Notes/Observations
- Major European PMI Manufacturing data (Beats: Spain, Netherlands, Swiss, Norway, Hungary; Misses: Germany, France, Italy, UK, Czech, Poland; In-line: Euro Zone )
- Turkey inflation rate hits highest annual pace since Sept 2003; central bank vows adjustment in policy coming this month
- Risk appetite remains fragile
Asia:
- China Aug Caixin PMI Manufacturing at a 14-month low (50.6 v 50.7e) with new export orders contracting for the 5th straight month.
- Japan Aug Final Manufacturing PMI: 52.5 v 52.5 prelim
- Australia July Retail sales miss expectations (M/M: 0.0% v 0.3%e)
- Bank of Japan (BoJ) Gov Kuroda reiterated the central bank’s forward guidance, unlikely to raise interest rates for ‘quite some time’
Europe:
- Fitch revised Italy sovereign debt rating outlook to Negative from Stable; affirms BBB rating
- UK PM Ma stated that there would be no compromise with EU on Brexit plan, reiterated stance that would not give in to those calling for a second referendum on Brexit
- ECB’s De Guindos (Spain): Euro Zone economic growth remained solid and broad-based. Expected underlying inflation to pick up towards the end of the summer; uncertainty around projected path of inflation had diminished
Americas:
- President Trump tweeted that a trilateral NAFTA deal with Canada was not necessary and Congress should not “interfere” with trade negotiations; Canada must agree to new terms or US would terminate and “go back to pre-NAFTA”
- Brazil electoral court (TSE) ruled that Lula could NOT run as a candidate in the Presidential election; Lula expected to appeal. Court ruled 6 to 1 that Lula should be barred from running
Economic Data:
- (IN) India Aug Manufacturing PMI: 51.7 v 52.3 prior (13th month of expansion)
- (IE) Ireland Aug Manufacturing PMI: 57.5 v 56.3 prior (63rd month of expansion)
- (JP) Japan Aug Vehicle Sales Y/Y: -0.2% v +1.2% prior
- (RU) Russia Aug Manufacturing PMI: 48.949.3e (4th month of contraction)
- (AU) Australia Aug Commodity Index (AUD): 113.6 v 111.5 prior; Commodity Index SDR Y/Y: 6.7% v 7.5% prior
- (SE) Sweden Aug Manufacturing PMI: 52.5 v 57.4 prior
- (TR) Turkey Aug CPI M/M: 2.3% v 1.8%e; Y/Y: 17.9% v 17.6%e (highest annual pace since 2003); CPI Core Index Y/Y: 17.2 v 15.1% prior
- (TR) Turkey Aug PPI M/M: 6.6 v 1.8% prior; Y/Y: 32.1% v 25.0% prior
- (NL) Netherlands Aug Manufacturing PMI: 59.1 v 57.6e (60th month of expansion)
- (NO) Norway Aug Manufacturing PMI: 60.5 v 54.4e (2nd month of expansion)
- (HU) Hungary Aug Manufacturing PMI: 56.2 v 53.1e (33rd month of expansion)
- (PL) Poland Aug Manufacturing PMI: 51.4 v 53.0e (45th month of expansion but lowest since Oct 2016)
- (TR) Turkey Aug Manufacturing PMI: 46.4 v 49.0 prior (5th straight contraction)
- (ES) Spain Aug Manufacturing PMI: 53.0 v 52.5e(58th month of expansion)
- (CH) Swiss July Real Retail Sales Y/Y: -0.3% v +0.2% prior
- (CZ) Czech Aug Manufacturing PMI: 54.9 v 55.2e (25th month of expansion but lowest since Aug 2017)
- (CH) Swiss Aug Manufacturing PMI: 64.8 v 61.0e (32 months without a contraction)
- (TH) Thailand Aug Business Sentiment Index: 51.4 v 52.0 prior
- (IT) Italy Aug Manufacturing PMI: 50.1 v 51.2e (24th month of expansion but lowest since Aug 2016)
- (FR) France Aug Final Manufacturing PMI: 53.5 v 53.7e (confirmed its 23rd month of expansion)
- (DE) Germany Aug Final Manufacturing PMI: 55.9 v 56.1e (confirmed its 44th month of expansion)
- (EU) Euro Zone Aug Final Manufacturing PMI: 54.6 v 54.6e (confirmed 61st month of expansion)
- (GR) Greece Aug Manufacturing PMI: 53.9 v 53.5 prior (15th month of expansion)
- (CH) SNB Total Sight Deposits for Week Ended Aug 31st (CHF): 576.2B v 576.8B prior
- (UK) Aug Manufacturing PMI: 52.8 v 53.9e (25th month of expansion but lowest since July 2016)
- (GR) Greece Q2 Final GDP Q/Q: 0.2% v 0.9% prior; Y/Y: 1.8% v 2.5% prior, GDP (unadj) Y/Y: 1.8% v 2.6% prior
- (ZA) South Africa Aug Manufacturing PMI: 43.4 v 50.0e – (DK) Denmark Aug Manufacturing PMI Survey: 59.1 v 55.8 prior
Fixed Income Issuance:
- (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 6-month bills; Avg Yield: 0.72% v 0.71% prior; Bid-to-cover: 3.17x v 2.58x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx50 -0.1% at 3,388, FTSE +0.8% at 7,492, DAX -0.3% at 12,333, CAC-40 flat at 5,406; IBEX-35 +0.1% at 9,404, FTSE MIB +0.2% at 20,313, SMI +0.1% at 8,986, S&P 500 Futures closed]
- Market Focal Points/Key Themes: European indices opened mixed and traded largely sideways as the session wore on; trading light due to restricted equity news flow and holidays in the US and Canada; attention on Brexit concerns after weekend reporting that Foreign Secretary Johnson my challenge May’s leadership; energy stocks supported by brent prices; underperformers include auto sector and consumer discretionary stocks
Equities
- Consumer discretionary: Casino CO.FR +0.8% (outlook), Safestyle SFE.UK +20.4% (settlement), WPP WPP.UK +0.1% (New CEO)
- Consumer staples: Ontex ONTEX.BE -18.8% (Rejects final offer from PAI)
- Energy: SBM Offshore SBMO.NL +8.3% (agreement with Brazilian prosecutor)
- Healthcare: Dechra Pharmaceuticals DPH.UK -15.3% (results), Medigene MDG.DE -0.3% (CFO resigns)
- Industrials: Fincantieri FCT.IT +5.9% (analyst action), Maire Technimont MT.IT +3.8% (order)
Speakers
- BOE Gov Carney said to signal willingness to extend his term. UK Treasury said to open talks with BOE Gov Carney to stay on in position. Concerned that trying to complete the process of finding a new governor would be difficult
- Italy Dep PM Di Maio: Introduction of citizens’ income remains a top priority and to be put in place by 2019
- Spain PM Sanchez: Confident of budget approval for 2019 and would provide €9.0B to regions if budget approved . Would not allow referendum on Catalan independence
- Turkey Central Bank (CBRT): Will take necessary actions; monetary policy stance to be adjusted in Sept. Recent developments regarding the inflation outlook indicated a significant risks to price stability
- Turkey Fin Min Albayrak: Short-term inflation spikes were normal; central bank had stated it would not hesitate to take necessary steps. Needed full-fledged fight against inflation at this point. Monetary policy would continue to be shaped within target of price stability. Under new presidential system the central bank policy was now coordinated with fiscal policy which means the central bank had a much stronger and effective hand. Not expecting any problems within the banking system and saw no problems or risks from overall debt levels (still low compared to international averages)
- Indonesia Fin Min Indrawati: Anticipating ongoing market pressure from Argentina; to monitor sentiment coming from that turmoil and focus on addressing Balance of Payment (BOP) concerns
- China President Xi reiterated view that unilateralism and protectionism were on the rise. Willing to work on Belt &Road initiative with international partners
- Russia Energy Min Novak: Sept oil production seen at level registered in July-Aug (approx 11.2M bpd)
- Oman Oil Min: Some OPEC+ members had difficulties reaching their own production quota due to lack of investment. Saw oil in range between $70-80 in 2018
Currencies
- The USD began the session near 1-wek highs as the global risk appetite remained fragile.
- EUR/USD had difficulties staying above the 1.16 handle as the week began and remained susceptible to technical headwinds.
- GBP currency began the session on softer footing as dealers noted that PM May’s Chequers plan continued to be attacked by EU and her own party officials. PM May also ruled out a second referendum on Brexit . GBP/USD approaching the lower end of the 1.29 handle in the session and dipped bwelow the level after the Aug PMI reading came in below expectations. Dealers noted that BOE Gov Carney said to signal willingness to extend term with markets now looking for confirmation in the near future. UK Treasury said to open talks with BOE Gov Carney to stay on in position
- TUR currency Lira was off its worst level despite inflation hitting a 15-year high at 17.9%. Dealers noted that market participants seemed to had expected worse news on inflation and a relief rally ensure for the Lira. Turkey Central Bank (CBRT) stated that it would take necessary actions and the monetary policy stance would be adjusted in Sept
Looking Ahead
- (AR) Argentina Aug Government Tax Revenue (ARS): No est v 293.9B prior
- (BR) Brazil July CNI Capacity Utilization: No est v 76.7% prior
- (IT) Italy Aug Budget Balance: No est v €10.6B prior
- (RO) Romania Aug International Reserves: No est v $34.8B prior
- (RU) Russia Aug Sovereign Wealth Funds: Wellbeing Fund: No est v $77.2B prior
- (ZA) South Africa Aug Naamsa Vehicle Sales Y/Y: No est v 2.6% prior
- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell 6-month Bills
- 06:45 (US) Daily Libor Fixing
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 08:00 (CL) Chile July Retail Sales Y/Y: 3.5%e v 6.3% prior, Commercial Activity Y/Y: No est v 9.1% prior
- 08:00 (CZ) Czech Aug Budget Balance (CZK): No est v 16.6B prior
- 08:05 (UK) Baltic Dry Bulk Index
- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming auctions
- 08:55 (FR) France Debt Agency (AFT) to sell combined €4.1-5.3B in 3-month, 6-month and 12-month BTF Bills
- 09:00 (BR) Brazil Aug Manufacturing PMI: No est v 50.5 prior
- 09:00 (SG) Singapore Aug Purchasing Managers Index (PMI): No est v 52.3 prior, Electronics Sector Index: No est v 51.6 prior
- 09:30 (EU) ECB announces Covered-Bond Purchases
- 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
- 10:00 (MX) Mexico July Total Remittances: $2.9Be v $3.1B prior
- 10:00 (MX) Mexico Central Bank Economist Survey
- 10:30 (MX) Mexico Aug Manufacturing PMI: No est v 52.1 prior
- 11:00 (CO) Colombia July Exports: $3.4Be v $3.3B prior
- 11:00 (IS) Iceland Q2 Current Account ISK): No est v 0.0B prior
- 12:00 (IT) Italy Aug New Car Registrations Y/Y: No est v 4.4% prior
- 13:00 (MX) Mexico Aug IMEF Manufacturing Index: No est v 50.0 prior; Non-Manufacturing Index: No est v 49.7 prior
- 14:00 (BR) Brazil Aug Trade Balance: $4.0Be v $4.2B prior
- 14:30 (US) Fed’s Evans (non-voter, dove) – 16:00 (US) Weekly Crop Progress Report
