Notes/Observations
Risk aversion sentiment was the theme in the session after the latest North Korean missile threat revived geopolitical tensions
British and EU negotiators resumed Brexit talks but officials played down the prospect of breakthroughs
Tropical Storm Harvey poised to re-enter the Gulf of Mexico and make another landfall closer to Houston
Overnight
Asia:
North Korea launched missile that passed over Northern Japan and landed into the sea
Japan PM Abe: North Korea missile is an unprecedented serious and grave threat to Japan. Spoke with President Trump for 40 minutes, agreed to strengthen pressure on North Korea, Trump gave "strong commitment" to Japanese security
Japan Chief Cabinet Sec Suga:Missile flying over Japan is a new and serious development, no objects did fall on Japan territory. Will take appropriate steps as needed regarding North Korea missile
Japan Foreign Min Kono: Discussed further sanctions on North Korea with US
South Korea President Moon orders show of force in response with 4 f-15k fighters conducting bomb dropping exercise
Japan July Jobless Rate matched its lowest rate since Jun 1994 ( 2.8% v 2.8%e)
Europe:
EU Chief Brexit Negotiator Barnier said to have expressed concern about progress so far in Brexit talks. UK needs positions on all issues and must start negotiating seriously
Germany Fin Min Schaeuble reiterates debt cut for Greece not currently on the agenda. Greece must press ahead with reform-for-aid program
Americas:
President Trump: Mexico has been very difficult in NAFTA talks, why wouldn’t they, they had a sweetheart deal for so long. One way or another Mexico will pay for the border wal
Energy:
Saudi Arabia and Russia are pushing to extend their deal to limit crude oil production for another three months
Economic data
(DE) Germany Sept GfK Consumer Confidence: 10.9 v 10.8e (highest since Oct 2001)
(UK) Aug Nationwide House Price Index M/M: -0.1% v 0.0%e ; Y/Y: 2.1% v 2.5%e
(NO) Norway Q2 Manufacturing Wage Index Q/Q: 0.4% v 0.7% prior
(FR) France Q2 Preliminary GDP Q/Q: 0.5% v 0.5%e; Y/Y: 1.7% v 1.8%e
(FR) France July Consumer Spending M/M: 0.7% v 0.7%e; Y/Y: 2.1% v 1.8%e
(TR) Turkey Aug Economic Confidence: 106.0 v 103.4 prior
(TR) Turkey July Trade Balance: -$8.8B v -$8.8Be
Fixed Income Issuance:
(ID) Indonesia sold total IDR7.0T in 6-month Bills & 2-year,4-year,7-year and 15-Year Project-based Sukuk (PBS)
(IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 6-month Bills; Avg Yield: -0.356% v -0.362% prior; Bid-to-cover: 1.72x v 1.62x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 -1.7% at 3,365, FTSE -1.5% at 7,292, DAX -2.0% at 11,877, CAC-40 -1.6% at 5,000, IBEX-35 -1.4% at 10,146, FTSE MIB -1.5% at 21,397, SMI -1.2% at 8,759, S&P 500 Futures -0.7%]
Market Focal Points/Key Themes: European indices opened down and continued lower; geopolitical concerns driving negative risk sentiment; all sectors move lower; Prosiebensat cuts outlook, dragging on broadcasters; insurers still under pressure pending evaluation of impact from Hurricane Harvey;commodity strength did not translate into support for materials stocks; upcoming earnings in US session include Best Buy and H&R Block
Equities
Consumer discretionary: Prosiebensat PSM.DE -10.0% (cuts outlook, analyst action), Mitie MTO.UK -0.4% (FCA opens investigation)
Materials: Avocet Mining AVM.UK 11.4% (standstill extension agreement)
Industrials: Hapag-Lloyd HLAG.DE % (earnings)
Financials: Wendel MF.FR +2.8% (analyst action), Sydbank SYDB.DK -3.8% (earnings), Van Lanschot LANS.NL +1.7% (results), Banca Generali BGN.IT 2.9% (analyst action)
Technology: Adva Optical ADV.DE -22.3% (cuts outlook)
Utilities: Findel FDL.UK +9.6% (trading update)
Energy: CGG CGG.FR -10.8% (analyst action), Statoil STL.NO -1.7% (Korpfjell exploration doesn’t find oil), Lundin Petroleum LUPE.SE -6.7% (Korpfjell exploration doesn’t find oil)
Speakers
German Chancellor Merkel: Seeing positive economic data in Europe; improving employment a good sign
South Africa Central Bank (SARB): Rate cut cycle likely to be modest
Denmark Finance Ministry presented its tax proposal; to cut taxes by DKK23B on cars, income and pensions. Cuts to be phased in through 2025 and apply to all income groups
Greece PM Tsipras: Conditions were appearing for a steady return to growth. 2017 GDP growth seen near 2.0%
Italy Business industry lobby Confindustria: Strong EUR currency to significantly affect the Italian economy
Poland Central Bank’s Kokoszczynski: Interest rate hike unlikely ahead of 2019 Presidential election –
China Foreign Ministry spokesperson Chunying: Urged relevant countries from provoking each other. Threats and sanctions could not solve the North Korea issue
Currencies
Risk aversion sentiment was the theme in the session after the latest North Korean missile threat revived geopolitical tensions – USD Index remained at 2 1/2 lows and did not participate in any safe-haven flows,
EUR/USD tested above the 1.20 level for its highest reading since Jan 2015. The pair has been moving higher ever since ECB chief Draghi did not comment or show any concern over its recent appreciation.
USD/JPY hovering around the 108.50 as the JPY currency (yen) benefited from risk-aversion sentiment .
Fixed Income
Bund futures trades at 165.58 up 79 ticks as the latest North Korean missile threat revives geopolitical tensions. Downside targets 164.50 followed by 163.75. To the upside the 165.75 to 166.00 remains key resistance.
Gilt futures trades at 128.73 up 67 ticks following other haven assets on the broad risk-off move. A resumption to the upside could eye 129.25 then 130.10. A move back below 128.25 targets 126.51
Tuesday’s liquidity report showed Monday’s excess liquidity fell to €1.700T from €1.701T and use of the marginal lending facility rose to €634M from €310M.
Corporateissuance no deals price in high grade primary
Looking Ahead
(BR) Brazil July Central Govt Budget Balance (BRL): No est v -19.8B prior
05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
05:30 (EU) ECB alotment in 7-day Main Financing Tender (MRO) vs. €7.0Be
05:30 (DE) Germany to sell €5.0B in new 0% coupon Sept 2019 Schatz
06:45 (US) Daily Libor Fixing
07:00 (BR) Brazil Aug FGV Inflation IGPM M/M: +0.1%e v -0.7% prior; Y/Y: -1.7%e v -1.7% prior
07:45 (US) Weekly Goldman Economist Chain Store Sales
08:00 (BR) Brazil July PPI Manufacturing M/M: No est v 0.0% prior; Y/Y: No est v 1.5% prior
08:05 (UK) Baltic Dry Bulk Index
08:30 (CA) Canada July Industrial Product Price M/M: -0.5%e v -1.0% prior; Raw Materials Price Index M/M: -0.3%e v -3.7% prior
08:55 (US) Weekly Redbook Sales
09:00 (US) Jun S&P/Case-Shiller 20-City M/M: 0.10%e v 0.1% prior; Y/Y: 5.60%e v 5.7% prior; House Price Index (HPI): No est v 198.97 prior
09:00 (US) Jun S&P/Shiller Case-Shiller (overall) HPI Y/Y: No est v 5.6% prior, House Price Index (HPI): No est v 190.61 prior
09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.10%
09:00 (EU) Weekly ECB Forex Reserves
09:00 (RU) Russia announces weekly OFZ bond auction
10:00 (US) Aug Consumer Confidence: 120.4e v 121.1 prior
11:00 (US) Fed Evans (dove, voter)
11:30 (US) Treasury to sell 4-Week Bills
13:00 (US) Treasury to sell 7-Year Notes
16:30 (US) Weekly API Oil Inventories
