Opitimism On The Coronavirus Front Aids Risk Appetite

Notes/Observations

• Risk appetite looking for fresh legs on hopes for US stimulus coupled by expected demand recovery despite recent Sino-U.S. tensions
• Various aspects of Coronavirus aiding risk-on sentiment. Declines of new cases for numerous countries (HK, Northern Britain, US); Russian vaccine announcement
• UK registered better-than-expected unemployment data but true picture is distorted by the government’s furlough scheme (Jun ILO Rate at 3.9% v 4.2%e)
• Germany Aug IFO Survey mixed but 6-month outlook improves

Asia:

• Japan June Current Account (BoP): ¥167.5B v ¥132.6Be; Adj Current Account: ¥1.05T v ¥821.1B prior; Trade Balance (BoP): -¥77.3B v -¥556.8B prior (current account surplus shrinks to 5-year low as exports plunge)
• Singapore Q2 Final GDP Q/Q: -42.9% v -43.0%e; Y/Y: -13.2% v -12.6%e – Australia July Business Confidence: -14 v +1 prior
• China July Retail Passenger Vehicle Sales registered its 4th straight month of gains (Y/Y: +7.9%) – PCA
• China PBOC said to be ‘satisfied’ with current market rates

Coronavirus:

• Hong Kong reported 33 new coronavirus cases (lowest number since current outbreak)
• US records under 50,000 new cases for 2nd straight day

Europe:

• BOE’s Ramsden: BOE is prepared to step up QE if the economy slows

Americas:

• President Trump stated that was looking seriously at a capital gains tax cut and in the income tax for middle income people. He believed the US economy could grow at 20% in Q3. When asked about China sanctions: We had already responded in many ways. Did not know if we want to make a new deal with China

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +1.86% at 371.44, FTSE +2.08% at 6,176.26, DAX +2.32% at 12,981.65, CAC-40 +2.48% at 5,031.09, IBEX-35 +2.50% at 7,230.00, FTSE MIB +2.59% at 20,161.50, SMI +1.00% at 10,192.21, S&P 500 Futures +0.67%]
• Market Focal Points/Key Themes: European indices open higher across the board and continued in the green as the session progressed; risk sentiment supported by drop in covid hospitaliztions in US and better than expected corporate earnings; better performing sectors include energy and consumer discretionary; underperforming sectors include utilities and health care; automotive shares supported after surge of car sales in China; miners under pressure following drop in spot gold prices; Vivendi and Amber capital in deal to seek board position in Lagardere; Bayer reaches deal to buy Kandy Thereapuetics; Carnival announces cruse cancellations; earnings expected in the upcoming US session include Broadridge Financial and Sysco

Equities

• Consumer discretionary: HelloFresh [HFG.DE] +3% (earnings), Zalando [ZAL.DE] +5% (earnings), Domino’s Pizza [DOM.UK] -2% (earnings)
• Healthcare: Basilea Pharmaceutical [BSLN.CH] +4% (earnings)
• Industrials: Deutz [DEZ.DE] -2% (earnings)

Speakers

• German ZEW commented that the assessment of the situation was improving but only slowly
• Poland Central Bank’s Lon: Interest rates seen holding steady for rest of 2020 and likely into 2021
• Turkey Central Bank (CBRT) cuts Open Market Liquidity to zero for market makers, effective Wed, Aug 12th
• OECD raised South Korea 2020 GDP forecast from -1.2% to -0.8% under base-line scenario and stressed that Bank of Korea (BOK) should consider unconventional policy steps
• Russia President Putin stated that Russia registered its first coronavirus vaccine (the first COVID-19 vaccine registration worldwide). Vaccine would be widely available to population from Jan 1st, 2021 and added that vaccination must be voluntary
• Japan and UK said to have agreed to cut auto tariffs in stages through 2026 (Reminder: On Aug 7th reports circulated that Japan and UK had largely agreed to post-Brexit trade terms)
• BOJ said to extend its special JGB lending program past the current fiscal year
• China govt said to have extended Hong Kong lawmakers term by one year [Reminder On July 31st Hong Kong Exec Lam announced that it would postpone the upcoming Sept Legislative election by one year due to coronavirus (as speculated)]

Currencies/Fixed Income

• USD was initially holding steady in the early portion of the session as market participants awaited US stimulus talks. Over the weekend President Trump signed executive orders aimed at providing additional coronavirus stimulus measures which help to put a pause in the greenback multi-month slide. The USD eventually softened as the session progressed with the move fueled by optimism on the coronavirus from. Numerous countries saw the number of new cases decline and Russia announced that it registered its vaccine
• EUR/USD higher by 0.3% at 1.1775. pair also aided by improvement in the German ZEW Expectation Survey

Economic Data

• (SE) Sweden July PES Unemployment Rate: 5.7% v 5.5% prior
• (SE) Sweden July Maklarstatistik Housing Prices Y/Y 7% v 5% prior; Apartment Prices Y/Y: 3% v 2% prior
• (UK) July Jobless Claims Change: +94.4K v -68.5K prior; Claimant Count Rate: 7.5% v 7.2% prior
• (UK) Jun Average Weekly Earnings 3M/Y: -1.2% v -1.1%e; Weekly Earnings (ex-bonus) 3M/Y: -0.2% v -0.1%e
• (UK) Jun ILO Unemployment Rate: 3.9% v 4.2%e; Employment Change 3M/3M: -220K v -300Ke
• (HU) Hungary July CPI M/M: 1.1% v 0.6%e; Y/Y: 3.8% v 3.1%e
• (CN) China July M2 Money Supply Y/Y: 10.7% v 11.1%e
• (CN) China July New Yuan Loans (CNY): 992.7B v 1.215Te
• (CN) China July Aggregate Financing (CNY): 1.69T v 1.850Te
• (DE) Germany Aug ZEW Current Situation Survey: -81.3 v -69.5e; Expectations Survey: 71.5 v 55.6e
• (EU) Euro Zone Aug ZEW Expectations Survey: 64.0 v 59.6 prior

Fixed Income Issuance

• (ES) Spain Debt Agency (Tesoro) sold total €6.23B vs. €5.5-6.5B indicated range in 6-month and 12-month Bills (July 7th 2020)
• (ID) Indonesia sold total IDR22.0T vs. IDR20T target in bills and bonds
• (UK) DMO sold £3.25B in 0.625% Jun 2025 Gilts; Avg Yield: -0.049% v -0.033% prior; Bid-to-cover: 2.25x v 2.53x prior; Tail: 0.4bps v 0.4bps prior

Looking Ahead

• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 05:30 (BE) Belgium Debt Agency (BDA) to sell €2.0-2.4B in 3-month and 12-month bills
• 05:30 (ZA) South Africa to sell combined ZAR6.6B in 2032, 2037 and 2044 bonds
• 05:40 BOE weekly allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)
• 06:00 (US) July NFIB Small Business Optimism Index: 100.5e v 100.6 prior
• 06:30 (UK) DMO to sell £1.25B in 1.75% July 2057 Gilts
• 06:30 (EU) ESM to sell €1.5B in 12-month Bills
• 06:45 (US) Daily Libor Fixing
• 07:00 (MX) Mexico Jun Industrial Production M/M: +17.1%e v -1.8% prior; Y/Y: -17.9%e v -30.7% prior; Manufacturing Production Y/Y: -19.3%e v -37.1% prior
• 07:00 (BR) Brazil Central Bank Meeting Minutes
• 07:00 (ZA) South Africa Jun Manufacturing Production M/M: +30.0%e v -44.3% prior; Y/Y: -25.8%e v -49.4% prior
• 07:45 (US) Goldman Economist Chain Store Sales
• 07:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (3-7 years)
• 08:00 (IN) India Jun Industrial Production Y/Y: -21.0%e v -19.5% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:15 (CA) Canada July Annualized Housing Starts: 205.0Ke v 211.7K prior
• 08:30 (US) July PPI Final Demand M/M: +0.3%e v -0.2% prior; Y/Y: -0.7%e v -0.8% prior
• 08:30 (US) July PPI (ex-food/energy) M/M: +0.1% v -0.3% prior; Y/Y: 0.0%e v 0.1% prior
• 08:30 (US) July PPI (ex-food/energy/trade): M/M: 0.2%e v 0.3% prior; Y/Y: No est v -0.1% prior
• 08:30 (CL) Chile Central Bank Economists Survey
• 08:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (7-20 years)
• 08:55 (US) Weekly Redbook LFL Sales data
• 09:00 (RU) Russia Jun Trade Balance: $4.2Be v $3.7B prior; Exports: $22.4Be v $20.9B prior; Imports: $18.6Be v $17.2B prior
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
• 09:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (20+ years)
• 10:00 (MX) Mexico Weekly International Reserve data
• 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills
• 11:30 (US) Treasury to sell 52-week bills
• 12:00 (RU) Russia Q2 Advance GDP Y/Y: -9.6%e v +1.6% prior
• 13:00 (US) Treasury to sell 3-Year Notes
• 16:30 (US) Weekly API Oil Inventories
• 18:45 (NZ) New Zealand Jun Net Migration: No est v 0.6K prior
• 19:00 (KR) South Korea July Unemployment Rate: 4.3%e v 4.3% prior
• 19:50 (JP) Japan July M3 Money Stock Y/Y: 7.0%e v 5.9% prior; M2 Money Stock Y/Y: 8.4%e v 7.2% prior
• 20:30 (AU) Australia Aug Westpac Consumer Confidence Index: No est v 87.9 prior
• 21:30 (AU) Australia Q2 Wage Price Index Q/Q: No est v 0.5% prior; Y/Y: No est v 2.1% prior
• 22:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave Official Cash Rate (OCR) unchanged at 0.25%
• 23:00 (CN) China to sell 2-year and 5-year upsized Government Bond