Awaiting US CPI Data

Notes/Observations

• Focus on US July CPI data due later today which could provide a clue as to when the Fed could start pulling back stimulus.
• German July Final CPI YoY reading confirmed its highest annual pace since 1993.

Asia

• South Korea July Unemployment Rate: 3.3% v 3.8%e.
• Singapore Q2 Final GDP Q/Q: -1.8% v -2.0%; Y/Y: 14.7% v 14.3%e.

Coronavirus

• Australia’s State of Victoria to extend its 6th lockdown by 1 additional week to Aug 19th.

Americas

• Senate passed the $1T bipartisan infrastructure plan; Bill now moves to House. Bill included money for: Roads/bridges at $110B; Rail at $66B; Power grid at $65B; Broadband at $65B; Water (inc. pipes) at $55B; Public transit at $39B; Airports at $25B; Pollution cleanup at $21B; Port at $17B; EV charge stations $7.5B.
• House Democratic leadership previously noted it would not pass the bipartisan infrastructure plan unless the Senate also passed a reconciliation spending bill with more social, climate change, and education spending.
• Most’ [~46] GOP Senators sign pledge to not help Democrats on debt ceiling, these Republicans want the Democrats to raise the debt ceiling by using procedures that did not rely on GOP votes. (Note: Democrats do not have the 60 votes needed to pass a debt ceiling increase through the ordinary legislative process). Noted the Democrats’ $3.5T budget outline did not include a measure to increase the debt limit.
• Fed’s Evans (dove, voter) stated that would like to see a few more employment reports ahead of decision to taper the Fed’s asset purchases; A difference of a month or two in the decision would not matter.

Energy

• (US) Weekly API Crude Oil Inventories: -0.8M v -0.9M prior.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.08% at 472.68, FTSE +0.41% at 7,190.55, DAX +0.04% at 15,776.30, CAC-40 +0.24% at 6,836.27, IBEX-35 +0.47% at 8,941.00, FTSE MIB +0.31% at 26,281.50, SMI +0.17% at 12,383.10, S&P 500 Futures -0.13%].
• Market Focal Points/Key Themes: European indices open modestly higher across the board but several later slipped to trade slightly in the red; sectors leading to the upside include financials and materials; while technology and health care sectors among the underperformers; industrials sector weighed down by ThyssenKrup’s results; Vestas’ cut to outlook drags down Danish index; Hella starts the day trading down as takeover valuations appear to be less than expected; Vivendi divests stake in UMG to Pershing Square; Norton and Avast agree on merger; earnings expected in the upcoming US session include Perrigo, Wendy’s and ebay.

Equities

• Consumer discretionary: Ahold Delhaize [AD.NL] +2% (earnings), Deliveroo [ROO.UK] -2% (earnings).
• Financials: ABN AMRO Bank [ABN.NL] +2% (earnings).
• Industrials: Leoni [LEO.DE] -7% (earnings).
• Technology: Avast [AVST.UK] +3% (merger; earnings).
• Materials: Salzgitter [SZG.DE] -5% (earnings), Wienerberger [WIE.AT] -2% (earnings).

Speakers

• Senate Democrats said to adopt $3.5T budget plan. Budget included climate change strategy and several new domestic social programs. House needs to approve a budget resolution, extended August recess scheduled to end on Sept 20th.
• House Majority Leader Hover (D-Md.) sent letter to lawmakers on Tuesday that the chamber will return to session on Aug. 23rd to consider the budget resolution, assuming Senate adoption likely later this week.

Currencies/Fixed Income

• USD was slightly firmer in quiet trade on wed. Focus was on US July CPI data due later today which could provide a clue as to when the Fed could start pulling back stimulus. Dealers noted that focus on the inflation figures was intensifying after several Fed members recently expressed views calling for a reduction in bond purchases.
  EUR/USD hovering just above the 1.17 level while USD/JPY was approaching the 111 neighborhood.
• Yields were slight higher in Europe between 2-3bps. German 10-year yield was at -0.44% and the Italian 10-year BTP was at 0.58%. German July Final CPI YoY reading confirmed its highest annual pace since 1993.

Economic data

• (SE) Sweden July PES Unemployment Rate: 3.9% v 3.7% prior.
• (DE) Germany July Final CPI M/M: 0.9% v 0.9%e; Y/Y: 3.8% v 3.8%e (confirmed its highest annual pace since 1993).
• (DE) Germany July Final CPI EU Harmonized M/M: 0.5% v 0.5%e; Y/Y: 3.1% v 3.1%e.
• (NO) Norway Q2 Average Monthly Earnings Y/Y: 2.1% v 2.9% prior.
• (RO) Romania July CPI M/M: 1.0% v 0.3% prior; Y/Y: 5.0% v 4.4%e (3rd month above target range).
• (JP) Japan July Preliminary Machine Tool Orders Y/Y: 93.4% v 96.6% prior.
• (IT) Italy July Final CPI M/M: 0.5% v 0.3% prelim; Y/Y: 1.9% v 1.8% prelim; – CPI FOI Index (ex-tobacco): 104.2 v 103.8 prior.
• (IT) Italy July Final CPI EU Harmonized M/M: -1.0% v -1.1% prelim; Y/Y: 1.0% v 0.9%e.
• (CN) China July Aggregate Financing (CNY): 1.060T v 1.70Te.
• China July M2 Money Supply Y/Y: 8.3% v 8.8%e v 8.6% prior; M1 Money Supply Y/Y: % v 5.5% prior; M0 Money Supply Y/Y: % v 6.2% prior.
• (CN) China July New Yuan Loans (CNY): 1.080T v 1.200Te.
• (CH) Swiss Q2 Real Estate Bubble Index: 1.90 v 1.78 prio.

Fixed income Issuance

• (IN) India sold total INR170B vs. INR170B indicated in 3-month, 6-month and 12-month bills.
• (DK) Denmark sold total DKK3.1B in 3-month, 6-month and 9-month Bills.
• (IT) Italy Debt Agency (Tesoro) sold €7.0B vs. €7.0B indicated in 12-month Bills; Avg Yield: -0.513% v -0.450% prior; Bid-to-cover: 1.27x v 1.26x prior.
• (UK) DMO sold £700M in 0.125% Mar 2039 inflation-linked bond (UKTi); Real Yield: -2.633%; bid-to-cover: 2.27x.

Looking Ahead

• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (ZA) South Africa July Sacci Business Confidence:
• 05:30 (DE) Germany to sell €4.0B in 0% Aug 2031 Bunds.
• 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).
• 06:00 (PT) Portugal July Final CPI M/M: No est v 0.3% prelim; Y/Y: No est v 1.5% prelim.
• 06:00 (PT) Portugal July Final CPI EU Harmonized M/M: No est v 0.3% prelim; Y/Y: No est v 1.1% prelim.
• 06:00 (PT) Portugal Q2 Unemployment Rate: No est v 7.1% prior.
• 06:00 (CZ_ Czech Republic to sell combined CZK10B in 2029, 2032 and 2057 bonds.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (RU) Russia to sell OFZ Bonds.
• 07:00 (US) MBA Mortgage Applications w/e Aug 6th: No est v -1.7% prior.
• 07:00 (MX) Mexico Jun Industrial Production M/M: 0.1%e v 0.1% prior; Y/Y: 15.5%e v 36.4% prior;
• Manufacturing Production Y/Y: 16.7%e v 48.0% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (HU) Hungary Central Bank July Minutes.
• 08:00 (BR) Brazil Jun Retail Sales M/M: 0.5%e v 1.4% prior; Y/Y: 8.6%e v 16.0% prior.
• 08:00 (BR) Brazil Jun Broad Retail Sales M/M: -1.8%e v +3.8% prior; Y/Y: 11.5%e v 26.2% prior.
• 08:00 (US) Fed’s Logan.
• 08:30 (US) July CPI M/M: 0.5%e v 0.9% prior; Y/Y: 5.3%e v 5.4% prior.
• 08:30 (US) July CPI (ex-food/energy) M/M: 0.4%e v 0.9% prior; Y/Y: 4.35e v 4.5% prior.
• 08:30 (US) July CPI Index NSA: 272.936e v 271.696 prior; CPI Core Index SA: 279.531e v 278.14 prior.
• 08:30 (US) July Real Avg Hourly Earning Y/Y: No est v -1.7% prior; Real Avg Weekly Earnings Y/Y: No est v -1.4% prior.
• 09:00 (RU) Russia Jun Trade Balance: $11.7Be v $10.2B prior; Exports: $36.5Be v $34.8B prior; Imports: $25.0Be v $24.6B prior.
• 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (7-20 years).
• 10:30 (US) Weekly DOE Oil Inventories.
• 10:30 (US) Fed’s Bostic.
• 12:00 (US) Fed’s George to speak to Business Economists.
• 13:00 (US) Treasury to sell 10-Year Notes.
• 14:00 (US) July Monthly Budget Statement: -$300.0Be v -$174.2B prior.
• 15:00 (AR) Argentina Jun Capacity Utilization: No est v 61.5% prior.
• 18:45 (NZ) New Zealand July Food Prices M/M: No est v 1.4% prior.
• 19:01 (UK) July RICS House Price Balance: 76%e v 83% prior.
• 19:50 (JP) Japan July PPI M/M: 0.5%e v 0.6% prior; Y/Y: 5.0%e v 5.0% prior.
• 21:00 (AU) Australia Aug Consumer Inflation Expectation: No est v 3.7% prior.
• 21:10 (JP) BOJ Outright Bond Operation; to Purchase 1~3 Years maturities.
• 22:00 (JP) Japan July Tokyo Avg Office Vacancies: No est v 6.19 prior.
• 23:00 (KR) South Korea Jun M2 Money Supply M/M: No est v 0.6% prior; “L” Money Supply M/M: No est v -0.5% prior.
• 23:00 (NZ) New Zealand Q3 2-yearInflation Expectation Survey: No est v 2.05% prior.