Markets continued to monitor possible responses of the UN and US to the Syrian government

Notes/Observations

- Markets continued to monitor possible responses of the UN and US to the Syrian government's use of chemical weapons
- West increases rhetoric against Syria after "very little doubt" that Syria used a chemical weapon against civilians
- Greece's Fin Min Stournaras confirmed that Greece will have a financing gap of about €10B for 2014/15; will test the bond markets in H2 of 2014
-Italy: PDL (Berlusconi's party) Bondi: PDL have agreed to withdraw from govt if the PD vote to expel Berlusconi from the senate next
- IMF's Lagarde: Unwind of unconventional monetary policies is likely to take longer than many think, there should not be a rush to exit 

Economic Data

- (TH) Thailand Customs Trade Balance: -$2.3B v -$2.1Be; Exports Y/Y: -1.5% v +1.0%e; Imports Y/Y: 1.1% v 1.8%e
- (SG) Singapore July Industrial Production M/M: -1.9% v 0.0%e; Y/Y: 2.7% v 1.8%e
- (FI) Finland July PPI M/M: -0.1% v -0.1% prior; Y/Y: 0.0% v 0.2% prior
- (CH) SNB Sight Deposits for Week Ended Aug 23rd: No est v 320.8B prior
- (CZ) Czech Aug Business Confidence: 1.8 v 0.9 prior; Consumer Confidence Index: -17.0 v -20.5 prior; Composite: 2.0 v -3.4
- (ES) Spain July PPI M/M: 0.5% v 0.0% prior; Y/Y: 0.8 v 1.3% prior
- (EU) ECB €15M borrowed in overnight loan facility vs. €7M prior; €87.2B parked in deposit facility vs. €86.5B prior - Daily Eurosystem Liquidity Conditions
- (SE) Sweden July PPI M/M: 0.9% v 0.3%e; Y/Y: -2.8% v -3.3%e
- (PL) Poland July Retail Sales M/M: 3.8% v 2.8%e; Y/Y: 4.3% v 3.2%e
- (PL) Poland July Unemployment Rate: 13.1% v 13.1%e
- (RO) Romania July M2 Money Supply Y/Y: 2.1% v 5.1% prior
- (TW) Taiwan July M2 Money Supply Y/Y: 5.4% v 4.8% prior; M1 Money Supply Y/Y: 8.6% v 7.9% prior 

Fixed Income:

- (DE) Germany sold €2.42B in 12-month BUBILL Bills; Avg Yield: 0.0970% v 0.0513% prior; Bid-to-cover: 1.9x v 1.9x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Indices: [Eurostoxx50 -0.7%, FTSE 100 closed, DAX -0.20% at 8,401, CAC-40 -0.50% at 4,047, IBEX-35 -0.50% at 8,641, FTSE MIB -1.7% at 17,043, SMI flat at 8,009, S&P 500 Futures flat at 1,660]

Market Focal Points: Mixed trading for emerging markets, Italian banks weaker amid political concerns, Upcoming US July Durable Goods data

By Sector

- Financials [Italian banks are broadly lower amid polticial concerns and wider peripheral debt spreads (UniCredit UCG.IT -3%, Intesa ISP.IT -2.7%), ING INGA.NL -1.5% (asset sale)]
-Telecom [KPN KPN.NL +3%, Telefonica Deutschland O2D.DE +3.5% (Telefoncia Deutschland revised offer for E-Plus)
- Industrials [Fiat Industrial FI.IT -2% (new CFO)]
- Healthcare [Sanofi SAN.FR +1% (data presentation)]
- Eurostoxx50 sectors [Industrials -1%, Utilities -0.8%, Energy -0.70%, Basic Materials -0.60%, Financials -0.5%, Consumer-Cyclical -0.30%, Technology -0.20%, Consumer Non-Cyclical -0.20%]

Speakers:

- Syria President Assad: Western statements on chemical weapons are illogical and politically motivated
- France Foreign Min Fabius: No decision has been made on Syria whether to take military action but all options are open; political solution needed
- Turkey Foreign Min: Would join any coalition against Syria; even if consensus is not achieved at UN Security Council
- UK Foreign Min Hague: Will not rule anything in or out; UK and US in strong agreement that a strong response is needed
- Israeli Intelligence Min Stainitz: Assad crossed the 'international red line'; Israel will not interfer in Syria but will act to defend itself as necessary
- German Bundesbank Gov Weidmann also reiterated criticism of OMT bond buying program; ECB best contribution to crisis is to focus on its mandate to preserve price stability
- ECB's Liikanen: Market situation has eased significantly from last summer; sees uncertain positive signals for Euro Area . Earlier he noted that he did not see change in policy stance; forward guidance was conditional
- China may start new round of CNY1T investment from H2 which would boost direct financing, expand local govt bonds and corporate debt and ask for credit support from policy banks

Currencies/Fixed Income:

- Summer doldrums hit the FX markets with UK out for a banking holiday.
- Markets continued to monitor possible responses of the UN and US to the Syrian government's use of chemical weapons
The USD was little changed against the major pairs. EUR/USD steady at 1.3370 while USD/JPY hovered at 95.50 area in a quiet session

Political/In the Papers:

- Jackson Hole takeaways : The main topic at the summit was how markets will deal with the eventual exit from the Fed's easy policy. Mexico Central Bank's Carstens noted that the exit from quantitative easing needs more predictability and that the capital flow reversal in emerging markets could become larger. Bank of England's Bean said that markets should not expect all central banks to remove stimulus measures at the same rate and that the recent volatility was a reminder that the exit from stimulus may not be smooth
- (GR) Greece's Fin Min Stournaras reiterated that Greece will test the bond markets in H2 of 2014 - German Press; Confirmed that Greece will have a financing gap of about €10B for 2014/15.
- (GR) Greece Govt spokesperson Kedikoglou: Greece's Financing gap to be smaller than forecasted - Financial press
- (GR) Eurogroup head Dijsselbloem has come under fire after saying Greece would need another package of aid; Opposition asking how the Netherlands has extra money for Greece but Dutch taxpayers are being asked to make more sacrifices at home - Greek press
- (GR) German Fin Min Schaeuble: Greece should help (the political contention) by stating clearly that it is not in favor of the 3rd package mentioned last week and will look for other ways to fund financing gap than loans from ESM - Greek press; Anticipated additional funding needs has become a large issue ahead of Germany's elections.
- (IT) Italy's PM Letta is expected to hold a cabinet meeting on Wed, Aug 28th - FT; The cabinet meeting is expected to deal with the changes to the property tax; In a related matter, over the weekend Five Star Leader Grillo called for an immediate return to elections.
- (UK) BoE's Bean: the rise in short dated Gilt yields since BOE announced forward guidance reflects the improvement in the economy - Jackson Hole symposium;

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)

- (EU) EFSF sends proposal to banks for upcoming transaction
- 06:00 (IL) Israel to sell Bonds
- 06:00 (RO) Romania to sell Bills
- 06:30 (US) Daily Libor Fixing
- 07:30 (BR) Brazil Central Bank Weekly Economists Survey
- 08:00 (ES) Spain Debt Agency (Tesoro) to sell combined € in 3-Month and 9-Month Bills
- 08:30 (US) July Durable Goods Orders: -4.0%e v 3.9% prior (revised from 4.2%); Durables Ex Transportation: +0.5%e v -0.1% prior (revised from 0.0%); Capital Goods Orders Non-defense Ex Aircraft: 0.5%e v 0.9% prior (revised from 0.70%); Capital Goods Shipments Non-defense Ex Aircraft: +0.3%e v -0.9% prior; Durables Ex-Defense: No est v +3.0% prior
- 08:50 (FR) France Debt Agency (AFT) to sell combined €7.6B in 3-month, 6-month, and 12-month bills
- 09:00 (MX) Mexico July Preliminary Trade Balance: -$480Me v +$856.4M prior
- 09:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender at fixed 0.50%
- 09:30 (EU) ECB announces prior settlements in SMP program to offset bond purchases
- 10:30 (IL) Israel Central Bank Interest Rate Decision: Expected to leave the Base Rate unchanged at 1.25%
- 10:30 (US) Aug Dallas Fed Manufacturing. Activity: 3.9e v 4.4 prior
- (DE) German SPD chief and candidate Steinbrck campaign event in Esslingen
- 11:00 (DE) German Chancellor Merkel holds Campaign Rally in Ilmenau
- 11:00 (US) Fed to purchase $1.25-1.75B in Notes
- 11:30 (US) Treasury to sell combined $55B in 3-Month and 6-Month Bills
- 13:00 (DE) German Chancellor Merkel holds Campaign Rally in Zwickau
- 13:30 (BR) Brazil Treasury releases July Federal Debt Data