Notes/Observations
Major European Aug Preliminary PMI Manufacturing data better-than-expected (Beats: France, Germany and Euro Zone)
Draghi speech in Germany mostly centered on academic observations but noted to be prepared for new challenges
President Trump raised the specter of a government shutdown to fulfil a campaign pledge of building the Mexican border wall
Overnight
Asia:
Japan Aug Preliminary PMI Manufacturing: 52.8 v 52.1 prior
Europe:
PM May said to drop pledge to cut ties with European Court of Justice (ECJ) after Brexit and sought only to ensure that the ECJ did not have direct jurisdiction over the UK
Americas:
President Trump commented on NAFTA during his from Arizona rally and personally believed that the US could not make a deal, will probably end up terminating it at some point
Mexico Foreign Min Videgaray: Mexico will continue with NAFTA talks
Energy:
Weekly API Oil Inventories: Crude: -3.6M v -9.2M prior
Economic data
(FR) France Aug Preliminary Manufacturing PMI: 55.8 v 54.5e (10th month of expansion), Services PMI: 55.5 v 55.8e, Composite PMI: 55.6 v 55.4e
(DK) Denmark Aug Consumer Confidence Index: 7.6 v 9.5e
(TR) Turkey Aug Consumer Confidence : 71.1 v 71.3 prior
(DE) Germany Aug Preliminary Manufacturing PMI: 59.4 v 57.6e (33rd month of expansion), Services PMI: 53.4 v 53.3e, Composite PMI: 55.7 v 54.7e
(EU) Euro Zone Aug Preliminary Manufacturing PMI: 57.4 v 56.3e (49th month of expansion), Services PMI: 54.9 v 55.4e, Composite PMI: 55.8 v 55.5e
(ZA) South Africa July CPI M/M: 0.3% v 0.3%e; Y/Y: 4.6% v 4.6%e (4th straight reading within the SARB target range of 3.0-6.0%)
(ZA) South Africa July CPI Core M/M: 0.5% v 0.5%e; Y/Y: 4.7% v 4.7%e
(TW) Taiwan July Industrial Production Y/Y: 2.4% v 3.3%e
(IS) Iceland Central Bank (Sedabanki) left its 7-Day Term Deposit Rate currently stands at 4.50% for its 1st pause in three meetings since removing capital controls
Fixed Income Issuance:
(IN) India sold total INR170B vs. INR170B indicated in 3-month and 6-month Bills (INR100B and 70B respectively)
(DK) Denmark sold total DKK1.45B in 2020 and 2027 Bonds
(EU) ECB allotted $35M in 7-day USD Liquidity Tender at fixed 1.64% vs $35M prior
(SE) Sweden sold total SEK2.5B vs. SEK2.5B indicated in 2023 and 2026 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.3% at 374.8, FTSE +0.1% at 7388, DAX -0.1% at 12219, CAC-40 flat at 5133, IBEX-35 -0.1% at 10397, FTSE MIB -0.1% at 21698, SMI -0.3% at 8941, S&P 500 Futures -0.2%]
Market Focal Points/Key Themes:
European Indices trade lower across the board tracking US futures lower, despite stronger than expected Manufacturing PMI readings out of Europe. Advertising giant WPP set the tone following its results trading lower by over 10% after cutting its full year outlook following pressure on client spending particularly in the fast moving consumer goods sector. Elsewhere K+S shares trade higher after vague rumours regarding a potential stake acquisition by Elliot. Elsewhere Bayer shares trade little changed after the EU initiates a phase II probe on competition concerns.
Looking ahead to the US morning, retailers continue to dominate earnings with notable names including Express and American Eagle set to report alongside earnings from Lowes.
Equities
Consumer discretionary [WPP [WPP.UK] -11% (Earnings, cuts outlook), Publicis [PUB.FR] -2.9% (In sympathy with WPP], Emmi [EMMN.CH] -9.5% (Earnings) , Rockwool [ROCKB.DK] +4.9% (Earnings)]
Materials: [K+S [SDF.DE] +3.6% (Reportedly Elliot looking to take stake) ]
Industrials: [Vedanta [VED.UK] +1.9% (Earnings) , Costain [COST.UK] +2.1% (Earnings)]
Healthcare: [Ambu [AMBUB.DK] +6.7% (Earnings), NMC Health [NMC.UK] +4.9% (Earnings)]
Speakers
ECB’s Draghi noted that research helped us decide whether a change in facts deserves a policy response or look through it. Research showed that QE and forward guidance are a success> Monetary policy must always prepare for new challenges
German Fin Min Schaeuble said to want more influence on region’s budgets and working on a proposal that would allow southern euro zone countries to tap into the single currency bloc’s bailout fund to boost investments during recessions (**Insight: Plan would mark a major change of policy for Schaeuble)
Norway PM Solberg: Growth is improving and employment is gaining
Currencies
EUR/USD reverse earlier loses following better Manufacturing PMI. Also Draghi’s speech ahead of his Jackson Hole conference focused only on academic observations and did not address any concern on the recent EUR currency appreciation or hints on QE exit.
GBP/USD tested 2-month lows below the 1.28 level despite talk that the UK was softening its stance on Brexit. PM May said to drop pledge to cut ties with European Court of Justice (ECJ) after BrexiT viewed as a sign of a new willingness to compromise
Fixed Income
Bund futures trades at 164.24 down 12 ticks following strong German PMI readings, with IHS Markit noting input inflation continued to rise, with manufacturing posting a steeper rate of price increases. Downside targets 163.50 followed by 162.56. To the upside the 164.50 to 165.20 remains key resistance.
Gilt futures trades at 127.55 down 10 ticks little changed along with Bunds. 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 rose to €1.715T from €1.711T and use of the marginal lending facility rose to €202M from €171M prior
Corporateissuance saw no deals priced in high-grade primary
Looking Ahead
05:30 (DE) Germany to sell €3.0B in 0.5% Aug 2027 Bunds
05:30 (UK) DMO to sell £2.7B in 0.75% 2023 Gilts
06:30 (DE) Chancellor Merkel discusses the West’s Future at Event in Berlin
06:45 (US) Daily Libor Fixing
07:00 (RU) Russia to sell combined RUB40B in 2024 and 2033 OFZ Bonds
07:00 (US) MBA Mortgage Applications w/e Aug 8th: No est v +0.1% prior
07:30 (CL) Chile Central Bank’s Traders Survey
08:00 (BR) Brazil Aug IBGE Inflation IPCA-15 M/M: +0.4%e v -0.2% prior; Y/Y: 2.7%e v 2.8% prior
08:00 (PL) Poland July M3 Money Supply M/M: +0.3%e v -0.2% prior; Y/Y: 5.0%e v 5.0% prior
08:05 (UK) Baltic Dry Bulk Index
09:00 (MX) Mexico Jun Retail Sales M/M: +0.2%e v -0.1% prior; Y/Y: 2.8%e v 4.1% prior
09:05 (US) Fed’s Kaplan speaks to Oil Group in Midland, Texas
09:30 (BR) Brazil July Current Account: -$3.4Be v +$1.3B prior; Foreign Direct Investment (FDI): $5.0Be v 4.0B prior
09:45 (US) Aug Markit Preliminary Manufacturing PMI: 53.5e v 53.3 prior, Services PMI: 55.0e v 54.7 prior, Composite PMI: No est v 54.6 prior
10:00 (US) July New Home Sales: 610Ke v 610K prior
10:00 (EU) Euro Zone Aug Advance Consumer Confidence: -1.8e v -1.7 prior
10:30 (US) Weekly DOE Crude Oil Inventories
11:00 (IT) Italy Debt Agency (Tesoro) announces upcoming CTZ auction for Aug 28th
11:30 (US) Treasury to sell $13B in 2-Year Floating Rate Notes Reopening
12:00 (CA) Canada to sell 5-Year Bonds
