UK Retail Sales Beats Expectations, Renewed US/China Trade Talks Soothes Risk Appetite

Notes/Observations

• Risk sentiment improves on US-China trade dialogue set to resume but remains fragile due to Turkish and Italian concerns
• UK July Retail sales data handily beats expectations aided by discounts, world cup and hot weather
• Norway Central Bank keeps policy steady and poised to hike at its next meeting in Sept

Asia:

• Australia Aug Consumer Inflation Expectation: 4.0% v 3.9% prior
• Australia July Employment Change: -3.9K v +15.0Ke; Unemployment Rate: 5.3% v 5.4%e ((lowest unemployment rate since Nov 2012)
• Japan July Trade Balance registers a larger-than-expected deficit ( -¥231.2B v -¥41.2Be) as exports slow
• China Commerce Ministry (MOFCOM): China Vice Commerce Min to visit the US for trade talks in late Aug, to meet with US Treasury Undersecretary Malpass. China reiterated its stance that it would not accept any unilateral trade measures and its opposition to trade protectionism. Reiterated that China welcomed dialogue.
• Hong Kong Monetary Authority (HKMA): Reiterates to continue to buy Hong Kong dollar (HKD) currency at 7.85 when weak-side of trading band is triggered
• Former BoJ Official Hayakaw: BoJ might tolerate bond yield rises to around 0.4% under the new guidance adopted in July. With the new guidance, the BoJ couldn now conduct ‘stealth’ rate hikes.

Europe:

• Turkish Foreign Min: Turkey is prepared to discuss issues with the United States without threats
• Qatar has pledged to invest $15B in Turkey economy
• Turkey Fin Min Albayrak: Turkey-Qatar will improve cooperation; Turkey tol emerge with rational policies, strong strategies, friends, cooperation
• IMF Official stated that it had not received any indication from Turkey authorities that they were considering a request for IMF financial assistance

Americas:

• White House Press Sec Sanders: Turkey’s tariff announcement is regrettable and was a step in the wrong direction
• US govt issues new North Korea-related sanctions; to implement sanctions on Chinese, Russian firms over North Korea connections

Economic Data:

• (NL) Netherlands July Unemployment Rate: 3.8% v 3.9%e
• (DE) Germany July Wholesale Prices M/M: 0.0% v 0.5% prior; Y/Y: 3.5% v 3.4% prior
• (CZ) Czech Jun Export Price Index Y/Y: +0.5% v -1.5% prior; Import Price Index Y/Y: +0.7% v -2.3% prior
• (CZ) Czech July PPI Industrial M/M: 0.3% v 0.1%e; Y/Y: 3.4% v 3.1%e
• (TR) Turkey Jun Industrial Production M/M: -2.0% v -1.6% prior; Y/Y: 3.2% v 5.0%e
• (NO) Norway Central Bank (Norges) left the Deposit Rates unchanged at 0.50%, as expected
• (UK) July Retail Sales (Ex-Auto Fuel) M/M: 0.9% v 0.0%e; Y/Y: 3.7% v 2.8%e
• (UK) July Retail Sales (Including Auto/Fuel) M/M: 0.7% v 0.2%e; Y/Y: 3.5% v 2.9%e
• (EU) Euro Zone Jun Trade Balance (Seasonally Adj): €16.7B v €16.9Be v €16.9B prior; Trade Balance NSA (unadj): €22.5Bv €16.5B prior

Fixed Income Issuance:

• (SE) Sweden sold SEK500M vs. SEK500M indicated in 0.125% I/L Dec 2027 Bond; Avg Yield: -1.5104% v -1.3716% prior; Bid-to-cover: 5.53x v 1.90x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx50 +0.8% at 3,376, FTSE +0.3% at 7,518, DAX +0.4% at 12,209, CAC-40 +0.4% at 5,326; IBEX-35 +0.7% at 9,451, FTSE MIB -1.0% at 20,700, SMI +0.6% at 8,983, S&P 500 Futures +0.3%]
• Market Focal Points/Key Themes: Euopean indices open higher across the board, excepting Italy dragged down by repercussions from Genoa bridge collapse, and playing catch-up after being closed for holiday yesterday; risk sentiment supportive; improved commodity prices support materials stocks; Amazon reportedly to open a car insurance comparison website in the UK; Italy PM said is looking forward to cancelling Autostrade’s licence, dragging on construction stocks including ACS and Hochtief; earnings expected in the upcoming US session include Walmart, JCPenny and Applied Materials

Equities

• Consumer discretionary: Carlsberg CARLB.DK +3.3% (results), JC Decaux DEC.FR +6.5% (analyst action), Kingfisher KGF.UK -2.0% (results), Lagardere MMB.FR +0.6% (acquisition), Rank Group RNK.UK -2.8% (results)
• Consumer staples: ForFarmers FFARM.NL +1.8% (results), ICA Gruppen ICA.SE -5.8% (results)
• Financials: Aegon AGN.NL +1.3% (results)
• Industrials: Atlantia ATL.IT -25.8% (potential termination of highways contract – halted), Boskalis Westminster BOKA.NL -6.7% (results), Henkel HEN3.DE -4.1% (results)
• Materials: KAZ Minerals KAZ.UK +7.5% (results)
• Technology: Wirecard WDI.DE +4.4% (results)

Speakers

• Norway Central Bank (Norges) Policy Statement noted that the decision to keep policy steady was unanimous and reiterated its view that the 1st potential rate hike likely to be in September. The outlook and the balance of risks did not appear to have changed substantially since the June report. Underlying inflation was below inflation target, but the driving forces indicated it would rise further out
• Netherlands Bureau for Economic Policy Analysis (CPB): Cuts 2018 GDP growth forecast from 2.9% to 2.8%. Maintained 2018 inflation at 2.0% while raising 2019 inflation from 2.4% to 2.5%
• Indonesia President Widodo budget speech forecasted 2019 GDP growth at 5.3% and proposes 2019 budget deficit to GDP ratio of 1.84% vs. 2.12% y/y
• China PBoC said to ban commercial banks from using interbank accounts to either deposit or lend yuan offshore through free trade zone scheme

Currencies

• The USD retraced some of its recent strength as risk appetite improved over the past 24 hours.
• US and China have agreed on a new round of trade talks, while Turkey has managed to halt the rout of the Lira and secure major investments from Qatar
• EUR/USD higher by 0.2% but unable to break above the 1.14 level as Italian budget concerns continue to linger in the background.
• GBP received a small lift after UK July Retail sales data handily beat expectations. GBP/USD holding above the 1.27 level as a result.
• TRY currency (Lira) appreciated for the 3rd straight day and briefly moved below 5.70 level against the USD. Focus will be on the upcoming an investor call later today . Reports that Qatar had already pledged to invest $15B in Turkish economy

Fixed Income

• Bund Futures trades at 163.42 down 14 ticks retracing some of the move seen yesterday as European Indices. Resistance moves to 163.82 then 164. A downside break of 163.00 sees 162.69 initially.
• Gilt futures trades at 123.64 down 9 ticks benefiting from better UK Retail sales numbers. Continued support at 123.12, with a continued move higher targeting 123.93 then 124.00.
• Thursday ‘s liquidity report showed Wednesday’s excess liquidity rose from €1.913T to €1.918T. Use of the marginal lending facility fell from €115M to €100M.
• Corporate issuance saw a quieter day in terms of issuance with two issuers raising $1.5B in the primary market.

Looking Ahead

• (CO) Colombia July Consumer Confidence: 17.8e v 15.5 prior
• (EG) Egypt Central Bank Interest Rate Decision
• 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)
• 05:30 (IN) India to sell combined INR120B in 2020, 2026, 2031, 2033 and 2045 bonds
• 06:00 (IL) Israel Q2 Advance GDP Annualized (1st reading): 2.5%e v 4.7% prior
• 06:45 (US) Daily Libor Fixing
• 08:00 (PL) Poland July CPI Core M/M: 0.0%e v 0.1% prior; Y/Y: 0.6%e v 0.6% prior
• 08:05 (UK) Baltic Dry Bulk Index
• 08:30 (US) Initial Jobless Claims: 215Ke v 213K prior; Continuing Claims: 1.74Me v 1.755M prior
• 08:30 (US) July Housing Starts: 1.26Me v 1.173M prior; Building Permits: 1.31Me v 1.292M prior (revised from 1.273M)
• 08:30 (US) Aug Philadelphia Fed Business Outlook: 22.0e v 25.7 prior
• 08:30 (CA) Canada Jun Manufacturing Sales M/M: 1.0%e v 1.4% prior
• 08:30 (CA) Canada July ADP Payrolls Report: No est v -10.5K prior
• 08:30 (US) Weekly USDA Net Export Sales
• 09:00 (RU) Russia Gold and Forex Reserve w/e Aug 10th : No est v $458.0B prior
• 09:00 Turkey Fin Min Albayrak holds investor call
• 10:00 (MX) Mexico Central Bank (Banxico) Aug Minutes
• 10:30 (US) Weekly EIA Natural Gas Inventories