign Free Trade Agreement (FTA) amendment with US in Sept

Currencies

• The USD remained on some soft footing after President Trump again complained about the job Fed Chair Powell was doing and believed the Fed should be more accommodating to his policies. Trump also reiterated his view that both China and Europe were manipulating their currencies.
• EUR/USD was holding above the 1.15 level and retesting the neckline in the head&shoulder chart formation on the daily charts. Dealers will closely monitor the daily close level to gauge whether a reversal was possible for the bearish EUR trend since the break occurred last week.
• GBP/USD higher by 0.2% as Brexit negotiations resumed. UK govt officials continued to remain optimistic that an agreement with the EU could be achieved
• USD/JPY traded below ¥110 for the first time since late June amid broad USD weakness but moved off its worst levels as the European session progressed. Pair at 110.17 just ahead of the US morning.

Fixed Income

• Bund Futures trades at 163.48 down 20 ticks retracing some of the move as European Indices trade higher. Resistance moves to 163.82 then 164. A downside break of 163.00 sees 162.69 initially.
• Gilt futures trades at 123.71 down 7 ticks following the move in Treasuries. Continued support at 123.12, with a continued move higher targeting 123.93 then 124.00.
• Monday ‘s liquidity report showed Friday’s excess liquidity rose from €1.872T to €1.878T. Use of the marginal lending facility fell from €128M to €45M.
• Corporate issuance saw 2 issuers raise $1.1B in the primary market

Looking Ahead

• 05:30 (SL) Sri Lanka July National CPI (NCPI) Y/Y: No est v 2.5% prior
• 05:30 (UK) Weekly John Lewis Partnership LFL sales
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 05:30 (DE) Germany to sell €4.0B in Sept 0% 2020 Schatz
• 05:30 (UK) DMO to sell £1.1B in 0.125% Aug I/L 2028 Gilts
• 05:30 (ZA) South Africa to sell combined ZAR2.4B in 2026, 2035 and 2040 bonds
• 06:00 (UK) Aug CBI Industrial Trends Total Orders: 8e v 11 prior; Selling Prices: 15e v 13 prior
• 06:00 (IL) Israel Jun Manufacturing Production M/M: No est v -2.8% prior
• 06:30 (EU) ESM to sell €2.0B in 6-month bills
• 06:45 (US) Daily Libor Fixing
• 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave the Base rate unchanged at 0.90%
• 08:00 (BR) Brazil CONAB Report on Sugarcane Ethanol Production
• 08:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)
• 08:05 (UK) Baltic Dry Bulk Index
• 08:30 (CA) Canada Jun Wholesale Trade Sales M/M: 0.7%e v 1.2% prior
• 09:00 (BE) Belgium Aug Consumer Confidence Index: No est v 0 (nil) prior
• 09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:30 (NZ) Fonterra Global Dairy Trade Auction
• 10:00 (MX)) Mexico weekly International Reserves data
• 11:30 (US) Treasury to sell 4-Week Bills
• 15:00 (MX) Citibanamex Survey of Economists
• 15:00 (AR) Argentina July Budget Balance (ARS): No est v -56.7B prior
• 16:30 (US) Weekly API Oil Inventories
• (US) Alaska state primary
• (US) Wyoming state primary