Notes/Observations
- Lingering U.S.-China trade tensions; Trump stated things were going ‘very well with China’; not ready to make a deal. Added that Sept trade talks with China could be cancelled
- Hong Kong closes airport as protests escalate
- Italy Dep PM Salvini said to try for confidence vote this week in order to force early elections
Asia:
- China PBoC set the Yuan Reference Rate lower for the 8th straight session ( 7.0211 vs. V 7.0136 prior
- PBoC Dir General of international dept. Zhu Jun reiterated volatility in the Yuan currency since Aug is normal market reaction to escalating trade frictions related to the US
- IMF annual report on China: escalation in trade tensions would justify more stimulus; risks were tilted to the downside; China should maintain flexible yuan if tariffs increased. China GDP growth could slow to 4% by 2030
Europe/Mideast:
- Members of Parliament said to plan to force PM Johnson to ask for Brexit extension
- UK Labour party leader Corbyn said to prepare to table no confidence vote
- Italy Dep PM Salvini: if I win elections, taxes will be cut regardless of the EU’s opinion
- Fitch affirmed Italy sovereign rating at BBB; outlook Negative
- Moody’s affirmed Portugal sovereign rating at Baa3; outlook revised to Positive from Stable
Americas:
- White House Trade Adviser Navarro: bipartisan support to get structural changes out of China. Since we put on tariffs China had devalued currency by over 10%, neutralizing our tariffs; clearly China manipulates its currency from a trade perspective (declines to comment on whether he would like to see China free float its currency)
- Goldman analyst noted that US China trade war was leading the US towards a recession, did not see a deal reached before 2020 President elections in the US. Expected remaining $300B in tariffs on China to go into effect
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.04% at 371.42, FTSE -0.25% at 7,235.45, DAX +0.05% at 11,699.65, CAC-40 -0.27% at 5,313.76, IBEX-35 -0.36% at 8,726.05, FTSE MIB -0.05% at 20,313.50, SMI +0.17% at 9,766.50, S&P 500 Futures -0.45%]
Market Focal Points/Key Themes:
Equities
- European Indices trade mixed across the board, following a mixed session in Asia and lower US Index futures as Hong Kong protests and trade tensions remain in focus.
- On the corporate front shares of Salzgitter trades lower after a decline in profits and reduced full year Revenue forecasts; Benchmark Holdings trades 30% lower after guiding full year results below forecasts, while M&C Saatchi declines sharply after revealing the company will take a one off charge to its full year results.
- In other news Osram Licht gains as AMS makes an improved €38.50/shr offer for the company, with AMS declining almost 10% on the news; Tullow Oil gains over 15% as the Jethro drilling results exceeding expectations, while Thomas Cook declines further after details of its recapitalization terms with Fosun.
Looking ahead notable earners include Sysco, Barrick Gold and Stars Group among others. - Consumer discretionary: Thomas Cook [TCG.UK] -20% (recapitalization), Benchmark Holdings [BMK.UK] -26% (trading update)
- Energy: Tullow Oil [TLW.UK] +17% (discovery)
- Healthcare: Curetis [CURE.NL] -16% (postpones results)
- Industrials: Salzgitter [SZG.DE] +1% (earnings; outlook cut), Sandvik [SAND.SE] -1.5%, ABB [ABBN.CH] +4% (Sandvik CEO to step down to join ABB)
- Technology: OSRAM Licht [OSR.DE] +10%, AMS [AMS.CH] -0% (AMS makes offer), M&C Saatchi [SAA.UK] -21% (trading update)
Speakers
- Italy Dep PM Salvini (Lega party) said to potentially pull ministers unless confidence vote is held soon
- Bank of Italy: End Jun Non-performing Loans (NPL) at €90B vs. €92B m/m
- Hong Kong and Macau Affairs Office: Situation in Hong Kong had come to a critical juncture. Hong Kong was showing signs of terrorism. Hong Kong should restore order; police should enforce laws strictly
- China FX Regulator SAFE stated that it did not expect a disorderly depreciation of CNY currency (Yuan). Changes in CNY exchange rate would not lead to large-scale deleveraging in China’s foreign debt. China had the confidence and capability to effectively fend off shocks and risks to maintain stable FX markets
- China PBOC Dep Gov Pan Gongsheng: FX market to return to fundamentals after fluctuations
Currencies/ Fixed Income
- USD became the week on firmer footing as global growth concerns remained the primary catalyst for price action as risks from trade and Brexit contined.
- EUR/USD was softer and holding below the 1.12 level. Dealers looked ahead towards Germany Q2 GDP data this week and likely to show a contraction for the quarter and support expectations for policy easing by the ECB in September
- The JPY currency continued to benefit from safe-haven flow with USD/JPY holding below the 105.50 level.
- GBP was a touch firmer on some short covering. Weekend reports suggested that PM Johnson accepted an offer from Irish PM Varadkar to meet to try to break the Brexit deadlock
- Italy’s 10-year BTP bond yield moved off 5-week highs on after rating agency Fitch left Italy’s sovereign rating unchanged which bought some relief to a market hit by the prospect of early elections
Economic Data
- (SE) Sweden Maklarstatistik July Housing Prices Y/Y 1% v 1% prior; Apartment Prices Y/Y: 4% v 3% prior
- (DK) Denmark July CPI M/M: +0.6% v -0.2% prior; Y/Y: 0.4% v 0.6% prior
- (DK) Denmark July CPI EU Harmonized M/M: +0.7% v -0.3% prior; Y/Y: 0.4% v 0.5% prior
- (RO) Romania July CPI M/M: -0.2% v -0.2% prior; Y/Y: 4.1% v 3.8% prior
- (CZ) Czech July CPI M/M: 0.4% v 0.2%e; Y/Y: 2.9% v 2.7%e
- (CZ) Czech Jun Export Price Index Y/Y: 0.1% v 2.0% prior; Import Price Index Y/Y: -0.7%e v +2.0% prior
- (CH) Swiss Weekly Total Sight Deposits (CHF): 585.5B v 582.7B prior; Domestic Sight Deposits: 469.0B v 473.9B prior
- (CN) China July Aggregate Financing (CNY): 1.010T v 1.625Te
- (CN) China July New Yuan Loans (CNY): 1.275Te
- (CN) China July M2 Money Supply Y/Y: 8.1% v 8.4%e
Fixed Income Issuance
- None seen
Looking Ahead
- (IT) Italy Senate President meeting with party leaders to set date on no-confidence vote
- 05:30 (DE) Germany to sell €3.0B in 6-month Bubills
- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
- 06:00 (IL) Israel July Consumer Confidence: No est v 110 prior
- 06:00 (PT) Portugal July Final CPI M/M: No est v –1.3% prelim; Y/Y: No est v 0.3% prelim
- 06:00 (PT) Portugal July Final CPI EU Harmonized M/M: No est v –1.7% prelim; Y/Y: No est v -0.7% prelim
- 06:00 (RO) Romania to Sell Bonds
- 06:45 (US) Daily Libor Fixing
- 07:00 (IL) Israel to sell bonds
- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 07:00 (BR) Brazil Aug IGP-M Inflation (1st Preview): No est v 0.4% prior
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 08:00 (RO) Romania Central Bank (NBR) Aug Minutes
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:30 (CL) Chile Central Bank Economists Survey
- 09:00 (FR) France Debt Agency (AFT) to sell combined €3.8-5.0B in 3-month, 6-month and 12-month Bills
- 09:00 (RU) Russia Q2 Advance GDP Y/Y: 0.8%e v 0.5% prior
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
- 14:00 (US) July Monthly Budget Statement: -$120.0Be v -$8.5B prior
- 16:00 (US) Weekly Crop Progress Report
