Notes/Observations
Trump raised his rhetoric against North Korea to an unprecedented level, triggering broad risk-off moves through Asian hours
Inflation focus stays; China inflation undershot expectations; Fed’s Dudley speech eyed on Thursday, US CPI data on Friday
Overnight
Asia:
China July inflation data remains steady CPI Y/Y: 1.4% v 1.5%e; PPI Y/Y: 5.5% v 5.6%e; data suggesting that monetary policy can’t be tightened further
RBA Assistant Gov Kent reiterated further rise in A$ would result in slightly lower domestic growth. AUD currency appreciation was more about dollar weakness and not linked to commodity prices
North Korea now making missile-ready nuclear weapons
President Trump: North Korea better not make any more threats to US; North Korea will be met with fire, fury like the world has never seen if it threatens US
Europe:
South Africa President Zuma survived a no-confidence vote. Parliament voted against no confidence motion via secret ballot
Energy:
Weekly API Oil Inventories: Crude: -7.84M v +1.78M prior
OPEC spokesperson: OPEC and partners held ‘fruitful’ compliance talks; producers remain steadfast in commitment to agreed upon output cuts
Economic Calendar
(NL) Netherlands Jun Manufacturing Production M/M: -0.3% v +1.2% prior; Y/Y: 3.3 v 3.9% prior; Industrial Sales Y/Y: 5.2 v 9.0% prior
(JP) Japan July Preliminary Machine Tool Orders Y/Y: 26.3% v 31.1% prior
(FR) Bank of France July Business Sentiment (beat): 105 v 103e
(CZ) Czech July CPI (beat) M/M: 0.5% v 0.3%e; Y/Y: 2.5% v 2.3%e
(GR) Greece July CPI Y/Y: 1.0% v 1.0% prior; CPI EU Harmonized Y/Y: 0.9% v 0.8%e
Fixed Income Issuance:
(IN) India sold total INR170B vs. INR170B indicated in 3-month and 6-month Bills
(DK) Denmark sold total DKK2.74B in 2020 and 2027 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 -1.1% at 3,476, FTSE -0.6% at 7,496, DAX -1.0% at 12,168, CAC-40 -1.2% at 5,155, IBEX-35 -0.9% at 10,643, FTSE MIB -1.1% at 21,809, SMI -1.3% at 9,040, S&P 500 Futures -0.3%]
Market Focal Points/Key Themes: European stocks open down and continued in the same direction though the morning; risk sentiment off given geopolitical concerns; gold higher, but didn’t translate into support for materials; emerging markets among biggest decliners; Worldpay being acquired by Vantive; Telit Communications declines further after CEO takes leave of absence; upcoming US session earnings include Weibo, Office Depot, Avnet and Mylan
Equities
Consumer discretionary [G4S [GFS.UK] -5% (Earnings)]
Consumer Staples [Ahold Delhaize [AD.NL] -2.2% (Earnings)]
Materials: [SGL Carbon [SGL.DE] +1.0% (Earnings, Divestment),
Industrials: [E.ON [EOAN.DE] -2.0% (Earnings), Brenntag [BNR.DE] -5.5% (Earnings), Interserve [IRV.UK] -4.0% (Earnings)]
Financials: [Legal & General [LGEN.UK] -1.9% (Earnings)]
Telecom: [Telit Communications [TCM.UK] -31% (CEO takes leave amid speculation historical indictments)]
Healthcare: [Novo Nordisk [NOVOB.DK] +4% (Earnings)]
Speakers
BoE Prudential Regulator Authority (PRA) Woods: urged lawmakers to allow financial firms an implementation period to adjust after Brexit – letter to Treasury
BOE Agents Summary: Consumer spending growth had eased slightly further in values term. Manufacturing output growth had risen again, with exports supported by the past fall in sterling. Recruitment difficulties had edged higher and broadened slightly.
Philippines Economic Planning Sec Pernia reiterated view that Q2 GDP growth likely to have been faster than Q1
Currencies
Risk aversion currencies and gold benefited from the Korean Peninsula after President Trump raised his rhetoric against North Korea to an unprecedented level. Geopolitics helping core bond yields move lower, give gold a bid. – USD/JPY fell to a 2-month low of 109.65
USD/CHF was lower by over 1% to test below 0.9630 while EUR/CHF cross edged away from its recent 2 1/2 highs near 1.15 to dipped below the 1.13 level.
Fixed Income
Bund futurestrades at 163.66 up 50 ticks as risk-off sentiment pushes through markets. Downside targets 162.67 followed by 162.56. To the upside the 165.00 to 165.20 remains key resistance.
Gilt futurestrades at 127.26 up 32 ticks as risk aversion hits across all markets. A continuation to the upside eyeing 127.75 then 128.25. A move back above 126.51 targets 125.97
Wednesday’s liquidity report showed Tuesday’s use of the marginal lending facility fell to €197M from €257M prior.
Corporate issuancesaw $19.5B come to market via 5 issuers headlined by BAT $17.25B 8 part offering, which was the second largest bond offering of the year.
Looking Ahead
(MX) Mexico July ANTAS Same-store Sales: 5.8%e v 5.4% prior
05:30 (DE) Germany to sell €4.0B in 0% Oct 2022 BOBL
06:00 (PT) Portugal Jun Trade Balance: No est v -€1.4B prior
06:00 (PT) Portugal Q2 Unemployment Rate: No est v 10.1% prior
06:00 (IE) Ireland Jun Property Prices M/M: No est v 2.2% prior; Y/Y: No est v 11.9% prior
06:00 (RU) Russia to sell combined RUB40B in 2024 and 2033 OFZ bonds
06:45 (US) Daily Libor Fixing
07:00 (US) MBA Mortgage Applications w/e Aug 4th: no est v -2.8% prior
07:00 Czech Central Bank to comment on CPI data
08:00 (BR) Brazil July IBGE Inflation IPCA M/M: +0.2%e v -0.2% prior; Y/Y: 2.7%e v 3.0% prior
08:00 (UK) Baltic Dry Bulk Index
08:15 (CA) Canada July Annualized Housing Starts: 205.0Ke v 213.2K prior (revised from 212.7K)
08:30 (US) Q2 Preliminary Nonfarm Productivity: 0.7%e v 0.0% prior; Unit Labor Costs: 1.1%e v 2.2% prior
08:30 (CA) Canada Jun Building Permits M/M: -1.9%e v +8.9% prior
08:30 (CL) Central Bank’s Traders Survey
09:00 (MX) Mexico July CPI M/M: 0.3%e v 0.3% prior; Y/Y: 6.4%e v 6.3% prior; CPI Core M/M: 0.3%e v 0.3% prior
10:00 (US) Jun Final Wholesale Inventories M/M: 0.6%e v 0.6% prelim; Wholesale Trade Sales M/M: No est v -0.5% prior
10:30 (US) Weekly DOE Crude Oil Inventories
11:30 (BR) Brazil weekly Currency Flows Weekly
12:00 (CA) Canada to sell 2-year bonds
13:00 (US) Treasury to sell $23B in 10-year notes
17:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave the Official Cash Rate (OCR) unchanged at 1.75%
