Markets Await Fed Rate Decision, US/China Conclude Recent Round Of Trade Talks

Notes/Observations

• Markets await the FOMC rate decision
• US/China complete recent round of trade talks but no signals presented on outcome
• European key data mixed in session (Inflation: France beat, Euro Zone in-line; GDP: Euro Zone beats, Spain miss; Employment: Germany, Italy both beat, Euro Zone in-line)

Asia:

• China July Official Govt (NBS) Manufacturing PMI: 49.7 v 49.6e
• Australia Q2 CPI Q/Q: 0.6% v 0.5%e; Y/Y: 1.6% v 1.5%e
• Japan and US trade negotiators said to have reached a broad agreement on the digital economy. Agreement envisioned tariff-free digital products and allowing businesses to host servers wherever they choose and not have to expose the workings of their computer programs to governments.
• US and North Korea officials met in DMZ last week, North Koreans expressed a willingness to resume working-level nuclear talks very soon
• North Korea again fired multiple short range ballistic missiles into the East Sea on Wed (July 31st)
• China Global Times Editor-in-chief Hu Xijin tweeted that Based on what he knew the atmosphere was good. I hope this beginning indicates the future talks would be smoother than various pessimistic predictions

Europe/Mideast:

• UK PM Johnson: No-deal Brexit up to the EU; says UK not aiming for a no-deal Brexit, we don’t think that’s where we’ll end up – Senior UK official: government won’t soften tone to help sterling currency

Americas:

• President Trump stated that he sought a ‘great deal’ with China or no deal at all; trade talks were going well; did recently spoke to China Pres Xi; we will see what happens in China trade talks

Energy:

• Weekly API Oil Inventories: Crude: -6.0M v -11M prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.01% at 385.08, FTSE -0.36% at 7,619.39, DAX +0.21% at 12,172.38, CAC-40 +0.05% at 5,513.69, IBEX-35 -0.08% at 8,979.00, FTSE MIB +0.36% at 21,355.50, SMI 0.00% at 9,891.00, S&P 500 Futures +0.22%]
• Market Focal Points/Key Themes: European Indices trade mostly higher, following lower markets in Asia and higher US futures. The Nasdaq trades 0.4% higher mainly boosted by strong results from Apple as the company returned to growth, beating on the top and bottom line and guided Q3 ahead of views. On the corporate front shares of French traded Airbus trade higher as results came ahead of views on higher output as Boeing suffers 737 Max woes; Air France trades almost 7% higher on higher Operating profit and Revenue and affirmed outlook , while L’Oreal is a notable decliner as Q2 LFL sales fell short of estimates. Banking names BNP Paribas trades higher on a top and bottom line beat, with Credit Suisse also gaining on better Q2 results. Other notable movers include LafargeHolcim, Next, Rentokil, Vinci, and Puma trading higher on earnings, while Aston Martin Lagonda, Dignity, Erste Bank and Societe Bic trade lower. In other news Grandvision gains as EssilorLuxoittica acquires HAL’s ~77% stake, while EssilorLuxoitiica gains as it renews a licence agreement with Bulgari. Looking ahead notable earners include General Electric, Humana, Fiat Chrysler, Bunge and Southern Company among others.

Equities

• Consumer discretionary: Puma [PUM.DE] +5.5% (earning; positive profit alert), Air France-KLM [AF.FR] +6.5% (earnings), Next [NEXT.UK] +8% (trading update), L’Oreal [OR.FR] -4% (earnings), Just Eat [JE.UK] +2% (earnings), Vinci [DG.FR] +3% (earnings)
• Financials: Credit Suisse [CSGN.CH] +5% (earnings), BBVA [BBVA.ES] +0.5% (earnings), Swiss Re [RUKN.CH] +0.5% (earnings), BNP Paribas [BNP.FR] +3.5% (earnings)
• Industrials: Airbus [AIR.FR] +1% (earnings), Aston Martin [AML.UK] -17% (earnings), BAE Systems [BA.UK] +1.5% (earnings)
• Technology: Ubisoft [UBI.FR] +1% (EA’s earnings), Fugro [FUR.NL] +17% (earnings), Computacenter [CCC.UK] +10% (trading update)

Speakers

• Northern Ireland DUP Party official Donaldson: Prospect of a no-deal Brexit outcome was significant. Not working towards an no-deal outcome. Problem remained the Irish backstop issue and bBelieved PM Johnson is right to take a hard stance
• German Govt said to see a 0.3% impact on GDP if trade tensions escalated
• Turkey Central Bank (CBRT) Quarterly Inflation Report (QIR) noted that recent rate cut was due to improving inflation outlook. Monetary policy to continue to support economic balancing period for rest of 2019. Turkey cut its 2019 CPI from 14.6% to 13.9% while maintaining 2020 CPI at 8.2%. It also cut the end-2019 Food price inflation from 16.0% to 15.0%
• Poland Central Bank’s Gatner: July CPI data supported the case for a rate hike in 2019
• Poland Central Bank official Sura: July inflation data above expectations but did not radically change the rate setters stance on policy
• US-China trade talks end (as scheduled) but no statement on any progress
• China Global Times Editor-in-chief Hu Xijin tweeted: “Based on what I know, Chinese and US negotiators had an efficient and constructive deep exchange on Wednesday. The two sides discussed increasing purchase of US farm products and the US side agreed to create favorable conditions for it. They will hold future talks.”

Currencies/Fixed Income

• A plethora of European data came out in the session but had little impact on price action with market participant awaiting the Fed rate decision. EUR/USD slightly lower at 1.1145
• The Turkish Lira received a boost as the CBRT quarterly inflation report opened the door for more rate cuts. USD/TRY lower by 0.5% to test below 5.51 50level.
• Better Australia CPI data helped the AUD currency rise for the 1st time in over a week as short positons were covered.

Economic Data

• (FI) Finland Jun House Price Index M/M: 0.1% v 0.9% prior; Y/Y: +0.6 v -1.0% prior
• (DE) Germany Jun Retail Sales M/M: 3.5% v 0.5%e; Y/Y: -1.6% v 0.0%e
• (UK) July Nationwide House Price Index M/M: 0.3% v 0.2%e; Y/Y: 0.3% v 0.1%e
• (DK) Denmark Jun Gross Unemployment Rate: 3.8% v 3.7% prior; Unemployment Rate (Seasonally Adj): 3.1% v 3.1% prior
• (FI) Finland May Final Trade Balance: €0.0B v €0.0B prelim
• (FR) France July Preliminary CPI M/M: -0.2% v -0.3%e; Y/Y: 1.1% v 1.1%e
• (FR) France July Preliminary CPI EU Harmonized M/M: -0.2% v -0.3%e; Y/Y: 1.3% v 1.2%e
• (ES) Spain Q2 Preliminary GDP Q/Q: 0.5% v 0.6%e; Y/Y: 2.3% v 2.3%e
• (HU) Hungary Jun PPI M/M: -0.6% v +0.5% prior; Y/Y: 0.1% v 2.7% prior
• (TR) Turkey Jun Trade Balance: -$3.2B v -$3.2Be
• (TH) Thailand Jun Current Account Balance: $3.9B v $4.7Be; Overall Balance of Payments (BOP): $B v -$0.6B prior; Trade Account Balance: +$4.4B v -$0.4B prior; Exports Y/Y: -2.1% v -7.2% prior; Imports Y/Y: -9.6% v -0.2% prior
• (DE) Germany July Unemployment Change: +1.0K v +2.0Ke; Unemployment Claims Rate: 5.0% v 5.0%e
• (NO) Norway Central Bank (Norges) Aug Bank Daily FX Purchases (NOK): -500M v -600M prior
• (TW) Taiwan Q2 Preliminary GDP Y/Y: 2.4% v 1.8%e
• (IT) Italy Jun Preliminary Unemployment Rate: 9.7% v 10.0%e
• (PL) Poland July Preliminary CPI M/M: 0.0% v -0.1%e; Y/Y: 2.9% v 2.6%e (highest annual pace since 2012)
• (CZ) Czech Jun M2 Money Supply Y/Y: 7.0% v 6.5% prior
• (ES) Spain May Current Account: +€2.7B v -€0.4B prior
• (PT) Portugal July Preliminary CPI M/M: -1.3% v 0.0% prior; Y/Y: -0.3% v +0.4% prior
• (PT) Portugal July Preliminary CPI EU Harmonized M/M: -1.7% v +0.4% prior; Y/Y: -0.7% v +0.7% prior
• (HK) Hong Kong Q2 Advance GDP Q/Q: -0.3% v +0.9%e; Y/Y: 0.6% v 1.5%e
• (EU) Euro Zone Q2 Advance GDP Q/Q: % v 0.2%e; Y/Y: % v 1.0%e
• (EU) Euro Zone Jun Unemployment Rate: 7.5% v 7.5%e
• (EU) Euro Zone July Advance CPI Estimate Y/Y: 1.1% v 1.1%e; CPI Core Y/Y: 0.9% v 1.0%e
• (IT) Italy July Preliminary CPI M/M: 0.1% v 0.1%e; Y/Y: 0.5% v 0.5%e
• (IT) Italy July Preliminary CPI EU Harmonized M/M: -1.7% v -1.7%e; Y/Y: 0.4% v 0.5%e
• (IS) Iceland Jun Final Trade Balance (ISK): -28.6B v -22.8B prelim
• (GR) Greece May Retail Sales Value Y/Y: -2.4% v -2.6% prior; Retail Sales Volume Y/Y: -2.0% v -1.9% prior
• (BE) Belgium Jun Unemployment Rate: 5.6% v 5.5% prior

Fixed Income Issuance

• None seen

Looking Ahead

• 05:30 (SL) Sri Lanka July CPI Y/Y: 4.0%e v 3.8% prior
• 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays)
• 05:30 (DE) Germany to sell €3.0B in 0% Aug 2029 Bunds
• 05:30 (EU) ECB allotment in 3-month LTRO
• 05:30 (GR) Greece Debt Agency (PDMA) to sell €1.25B indicated in 26-week bills
• 06:00 (IL) Israel Jun Unemployment Rate: No est v 3.6% prior
• 06:00 (IT) Italy Q2 Preliminary GDP Q/Q: -0.1%e v +0.1% prior; Y/Y: -0.1%e v -0.1% prior
• 07:00 (US) MBA Mortgage Applications w/e July: No est v -1.9% prior
• 07:00 (MX) Mexico Q2 Preliminary GDP Q/Q: -0.2%e v -0.2% prior; Y/Y: -0.3%e v 1.2% prior
• 07:00 (UK) Weekly PM Question time in House
• 07:00 (RU) Russia OFZ bonds auction
• 07:30 (IN) India June Eight Infrastructure (key) Industries: No est v 5.1% prior
• 08:00 (ZA) South Africa Jun Trade Balance (ZAR): 4.2Be v 1.7B prior
• 08:00 (BR) Brazil Jun National Unemployment Rate: 12.0%e v 12.3% prior
• 08:00 (BR) Brazil Jun PPI Manufacturing M/M: No est v 1.2% prior; Y/Y: No est v 6.2% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:15 (US) July ADP Employment Change: +150Ke v 102K prior
• 08:30 (US) Q2 Employment Cost Index (ECI): 0.7%e v 0.7% prior
• 08:30 (CA) Canada May GDP M/M: 0.1%e v 0.3% prior; Y/Y: 1.3%e v 1.5% prior
• 08:30 (CA) Canada Jun Industrial Product Price M/M: -0.2%e v +0.1% prior; Raw Materials Price Index M/M: -3.0%e v -2.3% prior
• 09:00 (CL) Chile Jun Unemployment Rate: 7.2%e v 7.1% prior
• 09:00 (CL) Chile Jun Industrial Production Y/Y: -1.5%e v -0.2% prior; Manufacturing Production Y/Y: -1.2%e v +1.9% prior; Total Copper Production Y/Y: No est v 492.3K tons prior
• 09:45 (US) July Chicago Purchasing Manager Index (PMI): 51.0e v 49.7 prior
• 10:00 (MX) Mexico Jun Net Outstanding Loans (MXN): No est v T prior
• 10:30 (US) Weekly DOE Oil Inventories
• 11:00 (CO) Colombia Jun National Unemployment Rate: No est v 10.5% prior; Urban Unemployment Rate: 11.7%e v 11.2% prior
• 14:00 (US) FOMC Interest Rate Decision: expected to cut Target Range by 25bps to 2.00-2.50%; cuts Interest Rate on Excess Reserves (IOER) by 25bps to 2.10%
• 14:30 (US) Fed Chair Powell post rate decision press conference
• 17:00 (BR) Brazil Central Bank (BCB) Interest Rate Decision: expected to cut Selic Target Rate by 25bps to 6.25%