Notes/Observations
Senate ‘skinny repeal’ bill fails; GOP dealt stiff blow in Senate’s bid to repeal ‘Obamacare’ (Republican Senators McCain, Murkowski and Collins all voted against the amendment)
European Q2 GDP coming in better-than-expected (France, German , Sweden YoY beat)
Overnight
Asia:
Japan Jun Jobless Rate matched lowest rate since Jun 1994 ( 2.8% 3.0%e); Job-To-Applicant Ratio saw its 4th month of improvement and highest since 1974 (1.51 v 1.50e)
Japan Jun Overall Household Spending registered its 1st rise in 16 months and largest increase since Aug 2015) Y/Y: (+2.3% v +0.5%e)
Japan Jun National CPI rose for the 6th straight month in June but failed to gain momentum (Y/Y: 0.4% v 0.4%e; CPI Ex Fresh Food (Core) Y/Y: 0.4% v 0.4%e; CPI Ex Fresh Food, Energy (Core-core) Y/Y: 0.0% v -0.1%e
Bank of Japan (BOJ) Summary of Opinions for the July 19-20 policy meeting reiterates CPI likely to approach 2% around FY19 (in-line with new timeline). Reiterated that no additional easing was necessary as price momentum had been maintained
South Korea Jun Industrial Production M/M: -0.2% v +1.9%e; Y/Y: -0.3% v +1.3%e – China FX Regulator SAFE: Will safeguard and increase value of forex reserves; Will crackdown on ‘forex irregularities’, including underground banks
Europe:
July GfK Consumer Confidence: -12 v -11e
UK Home Sec Rudd: EU citizens will be still allowed to come to the UK to live and work after Brexit as long as they register with Home Office
Chancellor of Exchequer Hammond (Fin Min) said to seek a two phase Brexit starting with an "off the shelf" transition period. Believes the two phases should end by 2022 and does not believe there was enough time for bespoke deal to be negotiated before April 2019
Americas:
Speaker Ryan, Maj Leader McConnell and Sec Mnuchin release joint statement on tax reform; plan to move it through committee in the autumn
Fed nominee Quarles: Do not support the adoption of the Taylor rule to guide monetary policy
Economic Calendar
(NL) Netherland July Producer Confidence Index: 6.6 v 7.2 prior
(FR) France Q2 Advance GDP Q/Q: 0.5% v 0.5%e; Y/Y: 1.8% v 1.6%e
(NO) Norway Jun Retail Sales W/Auto Fuel M/M: -0.6% v +1.4% prior
(FR) France July Preliminary CPI M/M: -0.3% v -0.4%e; Y/Y: 0.7% v 0.7%e
(FR) France July Preliminary EU Harmonized CPI M/M: -0.4% v -0.4%e; Y/Y: 0.8% v 0.8%
(FR) France Jun Consumer Spending M/M: -0.8% v -0.4%e; Y/Y: 0.5% v 1.0%e
(ES) Spain Q2 Preliminary GDP Q/Q: 0.9% v 0.9%e; Y/Y: 3.1% v 3.0%e
(ES) Spain July Preliminary CPI M/M: -0.7% v -0.8%e; Y/Y: 1.5% v 1.5%e
(ES) Spain July Preliminary CPI EU Harmonized M/M: -1.2% v -1.3%e; Y/Y: 1.7% v 1.6%e
(DE) Germany July CPI Saxony M/M: 0.3% v 0.2% prior; Y/Y: 1.7% v 1.7% prior
(CH) Swiss July KOF Leading Indicator: 106.8 v 106.0e
(TR) Turkey July Economic Confidence: 103.4 v 98.9 prior
(AT) Austria Q2 Preliminary GDP Q/Q: 0.9% v 0.7% prior; Y/Y: 2.2% v 2.5% prior
(SE) Sweden Q2 Preliminary GDP Q/Q: 1.4% v 0.9%e; Y/Y: 4.0% v 2.7%e
(DE) Germany July CPI Brandenburg M/M: 0.4% v 0.2% prior; Y/Y: 1.4% v 1.5% prior
(DE) Germany July CPI Hesse M/M: 0.4% v 0.1% prior; Y/Y: 1.9% v 1.9% prior
(DE) Germany July CPI Bavaria M/M: 0.4% v 0.1% prior; Y/Y: 1.6% v 1.4% prior
(AT) Austria July Manufacturing PMI: 60.0 v 60.7 prior (19th month of expansion)
(NO) Norway July Unemployment Rate: 2.8% v 2.8%e
(TW) Taiwan Q2 Preliminary GDP Y/Y: 2.1% v 2.2%e
(DE) Germany July CPI North Rhine Westphalia M/M: 0.4% v 0.1% prior; Y/Y: 1.8% v 1.6% prior
(PT) Portugal July Consumer Confidence: 1.1 v 0.8 prior; Economic Climate Indicator: 2.2 v 2.1 prior
(EU) Euro Zone July Business Climate Indicator: 1.05 v 1.14e ; Consumer Confidence: -1.7 v -1.7e
(DE) Germany July CPI Baden Wuerttemberg M/M: 0.4% v 0.1% prior; Y/Y: 1.7% v 1.6% prior
Fixed Income Issuance:
(IN) India sold total INR150B in 2024, 2027, 2034 and 2046 bonds
(IT) Italy Debt Agency (Tesoro) sold total €6.25B vs. €5.25-6.25B indicated range in 5-year and 10-year BTP Bonds
Sold €4.0B vs €3.5-4.0B indicated in new 0.90% Aug 2022 BTP; Avg Yield: 0.88% v 0.83% prior; Bid-to-cover: 1.34x v 1.28x prior
Sold €2.25B vs €1.75-2.25B indicated in 2.2% Aug 2027 BTP; Avg Yield: 2.16% v 2.16% prior; Bid-to-cover: 1.71x v 1.39x prior
(IT) Italy Debt Agency (Tesoro) sold total €1.5B vs. €1.0-1.5B indicated range in Oct 2024 CCTeu (Floating Rate Note); Avg Yield 0.77% v 0.83% prior; Bid-to-cover: 1.65x v 1.63x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -1.1% at 378, FTSE -0.7% at 7391, DAX -0.8% at 12112, CAC-40 -1.4% at 5113, IBEX-35 -0.8% at 10518, FTSE MIB -1.0% at 21417, SMI -0.7% at 8959, S&P 500 Futures -0.3%]
Market Focal Points/Key Themes: European Indices trade lower after another heavy bout of earnings, with the negative tone set by disappointing results from Amazon overnight. This morning key banking names reported, with good results out of Credit Suisse and BNP Paribas, while Barclays shares were in focus after charges related to its divestment of its African Unit, as well as provisions for miss selling PPI. Share of French Auto manufacturer Renault trades sharply lower after strong H1 results, but an affirmation of guidance disappointing the market. In Germany Adidas outperforms after raising outlook, and reporting strong prelim results. Looking ahead, notable earners include Loews, and Dana Hlds.
Equities
Consumer discretionary [Adidas [ADS.DE] +9% (Prelim results, raises outlook), Kering [KER.FR] -2% (Earnings), Essilor [EI.FR] -3.8% (Earnings), Air France [AF.FR] +0.9% (Earnings)]
Industrials: [Renault [RNO.FR] -6.2% (Earnings), Air Liquide [AI.FR] -2.4%, Safran [SAF.FR] -0.4% (Earnings), OHL [OHL.ES] -9% (Earnings)]
Financials: [Barclays [BARC.UK] +0.3% (Earnings), Credit Suisse [CSGN.CH] +1.9% (Earnings), UBS [UBSG.CH] -3.9% (Earnings)]
Speakers
Chancellor of Exchequer Hammond (Fin Min): Brexit transition could take up to three years, length to be determined by the facts
Ireland PM Varadkar said to be pushing for Irish Sea to become the post Brexit border with the UK. Warned UK PM May that her proposal for Irish Border was unworkable and would jeopardize Northern Ireland peace process
South Africa Central Bank (SARB) Gov Kganyago: Worst is behind on the growth situation; inflation outlook broadly balanced. CPI forecasts showed marked improvement but would not hesitate to reverse rates if inflation worsened
US Senate rejected the ‘skinny’ Obamacare repeal (as expected ). Republican Senators McCain, Murkowski and Collins voted against the amendment
Russia said to have ordered the US to reduce its diplomatic staff in the country to 455 in retaliation for more US sanctions (Staff number will reflect the same level as Russia diplomats in Washington)
Japan PM Abe’s Adviser Nakahara: Japan should adopt a policy mix of fiscal and monetary instruments under a new BoJ chief. Govt should spend ¥100T on infrastructure projects by issuing 60-year bonds the next decade and have the BoJ buy some of them through the market
China Foreign Exchange Trade System (CFETS): To increase CNY currency (Yuan) Reference Rates release; effective July 31st (5 times vs. 2 times prior per day)
Currencies
USD was trying to muster more consolidation in the wake of its recent weakness. The spat of better European GDP and inflation data was giving the greenback some headwinds. A batch of European Q2 GDP came in better-than-expected with France, German, Sweden YoY readings all beating expectations
The SEK currency was the session outperformer following its GDP performance. The Kroner shaking off recent political events and firmed against the Euro. EUR/SEK moving from 9.59 to under 9.52 following the GDP beat.
Dealers noted that CHF currency weakness had been the main market theme this week as the SNB remained the lone dove central bank in Europe as its appeared to be drifting away from the stance of most other G10 central banks. USD/CHF above the 0.97 level while EUR/USD was edging closer towards the 1.14 level for its highest reading since the floor was removed back in Jan 2015
Fixed Income
Bund futures trade at 161.70 down 48 ticks extending its drop after the latest round of German regional CPI readings. Resistance lies near the 162.10 level followed by 162.75. A break of the 160.00 support level could see lows target 159.25 followed by 157.50.
Gilt futures trade at 126.20 lower by 18 ticks as global stock indices slide. Price finds key support at the 125.42 support level. An acceleration lower could test the 122.88 region. Resistance remains the noted 126.51 region, followed by 127.50.
Friday’s liquidity report showed use of the marginal lending facility fell to €225M from €1.2B prior.
Corporate issuance saw $26B come to market via 4 issuers headlined by AT&T $22.5B -7part senior unsecured offering and American Express $2.25B senior unsecured note offering. This week’s issuance is at $36.4B. For the week ending July 26th Lipper US fund flows reported IG funds net inflows $2.3B bringing YTD inflows to $77.5B, High yield funds reported outflows of $20.8M bringing YTD outflows to $6.7B.
Looking Ahead
(BE) Belgium July CPI M/M: No est v -0.2% prior; Y/Y: No est v 1.6% prior
(MX) Mexico Jun YTD Budget Balance (MXN): No est v 381.7B prior
05:30 (ZA) South Africa to sell combined ZAR650M in 2029, 2033 and 2046 I/L bonds
06:00 (DE) Germany July Preliminary CPI M/M: 0.2%e v 0.2% prior; Y/Y: 1.5%e v 1.6% prior
06:00 (DE) Germany July Preliminary CPI EU Harmonized M/M: 0.3%e v 0.2% prior; Y/Y: 1.4%e v 1.5% prior
06:00 (PT) Portugal Jun Industrial Production M/M: No est v 0.4% prior; Y/Y: No est v 2.4% prior
06:00 (IE) Ireland Jun Retail Sales Volume M/M: No est v 0.8% prior; Y/Y: No est v 3.3% prior
06:00 (UK) DMO to sell combined £2.05B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively)
06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave 1-Week Auction rate unchanged at 9.00%
06:45 (US) Daily Libor Fixing
07:00 (BR) Brazil July FGV Inflation IGPM M/M: -0.6%e v -0.7% prior; Y/Y: -1.6%e v -0.8% prior
07:30 (IN) India Weekly Forex Reserves
08:00 (ZA) South Africa Jun Budget Balance (ZAR): +21.9Be v -21.2B prior
08:00 (BR) Brazil Jun National Unemployment Rate: 13.3%e v 13.3% prior
08:00 (UK) Baltic Dry Bulk Index
08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming Bond issuance
08:30 (US) Q2 Advance GDP Annualized Q/Q: 2.5%e v 1.4% prior; Personal Consumption: 2.9%e v 1.1% prior (**Note: Revisions: GDP revised from 2014-16; reference yr remains 2009)
08:30 (US) Q2 Advance GDP Price Index: 1.3%e v 1.9% prior; Core PCE Q/Q: 0.7%e v 2.0% prior
08:30 (US) Q2 Employment Cost Index (ECI): 0.6%e v 0.8% prior
08:30 (CA) Canada May GDP M/M: 0.2%e v 0.2% prior; Y/Y: 4.2%e v 3.3% prior
09:00 (CL) Chile Jun Manufacturing Production Y/Y: 1.1%e v 1.9% prior; Industrial Production Y/Y: 1.2%e v 0.1% prior
09:00 (CL) Chile Jun Total Copper Production: No est v 469.2K tons prior
09:30 (BR) Brazil Jun Primary Budget Balance (BRL): -20.0Be v -30.8B prior; Nominal Budget Balance: -54.6 v -67.0B prior; Net Debt to GDP Ratio: 48.5%e v 48.1% prior
10:00 (US) July Final University of Michigan Confidence: 93.1e v 93.1 prelim
11:00 (EU) Potential sovereign ratings after European close
13:00 (US) Weekly Baker Hughes Rig Count data
13:20 (US) Fed’s Kashkari (dove, FOMC voter) speaks at Townhall Event
