Euro Zone July Flash CPI Remains Above ECB Target For The 2nd Straight Month

Notes/Observations

• BOJ affirms its commitment to policy stimulus in its 1st ever forward guidance statement
• Mixed European growth and inflation data in session but remain constructive towards ECB objectives
• Euro Zone CPI beats and remained above ECB target for the 2nd straight month (also France and Italian July CPI beat)
• Euro Zone Q2 Preliminary GDP registered a slight miss, Germany July Unemployment Change missed and Spain Q2 Preliminary GDP missed; Italy Jun Unemployment Rate missed

Asia:

• Japan Jun Jobless Rate: 2.4% v 2.3%e (first rise since Feb)
• Japan Jun Preliminary Industrial Production M/M: -2.1% v -0.3%e; Y/Y: -1.2% v -0.6%e
• (JP) Bank of Japan (BOJ) left its key policy parameters unchanged (Interest Rate on Excess Reserves (IOER) Unchanged at -0.10%, Maintained 10-year JGB Yield Curve Control (YCC) at ~0.00% and kept its annual pace of JGB holdings at ¥80T). BOJ did tweaked its current policy to enhance its flexibility. Adjusted ETF allocation (as speculated) and reduced the amount to which negative rate were applied too. It guidance stated that it would maintain very low rate level for an extended period of time
• China July Official Govt Manufacturing PMI: 51.2 v 51.3e

Europe:

• PM May reportedly warned Tories that Labour Party may attempt to use a ‘humble address’ to extend Article 50 Brexit process
• UK July GfK Consumer Confidence: -10 v -9e
• Ireland Central Bank Q3 Quarterly Bulletin trimmed 2018 GDP growth forecast from 4.8% to 4.7% but maintained 2019 GDP growth forecast at 4.2%

Americas:

• President Trump said to put off possible Govt shutdown or any fight over border wall funding until after mid-term election

Economic Data:

• (DE) Germany Jun Retail Sales M/M: 1.2% v 1.0%e; Y/Y: 3.0% v 1.5%e
• (DK) Denmark Jun Gross Unemployment Rate: 3.9% v 4.0% prior; Unemployment Rate (seasonally adj): 3.2% v 3.2% prior
• (FI) Finland Jun House Price Index M/M: -0.4% v +0.2% prior; Y/Y: 1.1 v 1.5% prior
• (FI) Finland May Final Trade Balance: -€0.3B v -€0.3B prelim
• (FR) France July Preliminary CPI M/M: -0.1% v -0.3%e; Y/Y: 2.3% v 2.1%e
• (FR) France July CPI EU Harmonized M/M: -0.1% v -0.3%e; Y/Y: 2.6% v 2.4%e
• (ES) Spain Q2 Preliminary GDP Q/Q: 0.6% v 0.7%e; Y/Y: 2.7% v 2.8%e
• (AT) Austria Q2 Preliminary GDP Q/Q: 0.5% v 0.9% prior; Y/Y: 2.3% v 3.4% prior
• (HU) Hungary Jun PPI M/M: 1.9% v 1.9% prior; Y/Y: 7.5% v 5.3% prior
• (TR) Turkey Jun Trade Balance: -$5.5B v -$5.5Be
• (TH) Thailand Jun Current Account: $4.1B v $4.0Be, Overall Balance of Payments (BOP): -$5.3B v $0.0B prior; Trade Balance: $2.9B v $2.7B prior; Exports Y/Y: 10.0% v 13.1% prior; Imports Y/Y: 12.9% v 12.7% prior
• (DE) Germany July Unemployment Change: -6K v -10Ke; Unemployment Claims Rate: 5.2% v 5.2%e
• (TW) Taiwan Q2 Preliminary GDP Y/Y: 3.3% v 2.9%e
• (NO) Norway Central Bank (Norges) Aug Daily FX Purchases (NOK): -600M v -600M prior
• (PL) Poland July Preliminary CPI M/M: -0.1% v -0.1%e; Y/Y: 2.0% v 2.0%e
• (CZ) Czech Jun M2 Money Supply Y/Y: 5.4% v 5.2% prior
• (IT) Italy Jun Unemployment Rate: 10.9% v 10.8%e
• (ES) Spain May Current Account: +€2.4B v -€1.5B prior
• (PL) Portugal July CPI M/M: -0.6% v +0.1% prior; Y/Y: 1.6% v 1.5% prior
• (PL) Portugal July CPI EU Harmonized M/M: -0.4% v -0.6%e; Y/Y: 2.2% v 2.0%e
• (EU) Euro Zone July Advance CPI Estimate Y/Y: 2.1% v 2.0%e; CPI Core Y/Y: 1.1% v 1.0%e
• (EU) Euro Zone Q2 Advance GDP Q/Q: 0.3% v 0.4%e; Y/Y: 2.1% v 2.2%e
• (EU) Euro Zone Jun Unemployment Rate: 8.3% v 8.3%e (matches lowest level since Dec 2008)
• (IT) Italy CPI (includes tobacco) M/M: 0.3% v 0.2%e; Y/Y: 1.5% v 1.4%e
• (IT) Italy CPI EU Harmonized M/M: -1.4% v -1.7%e; Y/Y: 1.9% v 1.4%e

Fixed Income Issuance:

• (ID) Indonesia sold total IDR20T (above target) in 6-month Islamic Bills, 2-year, 4-year, 7-year and 15-year Project-based Sukuk (PBS)

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.1% at 391.2, FTSE +0.1% at 7711 DAX +0.1% at 12811, CAC-40 falt at 5492, IBEX-35 +0.5% at 9905, FTSE MIB +0.6% at 22080, SMI +0.2% at 9183, S&P 500 Futures +0.2%]
• Market Focal Points/Key Themes: European Indices trade mixed in range bound trade amidst a number of key names that reported results. Financial name Credit Suisse trades higher after reporting results, while Standard Chartered trades lower after missing on Revenue. Airliner Lufthansa trades sharply higher after an earnings beat, with Rexel, Leonardo, Thomas Cook, EDF and Vivendi among others trading higher after earnings. Meanwhile Gam Holding trades lower by 20% after an earnings decline and suspension of a director following an internal investigation, with Centrica another notable faller after missing estimates. In the M&A space Tiscali trades higher after it divested its 5G spectrum and fixed wireless branch to Fastweb. Looking ahead notable earners include P&G, Pfizer, Cummins, Ralph Lauren and Eaton.

Movers

• Consumer Discretionary Lufthansa [LHA.DE] +5.8% (Earnings), Thomas Cook [TCG.UK] +5.3% (Earnings), Just Eat [JE.UK] -5.8% (Earnings), Travis Perkins [TPK.UK] -10.9% (Earnings), Vivendi [VIV.FR] +5.0% (Earnings)
• Healthcare Sanofi [SAN.FR] -0.4% (Earnings)
• Financials Credit Suisse [CSGN.CH] +1.4% (Earnings), Stanchart [STAN.UK] -3.4% (Earnings), Gam Holding [GAM.CH] -17.8% (Earnings, suspension of Director)
• Industrials Leonardo [LDO.IT] +9.8% (Earnings)
• Technology Rexel [RXL.FR] +7.3% (Earnings)
• Energy BP [BP.UK] +0.9% (Earnings), EDF [EDF.FR] +2.7% (Earnings), Centrica [CNA.UK] -5% (earnings), Petrofac [PFC.UK] +2.8% (Contract)

Speakers

• France Fin Min Le Maire stated that it would revise the 2018 GDP growth outlook (**Reminder: On Jun 27th Q2 GDP came in below expectations)
• Turkey Central Bank Gov Cetinkaya Quarterly Inflation Report: Reiterated that its tight monetary policy stance will be maintained for a long time. Inflation outlook was deteriorating on cost factors; demand push on inflation was weakening. Inflationary pressure rose due to tourism. Q2 data suggested that economic activity decelerated and started to rebalance
• Turkey Central Bank (CBRT) Quarterly Inflation Report Forecast raised its 2018 CPI from 8,4% to 13.4% and 2019 CPI from 6.5% to 9.3%. Maintained CPI slowing to 5% in the medium term
• BOJ Gov Kuroda post rate decision press conferencebegan that by introducing forward guidance it would increase its commitment on price target; stronger framework aimed at hitting the 2% price target asap (had no calendar for achieving the 2% price target). BOJ did not see the need for further easing at this time. No fundamental change to the Yield Control (YCC) and was not anticipating a rise in long-term rates. BOJ now saw rates moving double the current tolerance band of +/- 10bps (**Note: part of the new flexibility in YCC). To take swift action if yields rose sharply
• Philippines Finance Sec Dominguez: Govt would avoid Chinese debt trap by ensuring economic viability of projects funded by Chinese money
• Russia July Oil production at 11.22M bpd v 11.06M bpd m/m ‘

Currencies

• The Japanese Yen was weaker in the aftermath of the BOJ policy decision as the central bank stressed a prolong period of extremely low rates (aka policy stimulus) in its 1st ever forward guidance. USD/JPY was higher by 0.3% to test above the 111.35 area. Dealers noted that the statement was encouraging long-term investors to build up global carry-trade positions
• A plethora of mixed European data did support the EUR currency a tad but the EUR/USD remained above the 1.17 level and near the upper end of its July trading range. Dealers noted that the mixed European growth and inflation data in session did little to dent any change in ECB moving away from its stimulus and continued to remain constructive towards ECB objectives

Fixed Income

• Bund Futures trades at 161.58 down 2 ticks following hotter than expected Euro Zone inflation data. A move back above 162.75 would target 163.47 then 163.63, with a move below 161.75 targeting 161.45 then 160.45.
• Gilt futures trades at 122.55 down 12 ticks following the move in Treasuries with continuing upside targeting 124.18 then 124.44, with a move lower seeing initial support at 123.23 then 122.85.
• Tuesday ‘s liquidity report showed Monday’s excess liquidity rose from €1.824T to €1.846T. Use of the marginal lending facility rose from €137M to €226M.
• Corporate issuance saw the week begin with 3 high-grade issuers

Looking Ahead

• 05.30 (UK) Weekly John Lewis LFL sales data
• 05:30 (ZA) South Africa Q2 Unemployment Rate: No est v 26.7% prior
• 05:30 (SL) Sri Lanka July CPI Y/Y: No est v 4.4% prior
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.1-1.5B in 3-month Bills
• 06:00 (IE) Ireland July Unemployment Rate: No est v 5.1% prior
• 06:00 (IL) Israel Jun Unemployment Rate: No est v 3.9% prior
• 06:00 (IT) Italy Q2 Preliminary GDP Q/Q: 0.2%e v 0.3% prior; Y/Y: 1.3%e v 1.4% prior
• 06:45 (US) Daily Libor Fixing – 07:00 (ES) Spain Jun YTD Budget Balance: No est v -€14.5B prior
• 07:45 (US) Weekly Goldman Economist Chain Store Sales
• 08:00 (BR) Brazil Jun National Unemployment Rate: 12.6%e v 12.7% prior
• 08:00 (ZA) South Africa Jun Trade Balance (ZAR): No est v 3.5B prior
• 08:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)
• 08:05 (UK) Baltic Dry Bulk Index
• 08:30 (US) Q2 Employment Cost Index (ECI): 0.7%e v 0.8% prior
• 08:30 (US) Jun Personal Income: 0.4%e v 0.4% prior; Personal Spending: 0.4%e v 0.2% prior, Real Personal Spending (PCE): No est v 0.0% prior
• 08:30 (US) Jun PCE Core M/M: 0.1%e v 0.2% prior; Y/Y: 2.0%e v 2.0% prior
• 08:30 (US) Jun PCE Deflator M/M: 0.1%e v 0.2% prior; Y/Y: 2.3%e v 2.3% prior
• 08:30 (CA) Canada May GDP M/M: 0.3%e v 0.1% prior; Y/Y: 2.3%e v 2.5% prior
• 08:30 (CA) Canada Jun Industrial Product Price M/M: 0.2%e v 1.0% prior; Raw Materials Price Index M/M: No est v 3.8% prior
• 08:55 (US) Weekly Redbook Sales
• 09:00 (US) May S&P/ Case-Shiller 20-City M/M: 0.20%e v 0.20% prior; Y/Y: 6.40%e v 6.56% prior; House Price Index (HPI): No est v 210.17 prior
• 09:00 (US) May S&P Case-Shiller (overall) HPI Y/Y: No est v 6.41% prior, Overall HPI Index: No est v 200.86 prior
• 09:00 (MX) Mexico Q2 Preliminary GDP Q/Q: 0.3%e v 1.1% prior; Y/Y: 2.9%e v 1.3% prior
• 09:00 (BE) Belgium Q2 Preliminary GDP Q/Q: No est v 0.3% prior; Y/Y: No est v 1.5% prior
• 09:00 (CL) Chile Jun Industrial Production Y/Y: 4.7%e v 3.6% prior; Manufacturing Production Y/Y: 4.3% e v 1.8% prior; Total Copper Production: No est v 498.4K tons prior
• 09:00 (CL) Chile Jun Unemployment Rate: 6.9%e v 7.0% prior
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:45 (US) July Chicago Purchasing Manager: 61.8e v 64.1 prior
• 10:00 (US) July Consumer Confidence: 126.5e v 126.4 prior
• 10:00 (MX) Mexico Jun Net Outstanding Loans: No est v 4.21T prior
• 11:00 (CO) Colombia Jun National Unemployment Rate: No est v 9.7% prior, Urban Unemployment Rate: 9.9%e v 10.1% prior
• 11:30 (US) Treasury to sell 4-Week Bills
• 13:00 (NZ) New Zealand July QV House Prices Y/Y: No est v 5.7% prior
• 16:30 (US) Weekly API Oil Inventories