German IFO Survey Mixed, Focus On Jackson Hole

Notes/Observations

• German Aug IFO Survey misses consensus with supply chain bottlenecks and rising commodity costs as factors.
• Awaiting for clues on taper from Powell at upcoming Jackson Hole symposium but Powell likely not to announce anything at this time.

Asia

• BOJ Member Nakamura reiterated overall assessment stance that the economy was picking up as a trend but outlook uncertain due to recent resurgence in Covid-19 cases.
• US have approved Huawei’s license application for auto chips worth hundreds of millions of dollars.
• China PBOC increased short-term cash injections as liquidity tightens; Open Market Operation (OMO) injected CNY50B in 7-day reverse repos against CNY10B maturing.
• China Ningo Port to reopen previously closed terminal on Wed, Aug 25th (terminal has through put of ~25% port capacity).

Coronavirus

• Japan Econ Min Nishimura: Seeking to expand state of emergency to 8 additional prefectures.
• Japan to spend additional ¥1.4T on COVID, using reserves.

Americas

• House advanced $3.5T budget framework package after ending stalemate between Speaker Pelosi and centrists. Clears the way for Democrats to pursue a massive social spending package that could pass both chambers without Republican support.
• House Speaker Pelosi stated that she was committed to passing the bill by Sep 27th and would also advance the $1.0T infrastructure bill (Note: most likely outcome is that both plans are finally approved).
• President Biden agreed with Pentagon recommendation to stick to Aug 31st Afghan pullout citing the very high risk of terrorism.

Energy

• Weekly API Crude Oil Inventories: -1.6M v -1.2M prior.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.11% at 472.30, FTSE +0.15% at 7,136.45, DAX -0.11% at 15,888.65, CAC-40 +0.10% at 6,670.88, IBEX-35 +0.21% at 8,967.00, FTSE MIB -0.13% at 25,993.50, SMI -0.20% at 12,407.80, S&P 500 Futures %].
• Market Focal Points/Key Themes: European indices open modestly higher across the board and again slipped to trad mixed later in the session; sectors trending into the green include technology and consumer discretionary; underperforming sectors include materials and utilities; Salmar takes stake in Refsnes Laks; Augean to be acquired by Fierra and Ancala; reportedly Blackstone takes majority stake in ASK Group; earnings expected in the upcoming US session include National Bank of Canada, Dick’s Sporting Goods and Autodesk.

Equities

• Financials: Augean [AUG.UK] +16% (agrees with the offer).
• Healthcare: Bavarian Nordic [BAVA.DK] -5% (earnings), Elekta [EKTAB.SE] -7% (earnings).
• Industrials: Stadler Rail [SRAIL.CH] +4% (earnings).
• Technology: Sopheon [SPE.UK] +9% (earnings).

Speakers

• ECB’s De Guindos (Spain) noted that it could revise Staff Projections higher in Sept as Q3 indicators were positive.
• German IFO Economists noted that almost 75% of businesses complain about supply chain bottlenecks. Export expectations had fallen but remain at a good level. Approx 67% of companies in both manufacturing and retail sought higher prices to cover rising costs.
• Iceland Central Bank Policy Statement noted that the economic outlook had improved since May driven by tourist arrivals. Inflationary pressures remained relatively high but appeared to be subsiding; Outlook was for CPI to ease more slowly compared to May forecast while the rise in inflationary expectations appeared to be reversing.
• Japan govt FY22/23 budget said to total over ¥110T.
• US Senate said to offer simpler alternative to Pres Biden’s tax plan; Proposes to increase penalties on companies sending profit abroad.
• President Biden expected to host executives from major technology, financial and energy companies on Wednesday (Aug 25th) for a summit on national cybersecurity.

Currencies/Fixed income

• USD retraced a bit of its recent strength with a focus on the upcoming Jackson Hole symposium. Markets seemed to have discounted the likelihood of any details on Fed tapering plans at this time but Fed Powell speech on Friday was expected to remain cautious.
• EUR/USD managed to shake off a mixed German IFO survey and hovered above 1.1750by mid-session.

Economic data

• (ES) Spain July PPI M/M: 1.7% v 2.2% prior; Y/Y: 15.3% v 15.4% prior.
• (TR) Turkey Aug Real Sector Confidence (seasonally adj): 112.2 v 112.1 prior; Real Sector Confidence NSA (unadj): 113.9 v 114.8 prior.
• (TR) Turkey Aug Capacity Utilization: 77.1% v 76.7% prior.
• (DE) Germany Aug IFO Business Climate Survey: 99.4 v 100.4e; Current Assessment: 101.4 v 100.8e; Expectations Survey: 97.5 v 100.0e.
• (CH) Swiss Aug Expectations Survey: -7.8 v +42.8 prior.
• (IS) Iceland Central Bank (Sedabanki) raised 7-Day Term Deposit Rate by 25bps to 1.25%.

Fixed income issuance

• (IN) India sold total INR 170B vs. INR170B indicated in 3-month, 6-month and 12-month bills.
• (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 1.375% Aug 2030 Bonds, Avg Yield: 1.22% v 1.44% prior; bid-to-cover: 2.68x v 2.06x prior.
• (SE) Sweden sold total SEK3.5B vs. SEK3.5B indicated in 2026 and 2032 Bonds.

Looking ahead

• (PT) Portugal Debt Agency (IGCP) to hold switch auction.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (EU) ECB allotment in 3-month LTRO tender.
• 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).
• 06:00 (UK) Aug CBI Retailing Reported Sales: 20e v 23 prior; Total Distributed Reported Sales: No est v 41 prior.
• 06:00 (RU) Russia to sell 2029 and 2036 OFZ bonds.
• 06:00 (CZ) Czech Republic to sell 2029 and 2037 bonds.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (US) MBA Mortgage Applications w/e Aug 20th: No est v -3.9% prior.
• 07:00 (MX) Mexico Q2 Final GDP Q/Q: 1.6%e v 1.5% prelim; Y/Y: 19.7%e v 19.7% prelim; GDP Nominal Y/Y: No est v 1.8% prior.
• 07:00 (MX) Mexico Jun IGAE Economic Activity Index (Monthly GDP) M/M: -0.3%e v +0.6% prior; Y/Y: 13.8%e v 25.1% prior.
• 07:00 (BR) Brazil Aug FGV Consumer Confidence: No est v 82.2 prior.
• 08:00 (BR) Brazil mid-Aug IBGE Inflation IPCA-15 M/M: 0.8%e v 0.7% prior; Y/Y: 9.2%e v 8.6% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) July Preliminary Durable Goods Orders: -0.3%e v+ 0.9% prior; Durables (ex-transportation) 0.5%e v 0.5% prior; Capital Goods Orders (non-defense/ex-aircraft): 0.5%e v 0.7% prior; Capital Goods Shipments (non-defense/ex-aircraft): 0.7%e v 0.6% prior.
• 08:30 (BR) Brazil July Current Account Balance: -$0.5Be v +$2.8B prior; Foreign Direct Investment (FDI): $4.7Be v $0.2B prior.
• 09:00 (BE) Belgium Aug Business Confidence Index: No est v 10.1 prior.
• 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (7-20 years).
• 10:00 (MX) Mexico Q2 Current Account Balance: +$3.8Be v -$5.1B prior.
• 10:30 (US) Weekly DOE Oil Inventories.
• 11:00 (BR) Brazil July Tax Collections (BRL): 161.6Be v 137.2B prior.
• 12:00 (RU) Russia July Industrial Production Y/Y: 8.0%e v 10.4% prior.
• 13:00 (US) Treasury to sell 2-Year FRN Reopening.
• 13:00 (US) Treasury to sell 5-Year Notes.
• 13:30 (BR) Brazil July Total Federal Debt (BRL): No est v 5.330T prior.
• 19:50 (JP) Japan July PPI Services Y/Y: 1.3%e v 1.1% prior.
• 20:00 (US) Jackson Hole agenda published.
• 21:00 (KR) Bank of Korea (BoK) Interest Rate Decision: Expected to leave 7-Day Repo Rate unchanged at 0.50%.
• 21:30 (AU) Australia Q2 Private Capital Expenditure: 2.6%e v 6.3% prior.
• 22:00 (KR) South Korea July Department Store Sales Y/Y: No est v 12.8% prior; Discount Store Sales Y/Y: No est v -2.4% prior.
• 22:00 (KR) South Korea July Retail Sales Y/Y: No est v 11.4% prior.
• 23:35 (JP) Japan to sell 20-Year JGB Bonds.