Notes/Observations
- UK Jun Wage and unemployment data bucked tepid economic growth
- European Q2 GDP data continues to show broadening expansion in region
- Draghi said to wait until autumn before giving clues on QE exit plans; Jackson Hole event risk possibly diminished
Overnight
Asia:
- PBOC Adviser Sheng Songcheng: Cut of RRR is not in line with China’s policy, more likely to use SLF, MLF and PSL. China unlikely to tighten monetary policy in H2
Europe:
- UK Govt paper said to reject the idea of a customs border in the Irish sea. UK wants to maintain a common travel area, which would allow UK and Irish citizens to move freely.
- Germany Fin Min Schaeuble believed ECB observes its mandate; did not agree with German constitutional court
Americas:
- Fed’s Kaplan (moderate, voter) reiterates call to start balance sheet unwind soon. Appropriate to be patient on timing on next rate hike.
- Fed Vice Chair Fischer: Efforts to loosen bank rules are ‘dangerous’ and extremely short sighted
- Congressional Budget office (CBO): If Trump ends key Obamacare funds premiums estimated to increase 20% in 2018 for Silver plans; removing cost-sharing payments would increase federal deficit by $194B from 2017 to 2018
Energy:
- Weekly API Oil Inventories: Crude: -9.2M v -7.84M prior
Economic Calendar
- (RO) Romania Q2 Advance GDP Q/Q: 1.6% v 1.2%e; Y/Y: 5.9% v 5.1%e
- (HU) Hungary Q2 Preliminary GDP Q/Q: 0.9% v 1.1%e; Y/Y: 3.2% v 3.6%e
- (CZ) Czech Q2 Advance GDP Q/Q: 2.3% v 0.8%e; Y/Y: 4.5% v 3.0%e
- (TH) Thailand Central Bank (BoT) left its Benchmark Interest Rate unchanged at 1.50% (as expected) for its 17th straight pause in the current easing cycle
- (NL) Netherlands Q2 Preliminary GDP Q/Q: 1.5% v 0.6%e; Y/Y: 3.3% v 2.3%e
- (IT) Italy Q2 Preliminary GDP Q/Q: 0.4% v 0.4%e; Y/Y: 1.5% v 1.4%e
- (PL) Poland Q2 Preliminary GDP Q/Q: 1.1% v 0.8%e; Y/Y: 3.9% v 3.8%e
- (UK) July Jobless Claims Change: -4.2K v +3.5K prior; Claimant Count Rate: 2.3% v 2.3% prior
- (UK) Jun Average Weekly Earnings 3M/Y: 2.1% v 1.8%e; Weekly Earnings ex Bonus 3M/Y: 2.1% v 2.0%e
- (UK) Jun ILO Unemployment Rate: 4.4% v 4.5%e; Employment Change 3M/3M: _125K v +97Ke
- Sells € in 6-month Bills; Avg Yield: % v -0.410% prior; Bid-to-cover: x v 2.80x prior
- Sells € in 12-month Bills; Avg Yield: % v -0.374% prior; Bid-to-cover: x v 1.94x prior
- (EU) Euro Zone Q2 Preliminary GDP (2nd reading) Q/Q: 0.6% v 0.6%e; Y/Y: 2.2% v 2.1%e
**Fixed Income Issuance:
- (IN) India sold total INR160B vs. INR160B indicated indicated in 3-month and 12-month Bills
- (DK) Denmark sold DKK600M in 3-month Bills; Yield: -0.660% v -0.680% prior; bid-to-cover: 5.0x v x 1.0x prior
- (ES) Spain Debt Agency (Tesoro) sold total €4.47B vs. €4.0-5.0B indicated range in 6-month and 12-month bills
- (EU) ECB allotted $35M in 7-day USD Liquidity Tender at fixed 1.66% vs $35M prior
- (SE) Sweden sold SEK10B vs. SEK10B indicated in 3-month bills; Avg Yield: -0.7615% v -0.7525% prior; Bid-to-cover: 1.65x v 1.45x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
**Equities**
Indices [Stoxx600 +0.7% at 379, FTSE +0.6% at 7429, DAX +0.9% at 12280, CAC-40 +1.0% at 5193, IBEX-35 +0.7% at 10549, FTSE MIB +1.1% at 21962, SMI +0.5% at 9056, S&P 500 Futures +0.2%]
Market Focal Points/Key Themes:
European Indices continue the positive sentiment seen this week with further strong rises today, led by the CAC which trades higher by over 1%, as well as the Dax. Press reports that ECB’s Draghi will make no new announcements at the Jackson hole meeting also helped boost Equities. In corporate news, Balfour Beatty outperforms after strong results, while Admiral trades lower after in line results. Evotec trades at 16 year highs after raising guidance following the completion of Aptuit acquisition, whilst Akza Nobel trades higher after reaching an agreement with Elliot after months of dispute.
Looking ahead notable earners out of the US include Target and Performance Food Group.
Equities
- Consumer discretionary [Lookers [LOOK.UK] -4.6% (Earnings)]
- – Consumer Staples [ ICA Gruppen [ICA.SE] -5% (Earnings)]
- Materials: [ Akza Nobel [AKZA.NL] +1% (Earnings), BHP [BLT.UK] +2.2% (Elliot announces 5% holding)]
- Industrials: [Maersk [MAERSKB.DK] +2% (Earnings) ]
- Financials: [Admiral [ADM.UK] -6.8% (Earnings), Swiss Life [SLHN.CH] -1.3% (Earnings)]
- Healthcare: [Evotec [EVT.DE] +3.3% (Completes acquisition of Aptuit, Raises outlook)]
- Real Estate: [Balfour Beatty [BBY.UK] +5.1% (Earnings)]
Speakers
- ECB’s Draghi reportedly will not deliver a fresh policy message at Jackson Hole and hold off on policy discussion until the autumn. Would focus on the theme of the symposium, fostering a dynamic global economy
- – ECB’s Hansson (Estonia): Wage pressures are beginning to emerge despite low inflation but are very uneven
- ECB’S Lautenschlaeger (Germany): Banks not as far advanced as we would like to see them in Brexit preparations
- Turkey Econ Min Zeybekci: Expected Q3 GDP growth over 7%
- Moody’s: Political tensions in the ruling African National Congress will weigh on South Africa’s growth
- Thailand Central Bank policy statement noted that today’s decision to keep policy steady was unanimous and reiterated that monetary policy remained accommodative. Strong THB currency (Baht) was affecting business and would monitor currency closely; Baht rising on external position . Inflation seen returning to target band later than expected as headline inflation to slowly rise in H2. No need to cut rates further
- – Indonesia President Widodo: 2018 GDP growth seen at 5.4% and inflation at 3.5%
- China govt said to take measures to increase foreign investment
Currencies
- EUR/USD stayed within recent ranges but saw some whippy price action after reports circulated that ECB chief Draghi would not deliver any fresh policy message at the upcoming Jackson Hole symposium next week. There was some speculation that Draghi might provide some groundwork on how the ECB would exits its unconventional policy. Draghi has not been at the Jackson Hole conference for the past 3 years and his last appearance foreshadowed the launch of QE. EUR/USD hovering around 1.1730 area ahead of the NY morning.
- The GBP currency was firmer following better wage data out of the UK. The BOE noted that they were watching wage growth closely as it gauged whether the increase in inflation was creating longer-lasting pressure on prices. GBP/USD probing the 1.29 level after testing fresh 5-week lows earlier in the session below 1.2850.
- The easing of tension on the Korean Peninsula continued to help weaken the JPY currency. USD/JPY approaching the 111 neighborhood.
Fixed Income
- Bund futures trades at 163.80 up 3 ticks after ECB’s Draghi is reportedly not planning on delivering a fresh policy message at Jackson Hole next week. Downside targets 163.50 followed by 162.56. To the upside the 164.50 to 165.20 remains key resistance.
- Gilt futures trades at 127.39 down 31 ticks as UK Unemployment Rate hits lowest level since 1975. A resumption to the upside could eye 128.25 then 128.75. A move back below 126.51 targets 125.97
- Wednesday’s liquidity report showed Tuesday’s excess liquidity in the Euro Zone rose to €1.742T from €1.741T and use of the marginal lending facility fell to €94M from €427M prior.
- Corporate issuance saw $19B come to market via 5 issuers headlined by Amazon’s $16B (fourth-largest high grade deal of 2017 ) 7 part offering, and Etrade’s $1B 2-part offering.
Looking Ahead
- (NG) Nigeria July CPI Y/Y: No est v 16.1% prior
- (CO) Colombia July Consumer Confidence Index: No est v -11.7 prior
- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €0.75-1.0B in 3-month and 12-month bills
- 06:00 (IL) Israel Q2 Advance GDP Y/Y: 3.1%e v 1.4% prior
- 06:00 (RU) Russia to sell combined RUB40B in 2022 and 2027 OFZ bonds
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e Aug 11th: No est v +3.0% prior
- 07:00 (ZA) South Africa Jun Retail Sales M/M: 0.1%e v 0.9% prior; Y/Y: 2.3%e v 1.7% prior
- 07:00 (BR) Brazil Aug FGV Inflation IGP-10 M/M: -0.1%e v -0.8% prior
- 08:00 (BR) Brazil IBGE Services Sector Volume Y/Y: -4.0%e v -1.9% prior
- 08:00 (UK) Baltic Dry Bulk Index
- 08:30 (US) July Housing Starts: 1.22Me v 1.215M prior; Building Permits: 1.25Me v 1.275M prior (revised from 1.254M)
- 08:30 (CA) Canada Jun Int’l Securities Transactions: No est v C$29.5B prior
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 11:30 (BR) Brazil weekly Currency Flow data
- 12:00 (CA) Canada to sell 30-year bonds
- 14:00 (US) FOMC Minutes from July 26th decision
