Market movers today
Given the market focus on trade war and Fed communication at the moment, look out for any comments here although nothing specific is scheduled for today.
In terms of economic data releases, it is another quiet day. In the Scandies, focus is on Norwegian manufacturing production in June, see overleaf.
In the euro area, the ECB publishes its Economic Bulletin.
In the US, initial jobless claims are due out in the afternoon.
Selected market news
US treasury yields closed the day in positive territory (+1.9-3.7bp), after having shed an entire 10-13bp earlier in yesterday’s session. The 5’30s flattened 2bp with break-evens marginally higher (10y +1bp to 1.63%). The US stock market closed the day in positive territory with the S&P 500 recovering from being 2% lower during the day. Meanwhile, US president Trump called for ‘bigger and faster’ rate cuts from the Fed. Fed funds market is currently pricing a 35bp rate cut for the September FOMC, while the market prices 110bp of cumulative cuts for the end of next year.
Matteo Salvini, leader of the League, hinted again at a potential break-up of the existing League/Five Star Italian coalition on Wednesday night, saying that ‘I am not one for half measures, either we can do things fully and well or I am not the one who clings on to this seat ‘. According to Corriere della Sera, Salvini has given Italian Prime Minister Giuseppe Conte until Monday to recede to his demands, which includes replacing, among others, Finance Minister Tria. The League currently stands at 40% in opinion polls.
The offshore Renminbi weakened a further 0.4% during the US open to 7.082 indicating further capital flight and pessimism regarding the Chinese economy in the face of the US trade war, but then strengthened during the Asia open as the PBOC set a stronger than expected fixing for the onshore Renminbi. The fixing will be closely watched over the coming weeks to gauge the intents of the PBOC, but for now Chinese authorities clearly do not want to signal any sort of devaluation. Chinese trade balance figures out this morning showed an increase of 3% y/y, while imports declined 5.6% resulting in a trade surplus of USD45.1bn. Both import and export numbers were significantly better than expected (imports: -9%, exports: -1%). In local currency the trade surplus with the US has expanded 11% since the start of the year.
The deepening fears of a serious global downturn and falling commodity prices have sent EUR/NOK to the highest level since 2008, as the cross touched 10.09 during yesterday’s session. Oil prices especially have affected the NOK and Brent crude saw another dip yesterday to just USD56/bbl, but recovered to above USD57/bbl as Saudi-Arabia said that it would take measures to stabilise prices.
