European unemployment data continues its improving trend

Notes/Observations

- Month end and summer markets keep participation light despite plethora of data releases

- German unemployment continues its improving trend

- Signs that ECB not heading for a substantial easing package in September

- Fridays US jobs report viewed as make-or-break for potential Fed Sept rate hike

Overnight

Asia:

- Japan PM Abe Adviser Hamada: Reiterates worth BoJ considering buying foreign bonds although US would probably not approve

- Bank of Japan (BOJ)'s Funo noted of not currently see any limits to how much BOJ can ease; would mobilize all easing tools to reach 2% inflation using its 3-pronged tools of quantity, quality of asset buying and negative rates to reach price target

Europe:

- (UK) Aug GFK Consumer Confidence saw its 6th consecutive negative reading but was better than expectation (-7 v -8e)

Energy:

- Weekly API Oil Inventories: Crude: +0.9M v +4.5M prior; 2nd straight build

Economic data

- (JP) Japan July Vehicle Production Y/Y: -4.1% v -1.0% prior

- (JP) Japan July Annualized Housing Starts (beat): 1.005M v 992Ke; Y/Y: 8.9% v 7.3%e, Construction Orders Y/Y: No est v -2.4% prior

- (DE) Germany July Retail Sales (mixed) M/M: 1.7% v 0.5%e; Y/Y: -1.5% v +0.3%e

- (UK) Aug Nationwide House Prices (beat) M/M: +0.6% v -0.2%e; Y/Y: 5.6% v 4.8%e

- (CH) Swiss July UBS Consumption Indicator: 1.32 v 1.21 prior

- (FR) France Aug Preliminary CPI (miss) M/M: 0.3% v 0.4%e; Y/Y: 0.2% v 0.3%e

- (FR) France July Consumer Spending (miss) M/M: -0.2% v +0.3%e; Y/Y: 0.5% v 1.1%e

- (DK) Denmark Q2 Preliminary GDP Q/Q: 0.5% v 0.5%e; Y/Y: 0.4% v 0.3%e

- (TR) Turkey July Trade Balance: -$4.8B v -$4.8Be

- (DE) Germany Aug Unemployment Change (beat): -7K v -4Ke; Unemployment Rate: 6.1% v 6.1%e

- (NO) Norway Q2 GDP (mixed) Q/Q: 0.0% v 0.1%e; Mainland GDP Q/Q: 0.4% v 0.3%e

- (IT) Italy July Preliminary Unemployment Rate (beat): 11.4% v 11.6%e

- (EU) Euro Zone July Unemployment Rate (miss): 10.1% v 10.0%e

- (EU) Euro Zone Aug Advance CPI Estimate (miss) Y/Y: 0.2% v 0.3%e; CPI Core Y/Y: 0.8% v 0.9%e

**Fixed Income Issuance:

- (FI) Finland opened itss book to sell €3.0B in 7-year bonds via syndicate; guidance seen at -20bps to mid-swaps

- (SI) Slovenia to sell EUR-denominated 1.5% Mar 2035 bond; guidance seen at +105-100bps

- (IN) India sold total INR140B vs. INR140B indicated in 3-month and 12-month bills

- (EU) ECB allotted $350M in 7-day USD Liquidity Tender at fixed 0.90% vs. $1.3B prior

- (SE) Sweden sold total SEK15B vs. SEK15B indicated in 3-month and 6-month Bills

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 1.5% v 2026 bonds; Avg Yield 1.05% v 1.21% prior; Bid-to-cover: 2.36x v 3.37x prior

- (GR) Greece Debt Agency (PDMA) sold €1.138B vs. €875M indicated in 26-week Bills; Avg yield: 2.97% v 2.97% prior; Bid-to-cover: 1.3x v 1.3x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.4% at 3043, FTSE little changed 6,823, DAX -0.1% at 10,648, CAC-40 +0.5% at 4,481, IBEX-35 +0.7% at 8,750, FTSE MIB +0.7% at 17,012, SMI +0.1% at 8,245, S&P 500 Futures -0.02%]

Equities

- Consumer discretionary [888 Holdings 888.UK +3.4% (Earnings), Grafton Group GFTU.UK -6% (Earnings)]

- Industrials: [Bouygues EN.FR +4.0% (Earnings)]

- Financials: Commerzbank CBK.DE +4.2% (Deutsche Bank said to be considering idea of merger)]
Telecom: [Iliad ILD.FR +3.9% (Earnings)]

- Healthcare: Biomerieux BIM.FR +7% (Earnings)]

- Energy: [Gulf Keystone Petroleum GKP.UK -25% (open offer to raise £25M)]

Speakers

- ECB's Villeroy (France) stated that ECB needed to continue its current monetary policy stance

- ECB's Praet (Belgium): Medium term policy horizon was flexible Financial stability needed commitment of many policy actors. Overly rigid interpretation of price stability objective might give rise to conflicts between price stability and financial stability at times

- Fed's Rosengren (moderate, FOMC voter): Timing of rate hikes should depend on financial stability concerns but added that keeping rates low for too long carried risk. Fed was close to reaching job and price mandates and believed somewhat faster rate hikes could reduce severity of next economic

- Fed's Evans (dove, non-voter) stated that he saw protracted period of low interest rates ahead as low growth and low rates was a difficult situation. Tighter policy would likely be done at a gradual pace.

- Sweden Think Tank NIER updated its economic forecasts which cut growth outlook for 2016 and 2017. The 2016 GDP growth forecast cut from 3.6% to 3.3% and 2017 GDP from 2.1% to 2.0%. It raised 2016 CPI from 0.9% to 1.0% and maintained 2017 CPI at 1.4%

- Saudi Arabia Oil Min al-Falih reiterated to maintain responsible oil production policy

Currencies

- Month-end trading kept participation to a minimum but the USD held onto recent gains. Dealers preparing for Fridays US jobs report which dealers/analysts viewed as make-or-break for potential Fed Sept rate hike

- EUR/USD was steady in the session aided by the continuing trend of improvement in German unemployment. The data helped the pair move off 3-week lows

- USD/JPY rose for a fourth straight session to test a 1-month high above 103.30 as markets eyed the likelihood of further easing by the BoJ at its September 20th-21st policy meeting. Comments from Bank of Japan (BOJ)'s Funo helped to seal the trend after noting he did not currently see any limits to how much BOJ could ease

**Fixed Income:

- Bund futures trade at 167.65 down 9 ticks on quiet range bound trade. Futures remain contained within the 166.60-168.00 range with a break above recent highs of 167.84-86 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.

- Dec Gilt futures trade at 131.58 up 6 ticks retracing from 131.42 lows as markets continue to trade on light volume. traded fresh contract highs at 131.83 yesterday a continuation back towards highs targets 132.24 then 132.50. A move lower targets 131.13 followed by range low at 130.96. Short Sterling futures trade flat to up 1bp with Jun17Jun18 trading 0bp bid as spreads approach recent lows.

- Tuesday's use of the marginal lending facility fell to €35M from €36M prior.

- Corporate issuance saw $2.5B via a single issuer bringing the weeks issuance above $10B topping estimates for the week. With one session to go August volume stands at $115.4B marking a record for the month.

Looking Ahead

- (AR) Argentina July Construction Activity M/M: No est v No prior; Y/Y: No est v No prior

- (UK) UK DMO to release Oct-Dec auction Calendar

- 05.30 (UK) Weekly John Lewis LFL sales data

- 05:30 (DE) Germany to sell €4.0B in 0% Sept 2016 Schatz

- 05:30 (PT) Portugal Debt Agency (IGCP) sells total € in 2021 and 2026 OT bonds

- 06:00 (PT) Portugal Q2 Final GDP Q/Q: 0.2%e v 0.2% prelim; Y/Y: 0.8%e v 0..8% prelim

- 06:00 (IT) Italy July Hourly Wages M/M: No est v 0.2% prior; Y/Y: No est v 0.7% prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia to sell Bonds

- 07:00 (US) MBA Mortgage Applications w/e Aug 26th: No est v -2.1% prior

- 07:00 (IN) India July Fiscal Deficit (INR): No est v 9.7B prior

- 08:00 (IN) India Q2 GDP Y/Y: 7.6%e v 7.9% prior; GVA Y/Y: 7.3%e v 7.4% prior

- 08:00 (PL) Poland Aug Preliminary CPI M/M: -0.3%e v -0.3% prior; Y/Y: -0.9%e v -0.9% prior

- 08:00 (ZA) South Africa July Trade Balance (ZAR): 8.0Be v 12.5B prior

- 08:00 (BR) Brazil Q2 GDP Q/Q: -0.5%e v -0.3% prior Y/Y: -3.7%e v -5.4% prior ; GDP 4-quarters annualized: -4.8%e v -4.7% prior

- 08:00 (CL) Chile July Unemployment Rate: 7.0%e v 6.8% prior

- 08:00 (US) Fed's Kashkari (non-voter) speaks on Fed Structure in St. Paul

- 08:15 (US) Aug ADP Employment Change: +175Ke v 179K prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (CA) Canada Jun GDP M/M: +0.5%e v -0.6% prior; Y/Y: 1.0%e v 1.0% prior, Quarterly GDP Annualized: -1.5%e v +2.4% prior

- (ES) Spain July YTD Budget Balance: No est v -€21.3B prior

- 08:45 (EU) ECB's Villeroy (France) speaks at Frankfurt event

- 09:00 (BE) Belgium Q2 Final GDP SA Q/Q: No est v 0.5% prelim; Y/Y: No est v 1.4% prior

- 09:30 (BR) Brazil July Nominal Budget Balance (BRL): -57.5Be v -32.2B prior; Primary Budget Balance: -17.9Be v -10.1B prior, Net Debt to GDP Ratio: 42.7%e v 42.0% prior

- 09:45 (US) Aug Chicago Purchasing Manager: 54.0e v 55.8 prior

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

- 10:00 (US) July Pending Home Sales M/M: 0.7%e v 0.2% prior; Y/Y: 2.2%e v 0.3% prior

- 10:00 (MX) Mexico July Net Outstanding Loans (MXN): No est v 3.27T prior

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

- 11:00 (CO) Colombia July National Unemployment Rate: No est v 8.9% prior; Urban Unemployment Rate: 10.0%e v 10.2% prior

- 12:00 (CA) Canada to sell 2-year bonds

- 13:30 (MX) Mexico Central (Banxico) Bank Releases Inflation Report

- 15:00 - (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 7.75%

- 18:45 (NZ) New Zealand Q2 Terms of Trade Index Q/Q: No est v 4.4% prior

- (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to leave Selic Rate unchanged at 14.25%

- 19:00 (KR) South Korea Aug CPI M/M: 0.2%e v 0.1% prior; Y/Y: 0.7%e v 0.7% prior; CPI Core Y/Y: 1.6%e v 1.6% prior

- 19:00 (KR) South Korea July BoP Current Account Balance: No est v $12.2B prior; Balance of Goods (BOP): No est v $12.4B prior

- 19:30 (AU) Australia Aug AiG Manufacturing Index: No est v 56.4 prior

- 19:50 (JP) Japan Q2 Capital Spending Y/Y: No est v 4.2% prior; Ex-Software Y/Y: No est v 4.3% prior, Company Profits: No est v -9.3% prior, Company Sales: No est v -3.3% prior

- 20:00 (AU) Australia Aug CoreLogic House RPData House Prices M/M: No est v 0.8% prior

- 20:00 (KR) South Korea Aug Trade Balance: $5.4Be v $7.8B prior, Exports Y/Y: -0.5%e v -10.2% prior, Imports Y/Y: -2.2%e v -14.0% prior

- 21:00 (CN) China Aug Manufacturing PMI (Govt Official): 49.8e v 49.9 prior; Non-manufacturing PMI (Services): No est v 53.9 prior

- 21:30 (KR) South Korea Aug PMI Manufacturing: No est v 50.1 prior

- 21:30 (AU) Australia July Retail Sales M/M: 0.3%e v 0.1% prior; Y/Y: No est v 10.2% prior; YTD Y/Y: No est v 10.3% prior

- 21:45 (CN) China Aug Caixin PMI Manufacturing: 50.1e v 50.6 prior

- 22:00 (JP) Japan Aug Final PMI Manufacturing: No est v 49.6 prelim

- 22:30 (TW) Taiwan Aug PMI Manufacturing: No est v 51.0 prior

- 23:00 (ID) Indonesia Aug PMI Manufacturing: No est v 48.4 prior

- 23:30 (MY) Malaysia Aug PMI Manufacturing: No est v 48.1 prior

- 23:30 (TH) Thailand CPI M/M: 0.1%e v -0.3% prior; Y/Y: 0.4%e v 0.1% prior; CPI Core Y/Y: 0.8%e v 0.7% prior

- 23:30 (TH) Thailand Aug Consumer Confidence: No est v 72.5 prior; Economic Confidence: No est v 61.4 prior