Risk Appetite Sentiment Finding Reasons To Continue

Notes/Observations

• Risk on appetite fueled by renewed optimism about a coronavirus vaccine
• Japan Suga won LDP leadership vote and poised to become the country’s new Prime Minister
• UK Parliament prepared to debate a proposal to rewrite parts of the Brexit withdrawal agreement.

Asia:

• Japan Chief Cabinet Sec Suga (leading LDP Party leadership candidate): if the pandemic worsened then govt would do whatever was necessary to protect jobs and businesses. Reiterates stance that had no plans to raise sales tax for 10 years, but could not rule out future tax hikes; No rush to change BOJ’s easing policy; must maintain 2% inflation target

Coronavirus:

• Total global cases 28.9M; total deaths: 922.7K
• Oxford and AstraZeneca resume coronavirus vaccine trial
• New Zealand PM Ardern announced she would extend Level 2 virus restrictions (in Auckland) by 1 week; Ex Auckland to move to alert Level 1 effective Midnight Sept 21st
• Chinese virologist (Dr. Li-Meng Yan) claimed she has evidence that COVID-19 was made in govt controlled lab in Wuhan; Planning to release scientific proof in the next few days

Europe:

• ECB chief Lagarde reiterated stance that incoming data showed a strong but uneven and incomplete recovery and that underlying price pressures had weakened. Reiterated stance that continued expansionary fiscal policies were vital to avoid excessive job shedding and support household incomes until the recovery was stronger – ECB’s De Guindos (Spain) reiterates Council stance that are closely monitoring the effects of FX rate on price stability
• ECB’s Rehn (Finland) reiterated Council stance that ECB was ready to use all means to achieve price stability. Core inflation in the euro area had stabilized at a low level that was not in line with the ECB’s goal.
• UK PM Johnson defended decision to alter Brexit divorce deals noting that he could not hand the EU the power to carve up the country. Issued a direct plea to Tory MPs not to rebel over upcoming Internal Market Bill – UK Chancellor of the Exchequer Sunak (Fin Min) said to seek flexibility to hold budget later if circumstances change with coronavirus cases. Could delay the Nov Budget Statement until New Year amide a 2nd wave
• Americas:
• President Trump tweeted that he signed a new Executive Order to LOWER DRUG PRICES

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.18% at 368.64, FTSE +0.05% at 6,034.92, DAX +0.20% at 13,228.25, CAC-40 +0.38% at 5,053.44, IBEX-35 +0.12% at 6,954.00, FTSE MIB -0.15% at 19,790.50, SMI +0.08% at 10,448.00, S&P 500 Futures +1.22%]
• Market Focal Points/Key Themes: European indices open higher across the board, but later retraced to only trade modestly in the green; investor sentiment buoyed after AstraZeneca resumes covid vaccine trial; better performing sectors include technology and industrials; consumer discretionary and health care sectors among underperformers; Euronext, Deutsche Boerse and Six Group bid for LSE’s Italian unit; Valneva enters covid vaccine deal with Dynavax; Metro rejects takeover offer from EP Global; Spanish LabMin says likely to extend furlough scheme past year end; reportedly Caixabank and Bankia to announce final terms of merger deal on Wednesday; earnings expected in upcoming US session include Lennar and Avery Dennison

Equities

• Consumer discretionary: H&M [HMB.SE] -3% (analyst downgrade)
• Healthcare: AstraZeneca [AZN.UK] +1% (resumes COVID-19 vaccine trials after review), Valneva [VLA.FR] +14% (supply agreements)
• Industrials: Dassault Aviation [AM.FR] +10% (deal with Greece), Costain [COST.UK] -5% (earnings)

Speakers

• Germany Economic Ministry Monthly Report: Pre-crisis growth level was not likely to be reached until beginning of 2022. Domestic recovery was continuing but had recently slowed
• France Fin Min Le Maire noted that the govt to revise French GDP forecast in coming days (**Note: Le Maire recently noted that the recession was not as bad as initially expected than the 2020 GDP forecast of -11.0%)
• EU Trade Sec Dombrovskis: Restoring transatlantic ties is a top priority and reiterated call to end US duties over Airbus subsidies
• Spain Labor Min Diaz stated that would likely to extend furlough scheme beyond year end and to maintain scheme for tourism industry “as long as needed”
• German Association of the Automotive Industry (VDA): No-deal Brexit outcome would mean combined EU/UK losses of up to €110B to 2025. Amount would be on top of the €100B in lost production from the pandemic in 2020
• Japan’s Suga (incoming PM) stated after winning the LDP leadership vote that must continue with policies of the Abe government; To continue efforts to overcome coronavirus crisis
• China Foreign Ministry spokesperson Zhao Lijoan: Ready to work with new Japan leadership and ensure improvement in relations.

Currencies/Fixed Income

• USD was softer in the session as risk appetite mustered some momentum. Risk-on buoyed by AstraZeneca resuming its coronavirus vaccine trial in UK after it was paused last week,
• EUR/USD was edging higher back towards the 1.19 neighborhood despite several ECB members commented that they were monitoring the effects of FX rate on price stability. Dealers noted of technical factors also aiding the currency despite the recent central bank rhetoric. The 1.20 level remained the key technical resistance.
• GBP/USD retraced some of its recent losses ahead of the UK Parliamentary debate on the Internal markets bill. UK PM Johnson issued a direct plea to his Tory MPs not to rebel over upcoming bill. Pair higher by 0.4% by mid-session to reapproach the 1.2850 area
• USD/JPY hovering around the 106 area as Suga won the LDP leadership challenger and was poised to be the country’s next PM. He vowed to carry on with Abe’s policies – European bond yield were lower in the session as markets continued to contemplate the possibility of interest rate cuts by the ECB as ECB chief noted that Euro currency strength had partly offset the positive impact that the ECB’s stimulus had in boosting inflation

Economic Data

• (SE) Sweden Aug PES Unemployment Rate: 5.6% v 5.7% prior
• (FI) Finland July Final Retail Sales Volume M/M: 4.5% v 4.1% prelim
• (FI) Finland Aug CPI M/M: 0.0% v 0.4% prior; Y/Y: 0.2% v 0.6% prior
• (IN) India Aug Wholesale Prices Y/Y:+0.2% v -0.4%e
• (TR) Turkey July Industrial Production M/M: 8.4% v 8.3%e; Y/Y:4.4% v 4.8%e
• (ES) Spain July House transactions Y/Y: -32.4% v -34.3% prior
• (CH) Swiss weekly Total Sight Deposits (CHF): 704.1B v 702.9B prior; Domestic Sight Deposits: 635.3B v 633.2B prior
• (CZ) Czech July Current Account Balance (CZK): +20.6B v -6.0Be
• (HK) Hong Kong Q2 Industrial Production Y/Y: -5.1% v -4.6% prior
• (HK) Hong Kong Q2 PPI Y/Y: 1.3% v 1.3% prior
• (EU) Euro Zone July Industrial Production M/M: 4.1% v 4.2%e; Y/Y: -7.7% v -8.1%e

Fixed Income Issuance

• (NO) Norway sold NOK6.0B vs. NOK6.0B indicated in 12-month Bills; Avg Yield: 0.04% v 0.10% prior; Bid-to-cover: 2.38x v 2.18x prior

Looking Ahead

• (UR) Ukraine Central Bank Sept Minutes
• 05:30 (DE) Germany to sell combined €8.0B in 3-month and 9-month
• 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 6-month and 9-month bills
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
• 06:00 (IL) Israel Q2 Current Account Balance: No est v $3.8B prior
• 06:00 (IL) Israel to sell 2023, 2025, 2037 and 2047 bonds (5 tranches)
• 06:00 (RO) Romania to sell RON100M in 4.1% 2030 Bonds
• 06:45 (US) Daily Libor Fixing
• 07:00 (TR) Turkey to sell Floating 2027 Bonds
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 08:00 (PL) Poland July Current Account Balance: €2.4Be v €2.8B prior; Trade Balance: €2.1Be v €2.7B prior; Exports: €19.8Be v €18.7B prior; Imports: €17.3Be v €16.0B prior
• 08:00 (IN) India Aug CPI Y/Y: 6.9%e v 6.9% prior
• 08:00 (BR) Brazil July Economic Activity Index (Monthly GDP): M/M: 3.4%e v 4.9% prior; Y/Y: -5.3%e v -7.1% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (ES) Spain Debt Agency (Tesoro) announcement of size on upcoming issuance
• 08:50 (FR) France Debt Agency (AFT) to sell €4.1-5.3B in 3-month, 6-month and 12-month bills (3 tranches)
• 09:45 (EU) ECB weekly QE bond buying update
• 11:00 (CO) Colombia July Manufacturing Production Y/Y: -3.4%e v -9.9% prior
• 11:00 (CO) Colombia July Retail Sales Y/Y: -10.0%e v -14.2% prior
• 11:00 (CO) Colombia July Industrial Production Y/Y: No est v -12.4% prior
• 16:00 (US) Weekly Crop Progress Report
• 17:00 (KR) South Korea Aug Export Price Index M/M: No est v -0.4% prior; Y/Y: No est v -5.8% prior
• 17:00 (KR) South Korea Aug Import Price Index M/M: No est v -0.9% prior; Y/Y: No est v -9.0% prior
• 17:00 (NZ) New Zealand Q3 Westpac Consumer Confidence: No est v 97.2 prior
• 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 91.1 prior
• 21:30 (AU) RBA Sept Minutes
• 21:30 (AU) Australia Q2 House Price Index Q/Q: -1.3%e v +1.6% prior; Y/Y: 6.8%e v 7.4% prior
• 22:00 (CN) China Aug Industrial Production Y/Y: 5.1%e v 4.8% prior; Industrial Production YTD Y/Y: +0.3%e v -0.4% prior
• 22:00 (CN) China Aug Retail Sales Y/Y: 0.0%e v -1.1% prior; Retail Sales YTD Y/Y: -8.8%e v -9.9% prior
• 22:00 (CN) China Aug Fixed Urban Assets Y/Y: -0.5%e v -1.6% prior
• 22:00 (CN) China Aug YTD Property Investment Y/Y: 4.1%e v 3.4% prior
• 22:00 (CN) China Aug Surveyed Jobless Rate: 5.6%e v 5.7% prio
• 23:30 (HK) Hong Kong to sell 3-month and 6-month Bills