Notes/Observations
- China trade negotiators discussed their phase-one trade deal, helping ease concern about escalating tensions between the two countries.
- Continued optimism about coronavirus treatments
- Germany Q2 Final GDP revised higher but still a record contraction
- Germany Aug IFO Survey beats expectations and improves from month-ago levels; data suggesting German economic recovery was on track but remained fragile
Asia:
- China Vice Premier Liu confirmed meeting with USTR Lighthizer and Tsy Sec Mnuchin. Stated that had constructive discussion on trade agreement and strengthening macroeconomic policy coordination. Agreed to continue pushing forward phase 1 implementation
- China PBoC Open Market Operation (OMO) injected CNY300B in 7-day and 14-day reverse repos
- PBoC Official: China Monetary policy direction will not change; Determined to maintain normal monetary policy; Flexible and appropriate monetary policy will not change
- PBoC Deputy Gov Liu Guoqiang stated to improve policy rate system based on OMO and MLF rates; Would push market rates to move around OMO and MLF rates
Coronavirus:
- Total global cases 23,575,676 (+0.9% d/d); total deaths: 811.9K (+0.5% d/d)
Americas:
- USTR Statement: US Trade Official Lighthizer and Treasury Sec Mnuchin spoke with China Vice Premier Liu He on implementation of Phase 1 Trade Deal. Both sides saw progress in trade deal Energy: – NHC: Laura expected to become hurricane later on Tuesday (as expected)
- Motiva Port Arthur refinery (603K bpd capacity) to temporary close due Storm Laura (largest refinery in North America)
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.38% at 372.28, FTSE +0.13% at 6,112.45, DAX +0.55% at 13,138.75, CAC-40 +0.69% at 5,042.25, IBEX-35 +0.53% at 7,147.00, FTSE MIB +0.39% at 20,191.50, SMI +0.04% at 10,312.35, S&P 500 Futures +0.31%]
- Market Focal Points/Key Themes: European indices open higher across the board and remained in the green as the session progressed; positive risk assessment attributed to latest news on potential covid treaments and advances in US-China trade talks; better performing sectors include financials and telecom; health care and materials sectors among underperformers; airline shares supported following report of returning demand for travel; reportedly French government discussing state-backed loans; Wizz Air seeking to acquire more slots at Gatwick; Credit Suisse plans to close 35 branches in Switzerland; focus on continuing US-China trade talksearnings expected in the upcoming US session include Hewlett Packard, Best Buy and Nordstrom
Equities
- Consumer discretionary: DFS Furniture [DFS.UK] +14% (trading udpate)
- Consumer staples: CHR Hansen [CHR.DK] -3% (long-term ambition)
- Financials: Aveva Group [AVV.UK] +2% (acquisition)
- Healthcare: Astrazeneca [AZN.UK] +1% (trial initiation)
- Industrials: Stadler Rail [SRAIL.CH] +4% (earnings)
Speakers
- German Fin Min Scholz stated that the domestic economy was developing better than expected. Believed that reached a coalition agreement on insolvencies
- France Fin Min Le Maire: Govt convinced French banks to apply a 1%-to-3% interest rate on extended State-backed loans. State-backed loans do not require repayments during the first year.
- Austria Fin Min Bluemel stated that saw extension of job subsidies into 2021
- German SPD Parliamentary member stated that was likely to extend a state wage-support program. Maintaining jobs was key to reviving growth (**Reminder: On Aug 16th reports circulated that Germany Fin Min Scholz would propose €10.0B plan to extend the job subsidies in Germany)
- Italy govt said to be planning €20-25B budget law with no extra deficit in next budget. Next budget to be further detailed in September and would be the first in 10 years without VAT increase clause
- German IFO Economists: stated that the domestic economic recovery was on track but remained fragile. Beliveed that it was too early to extend the short-term work scheme. Saw Q3 GDP growth around 7.0%
- China and Taiwan said to face longer EU stainless steel tariffs as an EU probe could prompt renewed 5-year duties
- Hong Kong Govt announced that it would relax some social distancing rules starting Aug 28th (Friday). Govt to allow dining in until 9 PM local time and reopen cinemas, beauty parlors and some sports venues. To allow removal of masks during outdoor exercise
Currencies/Fixed Income
- Continued risk-on sentiment weighed on the USD against the European pairs. China trade negotiators discussed their phase-one trade deal, helping to ease concern about escalating tensions between the two countries. Dealers also cited continued optimism about coronavirus treatments. Other safe-haven currencies were softer as a result.
- EUR/USD was higher by 0.2% at 1.1830 area as data suggested the German economy was developing better than expected. Germany Q2 Final GDP revised higher but still a record contraction. Germany Aug IFO Survey registered its 4th month of improvement suggesting German economic recovery was on track but remained fragile
- USD/JPY higher by 0.3% to move back above the 106 level. Unwinding of safe-haven flows weighing upon the yen.
Economic Data
- (FI) Finland July Unemployment Rate: 7.7 v 7.9% prior
- (DE) Germany Q2 Final GDP Q/Q: -9.7% v -10.1%e; Y/Y: -11.3% v -11.7%e; GDP NSA (unadj) Y/Y: -11.3% v -11.7%e
- (DE) Germany Q2 Private Consumption Q/Q: -10.9% v -9.8%e; Government Spending Q/Q: 1.5% v 1.5%e; Capital Investment Q/Q: -7.9% v -12.2%e
- (NO) Norway Q2 Overall GDP Q/Q: -5.1% v -1.7% prior; Mainland GDP Q/Q: -6.3% v -6.3%e
- (NO) Norway Jun Overall GDP M/M: 3.2% v 1.9% prior; GDP Mainland M/M: 3.7% v 3.8%e
- (ES) Spain July PPI M/M: 1.8% v 2.0% prior; Y/Y: -4.8% v -5.9% prior
- (AT) Austria Jun Industrial Production M/M: 5.0% v 8.5% prior; Y/Y: -10.3% v -14.3% prior
- (ZA) South Africa Jun Leading Indicator: 94.1 v 91.6 prior
- (TR) Turkey Aug Real Sector Confidence (Seasonally adj): 105.2 v 99.4 prior; Real Sector Confidence NSA (unadj): 106.2 v 100.7 prior
- (TR) Turkey Aug Capacity Utilization: 73.3% v 70.7% prior
- (SE) Sweden July PPI M/M: -0.7% v -0.2% prior; Y/Y: -4.9% v -3.8% prior
- (DE) Germany Aug IFO Business Climate Survey: 92.6 v 92.1e (4th straight month of improvement); Current Assessment Survey: 87.9 v 86.2e; Expectations Survey: 97.5 v 98.0e
- (PL) Poland July Unemployment Rate: 6.1% v 6.1%e
- (PL) Poland 2Q Unemployment Rate: 3.1% v 3.4%e
Fixed Income Issuance
- (ID) Indonesia sold total IDR22.0T vs. IDR20.0T target in bills and bonds
- (ES) Spain Debt Agency (Tesoro) sold total €3.145B vs. €2.5-3.5B indicated range in 3-month and 9-month Bills
- (UK) DMO sold £3.0B in 0.125% 2026 Gilts; Avg Yield: +0.026% v -0.068% prior; Bid-to-cover: 2.45x v 2.24x prior; Tail: 0.3bps v 0.3bps prior
Looking Ahead
- (RO) Romania July M3 Money Supply Y/Y: No est v 13.6% prior
- 05:15 (CH) Switzerland to sell 3-month Bills
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
- 05:30 (DE) Germany to sell €6.0B in new 0.00% Sept 2022 Schatz
- 05:30 (ZA) South Africa to sell combined ZAR6.6B in 2026, 2030 and 2048 bonds
- 06:00 (UK) Aug CBI Retailing Reported Sale: 6e v 4 prior; Total Distribution Sales: No est v -3prior
- 06:30 (UK) DMO to sell £1.25B in 1.625% 2054 conventional Gilt
- 06:45 (US) Daily Libor Fixing
- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
- 07:45 (UK) BOE APF Gilt purchase operation (+20 years)
- 07:45 (US) Goldman Economist Chain Store Sales
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.60% ; Expected to leave Overnight Deposit Rate unchanged at -0.05%
- 08:00 (BR) Brazil Mid-Aug IBGE IBGE Inflation IPCA-15 M/M: 0.3%e v 0.3% prior; Y/Y: 2.3%e v 2.1% prior
- 08:30 (BR) Brazil July Current Account Balance: $0.8Be v $2.2B prior; Foreign Direct Investment (FDI): $2.2Be v $4.8B prior
- 08:55 (US) Weekly Redbook LFL Sales data
- 09:00 (US) Jun S&P/CaseShiller Home Price Index (20-City) M/M: 0.10%e v 0.04% prior; Y/Y: 3.60%e v 3.69% prior; HPI: No est v 224.76 prior
- 09:00 (US1) Jun S&P/CaseShiller Home Price Index (overall) Y/Y: No est v 4.46% prior; HPI: No est v 218.87 prior
- 09:00 (US) Jun FHFA House Price Index M/M: No est v -0.3% prior; Q/Q: No est v 1.7% prior
- 09:00 (BE) Belgium Aug Business Confidence: No est v -13.9 prior
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement
- 10:00 (US) Aug Consumer Confidence Index: 93.0e v 92.6 prior
- 10:00 (US) July New Home Sales: 785Ke v 776K prior
- 10:00 (US) Aug Richmond Fed Manufacturing Index: 10e v 10 prior
- 10:00 (MX) Mexico Q2 Current Account Balance: +$0.8Be v -$1.0B prior
- 10:00 (MX) Mexico Weekly International Reserve data
- 13:00 (US) Treasury to sell new 2-year note
- 13:30 (CA) Bank of Canada (BOC) Dep Gov Schembri
- 15:00 (AR) Argentina July Trade Balance: No est v $1.5B prior
- 15:25 (US) Fed’s Daly participates on panel
- 16:30 (US) Weekly API Oil Inventories
- 17:00 (KR) South Korea Sept Business Manufacturing Survey: No est v 57 prior; Non-Manufacturing Survey: No est v 60 prior
- 18:45 (NZ) New Zealand July Trade Balance (NZD): 0.3Be v 0.4B prior; Exports: 4.9Be v 5.1B prior; Imports: 4.6Be v 4.6B prior
- 19:50 (JP) Japan July PPI Services Y/Y: 0.8%e v 0.8% prior
- 21:10 (JP) BOJ Outright Bond Purchase Operation for 1~3 years; 3~5 years and 5~10 Years maturitie
- 23:30 (TH) Thailand July ISIC Manufacturing Production Index: No est v -17.7% prior; Capacity Utilization: No est v 55.2% prior
