Risk appetite finds its groove again

Notes/Observations

- Global stock markets bounce back aided by dovish central bank comments helping to pushed back rate hike expectations for US and UK

- The recent market turmoil has raised speculation that perhaps ECB could expand its QE bond buying program

- Fed's symposium in Jackson Hole begins today; focus will be on Vice Chair Fischer speech on Sat

- Euro Zone M3 Money supply data beats expectations

Economic data

- (DE) Germany July Import Price Index (miss) M/M: -0.7% v -0.3%e; Y/Y: -1.7% v -1.4%e

- (UK) Aug Nationwide House Prices M/M: 0.3% v 0.4%e; Y/Y: 3.2% v 3.1%e

- (FI) Finland Aug Consumer Confidence Index: 8.3 v 6.9 prior; Business Confidence: -13 v -9 prior

- (FR) France Aug Business Confidence (beats): 100 v 99e (4-year high); Manufacturing Confidence: 103 v 102e

- (ES) Spain Q2 Final GDP Q/Q: 1.0% v 1.0%e; Y/Y: 3.1% v 3.1%e

- (SE) Sweden July Household Lending Y/Y: 7.1% v 7.0%e

- (EU) Euro Zone July M3 Money Supply (beat) Y/Y: 5.3% v 4.9%e; M3 3-month average: 5.1% v 5.0%e

Fixed Income Issuance:

- (IT) Italy Debt Agency (Tesoro) sold € vs. €6.75B in 6-month Bills; Avg Yield: 0.007% v 0.007% prior; Bid-to-cover: 1.54x v 1.79x

- (SE) Sweden sold total SEK1.0B in I/L 2019 and 2025 Bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +3.1%, FTSE +2.1% at 6,105, DAX +3.3% at 10,324, CAC-40 +3.0% at 4,636, IBEX-35 +2.7% at 10,249, FTSE MIB +2.3% at 21,973, SMI +2.6% at 8,771, S&P 500 Futures +1.3% at 1,93

- Market Focal Points/Key Themes: European stocks open higher, with risk sentiment improving; commodities improve supporting stocks all sectors; move higher lead by mining and automakers; Energy stocks buoyed by improving oil prices; US futures rose in European session

By Sector:

- Consumer discretionary [Pernod-Ricard RI.FR -3.6% (results), ISS ISS.DK +7.3% (raised guidance)]

- Energy [Seadrill SDRL.NO +3.3% (results), Hunting HTG.UK -2.5% (results), Amec Foster Wheeler MFW.UK +3.3% (earnings), Lamprell LAM.UK +3.3% (results), Genel GENL.UK +16.2% (Kazakhstan payment)]

- Healthcare [Fresenius FRE.DE +3.5% (raises outlook)]

- Industrials [Daimler DAI.DE +1.5% (potential stake acquisition), Syngenta SYNN.CH +5.4% (Monsanto desists on bid), Bouygues EN.FR +5.7% (results)]

- Materials [Lonmin LMI.UK -3.3% (cost-cutting update), CRH Plc CHR +5.4% (acquisition)]

- Technology [Gemalto GTO.FR -6.1% (earnings miss)]

Speakers

- ESM chief Regling did not believe that ESM alone would fund the entire €86B bailout for Greece (expected IMF to participate). Reiterated view that nominal Greek debt haircut was not on the agenda and could discuss extension of maturities in Oct

- Ukraine PM Yatsenyuk: Govt to hold extraordinary meeting today (Thurs, Aug 27th)

- Philippines Central Bank Gov Tetangco saw inflation moving back into target in 2016 and saw no need to recalibrate monetary policy following Q2 GDP data. To watch El Nino weather effect and recent market volatility on Inflation

- Russia Central Bank: Prepare to increase FX lending to banking sector if necessary. Considering resuming 1-year FX auctions and could increase limits on weekly and monthly auctions

- Japan Pension Fund GPIF: Q1 results (end Jun): Return 1.9% (lowest in a year due to losses on domestic bonds)

- China said to have cut US Treasuries holdings to defend recent decline of CNY currency (Yuan)

- China said to lossen foreign investment in property market

- China said to intervene to shore up stock market ahead of Sept 3rd WWII military victory parade against Japan

- Iran Foreign Min Zarif: US unlikely to reject the P5+1 nuclear agreement

Currencies

- USD holding onto bulk of recent gains despite commentary from NY Fed's Dudley that a Sept rate hike was looking less likely. Euro hampered by recent comments from ECB member Praet after he said that disinflation risks were increasing. The recent market turmoil has raised speculation that perhaps ECB could expand its QE bond buying program

- The EUR/USD hit 1-week lows below the 1.13 level during the session

- China PBoC was said to be intervening in Yuan FX swaps market with move aimed at taming Yuan depreciation expectations. China onshore currency ends Far East session at 6.4053 vs. 6.4085 fixing

**Fixed Income:

- Bund futures trade at 153.94 down 27 ticks as a surge in stocks put pressure on Bonds. Bunds have come off their lows on a quieter day trading near their highs, analyst cite a continuation to 154.52, with a break needed to see a move back to 155.30. To the downside a break of the lows at 153.63 sees 153.31 is serves as support with August lows at 152.91 next.

- UK Gilt futures trades 117.84 down ticks as risk on sentiment continues. Analysts look for initial resistance at 118.80, with 119.01 next. 119.38 needs to be broken to test resistance at 120.00 with 122.20 the eventual target. After breaking 117.80 this morning, a further break of the lows have analysts looking for support at 117.24.

- Thursday's liquidity report showed Wednesday's excess liquidity rose to €489.7B a rise of €3.0B from €486.7B prior. This is primarily due to a fall in AFs and MonPol portfolios to a record low of negative €68.5B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility rose sharply to €2.6B from €102M prior. Todays report confirms yesterdays increased take up of €2.9B at this week's MRO.

- Corporate Issuance has been very quiet with no IG take up for the last three sessions. Some are citing very little action until after labor day.

**Political/In the Papers:

- (GR) Greece PM Tsipras: Will not enter a coalition with the main center-right and centrist opposition parties

- (JP) Japan LDP ruling party to hold leader vote on Sept 20th

Looking Ahead

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

- (US) Kansas City Fed hosts symposium in Jackson Hole, Wyoming

- 05:30 (ZA) South Africa July PPI M/M: 0.6%e v 0.3% prior; Y/Y: 3.8%e v 3.7% prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills

- 05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (BR) Brazil Aug FGV Construction Costs M/M: 0.8%e v 0.7% prior

- 07:00 (FR) ECB's Coeure in Paris

- 08:00 (RU) Russia Gold and Forex Reserve w/e Aug 21st: No est v $362.9B prior

- 08:10 (US) Baltic Dry Bulk Index

- 08:30 (US) Q2 Preliminary GDP Annualized Q/Q: 3.2%e v 2.3% advance; Personal Consumption: 3.1%e v 2.9% advance

- 08:30 (US) Q2 Preliminary GDP Price Index: 2.0%e v 2.0% advance; Core PCE Q/Q: 1.8%e v 1.8% advance

- 08:30 (US) Initial Jobless Claims: 274Ke v 277K prior; Continuing Claims: 2.25Me v 2.254M prior

- 08:30 (US) Weekly USDA Net Export Sales

- 08:30 (E) EU Foreign Min Mogherini in Vienna

- 09:00 (MX) Mexico July Trade Balance: -$1.3Be v -$0.8B prior

- 10:00 (US) July Pending Home Sales M/M: +1.0%e v -1.8% prior; Y/Y: 8.3%e v 11.1% prior

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 11:00 (US) Kansas City Fed Manufacturing Activity: -4e v -7 prior

- 12:15 (FR) France Forein Min Fabius in Paris

- 12:30 (DE) German Fin Min Schaeuble in Berlin

- 13:00 (BR) Brazil July Central Govt Budget Balance (BRL): -6.8Be v -8.2B prior

- 13:00 (US) Treasury to sell 7-Year Notes

- 19:05 (UK) Aug GfK Consumer Confidence: 4e v 4 prior

- 19:30 (JP) Japan July Jobless Rate: 3.4%e v 3.4% prior; Job-To-Applicant Ratio: 1.19e v 1.19% prior

- 19:30 (JP) Japan July National CPI Y/Y: 0.2%e v 0.4% prior ; CPI Ex Fresh Food Y/Y: -0.2%e v +0.1% prior; CPI Ex Food, Energy Y/Y: 0.6%e v 0.6% prior

- 19:30 (JP) Japan Aug Tokyo CPI Y/Y: 0.1%e v 0.2% prior ; CPI Ex Fresh Food Y/Y: -0.2%e v -0.1% prior; CPI Ex Food, Energy Y/Y: 0.3%e v 0.3% prior

- 19:50 (JP) Japan July Retail Sales M/M: +0.6%e v -0.8% prior; Retail Trade Y/Y: 1.1%e v 0.9% prior; Large Retailers' Sales: 2.1%e v -0.3% prior

- 21:30 (CN) China July Industrial Profits Y/Y: No est v -0.3% prior