Euro Area PMI Data And Employment Suggests Recovery Remains On Track

Notes/Observations

• Major European PMI manufacturing data: (beats: France, Italy Misses: Germany, UK, Spain; in-line: Euro Zone); Overall sentiment suggests recovery remains on track
• Euro Zone Aug Core CPI hits a record low while headline rate goes negative for 1st time since 2016
• Broad USD sell-off gathering technical strength
• RBA expands the size and duration of the Term Funding facility to help avoid any potential financial cliff

Asia:

• RBA left both the Cash Rate Target 3-year Yield Control unchanged at 0.25% (as expected) but did increase size and duration of the term funding facility
• China Aug Caixin PMI Manufacturing registered its 4th straight expansion) and highest since Jan 2011 (53.1 v 52.5e)
• Japan Aug Final PMI Manufacturing: 47.2 v 46.6 prelim (Confirms 16 months of contraction)
• Australia Aug Final PMI Manufacturing: 53.6 v 53.9 prelim (Confirms 3rd month of expansion)

Coronavirus:

• Total global cases 25,405,845 (+1.0% d/d); total deaths: 849.4K (+0.5% d/d)

Europe:

• German government reportedly slightly less pessimistic on economy this year, but anticipates weaker than expected rebound next year –

Americas:

• Treasury Sec Mnuchin stated that Democrats did not want to negotiate in good faith on coronavirus stimulus plan
• Speaker Pelosi: repeated stimulus talks are at total standstill

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.08% at 366.82, FTSE -1.23% at 5,890.05, DAX +0.48% at 13,008.80, CAC-40 -0.13% at 4,940.83, IBEX-35 -0.09% at 6,963.00, FTSE MIB +0.29% at 19,690.50, SMI +0.95% at 10,232.00, S&P 500 Futures +0.29%]
• Market Focal Points/Key Themes: European indices open mixed with a slight positive bias and remained marginally in the green as the session progressed; risk appetite under pressure from persistently high numbers of new covid cases across Europe; technology and health care sectors lead to the upside; financials and consumer discretionary among the underperforming sectors; Saga rejects unsolicited offer; reportedly Engie to raise offer in bid for Suez; Rocket internet plans to take itself private; tech firms supported on latest orders from Apple; earnings expected in the upcoming US session include Build-a-Bear and H&R Block

Equities

• Consumer discretionary: Dunelm Group [DNLM.UK] +5% (trading update), Wizz Air [WIZZ.UK] -6% (operational update)
• Financials: Saga [SAGA.UK] +36% (equity raise)
• Healthcare: Astrazeneca [AZN.UK] +1% (starts US final stage trial of vaccine; drug approval in EU)

Industrials:

• Technology: Infineon [IFX.DE] +2%, Dialog Semi [DLG.DE] +2.5%, AMS [AMS.CH] +3% (Apple production), Datagroup [D6H.DE] -7% (earnings)

Speakers

ECB’s De Guindos (Spain): Expects strong rebound in Euro Zone Q3 GDP data. He noted that July data was very strong while Aug saw activity but less robust. Saw slight rise in 2021 inflation

• Sweden Central Bank (Riksbank) stated that it would begin purchases of corporate bonds from Sept 14th. Move to help keep companies’ funding costs down. Rikebank added that it was prepared to decide on further measures as markets remained fragile and vulnerable if crisis continued
• Germany Economy Ministry raised its 2020 GDP forecast from -6.3% to -5.8% while cutting the 2021 growth outlook from 5.2% to 4.4%
• Germany Econ Min Altmaier noted that theH1 domestic recession was less severe than initially feared; Germany was in unexpectedly fast V-shaped recovery. Stressed that he country could and would avoid a second virus lockdown
• Spain PM Sanchez stated that was urgent that the 2021 budget get approved. Moderately optimistic about economic recovery

Currencies/Fixed Income

• USD remained on the defensive with dealers citing yesterday’s comments from Fed Vice Chair Clarida that it would consider yield caps if circumstances changed markedly
• EUR/USD was hitting its highest level since April 2018 as the pair probed the psychologically significant 1.20 level. Euro made numerous attempts to break the key barrier but option defenses keeping it intact for the time being.
• GBP/USD tested above the 1.3440 level to achieve eight-and-a-half-month highs

Economic Data

• (RU) Russia Aug PMI Manufacturing: 51.1 v 48.7e (1st expansion in 16 months)
• (AU) Australia Aug Commodity Index: 94.2 v 94.6 prior
• (SE) Sweden Aug PMI Manufacturing: 53.4 v 52.1e (2nd straight expansion)
• (NL) Netherlands Aug Manufacturing PM: 52.3 v 47.9 prior (1st expansion in 5 months)
• (PL) Poland Aug PMI Manufacturing: 50.6 v 52.9e (2nd straight expansion)
• (HU) Hungary Aug Manufacturing PMI: 52.8 v 51.0e (2nd straight expansion)
• (TR) Turkey Aug PMI Manufacturing: 54.3 v 56.9 prior (3rd straight expansion)
• (CZ) Czech Q2 Preliminary GDP (2nd reading) Q/Q: -8.7% v -8.4%e; Y/Y: -11.0% v -10.7%e
• (HU) Hungary Q2 Final GDP Q/Q: -14.5% v -14.5%e; Y/Y: -13.6% v -13.6%e
• (HU) Hungary Jun Final Trade Balance: €0.7B v €0.7B prelim
• 03:10 (EU) Daily ECB Liquidity Stats
• (ES) Spain Aug Manufacturing PMI: 49.9 v 53.0e (moves back into contraction)
• (CH) Swiss Aug PMI Manufacturing: 51.8 v 51.6e (1st expansion in 18 months)
• (CZ) Czech Republic Aug PMI Manufacturing: 49.1 v 49.4e (21st month of contraction but highest since Dec 2018)
• (TH) Thailand Aug Business Sentiment Index: 45.7 v 42.9 prior
• (IT) Italy Aug Manufacturing PMI: 53.1 v 52.0e (2nd month of expansion and highest since Jun 2018)
• (FR) France Aug Final Manufacturing PMI: (confirmed 1st contraction in 3 months)
• (DE) Germany Aug Final Manufacturing PMI: 52.2 v 53.0e (confirmed 2nd month of expansion)
• (DE) Germany Aug Net Unemployment Change: -9.0K v -2.0Ke (2nd straight decline); Unemployment Claims Rate: 6.4% v 6.4%e
• (EU) Euro Zone Aug Final Manufacturing PMI: 51.7 v 51.7e (confirms 2nd month of expansion)
• (GR) Greece Aug Manufacturing PMI: 49.4 v 48.6 prior (6th straight contraction)
• (NO) Norway Aug PMI Manufacturing: 46.1 v 50.0e (6th straight contraction)
• (IT) Italy July Preliminary Unemployment Rate: 9.7% v 9.1%e
• (PL) Poland Aug Preliminary CPI M/M: -0.1% v 0.0%e; Y/Y: 2.9% v 3.0%e
• (UK) Aug Final Manufacturing PMI: 55.2 v 55.3e (confirmed its 3rd straight expansion)
• (UK) July Net Consumer Credit: £1.2B v £0.8Be; Net Lending: £2.7B v £3.0Be
• (UK) July Mortgage Approvals: 66.3K v 55.0Ke
• (UK) July M4 Money Supply M/M: 0.9% v 1.1% prior; Y/Y: 13.5% v 13.1% prior; M4 Ex IOFCs: 17.7% v 20.1% prior
• (HK) Hong Kong July Retail Sales Value Y/Y: -23.1% v -27.4%e; Retail Sales Volume Y/Y: -23.9% v -26.2%e
• (EU) Euro Zone Aug Advance CPI Estimate Y/Y: -0.2% v +0.2%e; CPI Core Y/Y: 0.4% (record low) v 0.8%e; CPI M/M: -0.4% v 0.0%e
• (EU) Euro Zone July Unemployment Rate: 7.9% v 8.0%e
• (ZA) South Africa Aug Manufacturing PMI: 57.3 v 50.9e (4th month of expansion)
• (DK) Denmark Aug PMI Survey: 52.3 v 56.9 prior
• (BE) Belgium July Unemployment Rate: 5.5% v 5.5% prior
• (IS) Iceland Q2 Current Account Balance (ISK): 7.0B v 16.7B prior

Fixed Income Issuance

• (ID) Indonesia sold total IDR9.5T vs. IDR8.0T target in Islamic Bonds (sukuk)

Looking Ahead

• (RO) Romania Aug International Reserves: No est v $41.8B prior
• (US) Aug Total Vehicle Sales data in session
• 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 (DE) Germany to sell €500M in Inflation-linked 2026 and 2046 bonds (Bundei)
• 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 6-month bills
• 05:30 (ZA) South Africa to sell combined ZAR6.6B in 2032, 2040 and 2044 bonds
• 06:00 (IE) Ireland Aug Unemployment Rate: No est v 5.0% prior
• 06:00 (PT) Portugal July Industrial Production M/M: No est v 11.2% prior; Y/Y: No est v -14.6% prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
• 07:45 (US) Goldman Economist Chain Store Sales
• 08:00 (CZ) Czech Aug Budget Balance (CZK): No est v -205.1B prior
• 08:00 (BR) Brazil Q2 GDP Q/Q: -9.2%e v -1.5% prior; Y/Y: -10.6%e v -0.3% prior; GDP 4-quarters Accumulated: -2.0%e v +0.9% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• (ZA) South Africa Aug Naamsa Vehicle Sales Y/Y: No est v -29.6% prior
• 08:30 (CL) Chile July Economic Activity Index (Monthly GDP) M/M: 2.1%e v 1.7% prior; Y/Y: -12.0%e v -12.4% prior; Economic Activity (ex-mining) Y/Y: No est v -14.0% prior
• 08:55 (US) Weekly Redbook LFL Sales data
• 09:00 (BR) Brazil Aug PMI Manufacturing: No est v 58.2prior
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:30 (CA) Canada Aug Manufacturing PMI: No est v 52.9 prior
• 09:45 (US) Aug Final Markit Manufacturing PMI: 53.6e v 53.6 prelim
• 10:00 (US) Aug ISM Manufacturing: 54.8e v 54.2 prior; Price Paid: 54.0e v 53.2 prior
• 10:00 (US) July Construction Spending M/M: +1.0%e v -0.7% prior
• 10:00 (MX) Mexico July Total Remittances: $3.3Bet v $3.5B prior
• 10:00 (MX) Mexico Central Bank Economist Survey
• 10:00 (MX) Mexico Weekly International Reserve data
• 10:30 (MX) Mexico Aug PMI Manufacturing: No est v 40.4 prior
• 11:00 (CO) Colombia Aug PMI Manufacturing: No est v 54.2 prior
• 11:00 (PE) Peru Aug CPI M/M: -0.1%e v +0.5% prior; Y/Y: 1.7%e v 1.9% prior
• 12:00 (IT) Italy Aug New Car Registrations Y/Y: No est v -11.0% prior
• 13:00 (MX) Mexico Aug IMEF Manufacturing Index: 49.0e v 48.1 prior; Non-Manufacturing Index: 47.8e v 47.0 prior
• 13:00 (NZ) New Zealand Aug QV House Prices Y/Y: No est v 7.5% prior
• 13:00 (US) Fed’s Brainard
• 14:00 (BR) Brazil Aug Trade Balance: $6.9Be v $8.1B prior; Total Exports: $18.4Be v $19.6B prior; Total Imports: $11.5Be v $11.5B prior
• (IT) Italy Aug Budget Balance: No est v -€7.2B prior
• 14:00 (NL) ECB’s Knot (Netherlands)
• 16:30 (US) Weekly API Oil Inventories
• 18:00 (CL) Chile Central Bank (BCCh) Interest Rate Decision: Expected to leave Overnight Rate Target unchanged at 0.50%
• 18:45 (NZ) New Zealand Q2 Terms of Trade Q/Q: +0.6%e v -0.7% prior
• 19:00 (KR) South Korea Aug CPI M/M: 0.4%e v 0.0% prior; Y/Y: 0.5%e v 0.3% prior; CPI Core Y/Y: 0.6%e v 0.7% prior
• 19:01 (UK) Aug BRC Shop Price Index Y/Y: No est v -1.3% prior
• 19:50 (JP) Japan End-Aug Monetary Base: No est v ¥576.3T prior
• 21:30 (AU) Australia Q2 GDP Q/Q: -6.0%e v -0.3% prior; Y/Y: -5.2%e v 1.4% prior
• 23:00 (CN) China to sell 3-yearand 7-year Upsized Government Bonds