Markets Finding Optimism Everywhere They Look Aiding Risk Appetite

Notes/Observations

• German ZEW Sept survey was undeterred in optimism despite stalled Brexit talks and rising COVID-19 cases
• China registers better data as its retail sales rise for the 1st time since the pandemic broke out

Asia:

• China Aug Industrial Production Y/Y: 5.6% v 5.1%e
• China Aug Retail Sales registered its 1st rise in 8 months (Y/Y: 0.5% v 0.0%e)
• China Aug Surveyed Jobless Rate: 5.6% v 5.6%e
• China PBOC injected CNY600B in 1-year MLF operation with rate unchanged at 2.95%
• China to extend tariff exemption on some US goods (16 products) by 1 additional year, the exemption to now last until Sept 16 2021 (products include lubricants, fish meal and whey)
• RBA Sept Minutes noted that monetary stimulus was continuing to support economy as a recovery was underway in most of Australia. Economic downturn not as severe as earlier expected but recovery likely to be uneven. Considering how further monetary measures could support recovery. Lower AUD currency would provide more assistance to economic recovery. Reiterated stance that cash rate will not increase until progress was made towards full employment and inflation

Europe:

• PM Johnson’s govt wins initial vote on proposed internal markets bill that would change to Brexit deal; House of Commons votes 340-263

Energy:

• Hurricane Sally rapidly strengthening, current a cat 2 storm and could be cat 3 upon landfall

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.52% at 370.42, FTSE +0.70% at 6,068.52, DAX +0.12% at 13,208.85, CAC-40 +0.32% at 5,067.84, IBEX-35 +1.22% at 7,036.00, FTSE MIB +0.54% at 19,901.50, SMI +0.73% at 10,533.50, S&P 500 Futures +0.52%]
• Market Focal Points/Key Themes: European indices opened mixed but later moved into the green as the session progressed; consumer discretionary and materials sectors among leaders; underperforming sectors include financials and telecom; Ocado lists M&S products for sale on its site; Fiat, Terna, Engie and others to collaborate on smart vehicle charging grid; PSA and Fiat amend merger agreement; reportedly Bankia and Caixa merger could be valued at €4.0B; Credit Agricole sells 3.1% stake in Carrefour; earnings expected in the upcoming US session include Adobe, Cracker Barrel and Fedex

Equities

• Consumer discretionary: H&M [HMB.SE] +11% (Q3 sales), Ocado [OCDO.UK] +6% (trading update), William Hill [WMH.UK] +7% (deal b/w DraftKings and ESPN), FirstGroup [FGP.UK] +9% (trading update), Marshalls [MSLH.UK] -5% (earnings), Carrefour [CA.FR] -3% (placement)

Speakers

• ECB’s Panetta (Italy) reiterated Council stance that prepared to adjust all instruments if needed; balance of risks remained to the downside. Needed to remain vigilant on the inflation front and carefully assess incoming information including the exchange rate
• Germany Stats Office: Early indicators point to further recovery in the domestic economy. Needed to avoid a 2nd wave of the virus to maintain the “V” shape recovery
• ESM’s Regling: Concerned over region’s banking sector
• Sweden Central Bank (Riksbank) to extend its USD loan program until Mar 31st 2021 despite limited demand. Assessment being that program had a calming effect on banking sector and other market participants
• EU Foreign Policy Chief Borrell noted that the EU-Turkey relationship was at a watershed moment. EU wanted constructive approach towards Turkey as Turkey is failing to deliver on promises to strengthen its judiciary
• Hungary Central Bank Dep Gov Virag: Targeted loan moratorium is needed
• German ZEW economists noted that its recent Sept survey was undeterred in optimism despite stalled Brexit talks and rising COVID-19 cases
• Bank of Korea (BOK) Aug Minutes had one member note that non-rate policy tools might be needed while another member saw the need to watch financial imbalances
• Hong Kong govt unveiled a HK$24B of virus relief measures (as speculated); eased some virus restrictions. To reopen pubs, pools and theme parks from Friday, Sept 18th. Pubs and karaoke places were allowed to open until midnight
• China EU envoy Zhang stated that a recent EU/China leaders video conference was a success. China was ready for free trade talks with EU and added that an accord measure by year-end was possible
• IEA Monthly Oil Report noted that oil market was more fragile as resurgent virus hurt demand. Cut its 2020 global oil demand contraction from -8.1M bpd to -8.4M bpd (91.7M vs. 91.9M bpd) while raising 2021 global oil demand growth from 5.2M bpd to 5.5M bpd (demand seen at 97.1M bpd)

Currencies/Fixed Income

• USD was slightly weaker against the major pairs but contained to its most recent trading range. Focus turning the Wed’s FOMC meeting.
• EUR/USD higher by 0.2% but unable to break back above the 1.19 level for the time being. Dealers reluctant to push the pair higher after ECB officials expressed concern over euro strength last week.
• GBP/USD was higher by 0.3% despite the UK parliament voting in favor of the government’s internal market bill. The uncertainty would likely cap the cable gains at some point as the bill would breach aspects of the withdrawal agreement. For now the GBP strength attributed to retracement of its recent steep losses over the past week and overall USD vulnerability

Economic Data

• (FI) Finland July GDP Indicator Y/Y: -2.8% v -4.2% prior
• (NO) Norway Aug Trade Balance (NOK): -2.9B v -1.8B prior
• (UK) Aug Jobless Claims Change: +73.7K v +69.9K prior; Claimant Count Rate: 7.6% v 7.4% prior
• (UK) July Average Weekly Earnings 3M/Y: -1.0% v -1.3%e; Weekly Earnings (ex-bonus) 3M/Y: +0.2% v -0.2%e
• (UK) July ILO Unemployment Rate: 4.1% v 4.1%e; Employment Change 3M/3M: -12K v -118Ke
• (DK) Denmark Aug PPI M/M: 0.9% v 0.0% prior; Y/Y: -1.0% v -2.1% prior
• (CH) Swiss Aug Producer & Import Prices M/M: -0.4% v +0.1% prior; Y/Y: -3.5% v -3.3% prior
• (FR) France Aug Final CPI M/M: -0.1% v -0.1%e; Y/Y: 0.2% v 0.2%e; CPI Ex-Tobacco Index: 104.34 v 104.31e
• (FR) France Aug Final CPI EU Harmonized M/M: -0.1% v -0.1%e; Y/Y: 0.2% v 0.2%e
• (SE) Sweden Aug Unemployment Rate: 8.8% v 8.9% prior; Unemployment Rate (seasonally adj): 9.1% v 9.2%e; Trend Unemployment Rate: 9.3% v 9.3% prior
• (PL) Poland Aug Final CPI M/M: -0.1% v -0.1% prelim; Y/Y: 2.9% v 2.9% prelim
• (NO) Norway Aug Region Output Survey (past 3-months): +1.47 v -2.63 prior; Output Survey (next 6-months): 0.19 v 0.08 prior
• (IT) Italy Aug Final CPI M/M: 0.3% v 0.3% prelim; Y/Y: -0.5% v -0.5% prelim; CPI Index (ex-tobacco): 102.5 v 102.3 prior
• (IT) Italy Aug Final CPI EU Harmonized M/M: -1.3% v -1.3% prelim; Y/Y: -0.5% v -0.5%e
• (TR) Turkey Aug Central Gov’t Budget Balance (TRY): +28.2B v -29.7B prior
• (IT) Italy July General Government Debt: €2.561T v €2.531T prior (record level)
• (DE) Germany Sept ZEW Current Situation Survey: -66.2 v -72.0e; Expectations Survey: 77.4 v 69.5e
• (EU) Euro Zone Sept ZEW Expectations Survey: 73.9 v 64.0 prior
• (EU) Euro Zone Q2 Labour Costs Y/Y: 4.2% v 3.7% prior

Fixed Income Issuance

• (ID) Indonesia sold total IDR9.5T vs.IDR8.0T target in Islamic bonds (Sukuk)
• (ES) Spain Debt Agency (Tesoro) sold total €1.75B vs. €1.0-2.0B indicated range in 3-month and 9-month Bills
• (UK) DMO sold £2.75B in 1.25% July 2027 Gilts; Avg Yield: +0.032% v -0.046% prior; bid-to-cover: 2.61x v 2.08x prior; Tail: 0.2bps v 0.7bps prior

Looking Ahead

• (NG) Nigeria Aug CPI Y/Y: 13.0%e v 12.8% prior
• 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 €4.0B in 0.00% Nov 2027 Bunds
• 05:30 (ZA) South Africa to sell combined ZAR6.6B in 2032, 2037 and 2048 bonds
• 06:00 (IE) Ireland July Trade Balance : No est v €6.6B prior
• 06:00 (PL)) Poland Central Bank (NBP) Interest Rate Decision: expected to leave Base Rate unchanged at 0.10%
• 06:30 (UK) DMO to sell £1.75B in 1.75% Sept 2037 Gilt;
• 06:30 (EU) ESM to sell €1.5B in 12-month Bills
• 06:45 (US) Daily Libor Fixing
• 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
• 07:00 (TR) Turkey to sell 9% 2022 Bonds
• 07:45 (US) Goldman Economist Chain Store Sales
• 08:00 (IS) Iceland Aug Unemployment Rate: No est v 8.8% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Sept Empire Manufacturing: 6.5e v 3.7 prior
• 08:30 (US) Aug Import Price Index M/M: 0.5%e v 0.7% prior; Y/Y: -2.2%e v -3.3% prior; Import Price Index (ex-petroleum) M/M: 0.3%e v 0.2% prior
• 08:30 (US) Aug Export Price Index M/M: 0.4%e v 0.8% prior; Y/Y: No est v -4.4% prior
• 08:30 (CA) Canada July Manufacturing Sales M/M: 9.0%e v 20.7% prior – 08:55 (US) Weekly Redbook LFL Sales data
• 09:00 (CA) Canada Aug Existing Home Sales M/M: 8.0%e v 26.0% prior
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:15 (US) Aug Industrial Production M/M: 1.0%e v 3.0% prior; Capacity Utilization: 71.5%e v 70.6% prior; Manufacturing Production: 1.6%e v 3.4% prior
• 10:00 (PL) Poland Central Bank Gov Glapinski to hold post rate decision press conference
• 11:30 (IL) Israel Aug CPI M/M: 0.2%e v 0.2% prior; Y/Y: -0.6%e v -0.6% prior
• 12:00 (RU) Russia Aug Industrial Production Y/Y: -6.4%e v -8.0% prior
• 13:00 (US) Treasury to sell 20-Year Bonds Reopening
• 16:30 (US) Weekly API Oil Inventories
• 18:45 (NZ) New Zealand Q2 Current Account Balance (NZD): 0.7Be v 1.6B prior; Current Account to GDP Ratio: -2.3%e v -2.7% prior
• 19:50 (JP) Japan Aug Trade Balance: -¥14.5Be v +¥10.9B prior (revised from ¥11.6B); Adjusted Trade Balance: ¥23.3Be v -¥34.8B prior; Exports Y/Y: -16.1%e v -19.2% prior; Imports Y/Y: -18.0%e v -22.3% prior
• 20:30 (AU) Australia Aug Leading Index M/M: No est v 0.05% prior
• 21:10 (JP) BOJ Outright Bond Purchase Operation for 1~3 years; 3~5 year and 5~10 years maturity
• 21:30 (KR) South Korea Central Bank to sell KRW2.0T in 2-Year Bonds
• 22:35 (CN) China to sell 1-year and 10-year Upsized Bonds)
• 23:30 (JP) Japan to sell 12-Month Bills
• (NZ) New Zealand Election Economic and Fiscal Update