UK Retail Sales Beats Expectations, Price Action Subdued In Session

Notes/Observations

• Quiet EU session with little impetus for fresh positions
• UK Aug retail sales beat expectations for a 2nd straight month but reports that Scientific advisers in Britain said to be proposing a two-week national lockdown in October could derail recovery

Asia:

• Japan Aug National CPI data inline but remained significantly away from target (Y/Y: 0.2% v 0.2%e )
• New Zealand Fin Min Robertson stated that the domestic economy was rebounding from its recession. RBNZ was committed current level of Cash Rate of 0.25% until March 2021

Coronavirus:

• Total global cases 30.1M ; total deaths: 94.5M

Europe:

• UK Govt spokesperson noted that there had been some limited progress in Brexit talks this week and talks will continue into next week. Significant gaps remained on fishing rights and subsidies
• UK Foreign Min Raab reiterated stance that the Good Friday agreement was not in jeopardy; there would not be any hard border in Ireland applied by Britain
• Scientific advisers in Britain said to be proposing a two-week national lockdown in October to try to stem the rising number of coronavirus cases

Americas:

• Fed released hypothetical scenarios for second round of bank stress tests. To decide by end of September whether to continue stopping the banking sector from performing share buybacks and paying dividends into Q4

Energy:

• JMMC technical meeting concluded that further necessary measures may be needed; reiterates compensation cuts should continue to end of Dec
• Russia Energy Min Novak expected market to return to five-year avg on stocks but it to depend on demand and other issues

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.12% at 370.80, FTSE -0.39% at 6,026.35, DAX +0.09% at 13,219.40, CAC-40 -0.40% 5,019.37, IBEX-35 -1.09% at 7,009.00, FTSE MIB -0.02% at 19,736.50, SMI +0.40% at 10,567.75, S&P 500 Futures -0.06%]
• Market Focal Points/Key Themes: European indices open mixed and remained directionless as the session wore on; increasing covid case numbers in Europe seen weighing on investor sentiment for quadruple witching day; better performing sectors lead by technology followed by materials; underperforming sectors include financials and energy; Euronext enters exclusive negotiations with LSE for Boursa Italiana; Caixabank formally agrees terms of agreement to merge with Bankia; press reports UK recommended another round of lockdowns next month; reportedly Apollo considering making a bid for Covestro; no major earnings expected during upcoming US session

Equities

• Consumer discretionary: Bilia [BILIA.SE] +7% (positive profit alert), EasyJet [EZJ.UK] -6% (new CFO)
• Financials: Euronext [ENX.FR] +3% (confirms talks with LSE), Bankia [BKIA,ES] -2%, CaixaBank [CABK.ES] +1% (confirm merger), Investec [INVP.UK] -4% (trading update)
• Industrials: Covestro [1COV.DE] +6% (takeover speculation)

Speakers

• Several ECB supervisor board members said to be in favor of lifting dividend ban for banking sector
• Germany Econ Min Altmaier stated that the rising virus infections threatened regional recovery
• BOJ Gov Kuroda reiterated stance that domestic economy had started to pick up
• Japan Fin Min Aso stated that the pandemic was keeping the global economic outlook uncertain
• Japan Econ Min Nishimura reiterated stance that was determined to prevent Japan from returning to deflation.

Currencies/ Fixed Income

• USD was little changed against the major European pairs in a quiet EU session with little impetus for fresh positions for the time being.
• GBP/USD steady and just under the 1.30 level. Cable able to recover from Thursday’s BOE decision and rhetoric on negative rates. UK Aug retail sales beat expectations for a 2nd straight month. However, upside could face hurdles as reports circulated that scientific advisers in Britain were proposing a two-week national lockdown in October to stem the rise of virus infection which could derail the budding recovery
• NZD currency (kiwi) was firmer as NZ Fin Min stated that the central bank would keep rates steady until March, This comment derailed speclation of any near term move into negative rates

Economic Data

• (UK) Aug Retail Sales (ex-auto/fuel) M/M: 0.6% v 0.4%e; Y/Y: 4.3% v 4.2%e
• (UK) Aug Retail Sales M/M: 0.8% v 0.8%e; Y/Y: 2.8% v 2.7%e
• (DE) Germany Aug PPI M/M: 0.0% v 0.0%e; Y/Y: -1.2% v -1.4%e
• (FR) France Q1 Final Wages Q/Q: 1.0% v 0.9% prelim
• (CN) Weekly Shanghai copper inventories (SHFE): 193.4K v 176.8K tons prior
• (RU) Russia Narrow Money Supply w/e Sept 11th (RUB): 13.28T v 13.19T prior
• (EU) Euro Zone July Current Account: €16.6B v €20.7B prior
• (IT) Italy July Current Account: €9.3B v €3.4B prior
• (GR) Greece July Current Account: -€0.9B v -€1.4B prior
• (IT) Italy July Industrial Sales M/M: 8.1% v 13.6% prior; Y/Y: -8.1% v -16.4% prior
• (IT) Italy July Industrial Orders M/M: 3.7%v 23.7% prior; Y/Y: -7.2% v -11.6% prior
• (PL) Poland Aug Sold Industrial Output M/M: -5.8% v -4.4%e; Y/Y: 1.5% v 3.0%e
• (PL) Poland Aug PPI M/M: -0.3% v -0.1%e; Y/Y: 1.5% v -1.0%e

Fixed Income Issuance

• (IN) India sold total INR300B vs. INR300B indicated in 2025, 2034 and 2050 bonds

Looking Ahead

• 05:30 (ZA) South Africa to sell combined ZAR2.0B in I/L 2025, 2038 and 2050 Bonds
• 06:00 (PT) Portugal July Current Account Balance: No est v €0.3B prior
• 06:00 (UK) DMO to sell £2.25B in 1-month, 3-month and 6-month bills (£0.5B, £0.75B and £1.0B respectively)
• 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave Key 1-Week Auction Rate unchanged at 4.25%
• 06:45 (US) Daily Libor Fixing
• 07:00 (BR) Brazil Sept IGP-M Inflation (2nd Preview): 4.2%e v 2.3% prior
• 07:30 (TR) Turkey Central Bank TCMB Survey of Expectations: Next 12 Month: No est v 9.7% prior
• 07:30 (IN) India Weekly Forex Reserve w/e Sept 11th: No est v $542.0B prior
• 07:30 (IS) Iceland to sell 2023 bonds
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:30 (US) Q2 Current Account Balance: -$160.0Be v -$104.2B prior
• 08:30 (CA) Canada July Retail Sales M/M: 1.0%e v 23.7% prior; Retail Sales (ex-auto) M/M: 0.5%e v 15.7% prior
• 08:30 (CA) Canada Aug Teranet House Price Index: M/M: No est v 0.3% prior; Y/Y: No est v 5.5% prior; House Price Index (HPI): No est v 239.01 prior
• 08:30 (CA) Canada July Wholesale Trade Sales M/M: No est v 18.5% prior
• 10:00 (US) Sept Preliminary University of Michigan Confidence: 75.0e v 74.1 prior
• 10:00 (US) Aug Leading Index: 1.3%e v 1.4% prior
• 10:00 (US) Fed’s Bullard
• 10:00 (DE) ECB’s Schnabel (Germany)
• 11:00 (EU) Potential sovereign ratings after European close Moody’s on Spain Sovereign Debt; S&P on Spain and Belgium Sovereign Debt, DBRS on Portugal Sovereign Debt
• 12:00 (RU) Russia Aug Unemployment Rate: 6.3%e v 6.3% prior; Real Wages Y/Y: 0.1%e v 0.6% prior
• 12:00 (RU) Russia Aug Real Retail Sales Y/Y: -1.7%e v -2.6% prior
• 13:00 (US) Weekly Baker Hughes Rig Count
• 15:00 (CO) Colombia July Economic Activity Index (Monthly GDP) Y/Y: -9.4%e v -11.1% prior