EU Equity Markets Hold Onto Gains

Notes/Observations

• Rallying energy prices are stoking concerns about a challenging stagflation-like environment for markets (elevated price pressures and a slowing economic recovery).
• China Evergrande Group curbed risk appetite in Asian trading.

Asia

• New Zealand Q2 GDP Q/Q: 2.8% v 1.1%e; Y/Y: 17.4% v 16.1%e.
• Japan Aug Trade Balance: -¥635.4B v +¥6.5Be; Exports Y/Y: 26.2% v 34.1%e; Imports Y/Y: 44.7% v 40.0%e.
• Australia Aug Employment Change: -146.3K v -80.0Ke; Unemployment Rate: 4.5% v 5.0%e.
• China State Planner (NDRC) stated that it would continue to release Copper. Aluminium and Zinc from reserves.
• US, UK and Australia to establish a security partnership for the Indo-Pacific that would involve helping Australia acquire nuclear-powered submarines, as Chinese influence over the region grows.

Europe

• ECB’s Lane (Ireland, chief economist) stated that PEPP volume was not an indicator of ECB policy stance.

Americas

• House Of Representatives Ways & Means Committee voted to advance higher corporate rate tax plans to the House for a vote.
• President Biden to announce a new working group with Britain and Australia to share advanced technologies in a thinly veiled bid to counter China.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.67% at 467.02, FTSE +0.55% at 7,054.85, DAX +0.64% at 15,715.25, CAC-40 +0.89% at 6,642.04, IBEX-35 +0.82% at 8,706.50, FTSE MIB +1.19% at 26,069.00, SMI +0.46% at 12,039.90, S&P 500 Futures -0.05%].
• Market Focal Points/Key Themes: European indices open higher across the board and advanced further into the green as the session progressed; improved risk sentiment follows comments from ECB’s Lane that yield curve remains low; among the stectors leading to the upside are materials and industrials; while underperformers include utilities and telecom; travel and leisure subsector supported after Ryanair raises outlook; Continental spins off Vitesco; Thyssenkrupp sells AST to Arvedino; Siemens looking to sell logistics unit; Vivendi to raise stake in Lagardere; major earnings expected in the upcoming US session.

Equities

• Consumer discretionary: Ryanair [RYA.UK] +6% (raises traffic targets), Lagardere [MMB.FR] +16% (earnings), Superdry [SDRY.UK] +15% (earnings), Ashtead Group [AHT.UK] +2% (earnings), Eco Animal Health [EAH.UK] -14% (AGM update).
• Industrials: Thales [HO.FR] +1% (affirms outlook following Australia’s contract cancellation), Continetal [CON.DE] -12% (Vitesco spin-off).
• Utilities: Veolia Environment [VIE.FR] +2% (capital increase).

Speakers

• ECB’s Rehn (Finland) reiterated Council view that EU area growth was robust, but still needed policy support. EU region outlook weighed down by production bottlenecks. Reiterated that pickup in inflation seen as transitory as medium term outlook was dampened by slack and muted wage pressures. Rate hike was not in sight but would happen one day.
• Swiss SECO (Govt) Sept Economic Forecasts cut its 2021 GDP growth from 3.6% to 3.4% while raising the 2022 GDP growth from 3.3% to 3.6%. Raised 2021 CPI from 0.4% to 0.5% and also raised the 2022 CPI from 0.5% to 0.8%.
• Finland Central Bank raised 2021 GDP growth forecast from 2.9% to 3.5% while cutting the 2022 growth outlook from 3.0% to 2.8%.
• German DIW Institute cut the 2021 German GDP forecast from 3.2% to 2.1% and saw 2022 GDP growth at 4.9%.
• Poland Central Bank’s Kropiwnicki: Nov policy meeting will be important for rate outlook and added that his support for raising interest rates to depend on its potential impact on economic growth.
• Czech Central Bank Vice Gov Mora stated that saw the possibility of a 50bps hike at the Sept policy meeting.
• India Central Bank (RBI) Dep Gov Patra stated that inflation was moderating from its short spike back in May while core inflation remained sticky. Recent inflation data vindicated MPC stance with inflation was back within target band.
• China PBoC and Russia Central Bank said to be discussing deepening of bank cooperation and promote local-currency settlement.
• China Commerce Ministry (MOFCOM) stated that economic teams from both US-China have maintained communications.
• China Vice Premier Liu He: China to boost EVs consumption.
• Japan Cabinet Office (Govt) Sept Economic Report: cut overall economic assessment fir 1st time in 4 months to recovery continuing to improve from an extremely low base but pace was weakening (**Note: Prior overall view of assessment of seeing further weakness in parts of the economy).

Currencies/Fixed Income

• USD and JPY currencies were firmer on safe-haven flows. China Evergrande Group curbed risk appetite during the Asian trading following recent weak economic data out of China.
• EUR/USD back below the 1.18 level. Dealers noted that rallying energy prices were stoking concerns about a challenging stagflation-like environment in the region.
• GBP steady ahead of next week’s BOE meeting. Recent UK inflation data has been hot. Dealers believe that MPC would hold off ramping up the hawkish rhetoric in September citing considerable uncertainty about the outlook.

Economic data

• (NL) Netherlands Aug Unemployment Rate: 3.2% v 3.1% prior.
• (EU) EU27 Aug New Car Registrations: -19.1% v -23.2% prior.
• (DK) Denmark Aug PPI M/M: 1.7% v 1.6% prior; Y/Y: 12.8% v 11.8% prior.
• (ES) Spain Q2 Labour Costs Y/Y: 13.2% v 1.4% prior.
• (CZ) Czech Aug PPI Industrial M/M: 1.2% v 0.6%e; Y/Y: 9.3% v 8.7%e.
• (IT) Italy July Total Trade Balance: €8.8B v €5.7B prior; Trade Balance EU: €1.9B v €0.9B prior.
• (HK) Hong Kong Aug Unemployment Rate: 4.7% v 4.9%e.

Fixed income issuanc

• (ES) Spain Debt Agency (Tesoro) sold total €5.19B vs. €4.5-5.5B indicated range in 2024, 2026 and 2031 bonds.
• Sold €1.39B in 0.0% May 2024 SPGB bonds; Avg yield: -0.513% v -0.547% prior; Bid-to-cover: 1.91x v 2.27x prior (Aug 5th 2021).
• Sold €1.75B in 0.0% Jan 2026 SPGB bonds; Avg Yield: -0.371% v -0.441% prior; bid-to-cover: 2.55x v 1.57x prior (Aug 5th 2021).
• Sold €2.05B in 0.50% Oct 2031 SPGB bonds; Avg Yield: 0.326% v 0.309% prior; bid-to-cover: 1.41x v 1.69x prior (Sept 2nd 2021).
• (FR) France Debt Agency (AFT) sold total €8.998B vs. €8.0-9.0B indicated range in 2024, 2026, 2027 Bonds.
• Sold €3.138B in 2.25% May 2024 Oat; Avg Yield: -0.66% v +0.23% prior; Bid-to-cover: 3.21x v 2.48x prior (Jan 18th 2018).
• Sold €2.652B in 0.25% Nov 2026 Oat; Avg Yield: -0.48% v -0.40% prior; Bid-to-cover: 2.27x v 1.52x prior (Feb 20th 2021 with b/c lowest since 2008).
• Sold €3.208B in 0.00% Feb 2027 Oat; Avg Yield: -0.42% v -0.30% prior; bid-to-cover: 2.51x v 2.27x prior (Jun 17th 2021).
• (SE) Sweden sold total SEK1.25B vs. SEK1.25B indicated in 2027 and 2039 inflation-linked bonds.
• (IE) Ireland Debt Agency (NTMA) sold €750M vs. €750M indicated in 6-month bills; Avg Yield: -0.640% v -0.636% prior; Bid-to-cover: 2.40x v 2.40x prior.

Looking ahead

• (EG) Egypt Central Bank Interest Rate Decision.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.
• 05:50 (FR) France Debt Agency (AFT) to sell €1.5-2.0B in inflation-linked 2026, 2031 and 2040 bonds (Oatei).
• 06:00 (PT) Portugal Aug PPI M/M: No est v 1.5% prior; Y/Y: No est v 10.2% prior.
• 06:00 (RO Romania to sell RON500M in 4.15% 2030 Bonds.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (BR) Brazil Sept FGV Inflation IGP-10 M/M: -0.6%e v +1.2% prior.
• 08:00 (PL) Poland Aug CPI Core M/M: 0.2%e v 0.4% prior; Y/Y: 3.9%e v 3.7% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (EU) ECB chief Lagarde.
• 08:15 (CA) Canada Aug Annualized Housing Starts: 266.5Ke v 272.2K prior.
• 08:30 (US) Sept Philadelphia Fed Business Outlook: 19.0e v 19.4 prior.
• 08:30 (US) Aug Advance Retail Sales M/M: -0.7%e v -1.1% prior; Retail Sales (ex-auto) M/M: -0.1%e v -0.4% prior; Retail Sales (ex-auto/gas): 0.0%e v -0.7% prior; Retail Sales (control group): 0.0%e v -1.0% prior.
• 08:30 (US) Initial Jobless Claims: 323Ke v 310K prior; Continuing Claims: 2.74Me v 2.783M prior.
• 08:30 (CA) Canada July Wholesale Trade Sales M/M: -2.0%e v -0.8% prior.
• 08:30 (CA) Canada July Int’l Securities Transactions (CAD): No est v 19.7B prior.
• 08:30 (US) Weekly USDA Net Export Sales.
• 09:00 (RU) Russia Gold and Forex Reserve w/e Sept 10th: No est v $620.8B prior.
• 10:00 (US) July Business Inventories: 0.5%e v 0.8% prior.
• 10:30 (US) Weekly EIA Natural Gas Inventories.
• 12:00 (CA) Canada to sell 30-year bonds.
• 15:00 (AR) Argentina Q2 Current Account Balance: $2.0Be v $0.7B prior.
• 16:00 (US) July Total Net TIC Flows: No est v $31.5B prior; Net Long-term TIC Flows: No est v $110.9B prior.
• 18:30 (NZ) New Zealand Aug Manufacturing PMI: No est v 62.6 prior.
• 20:30 (SG) Singapore Aug Non-oil Domestic Exports M/M: +2.4%e v -0.9% prior; Y/Y: 8.5%e v 12.7% prior; Electronic Exports Y/Y: 8.0%e v 15.0% prior.
• 23:00 (CN) China to sell 30-year Upsize Bonds.
• 22:30 (JP) Japan to sell 3-Month Bills.