Notes/Observations
Price action subdued in Europe with London closed for banking holiday
US and European central bankers didn’t offer fresh policy guidance at the Jackson Hole central bankers meeting
Markets assessing the economic-impacting damage Hurricane Harvey as storm caused catastrophic flooding in Texas
Euro at 2 ½ highs against USD after Draghi failed to issue any concern over its appreciation during his Jackson Hole speech
North Korea launched three short-range missiles on Saturday as US/South Korea continued joint military drills
key week for US economic releases highlighted by Non-farm payrolls on Friday
Overnight/Weekend
Jackson Hole:
ECB Draghi: Global recovery was firming up. Without stronger potential growth, the cyclical recovery we see now globally will ultimately converge downwards to slower growth rates. Reiterated Council view that significant monetary accommodation is still needed, inflation has yet to converge to target; (**Note: did not comment on ECB policy directly or foreign exchange)
BoJ Gov Kuroda: Reiterated policy to stay very accommodative; Does not think Q2 GDP growth rate of 4% can be sustained
Fed’s Kaplan (moderate, voter): we are closer to Neutral rate than some people believe. Reiterated Fed may raise rates one more time this year, but can afford to be patient; want to see how inflation goes before making rate decision. A stock market or real estate correction would not necessarily hurt the economy
Fed’s Powell (moderate; voter: eagerly watching Washington but no ready to add fiscal stimulus measures into our forecast. We have a balance sheet plan; will normalize policy soon
Asia:
North Korea said to have fired several short range missiles into the waters off of its east coast on Sat, Aug 26th. US analysts say all of three of the short range ballistic missiles launches failed as they were fired over a period of 20 minutes (**Reminder: US and South Korean troops are currently conducting their annual joint military exercises)
China July Industrial Profits Y/Y: 16.5% v 19.1% prior (3-month low)
China approves Guodia, Shenhua group to merge into a new energy company
Europe:
France could be willing to begin Brexit trade talks by Oct. Under France’s proposal, the UK would seek a 3-year transitional agreement and continue to pay into the EU’s budget of €10B/year
Brexit Min Davis: Will call on EU to be more flexible in its approach ahead of 3rd round of talks. Both sides must be flexible and willing to compromise when it comes to solving areas where we disagree. EU itself has said, the clock is ticking so neither side should drag its feet
EU Brexit Negotiator Verhofstadt: UK must make concrete Brexit proposals, must address key elements of Brexit deal; EU Citizens’ rights most important Brexit issue
Americas:
President Trump reiterated "we are in the NAFTA renegotiation process with Mexico, and Canada. Both being very difficult, may have to terminate?"
Trump administration mulling reduction in certain summer work visas. plan is said to focus on 5 jobs programs under the J-1 visa exchange visitor program, including the summer work travel program.
Energy:
Hurricane Harvey pounds Houston Texas with “catastrophic floods” with National Weather Service saying conditions are unprecedented
Houston Port Spokeswoman: All port facilities to be closed on Monday due to continued weather threat
US Dept of Interior Bureau of Safety and Environmental Enforcement: Approx 22% of current oil production in US Gulf of Mexico is offline due to Tropical Storm Harvey (equates to ~379k bpd)
Economic data
(FI) Finland Aug Business Confidence: 7 v 8 prior; Consumer Confidence: 23.5 v 22.8 prior
(SE) Sweden July Retail Sales M/M: +0.9% v -0.1%e; Y/Y: 3.7% v 3.3%e
(SE) Sweden July Trade Balance (SEK): -0.5B v 5.4B prior
(EU) Euro Zone July M3 Money Supply Y/Y: 4.5% v 4.9%e
(IT) Italy Aug Consumer Confidence: 110.8 v 106.9e; Manufacturing Confidence: 108.1 v 108.0e
Fixed Income Issuance:
(IT) Italy Debt Agency (Tesoro) sold €2.0B vs. €1.5-2.0B indicated in CTZ bonds; Avg Yield: -0.139% v -0.160% prior; Bid-to-cover: 1.68x v 1.64x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 -0.5% at 3,425, FTSE -0.1% at 7,401, DAX -0.6% at 12,098, CAC-40 -0.3% at 5,087, IBEX-35 -0.2% at 10,322, FTSE MIB -0.1% at 21,727, SMI -0.3% at 8,876, S&P 500 Futures -0.2%]
Market Focal Points/Key Themes: European stocks open lower and continue momentum; stocks under pressure following ECB President Draghi’s speech in Jackson Hole in which he didn’t show concern over rising Euro; all sectors moving lower, technology most affected; export companies underperforming, putting pressure on DAX; insurers underperforming as fallout from Hurricane Harvey is assessed; UK closed for bank holiday
Equities
Consumer discretionary: Aryzta ARYN.CH +1.0% (new CEO)
Materials: SGL Carbon SGL.DE +3.4% (analyst action)
Industrials: EMS-Chemie EMSN.CH -2.0% (earnings)
Financials: Zurich Insurance ZURN.CH -0.6% (Hurricane Harvey), Conwert Immobilien CWI.AT +3.3% (earnings)
Telecom: Altice ATC.NL +0.8% (buyback)
Healthcare: Novartis NOVN.CH -0.8% (study results disappoint), Bayer BAYN.DE +0.3% (study results),
Poxel POXEL.FR +1.8% (clinical data presentation)
Speakers
France Fin Min Le Maire: Polls show that French people impatient to see reforms. Govt will hold firm on labor law reform
Greece PM Tsipras: Aim to cut tax rates further after 2019. Improvement in economy expected to be confirmed in growth rates for Q2 and Q3
Russia Dep Fin Min Moiseev: reiterates view that banking sector is stable; no immediate threats seen
Japan Cabinet Office Monthly Economic Report: Maintain overall economic assessement; Economy is experiencing a moderate recovery (**Note: Japanese government has not used the term "expansion" in 25 years; (last used in Jan 1992)
Bank of Korea (BOK) Gov Lee: Govt has not requested any hike in Key interest rate. monetary policy is decided by the the central bank’s board
Thailand Commerce Min Tantaporn: Raises 2017 Export growth target to from 2.5% to 7% as global economic conditions look good
Venezuela Oil Min Del Pino said to plan visit to Russia Energy Min Novak in Moscow ahead of planned Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) monitoring committee on Friday, Sept 22nd
Fixed Income
Bund futures trades at 164.66 down 6 ticks stuck in a tight range with future volumes falling as a UK bank holiday halts activity. Downside targets 163.50 followed by 162.56. To the upside the 164.50 to 165.20 remains key resistance.
Gilt futures and UK markets were closed for holiday.
Monday’s liquidity report showed Friday’s excess liquidity fell to €1.701T from €1.703T and use of the marginal lending facility rose to €310M from €131M prior.
Corporate issuance saw $3.8B last week as we enter the end of earning season.
Looking Ahead
06:00 (IE) Ireland July Retail Sales Volume M/M: No est v -4.8% prior; Y/Y: No est v 4.1% prior
06:00 (DE) German Chancellor Merkel meets France President Macron, Italy PM Gentiloni and Spain PM Rajoy in Paris
06:45 (US) Daily Libor Fixing
07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
07:00 (BR) Brazil Aug FGV Construction Costs M/M: 0.3%e v 0.2% prior
07:25 (BR) Brazil Central Bank Weekly Economists Survey
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) July Advance Goods Trade Balance: -$64.5Be v -$63.9B prior
08:30 (US) July Preliminary Wholesale Inventories M/M: No est v 0.7% prior, Retail Inventories M/M: No est v 0.6% prior
09:00 (MX) Mexico July Trade Balance: -$1.0Be v $0.1B prior
09:00 (FR) France Debt Agency (AFT) to sell combined €4.6-5.8B in 3-month, 6-month and 12-month Bills
09:30 (EU) ECB announces Covered-Bond Purchases
09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
10:30 (US) Aug Dallas Fed Manufacturing Activity: 16.8e v 16.8 prior
11:30 (US) Treasury to sell 3-Month and 6-Month Bills
13:00 (US) Treasury to sell 2-Year Notes
13:00 (US) Treasury to sell 5-Year Notes
16:00 (US) Weekly Crop Progress Report
