Notes/Observations
- US-Mexico trade deal boosts sentiment; hopes of a similar outcome for U.S. talks with China
- Euro Zone July M3 Money Supply comes in below expectations
- Italian Aug Confidence data misses across the board; 10-year BTP yield edges towards the 3.20% area
Asia:
- PBOC: sets USD/CNY mid-point at 6.8052 vs 6.8508, the strongest fixing in over a year (since Jun 2017). Reminder: On Aug 27th reports circulated that PBoC resumed the counter-cyclical factor in the Yuan mid-point fixing mechanism
Europe:
- Italy Deputy PM Di Maio (Five Star party leader): Italy will definitely veto EU budget without assistance on migrants
- Greece PM Tsipras: to hold national elections in fall of 2019; our govt needs to be refreshed
- France PM Philippe said to have asked ministers to prepare contingency measures in the case of a ‘no-deal’ Brexit. Measures might include those related to UK citizens that are currently living in France.
- UK Trade Sec Fox: Would be an economic disadvantage if the UK did not get the Brexit it wants with the EU. In mutual interest of both sides to get a good trade deal ; expected an EU response on UK proposals by Oct
Americas:
- President Trump: There will be US-Mexico trade agreement; will call this US-Mexico trade agreement, dropping NAFTA name. To terminate existing NAFTA deal to go into this new deal. Have not started with Canada yet; wanted to see if could reach deal with Mexico first; expects to begin talks with Canada immediately. Could do a separate deal with Canada or make them part of the deal with Mexico
- Trade Rep Lighthizer: US-Mexico agreement to go to Congress for approval. Sunset clause had shifted to a review process every six years that would not cause NAFTA to expire; Would have 16-year life span that would be extended for another 16 years after completion of each 6-year review period. Mexico had agreed to eliminate Chapter 19 dispute settlement chapter as part of NAFTA agreement
- Mexico President Pena Nieto: goal is to conclude trilateral NAFTA talks this week. Hoped that Canada could be reincorporated into trade deal
Economic Data:
- (NO) Norway Q3 Consumer Confidence: 16.4 v 19.6 prior
- (FI) Finland July House Price Index M/M: -0.7% v -0.4% prior; Y/Y: 0.7% v 1.4% prior
- (FR) France Aug Consumer Confidence: 97 v 97e
- (CH) Swiss Q2 Non-farm payrolls: 5.048M v 4.961M q/q
- (SE) Sweden July Retail Sales M/M: -1.0% v +0.4%e; Y/Y: -1.2% v +0.5%e
- (SE) Sweden July Trade Balance (SEK): 0.0B (flat) v -0.3B prior
- (EU) Euro Zone July M3 Money Supply Y/Y: 4.0% v 4.3%e
- (IT) Italy Aug Consumer Confidence: 115.2 v 115.8e, Manufacturing Confidence: 104,8 v 106.5e, Economic Sentiment: 103.8 v 105.3 prior
- (IT) Italy July PPI M/M: 0.4% v 0.3% prior; Y/Y: 3.6% v 3.2% prior
Fixed Income Issuance:
- (ID) Indonesia sold total IDR20T vs. IDR10T indicated in 3-month and 9-month Bills, 5-year, 15-year, 20-year bonds
- (IT) Italy Debt Agency (Tesoro) sold €1.75B vs. €1.25-1.75B indicated in Mar 2020 CTZ; Avg Yield: 1.277% v 1.75% prior; Bid-to-cover: 1.87x v 1.60x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 0.0% at 385.4, FTSE +0.2% 7596, DAX 0.0% at 12538, CAC-40 0.0% at 5478, IBEX-35 -0.6% at 9601, FTSE MIB -1.1% at 20560, SMI -0.4% at 9059 S&P 500 Futures +0.0%]
- Market Focal Points/Key Themes: European Indices trade mixed, after a mixed session in Asia and flat futures in the US. The UK Ftse trades higher catching up with the positive session in Europe yesterday following the UK Bank Holiday. On the earnings front Royal Unibrew, Flughafen Zurich trade higher after earnings and raised outlook; Technolopolis trades higher after its to be acquires for €4.65/shr, while Agfa Gevaert trades over 5% higher after announcing a strategic partnership with Lucky. In the US Aspen Insurance is to be acquired for $42.75 in cash, KlX inc reported results and confirmed Sep14 as the spin off date for KLX Energy Services. Looking ahead notable earners include retailers Best Buy, BJ’s Wholesale, DSW as well as Canadian names Bank of Nova Scotia and Bank of Montreal.
Movers
- Consumer Discretionary Bunzl (BNZL.UK) +0.8% (Earnings), Royal Unibrew (RBREW.DK) +4.6% (Earnings), IC Group [IC.DK]+5.3% (Earnings)
- Financials Technopolis [TPS1V.FI] +13.2% (To be acquired), Baloise [BALN.CH] -3.7% (Earnings)
- Industrials Flughafen Zurich [FHZN.CH] +2% (Earnings), Fincantieri [FCT.IT] +2.3% (might get contract to rebuild Genoa bridge), Renault (RNO.FR) +2.3% (Analyst upgrade)
- Technology Agfa Gevaert [AGFB.BE] +5.4% (Strategic partnership with Lucky)
- Consumer Staples Norwegian Royal Salmon [NRS.NO] 0.0% (Earnings)
Speakers
- France Labor Min reiterated view that unemployment was not falling fast enough
- Poland Central Bank’s Lon stated that holding interest rates steady should suffice (in-line with majority view)
- China Fin Min Liu Kun reiterated stance to control local government debt risks, ‘resolutely’ curb rise in hidden debt
- Indonesia Finance Ministry official Nazara stated that govt sought to impose import tariffs to more goods
- Iran Parliament said not to be convinced by President Rouhani explanation of economy and refered questions to judiciary
- North Korea letter to US Sec of State Pompeo said to warn that denuclearization talks could fall apart (Note: President Trump recently asked Sec of State Pompeo to cancel North Korea trip at this time due to lack of denuclearization progress)
- UAE Energy Min (OPEC president) Mazrouei: OPEC production was rising; approaching full compliance. **Reminder: On Aug 27th reports circulated that OPEC+ monitoring compliance declined to 109% in July (from 120% in June and 147% in May)
- Saudi Energy adviser: Move by Iran to close the Strait of Hormuz would likely have UN Security Council authorize a military strike
Currencies
- The USD remained on soft footing as risk appetite continued to simmer following the US-Mexico trade agreement. Most emerging-market currencies received a boost on hopes of a similar outcome for U.S. talks with China
- EUR/USD probing 1-month highs as the pair edged back towards the 1.17 level. Euro firmer despite the higher Italian yields as the 10-year BTP tested the 3.20 area. Softer Euro Zone money supply data or disappointing Italian confidence could not derail the price action.
- GBP/USD lagged in advances compared to other majors but moved into in positive territory despite lingering concerns about a no-deal Brexit. Pair back above the 1.29 level
- The SEK currency was softer in the session after Swedish July retail sales data came in below expectations. SEB analyst pushed back its forecast for the 1st potential rate hike by the Riksbank until April 2019
- Turkey Lira maintained a soft tone for the 2nd straight session as local markets returned from holiday.
Fixed Income
- Bund Futures trades at 162.61 down 6 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 123.01 down 29 ticks following the move in Treasuries. Continued support at 123.12, with a continued move higher targeting 123.93 then 124.00.
- Tuesday ‘s liquidity report showed Monday’s excess liquidity fell from €1.851T to €1.848T. Use of the marginal lending facility rose from €55M to €70M.
- Corporate issuance saw no high grade issuers in the primary market
Looking Ahead
- (IT) Italy Fin Min Tria in China to help build economic dialogue (thru Sept 1st)
- 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 (ZA) South Africa to sell combined ZAR2.4B in 2030, 2041 and 2048 bonds
- 06:00 (IE) Ireland July Retail Sales Volume M/M: No est v -3.4% prior; Y/Y: No est v 7.0% prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (BE) ECB’s Preat (Belgium, chief economist)
- 07:45 (US) Weekly Goldman Economist Chain Store Sales
- 08:05 (UK) Baltic Dry Bulk Index
- 08:30 (US) July Advance Goods Trade Balance: -$69.0Be v -$67.9B prior (revised from 68.3B)
- 08:30 (US) July Preliminary Wholesale Inventories M/M: 0.2%e v 0.1% prior, Retail Inventories M/M: No est v 0.1% prior (revised from 0.0%)
- 08:55 (US) Weekly Redbook Sales
- 09:00 (US) Jun S&P/ Case-Shiller 20-City M/M: 0.20%e v 0.20% prior; Y/Y: 6.43%e v 6.51% prior; House Price Index (HPI): No est v 211.94 prior
- 09:00 (US) Jun S&P Case-Shiller (overall) HPI Y/Y: No est v 6.38% prior, Overall HPI Index: No est v 202.95 prior
- 09:00 (MX) Mexico July Unemployment Rate: 3.5%e v 3.4% prior; Unemployment Rate (Seasonally adj): 3.4%e v 3.4% prior
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)
- 10:00 (US) Aug Consumer Confidence: 126.6e v 127.4 prior
- 10:00 (US) Aug Richmond Fed Manufacturing Index: 17e v 20 prior
- 11:30 (US) Treasury to sell 4-week Bills
- 13:00 (US) Treasury to sell $37B in 5-Year Notes
- 16:30 (US) Weekly API Oil Inventories
