Notes/Observations
Focus on upcoming US payroll data for clarity of a possible 3rd rate hike this year as recent data suggest improving US fundamentals
Major European Manufacturing data remains in growth territory (Beats: Italy, UK Misses: Germany, Sweden, Norway; In-line: France and Euro Zone)
Overnight
Asia:
Japan Aug Final PMI Manufacturing: 52.2 v 52.8 prelim (confirmed 12th month of expansion)
China Aug Caixin PMI Manufacturing beat expectations to its highest level since Feb (51.6 v 51.0e)
China PBoC Research Bureau Head Xu Zhong: Reiterated ‘prudent and neutral’ monetary policy; China should keep tight property curbs in main cities. Property market had become major source of financial risk. Considering measures related to home mortgage loan growth to reduce volatility related to property market prices
Europe:
UK Trade Sec Liam Fox: UK must not allow itself to be blackmailed by EU over Brexit divorce bill in order to start trade talks; a bad Brexit deal would harm both UK and EU companies
German Chancellor Merkel may double urban transport infrastructure fund to up to €1.0B
Americas:
President Trump to propose initial $5.9B in Harvey aid; said to consider linking debt limit increase to Harvey aid
Treasury Sec Mnuchin: have been working with WH adviser Cohn and lawmakers on tax plan proposal, have been discussing detailed plan. September 29th remains the debt ceiling deadline. Having a weaker USD is somewhat better for trade
Economic data
(IE) Ireland Aug Manufacturing PMI: 56.1 v 54.6 prior (51st straight month of expansion and Highest reading since July 2015)
(IN) India Aug Manufacturing PMI: 51.2 v 47.9 prior
(JP) Japan Aug Domestic Vehicle Sales Y/Y: +4.7% v -1.1% prior
(JP) Japan Aug Consumer Confidence: 43.3 v 43.5e
(PE) Peru Aug CPI M/M: 0.7% v 0.4%e; Y/Y: 3.2% v 3.0%e
(FI) Finland Q2 GDP Q/Q: 0.4% v 1.1% prior; Y/Y: 3.0% v 2.9%
(RU) Russia Aug Manufacturing PMI: 51.6 v 51.8e (13th month of expansion)
(SE) Sweden Aug Manufacturing PMI: 54.7 v 60.5e
(CZ) Czech Q2 Preliminary GDP Q/Q: 2.5% v 2.3%e; Y/Y: 4.7% v 4.5%e
(NL) Netherlands Aug Manufacturing PMI: 59.7 v 58.9 prior (48th month of expansion)
(NO) Norway Aug Manufacturing PMI: 55.7 v 56.9e
(HU) Hungary Aug Manufacturing PMI: 56.6 v 56.5e (20th month of expansion)
(PL) Poland Aug Manufacturing PMI: 52.5 v 53.0e (34th month of expansion)
(ES) Spain Aug Manufacturing PMI: 52.4 v 54.4e (46th month of expansion)
(SE) Sweden Q2 Current Account (SEK): 39.5B v 47.5B prior
(CZ) Czech Aug Manufacturing PMI: 54.9 v 55.8e (12th month of expansion)
(CH) Swiss Aug Manufacturing PMI: 61.2 v 60.2e (highest since Apr 2011)
(IT) Italy Aug Manufacturing PMI: 56.3 v 55.3e (12th month of expansion)
(FR) France Aug Final Manufacturing PMI: 55.8 v 55.8e (confirm its 11th month of expansion)
(DE) Germany Aug Final Manufacturing PMI: 59.3 v 57.4e (confirms 33rd month of expansion)
(EU) Euro Zone Aug Final Manufacturing PMI: 57.4 v 57.4e (Confirms 48th straight month of growth)
(IT) Italy Q2 Final GDP (2nd reading) Q/Q: 0.4% v 0.4%e; Y/Y: 1.5% v 1.5%e
(GR) Greece Aug Manufacturing PMI: 52.2 v 50.5 prior (3rd month of expansion)
(NO) Norway Aug Unemployment Rate: 2.7% v 2.7%e
(UK) Aug PMI Manufacturing: 56.9 v 55.0e (13th month of expansion)
(ZA) South Africa Aug Manufacturing PMI: 44.0 v 42.9 prior (3rd straight contraction)
(DK) Denmark Aug Manufacturing PMI Survey: 61.1 v 63.9 prior
(GR) Greece Q2 GDP Q/Q: 0.5% v 0.2%e; Y/Y: 0.8% v 0.4% prior (2nd straight quarterly growth)
Fixed Income Issuance:
(IN) India sold total INR180B vs. INR180B indicated in 2022, 2031, 2033 and 2055 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.4% at 375.5, FTSE +0.2% at 7447, DAX +0.5% at 12117, CAC-40 +0.8% at 5124, IBEX-35 +0.5% at 10350, FTSE MIB +0.5% at 21775, SMI +0.1% at 8932, S&P 500 Futures +0.1%]
Market Focal Points/Key Themes:
European Indices continue their march higher with positive corporate data helping drive sentiment. Price action remains muted ahead of the US long weekend and the August NFP figures out later today. Vivendi shares trade sharply higher following their results setting the tone, and helping the CAC outperform. Elsewhere Volvo trades higher after setting new targets whole Indivior weighs on the UK mid caps after falling close to 40% on the day after a court ruling could effect FY17 results.
Equities
Consumer discretionary [Vivendi [VIV.UK] +4.8% (Earnings)]
Industrials: [Volvo [VOLVB] +7.1% (New financial targets)]
Technology: [Sonova [SOON.CH] +1.2% (New CEO), Gemalto [GTO.NL] -4.7% (Earnings), Nets [NETS.DK] +1.5% (Confirms takeover talk)]
Telecom: [ Illiad [ILD.FR] +0.7% (Earnings)]
Healthcare: [ Indivior [INDV.UK] -39% (To appeal court rulings ANDA litigation after court ruled Dr Reddy’s did not infringe on patent)]
Speakers
ECB’s Nowotny (Austria): As long as we have low inflation, I do not see perspective for higher interest rates
ECB’a Constantio reiterated view that region recovery is becoming broader and more robust. Task of normalizing inflation remained difficult
Canadian rating agency DBRS: UK’s ‘AAA’ sovereign rating will likely not come under threat unless there is a wide-scale deterioration in institutional and structural factors
Iraq Oil Min Luaibi: Fully compliant with global oil production deal; too early to talk about expansion of oil cut agreement. Iraq oil production at 4.32M bpd ; southern exports between 3.22-3.23M bpd
Currencies
USD trying to hold on to recent gains with the focus turning upon the upcoming US payroll data for clarity of a possible 3rd rate hike this year. Dealers citing the recent trend in US data the suggested an improving picture of fundamentals
EUR/USD fractionally lower in quiet trade. The pair has moved over 250 pips off its recent 2 ½ highs. Analysts note that ECB was highly unlikely to take any decision on trimming its asset purchases at its Sept policy meeting next week. Overall the market now believing that QE would be phased out only slowly as the euro’s rapid gains against the dollar are worrying a growing number of policymakers
Better-than-expected Aug UK PMI Manufacturing helped the GBP currency firm up against both the USD and EUR pairs. GBP/USD reversed its slight losses to trade at 1.2930 just ahead of the NY morning.
Fixed Income
Bund futures trades at 165.09 down 13 ticks, winding down the week in the upper third of this week’s trading range. Downside targets 164.50 followed by 163.75. To the upside the 165.75 to 166.00 remains key resistance.
Gilt futures trades at 128.26 down 6 ticks, little changed with the focus on next week’s 2065 syndication and BOE reinvestment buybacks. A resumption to the upside could eye 129.25 then 130.10. A move back below 128.25 targets 126.51
Friday’s liquidity report showed Thursday’ excess liquidity rose to €1.731T from €1.729T and use of the marginal lending facility rose to €250M from €109M.
Corporateissuance saw $1.73B come to market this week, the smallest total in 2017. Next week’s forecast is between $35-40B. For the week ending August 30th IG Funds reported inflows of $6.1B, while High Yields funds reported inflows of $0.3B
Looking Ahead
(IT) Italy Aug Budget Balance: No est v €11.2B prior
(RO) Romania Aug International Reserves: No est v $38.2B prior
(ZA) South Africa Aug Naamsa Vehicle Sales Y/Y: 3.2%e v 4.1% prior
(RU) Russia Aug Sovereign Wealth Funds: Reserve Fund: No est v $16.9B prior; Wellbeing Fund: No est v $74.7B prior
(AR) Argentina Aug Government Tax Revenue (ARS): 215.5Be v 237.3B prior
(US) Aug Wards Domestic Vehicle Sales: No est v 12.96M prior; Total Vehicle Sales: No est v 16.69M prior
05:30 (ZA) South Africa to sell combined ZAR650M in I/L 2029, 2038 and 2050 bonds
06:00 (UK) DMO to sell combined £6.0B in 1-month, 3-month and 6-month bills (£2.0B, £2.0B and £2.0B respectively)
06:45 (US) Daily Libor Fixing
07:00 (CA) Canada July MLI Leading Indicator M/M: No est v 0.2% prior
07:30 (IN) India Weekly Forex Reserves
08:00 (BR) Brazil Q2 GDP Q/Q: 0.0%e v 1.0% prior; Y/Y: 0.0%e v -0.4% prior; GDP 4-quarters accumulated: -1.5%e v -2.3% prior
08:00 (BR) Brazil Aug PMI Manufacturing: No est v 50.0 prior
08:00 (CL) Chile July Retail Sales Y/Y: 4.0%e v 4.2% prior
08:00 (CZ) Czech Aug Budget Balance (CZK): No est v 25.0B prior
08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming issuance
08:00 (IN) India announces upcoming Bill auction (held on Wed)
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Aug Change in Nonfarm Payrolls: +180Ke v +209K prior; Private Payrolls: +170Ke v +205K prior; Manufacturing Payrolls: +9Ke v +16K prior
08:30 (US) Aug Unemployment Rate: 4.3%e v 4.3% prior; Underemployment rate: No est v 8.6% prior
08:30 (US) Aug Average Hourly Earnings M/M: 0.2%e v 0.3% prior; Average Hourly Earnings Y/Y: 2.6%e v 2.5% prior; Average Weekly Hours: 34.5e v 34.5 prior
09:30 (CA) Canada Aug Manufacturing PMI: No est v 55.5 prior
09:45 (US) Aug Final Markit Manufacturing PMI: 52.5e v 52.5 prelim
10:00 (US) Aug ISM Manufacturing: 56.5e v 56.3 prior; Prices Paid: 62.0e v 62.0 prior
10:00 (US) Aug Final University of Michigan Confidence: 97.4e v 97.6 prelim
10:00 (US) July Construction Spending M/M: +0.5%e v -1.3% prior
10:00 (MX) Mexico July Total Remittances: $2.4Be v $2.4B prior
10:00 (MX) Mexico Central Bank (Banxico) Economist Survey
10:00 (BR) Brazil July CNI Capacity Utilization: No est v 77.0% prior
10:30 (MX) Mexico Aug PMI Manufacturing: No est v 51.2 prior
12:00 (IT) Italy Aug New Car Registrations Y/Y: No est v 5.9% prior
13:00 (US) Weekly Baker Hughes Rig Count data
13:00 (MX) Mexico Aug IMEF Manufacturing Index: 51.8e v 51.5 prior; Non-Manufacturing Index: 52.0e v 53.0 prior
14:00 (BR) Brazil Aug Trade Balance: $4.4Be v $6.3B prior; Exports: $18.2Be v $18.8B prior; Imports: $14.0Be v $12.5B prior
