Market Is Looking For Reassurance From The Fed That More Rate Cuts Could Be Coming

Notes/Observations

• Trigger events could be looming large with high-profile events (Jackson Hole and G7 meetings)
• Global central bankers gather in Wyoming Fed Chairman Powell to deliver Jackson Hole speech on Friday morning at (10:00 ET/14:00 GMT); likely to give insight into what the Fed might do come September; market is looking for reassurance from the Fed that more rate cuts could be coming
• G7 meeting in France on Aug 24-26 (Sat-Monday) with discussions about trade possible German fiscal easing possible

Asia:

• China PBoC set the daily yuan reference rate: 7.0572 v 7.0490 prior (weakest CNY fixing since March 21 2008)
• Japan July National CPI Y/Y: 0.5% v 0.6%e; CPI Ex-fresh food (core) Y/Y: 0.6% v 0.6%e; CPI Ex-fresh food/energy (core-core) Y/Y: 0.6% v 0.5%e
• Japan Econ Min Motegi: Plans to resume ministerial level trade talks with US on Sat, Aug 24th as talks have been extended for 1 day; getting close to a conclusion; US Pres Trump and Japan PM Abe may discuss trade talk results on sidelines at G7 on Aug 23-27
• RBNZ Gov Orr reiterated rate view that the Aug 50bps rate cut reduced probability of having to do more later. Could afford to wait and observe what was happening. To look at what situation was like in November and would cut if necessary

Europe/Mideast:

• Italy President Mattarella: govt crisis needs to be resolved quickly; new elections are a choice that should not be taken lightly
• French official: talks between Pres Macron and UK PM Johnson were constructive. Macron and Johnson agreed to continue exchanges between Britain and the EU until the end of Sept to try and reach an agreement on Brexit
• Senior German official: Merkel’s ’30 days’ remarks were her just being polite; those with knowledge believed she had concluded train had already left the station and was impossible to stop ‘no deal’ Brexit

Americas:

• White House Econ Adviser Kudlow: We are still looking at “tax cuts 2.0” to improve long term growth of economy. Might see additional tax cuts rolled out during the Presidential campaign. Pres Trump did not take ‘tax cuts 2.0’ off the table in his remarks yesterday; he only meant there won’t be something immediate

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.56% at 376.40, FTSE +0.72% at 7,179.24, DAX +0.56% at 11,813.17, CAC-40 +0.58% at 5,419.64, IBEX-35 +0.57% at 8,766.00, FTSE MIB +0.47% at 20,914.50, SMI +0.71% at 9,875.00, S&P 500 Futures +0.38%]

Market Focal Points/Key Themes:

Equities

• European Indices trade higher across the board in a quite session following slighly higher session in Asia, and higher US Index futures this morning amid traders awaiting US Fed chair Powell speech later today and Manufacturing US PMI index coming below 50 for the 1st time in nearly 10 years yesterday.
• Shares of software giant Salesforce trade 6.5% higher on a pre-market following earnings beat, upgraded outlook.
• On M&A front, shares of Kloeckner in Germany trade almost 11% higher on press speculation regarding imminent merger with Tyssenkrupp’s unit. Entertainment One in the UK rise sharply after announcement to be acquired by US toys-producer Hasbro.
• Elsewhere on the corporate front shares of Rockwool International in Denmark trade sharply lower following announced earnings and ourlook cut, while shares of Computacenter on LSE gain after its results coming ahead of analysts’ expectations.
• Looking ahead notable earners include Foot Looker, Buckle and Hibbett Sports.
• Consumer discretionary: Entertainment One [ETO.UK] +30% (to be acquired by Hasbro), Adocia [ADOC.FR] -28% (ruling), Rockwool International [ROCKA.DK] -16% (earnings; outlook cut), Mekonomen [MEKO.SE] +10% (earnings)
• Financials: ASR Nederland [ASRNL.NL] +2% (earnings)
• Industrials: Kloeckner [KCO.DE] +11%, Thyssenkrupp [SKA.DE] +2.5% (ThyssenKrupp reportedly planning to merge steel unit with Kloeckner)
• Technology: Computacenter [CCC.UK] +3% (earnings)

Speakers

• Poland Central Bank Hardt stated that the central bank should not take extraordinary measures. When faced with faced with rising prices but a slowing economy then price stability had to trump economic stimulus on the NBP’s priority list
• China Global Times editor: China ‘unreliable entity list’ said to be imminent; companies listed to face ‘severe punishment’
• (SG) Fitch affirmed Singapore sovereign rating at AAA; outlook stable

Currencies/ Fixed Income

• USD holding onto slight strength ahead of the key speech from Fed Chair Powell at the Jackson Hole Symposium. Market participants appeared to be looking for reassurance from the Fed that more rate cuts could be coming. However, dealers noted that some of the Fed non-voter members speaking in various television interviews seemed to voice resistance to the notion that the US needed lower interest rates. To the upside traders look to recent high of 98.93 recent high from this month and to the low side 97.21.
• GBP/USD: The cable pulled back today from recent strength after PM Johnson and Macron met to discuss Brexit and the UK departure. Not much in the way of levels to the upside and levels to the downside are in the range of 1.21.
• EUR/USD: The Euro remained weak as we approach Jackson Hole where we could receive some views as to the ECBs plans in their upcoming rate decisions or potential easing actions. The Euro currently trades around 1.107 near yearly lows of 1.103.

Economic Data

• (DK) Denmark July Retail Sales M/M: -0.2% v 0.4% prior; Y/Y: 2.4% v -1.3% prior
• (AT) Austria Jun Industrial Production M/M: +0.5% v -0.9% prior; Y/Y: +1.3% v -0.4% prior
• (CN) Weekly Shanghai copper inventories (SHFE): 156.6 v 162.8K tons prior
• (RU) Russia Narrow Money Supply w/e Aug 16th (RUB): 10.64T v 10.53T prior
• (TW) Taiwan July Industrial Production Y/Y: +3.0% v -0.6%e
• (TW) Taiwan July M2 Money Supply Y/Y: 3.4% v 3.1% prior; M1 Money Supply Y/Y: 7.3% v 7.4% prior
• (IS) Iceland July Wage Index M/M: % v -0.1% prior; Y/Y: % v 4.3% prior

Fixed Income Issuance

• (IN) India sold total INR170B vs. INR170B indicated in 2021, 2026, 2031, 2039 and 2059 bonds

Looking Ahead

• 06:00 (UK) DMO to sell €6.5B in 1-month, 3-month and 6-month bills (£0.5B, £2.5B and £3.0B respectively)
• 06:30 (IS) Iceland to sell 1.5% Feb 2026 RIKB inflation-linked Bonds
• 07:00 (MX) Mexico Q2 Final GDP Q/Q: 0.0%e v 0.1% prelim; Y/Y: -0.8%e v -0.7% prelim; GDP Nominal Y/Y: 3.4%e v 6.3% prior
• 07:00 (MX) Mexico Jun IGAE Economic Activity Index (Monthly GDP) M/M: 0.2%e v 0.0% prior; Y/Y: -0.6%e v -0.4% prior
• 07:30 (IN) India Weekly Forex Reserve w/e Aug 16th: No est v $430.6B prior
• 07:30 (IN) India Finance Ministry press conference
• 08:00 (PL) Poland July M3 Money Supply M/M: +0.6%e v -0.2% prior; Y/Y: 9.5%e v 9.3% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:30 (CA) Canada Jun Retail Sales M/M: -0.3%e v -0.1% prior; Retail Sales (ex-auto) M/M: 0.0%e v -0.3% prior
• 09:00 (BE) Belgium Aug Business Confidence: -6.0e v -5.0 prior
• 09:00 (CL) Chile July PPI M/M: No est v -0.9% prior
• 09:00 (US) Fed’s Harker (hawk, non-voter) on CNBC
• 10:00 (US) July New Home Sales: 647Ke v 646K prior
• 10:00 (MX) Mexico Q2 Current Account Balance: -$2.0Be v -$0.6B prior
• 10:00 (US) Fed Chair Powell at Jackson Hole symposium
• 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Greece; S&P on Sweden)
• 13:00 (US) Weekly Baker Hughes Rig Count

Weekend:

• G7 meeting in Biarritz, France