Notes/Observations

Market sentiment turning towards safe-haven flows; terrorist attacks in Spain’s Barcelona and Cambrils as well as rumors about the possible resignation of Trump’s economic advisor Gary Cohn boost risk aversion

Overnight

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Europe:

Islamic State claimed responsibility for van attack in Barcelona that killed over a dozen and injured over 100

UK Govt to issue position papers on Aug 21st on confidentiality of EU information obtained before Brexit and goods placed on supply chains in single market before Brexit

Americas:

Fed Chair Yellen scheduled to speak at Jackson Hole Symposium on Friday, Aug 25th with her remarks to focus on "financial stability"

Fed’s Kashkari (dove, voter): Fed will consider debt ceiling debate when deciding the start of running down balance sheet. Difficult to see how the math works for fast US GDP growth

Economic data

(DE) Germany July PPI M/M: 0.2% v 0.0%e; Y/Y: 2.3% v 2.2%e

(EU) Euro Zone Jun Current Account (Seasonally Adj): €21.2B v €30.5B prior; Current Account NSA: €28.1B v €17.9B prior

(IT) Italy Jun Current Account Balance: €5.3B v €2.3B prior

(IT) Italy Jun General Government Debt: €2.281T (record high) v €2.279T prior

(EU) Euro Zone Jun Construction Output M/M: -0.5% v -0.2% prior; Y/Y: 3.4% v 2.7% prior

Fixed Income Issuance:

(IN) India sold total INR150B vs. INR150B in 2022, 2029, 2033 and 2051 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -1.0% at 373.3, FTSE -1.1% at 7310, DAX -0.9% at 12093, CAC-40 -1.2% at 5083, IBEX-35 -1.2% at 10321, FTSE MIB -0.9% at 21601, SMI -1.0% at 8857, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes:

European Indices trade sharply lower following on from the steep losses seen on Wall Street overnight, with the French CAC and Spanish IBEX leading declines. Yesterday’s terror attack in Spain weighed on sentiment with Travel and Leisure stocks the leading the decliners, with sharp falls in some of Europe’s major airlines.

Elsewhere Vopak shares trade sharply lower after cutting its FY17 outlook, whilst shares of Fiat Chrysler trades lower after Guangzhou Auto said it has no plans to acquire Fiat.

Looking ahead notable earners include Deere & Co, Footlocker and Estee Lauder.

Equities

Consumer discretionary [Air France [AF.FR] -2.8%, Int Con Airlines [IAG.UK] -2.5% (Earnings), Lufthansa [LHA.DE] -1.6%, Easyjet [EZJ.UK] -2.2%, Ryanair [RYA.UK] -2.5% (Barcelona Terror Attack), Fiat [FCA.IT] -1.6% (Guangzhou Auto notes no current plan to acquire Fiat )]

Telecom: [Medivir [MVIRB.SE] +3.6% (Licenses exclusive rights to MIV-802 for Greater China to Ascletis)]

Healthcare: [ Nicox [COX.FR] +5.8% (Announces that its Exclusive Licensee Submits response to CRL for latanoprostene bunod ophthalmic solution, 0.024%), Astrazeneca [AZN.UK] -1.1% (FDA approves ovarian cancer treatment Lynparza Tablets) ]

Real Estate: [Vopak [VPK.NL] -8.6% (Earnings)]

Speakers

South Africa Mining Min Zwane stated that mining charter requirements are achievable and would continue to strengthen its laws in the sector

Taiwan Fin Min Sheu Yu-Jer: To raise corporate tax rate and cut individual rates

China Banking Regulator (CBRC) Xiao Yuanqi: To issue new regulations to crackdown on illicit banking activities. To limit impact on economy amid stronger supervision

S&P affirmed South Korea sovereign rating at AA; outlook stable. Geopolitical risks on Peninsula would not escalate with a direct armed conflict unlikely

Currencies

FX markets were subdued on Friday with focus turning to next week’s Jackson Hole symposium. Currency flows favored safe-haven assets with Yen and Swissie slightly firmer (spot gold probing the $1,300/oz)

EUR/USD trying to recover from perceived ECB concern over any FX overshoot. USD remains vulnerable to President Trump’s inability to date in trying to push through the pro-growth measures

Fixed Income

Bund futures trades at 164.36 up 4 ticks as thin summer trading continues. Downside targets 163.50 followed by 162.56. To the upside the 164.50 to 165.20 remains key resistance.

Gilt futures trades at 127.83 up 13 ticks as Bunds and Treasuries remain underpinned by tensions in the White House. A resumption to the upside could eye 128.25 then 128.75. A move back below 126.51 targets 125.97

Friday’s liquidity report showed Thursday’s use of the marginal lending facility fell to €123M from €174M prior.

Corporate issuance saw $1.15 come to market via 2 issuers headlined by Ipalco Enterprises $405M senior secure offering, and H&E $750M senior notes offering. For the week ending August 16th IG Funds reported inflows of $2.43B, while High Yields funds reported inflows of $2.19B

Looking Ahead

(ZA) South Africa to sell combined ZAR650M in 2025, 2029 and 2046 I/Lbonds

(BR) Brazil Aug CNI Industrial Confidence: No est v 50.6 prior

06:00 (PT) Portugal July PPI M/M: No est v -0.2% prior; Y/Y: No est v 2.7% prior

06:00 (UK) DMO to sell combined £5.5B in 1-month, 3-month and 6-month bills

06:30 (IS) Iceland to sell bills

07:00 (BR) Brazil Aug IGP-M Inflation (2nd Preview): 0.0%e v -0.7 % prior

07:30 (CL) Chile Q2 GDP Q/Q: 0.7%e v 0.2% prior; Y/Y: 1.0%e v 0.1% prior

07:30 (CL) Chile Q2 Current Account Balance: -$1.3Be v -$1.0B prior

07:30 (IN) Weekly India Forex Reserve data

08:00 (PL) Poland July Sold Industrial Output M/M: -6.7%e v +2.7% prior; Y/Y: 8.4%e v 4.5% prior; Construction Output Y/Y: 13.3%e v 11.6% prior

08:00 (PL) Poland July Retail Sales M/M: 1.4%e v 0.9% prior; Y/Y: 7.9%e v 6.0% prior; Real Retail Sales Y/Y: 7.4%e v 5.8% prior

08:00 (PL) Poland July PPI M/M: 0.0%e v -0.4% prior; Y/Y: 2.0%e v 1.8% prior

08:00 (UK) Baltic Dry Bulk Index

08:30 (CA) Canada July CPI M/M: 0.0%e v -0.1% prior; Y/Y: 1.2%e v 1.0% prior; Consumer Price Index: 130.4e v 130.4 prior

08:30 (CA) Canada CPI Core- Common Y/Y: No est v 1.4% prior;CPI Core- Trim Y/Y: No est v 1.6% prior; CPI Core- Median Y/Y: No est v 1.2% prior

10:00 (US) Aug Preliminary University of Michigan Confidence: 94.0e v 93.4 prior

11:00 (EU) Potential Sovereign ratings following European close

(EG) Egypt Sovereign Debt to be rated by Moody’s

(RO) Romania Sovereign Debt to be rated by Moody’s

(GR) Greece Sovereign Debt to be rated by Fitch

(IE) Ireland Sovereign Debt to be rated by Canadian rating agency DBRS

(BE) Belgium Sovereign Debt to be rated by Canadian rating agency DBRS

13:00 (US) Weekly Baker Hughes Rig Count data

13:00 (CO) Colombia Central Bank Quarterly Inflation Report

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