Overnight
Concerns over North Korea’s latest missile test eased for now
German State CPI data towards ECB target; but yet to confirm any early ECB taper
Overnight
Asia:
UN Security Council: Condemned North Korea’s firing of a ballistic missile over Japan as an "outrageous" act and demanded that Pyongyang not launch any more missiles and abandon all nuclear weapons and programs
North Korea Leader Kim Jong Un: Test firing of missile over Japan was “meaningful prelude” to containing territory of Guam; watching response of US before deciding on further action
Moody’s: G20 economies will collectively grow at an annual rate of slightly more that 3% in 2017 and 2018. Raised China 2017 GDP growth forecast from 6.6% to 6.8% and 2018 GDP growth forecast from 6.3% to 6.4%
Japan July Retail Sales M/M: 1.1% v 0.3%e; Retail Trade Y/Y: 1.9% v 1.0%e
RBNZ Gov Wheeler: Policy a key driver in economic performance; reiterates lower NZD needed to increase tradable inflation
Europe:
UK govt has been warned Brexit transition deal cannot last more than 2 years or it will risk being challenged in European Court of Justice (ECJ) or shot down in German parliament
UIK PM May: Britain looking at ways to replicate EU’s existing external trade deals after Brexit
UK Aug BRC Shop Price Index y/y: -0.3% v -0.4% prior
Americas:
S&P: United States would maintain its AA+ sovereign rating as long as the federal government avoids a default even if it does not increase the debt ceiling in a timely manner
Energy:
Weekly API Oil Inventories: Crude: -5.8M v -3.6M prior
Colonial, the biggest fuel pipeline in the U.S., system is starting to have problems in Texas
Economic data
(NL) Netherlands Aug Producer Confidence: 5.4 v 6.6 prior
(JP) Japan Aug Small Business Confidence: 49.0 v 50.0 prior
(CH) Swiss July UBS Consumption Indicator: 1.38 v 1.30 prior
(NO) Norway July Retail Sales (includes Auto/Fuel) M/M: 0.4% v 0.3%e
(DE) Germany Aug CPI Saxony M/M: 0.2% v 0.3% prior; Y/Y: 1.9% v 1.7% prior
(ES) Spain Aug Preliminary CPI M/M: 0.2% v 0.3%e; Y/Y: 1.6% v 1.7%e
(ES) Spain Aug Preliminary CPI EU Harmonized M/M: 0.2% v 0.2%e; Y/Y: 2.0% v 1.8%e
(SE) Sweden Aug Consumer Confidence: 100.3 v 103.0e; Manufacturing Confidence: 117.1 v 119.3e; Economic Tendency Survey: 110.7 v 111.8e
(CH) Swiss Aug KOF Leading Indicator: 104.1 v 107.0e
(DE) Germany Aug CPI Bavaria M/M: 0.2% v 0.4% prior; Y/Y: 1.8% v 1.6% prior
(DE) Germany Aug CPI Brandenburg M/M: 0.1% v 0.4% prior; Y/Y: 1.8% v 1.4% prior
(DE) Germany Aug CPI Hesse M/M: 0.0% v 0.4% prior; Y/Y: 1.8% v 1.9% prior
(CH) Swiss Aug Credit Suisse Expectations Survey: 25.0 v 34.7 prior
(DE) Germany Aug CPI North Rhine Westphalia M/M: 0.1% v 0.4% prior; Y/Y: 1.9% v 1.8% prior
(UK) July Mortgage Approvals: 68.7K v 65.5Ke
(UK) July Net Consumer Credit: £1.2B v £1.5Be; Net Lending: £3.6B v £3.8Be
(PT) Portugal Aug Consumer Confidence: 2.3 v 2.5 prior; Economic Climate Indicator: 2.1 v 2.2 prior
(EU) Euro Zone Aug Business Climate Indicator: 1.09 v 1.05e; Consumer Confidence (Final reading): -1.5 v -1.5e
Fixed Income Issuance:
(FI) Finland opened its books to sell 10-year note via syndicate; guidance seen -21bps to mid-swaps
(IN) India sold total INR160B vs. INR160B indicated indicated in 3-month and 12-month Bills
(DK) Denmark sold total DKK 7.82B in 3-month and 6-month bills
(EU) ECB allotted $35M in 7-day USD Liquidity Tender at fixed 1.66% vs $35M prior
(SE) Sweden sold total SEK10B vs. 10B indicated in 3-month and 6-month bills
(NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 2027 Bonds; Avg Yield: 1.54% v 1.65% prior; Bid-to-cover: 2.24x v 2.22x prior
(IT) Italy Debt Agency (Tesoro) sold total €5.5B vs. €4.5-5.5B indicated range in 5-year and 10-year BTP Bonds
Sold €3.0B vs €2.5-3.0B indicated in new 0.90% Aug 2022 BTP; Avg Yield: 0.84% v 0.88% prior; Bid-to-cover: 1.57x v 1.34x prior
Sold €2.5B vs €2.0-2.5B indicated in 2.2% Aug 2027 BTP; Avg Yield: 2.09% v 2.16% prior; Bid-to-cover: 1.60x v 1.71x prior
(IT) Italy Debt Agency (Tesoro) sold €1.75B vs. €1.25-1.7B indicated range in Oct 2024 CCTeu (Floating Rate Note); Avg Yield: 0.81% v 0.77% prior; Bid-to-cover: 1.48x v 1.65x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.5% at 370.2, FTSE +0.3% at 7361, DAX +0.5% at 12006, CAC-40 +0.4% at 5049, IBEX-35 +0.3% at 10226, FTSE MIB flat at 10228, SMI +0.3% at 8836, S&P 500 Futures +0.1%]
Market Focal Points/Key Themes:
European Indices trade higher across the board tracking the rebound seen in the US yesterday and continued follow through in Futures this morning. On the Earnings front Biomerieux traded at all time highs following results, while Bertrandt, Baloise and James Fisher trade higher after reporting results. Home ware specialist Dunelm trades lower after its Chief Exec stepped down for personal reasons while HSS Hire trades over 10% lower after reporting a loss.
Looking ahead to the US morning, notable earners include Dycom, Chico FAS and Analog Devices.
Equities
Consumer discretionary [Bertrandt [BDT.DE] +5.2% (Earnings), Dunelm [DNLM.UK] -3.6% (CEO steps down), RTL [RTL.BE] +2.2% (Earnings)]
Industrials: [James Fisher [FSJ.UK] +3.8% (Earnings)]
Financials: [Baloise [BALN.CH] +2.6% (Earnings), HSS Hire [HSS.UK] -13% (Earnings), ASR Nederland [ASRNL.NL] +2.4% (Earnings)]
Healthcare: [Biomerieux [BIM.FR] +7.3% (Earnings),
Energy: [Petrofac [PFC.UK] +2.4% (Earnings)]
Speakers
UK PM May reiterated view that no Brexit deal is still better than a bad deal
German Bundesbank Survey: Low interest rates were weighing on small business. No sign of real-estate bubble
Moody’s: Euro Area to grow above potential over the next two years; raised its GDP growth forecasts for Germany, France and Italy. Now forecasted Euro Area 2017 GDP growth of 2.1% and at 1.9% in 201; Germany 2018 GDP growth at 2.2% and at 2.0% in 2018
Canadian rating agency DBRS: Very unlikely Spain sovereign rating would be immediately damaged by Catalonia region voting for independence in October’s referendum
Libya National Oil Company exec: 360K bpd of crude production shutdown by pipeline blockades that have closed 3 fields
Currencies
As concerns over the Korean Peninsula eased the USD managed to recover some of its lost luster. The USD Index tested 91.62 on Monday but advanced to approach 92.30 in today’s session to move off its 2 ½ year lows.
The EUR/USD was back below the 1.1950 level (over 100 pips lower from its recent 2 1/2 year highs. German State CPI data edged towards ECB target; but yet to confirm any early ECB taper
USD/JPY back above the 110 level after testing 4 1.2 month lows of 108.26 in the aftermath of the North Korean missile launch towards Japan.
Fixed Income
Bund futures trades at 165.20 down 6 ticks as Tuesday’ s risk-off moves, spurred by North Korea missile launch, begin to unwind. Downside targets 164.50 followed by 163.75. To the upside the 165.75 to 166.00 remains key resistance.
Gilt futures trades at 128.44 down 18 ticks as North Korean tensions ease. A resumption to the upside could eye 129.25 then 130.10. A move back below 128.25 targets 126.51
Wednesday’s liquidity report showed Tuesday’s excess liquidity rose to €1.716T from €1.700T and use of the marginal lending facility rose to €640M from €634M.
Corporateissuance saw $225M come to market via CBL & Associates offering
Looking Ahead
(GR) Greece Debt Agency (PDMA) to sell €875M in 26-Week Bills
(FI) Finland Government drafts 2018 Budget
05.30 (UK) Weekly John Lewis LFL sales data
05:30 (EU) ECB allotment in 3-month LTRO
06:00 (PT) Portugal July Industrial Production M/M: No est v 0.5% prior; Y/Y: No est v 0.6% prior
06:00 (EU) Juncker and German Chancellor Merkel to discuss the State of EU
06:45 (US) Daily Libor Fixing
07:00 (RU) Russia to sell combined RUB35.6 in 2022 and 2026 OFZ Bonds
07:00 (US) MBA Mortgage Applications w/e Aug 25th: No est v -0.5% prior
07:00 (BR) Brazil Aug FGV Inflation IGPM M/M: +0.1%e v -0.7% prior; Y/Y: -1.7%e v -1.7% prior
08:00 (DE) Germany Aug Preliminary CPI M/M: 0.1%e v 0.4% prior; Y/Y: 1.8%e v 1.7% prior
08:00 (DE) Germany Aug Preliminary CPI EU Harmonized M/M: 0.1%e v 0.4% prior; Y/Y: 1.7%e v 1.5% prior
08:00 (CL) Chile July Total Copper Production: No est v 453.2K prior
08:00 (CL) Chile July Manufacturing Production Y/Y: 2.0%e v 0.9% prior; Industrial Production Y/Y: +0.3%e v -2.1% prior
08:00 (ZA) South Africa July Budget Balance (ZAR): -66.1Be v +15.4B prior
08:05 (UK) Baltic Dry Bulk Index
08:15 (US) Aug ADP Employment Change: +185Ke v +178K prior
08:30 (US) Q2 Preliminary GDP Annualized (2nd reading) Q/Q: 2.7%e v 2.6% advance; Personal Consumption: 3.0%e v 2.8% advance
08:30 (US) Q2 Preliminary GDP Price Index: 1.0%e v 1.0% advance; Core PCE Q/Q: 0.9%e v 0.9% advance
08:30 (CA) Canada Q2 Current Account: -$17.6Be v –$14.1B prior
09:15 (US) Fed’s Powell (moderate, voter) at conference
09:30 (BR) Brazil July Primary Budget Balance (BRL): -17.1Be v -19.6B prior; Nominal Budget Balance: -44.2Be v -51.1B prior
10:30 (US) Weekly DOE Crude Oil Inventories
12:00 (CA) Canada to sell 2-Year Bonds
13:30 (MX) Mexico Central Bank (Banxico) Quarterly Inflation Report (QIR)
15:00 (US) July Agriculture Prices Received: No est 4.6% prior
15:30 (MX) Mexico July YTD Budget Balance (MXN): No est v 141.9B prior
