Notes/Observations
- Market narrative turning more macro following a strong earnings season
- Turkey Central Bank announced a set of measures to support embattled Lira currency; vowed to take all necessary measures to maintain financial stability
- Turkey FX woes rattling other vulnerable emerging markets
Asia:
- Market narrative turning more macro following a strong earnings season
- Turkey Central Bank announced a set of measures to support embattled Lira currency; vowed to take all necessary measures to maintain financial stability
- Turkey FX woes rattling other vulnerable emerging markets
Asia:
- Japan Econ Min Motegi: US and Japan agreed to expand trade; next meeting to be held around September
Europe:
- Russia Fin Min Siluanov: To further cut its holdings of US securities in response to new sanctions; had no plans to shut down US companies
- Turkey President Erdogan reiterated that Turkey economy was NOT in a crisis; weakness in the Lira currency was a “currency plot”
- Fitch raised Greece sovereign rating two notches to BB- from B; outlook Stable
Americas:
- President Trump tweets that deal with Mexico is “coming along nicely”; “Canada must wait”
Economic Data:
- (SE) Sweden July PES Unemployment Rate: 3.8% v 3.7% prior
- (NL) Netherlands Jun Retail Sales Y/Y: 4.0% v 4.3% prior
- (SE) Sweden Aug SEB Housing Price Indicator: 26 v 13 prior
- (SE) Sweden Jun Household Consumption M/M: 0.3% v 0.2% prior; Y/Y: 4.3% v 3.7% prior
- (CH) SNB Total Sight Deposits for Week Ended Aug 10th (CHF): 576.1B v 575.9B prior
- (CZ) Czech Jun Current Account (CZK): -1.6B v -12.0Be
- (IT) Italy Jun Final CPI (includes tobacco) M/M: 0.3% v 0.3% prelim; Y/Y: 1.5% v 1.5% prelim
- (IT) Italy Jun Final CPI EU Harmonized M/M: -1.4% v -1.4% prelim; Y/Y: 1.9% v 1.9% prelim, CPI Index (Ex Tobacco): 102.5 v 102.2 prior
Fixed Income Issuance:
- None seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx50 -0.4% at 3,410, FTSE -0.5% at 7,633, DAX -0.5% at 12,366, CAC-40 -0.2% at 5,403; IBEX-35 -0.9% at 9,517, FTSE MIB -0.5% at 20,983, SMI -0.5% at 8,982 , S&P 500 Futures -0.3%]
- Market Focal Points/Key Themes: European indices open lower and continued trend as the session progressed; contagion concerns impacting risk sentiment, especially in emerging markets; ongoing financial concerns in Turkey drag on banking sector, BBVA, BNP Paribas and Unicredit among those most affected; attention turning to macro data as earnings season winds down this week; earnings expected in the upcoming US session include JinkoSolar and Sysco Corp
Equities
- Consumer discretionary: Air France-KLM AF.FR -5.3% (potential industrial action), Aryzta ARYN.CH -5.4% (capital raise), Ingenico ING.FR -4.3% (analyst action)
- Financials: BBVA BBVA.ES -3.0% (Turkey concerns), Plus500 PLUS.UK -9.8% (results), Talanx TLX.DE +0.6% (results), Unicredit UCG.IT -1.7% (Turkey concerns)
- Healthcare: Bayer BAYN.CH -10.9% (Monsanto suit)
- Industrials: Chemring Group CHG.UK -16.1% (accident), Evraz EVR.UK -1.5%(analyst action)
- Telecom: United Internet UTDI.DE 4.3% (results)
- Telecom: Drillisch DRI.DE +2.2% (results)
Speakers
- Italy Dep PM Di Maio (Five Star party leader): Country not open to speculator attacks
- Reportedly 50 Conservative MPs form bloc to challenge Brexiteers
- Spain Budget Min Montoro: Willing to delay budget bill
- Turkey Central Bank (CBRT) Statement: Banks would be provided all liquidity they needed and would resume intermediary function at FX deposit market. Collateral deposits limits for Lira transactions raised and could hold more than one Repo auction could be held each day. To monitor markets and take all necessary measures
- Turkey Central Bank (CBRT) cuts its Reserve Requirement Ratio (RRR) BY 250bps for all maturities. Cut RRR in FX by 250bps in all maturities and by 400bps in some maturities. Move to provide TRY10B, $6B and $3B in gold liquidity
- Turkey market regulator CMB warned against any rumors of misleading information on the markets, could result in fines or even prison
- South and North Korea leaders said to be hold summit by Sept in Pyongyang
- South Korea Fin Min Kim: Closely monitoring FX markets; to take measures if necessary
Currencies
- FX markets continued to find flows into safe haven currencies as risk aversion sentiment percolated up on Turkish crisis
- Focus remained on Turkey and possible contagion from its currency crisis. Turkey Central Bank announced a set of measures to support embattled Lira currency; vowed to take all necessary measures to maintain financial stability. TRY currency (LIra) dropped to as low as 7.236 in pre- European trade before recovering to 6.45 area
- The Turkish currency situation was rattling other vulnerable emerging markets as Indonesia and South Africa were economies that were also heavily reliant on foreign investors. USD/ZAR was at 2-year lows as the pair tested 15.44 level. The USD/CNY was neared its weakest level in more than a year, hitting 6.8911 to a dollar.
- EUR/USD remaining below the key technical level of 1.15 and was trading with a 1.13 handle throughout today’s session. The Italian budget issue was simmering in the background of the Turkish FX meltdown. Italy Dep PM Di Maio believed that his country was not at risk of financial market attack but the 10-yeat BTP yield was inching back towards the late May highs of 3.11% area. Spain Budget Min Montoro also noted that his govt was willing to delay its 2019 budget bill
- GBP/USD was near 11-month lows
- USD/JPY pair was lower by 0.5% at 11.30 area just ahead of the US morning.
Fixed Income
- Bund Futures trades at 163.41 up 9 ticks continuing to rise on risk aversion flows due to the continued decline of the Turkish Lira.
- Continued upside targets 163.63 then a push for 164, with a reversal targeting 163.3 then 162.69.
- Gilt futures trades at 123.58 down 4 ticks pulling back from the recent highs after the recent run up with initial support at 123.32 then 123.12, while further momentum targets 123.63 then 124.00.
- Monday ‘s liquidity report showed Friday’s excess liquidity fell from €1.903T to €1.889T. Use of the marginal lending facility fell from €35M to €30M.
- Corporate issuance saw the week finish with $38.4B of high grade issuance.
- Analysts see H2 of 2018 M&A related issuance to range $100-150B.
Looking Ahead
- OPEC Monthly Report (no set time)
- 05:30 (DE) Germany to sell €3.0B in 6-Month BuBills
- 06:00 (IL) Israel July Trade Balance: No est v -$2.1B prior
- 06:00 (TR) Turkey to sell 2020 Bonds
- 06:00 (TR) Turkey to sell 3-month bills
- 06:45 (US) Daily Libor Fixing
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 08:00 (IN) India July CPI Y/Y: 4.5%e v 5.0% prior
- 08:00 (PL) Poland Jun Current Account: -€0.3Be v €0.0B prior; Trade Balance: -€0.1Be v +€0.1B prior; Exports €17.8Be v €17.3B prior; Imports: €17.8Be v €17.2B prior
- 08:00 (RO) Romania Central Bank (NBR) Aug Minutes
- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming auctions
- 08:05 (UK) Baltic Dry Bulk Index
- 08:55 (FR) France Debt Agency (AFT) to sell combined €4.0-5.2B in 3-month, 6-month and 12-month BTF Bills
- 09:30 (EU) ECB announces Covered-Bond Purchases
- 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
- 11:30 (US) Treasury to sell 3-month and 6-month Bills
- 16:00 (US) Weekly Crop Progress Report
