Euro Strengthens As Market Digests Recent ECB Action

Notes/Observations

• European markets broadly higher following gains in Asia.
• Hang Seng Index outperforms as internet and gaming stock rebound.

Asia

• (JP) Japan Minister Kono officially declares candidacy for LDP Leadership (as expected).
• Toyota Cuts FY21 Production guidance to 9.0M units (prior 9.3M) citing coronavirus impact in Southeast Asia and parts shortages.
• (CN) China Aug Wholesale vehicle sales -17.8% y/y – CAAM.
• (AU) Australia Aug Port Hedland Iron Ore Exports 44.4Mt v 44.3Mt prior.
• (CN) China said to have issued a draft ruling that would limit taller building in small cities.
• (JP) Japan Minister Kono: confirms run for the LDP leadership race; Not considering raising sales tax, but not cutting it, either.
• (HK) Hong Kong Monetary Authority (HKMA): Confirms launch of Wealth Connect, to conduct exams on northbound business.
• (CN) China Foreign Ministry spokesperson: President Xi and US Pres Biden agreed to maintain frequent contact by various means.
• (CN) China regulators reportedly met several platform companies, including Meituan, Didi, Tencent over labor issues – press.
• (KR) Japan, US and South Korea said to hold North Korea talks on Sept 14th in Tokyo – press.

Coronavirus

• (SG) Singapore Health Ministry: to start COVID booster shots from Sept 14th; Not reversing restrictions for now.

Europe

• (FR) CAC 40 index to include Eurofins Scientific; Atos to be excluded; effective Sept 17th.
• (NO) Norway’s OBX index to include Frontline, Golden Ocean, Kahoot! and MPC – press.
• (IT) Italy said to sell off Alitalia assets to avoid potential sanctions – Press.
• (DE) German ZDF Poll on Sept elections: SPD: 25% (no change); Merkel CDU/CSU bloc: 22% (no change).
• (IE) Ireland PM Martin: Sees potential to solve NI protocol; window in the next month to solve Brexit.
• (UA) Ukraine President Zelensky: there is a possibility of a war with Russia; Interested in a substantive meeting with Russian Pres Putin.

Americas

• (US) NHC: Hurricane Larry heading towards Newfoundland.
• (CN) China Commerce Ministry (MOFCOM): to collect deposits on certain chemicals (monoalkyl ethers of ethylene glycol and propylene glycol) imported from the US.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.31% at 469.04, FTSE +0.39% at 7,051.91, DAX +0.43% at 15,690.95, CAC-40 +0.54% at 6,721.03, IBEX-35 -0.13% at 8,789.50, FTSE MIB +0.29% at 25,986.00, SMI +0.21% at 12,141.58 , S&P 500 Futures +0.45%].
• Market Focal Points/Key Themes: European indices open generally higher but divided as the session wore on with periphery indices underperforming; general improvement in risk sentiment attributed to call between Biden and Xi; sectors leading to the upside include consumer discretionary and technology; lagging sectors include real estate and telecom; automotive subsector under pressure following outlook cut by Toyota; Atos to be replaced by Eurofins on CAC40; reportedly Icade looking to spin off it’s healthcare real estate unit; Holcim to divest Brazil unit; Sampo divests a portion of it’s Nordea holdings; focus on continuing Eurogroup meeting through the day; earnings expected in the upcoming US session include Oracle and Kroger.

Equities

• Consumer discretionary: LVMH [MC.FR] +2% (analyst action), Cineworld Group [CINE.UK] -1% (to pay $170M to holders).
• Consumer staples: Nestle [NESN.CH] -1% (sees higher input cost inflation next year).
• Technology: Atos [ATO.FR] -2% (CAC 40 exclusion).
• Materials: FLSmidth [FLS.DK] +4% (completes placing).

Speakers

• (AT) ECB’s Holzmann (Austria): Reiterates PEPP must expire next year [2022] with recovery.
• (CN) China Cyberspace official Zeliang: China should better regulate AI industry.
• (EU) Various EU Ministers commenting at Eurogroup meeting.
• Belgium Fin Min: debt rate in Belgium is one of the concerns we have.
• Portuguese Fin Min: we need to focus on recovery from crisis this year and next.
• Spanish Fin Min: we hope to start reducing Spanish debt already from 2021.
• EU Economic Commissioner Gentiloni (Italy): we are ending summer with a positive economic outlook.
• EU’s Dombrovskis (trade chief): we will need a debt reduction path that is realistic for EU countries; intends to restart talks on fiscal rules.
• France Fin Min Le Maire: need quickest possible recovery plans implementation; need start of tailor made support for hard hit sectors; Will reduce public debt and deficit next year in France.

Currencies/Fixed Income

• USD weaker amid flows away from safe havens, with risk sentiment getting a boost following Xi-Biden talks; USD/CHY drifting lower.
• EUR/USD supported following results of ECB meeting, weaker dollar, higher yields.
• GBP/USD hits weekly high on improved risk outlook.

Economic data

• (NL) Netherlands July Trade Balance: €5.8B v €6.7B prior.
• (NL) Netherlands July Manufacturing Production M/M: 1.3% v 4.4% prior; Y/Y: 14.1% v 17.9% prior.
• (FI) Finland July Industrial Production M/M: +1.0% v -1.8% prior; Y/Y: 5.0% v 4.1% prior.
• (UK) July Monthly GDP M/M: 0.1% v 0.5%e; GDP 3M/3M: 3.6%e v 3.8%e.
• (DE) Germany Aug Final CPI M/M: 0.0% v 0.0% prelim; Y/Y: 3.9%e v 3.9% prelim.
• (UK) July Visible Trade Balance: -£12.7B v -£11.0Be; Overall Trade Balance: -£3.1B v -£1.6Be; Trade Balance Non EU: -£7.0B v -£7.1B prior.
• (NO) Norway Aug CPI M/M: 0.0% v -0.2%e; Y/Y: 3.4% v 3.2%e.
• (DK) Denmark Aug CPI M/M: -0.2% v +0.7% prior; Y/Y: 1.8% v 1.9%e.
• (UK) July Index of Services M/M: 0.0% v 0.6%e; 3M/3M: 4.5% v 4.7%e.
• (UK) July Industrial Production M/M: +1.2%e v 0.4%e; Y/Y: 3.8%e v 3.0%e.
• (RO) Romania Aug CPI M/M: 0.2% v 0.3%e; Y/Y: 5.3% v 5.2%e (4th month above target range).
• (FR) France July Manufacturing Production M/M: 0.3% v 0.4%e; Y/Y: 4.0% est v 4.2%.
• (ES) Spain July Industrial Production M/M: -1.1% v +0.5%e; Y/Y: 3.4% v 5.9%e.
• (CZ) Czech Aug CPI M/M: 0.7% v 0.2%e; Y/Y: 4.1% v 3.6%e.
• (TR) Turkey July Unemployment Rate: 12.0% v 10.6% prior.
• (AT) Austria July Industrial Production M/M: -0.3% v -1.8% prior; Y/Y: 9.7% v 11.3% prior.
• (CZ) Czech July Export Price Index Y/Y: 7.7% v 3.4% prior; Import Price Index Y/Y: 7.9% v 5.1% prior.
• (CN) Weekly Shanghai copper inventories (SHFE): 61.8K v 69.3K tons prior.
• (RU) Russia Narrow Money Supply w/e Sept 3rd (RUB): 14.35T v 14.24T prior.
• (IT) Italy July Industrial Production M/M: +0.8% v -0.1%e; Y/Y: 7.0% v 5.2%e.
• (CN) China Aug Aggregate Financing (CNY): 2.96T v 2.75Te.
• (CN) China Aug M2 Money Supply Y/Y: 8.2% v 8.4%e.
• (CN) China Aug New Yuan Loans (CNY): 1.220T v 1.325Te.

Fixed income Issuance

• (EU) European Investment Bank (EIB) to sell EUR-denominated Nov 2030 bond; guidance seen -12bps to mid-swaps.
• ABN.NL To sell EUR-denominated 20-year notes; guidance seen +10bps to mid-swaps.
• Prices 7-yr $500M Eurobond issue with a 2.6% coupon.

Looking Ahead

• 06:00 (IE) Ireland July Industrial Production M/M: No est v -4.4% prior; Y/Y: No est v 12.0% prior.
• 06:00 (PT) Portugal Aug Final CPI M/M: No est v -0.2% prelim; Y/Y: No est v 1.5% prelim.
• 06:00 (PT) Portugal Aug Final CPI Harmonized M/M: No est v -0.1% prelim; Y/Y: No est v 1.3% prelim.
• 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to raise Key 1-Week Auction Rate by 50bps to 7.00%.
• 07:00 (MX) Mexico July Industrial Production M/M: +0.2%e v -0.5% prior; Y/Y: 7.2%e v 13.5% prior; Manufacturing Production Y/Y: 5.4%e v 16.3% prior.
• 07:30 (CL) Chile Central Bank Economist Survey.
• 07:30 (IN) India Weekly Forex Reserve w/e Sept 3rd: No est v $633.6B prior.
• 08:00 (IN) India July Industrial Production Y/Y: 10.0%e v 13.6% prior.
• 08:00 (IS) Iceland Aug Unemployment Rate: No est v 6.1% prior.
• 08:00 (BR) Brazil July Retail Sales M/M: +0.5%e v -1.7% prior; Y/Y: 3.0%e v 6.3% prior.
• 08:00 (BR) Brazil July Broad Retail Sales M/M: -0.6%e v -2.3% prior; Y/Y: 4.0%e v 11.5% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Aug PPI Final Demand M/M: 0.6%e v 1.0% prior; Y/Y: 8.2%e v 7.8% prior.
• 08:30 (US) Aug PPI (ex-food/energy) M/M: 0.6%e v 1.0% prior; Y/Y: 6.6%e v 6.2% prior.
• 08:30 (US) Aug PPI (ex-food/energy/trade) M/M: 0.6%e v 0.9% prior; Y/Y: 6.3%e v 6.1% prior.
• 08:30 (CA) Canada Aug Net Change in Employment: +66.8Ke v +94.0K prior; Unemployment Rate: 7.3%e v 7.5% prior; Full Time Employment Change: No est v.
• +83.0K prior; Part Time Employment Change: No est v +11.0K prior; Participation Rate: 65.3%e v 65.2% prior; Hourly Wage Rate: No est v 0.6% prior.
• 08:30 (CA) Canada Q2 Capacity Utilization Rate: 81.3%e v 81.7% prior.
• 08:30 (US) Weekly USDA Net Export Sales.
• 09:00 (RU) Russia July Trade Balance: $17.7Be v $18.3B prior; Exports: $45.0Be v $43.9B prior; Imports: $26.5Be v 25.6B prior.
• 10:00 (US) July Final Wholesale Inventories M/M: 0.6%e v 0.6% prior; Wholesale Trade Sales M/M: No est v 2.0% prior.
• 12:00 (RU) Russia Q2 Preliminary GDP (2nd reading) Y/Y: 10.3%et v 10.3% advance.
• 13:00 (US) Weekly Baker Hughes Rig Count.

Speakers/events

• Eurogroup meeting.
• 05:30 (EU) ECB chief Lagarde at Eurogroup meeting.
• 06:10 (NL) ECB’s Elderson (Netherlands, SSM member).
• 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision.
• 11:00 (EU) Potential sovereign ratings after European close: S&P on Luxembourg, Norway, Austria, Malta and Portugal.