Market movers today
Financial markets will be looking to the developments in Hong Kong amid the stand-off with China, while also, any response from China to the delay in the US imposing tariffs until December will be in focus. Finally, the prospects of a wider contagion effects from the crisis in Argentina is a possible market mover in emerging markets.
In terms of data releases, a key focus point in the euro area is the GDP release for Q2. We expect an unchanged euro area GDP growth figure from the advance estimate (0.2% q/q), but with the first release of the drivers we will assess if investments are still holding up amid the global uncertainty. Furthermore, the ailing German economy will publish its first Q2 GDP estimate. We expect 0.1%, but we acknowledge a downside risk to our forecast.
In the UK, CPI inflation in July is due out, where consensus is for unchanged core inflation compared to June at 1.8%.
In the Nordic region, the Swedish CPI data is one of the more anticipated releases.
Selected market news
The Trump administration took the markets by surprise once again yesterday as the Office of the US Trade Representative announced that tariffs will be delayed to 15 December on a range of goods such as mobile phones, computers and video game consoles (see here ). The announcement led to a jump in equities and bond yields along with a surge in the oil price and yen. As such, it is positive for companies like Apple and electronics companies that they do not have to pay tariffs on Christmas sales. But apart from that we do not believe it is a sign that the US side is softening in the trade talks. The decision seems to be solely for domestic reasons and not to ease the pressure on China. Some goods will also be removed from the list due to health and security reasons according to the statement. News also broke that US and Chinese negotiators had talked on the phone on Tuesday. It was likely a call to confirm that the two sides will meet physically in Washington in early September. One effect of the tariff delay may be that China reads it in a way that Trump is not willing to take much pain in the trade war and as such it could make China less willing to make concessions, as they may think they have time on their side as we move closer to the US elections next year.
Meanwhile, data releases overnight showed a substantial weakening in economic activity in China in July. Industrial production growth dropped to 4.8% y/y from 6.3% y/y and retail sales growth slipped to 7.6% y/y from 9.8% y/y.
The Italian Senate has called for Prime Minister Conte to appear before the Senate on Tuesday next week, which could mean that a no confidence vote will take place on this day.
The German government published its 2020 budget proposal yesterday, which includes no net debt increase, i.e. does not propose fiscal stimulus.