Notes/Observations
- Global trade issues back on the front burner
- Trump tariff announcement puts risk aversion back on the table; latest escalation by the US raises the probability of a no-deal outcome in trade talks with China
- Japan removed South Korea from trusted export white-list
- Trump to make announcement on EU trade later on Friday (13:45 ET/17:45 GMT)
- Key focus turns to US July jobs report
Asia:
- China Foreign Min Wang Yi reiterated stance that new tariffs were not the solution to the trade dispute
- China PBoC: Fed rate cut not a decisive factor on Chinese monetary policy; targeted easing to continue to be main policy (in line with prior PBoC comments)
- Japan removed South Korea from trusted export white-list (Note: relates to Japan’s trusted export partners)
- Australia Jun Retail Sales reasonably solid with MoM: 0.4% v 0.3%e
Europe/Mideast:
- UK conservative party loses Brecon and Radnorshire seats in special election to Liberal Democrats; Conservative party now retains majority by 1 member of parliament
- ECB said to be prepared to announce tiered rate cut along with a deposit rate cut in September. The introduction of tiering to ensure forward guidance indicating more cuts could follow was convincing. ECB still said to be undecided on QE and not necessarily imminent
Americas:
- Trump announced his new 10% tariffs set for Sept 1st after getting a briefing on the trade talks from his negotiators on Thursday. President said to ruled out a Treasury Sec Mnuchin proposal to given China a warning about potential new tariffs President Trump Not concerned about drop in Dow stocks; Taxing China until US can reach trade deal; thinks Xi wants to make a deal but not movig fast enough; China is devaluing its currency
- President Trump shows an announcement regarding EU trade at 13:45ET Friday
- US Senate: passed the 2-year budget, debt limit deal backed by Trump; sent back to Trump to sign
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -2.10% at 379.54, FTSE -2.05% at 7,429.38, DAX -2.65% at 11,929.04, CAC-40 -2.78% at 5,402.91, IBEX-35 -1.41% at 8,910.65, FTSE MIB -2.01% at 21,133.50, SMI -0.88% at 9,832.00, S&P 500 Futures -0.46%]
- Market Focal Points/Key Themes: European Indices trade sharply lower across the board, following weaker session in Asia and lower US futures as trade tensions come to the forefront once again as US President Trump enacted 10% tariffs on over $300B of Chinese goods. On the corporate front sizable losses are seen across the board, with Allianz declining almost 3% following positive earnings; Royal Bank of Scotland sharply lower as lower Net Interest Income and generally weaker market tone overshadowed a positive earnings report and a special dividend. Credit Agricole, BT, ePRICE, Brunel Int, Ferrexpo and Nataxis are among other names declining on earnings and trading updates. International Consolidated Airlines bucks the trend gaining over 2% on upbeat results and affirmed outlook with Andritz in Austria also outperforming despite a drop in profits as orders were strong in Q2. In other news European Automakers trade sharply lower on trade tensions as well as US July sales data; while in the US gainers include Pinterest, Zix, and US Steel on earnings after the close, while Flour, Square, and Chemours are notable decliners on earnings. Looking ahead notable earners include Oil giants Exxon and Chevron, as well as Sprint and Newell Brands among others.
Equities
- Consumer discretionary: IAG [IAG.UK] +2.5% (earnings), Pets at Home [PETS.UK] +2% (trading update)
- Financials: Allianz [ALV.DE] -3% (earnings), Royal Bank of Scotland [RBS.UK] -5% (earnings; cuts target), Credit Agricole [ACA.FR] -5.5% (earnings)
- Industrials: Pirelli [PIRC.IT] -5% (earnings; cuts outlook), Andritz [ANDR.AT] +9% (earnings)
- Technology: Robit [ROBIT.FI] -17% (profit warning)
- Telecom: BT Group [BT.A.UK] -4% (earnings), Telecom Italia [TLIT.IT] -2% (earnings)
Speakers
- BOE Gov Carney: Not helpful to downplay the challenges ahead of Brexit. Reiterated view that still more likely than not there will be a Brexit deal. Response would not be automatic if a no-deal outcome
- We will do everything we can to support the economy
- Italy said to consider Dep Fin MIn Garavaglia for Italy’s EU Commission position
- South Korea said to remove Japan from its white list (**Note: responds to earlier move by Japan). To continue efforts for diplomatic solutions but will take steps in strengthening its export controls.
- China Foreign Ministry Spokeswoman Hua Chunying: if the US was bent on adding tariffs, the China would have to take countermeasures; Reiterates stance that China would never step back on important issues
- China Commerce Ministry (MOFCOM): reiterated stance that China vowed to retaliate if US tariff hike took effect
- China Global Times Editor-in-chief Hu Xijin tweeted: As far as I know, China had recently sped up buying US farm products, public opinion was helping make the adjustment. But President Trump in a rush to reach a deal and was too arrogant. Influenced by wrong intelligence, he misjudged China in many fields. He might make big mistake on China.
Currencies/Fixed Income
- Safe-haven flows dominated FX price action with the heighten escalation on the global trade front. Trump’s threat to impose tariffs on essentially all Chinese imports helped to push the JPY and CHF currencies firmer in the session. Spot gold near 6-year highs. Money poured into govt bonds with US 10-year lower by another 5bps in electronic trade and German 10-year Bunds hit a fresh record low at -0.49%
- USD/CNY was higher by 0.1% to test above 6.90 level. Dealers noted that the escalation in the trade war would likely put more pressure on the yuan to weaken, thus raising the risk USD/CNY could breach the 7 level -USD: Looking at the USD index, the dollar has had a quite volatile week with the strengthening after the rate cut then the sell off after Trumps new tariffs added to China. To the downside traders look to the level in the 98.00 range.
- GBP: The cable continues its slide as it approaches traders look att he 1.21 handle with the next level in the region of 1.198.
Economic Data
- (CH Swiss July CPI M/M: -0.5% v -0.4%e; Y/Y: 0.3% v 0.5%e; CPI Core Y/Y: 0.4% v 0.6%e
- (CH Swiss July CPI EU Harmonized M/M: 0.0% v 0.0%e; Y/Y: 0.4% v 0.6%e
- (ES) Spain July Net Unemployment Change: -4.3K v -22.5Ke – (HU) Hungary Jun Retail Sales Y/Y: 5.2% v 6.0%e
- (CH) Swiss July PMI Manufacturing: 44.7 v 47.5e
- (CN) Weekly Shanghai copper inventories (SHFE): 156.0K v 149.2K tons prior
- (IT) Italy Jun Industrial Production M/M: -0.2% v -0.3%e; Y/Y: -1.2% v -0.8%e; Industrial Production NSA Y/Y:-4.2 % v -0.6% prior
- (NO) Norway July Unemployment Rate: 2.4% v 2.3%e
- (RU) Russia Narrow Money Supply w/e July 26th (RUB): 10.44T v 10.55T prior
- (UK) July Construction PMI: 45.3 v 46.0e
- (EU) Euro Zone Jun Retail Sales M/M: 1.1% v 0.3%e; Y/Y: 2.6% v 1.3%e
- (EU) Euro Zone Jun PPI M/M: -0.6% v -0.3%e; Y/Y: 0.7% v 0.8%e
- (IT) Italy Jun Retail Sales M/M: 1.9% v -0.7% prior; Y/Y: +1.9% v -1.8% prior
Fixed Income Issuance
- (IN) India sold total INR170B vs. INR170B indicated in 2024, 2029, 2043, and 2049 bonds
Looking Ahead
- 06:00 (UK) DMO to sell €6.0B in 1-month, 3-month and 6-month bills (£0.5B, £2.5B and £3.0B respectively)
- 07:00 (MX) Mexico July Vehicle Domestic Sales: No est v 106.4K prior
- 07:00 (MX) Mexico Jun Leading Indicators M/M: No est v 0.00% prior
- 07:30 (IN) India Weekly Forex Reserves w/e July 26th: No est v $430.4B prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:00 (IN) India announces upcoming bill issuance (held on Wed)
- 08:30 (US) July Change in Nonfarm Payrolls: +165Ke v +224K prior; Change in Private Payrolls: +165Ke v +191K prior; Change in Manufacturing Payrolls: +5Ke v +17K prior
- 08:30 (US) July Unemployment Rate: 3.6%e v 3.7% prior; Underemployment Rate: No est v 7.2% prior; Labor Force Participation Rate: No est v 62.9% prior
- 08:30 (US) July Average Hourly Earnings M/M: 0.2%e v 0.2% prior; Y/Y: 3.1%e v 3.1% prior; Average Weekly Hours: 34.4e v 34.4 prior
- 08:30 (US) Jun Trade Balance: -$54.6Be v -$55.5B prior
- 08:30 (CA) Canada Jun Int’l Merchandise Trade: -0.3Be v C$0.8B prior
- 09:00 (SG) Singapore July Purchasing Managers Index (PMI): 49.6e v 49.6 prior; Electronics Sector Index: No est v 49.2 prior
- 09:00 (CL) Chile Jun Retail Sales Y/Y: 0.0%e v 3.3% prior; Commercial Activity Y/Y: No est v 5.5% prior
- 10:00 (US) Jun Factory Orders: +0.7%e v -0.7% prior; Factory Orders (ex-transportation): No est v 0.4% prior
- 10:00 (US) Jun Final Durable Goods Orders: No est v 2.0% prelim; Durables Ex-Transportation: No est v 1.2% prelim; Capital Goods Orders (non-defense/ex-aircraft): No est v 1.9% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v 0.6% prelim
- 10:00 (US) July Final University of Michigan Confidence: 98.5e v 98.4 prelim
- 11:00 (DK) Denmark July Foreign Reserves (DKK): No est v 449.6B prior
- 11:00 (CO) Colombia Jun Exports: $3.1Be v $3.8B prior
- 11:00 (EU) Potential sovereign ratings after European close
- 13:00 (US) Weekly Baker Hughes Rig Count
- 13:45 (US) President Trump on EU trade
- 14:00 (CO) Colombia Central Bank July Minutes
