Markets Turn Cautious Ahead Of Friday’s Virtual Jackson Hole Symposium

Notes/Observations

• Question on Jackson Hole is whether Fed Chair Powell provides clear communication on the shape and timing of tapering of asset purchases.
• Focus on 2nd reading of US Q2 GDP.

Asia

• Bank of Korea (BoK) raised its 7-Day Repo Rate by 25bps to 0.75% (not expected) for its 1st hike since Nov 2018; signaled further tightening as growth seen weathering Delta virus impact.
• Former LDP Official Kishida to challenge PM Suga in LDP Leadership election on Sept 29th.

Coronavirus

• US regulators said to likely to approve Covid-19 booster shots at least 6 months after people have received their latest shot.

Europe

• Forsa Federal election poll, Germany SPD party is ahead of CDU, 23% v CDU’s 22%.

Americas

• Jackson Hole agenda published Thursday evening in US (20:0 ET/00:00 GMT).
• Most polls show Canada PM’s Liberal Party and the opposition Conservatives running neck and neck.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.51% at 469.42, FTSE -0.52% at 7,112.13, DAX -0.71% at 15,748.20, CAC-40 -0.49% at 6,643.78, IBEX-35 -0.77% at 8,908.00, FTSE MIB -0.57% at 25,911.50, SMI -0.04% at 12,360.14, S&P 500 Futures -0.14%].
• Market Focal Points/Key Themes: European indices open lower across the board and stayed under pressure as the session progressed (notably SMI trades marginally in the green); concern over uncertainty heading into Jackson Hole Symposium blamed for lack of risk appetite; better performing sectors include industrials and financials; while consumer discretionary and materials sectors among those leading to the downside; Abertis sells it’s A’lienor stake to Eiffage; Illiad updates on it’s going private offer; focus on release of ECB minutes later in the day; earnings expected during the upcoming US session include Regis, Movado and JM Smucker.

Equities

• Consumer discretionary: Delivery Hero [DHER.DE] +1% (earnings).
• Financials: DWS [DWS.DE] -12% (US authorities said to have opened probe).
• Materials: CRH PLC [CRH.UK] +2% (earnings).
• Industrials: Eiffage [FGR.FR] +1.5% (earnings; acquisition), Polymetal International [POLY.UK] -1.5% (earnings).
• Telecom: Bouygues [EN.FR] +1.5% (earnings).

Speakers

• Norway Central Bank (Norges) announced it would return to normal liquidity operations from Thurs, Aug 26th (today) as the last of the extraordinary F-loans matured. Going forward surplus liquidity to be withdrawn using F-loan deposits with maturity determined by projections of structural liquidity.
• China Commerce Ministry (MOFCOM) spokesperson Gao Feng stated that it had maintained normal trade and economic communications with US. To study targeted measures to stabilize trade and logistics. Reiterated govt stance to keep economy within a reasonable range. Had no information on potential talks between Liu He and US Treasury Sec Yellen (**Reminder: Treasury Sec Yellen was said to be considering a trip to China in the coming months).
• Japan Cabinet Office (Govt) Aug Economic Report maintained its overall economic assessment of seeing further weakness in parts of the economy.

Currencies/Fixed Income

• USD was steady with focus on the virtual Jackson Hole symposium. The big question on markets is whether Fed Chair Powell would provide a clear communication on the shape and timing of tapering of asset purchases or wait until September to deliver a more substantive signal.
• EUR/USD trading at 1.1760 area while GBP/USD at 1.3740 ahead of the US morning.

Economic data

• (FI) Finland July Preliminary Retail Sales Volume Y/Y: 1.4% v 4.3% prior.
• (DE) Germany Sept GfK Consumer Confidence Index: -1.2 v -0.5e (18th straight negative reading).
• (DK) Denmark July Retail Sales M/M: -0.1% v -1.2% prior; Y/Y: 4.8% v 6.5% prior.
• (FR) France Aug Business Confidence: 110 v 112e; Manufacturing Confidence: 110 v 109e; Production Outlook Indicator: 16 v 20 prior; Own-Company Production Outlook: 23 v 19 prior.
• (SE) Sweden July PPI M/M: 2.7% v 1.5% prior; Y/Y: 13.5% v 9.6% prior.
• (SE) Sweden July Household Lending Y/Y: 6.3% v 6.2% prior.
• (SE) Sweden July Unemployment Rate: 8.0% v 10.3% prior; Unemployment Rate (seasonally adj): 8.4% v 9.2%e; Trend Unemployment Rate: 9.0% v 9.2% prior.
• (NG) Nigeria Q2 GDP Y/Y: 5.0% v 5.9%e.
• (EU) Euro Zone July M3 Money Supply Y/Y: 7.6% v 7.6%e.
• (IT) Italy Jun Industrial Sales M/M: +3.1% v -0.9% prior; Y/Y: 28.4% v 40.1% prior.
• (HK) Hong Kong July Trade Balance (HKD): -35.0B v -34.8Be; Exports Y/Y: 26.9% v 26.8%e ; Imports Y/Y: 26.1% v 26.9%e.

Fixed income issuance

• (IT) Italy Debt Agency (Tesoro) sold €2.75B vs. €2.25-2.75B indicated range in 0.00% Jan 2024 BTP Bond; Avg Yield: -0.29% v -0.29% prior; bid-to-cover: 1.51x v 1.37x prior.
• (IT) Italy Debt Agency (Tesoro) sold €1.0B vs. €0.75-1.0B indicated range in 0.65% May 2026 I/L Bonds (BTPei); Real Yield: -1.20% v -0.92% prior; bid-to-cover: 1.55x v 1.57x prior.

Looking ahead

• (AR) Argentina Aug Consumer Confidence Index: No est v 37.9 prior.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (ZA) South Africa July PPI M/M: 0.6%e v 0.8% prior; Y/Y: 7.1%e v 7.7% prior.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell combined HUF55B in 5-year, 10-year and 15-year bonds.
• 06:00 (CA) Canada Aug CFIB Business Barometer: No est v 69.4 prior.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (BR) Brazil Aug FGV Construction Costs M/M: 0.7%e v 1.2% prior.
• 07:00 (MX) Mexico July Unemployment Rate NSA (unadj): 4.1%e v 4.0% prior.
• 07:30 (EU) ECB July Minutes.
• 08:00 (PL) Poland Central Bank July Minutes (two decisions ago).
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Q2 Preliminary GDP Annualized (2nd reading) Q/Q: 6.7%e v 6.5% advance; Personal Consumption : 12.2%e v 11.8% advance.
• 08:30 (US) Q2 Preliminary GDP Price Index: 6.0%e v 6.0% advance; Core PCE Q/Q: 6.1%e v 6.1% advance.
• 08:30 (US) Initial Jobless Claims: 350Ke v 348K prior; Continuing Claims: 2.76Me v 2.820M prior.
• 08:30 (CL) Chile Central Bank Traders Survey (bi-monthly).
• 08:30 (US) Weekly USDA Net Export Sales.
• 09:00 (BR) Brazil July Total Formal Job Creation: +300.0Ke v +309.1K prior.
• 09:00 (RU) Russia Gold and Forex Reserve w/e Aug 20th: No est v $593.8B prior.
• 10:00 (MX) Mexico Central Bank (Banxico) Aug Minutes.
• 10:10 (FR) ECB’s Villeroy (France).
• 10:30 (US) Weekly EIA Natural Gas Inventories.
• 11:00 (US) Aug Kansas City Fed Manufacturing Activity Index: 25e v 30 prior.
• 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.
• 12:00 (CA) Canada to sell 30-year bonds.
• 13:00 (US) Treasury to sell 7-Year Notes.
• 18:00 (NZ) New Zealand Aug Consumer Confidence Index: No est v 113.1 prior.
• 19:00 (US) Fed’s Annual Jackson Hole Policy Retreat.
• 19:30 (JP) Japan Aug Tokyo CPI Y/Y: -0.3%e v -0.4% prior (revised from -0.1%); CPI (ex-fresh food) Y/Y: -0.1%e v -0.3% prior (revised from +0.1%); CPI (ex-fresh food/energy) Y/Y: -0.2%e v -0.4% prior (revised from 0.0%).
• 20:00 (US) Jackson Hole agenda published.
• 21:30 (CN) China July Industrial Profits Y/Y: No est v 20.0% prior.
• 21:30 (AU) Australia July Preliminary Retail Sales M/M: -2.5%e v -1.8% prior.
• 22:30 (JP) Japan to sell 3-Month Bills