China said to have completed its Taiwan drills but will continue to patrol

EU Mid-Market Update: Focus on upcoming US CPI data; China said to have completed its Taiwan drills but will continue to patrol.

Notes/Observations

- CPI the focus of the day, with Denmark, Norway, Czech and Germany all measuring elevated readings. Incoming US CPI at 08:30ET the main catalyst for the week, with consensus for a softening compared to last month.

- Chip shortages return to the spotlight after Toyota announced a suspension on 3 production lines in Sept due to chip shortages and Covid outbreaks. Honda, who raised FY22/23 rev outlook but affirmed unit sales in its Q1 this morning, expects chip shortage to last through the fiscal year.

- Commodities in Europe face a squeeze amid reports that the Rhine River will effectively become impassable at point Kaub in Germany, after river levels drop further.

- Further in Europe, Germany and Austria said to be near a deal to fill Haidach gas storage, to attempt to alleviate concerns for German gas storage levels.

- Asia closed lower with Hang Seng underperforming at -2.1% EU indices are +0.1-0.3% higher with exception of SMI at -0.5% . EU bond yields are lower. US futures have rallied into the green after China declares military drills near Taiwan have ended. Safe haven: Gold -0.2%, DXY -0.2%; Commodity: Brent -0.6%, WTI -0.5%; Crypto: BTC -2.9%, ETH -3.8%.

Asia

- China July CPI came in lower than consensus but still at a 2-year high (Y/Y: 2.7% v 2.9%e); PPI at a 17-month low (Y/Y: 4.2% v 4.9%e).

- Japan Jun PPI (CGPI) M/M: 0.4% v 0.4%e; Y/Y: 8.6% v 8.4%e.

- South Korea July Unemployment Rate: 2.9% v 2.9% prior.

- Japan Cabinet Reshuffle said to have Fin Min Suzuki and Econ Min Yamagiwa remain in posts. Chief Cabinet Sec Matsuno to remain as well as Foreign Fin Hayashi. Changes include Nishimua being appointed Trade Min and Hamada appointed Defense Min.

Taiwan

- China reiterated stance of not ruling out the use of force for Taiwan and the use of 1 country 2 systems for Taiwan (**Note: white paper: Taiwan Issue and the Cause of China's Reunification in the New Era).

Europe

- Germany Finance Ministry said to be looking at raising income tax brackets which would drop the expected tax take by €10.12B in 2023. Want to raise income tax thresholds and slightly increase child benefits to help households cope with inflation.

- Strike at UK's largest container port to go ahead after talks break down (**Reminder: UK largest container port Felixstowe's workers said to hold an eight-day strike on Aug 21-29th).

- German Rhine River is said to become effectively impassable at Kaub (key point between Frankfurt and Dusseldorf) on Friday, Aug 12th.

Americas

- Fed’s Bullard (voter, hawk): Could see some relief in headline CPI; too early to claim inflation has peaked - podcast.

Energy

- Weekly API Crude Oil Inventories: +2.2M v +2.2M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 % at #, FTSE +0.09% at 7,494.75, DAX +0.30% at , CAC-40 +0.08% at 6,495.58, IBEX-35 +0.24% at 8,332.14, FTSE MIB +0.34% at 22,564.00, SMI -0.48% at 11,079.18, S&P 500 Futures +0.32%].

Market Focal Points/Key Themes: European indices open lower across the board but later turned around to trade with a positive bias; sectors leading to the upside include financials and consumer discrationary; sectors among those tranding to the downside are health care and technology; tech sector under pressure following Micron guidance yesterday; reportedly buyers for Atlantia are delaying bid; earnings expected during the upcoming US session include Diamond Offshore, Metro, Walt Disney and Sonos.

Equities

- Consumer discretionary: Deliveroo [ROO.UK] +3% (earnings), Royal Mail [RMG.UK] -1.5% (comments on strike), TUI [TUI1.DE] -1.5% (earnings).

- Consumer staples: Ahold Delhaize [AD.NL] +7% (earnings; raises outlook).

- Energy: E.ON [EOAN.DE] -1% (earnings).

- Financials: Prudential plc [PRU.UK] -1% (earnings).

- Industrials: Brenntag [BNR.DE] +0.5% (earnings).

Speakers

- Germany Fin Min Lindner noted that the domestic Economic outlook was fragile and inflation being a concern.

- Slovakia refinery firm Slovnaft stated that had made payment and expects oil flows via Druzhba oil pipeline from Russia to resume in coming days.

- China military official stated that it had completed its various tasks around Taiwan. To conduct regular patrols in the Taiwan Strait.

- Thailand Central Bank Policy Statement noted that the vote to hike was 6-1 (dissenter sought 50bps hike). Rate normalization should be gradual and not affect economy. Domestic economy continued to gain traction and seen returning to pre-pandemic level this year. Foreign tourist arrivals to beat forecasts. Inflation seen remaining high but close to forecasts; medium term inflation to remain within target. Inflation to begin falling later this year and to return to target in 2023. MPC to closely monitor FX.

- Japan PM Kishida confirmed that did carry out a Cabinet reshuffle.

Currencies/fixed income

- Focus on various inflation readings globally. The upcoming July US CPI reading to be viewed as a gauge on just how steeply the Fed would have to raise interest rates in coming months. Data likely to show that core consumer prices edged higher in July while the headline was expected to ease from recent cycle highs. Dealers noted that a higher-than-expected CPI figure could send risk assets falling.

- Norway July CPI data adding pressure that Norges delivers a bigger interest rate hike at its Aug meeting compared to the 25bps hike indicated by its forward guidance.

- Oil prices continued to move lower after US API data showed another crude inventories build last week.

Economic data

- (SE) Sweden July Maklarstatistik Housing Prices Y/Y: 1% v 3% prior; Apartment Prices Y/Y: -2% v +2% prior.

- (NL) Netherlands Jun Manufacturing Production M/M: -0.5% v -1.5% prior; Y/Y: 6.2% v 9.9% prior; Industrial Sales Y/Y: 29.7% v 34.6% prior.

- (FI) Finland Jun Industrial Production M/M: 1.3% v 0.3% prior; Y/Y: 8.9% v 5.2% prior.

- (DE) Germany July Final CPI M/M: 0.9% v 0.9% prelim; Y/Y: 7.5% v 7.5% prelim.

- (DE) Germany July Final CPI EU Harmonized M/M: 0.8% v 0.8% prelim; Y/Y: 8.5% v 8.5% prelim.

- (SE) Sweden Jun Private Sector Production M/M: -0.1% v +1.2% prior; Y/Y: 5.4% v 6.8% prior.

- (SE) Sweden Jun Industrial Orders M/M: 1.3% v -2.7% prior; Y/Y: -1.7% v -5.1% prior.

- (SE) Sweden Jun Industry Production Value Y/Y: -0.5% v 0.3% prior; Service Production Value Y/Y: 8.0% v 9.1% prior.

- (SE) Sweden Jun Household Consumption M/M: -0.4% v 0.7% prior; Y/Y: 3.9% v 6.4% prior.

- (NO) Norway July CPI M/M: 1.3% v 0.9%e; Y/Y: 6.8% v 6.3%e.

- (NO) Norway July CPI Underlying M/M: 1.5% v 0.8%e; Y/Y: 4.5% v 3.8%e.

- (NO) Norway July PPI (including oil) M/M: 7.5% v 7.2% prior; Y/Y: 73.6% v 68.8% prior.

- (DK) Denmark July CPI M/M: 1.1% v 0.8% prior; Y/Y: 8.7% v 8.2% prior.

- (DK) Denmark July CPI EU Harmonized M/M: 1.2% v 0.9% prior; Y/Y: 9.2%v 9.1% prior.

- (TH) Thailand Central Bank (BOT) raised the Benchmark Interest Rate by 25bps to 0.75% (**Note: 1st hike since Dec 2018).

- (AT) Austria Jun Industrial Production M/M: -2.1% v +0.9% prior; Y/Y: 4.6% v 9.6% prior.

- (CZ) Czech July CPI M/M: 1.3% v 1.6%e; Y/Y: 17.5% v 17.8%e.

- (CZ) Czech Jun Export Price Index Y/Y: 16.5% v 16.2% prior; Import Price Index Y/Y: 21.0%v 20.7% prior.

- (TR) Turkey Jun Unemployment Rate: 10.3% v 10.6% prior.

- (IT) Italy July Final CPI M/M: 0.4% v 0.4% prelim; Y/Y: 7.9% v 7.9% prelim; CPI Index (ex-tobacco): # v 112.3e.

- (IT) Italy July Final CPI EU Harmonized M/M: -1.1% v -1.1% prelim; Y/Y: 8.4% v 8.4% prelim.

- (GR) Greece Jun Industrial Production Y/Y: 8.4% v 3.6% prior.

- (GR) Greece Jun Unemployment Rate: 12.1% v 12.5% prior.

Fixed income issuance

- (IN) India sold total INR330B vs. INR330B indicated in 3-month, 6-month and 12-month bills.

- (DK) Denmark sold total DKK0B (nil) in 3-month Bills; receive zero bids.

- (IT) Italy Debt Agency (Tesoro) sold €7.0B vs. €7.0B indicated in 12-month Bills; Avg Yield: 0.994% v 0.722% prior; Bid-to-cover: 1.37x v 1.41x prior.

Looking ahead

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

- 05:30 (ZA) South Africa July Sacci Business Confidence: No est v 89.3 prior.

- 05:30 (DE) Germany to sell €150B in 1.25% Aug 2048 Bunds.

- 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2032, 2037 and 2040 bonds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (PT) Portugal July Final CPI M/M: No est v 0.0% prelim; Y/Y: No est v 9.1% prelim.

- 06:00 (PT) Portugal July Final CPI EU Harmonized M/M: No est v 0.0% prelim; Y/Y: No est v 9.4% prelim.

- 06:00 (PT) Portugal Q2 Unemployment Rate: No est v 5.9% prior.

- 06:55 (US) Daily Libor Fixing.

- 07:00 (US) MBA Mortgage Applications w/e Aug 5th: No est v 1.2% prior.

- 07:00 (CZ) Czech Central Bank to comment on CPI data.

- 08:00 (HU) Hungary Central Bank (MNB) July Minutes.

- 08:00 (IS) Iceland July Unemployment Rate: No est v 3.3% prior.

- 08:00 (BR) Brazil Jun Retail Sales M/M: -0.9%e v +0.1% prior; Y/Y: +0.1%e v -0.2% prior.

- 08:00 (BR) Brazil Jun Broad Retail Sales M/M: -0.6%e v +0.2% prior; Y/Y: 0.0%e v -0.7% prior.

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

- 08:30 (US) July CPI M/M: 0.2%e v 1.3% prior; Y/Y: 8.7%e v 9.1% prior.

- 08:30 (US) July CPI (ex-food/energy) M/M: 0.5%e v 0.7% prior; Y/Y: 6.1%e v 5.9% prior.

- 08:30 (US) July CPI Index NSA: 296.723e v 296.311 prior; CPI Core Index SA: 295.835e v 294.354 prior.

- 08:30 (US) July Real Avg Hourly Earning Y/Y: No est v -3.6% prior; Real Avg Weekly Earnings Y/Y: No est v -4.4% prior.

- 08:30 (UR) Ukraine July CPI M/M: 1.7%e v 3.1% prior; Y/Y: 23.2%e v 21.5% prior.

- 08:30 (CL) Chile Central Bank Economists Survey.

- 10:00 (US) Jun Final Wholesale Inventories M/M: 1.9%e v 1.9% prelim; Wholesale Trade Sales M/M: 0.5%e v 0.5% prior.

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

- 11:00 (US) Fed’s Evans on economy and monetary policy.

- 12:00 (RU) Russia July CPI M/M: -0.2%e v -0.4% prior; Y/Y: 15.3%e v 15.9% prior.

- 12:00 (RU) Russia July CPI Core M/M: 0.1%e v 0.2% prior; Y/Y: 18.8%e v 19.2% prior.

- 13:00 (US) Treasury to sell 10-Year Notes.

- 14:00 (US) July Monthly Budget Statement: -$170.0Be v -$88.8B prior.

- 14:00 (US) Fed’s Kashkari.

- 15:00 (AR) Argentina Jun Wages M/M: No est v 6.2% prior.

- 18:45 (NZ) New Zealand Jun Net Migration: No est v -828 prior.

- 19:01 (UK) July RICS House Price Balance: 60%e v 65% prior.

- 20:00 (SG) Singapore Q2 Final GDP Q/Q: No est v 0.0% prelim; Y/Y: no est v 4.8% prelim.

- 21:00 (AU) Australia Aug Consumer Inflation Expectation: No est v 6.3% prior.

- 23:00 (KR) South Korea Jun M2 Money Supply M/M: No est v 0.8% prior; "L" Money Supply M/M: No est v 1.0% prior.

- 23:30 (TH) Thailand July Consumer Confidence: no est v 41.6 prior; Economic Confidence: No est v 35.7 prior.