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European Indices Trade Mainly Lower As The US Prepares Further Tariffs On China


  • European Indices reverse earlier losses to trade mainly higher after weakness in Asia
  • President Trump could announce further $200B in tariffs on China as early as today
  • Cable rises on optimism ahead of EU Summit later this week


  • Pres Trump reportedly told advisers to proceed with $200B tariffs on China; tariff level likely to be around 10%, below the 25% previously announced at time of initial announcement
  • China official reportedly considering declining offer of talks noting they won’t negotiate with a gun to their head


  • British Chambers of Commerce (BCC) cuts 2018 UK GDP growth forecast to 1.1% vs 1.3% prior; Cuts 2019 GDP 1.4% to 1.3%
  • Italy government is considering tax breaks for small Italian investors who buy domestic government bonds and keep them to maturity
  • EU Brexit negotiator Barnier said to eye an Irish border plan to unlock Brexit talks; British rather than EU officials could take charge of checking NI-bound goods
  • Riksbank minutes reveal members moving towards rate hike soon

Economic Data:

  • (EU) EURO ZONE AUG FINAL CPI Y/Y: 2.0% V 2.0%E; CPI CORE Y/Y: 1.0% V 1.0%E
  • (NO) Norway Aug Trade Balance (NOK): 31.8B v 24.5B prior
  • (CZ) Czech Aug PPI Industrial M/M: +0.1% v -0.1%e; Y/Y: 3.3% v 3.1%e
  • (AT) Austria Aug CPI M/M: 0.0% v -0.2% prior; Y/Y: 2.2% v 2.1% prior
  • (TR) Turkey Jun Unemployment Rate: 10.2% v 9.7% prior
  • (TR) Turkey July Industrial Production M/M: 3.5% v -1.0%e; Y/Y: 5.6% v 1.2%e
  • (CZ) Czech July Export Price Index Y/Y: 1.8% v 0.5% prior; Import Price Index Y/Y: 2.5% v 0.7% prior
  • (IT) Italy July Total Trade Balance: €5.7B v €5.2B prior; Trade Balance EU: €2.7B v €1.6B prior

Fixed Income Issuance:

  • (NO) Norway sells NOK6.0B vs. NOK6.0B indicated in 6-month bills; Avg Yield: 0.89% v 0.72% prior; Bid-to-cover: 2.24x v 3.17x prior



  • Indices [Stoxx50 +0.1% at 3,348, FTSE -0.2% at 7,291, DAX -0.2% at 12,100, CAC-40 flat at 5,351; IBEX-35 +0.6% at 9,417, FTSE MIB +0.7% at 21,019, SMI -0.3% at 8,936, S&P 500 Futures -0.1%]
  • Market Focal Points/Key Themes: European indices open broadly down, but reverse to trade slightly higher as the session wore on; risk sentiment off over trade concerns; US President Trump could announce additional $200B tariffs on Chinese goods as early as today; press reports of potential agreement on Irish border help assuage Brexit concerns; financial sector better performer, while technology leads to the downside; Ralley signs debt facility, supporting Casino shares; Chile closed for holiday; earnings expected in the upcoming US session include FedEx and Oracle, additionally master trust data; attention on upcoming interest rate decisions this week, including BOJ, RBA and SNB


  • Consumer discretionary: Boohoo.com BOO.UK +0.9% (New CEO), Hennes & Mauritz HMB.SE +11.4% (quarterly sales, potential credit deal), Melia Hotels MEL.ES +0.1% (analyst action)
  • Consumer staples: Dairy Crest DCG.UK +1.6% (trading update)
  • Financials: Credit Suisse CSGN.CH -0.1% (Swiss regulator observation), Scor SCR.FR +1.2% (new offer)
  • Healthcare: Argenx ARGX.BE +4.9% (study results), Realm Therapeutics RLM.UK -12.0% (potential sale of company), UCB UCB.BE -0.1% (analyst action)
  • Industrials: Kongsberg Gruppen KOG.NO +1.5% (awarded order)
  • Materials: Petra Diamonds PDL.UK +4.4% (results)


  • (UK) UK PM May: Thank Parliament will vote to support a possible Brexit deal
  • (CN) China Foreign Ministry: If the US implements new tariffs, then China will take necessary response; Talks should take place on an equal footing
  • (FR) France Pres Macron: It is indispensable to find accord for Brexit – Speaking alongside Austria’s Kurz
  • (UK) Chancellor of the Exchequer Hammond (Fin Min): UK is fundamentally strong ahead of Brexit; No deal is unlikely but not impossible


  • GBPUSD rises above 1.31 once again on optimism ahead of the EU summit on Thursday up over 0.2%
  • Emerging market currency’s trade under pressure once again on tariffs threats, with the USDTRY over 1.5% higher the USDINR over 0.8% higher as Government plans over the weekend to curb the fall fail to lift the rupee.

Fixed Income

  • Bund Futures trades at 159.14 down 10 ticks as December Bund stays under pressure. Resistance moves to 161.82 then 163. A downside break of 159.85 sees 158.69 initially.
  • Gilt futures trades at 121.53 down 2 ticks following the move in Treasuries. Continued support at 122.50, with a continued move higher targeting 123.93 then 124.00.
  • Monday ‘s liquidity report showed Friday’s excess liquidity fell from €1.904T to €1.886T. Use of the marginal lending facility rose from €40M to €74M.
  • Corporate issuance saw high grade issuers raise $33.4B in the primary market last week

Looking Ahead

  • 06:00 (IL) Israel Q2 Current Account: No est v $1.9B prior
  • 06:00 (IL) Israel Aug Trade Balance: No est v -$2.3B prior
  • 07:25 (BR) Brazil Central Bank Weekly Economists Survey
  • 07:30 (BR) Brazil July Economic Activity (monthly GDP) M/M: No est v 3.3% prior; Y/Y: No est v 1.8% prior
  • 08:05 (UK) Baltic Dry Bulk Index
  • 08:30 (US) Sept Empire Manufacturing: No est v 25.6 prior
  • 08:30 (CA) Canada July Int’l Securities Transactions (CAD): No est v 11.6B prior
  • 09:00 (CA) Canada Aug Existing Home Sales M/M: No est v 1.9% prior
  • 16:00 (US) Weekly Crop Progress Report
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