Notes/Observations
- Improved risk sentiment continued in for bulk of session; but soured a bit just ahead of the NY morning
- UK wage data beats expectations and justifies recent BOE rate hike
- China to ask WTO for authorization to impose trade sanctions on $8.4B worth of exports stemming from a 2013 dispute (Note: years of legal wrangling seen forthcoming here)
Asia:
- China PBoC says banking liquidity is at ‘reasonable and plentiful’ level; skips OMO for 15th straight session
- Japan Fin Min Aso reiterated view that did not want to pursue a bilateral FTA with the US
- Japan Economy Min Motegi: US and Japan were still negotiating a date for bilateral trade talks, if they were held it would be before the Abe-Trump summit (expected on Sept 25th). US and Japan had some differences on trade
- White House Press Sec Sanders: Trump has received second letter from North Korea Leader Kim about scheduling second meeting; US was open to it
Europe:
- UK Tory ‘Eurosceptics’ said to have been unable to reach agreement on alternate Brexit plan for UK exit from EU
- Brexit supporters in UK said to be preparing for a new fight over EU laws. Preparing over how EU laws will apply in Britain after it leaves the EU (Reminder: On Sept 6th Group of Brexiteers in PM May’s cabinet said to advocate for new Brexit strategy based on EU
- Canada free trade deal rather than make new concessions if EU dismisses Chequers plan)
Americas:
- Mexico Fin Min said to be prepared to sign bilateral trade agreement with the US if the US could not reach a deal with Canada
- Fed’s Bostic (dove, voter): tariffs could start to be a bind for US businesses; inflation might ramp up due to tariff impacts
Energy:
- Russia Energy Min Novak: OPEC and allies to discuss cooperation agreement post 2018 in Algeria; OPEC+ had the tools to use quotas if the market needs
Economic Data:
- (FR) France Q2 Final Private Sector Payrolls Q/Q: 0.1% v 0.2%e; Total Payrolls: 0.0% v 0.2%e
- (NO) Norway July GDP M/M: -0.2%; Mainland GDP M/M: 0.2%
- (RO) Romania Aug CPI M/M: 0.3% v 0.1%e; Y/Y: 5.1% v 4.8%e
- (JP) Japan Aug Preliminary Machine Tool Orders Y/Y: 5.3% v 13.1% prior
- (HU) Hungary Aug CPI M/M: +0.1% v -0.1%e; Y/Y: 3.4% v 3.3%e (annual pace remains at 5-year high)
- (NO) Norway Aug Region Survey; Output Past 3 Months: 1.35 v 1.23 prior, Output Next 6 Months: 1.46 v 1.47 prior
- (UK) July Average Weekly Earnings 3M/Y: 2.6% v 2.4%e v; Weekly Earnings (ex-bonus) 3M/Y: 2.9% v 2.8%e
- (UK) Aug Jobless Claims Change: +8.7K v +10.2K prior; Claimant Count Rate: 2.5% v 2.5% prior
- (UK) July ILO Unemployment Rate: 4.0% v 4.0%e; Employment Change 3M/3M: +3K v +10Ke
- (DE) Germany Sept ZEW Current Situation: 76.0 v 72.0e; Expectations Survey: -10.6 v -13.5e
- (EU) Euro Zone Sept ZEW Expectations Survey: -7.2 v -11.1 prior
Fixed Income Issuance:
- (ES) Spain Debt Agency (Tesoro) opened its book to sell Nov 2033 Inflation-linked bonds; guidance seen -135-137bps to SPGB
- (NL) Netherlands Debt Agency (DSTA) sold €875M vs. €0.75-1.25B indicated in 4% Jan 2037 DSL; Yield: 0.850% v 0.298% prior
- (ES) Spain Debt Agency (Tesoro) sold total €4.54B vs. €4.0-5.0B indicated range in 6-month and 12-month Bills
- (ZA) South Africa sold total ZAR2.4B vs. ZAR2.4B indicated in 2030, 2031 and 2048 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.5% at 373.6, FTSE -0.6% 7233, DAX -0.9% at 11879, CAC-40 -0.2% at 5257, IBEX-35 -0.3% at 9240, FTSE MIB -0.7% at 20775, SMI -0.1% at 8919, S&P 500 Futures -0.2%]
- Market Focal Points/Key Themes: European Indices trade lower across the board as the downtrend continues tracking US futures lower after a mixed session yesterday. On the corporate from Amer Sports was among the biggest gainers on the Eurostoxx 600 following reported bid interest; Aryzta also gains on a standby underwriting agreement for €800M capital raise. Elsewhere ArelorMittal declines as its reported the company has raised its offer for Essar Steel, and Orexo gains sharply in Sweden after wining a rivival ruling for patent on Zubsolv Opiod addiction drug. Looking ahead notable earners include Peak Resorts and Francesca Holdings.
Movers
- Consumer Discretionary Aryzta [ARYN.CH] +14% (standby underwriting agreement for €800M capital raise), Amer Sports [AMEAS.FI] +12% (Reported bid interest from Anta Sports)
- Industrials Elementis [ELM.UK] -3.2% (To cut acquisition price for Mondo Minerals to $500M from $600M; announces ~$230M rights issue to fund the transaction)
- Materials Arcelor Mittal [MT.NL] -2.2% (Raises offer for Essilor Steel)
- Healthcare Orexo [ORX.SE] +32% (Wins revival ruling for patent on Zubsolv opioid addiction drug (buprenorphine and naloxon)
- Technology Midwich Group [MIDW.UK] -5.5% (Earnings)
Speakers
- Sweden Central Bank (Riksbank) First Deputy Gov Af Jochnick: Swedish economy was doing well but difficult to get inflation to 2%. Underlying inflation continued to be quite weak but view the overall trend as rising. Reiterated view that 1st potential rate hike could come in Dec-Feb period
- German Fin Min Scholz: Consequences of financial crisis still being felt; crucial steps on banking union needed this year
- Italy Fin Min Tria reiterated stance that both citizens income and tax cuts could be done gradually. Wanted to close the growth gap between Italy and Euro region and this could not be done without deficit spending
- Russia Econ Min Oreshkin: RUB currency (Ruble) was considerably below its equilibrium level at this time. Ruble currency might target 63-64 area in the medium term. Raised its short-term capital outflow forecast but saw no reason to change to long-term outflows forecast.
- China to ask WTO for authorization to impose trade sanctions on the US due to non-compliance of the 2017 trade dispute ruling (**Note: Request relates to 2013 dumping dispute issue)
Currencies
- Safe-haven flows continued to reverse for the USD and JPY-related pairs as improved risk sentiment continued to reverberate as trade and Brexit fears dissipated for the time being – Over the past 24 hours the Brexit headlines appear more positive as EU’s seemed more willing to compromise to achieve an agreement with the UK.
- UK wage data beat expectations and again justified the recent BOE rate hike. GBP/USD initially trading above 1.3070 before some retracement
- The continued conciliatory tone from Italian officials on the 2019 budget matters also aiding sentiment. EUR/USD higher by 0.3% to test 1.1625. Dealers note that 1.1750 will be the key resistance level should the EUR rally continue.
Fixed Income
- Bund Futures trades at 159.44 down 30 ticks with the focus on Thursday’s ECB meeting. Resistance moves to 161.82 then 163. A downside break of 159.85 sees 158.69 initially.
- Gilt futures trades at 121.73 down 22 ticks following the move in Treasuries. Continued support at 122.50, with a continued move higher targeting 123.93 then 124.00.
- Tuesday ‘s liquidity report showed Monday’s excess liquidity fell from €1.921T to €1.901T. Use of the marginal lending facility rose from €35M to €41M.
- Corporate issuance saw 6 issuers raise $8.6B in the primary market
Looking Ahead
- 05.30 (UK) Weekly John Lewis LFL sales data
- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
- 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
- 05:30 (BE) Belgium Debt Agency (BDA) to sell €2.4-2.8B in 3-month and 12-month bills
- 05:30 (UK) DMO to sell £2.5B in new conventional 1.75% Jan 2049 Gilts
- 06:00 (US) Aug NFIB Small Business Optimism: 108.0e v 107.9 prior
- 06:00 (IE) Ireland July Property Prices M/M: No est v 1.1% prior; Y/Y: No est v 12.0% prior
- 06:00 (TR) Turkey to sell 23% 2020 Bonds on Sept. 11th
- 06:30 (EU) EFSF to sell €1.0B in 0.10% Mar 2021 bonds
- 06:45 (US) Daily Libor Fixing
- 07:00 (BR) Brazil Sept IGP-M Inflation (1st Preview): 0.7%e v 0.7% prior
- 07:00 (ZA) South Africa July Manufacturing Production M/M: 0.6%e v 0.3% prior; Y/Y: 0.9%e v 0.7% prior
- 07:30 (CL) Chile Central Bank Economists Survey
- 07:45 (US) Weekly Goldman Economist Chain Store Sales
- 08:00 (EU) ECB’s Nouy (SSM chief) in Strasbourg, France
- 08:05 (UK) Baltic Dry Bulk Index
- 08:15 (CA) Canada Aug Annualized Housing Starts: 216.3Ke v 206.3K prior
- 08:55 (US) Weekly Redbook Sales
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:00 (MX) Mexico July Industrial Production M/M: -0.2%e v +0.3% prior; Y/Y: 1.0%e v 0.2% prior, Manufacturing Production Y/Y: 2.2%e v 2.0% prior
- 09:00 (RU) Russia July Trade Balance: $14.5Be v $15.6B prior
- 10:00 (US) July JOLTS Job Openings: 6.675Me v 6.662M prior
- 10:00 (US) July Final Wholesale Inventories M/M: 0.7%e v 0.7% prelim, Wholesale Trade Sales M/M: +0.1%e v -0.1% prior
- 11:30 (US) Treasury to sell 4-Week and 52-Week Bills
- 12:00 (IS) Iceland Aug International Reserves (ISK): No est v 670B prior
- 13:00 (US) Treasury to sell $35B in 3-Year Notes
- 16:00 (AR) Argentina Central Bank (BCRA) Interest Rate Decision: Expected to leave LELIQ Rate unchanged at 60.00%
- 16:30 (US) Weekly API Oil Inventories
- (MX) Mexico Aug ANTAD SSS Y/Y: No est v 4.8% prior
- (PE) Peru July Trade Balance: No est v $1.1B prior
