Notes/Observations
FOMC minutes highlight the most divided Board since the central bank began normalizing policy
ECB July Minutes likely to paint a likely dovish spin ahead of any clue of when policy would begin to start normalizing
Overnight
Asia:
Australia July Employment Change: +27.9K v +20.0Ke (5th straight increase); Unemployment Rate: 5.6% v 5.6%e
Japan’s exports and imports rose at a fast clip in July aided by a recovery in global demand (exports to China +18% y/y)
Europe:
Next phase of Brexit talks said to be anticipated to be delayed until Dec as London awaits new German govt
Americas:
FOMC Jun 14th Minutes: Several participants ready to move on balance sheet in July; others sought confirmation that weak inflation was transitory before next hike. Officials split over whether inflation expectations are well anchored
Fed’s Mester (hawk, non-voter): do not feel soft inflation readings should delay rate hike
President Trump tweets: "Rather than putting pressure on the businesspeople of the Manufacturing Council & Strategy & Policy Forum, I am ending both. Thank you all!"
Energy:
Saudi Arabia Jun production at 10.07M v 9.88M bpd prior; exports drop to 6.89M bpd in Jun from 6.92M in May – JODI
Fixed Income Issuance:
None seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.2% at 378.2, FTSE -0.3% at 7411, DAX -0.3% at 12223, CAC-40 -0.4% at 5156, IBEX-35 -0.8% at 10468, FTSE MIB -0.3% at 21924, SMI -0.8% at 8973, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes:
European Indices trade slightly lower this morning following a pullback on Wall Street overnight. Earnings remain the focus as we enter the back end of earnings with notable upside moves for Straumann and Oriflame following results, while Kingfisher lags on the FTSE following weakler LFL sales. Other downside movers include Hikma Pharma after cutting FY forecasts, while Vestas Wind and Geberit trading sharply lower after missing estimates.
Looking ahead notable earners include Walmart and Alibaba.
Equities
Consumer discretionary [ Kingfisher [KGF.UK] -3.6% (Earnings), Rank Group [RNK.UK] -4.3% (Earnings), Sixt SE [SIX2.DE] +2.5% (Earnings), Straumann [STMN.CH] +7.6% (Earnings), Oriflame [ORI.SE] +13.5% (Earnings)]
Industrials: [Geberit [GEBN.CH] -6.8% (Earnings)]
Healthcare: [Hikma Pharma [HIK.UK] -8.1% (Earnings), Novo Nordisk [NOVOB.DK] +1.9% (Novo’s Semaglutide superior to Lilly’s dulaglutide on glucose control and weight loss in people with type 2 diabetes in SUSTAIN 7)]
Energy: [Vestas Wind Sys [VWS.DE] -7.5% (Earnings)]
Speakers
Thailand Central Bank Gov Veerathai reiterated view that would closely monitor the THB currency (Baht); have not seen any unusual speculation at this time
Currencies
The GBP was trying to halt a 5-day decline against the USD and EUR pairs after retail sales data came in better-than-expected (back-months revised lower). GBP/USD hovering around the 1.29 level
EUR/USD was lower by 0.3% ahead of the ECB release of its July minutes. Markets looking for more clarity in the ECB’s account later today. Overall the view that ECB would not unveil any strategy for tapering of its bond purchases or when it is likely to make an announcement on its plan. For the time being dealers noted that the recent Euro bull run could subside with EUR/USD possible testing 1.15 if the ECB showed signs of caution
Fixed Income
Bund futures trades at 163.94 down 5 ticks as thin summer trading continues. Downside targets 163.50 followed by 162.56. To the upside the 164.50 to 165.20 remains key resistance.
Gilt futures trades at 127.57 down 1 tick after Retail Sales in UK grew modestly. A resumption to the upside could eye 128.25 then 128.75. A move back below 126.51 targets 125.97
Thursday’s liquidity report showed Wednesday’s excess liquidity in the Euro Zone fell to €1.722T from €1.742T and use of the marginal lending facility rose to €174M from €94M prior.
Corporate issuance saw $5.75B come to market via 3 issuers headlined by VMWare Inc $4B 3 part offering, and Bank of New York Mellon $750M 12-year subordinated notes
Looking Ahead
(BR) Brazil Aug CNI Industrial Confidence: No est v 50.6 prior
(EG) Egypt Central Bank Interest Rate Decision: Deposit Rate currently at 18.75%; Lending Rate currently at 19.75%
05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)
05:30 (PL) Poland to sell Bonds
06:00 (IL) Israel Jun Manufacturing Production M/M: No est v -4.1% prior
06:45 (US) Daily Libor Fixing
07:30 (EU) ECB account of the monetary policy meeting (July Minutes)
07:30 (BR) Brazil Jun Economic Activity Index (Monthly GDP) M/M: +0.7%e v -0.5% prior; Y/Y: -0.5%e v +1.4% prior
08:00 (PL) Poland July Employment M/M: 0.1%e v 0.2% prior; Y/Y: 4.3%e v 4.3% prior
08:00 (PL) Poland July Average Gross Wages M/M: 0.4%e v 2.7% prior; Y/Y: 5.4%e v 6.0% prior
08:00 (UK) Baltic Dry Bulk Index
08:30 (US) Initial Jobless Claims: 240Ke v 244K prior; Continuing Claims: 1.96Me v 1.951M prior
08:30 (US) Aug Philadelphia Fed Business Outlook: 18.0e v 19.5 prior
08:30 (CA) Canada Jun Manufacturing Sales M/M: -1.0%e v +1.1% prior
08:30 (UK) Weekly USDA Net Export Sales
09:00 (RU) Russia Gold and Forex Reserve w/e Aug 11th: No est v $420.1B prior
09:00 (RU) Russia July Unemployment Rate: 5.1%e v 5.1% prior
09:00 (RU) Russia July Real Disposable Income: 0.4%e v 0.0% prior; Real Wages Y/Y: 3.1%e v 2.9% prior
09:00 (RU) Russia July Real Retail Sales M/M: 3.5%e v 1.1% prior; Y/Y: 1.0%e v 1.2% prior
09:00 (RU) Russia July PPI M/M: +0.3%e v -0.3% prior; Y/Y: 3.0%e v 2.9% prior
09:15 (US) July Industrial Production M/M: 0.3%e v 0.4% prior; Capacity Utilization: 76.7%e v 76.6% prior; Manufacturing Production: 0.2%e v 0.2% prior
10:00 (US) July Leading Index: 0.3%e v 0.6% prior
10:30 (US) Weekly EIA Natural Gas Inventories
11:00 (BR) Brazil to sell 2018, 2019 and 2021 LTN bills
11:00 (BR) Brazil to sell 2023 and 2027 bonds
17:00 (CH) Chile Central Bank (BCCh) Interest Rate Decision; Expected to leave Overnight Rate Target unchanged at 2.50%
