Notes/Observations
- Japan Abe resignation brought a sudden departure of the architect of Abenomics and casted doubt on its future oath
- USD weakness prominent in aftermath of Fed new inflation framework
Asia:
- Japan Aug Tokyo CPI Y/Y: 0.3% v 0.6%e
- RBNZ Assist Gov Hawkesby stated that their policy approach was in line with new Federal Reserve strategy, stance allowed inflation to run above target after weakness
- South Korea govt ruling party said to be studying a potential 4th extra budget if the virus outbreak worsened that includes cash handouts
Coronavirus:
- Total global cases 24,373,497 (+2.3% d/d); Total deaths toll 830,518 (+1.5% d/d)
Europe:
- EU said to have warned UK PM Johnson that he had less than two weeks to save post-Brexit trade deal. EU chief negotiator Barnier and UK counterpart Frost to hold emergency talks next week in an effort to save the negotiations
Americas:
- President Trump RNC acceptance speech stated that he could impose tariffs on companies that left the US, to provide tax credits to bring jobs out of China. Promised to end ‘reliance’ on China ‘once and for all’
- Fed’s Kaplan (dove, voter): new framework says prices could run ‘moderately above’ target; moderate overshoot probably meant 2.25% or 2.5%area
- White House Advisor Kudlow stated that he saw a strong recovery coming and reiterated that expected a strong Q3. Economy could keep recovering without more stimulus
- House Speaker Pelosi noted that Democrats were willing to negotiate once GOP took the process seriously; willing to meet in the middle at $2.2T but no less
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.17% at 370.10, FTSE +0.18% at 6,010.95, DAX -0.21% at 13,068.30, CAC-40 +0.02% at 5,017.10, IBEX-35 +0.64% at 7,136.00, FTSE MIB +0.47% at 19,940.50, SMI -0.31% at 10,209.06, S&P 500 Futures +0.35%]
- Market Focal Points/Key Themes: European indices open modestly higher but later traded mixed; financials and materials among better performers; consumer discretionary and technology sectors among worse performers; Greggs shares under pressure following reports of covid outbreak at distribution center; ECB approves bad loan plan of Monde dei Paschi; Bayer aknowledges “bumps” in Roundup deal; Sanofi starts tender offer for Principia; no major earnings expected in the upcoming US session
Equities
- Consumer discretionary: Brunello [BC.IT] +2% (earnings), Norwegian Air [NAS.NO] -8% (earnings)
- Healthcare: Bayer [BAYN.DE] -2% (Judge threatens to restart litigation)
- Technology: Frontier Developments [FDEV.UK] +7% (trading update)
Speakers
- Japan LDP ruling party Sec General Seko confirmed that PM Abe to resign. Next PM to be decided by LDP election and stressed it was important that the successor continued current path
- Japan outgoing PM Abe stated that he could not be Prime Minister if unable to do his best. Confirmed he had undergone new treatment for health in early Aug. To stay on in position until new successor was appointed. No comment on possible replacement.
- South Korea President Moon replaced his Defense Minister and appointed Army Chief of Staff General Suh into the position.
Currencies/Fixed Income
- Fed Chair Powell finally revealed the central bank’s new policy framework and announced that it would drop its practice of pre-emptively increasing rates to prevent higher inflation. The USD was initially firmer as US yields moved higher. Clarification of the new framework by Fed’s Kaplan that prices could run ‘moderately above’ targetwhich he saw as meaning 2.25% or 2.5% area the brought reality to markets that US yields would stay lower for longer. USD was softer throughout the EU session with the USD Index at its lowest level since May 2018.
- EUR/USD higher by 0.7% to move back above the 1.19 level. The key resistance remains at the psychological 1.20 level,
- USD/JPY was below the 106.00 in the aftermath of Pm Abe’s announced resignation. Analysts debated whether Abenomics would survive beyond Abe’s term as PM. He be took office on Dec 26th 2012 when USD/JPY was under the 85 level. Abenomics was based upon “three arrows” of monetary easing from the Bank of Japan, fiscal stimulus through government spending, and structural reforms
- GBP/USD approached the 1.33 handle for its highest level in 2020. Focus remains on Brexit talks as the Oct deadline for any agreement loomed. For now Cable enjoying its strength on the back of dollar weakness.
Economic Data
- (NL) Netherlands Aug Producer Confidence Index: -5.4 v -8.7 prior
- (FI) Finland Q2 GDP Q/Q: -4.5 v -1.9% prior; Y/Y: -6.4%t v -1.3% prior
- (DE) Germany Sept GfK Consumer Confidence Index: -1.8 v +1.0e (6th straight month of negative readings)
- (DE) Germany July Import Price Index M/M: 0.3% v 0.2%e; Y/Y: 4.6% v -4.7%e
- (FR) France Q2 Final GDP Q/Q: -13.8% v -13.8%e; Y/Y: -18.9% v -19.0%e
- (FR) France Aug Preliminary CPI M/M: -0.1% v -0.2%e; Y/Y: 0.2% v 0.1%e
- (FR) France Aug Preliminary CPI EU Harmonized M/M: -0.1% v -0.2%e; Y/Y: 0.2% v 0.2%e
- (FR) France July PPI M/M: 0.4% v 0.7% prior; Y/Y: -2.6% v -2.7% prior
- (FR) France July Consumer Spending M/M: 0.5% v 1.2%e; Y/Y: 0.6% v 2.6%e
- (ES) Spain Jun Total Mortgage Lending Y/Y: -6.9% v -28.0% prior; House Mortgage Approvals Y/Y: -12.7% v -27.6% prior
- (ES) Spain July Adjusted Retail Sales Y/Y: -3.9% v -4.7% prior; Retail Sales (unadj) Y/Y: -3.7% v -3.3% prior
- (CH) Swiss Aug KOF Leading Indicator: 110.2 v 90.0e
- (AT) Austria Q2 Final GDP Q/Q: -10.4% v -10.7% prelim; Y/Y: -12.5% v -12.8% prelim
- (AT) Austria July PPI M/M: 0.1% v 0.2% prior; Y/Y: -2.1% v -2.1% prior
- (HU) Hungary July Unemployment Rate: 4.8% v 4.9%e
- (TR) Turkey Aug Economic Confidence Index: 85.9 v 82.2 prior
- (SE) Sweden Q2 GDP Q/Q: -8.3% v -8.6%e; Y/Y: -7.7% v -8.2%e
- (CN) Weekly Shanghai copper inventories (SHFE): 170.1K v 172.3K tons prior
- (RU) Russia Narrow Money Supply w/e Aug 21st (RUB):13.22 T v 13.22T prior
- (NO) Norway Aug Unemployment Rate: 4.3% v 4.7%e
- (IT) Italy Aug Consumer Confidence Index: 100.8 v 101.0e; Manufacturing Confidence: 86.1 v 88.9e; Economic Sentiment: 80.8 v 77.0 prior
- (PT) Portugal Aug Consumer Confidence Index: -26.0 v -28.3 prior; Economic Climate Indicator: -1.3 v -2.9 prior
- (EU) Euro Zone Aug Economic Confidence: 87.7 v 85.0e; Industrial Confidence: -12.7 v -13.3e; Services Confidence: -17.2 v -23.0; Consumer Confidence (final): -14.7 v -14.7 advance
- (IS) Iceland Aug CPI M/M: 0.5% v 0.1% prior; Y/Y: 3.2% v 3.0% prior
- (IT) Italy July PPI M/M: 0.4% v 0.7% prior; Y/Y: -5.4% v -6.1% prior
Fixed Income Issuance
- (IT) Italy Debt Agency (Tesoro) sold total €7.0B vs. €6.0-7.0B indicated range in 5-year and 10-year BTP Bonds
- Sold €4.5B vs. €4.0-4.5B indicated range in 0.50% Feb 2026 BTP bonds; Avg Yield: 0.58% v 0.46% prior; Bid-to-cover: 1.34x v 1.62x prior
- Sold €2.5B vs. €2.0-2.5B indicated range in 1.65% Dec 2030 BTP; Avg Yield: 1.11% v 1.04% prior; bid-to-cover: 1.35x v 1.38x prior
- (IT) Italy Debt Agency (Tesoro) sold €1.25B vs. €0.75-1.25B indicated range in Dec 2023 floating rate bonds (CCTeu); Avg Yield: 0.45% v 0.56% prior; Bid-to-cover: 1.68x v 1.74x prior
Looking Ahead
- (IN) India to sell INR300B in 2022, 2030, 2033 and 2060 bonds
- (US) Kansas City Fed holds Annual Policy Symposium
- (BE) Belgium Aug CPI M/M: No est v 0.2% prior; Y/Y: No est v 0.7% prior
- (MX) Mexico July YTD Budget Balance (MXN): No est v -293.3B prior
- (BR) Brazil July Central Govt Budget Balance (BRL): -100.5Be v -194.7B prior
- (BR) Brazil July Total Federal Debt (BRL): No est v 4.390T prior
- 05:30 (ZA) South Africa to sell combined ZAR2.0B in I/L Bonds
- 06:00 (IE) Ireland July Retail Sales Volume M/M: No est v 38.4% prior; Y/Y: No est v 3.5% prior
- 06:00 (PT) Portugal July Retail Sales M/M: No est v 4.4% prior; Y/Y: No est v -6.6% prior
- 06:00 (UK) DMO to sell £2.25B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £1.5B respectively)
- 06:45 (US) Daily Libor Fixing
- 07:00 (BR) Brazil Aug FGV Inflation IGPM M/M: 2.6%e v 2.2% prior; Y/Y: 12.8%e v 9.3% prior
- 07:30 (IN) India Weekly Forex Reserve w/e Aug 21st: No est v $535.3B prior
- 08:00 (BR) Brazil July National Unemployment Rate: 13.6%e v 13.3% prior
- 08:00 (ZA) South Africa July Budget Balance (ZAR): -116.8Be v -22.3B prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:00 (IN) India announces upcoming bill issuance (held on Wed)
- 08:30 (US) July Personal Income: -0.3%e v -1.1% prior; Personal Spending: 1.6%e v 5.6% prior; Real Personal Spending (PCE): 1.3%e v 5.2% prior
- 08:30 (US) July PCE Deflator M/M: 0.4%e v 0.4% prior; Y/Y: 1.0%e v 0.8% prior
- 08:30 (US) July PCE Core Deflator M/M: 0.5%e v 0.2% prior; Y/Y: 1.2%e v 0.9% prior
- 08:30 (US) July Advance Goods Trade Balance: -$72.0Be v -$70.6B prior
- 08:30 (US) July Preliminary Wholesale Inventories M/M: -0.9%e v -1.4% prior; Retail Inventories M/M: -1.1%e v -2.6% prior
- 08:30 (CA) Canada Jun GDP M/M: 5.6%e v 4.5% prior; Y/Y: -9.1%e v -13.8% prior; Quarterly GDP Annualized: -39.0%e v -8.2% prior
- 08:30 (BR) Brazil July Total Outstanding Loans (BRL): 3.624Te v 3.625T prior; M/M: 0.0%e v 0.8% prior; Personal Loan Default Rate: 5.3%e v 5.2% prior
- 09:00 (CL) Chile July Unemployment Rate: 12.8%e v 12.2% prior
- 09:05 (UK) BOE Gov Baily at Jackson Hole
- 09:45 (US) Aug Chicago Purchase Managers Index: 52.6e v 51.9 prior
- 10:00 (US) Aug Final University of Michigan Confidence: 72.8e v 72.8 prelim
- 11:00 (EU) Potential sovereign ratings after European close
- 13:00 (US) Weekly Baker Hughes Rig Count
