Notes/Observations
- BOE expected to deliver a dovish rate hike – UK Construction PMI handily beats expectations
- Risk aversion continues to simmer on trade war escalation concerns
Asia:
- BoJ’s Amamiya reiterated that it would take time to hit 2% inflation and that powerful easing was appropriate. If bond yields rise too rapidly BOJ would act quickly as policy has not changed
- Australia Jun Trade Balance (A$): 1.9B V 0.9BE; Exports m/m: +3% v +4% prior; Imports m/m: -1% v +3% prior
- China PBOC: To continue to implement the prudent monetary policy in the latter half of 2018 to ensure economic and financial stability
Europe:
- UK Environmental Min Gove said to have discussed a backstop plan related to the Single Market at a private dinner which would keep the UK in the EU single market if PM May Brexit strategy failed
- German officials said to refute speculation of a vague Brexit deal so as to prevent the UK crashing out of the EU with no deal
- White House Press Sec Sanders: US to sanction two Turkish govt officials over pastor’s detention; there’s no evidence Pastor Brunson did anything wrong (Note: Turkey foreign ministry: Turkey to respond in kind to the US sanctions). TRY currency (Lira) fell to fresh record lows)
Americas:
- Fed left interest rates unchanged (as expected in an unanimous vote) with economy growing at ‘strong rate’. Reiterated guidance for “further gradual increases”
- US official confirmed that Trump administration was considering raising proposed tariffs on Chinese imports to 25% from 10%, Trump has directed Lighthizer to consider increasing tariffs
- US Treasury Dept announced proposed tax regulations on repatriation of US corporate income held overseas
- Brazil Central Bank left its Selic Target Rate unchanged at 6.50% (as expected). Base scenario called for keeping the SELIC Rate on hold. Reiterated view that shocks to Brazil’s inflation were temporary. Next rate move would depend on economic activity and the balance of risks
Economic Data:
- (CH) Swiss July SECO Consumer Confidence: -7 v +2e
- (HU) Hungary May Final Trade Balance: €0.6B v €0.6B prior
- (ES) Spain July Net Unemployment M/M: -27.1K v-90.0K prior
- (CH) Swiss Jun Real Retail Sales Y/Y: 0.3% v 0.0%e
- (CH) Swiss July Manufacturing PMI: 61.9 v 60.9e
- (BR) Brazil July FIPE CPI (Sao Paulo): 0.2% v 0.2%e
- July FAO World Food Price Index: 168.8 v 173.7 prior
- (UK) July Construction PMI: 55.8 v 52.8e (4th month of expansion)
- (EU) Euro Zone Jun PPI M/M: 0.4% v 0.3%e; Y/Y: 3.6% v 3.5%e
Fixed Income Issuance:
- (ES) Spain Debt Agency (Tesoro) sold total €3.996B vs. €3.5-4.5B indicated range in 2021, 2023 and 2028 Bonds
- Sold €1.74B in 0.05% Jan 2021 SPGB; Avg yield: -0.149% v -0.098%, Bid-to-cover: 1.60x v 2.22x prior
- Sold €656M in 0.35% July 2023 SPGB; Avg yield: 0.368% v 0.313% prior; Bid-to-cover: 3.38x v 1.56x prior
- Sold €1.57B in 1.40% Apr 2028 SPGB; Avg yield: 1.422% v 1.308% prior, Bid-to-cover: 1.50x v 1.47x prior
- (ES) Spain Debt Agency (Tesoro) sold €539M vs. €250-750M indicated range in 1.0% Nov 2030 Inflation-linked Bonds; Real Yield: 0.239% v 0.306% prior; Bid-to-cover: 2.15x v 2.6x – (FR) France Debt Agency (AFT) sold total €6/356B vs. €5.5-6.5B indicated range in 2029, 2031 and 2036 Oats
- Sold €2.41B in 5.5% Apr 2029 Oat; Avg Yield: 0.74 v 0.86% prior; Bid-to-cover: 1.98x v 2.05x prior
- Sold €1.581B in 1.50% May 2031 Oat; Avg Yield 0.98% v 0.86% prior; Bid-to-cover: 1.70x v 1.39x prior
- Sold €2.365B in 1.25% May 2036 Oat; Avg Yield 1.28% v 1.37% prior; Bid-to-cover: 1.31x v 2.14x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx50 -1.1% at 3,470, FTSE -0.8% at 7,588, DAX -1.8% at 12,516, CAC-40 -0.7% at 5,461; IBEX-35 -1.0% at 9,700, FTSE MIB -1.30% at 21,507, SMI -0.4% at 9,136, S&P 500 Futures -0.4%]
- Market Focal Points/Key Themes: European stocks open lower across the board and continued trend as session progressed; geopolitical concerns over trade keep risk sentiment muted; materials impacted by commodity prices; auto stocks underperform on tariff concerns; consumer discretionary better performing sector; attention turning to BOE rate decision and commentary later today, and tomorrow’s NFP; earnings expected in the upcoming US session include Avon, CNX Resources and CBRE Group
Equities
- Consumer discretionary: Hugo Boss BOSS.DE -5.1% (results), Merlin Entertainments MERL.UK -1.0% (results)
- Energy: CGG CGG.FR +8.1% (results), TGS Nopec TGS.NO +2.5% (results)
- Financials: Amundi AMUN.FR +7.7% (results), AXA CS.FR +1.6% (results), Barclay’s BARC.UK -0.7% (results), London Stock Exchange LSE.UK +3.1% (results),
- Societe Generale GLE.FR -1.6% (results)
- Healthcare: Carmat ALCAR.FR +8.7% (first successful transplant), Novacyt ALNOV.FR -8.0% (results)
- Industrials: AMG Advanced Metallurgical AMG.NL -4.6% (results), BMW BMW.DE -1.6% (results), Rheinmetal RHM.DE -1.4% (results), Rolls Royce RR.UK +5.2% (results)
- Materials: KAZ Minerals KAZ.UK -13.3% (acquisition), Lanxess LXS.DE -3.5% (results)
- Technology: Dialog Semiconductor DLG.DE -5.2% (results), Siemens SIE.DE -4.5% (results)
- Telecom: Altice ATC.NL -13.0% (results)
Speakers
- Italy Fin Min Tria said to be holding a top-level meeting on the budget to consider populist demands for flat tax and income support for the poor . To meet Dep PM Silvini and Di Maio and EU Affiairs Min Savona
- Norway Central Bank (Norges) Q2 Lending Survey noted that household credit demand rose with banks expecting Q3 household credit demand to be little changed
- Russia said to forecast oil production at around 11.2M bpd through the end of 2018 (**Note: July production was 11.22M bpd)
- Taiwan Central Bank (CBC) June Minutes: Some members concerned about FX impact on CPI. One member advised to prepare plan if CPI went above the 2% level. One member believed the H2 inflation pressure to be mild
- China Foreign Ministry: Door to talks remained open; Reiterated stance that unilateral trade pressure by US was counterproductive, any willful act by US would backfire
- China banking regulator said to lower commercial banks’ risk weighting for debt-to-equity swaps
Currencies
- Risk appetite dwindled in global trading as global trade concerns lingered after a US official confirmed that Trump administration was considering raising proposed tariffs on Chinese imports to 25% from 10%. The sentiment benefited the USD overall. Additionally the greenback was aided by the Fed repeatedly emphasized the economy’s strength in a statement following its rate decision.
- GBP was softer of the highly anticipated dovish rate hike by the BOE later today. GBP/USD hitting multi-week low below the 1.3170 level.
- BOJ demonstrated its flexibility in it policy performing an unplanned purchased in the 5-10-year JGB range during the Asian session that helped to cap rising JGB yields. BOJ commented that it acted to meet target of keeping the 10-year JGB curve around 0.00% with the operation. USD/JPY a tad softer at 111.60 as riosk aversion helping the yen currency
- TRY currency (Lira) traded beyond the 5.05 level for fresh record lows against the USD following US sanctioning of two Turkish govt officials over pastor’s detention
Fixed Income
- Bund Futures trades at 161.07 up 4 ticks after the FOMC maintained a steady rate stance. 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 122.03 down 17 ticks ahead of the BOE rate decision, with continuing upside targeting 123.18 then 124.44, with a move lower seeing initial support at 122.23 then 121.85.
- Thursday ‘s liquidity report showed Wednesday’s excess liquidity rose from €1.855T to €1.906T. Use of the marginal lending facility rose from €207M to €254M.
- Corporate issuance saw NY Life raise $900M in the primary market
Looking Ahead
- 05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds (3 tranches)
- 06:00 (IE) Ireland July Live Register Monthly Change: No est v -4.8K prior; Live Registry Level: No est v 219.3K prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to raise Interest Rates by 25bps to 0.75%
- 07:00 (UK) Bank of England (BOE) Minutes
- 07:00 (UK) Bank of England (BOE) Quarterly Inflation Report (QIR)
- 07:00 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to raise Repurchase Rate by 25bps to 1.25%
- 07:00 (ZA) South Africa Jun Electricity Consumption Y/Y: No est v 0.2% prior; Electricity Production Y/Y: No est v -0.8% prior
- 07:30 (US) July Challenger Job Cuts: No est v 37.2K prior; Y/Y: No est v 19.6% prior
- 08:00 (BR) Brazil Jun Industrial Production M/M: +14.0%e v -10.9% prior; Y/Y: +4.5%e v -6.6% prior
- 08:05 (UK) Baltic Dry Bulk Index
- 08:15 (CZ) Czech Central Bank Gov Rusnok to hold post Rate Decision press conference
- 08:30 (US) Initial Jobless Claims: 220Ke v 217K prior; Continuing Claims: 1.75Me v 1.745M prior
- 08:30 (US) Weekly USDA Net Export Sales
- 09:00 (MX) Mexico Jun Leading Indicators M/M: No est v -0.12 prior
- 09:00 (SG) Singapore July Purchasing Managers Index (PMI): No est v 52.5 prior; Electronics Sector: No est v 51.9 prior
- 09:00 (RU) Russia Gold and Forex Reserve w/e July 27th: No est v $457.9B prior
- 09:00 (CL) Chile Jun Retail Sales Y/Y: 4.8%e v 3.0% prior; Commercial Activity Y/Y: No est v 6.4% prior
- 10:00 (US) Jun Final Durable Goods Orders: No est v 1.0% prelim; Durables Ex Transportation: No est v 0.4% prelim, Capital Goods Orders (Non-defense/ex-aircraft): No est v 0.6% prelim, Capital Goods Shipments (Non-defense/ex-aircraft): No est v 1.0% prelim
- 10:00 (US) Jun Factory Orders: 0.7%e v 0.4% prior, Factory Orders (Ex Transportation): No est v 0.7% prior
- 10:00 (DK) Denmark July Foreign Reserves(DKK): No est v 468.1B prior
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (CO) Colombia Jun Exports: $3.5Be v $3.7B prior
- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Rate unchanged at 7.75%
- 15:00 (AR) Argentina Jun Industrial Production Y/Y: -3.5%e v -1.2% prior
