Plethora of EU inflation and growth data paints a mixed picture

EU Mid-Market Update: Plethora of EU inflation and growth data paints a mixed picture but verdict anticipates the worst is behind the region.

 

Notes/Observations

- USD having its worst monthly performance in a decade

- US Congress yet to announce stimulus deal, negotiations continue

- EU inflation data shows much work needed to be done to get back to target

- EU GDP data mixed in session with steep contractions but worst believed to be over

 

Asia:

- South Korea Jun Industrial Production M/M: 7.2% v 2.3%; Y/Y: -0.5% v -5.0%e

- Japan Jun Jobless Rate: 2.8% v 3.1%e

- Japan Jun Preliminary Industrial Production M/M: 2.7% v 1.0%e; Y/Y: -17.7% v -19.3%e

- China July Manufacturing PMI (Official Govt) registered its 5th straight expansion (51.1 v 50.9e)

- China reported to set up bailout fund for state companies, aiming to raise CNY100B to help avoid bond defaults

- Japan Senior Finance Ministry (MOF) Official reiterated stance of not commenting on FX levels but noted they were watching FX markets with urgency. Stressed that FX stability was important

 

Coronavirus:

- Total global cases 17,241,298 (+1.6% d/d); total deaths 672.1K (+0.9% d/d)

- Tokyo Gov Koike: Tokyo confirmed 463 additional coronavirus cases (record high); Tokyo must think of declaring emergency if situation worsens

- Japan Okinawa prefecture said to declare a State of Emergency over recent coronavirus outbreak

- UK govt recorded 846 new cases (highest daily tally since late Jun)

- Germany said to have 989 new coronavirus cases (highest daily level since Jun 19th)

 

Europe:

- UK PM Johnson said to have reapplied lockdown restrictions on a large part of northern England. Cited that people were not social distancing and contributed to a new spike in pandemic cases

- Italy govt decree said to extend ban on firing workers until Dec 31st in the wake of the coronavirus pandemic

 

Americas:

- White House chief of staff Meadows: not very optimistic that we will have any kind of an agreement on a comprehensive bill in the near future. Not even optimistic about next week

- Treasury Sec Mnuchin stated that negotiations on additional stimulus measures made some progress, to continue Friday, Saturday

- President Trump stated that a Blanket shutdown was not a viable long term strategy, small shutdowns could be very helpful but not for a long period of time. Wants a temporary extension of the extra employment benefits. Did not want to delay to 2020 US election but believed mail-in votes would cause problems (Note: Both Senate Majority and House Minority Leaders dismissed Trump’s suggestion of delaying November Presidential election)

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.81% at 362.30, FTSE +0.37% at 6,012.45, DAX +0.71% 12,468.70, CAC-40 +0.67% at 4,885.39, IBEX-35 -0.11% at 6,989.00, FTSE MIB +1.12% at 19,444.50, SMI +0.51% at 10,146.69, S&P 500 Futures +0.21%]

Market Focal Points/Key Themes: European indices opened modestly higher across the board, and moved further in the green (IBEX being the notable exception); financials and technology sectors among underperformers; better performing sectors include consumer discretionary; reportedly Italy extends ban of firing employees to end of year; earnings expected in the upcoming US session include Caterpillar, Chevron, Merck and Under Armour

 

Equities

- Consumer discretionary:International Consolidated Airlines Group [IAG.UK] -7% (earnings; capital increase)

- Materials: Umicore [UMI.BE] -7% (earnings)

- Energy: Engie [ENGI.FR] +3% (earnings)

- Financials: BNP Paribas [BNP.FR] +5% (earnings)

- Industrials: Vinci [DG.FR] +1% (earnings)

- Telecom: Nokia [NOKIA.FI] +13% (earnings), BT Group [BT.A.UK] -1% (earnings)

 

Speakers

- Spain PM Sanchez: Economic recovery must focus on reducing inequality between regions

- Poland Central Bank Gov Glapinski stated that had room for more easing if needed. Weaker PLN currency (Zloty) would help the domestic economy recover faster. Expected CPI to slow down in coming quarters

- South Africa Central Bank (SARB) stated that the economic recovery needed a multi-prong approach; not the time to try failed policies or instruments. Prepared to support the economy within its mandate

- Japan MOF's Okamura (top currency official) stated after a meeting with Japanese officials that would continue monitoring markets

- Japan Cabinet Office Mid-term Forecasts pushed back budget balance projections by two years until FY28/29 (in-line with recent speculation)

- China Foreign Ministry spokesperson Wang Wenbib reiterated stance that Hong Kong was an internal affair. Reiterated stance that Hong Kong security law protected both rights and interests. Safe holding of election was responsibility of HK govt; believed that Hong Kong would properly handle its affairs and virus outbreak

 

Currencies/ Fixed Income

- USD ended the month of July on soft footing with confidence in the greenback eroding further on Thursday after President Trump raised the possibility of delaying the nation's November presidential election. USD was approx. 5% lower in the month initially fueled by divergence in growth as US coronavirus cases surged in numerous States.

- EUR/USD tested the 1.19 level to register two-year highs and put in its best monthly performance since September 2010. The Euro found its grove after EU Leaders approved a planned EU Recovery Fund of €750B earlier in July. Pair was flat by mid-session with the USD moving off its worst level on position squaring

- USD/JPY probed 4-month lows after testing 104.20 during the Asian session. Pair at 104.80 by mid-session.

 

Economic Data

- (NL) Netherlands Jun Retail Sales Y/Y: 10.0% v 6.9% prior

- (FR) France Q2 Preliminary GDP Q/Q: -13.8% v -15.2%e; Y/Y: -19.0% v -20.0%e

- (DE) Germany Jun Retail Sales M/M: -1.6% v -3.0%e; Y/Y: 5.9% v 3.0%e

- (UK) July Nationwide House Price Index M/M: +1.7% v -0.2%e; Y/Y: +1.5% v -0.3%e

- (FI) Finland May Final Trade Balance: -€0.3B v -€0.3B prior

- (NL) Netherlands Jun House Price Index M/M: 0.3% v 0.8% prior; Y/Y: 7.6% v 7.7% prior

- (CH) Swiss Jun Real Retail Sales Y/Y: 1.1% v 6.2% prior

- (FR) France July Preliminary CPI M/M: +0.4% v -0.1%e; Y/Y: 0.8% v 0.3%e

- (FR) France July Preliminary CPI EU Harmonized M/M: +0.4% v -0.1%e; Y/Y: 0.9% v 0.4%e

- (FR) France Jun Consumer Spending M/M: 9.0% v 6.8%e; Y/Y: +1.3% v -2.5%e

- (ES) Spain Q2 Preliminary GDP Q/Q: -18.5% v -16.6%e; Y/Y: -22.1% v -19.7%e

- (CZ) Czech Q2 Advance GDP Q/Q: -8.4% v -10.1%e; Y/Y: -10.7% v -12.3%e

- (HU) Hungary May Average Gross Wages Y/Y: 9.4% v 6.6%e

- (HU) Hungary May Final Trade Balance: €0.1B v €0.2B prior

- (TH) Thailand Jun Current Account Balance: -0.3$B v $1.0Be; Overall Balance of Payments (BOP): $3.5B v $1.1B prior; Trade Account Balance: $2.3B v $3.2B prior; Exports Y/Y: -24.6% v -23.6% prior; Imports Y/Y: -18.2% v -34.2% prior

- (CN) Weekly Shanghai copper inventories (SHFE): 159.5K v 157.7K tons prior

- (TW) Taiwan Q2 Preliminary GDP Y/Y: -0.7% v 0.0%e

- (IT) Italy Q2 Preliminary GDP Q/Q: -12.4% v -15.5%e; Y/Y: -17.3% v -17.3%e

- (DE) Germany July CPI Brandenburg M/M: -0.6% v +0.7% prior; Y/Y: 0.0% v 1.0% prior

- (NO) Norway July Unemployment Rate: 4.9% v 4.4%e

- (NO) Norway Central Bank (Norges) Aug Daily FX Purchases (NOK): -2.0B v -2.5B prior

- (RU) Russia Narrow Money Supply w/e July 24th (RUB): 13.03T v 13.08T prior

- (PL) Poland July Preliminary CPI M/M: -0.1% v -0.1%e; Y/Y: 3.1% v 3.1%e

- (CZ) Czech Jun M2 Money Supply Y/Y: 9.5% v 8.9% prior

- (PT) Portugal Q2 Advance GDP Q/Q: -14.1% v -3.8% prior; Y/Y: -16.5% v -2.3% prior

- (PT) Portugal July Preliminary CPI M/M: -1.3% v +0.9% prior; Y/Y: 0.2% v 0.1% prior

- (PT) Portugal July Preliminary CPI EU Harmonized M/M: -2.0% v +1.2% prior; Y/Y: 0.0% v 0.2% prior

- (EU) Euro Zone Q2 Advance GDP Q/Q: -12.1% v -12.1%e; Y/Y: -15.0% v -14.5%e

- (EU) Euro Zone July Advance CPI Estimate Y/Y: 0.4% v 0.2%e; CPI Core Y/Y: 1.2% v 0.8%e

- (IT) Italy July Preliminary CPI (including tobacco) M/M: -0.1% v +0.1%e; Y/Y: -0.3% v -0.1%e

- (IT) Italy July Preliminary CPI (EU Harmonized) M/M: -0.6% v -1.5%e; Y/Y: +0.9% v -0.2%e

- (GR) Greece May Retail Sales Value Y/Y: % v -24.8% prior; Retail Sales Volume Y/Y: -5.3% v -24.7% prior

- (IS) Iceland Jun Final Trade Balance (ISL): -12.9B v -12.5B prelim

 

Fixed Income Issuance

- (IN) India sold total INR340B vs. INR300B indicated in 2022, 2030, 2033 and 2060 bonds

 

Looking Ahead

- 05:30 (ZA) South Africa to sell combined ZAR2.0B in I/L 2025, 2033 and 2046 Bonds

- 06:00 (IT) Italy Jun Retail Sales M/M: No est v 24.3% prior; Y/Y: No est v -10.5% prior

- 06:00 (UK) DMO to sell £3.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £2.0B respectively)

- 06:45 (US) Daily Libor Fixing

- 07:00 (MX) Mexico May Gold Production: No est v 3.4K kilogram prior; Silver Production: No est v 183.8K tons prior ; Copper Production: No est v 41,2K tons

- 07:30 (IN) India Jun Eight Infrastructure (key) Industries: No est v -23.4% prior

- 07:30 (IN) India Weekly Forex Reserve w/e July 24th: No est v $517.6B prior

- 08:00 (BR) Brazil Jun PPI Manufacturing M/M: No est v 0.9% prior; Y/Y: No est v 5.0% prior

- 08:00 (ZA) South Africa Jun Trade Balance (ZAR): 10.0Be v 15.9B prior

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

- 08:00 (IN) India announces upcoming bill issuance (held on Wed)

- 08:00 (ES) Spain Debt Agency (Tesoro) upcoming announcement on bond issuance

- 08:30 (US) Jun Personal Income: -0.7%e v -4.2% prior; Personal Spending: 5.3%e v 8.2% prior; Real Personal Spending (PCE): 5.0%e v 8.1% prior

- 08:30 (US) Jun PCE Deflator M/M: 0.4%e v 0.1% prior; Y/Y: 0.9%e v 0.5% prior

- 08:30 (US) Jun PCE Core Deflator M/M: 0.2%e v 0.1% prior; Y/Y: 1.0%e v 1.0% prior

- 08:30 (US) Q2 Employment Cost Index (ECI): 0.6%e v 0.8% prior

- 08:30 (CA) Canada May GDP M/M: +3.5%e v -11.6% prior; Y/Y: -14.6%e v -17.1% prior

- 08:30 (CA) Canada Jun Industrial Product Price M/M: 0.8%e v 1.2% prior; Raw Materials Price Index M/M: 7.0%e v 16.4% prior

- 08:30 (CL) Chile Central Bank Meeting July Minutes

- 09:00 (CL) Chile Jun Unemployment Rate: 12.5%e v 11.2% prior

- 09:00 (CL) Chile Jun Retail Sales Y/Y: -26.0%e v -28.7% prior; Commercial Activity Y/Y: No est v -23.5% prior

- 09:00 (CL) Chile Jun Industrial Production Y/Y: No est v -5.7% prior; Manufacturing Production Y/Y: -5.0%e v -13.3% prior; Total Copper Production: No est v 495.6K tons

- 09:30 (BR) Brazil Jun Primary Budget Balance (BRL): -168.2Be v -131.4B prior; Nominal Budget Balance: -173.7Be v -140.4B prior; ; Net Debt to GDP Ratio: 57.3%e v 55.0% prior

- 09:45 (US) July Chicago Purchase Managers Index (PMI): 44.0e v 36.6 prior

- 10:00 (US) July Final University of Michigan Confidence: 72.9e v 73.2 prior

-10:00 (MX) Mexico Jun Net Outstanding Loans (MXN): No est v 4.986T prior

- 11:00 (CO) Colombia Jun National Unemployment Rate: No est v 21.4% prior; Urban Unemployment Rate: 24.0%e v 24.5% prior

- 11:00 (CO) Colombia Jun Exports: $2.2Be v $2.2B prior

- (CO) Colombia Central Bank Interest Rate Decision

- 11:00 (EU) Potential sovereign ratings after European close )Moody's on Germany Sovereign Debt; Fitch on Lithuania

- 13:00 (US) Weekly Baker Hughes Rig Count

- 15:00 (US) Jun Agricultural Prices Paid: No est v -1.9% prior; Prices Received: No est v -4.8% prior

- 20:00 (KR) South Korea July Trade Balance: $3.5Be v $3.7B prior; Exports Y/Y: -8.5%e v -10.9% prior; Imports Y/Y: -11.5%e v -11.2% prior (revised from -11.4)

Sat

- 01:00 (PE) Peru July CPI M/M: -0.1%e v -0.3% prior; Y/Y: 1.7%e v 1.6%