Notes/Observations
- No surprises on rate decisions in session. Both Norges and Philippines kept policy steady
- China and US to keep dialogue open on trade with a call taking place ‘soon’
- North Korea leader Kim Jong Un said to be sharing power with his sister
Asia:
- US and China officials reportedly plan to hold video conference in coming days to discuss progress fulfilling terms of ‘Phase 1’ trade agreement
- China Monthly Loan Operation left both 1-Year and 5-year Loan Prime Rate unchanged at 3.85% and 4.65% respectively for the 4th straight month
- China said to be cautious about hitting US companies back after the Huawei sanctions. Analysts believed China would hold back as they did want to upset the economic benefits/innovations US companies brought to China
- RBNZ Assistant Gov Hawkesby: Size and composition of balance sheet will become a more active tool for monetary policy decisions
Coronavirus:
- Total global cases 22,328,069 (+1.2% d/d); total deaths: 786.3K (+0.9% d/d)
Europe:
- German Finance Ministry Report: July Tax Revenues -0.3%. Expected plunge in fiscal revenues caused by lockdown measures to contain the COVID-19 pandemic proving less steep than originally feared
Americas:
- FOMC July Minutes: Pace of employment gains had likely slowed; Most members agree yield caps and targets would likely provide only modest benefits in current environment; banks could come under significant stress in a more adverse virus scenario
- USTR Lighthizer: Phase 1 trade deal with China was pretty much on track. Saw Chinese purchases on phase-1 deal as challenging but believed was doing very well
- US suspended its extradition treaty with Hong Kong
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -1.1% at 365.6, FTSE -1.19% at 6,039, DAX -1.2% at 12,823, CAC-40 -1.4% at 4,907, IBEX-35 -1.2% at 7,008, FTSE MIB -1.3% at 19,801, SMI -0.7% at 10,236, S&P 500 Futures -0.4%]
- Market Focal Points/Key Themes: European indices open down across the board slipping further as the session wore on; risk sentiment affected by US-China tensions and rising covid cases; underperforming sectors include financials and materials; better peforming sectors include telecom and utilities; reportedly Accor looking to merge with Intercontinental Hotels; reportedly chipmakers see weaker shipments; earnings expected in the upcoming US session include Alibaba, Cree, and Estee Lauder
Equities
- Consumer discretionary: TAG Immobilien [TEG.DE] +4% (earnings; offering)
- Materials: CRH [CRH.UK] -1.5% (earnings)
- Industrials: BAM Groep [BAMNB.NL] +1% (earnings), Antofagasta [ANTO.UK] -4% (earnings)
Speakers
- Central banks (BOE, BOJ, SNB and FED) to reduce frequency of 7-day USD liquidity operations from 3x to 1x per week; effective Sept 1st
- Norway Central Bank (Norges) Policy Statement reiterated its forward guidance that Deposit Rate would most likely to stay at current level for some time. NOK currency (Crown) and low wage growth suggested inflation would moderate further out. Domestic economy in the midst of a deep downturn
- Philippines Central Bank (BSP) Policy Statement noted that its monetary policy stance remained appropriate and remained committed to deploy all tools as needed. Saw early signs of economic recovery and inflation within target
- China Foreign Ministry spokesperson Zhao Lijian: Have decided that Hong Kong to suspend agreement with US on some legal cooperation (Note: comments after US suspended extradition treaty with Hong Kong)
- China Commerce Ministry (MOFCOM) spokesperson Geo Feng echoed stance that China and US agreed to have talk soon regarding trade
- China Supreme Court said to lower ceiling on private lending rates. Interest rate of private loans in China could not exceed 4 times of PBOC’s 1-year loan prime rate
- North Korea leader Kim Jong Un said to retain absolute power but US and South Korea issues to be handled by his sister
Currencies/Fixed Income
- USD rebounded from 2-year lows in the aftermath of the FOMC July Minutes as officials expressed concern about the path of the recovery, and reiterated that the virus was in charge right now. The greenback was aided by the degree of shorts in the markets beforehand thus allowing the dollar to have its best session since June. Dealers noted that speculation had been rife that the Fed could adopt an average inflation target. The failure to announce such an event prompted the USD short covering.
- EUR/USD at 1.1830 area by mid-session. Pair unable to break above the key 1.20 psychological level during the week. The 1.15 area suggested to be the new floor in the pair.
Economic Data
- (NL) Netherlands Jun Consumer Spending Y/Y: -7.0% v -11.9% prior
- (NL) Netherlands July Unemployment Rate: 4.5% v 4.6%e
- (NL) Netherlands Aug Consumer Confidence Index: -29 v -26 prior
- (DE) Germany July PPI M/M: 0.2% v 0.1%e; Y/Y: -1.7% v -1.8%e
- (CH) Swiss July Trade Balance (CHF): 3.4B v 3.2B prior; Real Exports M/M: 2.3% v 8.1% prior; Real Imports M/M: 1.1% v 5.1% prior; Swiss Watch Exports Y/Y: -17.0% v -35.1% prior
- (CH) Swiss Q2 Industrial Output Y/Y: -8.6% v +0.6% prior; Industry & Construction Output Y/Y: -7.7% v +0.5% prior
- (SE) Sweden July Unemployment Rate: 8.9% v 9.8%e; Unemployment Rate (Seasonally Adj): 9.2% v 9.5%e; Trend Unemployment Rate: 9.4% v 9.3% prior
- (SE) Sweden Q2 Total No. of Employees Y/Y: -1.9% v+ 0.3% prior
- (PH) Philippines Central Bank (BSP) left Overnight Borrowing Rate unchanged at 2.25 (as expected)
- (TW) Taiwan July Export Orders Y/Y: 12.4% v 3.1%e
- (NO) Norway Central Bank (Norges) left Deposit Rates unchanged at 0.00% (as expected)
- (PL) Poland July Industrial Output M/M: 3.4% v 1.5%e; Y/Y: +1.1% v -1.2%e
- (PL) Poland July PPI M/M: 0.3% v 0.3%e; Y/Y: -0.6% v -0.6%e
- (HK) Hong Kong July CPI Composite Y/Y: -2.3% v +0.5%e
- (TW) Taiwan Q2 Current Account Balance: $21.8B v $18.2B prior
- (EU) Euro Zone Jun Construction Output M/M: 4.0% v 29.4% prior; Y/Y: -5.9% v -10.5% prior
- (IS) Iceland Q2 Unemployment Rate: 6.9% v 3.6% prior
Fixed Income Issuance
- (FR) France Debt Agency (AFT) sold total €6.997B vs. €5.5-7.0B indicated range in 2024, 2025 and 2027 bonds
- Sold €1.505B in 1.75% Nov 2024 Oat; Avg Yield: -0.59% v +0.30% prior; bid-to-cover: 2.76x v 4.67x prior
- Sold €3.387B in 0.00% Mar 2025 Oat; Avg Yield: -0.57% v -0.48% prior; Bid-to-cover: 1.79x v 2.16x prior
- Sold €2.106B in 1.00% May 2027 Oat Avg Yield: % v -0.23% prior; Bid-to-cover: 2.32x v 1.90x prior
- (SE) Sweden sold SEK1.0B vs. SEK1.0B indicated in 0.125% I/L 2030 Bonds; Avg Yield: -1.4272% v -1.2325% prior; Bid-to-cover: 2.46x v 3.39x prior
- (UK) DMO sold €1.1B in 0.125% Aug 2028 inflation-linked gilts (UKTi); Real Yield: -2.882% v -2.509% prior; bid-to-cover: 2.44x v 2.77x prior (IE) Ireland Debt Agency (NTMA) sold €750M vs. €750M indicated in 6-month Bills; Avg Yield: -0.540% v -0.510% prior; Bid-to-cover: 3.00x v 3.00x prior
Looking Ahead
- 05:50 (FR) France Debt Agency (AFT) to sell €0.5-1.0B in 2028, 2032 and 2036 inflation-linked bonds (Oatei)
- 06:00 (IL) Israel Jun Manufacturing Production M/M: No est v % prior
- 06:00 (PT) Portugal Jun Current Account Balance: No est v -€1.8B prior
- 06:00 (RO) Romania to sell RON500M in 3.65% 2025 Bonds; Avg Yield: % v 3.79% prior; Bid-to-cover: x v 1.98x prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave One-Week Repo Rate unchanged at 8.25%
- 07:30 (EU) ECB Account of July Monetary Policy Meeting (Minutes)
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:30 (US) Aug Philadelphia Fed Business Outlook: 20.8e v 24.1 prior
- 08:30 (US) Initial Jobless Claims: 920Ke v 963K prior; Continuing Claims: 15.00Me v 15.486M prior
- 08:30 (CA) Canada July Teranet House Price Index M/M: No est v 0.7% prior; Y/Y: No est v 5.9% prior; HP Index: No est v 238.19 prior
- 08:30 (CA) Canada July ADP Payroll Estimates: No est v +1.042M prior
- 08:30 (US) Weekly USDA Net Export Sales
- 09:00 (RU) Russia Gold and Forex Reserve w/e Aug 14th: No est v $600.7B prior
- 10:00 (US) July Leading Index: 1.1%e v 2.0% prior
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 10:30 (SE) Sweden Central Bank (Riksbank) Dep Gov Skingsley
- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
- 12:00 (RU) Russia July Unemployment Rate: 6.3%e v 6.2% prior; Real Wages Y/Y: 0.1%e v 1.0% prior
- 12:00 (RU) Russia July Real Retail Sales Y/Y: -4.5%e v -7.7% prior
- 12:00 (CA) Canada to sell 2-Year Bonds
- 13:00 (US) Fed’s Daly discusses the New Future of Work
- 13:00 (US) Treasury to sell 30-Year TIPS
- 15:00 (AR) Argentina Jun Economic Activity Index (Monthly GDP) M/M: 10.0%e v 10.0% prior; Y/Y: -13.3%e v -20.6% prior
- (BR) Brazil July Tax Collections (BRL): No est v 86.3B prior
- (MX) Citibanamex Survey of Economists
- (BR) Brazil Aug CNI Industrial Confidence: No est v # prior
- 17:00 (KR) South Korea July PPI Y/Y: No est v -0.9% prior
- 19:00 (AU) Australia Aug Preliminary PMI Manufacturing: No est v 54.0 prior; PMI Services: No est v 58.2 prior; PMI Composite: No est v 57.8 prior
- 19:01 (UK) Aug Preliminary GfK Consumer Confidence: No est v -27 prior
- 19:30 (JP) Japan July National CPI Y/Y: 0.3%e v 0.1% prior; CPI Ex Fresh Food (Core) Y/Y: 0.1%e v 0.0% prior; CPI Ex Fresh Food/Energy (Core-core) Y/Y: 0.5%e v 0.4% prior
- 20:00 (KR) South Korea Aug MTD (20-day) Imports Y/Y: No est v -13.7% prior; Exports Y/Y: No est v -12.8% prior
- 21:10 (JP) BOJ Outright Bond Purchase operation for 1~3 Years, 5~10 Years and 25 Years~ maturities
- 20:30 Japan Aug Preliminary PMI Manufacturing: No est v 45.2 prior; PMI Services: No est v 45.4 prior; PMI Composite: No est v 44.9 prior
- 23:00 (NZ) New Zealand July Credit Card Spending M/M: No est v 14.0% prior; Y/Y: No est v -9.2% prior
- 23:00 (CN) China to sell 3-month and 6-month Bills
- 23:00 (TH) Thailand Central Bank to sell THB10B in 2023 Bonds
- 23:30 (JP) Japan to sell 3-Month Bills
