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Quiet Start To Week With Focus Remaining On Trade, Turkey And Upcoming Jackson Hole Symposium

Notes/Observations

  • Currency crisis in Turkey and trade talks between the US/China likely to remain in focus this week; Fed’s Jackson Hole symposium begins Thursday evening
  • Minutes from the recent Fed and ECB meetings will be released on Wednesday and Thursday Asia:
  • US and China reportedly plot roadmap to resolve trade dispute before President Trump-Pres Xi meeting in Nov
  • South Korea government said to plan to increase the 2019 budget by 9.7% to KRW470T

Europe:

  • ECB’s Weidmann (Germany): On course to normalize monetary policy and reiterates that process would be gradual
  • Germany Finance Ministry Monthly Report noted that the persistent debate about tariffs and the threat of a trade war was choking trade activity. Cited Turkey as a global economic risk
  • Moodys cuts Turkey sovereign rating one notch to Ba3 from Ba2; outlook negative
  • S&P cuts Turkey sovereign rating one notch to B+ from BB-; outlook stable
  • S&P affirmed Hungary sovereign rating at BBB-; outlook positive
  • Fitch affirmed Russia sovereign rating at BBB-; outlook Positive
  • ESM: Greece had successfully concluded its bailout program (as expected)
  • Italy expected to launch its infrastructure plan in Sept
  • Italy’s PM office’s Giorgetti. Hopes ECB quantitative easing will be extended
  • First ‘no-deal’ technical notices to be published on Thursday, Aug 26th

Americas:

  • White House Chief Economist Hassett: we are very close to trade deal with Mexico. Still a few sticking points in trade discussions
  • White House Counsel Don McGahn has cooperated extensively in Mueller Inquiry
  • US administration has rejected efforts by Turkey to link the release of US Pastor Brunson with relief for Turkish bank Halkbank which faces potential fines for violating US sanctions on Iran
  • Venezuela President Maduro announces massive 95% devaluation with new FX rate tied to Cryptocurrency
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Energy:

  • Senior Iranian diplomat said to have asked OPEC Sec Gen Barkindo to keep OPEC away from political agenda of some member

Economic Data:

  • (DE) Germany July PPI M/M: 0.2% v 0.2%e; Y/Y: 3.0% v 3.0%e
  • (SE) Sweden Q2 Industry Capacity: 90.9% v 90.3% prior
  • (TW) Taiwan July Export Orders Y/Y: 8.0% v 2.9%e
  • (PL) Poland July Sold Industrial Output M/M: -5.3% v -5.7%e; Y/Y: 10.3% v 10.0%e; Construction Output Y/Y: 18.7% v 22.3%e
  • (PL) Poland July PPI M/M: 0.1% v 0.1%e; Y/Y: 3.4% v 3.5%e
  • (CH) Swiss Total Sight Deposits w/e Aug 17th (CHF): 576.7B v 576.1B prior; Domestic Sight Deposits: 472.6B v 473.4B prior
  • (GR) Greece Jun Current Account: €0.2B v €0.2B prior
  • (PH) Philippines July Overall Balance of Payments (BOP): -$0.5B v -$1.2B prior
  • (TW) Taiwan Q2 Current Account: $17.8B v $19.4B prior
  • (EU) Euro Zone Jun Construction Output M/M: 0.2% v 0.3% prior; Y/Y: 2.6% v 2.0% prior

Fixed Income Issuance:

  • (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 3-month bills; Avg Yield: 0.68% v 0.71% prior; Bid-to-cover: 2.68x v 2.58x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +0.6% at 383.3, FTSE 0.6% at 7600, DAX +1.0% at 12338, CAC-40 +0.6% at 5379, IBEX-35 +0.6% at 9474, FTSE MIB +0.1% at 20438, SMI +0.3% at 9034 S&P 500 Futures +0.2%]
  • Market Focal Points/Key Themes: European Indices trade higher across the board tracking strong Asian Indices and US futures. Italian shares in focus after reports of the Government launching a potential €80B infrastructure plan in Sep to rebound Countries infrastructure. Atlantia shares trade almost 10% lower as the Government said to plan special decree to strip Autostrade concessions, while motorway operators SIAS and ASTM trade lower after talks of potential nationalization of Italian Motorways. Elsewhere G4S trades lower after the UK Gov temporarily takes over a G4S operated prison due to conditions. On the earnings front Mulberry is a niotable decliner following a profit warning, while NMC Health trades higher after an ipbeat trading statement. In the US PepsiCo announced the acquisition of SodaStream in a $3.2B deal. Looking ahead notable earners include Estee Lauder and Black Box Corp.

Movers

  • Consumer Discretionary G4S [GFS.UK] -1% (UK Gov takes over failing Birmingham Prison from G4S), Mulberry [MUL.UK] -20% (profit warning)
  • Industrials John Wood Group [WG.UK] +1.2% (Contract win), Subsea 7 [SUBC.NO] +2.6% (Contract win), Salini Impregilo [SAL.IT] +3.5% (Sells unit to Vinci), Atlantia -8% [Gov planning special decree to revoke Autostrade of concession)
  • Healthcare NMC Health [NMC.UK]+5% (Trading update)

Speakers

  • Italy Dep PM Salvini stated that could not confirm of plan to write AD-HOC law to revoke concessions in the country (aka nationalization of roads), have begun the process on revoking concession on Autostrade
  • Turkey President Erdogan reiterated Turkey has power and ability to overcome everything
  • Poland Fin Min Czerwinska reiterated view that saw 2018 GDP growth below 5% level
  • South Korea President Moon said to call for an aggressive fiscal policy and asked aides to prepare comprehensive steps for jobs
  • Indonesia Central Bank official Hendarsah: To maintain presence in market to maintain confidence (**Note: refers to dual intervention in FX and bond markets)

Currencies

  • FX markets appeared to be mired in the mid-August doldrums but the currency crisis in Turkey and trade talks between the US/China would likely to remain in focus this week. Also of interest was the Fed’s Jackson Hole symposium that starts on Thursday with Fed Chair Poweel speech on Friday.
  • EUR/USD was softer by 0.3% and holding above the 1.14 level. The Italian budget remained in focus with reports that Italy would launch a €30B infrastructure plan in Sept which would blow out EU budget-deficit rules. The 1.15 arae remained key resistance in the pair.
  • USD/Try was higher by over 1% after Friday’s sovereign downgrades by Moody’s Investors Service and S&P Global Ratings on Turkey. One analyst nnvisioned TRY currency (Lira) weakening towards 8.0 area before reaching the pain threshold that would likely compel Turkey to compromise on some of its strategic objectives.
  • The pending resumption of US-China trade talks prompted analysts to speculate whether US could pressure China to take measures to keep the yuan from falling further. The yuan has fallen about 7.5% in about 2 months versus the dollar. China PBoC did set its yuan reference rate a tad stronger in the Asian session today (6.8718 v 6.8894 prior)

Fixed Income

  • Bund Futures trades at 163.53 down 3 ticks retracing some of the move as European Indices trade higher. Resistance moves to 163.82 then 164. A downside break of 163.00 sees 162.69 initially.
  • Gilt futures trades at 123.64 down 3 ticks following the move in Treasuries. Continued support at 123.12, with a continued move higher targeting 123.93 then 124.00.
  • Monday ‘s liquidity report showed Friday’s excess liquidity fell from €1.898T to €1.872T. Use of the marginal lending facility was unchanged from €128M to €128M.
  • Corporate issuance saw high grade issuers raising $29.6B in the primary market last week.

Looking Ahead

  • (BR) Brazil Aug CNI Industrial Confidence: No est v 50.2 prior
  • (SA) Saudi Arabia Jun Oil Production: No est v 10.03M bpd prior – JODI
  • 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 3-month Bills
  • 06:00 (PL) Portugal July PPI M/M: No est v 0.6% prior; Y/Y: No est v 4.0% prior
  • 06:00 (DE) German Bundesbank Monthly Report
  • 06:45 (US) Daily Libor Fixing
  • 07:25 (BR) Brazil Central Bank Weekly Economists Survey
  • 07:30 (CL) Chile Q2 GDP Q/Q: 0.7%e v 1.2% prior; Y/Y: 5.2%e v 4.2% prior
  • 07:30 (CL) Chile Q2 Current Account Balance: No est v -$0.3B prior
  • 08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
  • 08:05 (UK) Baltic Dry Bulk Index
  • 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming auctions
  • 08:55 (FR) France Debt Agency (AFT) to sell combined €3.8-5.0B in 3-month, 6-month and 12-month BTF Bills
  • 09:30 (NZ) Fonterra Global Dairy Trade Auction
  • 09:30 (EU) ECB announces Covered-Bond Purchases
  • 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
  • 11:00 (US) Fed’s Bostic (dove, voter) in TN
  • 11:30 (US) Treasury to sell 3-month and 6-month Bills
  • 16:00 (US) Weekly Crop Progress Report
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