Notes/Observations
- Scaled-back US tariffs on $112B Chinese goods and China’s retaliatory tariffs on $75B of US products went into effect Sept 1st (as expected)
- Sept arrives and expected to be a very busy and active month in dovish global central bank policy making. Brexit, tariff war, and a slowing global economy putting pressure on central banks to act
- European PMI Manufacturing data generally beat expectations but remain in contraction territory (Beats: France, Spain, Italy, Netherlands, Poland, Turkey, Hungary, Czech; Misses: Germany, UK, Russia; In-line: Euro Zone )
- Markets in US and Canada closed for holiday Monday, September 2nd
Asia:
- South Korea Aug trade balance registers a smaller surplus as exports fall for the 9th straight month
- China Aug Manufacturing PMI saw its 4th consecutive contraction (49.5 v 49.6e)
- China Aug Caixin PMI Manufacturing saw its 1st expansion in 3 months (50.4 v 49.8e)
- China Customs Tariff Commission of the State Council clarified tariff increase on US goods. Next round went into effect on Sept 1st on $75B in goods in 2 batches, second round to take effect on Dec 15th
- Hong Kong Chief Sec Cheung: Violence escalated during the weekend and strongly condemns it; Govt was reviewing law in order to help law enforcement
Europe/Mideast:
- UK Opposition Labour Party Brexit spokesperson: Lawmakers opposed to no deal Brexit to try to pass a law this week that would block PM Johnson from allowing it to happen Oct 31st
- Austria National Bank Gov Holzmann (newly appointed ECB member): Worried about adding additional stimulus to the EU, lowering the deposit rate – local media
Americas:
- President Trump: Sept meeting with Chinese trade delegation was “still on”
- Argentina implements capital controls including limiting time to repatriate dollars to 5 days and will require authorization to buy foreign currency
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx50 +0.2% at 3,433, FTSE +1.0% at 7,281, DAX +0.1% at 11,954, CAC-40 +0.2% at 5,489, IBEX-35 +0.1% at 8,820, FTSE MIB +0.9% at 21,507, SMI +0.3% at 9,931]
Market Focal Points/Key Themes:
Equities
- European indices opened slightly higher and continued the trend as the session advanced; trading subdued as a result of holidays in Americas, Far East; Financials and Materials best performers; mining supported following comments from China seeking to buy more ore; property firms among worst performers; TLG Immobilien takes stake in AroundTown, considering merger; Investor AB announced plans to IPO its EQT AB unit; no major earning expected with US and Canada closed for holidays
- Consumer discretionary: Adecco [ADEN.CH] +1.9% (analyst action), Modern Times Group [MTGB.SE] +14.1% (China JV), Motif Bio [MTFB.UK] -7.5% (loan amendment)
- Energy: Cabot Energy [CAB.UK] +28.6% (loan amendment), Hurricane Energy [HUR.UK] -1.3% (operational update)
- Financials: Aroundtown Property [AT1.DE] +2.6% (TLG Immobilien discloses stake), Old Mutual [OML.UK] +0.5% (results)
- Healthcare: Astrazeneca [AZN.UK] +2.5% (study results), CellaVision [CEVI.SE] -8.7% (analyst action)
- Industrials: Akka Technologies [AKA.FR] +0.7% (analyst action)
- Technology: De La Rue [DLAR.UK] +0.2% (new Chairman)
- Telecom: Kinepolis [KIN.BE] +3.6% (expands in Canada)
Speakers
- ECB’s Mersch (Luxembourg): Private currencies had little prospect of being viable. Widespread use of Facebook’s Libra currency could reduce the ECB’s role over the Euro and impair monetary policy transmission
- Israel Central Bank Gov Yaron: Could intervene in the FX market if the exchange rate deviates substantially from a window that’s consistent with price stability and economic activity. Potential FX intervention would have no advance warning
- China Foreign Ministry spokesperson Geng Shuang stated that focus should be on creating favorable conditions for trade talks with US. Additionally China reaffirmed support for HK Chief exec Lam and Police efforts to contain violence. Stated that protests had evolved into extreme violence
- Hong Kong Police: Radical behaviors spreading like a pandemic; behavior of some protesters are irrational
Currencies/ Fixed Income
- Euro Zone Aug PMI Manufacturing data mainly saw the majority of readings slightly exceed expectations. Germany was one of the misses and the key economic engine of Europe highlighted the darkening of the economic clouds in the region. EUR/USD hovering just above its two year low of 1.0960 from late last week. Dealers noted that the prospects of ECB monetary stimulus to maintain pressure on the pair
- GBP continued to have a heavy tone as dealers continued to believe that there was an increased chance of a hard Brexit and heightened political disarray. GBP/USD hitting a 2-week low under the 1.21 level. UK Aug PMI data contributed to the pound’s soft tone as it hit a 7-year low with its 4th straight contraction
- On the issuance front, Sept brings back market participants while Austria, Germany, France and Spain are poised to collectively issue €19B worth of bonds this week.
Economic Data
- (RU) Russia Aug PMI Manufacturing: 49.1 v 49.7e (4th straight contraction)
- (SE) Sweden Aug PMI Manufacturing: 52.4 v 50.5e
- (CH) Swiss July Real Retail Sales Y/Y: 1.4% v 0.7% prior
- (AU) Australia Aug Commodity Index: 124.9 v 130.4 prior
- (NL) Netherlands Aug Manufacturing PMI: 51.6 v 50.7e
- (NO) Norway Aug PMI Manufacturing: 51.4e v 48.4 prior
- (HU) Hungary Aug Manufacturing PMI: 52.6 v 52.0e (45th month of expansion)
- (PL) Poland Aug PMI Manufacturing: 48.8 v 47.7e (10th straight contraction)
- (TR) Turkey Aug PMI Manufacturing: 48.0 v 46.7 prior (17th straight contraction)
- (TR) Turkey Q2 GDP Q/Q: 1.2% v 0.4%e; Y/Y: -1.5% v -2.0%e
- (HU) Hungary July PPI M/M: +0.3% v -0.6% prior; Y/Y: 0.3% v 0.1% prior
- (ES) Spain Aug Manufacturing PMI: 48.8 v 45.5e (3rd straight contraction)
- (CZ) Czech Republic Aug PMI Manufacturing: 44.9 v 43.5e (9th straight contraction)
- (CH) Swiss Aug PMI Manufacturing: 47.2 v 45.4e (5th straight contraction)
- (TH) Thailand Aug Business Sentiment Index: 47.2 v 49.1 prior
- (IT) Italy Aug Manufacturing PM: 48.7 v 48.5e (11th straight contraction)
- (FR) France Aug Final Manufacturing PMI: 51.1 v 51.0e (confirmed move back into expansion)
- (DE) Germany Aug Final Manufacturing PMI: 43.5 v 43.6e (confirmed 8th straight contraction)
- (EU) Euro Zone Aug Final Manufacturing PMI: 47.0 v 47.0e (confirmed 7th straight contraction)
- (GR) Greece Aug Manufacturing PMI: 54.9 v 54.6 prior (27th month of expansion)
- (CH) Swiss weekly Total Sight Deposits (CHF): 591.6B v 591.7B prior; Domestic Sight Deposits: 475.5B v 478.1B prior
- (UK) Aug PMI Manufacturing: 47.4 v 48.8e (4th straight contraction and lowest since July 2012)
- (DK) Denmark Aug PMI Survey: 48.7 v 49.5 prior
- (ZA) South Africa Aug Manufacturing PMI: 45.7 v 51.4e (moved back into contraction)
- (IS) Iceland Q2 Current Account Balance (ISK): 11.1B v 40.3B prior
Fixed Income Issuance
- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills; Avg Yield: 1.21% v 1.11% prior; Bid-to-cover: 3.57x v 3.25x
Looking Ahead
- (RU) Russia Aug Sovereign Wealth Funds: Wellbeing Fund: No est v $124.1B prior
- (IT) Italy Aug Budget Balance: No est v €3.2B prior
- (RO) Romania Aug International Reserves: No est v $39.8B prior
- (AR) Argentina Aug Government Tax Revenue (ARS): No est v 450.9B prior
- (BR) Brazil July CNI Capacity Utilization: No est v 77.2% prior
- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month bills
- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
- 06:45 (US) Daily Libor Fixing
- 07:00 (IL) Israel to sell bonds
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 08:00 (CZ) Czech Aug Budget Balance (CZK): No est v -9.7B prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance
- 09:00 (BR) Brazil Aug PMI Manufacturing: No est v 49.9 prior
- 09:00 (FR) France Debt Agency (AFT) to sell combined €3.7-4.9B in 3-month, 6-month and 12-month Bills
- 10:00 (MX) Mexico July Total Remittances: $3.0Be v $3.1B prior
- 10:00 (MX) Mexico Central Bank Economist Survey
- 10:30 (MX) Mexico Aug PMI Manufacturing: No est v 49.8 prior
- 12:00 (IT) Italy Aug New Car Registrations Y/Y: No est v -0.1% prior
- 13:00 (MX) Mexico Aug IMEF Manufacturing Index: 49.2e v 49.6 prior; Non-Manufacturing Index: 47.7e v 47.1 prior
- 14:00 (BR) Brazil Aug Trade Balance: $3.3Be v $2.3B prior; Total Exports: $19.2Be v $20.1B prior; Total Imports: $15.8Be v $17.8B prior
