Notes/Observations
- Turkey Lira currency continues its retracement from recent record lows; risk of the Turkish crisis spreading to other emerging markets appears limited for now
- Indonesia Central Bank hikes its key rate for the 4th straight time and maintains its hawkish tone
- UK July CPI in-line with expectations but remained above BOE target for the 20th straight month; data did little to change the outlook of the path for BOE rate hikes of one hike per year
- Assumption day holiday keeps participation at a minimum in Europe
Asia:
- China PBoC set the Yuan Reference Rate at 6.8856 v 6.8695 prior for its weakest CNY currency fix since May 12th 2017
- China State Planner (NDRC) Spokesman reiterates there was no winner from trade war; Jan-July data showed limited impact on China’s economy from trade frictions; Trade frictions would have negative impact on domestic economy. Reiterated that China would ensure the achievement of annual economic growth target, despite trade war. And to keep economic growth within a reasonable range in H2
Europe:
- Turkey has raised tariffs on some US imports including raising passenger cars tariffs by 120%, alcohol tariffs by 140% & tobacco tariffs by 60%
Americas:
- White House official: more economic pressure could be in store for Turkey if it does not release Pastor Brunson
- State Dept spokesperson: conversations are continuing with Turkey about Brunson
Energy:
- Weekly API Oil Inventories: Crude: +3.7M v -6.0M prior
Economic Data:
- (PE) Peru Jun Economic Activity Index (Monthly GDP) Y/Y: 2.0% v 6.4% prior
- (DK) Denmark July PPI M/M: 0.2% v 1.5% prior; Y/Y: 6.7% v 6.8% prior
- (FI) Finland Jun Current Account Balance: -€0.4B v -€0.5B prior
- (NO) Norway July Trade Balance (NOK): 25.3B v 22.0B prior
- (TR) Turkey May Unemployment Rate: 9.7% v 9.6% prior
- (ID) Indonesia Central Bank (BI) raised the 7-day Reverse Repoby 25bps to 5.50% (not expected) for its 4th straight hike in the current tightening cycle.
- (TR) Turkey July Central Gov’t Budget Balance (TRY): +1.1B v -25.6B prior
- (UK) July CPI M/M: 0.0% v 0.0%e; Y/Y: 2.5% v 2.5%e; CPI Core Y/Y: 1.9% v 1.9%e; CPIH Y/Y: 2.3% v 2.3%e
- (UK) July RPI M/M: 0.1% v 0.2%e; Y/Y: 3.2% v 3.4%e, RPI-X (ex-mortgage interest payment) Y/Y: 3.3% v 3.5%e, Retail Price Index: 281.7 v 282.1e
- (UK) July PPI Input M/M: 0.5% v 0.1%e; Y/Y: 10.9% v 10.3%e
- (UK) July PPI Output M/M: 0.0% v 0.2%e; Y/Y: 3.1% v 3.0%e
- (UK) July PPI Output Core M/M: 0.0% v 0.2%e; Y/Y: 2.2% v 2.1%e
- (UK) Jun ONS House Price Index Y/Y: 3.0% v 2.6%e
Fixed Income Issuance:
- (DK) Denmark sold total DKK2.83B in 2020 and 2027 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx50 +0.1% at 3,413, FTSE -0.1% at 7,604, DAX +0.2% at 12,386, CAC-40 flat at 5,405; IBEX-35 -0.3% at 9,481, FTSE MIB -0.3% at 20,906, SMI -0.4% at 9,004 , S&P 500 Futures -0.1%]
- Market Focal Points/Key Themes: European stocks open slightly higher but later moved towards mixed as the session progressed; trading somewhat muted with bank holidays in several European countries; materials stocks impacted following disappointing economic news from China; focus on UK economic data; markets closed for holiday include Italy, Austria, Greece, Cyprus and Slovenia; Chile and Costa Rica closed for holiday; upcoming earnings expected in the US session include Super Micro Computer, Macy’s and Ability
Equities
- Consumer discretionary: Aeroflot AFLT.RU +2.2% (share buyback)
- Energy: Vestas Wind VWS.DK +4.6% (results)
- Healthcare: ALK-Abello ALKB.DK +9.8% (results), GlaxoSmithKline GSK.UK +1.6% (study results), Hikma Pharmaceuticals HIK.UK +8.6% (results), Stratec Biomedical SBS.DE -13.4% (results)
- Industrials: Balfour Beaty BBY.UK +2.9% (results), Heijmans HEIJM.NL +3.9% (results), Leoni LEO.DE -5.0%(results), William Demant WDH.DK -8.0% (results)
- Financials: Admiral Group ADM.UK +2.3(results), Amundi AMUN.FR +2.9% (analyst action), Royal Bank of Scotland RBS.UK -0.2% (confirms dividend), Selvaag Bolig SBO.NO +6.6% (results)
Speakers
- Italy Interior Min Salvini (also Dep PM): To invest in infrastructure despite EU limits. The 2019 budget to include funds for infrastructure
- UK Foreign Sec Hunt stated that he was worried that the negotiations with the EU might not result in a Brexit deal but was very confident that govt would weather the storms ahead. No-deal Brexit would have a short-term impact on economy
- Turkish Court reportedly rejected appeal to release US Pastor Brunson from House Arrest
- Turkey Presidential aide Kalin stated that would continue abiding by free market rulles, don’t want economic warfare with anyone. Improvement trend in markets over the past two days were noted; expected the trend in Turkish markets expected to continue
- Indonesia Central Bank (BI) Policy Statement reiterated it would remain preemptive and front-loaded on monetary policy. Decision to hike was consistent with efforts to keep competitiveness. The rate hike was needed to keep financial markets attractive and keep the current account deficit at a safe level. Domestic economy was resilient with consumption to support growth going forward. Global uncertainty was rising due to contagion risks from Turkey’s fragility; to watch all impact of Turkey’s slowdown. Indonesia FX Reserves level was seen as sufficient (**Note: July Foreign Reserves at $118.3B and has fallen for the past 6 months) . Saw a narrowing of the current account deficit on import reduction and reiterated to guard IDR currency (Rupiah) to be in-line with fundamentals; to maintain duel interventions
Currencies
- Overall the USD maintaining its firm tone against the major European pairs; rebound in the Turkish lira continued for a 2nd session.
- USD/TRY briefly tested below the 6.00 level after hitting a record high of 7.22 earlier in the week. Analysts noted that risk of the Turkish crisis spreading to other emerging markets seemed limited
- GBP/USD tested below 1.27 for its lowest level since Jun 2017 but moved off its worst levels. The 2.5% annual CPI reading for July did little to change the outlook of the path for BOE rate hikes of one hike per year.
- EUR/USD probing the lower end of the 1.13 handle as technical damage of the recent break of 1.15 keeps the downside possibilities open. Italian budget situation also simmering on the back burner with the recent bridge collapse in Italy having govt official there call for more infrastructure spending.
Fixed Income
- Bund Futures trades at 163.19 down 2 ticks little changed on a quiet trading day as many European nations observe various holidays. Support remains at 163.63 then 164. A downside break of 163.00 sees 162.69 initially.
- Gilt futures trades at 123.44 up a tick with little reaction after inline inflation readings. Continued support at 123.12, with a move higher targeting 123.58 then 123.74.
- Wednesday ‘s liquidity report showed Tuesday’s excess liquidity rose from €1.908T to €1.913T. Use of the marginal lending facility rose from €31M to €115M.
- Corporate issuance saw a further 7 issuers raising $8.9B bringing this weeks issuance to $23.2B.
Looking Ahead
- 05:30 (DE) Germany to sell €1.0B in 2.5% July 2046 Bunds
- 05:30 (PT) Portugal Debt Agency (IGCP) to sell combined €0.75-1.0B in 3-month and 12-month Bills
- 06:00 (IE) Ireland Jun Trade Balance: No est v €5.2B prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e Aug 10th: No est v -3.0% prior
- 07:00 (BR) Brazil Aug FGV Inflation IGP-10 M/M: 0.6%e v 0.9% prior
- 07:00 (ZA) South Africa Jun Retail Sales M/M: No est v 1.1% prior; Y/Y: 2.2%e v 1.9% prior
- 07:00 (RU) Russia to sell RUB10B in Dec 2021 OFZ Bonds
- 07:30 (BR) Brazil Jun Economic Activity Index (Monthly GDP) M/M: No est v -3.3% prior; Y/Y: +1.6%e v -2.9% prior
- 08:05 (UK) Baltic Dry Bulk Index
- 08:30 (US) Aug Empire Manufacturing: 20.0e v 22.6 prior
- 08:30 (US) Q2 Preliminary Nonfarm Productivity: 2.4%e v 0.4% prior; Unit Labor Costs: 0.2%e v 2.9% prior
- 08:30 (US) July Advance Retail Sales M/M: 0.1%e v 0.5% prior; Retail Sales Ex Auto M/M: 0.3%e v 0.4% prior, Retail Sales Ex Auto and Gas: 0.4%e v 0.3% prior; , Retail Sales Control Group: 0.4%e v 0.0% prior
- 09:00 (CA) Canada July Existing Home Sales M/M: No est v 4.1% prior
- 09:15 (US) July Industrial Production M/M: 0.3%e v 0.6% prior; Capacity Utilization: 78.2%e v 78.0% prior, Manufacturing Production: 0.3%e v 0.8% prior
- 10:00 (US) Jun Business Inventories: 67e v 0.4% prior
- 10:00 (US) Aug NAHB Housing Market Index: No est v 68 prior
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 11:30 (IL) Israel July CPI M/M: 0.2%e v 0.1% prior; Y/Y: 1.6%e v 1.3% prior
- 12:00 (CO) Colombia Q2 GDP Q/Q: No est v 0.4% prior; Y/Y: 2.6%e v 2.2% prior
- 15:00 (AR) Argentina July National CPI M/M: 3.0%e v 3.7% prior; Y/Y: No est v 29.5% prior
- 15:00 (CO) Colombia Jun Economic Activity (monthly GDP) Y/Y: 2.7%e v 2.4% prior
- 16:00 (US) Jun Total Net TIC Flows: No est v $69.9B prior; Net Long-Term Flows: No est v $45.6B prior
