Quiet start to week ahead of Jackson Hole

Notes/Observations

- Departure of Bannon from the White House has led to speculation that President Trump may be trying to reconnect with the GOP's tax reform agenda

- Focus on the content of the Jackson Hole symposium (**Note: Starts on Thursday)

 

Overnight

Asia:

- North Korea warned that the upcoming US/South Korea military exercises will be ‘adding fuel to the fire’
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- South Korea President Moon: US/Korea joint drill is a defensive annual drill, not aimed at heightening tensions

- Bank of Japan (BoJ) Gov Kuroda said the central bank has methods to avoid adverse effects when it normalizes policy; wants to avoid creating confusion by discussing specifics

Europe:

- German Chancellor Merkel: Reiterates view to serve full 4-year term if re-elected; Stands by 2015 decision to open German borders to refugees

- German Finance Ministry Aug Report: Reiterates view that monthly data suggested further economic expansion, indicators suggest industrial sector will continue to grow in Q3

- German Emnid Poll: Conservative coalition lead continues ahead of Sept elections. CDU/CSU 39% (+1); - SPD 24% (unchanged)

- UK Brexit Min Davis: firmly believe early round of negotiations have already demonstrated that many questions around our withdrawal are inextricably linked to our future relationship

- UK Brexit Dept: To issue two formal position papers this week along with a batch of proposals for discussions on future relations ahead of upcoming negotiations in October

- Fitch raises Greece sovereign rating one notch to B- from CCC; outlook Positive

Americas:

- Trump to address US troops and American people on Monday (**Note: VP Pence and Nat Sec Advisor McMaster said to be pushing for increasing US troop strength in Afghanistan

 

Economic data

- (NL) Netherlands July House Price Index M/M: 0.9% v 0.7% prior; Y/Y: 7.6 v 8.0% prior

- (JP) Japan July Convenience Store Sales Y/Y: 0.0 v -0.1% prior

- (TW) Taiwan July Export Orders Y/Y: 10.5% v 13.0%e

Fixed Income Issuance:

- (NO) Norway sold NOK3.0B vs. NOK3.0B in 3-month Bills; Avg Yield: 0.38%; Bid-to-cover: 3.13x

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.2% at 373.4, FTSE -0.5% at 7308, DAX %-0.4 at 12114X, CAC-40 -0.5% at 5088, IBEX-35 -0.1% at 10373, FTSE MIB -0.3% at 21751, SMI +0.3% at 8898, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes:

European Indices trade lower across the board with the exception of the Swiss SMI as the global Geo-Political tensions weigh on a light day for corporate and macro data. M&A activity has dominated headlines this morning, with Fiat Chrysler shares outperforming after Great Wall Motor confirmed interest in company, while Shares of Rathbone Brojhers trade higher after confirming merger talks with Smith and Williamson, elsewhere Maersk Shares trade sharply higher after divesting Maersk Olie Og Gas to Total for $7.5B.

 

Equities

- Consumer discretionary [Fiat Chrysler [FCA.IT] +3.5% (Great Wall motor confirms interest in company), Roulart Media [ROU.BE] -11.7% (Earnings)]

- Materials: [Metall Zug [METN.CH] -1.3% (Earnings)]

- Industrials: [Maersk [MAERSK.DK] +3.8% (divests Mærsk Olie og Gas A/S to Total S.A. for $7.45bn), Global Ports Holdings [GPH.UK] -8.4% (Earnings)]

- Financials: [Rathbone Brothers {RAT.UK] +0.8% (Confirms merger talks)]

- Energy: [Interoil Exploration [IOX.NO] -7.2% (Canacol Energy explore strategic alternative with respect to stake)]

 

Speakers

- China Commerce Ministry (MOFCOM): To take all proper measures to ensure interests; expresses strong dissatisfaction on US probe on intellectual property. Urges US to respect facts and multilateral trade principles

- China Foreign Ministry spokesperson Hua Chunying stated that US-South Korea military exercises are not conducive to reducing tensions on the Korean Peninsula. Urged an end to vicious escalation on Korean Peninsula

- Libya National Oil Company (NOC): Force Majeure declared on loading of Sharara crude from Zawiya oil terminal

 

Currencies

- FX markets saw a quiet start to the week with most focus on the upcoming Jackson Hole conference that begins on Thursday. ECB Chief Draghi will attend the symposium but has a speech in Germany before he departs for the US. Some speculation that ECB announcement of the tapering of its QE program could be a two-step process that is split between the September and October. ECB could make an "announcement in principle" in September, following it up with tapering's practicalities in October

- EUR/USD hovering in the mid-1.17 area.

- USD/JPY trading below the 109 neighborhood with the JPY currency remaining firm on safe-haven flows as US/South Korean begin a 10-day military exercise.

 

Fixed Income

- Bund futures trades at 164.40 up 24 ticks as risk assets suffer with European stocks sliding lower and credit spreads widen from the open. Downside targets 163.50 followed by 162.56. To the upside the 164.50 to 165.20 remains key resistance.

- Gilt futures trades at 127.92 up 30 ticks as Bunds track Treasuries. A resumption to the upside could eye 128.25 then 128.75. A move back below 126.51 targets 125.97

- Monday's liquidity report showed Friday’s excess liquidity rose to €1.714T from €1.712T and use of the marginal lending facility rose to €157M from €123M prior.

- Corporate issuance saw $29B last week with talk that this week could see between $5-10B coming to market, as we enter end of earning season.

 

Looking Ahead

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 3-month Bills

- 06:00 (TR) Turkey to sell 2022 Bonds

- 06:00 (IL) Israel July Unemployment Rate: No est v 4.5% prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey

- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (US) July Chicago Fed National Activity Index: 0.10e v 0.13 prior

- 08:30 (CA) Canada Jun Wholesale Trade Sales M/M: -0.5%e v 0.9% prior

- 09:00 (BE) Belgium Aug Consumer Confidence: No est v 2 prior

- 09:00 (FR) France Debt Agency (AFT) to sell combined €4.3-5.5B in 3-month, 6-month and 12-month Bills

- 09:30 (EU) ECB announces Covered-Bond Purchases

- 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills

- 16:00 (US) Weekly Crop Progress Report

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index

- 21:00 (US) President Trump to address US troops and American people