Bank of America sees economy reaccelerating since early August

EU mid-market update: Bank of America sees economy reaccelerating since early August; Trump threatens 'severe consequences' if Putin shies away from ceasefire deal; UK GDP better than expected.

Notes/observations

- FTSE a red outlier in across a green Europe, down -0.1% after Bank of England rate cut expectations were pared following stronger than expected preliminary reading of UK Q2 GDP. Sterling is relatively unchanged.

- Yen firmed up overnight as US Treasury Sec Bessent said BoJ is behind the curve in managing inflation and is likely to hike interest rates soon.

- Bitcoin made new all-time-high overnight, hitting $124K.

- BofA Institute reported total card spending rose 3.5% Y/Y in the week ending Aug 9, up from 3.0% the prior week and July’s 1.8% average, signaling possible economic re-acceleration, with entertainment leading gains and department stores seeing the sharpest drop.

- Fed’s Daly (non-voter) said a large September rate cut is not warranted, warning that a 50bps move would send an unwarranted urgency signal not justified by current labor market strength, countering Treasury Sec Bessent’s Aug 12 call for such a cut.

- Ahead of upcoming Trump/Putin meeting on Friday, location confirmed at Anchorage Military Base in Alaska and talks set to start at 15:30ET. Trump warned that if Russia doesn’t agree to ceasefire, there will be ‘severe consequences’. White House narrative continues to pivot from expectations of a full peace deal.

- DeepSeek’s launch of its R2 AI model has reportedly been delayed due to persistent training failures on Huawei’s Ascend chips—adopted under official encouragement—forcing a switch to Nvidia for training while retaining Huawei for inference, alongside prolonged data labeling, even as Alibaba’s Qwen3 has adapted and streamlined its core reasoning algorithms.

- Asia closed mixed with Nikkei225 underperforming -1.4%. EU indices -0.1% to +0.8%. US futures flat to -0.1%. Gold -0.1%, DXY +0.1%; Commodity: Brent +0.5%, WTI +0.5%; Crypto: BTC +1.3%, ETH +0.6%.

Asia

- Australia July Employment Change: +24.5K v +25.0Ke; Unemployment Rate: 4.2% v 4.2%e.

- China 'urged' by think tanks to strengthen yuan (CNY) warning that prolonged undervaluation might escalate trade tensions and distort China’s growth model.

Global conflict/tensions

- US and Russia ‘propose West Bank-style occupation of Ukraine.

- President Trump said to be preparing to offer Putin access to rare earth minerals to incentivize him to end the war in Ukraine.

Europe

- UK July RICS House Price Balance: -13% v -7% prior.

Americas

- Fed's Goolsbee (voter) noted of some important data coming in before Fed's Sept meeting, not implying that could not reach a decision until then..

- Goldman Sachs analyst sees 3 rate cuts in 2025 and 2 in 2026, terminal rate between 3-3.25%.

- UBS on Fed: See a 25bps rate cut at each meeting through to Jan’26.

speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.22% at 552.04, FTSE -0.03% at 9,162.35, DAX +0.25% at 24,249.93, CAC-40 +0.32% at 7,829.61, IBEX-35 +0.66% at 15,120.98, FTSE MIB +0.78% at 42,517.00, SMI +0.10% at 11,984.98, S&P 500 Futures -0.06%].

Market Focal Points/Key Themes: European opened generally higher but became mixed as the session wore on; markets seen hesitant ahead of risk events later in the week; among outperforming sectors are financials and real estate; underperforming sectors include materials and energy; Empiric Student agrees to be acquired by United; Centrica to buy Isle of Grain LNG terminal from National Grid; earnings expected in the upcoming Americas session include JD.com and Deere.

Equities

- Consumer discretionary: Carlsberg [CARLB.DK] -6.0% (earnings).

- Financials: Swiss Re [RUKN.CH] +1.0% (earnings).

- Utilities: RWE [RWE.DE] -4.0% (earnings).

- Industrials: Hapag-Lloyd [HLAG.DE] -7.5% (earnings; narrows guidance), Thyssenkrupp [TKA.DE] -7.0% (earnings; outlook cut).

- Technology: ASML [ASML.NL] +0.5% (Foxconn 2026 outlook; DeepSeek R2 delayed), Adyen [ADYEN.NL] -17.5% (earnings).

- Materials: Antofagasta [ANTO.UK] +1.0% (earnings), Lanxess [LXS.DE] -3.5% (earnings).

Speakers

- Norway Central bank Policy Statement noted that it was likely be appropriate to continue with a cautious normalization of the policy rate ahead. Economic outlook was uncertain but reiterated stance that rate would be reduced further in course of 2025 if economy evolved broadly as envisaged.

- Turkey Central Bank (CBRT) Gov Karahan reiterated stance to continue to use all policy tools in a decisive way for price stability; tight stance would continue to ensure disinflation.

- China govt said to consider asking firms run by central government to buy homes.

- Russia govt Aide Ushakov stated that Putin and Trump to give joint news conference at the end of summit in Alaska.

- Fed’s Daly (non-voter): Large rate cut in Sept did not seem warranted.

Currencies/fixed income

- USD put in a mixed performance during the session. Focus on the upcoming Trump-Putin meeting in Alaska on Friday.

- GBP/USD drifted initially higher as Q2 GDP data beat consensus expectations but was unable to move above the 1.36 handle.

- EUR/USD moved back below the 1.17 level and well contained within its projected 1.15-1.20 trading range.

- USD/JPY was lower after comments by US Tsy Sec Bessent on BOJ policy aided the JPY currency. Bessent stated that the BOJ was falling behind in battling inflation. Pair tested 146.21 during the session but was back around 146.50 by mid-session. Dealers noted that Bessent’s rhetoric would not likely impact BOJ policy.

- 10-year German Bund yield at 2.66% and 10-year Gilt yield at 4.58%. 10-year Treasury yield: 4.21%.

Economic data

- (FI) Finland July CPI M/M: +0.2% v -0.2% prior; Y/Y: 0.2% v 0.2% prior.

- (UK) Jun Monthly GDP M/M: 0.4% v 0.2%e.

- (UK) Q2 Preliminary GDP Q/Q: 0.3% v 0.1%e; YT/Y: 1.2% v 1.0%e.

- (UK) Jun Industrial Production M/M: 0.7% v 0.3%e; Y/Y: +0.2% v -0.2%e.

- (UK) Jun Manufacturing Production M/M: 0.5% v 0.4%e; Y/Y: 0.0% v -0.8%e.

- (UK) Jun Visible Trade Balance: -£22.2B v -£21.9Be v -£21.7B prior; Overall Trade Balance: -£5.0B-£5.8Be - 02:00 - (SE) Sweden July Final CPI M/M: 0.2% v 0.2% prelim; Y/Y: 0.8% v 0.8% prelim.

- (SE) Sweden July Final CPIF M/M: 0.3% v 0.3% prelim; Y/Y: 3.0% v 3.0% prelim.

- (IN) India July Wholesale Prices (WPI) Y/Y: -0.6% v -0.5%e.

- (CH) Swiss July Producer & Import Prices M/M: -0.2% v -0.1% prior; Y/Y: -0.9% v -0.7% prior.

- (FR) France July Final CPI M/M: 0.2% v 0.2% prelim; Y/Y: 1.0% v 1.0% prelim.

- (FR) France July Final CPI EU Harmonized M/M: No est v 0.3% prelim; Y/Y: No est v 0.9% prelim; CPI Index (ex-tobacco): No est v 120.23 prior.

- (NO) Norway Central Bank (Norges) I=leaves Deposit Rate unchanged at 4.25% (as expected).

- (PL) Poland July Final CPI M/M: 0.3% v 0.3% prelim; Y/Y: 3.1% v 3.1% prelim.

- (UK) Q2 Output Per Hour Y/Y: -0.8% v -0.2% prior.

- (IT) Italy Jun General Government Debt: €3.071T v €3.053T prior.

- (EU) Euro Zone Q2 Preliminary GDP (2nd of 3 readings) Q/Q: 0.1% v 0.1% advance; Y/Y: 1.4% v 1.4% advance.

- (EU) Euro Zone Jun Industrial Production M/M: -1.3% v -1.0%e; Y/Y: 0.2% v 1.5%e.

- (CY) Cyprus Q2 Preliminary GDP Q/Q: 0.5% v 1.4% prior; Y/Y: 3.6% v 3.0% prior.

Fixed income issuance

- (IN) India sold total INR280B vs. INR280B indicated in 2030 and 2055 bonds.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

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

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 06:00 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

- 06:00 (PT) Portugal Q2 Labour Costs Y/Y: No est v 4.0% prior.

- 08:00 (BR) Brazil Jun IBGE Services Volume M/M: 0.0%e v 0.1% prior; Y/Y: 2.0%e v 3.6% prior.

- 08:00 (BR) Brazil CONAB Crop Report.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) July PPI Final Demand M/M: 0.2%e v 0.0% prior; Y/Y: 2.5%e v 2.3% prior.

- 08:30 (US) July PPI (ex-food/energy) M/M: 0.2%e v 0.0% prior; Y/Y: 3.0%e v 2.6% prior.

- 08:30 (US) July PPI (ex-food/energy/trade) M/M: 0.2%e v 0.0% prior; Y/Y: 2.5%e v 2.5% prior.

- 08:30 (US) Initial Jobless Claims: 225Ke v 226K prior; Continuing Claims: 1.97Me v 1.974M prior.

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

- 09:00 (RU) Russia Q2 Preliminary Current Account Balance: $9.4Be v $18.1B prior (revised from $17.7B).

- 09:00 (RU) Russia Gold and Forex Reserve w/e Aug 8th: No est v $676.4B prior.

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

- 11:00 (CO) Colombia Jun Retail Sales Y/Y: 11.6%e v 13.2% prior.

- 11:00 (CO) Colombia Jun Manufacturing Production Y/Y: 2.7%e v 3.0% prior; Industrial Production Y/Y: 1.2%e v -0.2% prior.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 2 Year Bonds.

- 18:30 (NZ) New Zealand July Manufacturing PMI: No est v 48.8 prior.

- 18:45 (NZ) New Zealand July Food Prices M/M: No est v 1.2% prior.

- 18:45 (NZ) New Zealand Jun Net Migration: No est v 1.5K prior.

- 19:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 4.50%.

- 19:50 (JP) Japan Q2 Preliminary GDP Q/Q: 0.1%e v 0.0% prior; GDP Annualized Q/Q: +0.4%e v -0.2% prior; GDP Nominal Q/Q: 1.4%e v 0.9% prior; GDP Deflator Y/Y: 3.2%e v 3.3% prior; Private Consumption Q/Q: 0.1%e v 0.1% prior; Business Spending Q/Q: 0.7%e v 1.1% prior; Inventory Contribution % GDP: No est v 0.6% prior; Net Exports Contribution % GDP: No est v -0.8% prior.

- 21:30 (CN) China July New Home Prices M/M: No est v -0.3% prior; Used Home Prices M/M: No est v -0.6% prior.

- 22:00 (CN) China July Retail Sales Y/Y: 4.6%e v 4.8% prior; YTD: 4.9%e v 5.0% prior.

- 22:00 (CN) China July Industrial Production Y/Y: 6.0%e v 6.8% prior; YTD: No est v 6.4% prior.

- 22:00 (CN) China July YTD Fixed Urban Assets Y/Y: 2.7%e v 2.8% prior.

- 22:00 (CN) China July Surveyed Jobless Rate: 5.1%e v 5.0% prior.

- 22:00 (CN) China July YTD Property Investment Y/Y: -11.4%e v -11.2% prior; Residential Property Sales Y/Y: No est v -5.2% prior.

- 23:00 (ID) Indonesia Jun External Debt: No est v $435.6B prior.

- 23:30 (JP) Japan to sell 3-Month Bills.

- 23:35 (JP) Japan to sell 10-Year inflation-linked JGB bonds.