Market movers today
Another quiet day on the data front, but there will be substantial market focus on developments in Italy, Turkey and the trade spat between China and the US.
In Italy, the government’s budget intentions for 2019 are catching the attention of the market. Today, there is going to be another government meeting on the budget. Over the past few days, various members of the new government have stated that EU budget rules may not hold back the government’s fiscal plans.
In Turkey, the lira has stabilised, but the market remains nervy and additional pressures on the currency may prompt central bank action if sustained. See our views on the situation in Flash Comment – Turkish lira: perfect storm deepens around the TRY , 7 August.
In China, the number for the producer price inflation in July is due to be released overnight. Inflation is set to decline modestly to 4.5% in July from 4.7% in June.
Selected market news
It has been a mixed picture for Asian equities this morning where markets in Japan, Hong Kong and Korea have edged higher, while China has moved lower.
10Y JGBs continue to range trade around 10bp. The investor flow data from Japan released this morning showed that Japanese investors sold Italian government bonds in July and buying French government bonds.
The 3Y US Treasury bond auction was a bit ‘soft’ and US Treasury yields moved modestly higher. Today, the US Treasury will continue with the 10Y auction, where it will sell a record amount of 10Y bonds.
The situation continues to deteriorate in Turkey and the currency continues to be under pressure on the back of the political stand-off with the US. A Turkish delegation is travelling to the US for talks, but for now the market pressure continues.
Finally, the US will raise tariffs to 25% on an additional USD16bn of imports from China. This is the second time the US has raised tariffs to 25% on Chinese goods and China has stated that it will retaliate.
