Notes/Observations
Unemployment data continues to improve in Europe; Euro Zone at lowest level since 2009; Italy Unemployment hits a 5-year low but aided by temporary positions
Geopolitical risks simmer around the globe (Venezuela, North Korea and Russia)
Central bank policy decisions due from RBA and BOE this week with US jobs data scheduled on Friday
Overnight/weekend
Asia:
China July Manufacturing PMI (Govt Official) misses expectations but expands for the 12th straight month. ( 51.4 v 51.5e). Softer data seen as govt began to try to rein in a hot property market and rising corporate debt.
China State Researcher Long Guoqiang: US trade calculation exaggerates deficit with China
Japan Jun Preliminary Industrial Production registers a slight beat and hints at more stable growth (M/M: 1.6% v 1.5%e; Y/Y: 4.9% v 4.8%e)
North Korea said to have test fired another missile
South Korea and US conduct joint ballistic missile test in response to North Korea’s most recent ICBM test
Europe:
ECB’S Lautenschlaeger (Germany): it’s important to prepare for the exit from accommodative policy in good time; unwind will be a long process; Inflation is not quite there yet
Fitch affirmed France sovereign rating at AA; outlook Stable
Americas:
(VZ) At least 9 killed, including a candidate, amid Venezuela protests during election for new legislative body that will reform constitution
US said to be considering oil-related sanctions against Venezuela, which could be announced by as early as today; not expected to include ban on Venezuelan oil shipments to the U
Economic Calendar
(DE) Germany Jun Retail Sales M/M: 1.1% v 0.2%e; Y/Y: 1.5% v 2.7%e
(TR) Turkey Jun Trade Balance: -$6.0B v -$6.0Be
(IT) Italy Jun Preliminary Unemployment Rate: 11.1% v 11.2%e
(UK) Jun Net Consumer Credit: £1.5B v £1.5Be; Net Lending: £4.1 v £3.4Be
(UK) Jun Mortgage Approvals: 64.7K v 65.0Ke
(EU) Euro Zone July Advance CPI Estimate Y/Y: 1.3% v 1.3%e; CPI Core Y/Y: 1.2% v 1.1%e
(EU) Euro Zone Jun Unemployment Rate: 9.1% v 9.2%e (lowest level since 2009)
(IT) Italy July Preliminary CPI (NIC including tobacco) M/M: 0.1% v 0.0%e; Y/Y: 1.1% v 1.0%e
(IT) Italy July Preliminary CPI EU Harmonized M/M: -1.9% v -1.9%e; Y/Y: 1.2% v 1.2%e
Fixed Income Issuance:
None seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.2% at 379, FTSE +0.4% at 7398, DAX flat at 12164, CAC-40 -0.1% at 5126, IBEX-35 +0.1% at 10550, FTSE MIB +0.3% at 21496, SMI +0.4% at 9055, S&P 500 Futures flat at 2471]
Market Focal Points/Key Themes: European Indices trade higher across the board with outperformance in the Swiss SMI and FTSE 100, after US indices closed around flat on Friday. HSBC shares outperform following their earnings beat and sharebuyback, whilst upgraded guidance helps Sanofi trade higher. On the downside Utilitywise trade lower by over 40% after lowering guidance, while Legrand trades lower after results. In what will be another busy week for earnings notable highlight this mornign include
Equities
Materials: [Umicore +2.2% (Earnings)]
Financials: [HSBC [HSBA.UK] +2.7% (Earnings)]
Technology: [RIB Software [RSTA.DE] +4.5% (Earnings), Rexel [RXL.FR] +1.4% (Earnings), Legrand [LR.FR] -4% (Earnings)]
Healthcare: [Sanofi [SAN.FR] +1.5% (Earnings)]
Utilities:[Veolia {VIE.FR] +2.2% (Earnings), Utilitywise [UTW.UK] -41% (Earnings, guidance)]
Speakers
Chancellor of Exchequer Hammond (Fin Min): Would not seek to bring the tax rate down to well below EU standards
VP Pence: US stood with Baltic nations, whose biggest threat is Russian aggression. US hoped for better relations with Russia. Recent diplomatic action taken by Moscow would not deter the commitment of the US
China PBoC Dep Gov Zhang Xiaohu reiterated China to balance yuan rate flexibility and stability
Currencies
USD consolidated its recent bout of weakness but the greenback was still facing headwinds from political uncertainty.
EUR/USD around 1.1740 as price developments and employment trends continued to play into the ECB playbook and keep potential scaling back of stimulus in the near future.
GBP/USD fractionally lower at 1.3110 with focus on the BOE rate decision this Thursday.
Fixed Income
Bund futures trade at 161.89 down 14 ticks remaining contained with gamma likely to remain suppressed into another week of net negative supply and supportive month-end flows. Resistance lies near the 162.75 level followed by 163.50. A break of the 160.00 support level could see lows target 159.25 followed by 157.50.
Gilt futures trade at 126.24 higher by 5 ticks with the focus on Thursday’s BOE rate decision, Inflation Report and monetary policy summary. 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.
Monday’s liquidity report showed Friday’s excess liquidity fell to €1.661T a drop of €16B from €1.677T prior. Use of the marginal lending facility fell to €207M from €225M prior.
Corporate issuance saw $36B issued last week. Next week’s forecast is $25B
Looking Ahead
06:00 (IL) Israel to sell 2021, 2022 and 2027 bonds
06:00 (IT) Italy Jun PPI M/M: No est v -0.4% prior; Y/Y: No est v 3.1% prior
06:45 (US) Daily Libor Fixing
07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
07:00 (IN) India Jun Fiscal Deficit (INR Crore): No est v 167739 prior
07:25 (BR) Brazil Central Bank Weekly Economists Survey
08:00 (PL) Poland July Preliminary CPI M/M: -0.2%e v -0.2 % prior; Y/Y: 1.6%e v 1.5 % prior
08:00 (ZA) South Africa Jun Trade Balance (ZAR): No est v 9.5B prior
08:00 (UK) Baltic Dry Bulk Index
08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week
08:30 (CA) Canada Jun Industrial Product Price M/M: -0.3%e v -0.2% prior; Raw Materials Price Index M/M: -3.3%e v -1.8% prior
09:00 (FR) France Debt Agency (AFT) to sell combined €4.9-6.1B in 3-month, 6-month and 12-month Bills
09:00 (BE) Belgium Q2 Preliminary GDP Q/Q: No est v 0.6% prior; Y/Y: No est v 1.6% prior
09:00 (MX) Mexico Q2 Preliminary GDP Q/Q: No est v 0.7% prior; Y/Y: 1.8%e v 2.8% prior
09:00 (CL) Chile Jun Unemployment Rate: 7.1%e v 7.0% prior
09:30 (EU) ECB announces Covered-Bond Purchases
09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
09:45 (US) July Chicago Purchasing Manager: 60.0e v 65.7 prior
10:00 (US) Jun Pending Home Sales M/M: +1.0%e v -0.8% prior; Y/Y: No est v 0.5% prior
10:00 (MX) Mexico Jun Net Outstanding Loans (MXN): No est v 3743B prior
10:30 (US) July Dallas Fed Manufacturing Activity: 13.0e v 15 prior
11:30 (US) Treasury to sell 3-Month and 6-Month Bills
15:00 (AR) Argentina Jun Industrial Production Y/Y: 3.5%e v 2.7% prior; Construction Activity Y/Y: No est v 10.3% prior
16:00 (US) Weekly Crop Condition Report
