BBA Loans hit an 18-month low

Notes/Observations

- Summer markets and upcoming Fed Chair Yellen speech keeping participation at a minimum; 10-year Notes in tightest trading range in a decade

- UK July BBA Loans hit 18-month low (37.7K vs. 38.0Ke)

Overnight

Asia:

- (CN) PBOC to inject CNY90B in 7-day reverse repos and CNY50B in 14-day reverse repos (**Note: 1st time PBoC injected liquidity via 14-day instrument since Feb. recent operations had been only using 7-day reverse repos)

- (NZ) New Zealand trade balance registers its 1st deficit in 7 months (-N$433M v -N$325Me)

- North Korea reportedly fires submarine-launched ballistic missile

Energy:

- (US) Weekly API Oil Inventories: Crude: +4.5M v -1M prior; largest build since Apr

Economic data

- (DE) Germany Q2 Final GDP Q/Q: 0.4% v 0.4%e; Y/Y: 1.8% v 1.8%e; GDP NSA Y/Y: 1.3% v 1.3%e

- (CZ) Czech Aug Business Confidence: 14.5 v 12.9 prior; Consumer Confidence: 2.0 v 0.0 prior

- (ZA) South Africa July CPI M/M: 0.8% v 0.9%e; Y/Y: 6.0% v 6.1%e (annual reading moves back within target)

- (PL) Poland July Unemployment Rate: 8.6% v 8.6%e

- (UK) July BBA Loans for House Purchase (miss): 37.7K v 38.0Ke (lowest since Jan 2015)

- Iceland Central Bank cuts rates for 1st time in over 18 months-

**Fixed Income Issuance:

- (IN) India sold total INR140B vs. INR140B indicated in 3-month and 6-month bills

- (EU) ECB allotted $1.3B in 7-day USD Liquidity Tender at fixed 0.90% vs. $10M prior

- (SE) Sweden sold total SEK3.5B vs. SEK3.5B indicated in 2022 and 2032 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Index snapshot (as of 10:00 GMT)**

Indices [Stoxx50 +0.5% at 3,009, FTSE -0.1% at 6,865, DAX +0.3% at 10,627, CAC-40 +0.6% at 4,446, IBEX-35 +0.7% at 8,640, FTSE MIB +0.8% at 16,918, SMI +0.2% at 8,219, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European equity indices are trading mixed across the board as market participants remain cautious ahead of Fed Chair Janet Yellens speech on Friday; Commodity and mining, energy stocks underperforming, adding weight to the FTSE 100 on the back of lower oil prices; Homebuilder stocks once again trading notably higher; WPP leading the gains in the index after releasing H1 results; Financial stocks leading the gains in the Eurostoxx with the Italian peripheral lenders leading the sector; upcoming scheduled US earnings (pre-market) include Express, KLX, Royal Bank of Canada, and ReneSola.

Equities (as of 09:50 GMT)

- Consumer Discretionary: [Paddy Power Betfair PPB.UK -0.2% (H1 results), WH Smith SMWH.UK +1.3% (trading update), WPP WPP.UK +5.8% (H1 results)]

- Energy: [Verbund VER.AT +0.7% (raises outlook)]

- Healthcare: [AstraZeneca AZN.UK -0.7% (To sell Small Molecule Anti-Infective Business to Pfizer for upfront payment of $550M plus deferred payment of $175M), Lundbeck LUN.DK +3.4% (Q2 results, raises outlook)]

- Industrials: [Carillion CLLN.UK -0.6% (H1 results, names new group finance director), Costain Group COST.UK +3.7% (H1 results), Thales HO.FR -1.1% (Reportedly shipbuilder DCNS hit by data leak impacting submarine contract in India)]

- Materials: [Glencore GLEN.UK -4.3% (H1 results), Svenska Cellulosa SCAB.SE +10.3% (Plans to decide on a split of the company into two listed companies)]

Speakers

- South Africa Central Bank (SARB) Gov Kganyago stated that he saw Q2 GDP improving q/q but the country to lose jobs in 2016. Reiterated view that risk of higher wages reduced the number of jobs. Reforms would create space for monetary policy (**Reminder on Jun 8th South Afirca Q1 GDP data came in worse than expected (QoQ -1.2% v -0.1%e and YoY: -0.2% v -0.1%e)). Later he noted Inflation seemed to have settled in upper end of target; Recent ZAR currency strength and softer food prices to help keep CPI in check

- Czech Central Bank announced systemic risk buffer change for key banks where buffer rate for Czech unit of Societe Generale raised from 2.5% to 3.0% as of Jan. 2017 and buffer rate for Czech unit of UniCredit from 1.0% to 2.0%

- Turkey President Erdogan reiterated view that Central Bank rate cuts have not been enough (**Reminder: On Aug 23rd Turkey Central Bank (CBRT) again narrowed its rate corridor for the 6th straight month (Left the Benchmark Repurchase Rate unchanged at 7.50% while cutting Overnight Lending Rate by 25bps to 8.50%)

- Norway Q3 Oil Investment Survey: Oil companies saw 2016 oil and gas spending at NOK163.5B vs. NOK165.9B prior. Exploration spending seen at NOK23.1B v NOK22.3B q/q

- India Finance Ministry official: Cabinet Secretary to finalize govt nominees on MPC; unlikely to take shape before next RBI meeting on Oct 4th

- Japan Cabinet Office (Govt) Aug Monthly Report maintained its overall economic assessment that economy remained on a moderate recovery path with weakness seen recently

Currencies

- FX markets remained quiet in typical summertime doldrums as participant were reluctant to place fresh positions ahead of Fed Chair Yellen's keynote address on Friday

- The quiet time had dealers ponder how the BoJ would deal with a strengthening yen currency as USD/JPY pair held just above parity.

- USD/ZAR pair saw ZAR currency (Rand) softer by over 1% to trade above 14.13 following reports that South Africa police unit summoned the Finance Minister Gordhan

**Fixed Income:

- Bund futures trade at 167.65 down 2 ticks consolidating at the the top of the range as volumes remain light ahead of Fed Chair Janet Yellen's speech at the Jackson Hole conference on Friday.. A move higher above targets 167.84-86 with a break above targeting resistance at 168.02-06 followed by a run to 168.86 post brexit highs. Downside continues to test range low at 166.65 with a move below testing 166.36/38 base.

- Gilt futures trade at 132.33 down 20 ticks recovering from 132.54 high. Analysts continue to eye a break of 131.65 support targeting 131.28 then 130.98. A move higher targets 132.72 yesterday high followed by 132.97 contract high. Short Sterling futures trade flat to down 1bp with Jun17Jun18 trading 1/2bp.

- Wednesdays excess liquidity report showed Tuesday's excess liquidity rising to €991.8B a rise of €6.9B from €984.9B prior. This was primarily due to AFs and MonPol portfolios falling to negative €582.8. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €0M from a prior €15M.

- Corporate issuance was light once again with just $2.2B coming to market via 2 issuers. Issuance is expected to remain light until September.

Looking Ahead

- (AR) Argentina July Trade Balance: No est v $0.1B prior

- 05:30 (DE) Germany to sell €4.0B in 0% Oct 2021 BOBL

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia to sell Bonds

- 07:00 (US) MBA Mortgage Applications w/e Aug 19th: No est v -4.0% prior

- 07:00 (BR) Brazil Aug FGV Consumer Confidence: No est v 76.7 prior

- 07:30 (CL) Chile Central Bank's Traders Survey

- 08:00 (CL) Chile July PPI M/M: No est v -1.0% prior

- 08:00 (BR) Brazil Aug IBGE Inflation IPCA-15 M/M: 0.5%e v 0.5% prior; Y/Y: 9.0%e v 8.9% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (BR) Brazil July Total Federal Debt (BRL): No est v 2.959T prior

- 09:00 (US) Jun FHFA House Price Index M/M: 0.3%e v 0.2% prior; Q/Q: No est v 1.3% prior

- 09:00 (BE) Belgium Aug Business Confidence: 0.8e v 1.0 prior

- 09:45 (UK) BOE to buy £1.17B in APF Gilt purchase operation

- 10:00 (US) July Existing Home Sales: 5.51Me v 5.57M prior

- 10:30 (US) Weekly DOE Crude Oil Inventories

- 12:00 (FR) France July Net Change in Jobseekers: -20.5Ke v +5.4K prior; Total Jobseekers: 3.505Me v 3.526M prior

- 13:00 (US) Treasury to sell $34B in new 5-year note

- 19:50 (JP) Japan July PPI Services Y/Y: No est v 0.2% prior

- 21:00 (CN) China July Swift Global Payments: No est v 1.7% prior

- 21:00 (PH) Philippines Jun Trade Balance: -$1.9Be v -$2.0B prior, Imports: No est v $6.7B prior, Y/Y: 14.7%e v 39.3% prior

- 21:30 (AU) Australia Q2 Private Capital Expenditure (CAPEX): No est v -5.2% prior

- 23:00 (KR) South Korea Q2 Household Credit: No est v 11.4% prior