Market movers today

In the euro area, the main focus is on the German Zew. We expect the Zew to decline further and hence continue to point to a gloomy outlook in the uncertain global environment and the escalation of trade war.

In the UK, the labour market report for June is due out. The growth rates in wages and employment have been fairly high despite rather weak economic momentum. The question is whether this can continue or the labour market will start to show signs of moderation.

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In the US, CPI core is being released. We expect it rose +0.2% m/m in July, which translates into an unchanged annual inflation rate at 2.1% y/y.

Overnight in China we get a batch of releases including industrial production, retail sales and fixed asset investments. In line with consensus, we expect the data still to paint a soft picture of the Chinese economy, but not a hard landing. Retail sales growth moved sharply higher but we expect it to have fallen back to around 8-8½% in July.

Selected market news

Political uncertainty in Europe, Asia and Latin America clouded financial markets yesterday and overnight. Negative risk sentiment is prevailing, with equity markets in the US and Asia down over 1%, bond yields trading close to record low levels and the yen continuing to appreciate.

The Argentinian market made headlines yesterday as its asset prices and currency collapsed following President Mauricio Macri’s defeat in the weekend’s primary elections. Even though the market has corrected some, the Argentinian peso is still down some 16% compared to Friday’s close, while its stock market lost close to 40% of its value yesterday.

In Italy, the Senate has yet to agree on the date for a no confidence vote on Prime Minister Conte’s government. The latest reports suggest that a decision is likely to be made tonight and that the vote could take place on Tuesday next week. The Italian CDS has risen closer to the high level seen last May, but is still trading at some distance from the levels seen last year.

At a regular press conference overnight, Hong Kong’s Chief Executive Carrie Lam, when faced with questions about the recent development in protests and demonstrations, said: “It would take a very long time to restore Hong Kong.” She further urged everyone to set aside prejudice. In the Chinese state media, speculation has begun about whether China would intervene if the situation in Hong Kong does not improve.

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