Market movers today
Trade war headlines and geopolitical developments remain the key market drivers, although the news flow might calm down compared to the last days after the G7 summit. In Italy, look out for the ongoing coalition talks, as a deal seems to be moving closer. This morning news media report that PD is still undecided on Conte. Talks will resume at 11:00 CEST.
Final German Q2 GDP data will reveal how hard net exports have been hit by the escalating trade war and Brexit uncertainty. We will also look out for signs of weakness in domestic demand, especially weaning investment growth.
ECB Vice President Luis de Guindos and BOE policy committee member Silvana Tenreyro speak at a conference in Manchester.
The Hungarian central bank will publish its rate announcements at 14:00 CEST. We expect the policy rate to remain at 0.90%, as inflation has fallen closer to the 3% target from its overshooting levels. Furthermore, the current global monetary easing bias will keep the MNB from hiking.
In Sweden, household lending and trade balance figures are due for release. The trade balance is still likely to show a surplus, possibly lower than last month’s SEK2.9bn.
Selected market news
An eventful G7 meeting concluded yesterday. On Iran, French President Emmanuel Macron said that an US-Iran deal could be reached if Iranian President Hassan Rouhani and Trump meet. Trump agreed ‘if the circumstances were correct’. An agreement still seems far away, though.
On global trade, the G7 leaders agreed that there is a need for modernising and reforming the WTO system to make it more efficient, reflecting the changing economic structures. While it seems doubtful the US and China are anywhere close to a trade deal despite Trump’s comments yesterday, it was positive that Trump said that the US and the EU are ‘very close to doing a deal’. We have to be careful about Trump’s comments but this topic will be increasingly on our radar ahead of Trump’s decision in November whether to impose tariffs on auto imports from Europe or not.
On Brexit, the EU and UK talks are now intensifying on the back of positive meetings ahead of and at the G7 meeting. In our view, the EU seems more willing to compromise, well knowing that the backstop is a major hurdle for avoiding a no deal. Also, PM Boris Johnson seems more pragmatic (probably well knowing that a no-deal Brexit may backsplash economically and hence politically eventually). Still, the EU has said it is up to the UK to find ways to avoid the backstop.
In China, industrial profits rose 2.6% y/y in July versus a decrease of 3.1% in June. While this seems positive on the surface, it is more about base effects and year-to-date profits are still down, indicating the economy has slowed.
