Notes/Observations
- Focus on ECB rate decision; likely to announce a reduction in the pace of its PEPP bond buying for Q4 but not expected to offer any signal on the future of its QE plan until later in the year.
Asia
- China Aug CPI Y/Y: 0.8% v 1.0%e; PPI Y/Y: 9.5% v 9.0%e.
- Bank of Korea (BOK) Quarterly Monetary Policy Report noted that raising policy interest rates would help trim household debt. To gradually adjust monetary policy amid inflationary pressures. Rate hike would reduce risks from imbalances.
- North Korea confirmed its held military parade to mark anniversary of country’s founding, unclear if it displayed new weapons or Leader Kim made a speech.
Coronavirus
- Japan Econ Min Nishimura confirmed govt was seeking to extend state of emergency restrictions in Tokyo and certain other areas through Sept 30th.
Europe
- UK Parliament approved PM Johnson’s health and social care tax hike.
- BOE Gov Bailey testified that he believed minimum conditions for a rate rise has been met, but not sufficient for one. Other MPC members said to be evenly split at their August meeting as to whether minimum conditions were met to raise rates.
- Northern Ireland DUP leader Donaldson said to plan on issuing a warning in an upcoming speech that party would break from govt coalition if their demands on the Northern Ireland protocol are not met.
Americas
- Fed Beige Book noted that growth downshifted slightly in early July through August.
- Fed’s Kaplan (non-voter; hawkish) noted that current Fed asset purchases were not well suited to current situation. No fundamental change to outlook by Sept end meeting, would support starting taper in Oct (announced in Sept).
- Fed’s Williams (FOMC voter): Want to see more progress on employment goal; Taper start may be appropriate this year, dependent on jobs.
Energy
- Weekly API Crude Oil Inventories: -2.9M v -4.0M prior.
Speakers/Fixed income/FX/Commodities/Erratum
Equities
- Indices [Stoxx600 -0.57% at 465.20, FTSE -1.30% at 7,003.43, DAX -0.48% at 15,535.05, CAC-40 -0.50% at 6,635.57, IBEX-35 -1.09% at 8,742.50, FTSE MIB -0.64% at 25,711.00, SMI -0.54% at 12,149.67, S&P 500 Futures -0.32%].
- Market Focal Points/Key Themes: European indices open lower across the board and stayed in the red as the session wore on; better performing sectors include real estate and utilities; sectors leading to the downside include materials and consumer discretionary; 888 acquires non-US assets of William Hill from Caesars’; EasyJet rejects takeover offer, announces rights issue; Assa Abloy acquires hardware & home improvement unit from Spectrum Brands; focus on ECB meeting and press conference later; earnings expected during the upcoming US session include Hovnanian and Academy Sports.
Equities
- Consumer discretionary: WM Morrison [MRW.UK] +1% (earnings), EasyJet [EZJ.UK] -10% (trading update; rejected offer; rights issue), Genus [GNS.UK] -10% (earnings).
- Financials: 888 Holdings [888.UK] -1% (acquires assets).
- Healthcare: Merck KGaA [MRK.DE] +1% (earnings).
Speakers
- Sweden Central Bank (Riksbank) Gov Ingves stated that recent data supported picture that economic recovery is proceeding. Reiterated view that inflation pick-up is transitory; saw no reason for CPI to jump to a higher, lasting level.
- German Fin Min Scholz stated that needed to watch inflation very carefully.
- Northern Ireland DUP leader Donaldson stated that urgent action was needed on Northern Irish Protocol. Withdrew support from some cooperation with Ireland under 1998 Belfast Agreement to protest Brexit protocol.
- Malaysia Central Bank (BNM) Policy statement reiterated stance that monetary policy to remain accommodative. Policy stance to remain data dependent. Easing containment measures, vaccination progress and expansion in global demand to support growth momentum in 2022 but risks to growth outlook remain tilted to downside.
- India Finance Ministry Monthly Economic Report (DEA) Domestic economy poised for a faster recovery and stronger growth.
Currencies/Fixed Income
- Focus on ECB rate decision. Expectations of a dovish taper with the central bank likely to announce a reduction in the pace of its PEPP bond buying but not expected to offer any signal on the future of its QE plan until later in the year. Dealers see ECB lowering its monthly purchases from an average of €80B to €60B. ECB to stress it would keep financing conditions as accommodative as possible.
- EUR/USD drifting higher towards 1.1830 in a quiet session thus far. The Euro could move higher on the taper with 1.20 level seen as key resistance.
- TRY currency (lira) was weak after Turkey Central Bank (CBRT) Gov Kavcioglu noted on Wed that it would give weight to the analysis of core inflation . Analysts note that CBRT thus shifted its policy focus to core inflation and spurring rate-cut speculation.
Economic data
- (DE) Germany July Current Account Balance: €17.6B v €18.0Be; Trade Balance: €18.1B v €14.6Be; Exports M/M: 0.5% v 0.1%e; Imports M/M: -3.8% v +0.1%e.
- (NO) Norway July GDP Overall M/M: 0.7% v 0.9% prior; GDP Mainland M/M: 0.4% v 0.7%e.
- (JP) Japan Aug Preliminary Machine Tool Orders Y/Y: 86.2% v 93.4% prior.
- (MY) Malaysia Central Bank (BNM) left the Overnight Policy Rate unchanged at 1.75% (as expected).
- (IT) Bank of Italy (BOI) Banks and Money Monthly Statistics: July Gross Non-performing Loans (NPLs): €48.4B v €48.5B prio.
- (ZA) South Africa Q2 Current Account Balance (ZAR): 343B v 334Be (record high surplus); Current Account to GDP Ratio: 5.6% v 6.7%e.
Fixed income Issuance
- (IN) India sold total INR328.7B vs. INR310B indicated in 2026, 2034, 2035 and 2050 bonds.
- (IT) Italy Debt Agency (Tesoro) sold €7.0B vs. €7.0B indicated in 12-month Bills; Avg Yield: -0.477% v -0.513% prior; Bid-to-cover: 1.42x v 1.27x prior.
- (IE) Ireland Debt Agency (NTMA) sold total €1.25B vs. €1.0-1.25B indicated range in 2031 and 2041 IGB Bonds.
Looking Ahead
- European Finance Ministers (Eurogroup) meeting.
- 05:25 (EU) Daily ECB Liquidity Stats.
- 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds.
- 06:00 (IE) Ireland Aug CPI M/M: No est v 0.4% prior; Y/Y: No est v 2.2% prior.
- 06:00 (IE) Ireland Aug CPI EU Harmonized M/M: No est v 0.4% prior; Y/Y: No est v 2.2% prior.
- 06:00 (PT) Portugal July Trade Balance: No est v -€1.5B prior.
- 06:00 (RO) Romania to sell RON700M in 12-month bills.
- 06:00 (RO) Romania to sell RON300M in 3.7% 2024 bonds.
- 06:45 (US) Daily Libor Fixing.
- 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to raise Key Rate by 50bps to 8.50%.
- 07:00 (ZA) South Africa July Manufacturing Production M/M: -3.7%e v -0.7% prior; Y/Y: 3.0%e v 12.5% prior.
- 07:00 (MX) Mexico Aug CPI M/M: 0.2%e v 0.6% prior; Y/Y: 5.6%e v 5.8% prior; CPI Core M/M: 0.4%e v 0.5% prior.
- 07:45 (EU) ECB Interest Rate Decision: Expected to leave Key Rates unchanged; Expected to leave Main 7-Day Refinancing Rate unchanged at 0.00%; Expected to leave Marginal Lending Facility unchanged at 0.25%; Expected to leave Deposit Facility Rate unchanged at -0.50%.
- 08:00 (BR) Brazil Aug IBGE Inflation IPCA M/M: 0.7%e v 1.0% prior; Y/Y: 9.5%e v 9.0% prior.
- 08:00 (UK) Daily Baltic Dry Bulk Index.
- 08:30 (US) Initial Jobless Claims: 335Ke v 340K prior; Continuing Claims: 2.73Me v 2.748M prior.
- 08:30 (UR) Ukraine Aug CPI M/M: -0.2%e v +0.1% prior; Y/Y: 10.3%e v 10.2% prior.
- 08:30 (EU) ECB chief Lagarde post rate decision press conference.
- 09:00 (RU) Russia Gold and Forex Reserve w/e Sept 3rd: No est v $615.6B prior.
- 10:30 (US) Weekly EIA Natural Gas Inventories.
- 11:00 (US) Weekly DOE Oil Inventories.
- 11:00 (US) Fed’s Daly.
- 13:00 (US) Fed’s Bowman.
- 13:00 (US) Treasury to sell 30-Year Notes.
- 14:00 (US) Fed’s Williams, Kaplan, Kashkari, Rosengren participate in virtual event.
- 18:45 (NZ) New Zealand July Net Migration: No est v 0.9K prior.
- 18:45 (NZ) New Zealand Aug Total Card Spending M/M: No est v 0.9% prior; Retail Card Spending M/M: No est v 0.6% prior.
- 19:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to raise Reference Rate by 50bps to 1.00%.
- 23:00 (CN) China to sell 50-year Upsize Bond.
- 23:30 (JP) Japan to sell 3-Month Bills.
