Euro Zone July Final CPI stays above the ECB target

Notes/Observations

- Euro Zone July Final CPI stayed above the ECB target but is it sustainable?

- Turkish Lira trying to eek out a 5th day of gains but faces headwinds as govt action appears to have larger implications down the road

Asia:

- South Korea Fin Min Kim: Government to employ all available policy tools to counter slow job growth; gov't had 'grave' concerns with the sluggish job market

- RBA Gov Lowe: Domestic economy moving in the right direction; reiterated view that expected the next move in interest rates to be up, board's view likely to hold rates steady for a while yet. The most likely trigger for a rate cut would be 'China shock'. Still believed that s lower Australian dollar currency (AUD) would be helpful

Europe:

- EU Dombrovkis says EU Capital Markets Union plan could be delayed

Americas:

- Fed Chair Powell to speak on Friday, Aug 24 at Jackson Hole conference; topic is 'monetary policy in a changing economy'

- Treasury Sec Mnuchin reiterated that further Turkey sanctions were being prepared if Pastor Brunson was not released

- Trade Rep Lighthizer: hopes to have a breakthrough in NAFTA discussion in next few days

Energy:

- US Sec of State Pompeo named Brain Hook as new special Iran representative; hoped one day soon to reach agreement with Iran

Economic Data:

- (AT) Austria July CPI M/M: -0.2% v +0.2% prior; Y/Y: 2.1% v 2.0% prior

- (TR) Turkey Aug Consumer Confidence: 68.3 v 73.1 prior (lowest level since Dec)

- (CN) Weekly Shanghai copper inventories (SHFE): 155.1K v 171.1K tons prior

- (EU) Euro Zone Jun Current Account (Seasonally Adj): €24.0B v €24.0B prior

- (IT) Italy Jun Current Account: €5.1B v €2.4B prior

- (PL) Poland July Employment M/M: 0.1% v 0.2%e; Y/Y: 3.5% v 3.6%

- (PL) Poland July Average Gross Wages M/M: -0.5% v -0.2%e; Y/Y: 7.2% v 7.6%e

- (RU) Russia Narrow Money Supply w/e Aug 10th: 10.35T v 10.25T prior

- (TW) Taiwan Q2 Final GDP Y/Y: 3.3% v 3.3%e

- (IT) Italy Jun General Government Debt: €2.323T v €2.327T prior

- (HK) Hong Kong July Unemployment Rate: 2.8% v 2.8%e (matched lowest level since Jan 1998)

- (EU) Euro Zone July Final CPI Y/Y: 2.1% v 2.1%e; CPI Core Y/Y: 1.1% v 1.1%e (2nd month above ECB target

Fixed Income Issuance:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 -0.1% at 3,379, FTSE flat at 7,555, DAX -0.1% at 12,226, CAC-40 +0.2% at 5,357; IBEX-35 -0.1% at 9,419, FTSE MIB -0.5% at 20,421, SMI +0.2% at 9,017 , S&P 500 Futures flat]

Market Focal Points/Key Themes: European indices open largely flat and maintained direction as the session progressed; potential of renewed US-China talks helping risk sentiment going into the weekend; telecom and utilities among better performing sectors; materials on the backfoot following slip in commodity prices; chip stocks including STMicroelectronics under pressure following weak forecast from Applied Materials; Atlantia recovering after Italian government divided over how to respond to Genoa bridge collapse, with Deputy PM Salvini reportedly negotiating a fine of €500M against Autostrade; earnings expected in the upcoming US session include Deere, The Cato and Zoe's Kitchen

Equities

- Consumer discretionary: Air France-KLM AF.FR -3.1% (new CEO, analyst action), Rovio Entertainment ROVIO.FI +3.3%(results)

- Financials: Royal Bank of Scotland RBS.UK +0.3% (CFO steps down)

- Energy: Gazprom Neft SIBN.RU +1.7% (results)

- Industrials: Atlantia ATL.IT +6.0%(expected to hold board meeting), Golden Ocean GOGL.NO +3.4%(results), Maersk MAERSK.BE +2.9% (results), Peab PEABB.SE +9.6% (results), Schindler SCHP.CH +0.8% (results)

- Real estate: Vopak VPK.NL -6.5% (results)

Speakers

- Italy's Deputy PM Salvini said to be seeking €500M fine from Autostrade due to the recent bridge collapse in Genoa

- Turkey Govt announced new measures for banks and companies to mitigate the economic attack on the country in which loan channels would remain open for the real sector and no extra collateral to be demanded on any TRY currency (TRY) declined

- Hungary Central Bank's Nagy: Domestic corporate FX debt was not a risk. he decline in Govt FX debt had made Hungary less vulnerable

- RBA’s Ellis: Wage growth could be slow to tighter job market

- Thailand Fin Min Apisak stated that saw signs of improvement in all aspects of Q2 GDP (**Note: Q2 GDP data set for release on Monday, Aug 20th)

Currencies

- The USD was marginally softer as the Turkish lira continued to show signs of some stabilization. The Turkish govt had announced measures in recent sessions but some analyst ponder that the moves that appear to be working in the short term would remove the ability of foreigners to hedge against Turkish lira weakness and curb investment flows into the country. As the NY morning approached the TRY was on some soft footing (along with other emerging market currencies)

- The EUR/USD was slightly higher in the session and hovered around the 1.14 level as some position traders covered euro short positions. The Euro Zone July final CPI reading stayed above ECB target of around 2% the for the 2nd straight month and keeping the timeline intact for now of the 1st possible rate hike after summer 2019.

Looking Ahead

- 05:30 (ZA) South Africa to sell ZAR600M in I/ L 2029, 2033 and 2050 bonds

- 06:00 (UK) DMO to sell €5.5B in 1-month, 3-month and 6-month bills (£2.0B, £2.0B and £1.5B respectively)

- 06:45 (US) Daily Libor Fixing

- 07:00 (BR) Brazil Aug IGP-M Inflation (2nd Preview): 0.7%e v 0.5% prior

- 07:30 (TR) Turkey Jun Central Bank TCMB Survey of Expectations

- 07:30 (IN) India Weekly Forex Reserves

- 08:15 (UK) Baltic Dry Bulk Index

- 08:30 (CA) Canada July CPI M/M: 0.1%e v 0.1% prior; Y/Y: 2.5%e v 2.5% prior, CPI Core- Common Y/Y: 2.0%e v 1.9% prior, CPI Core- Median Y/Y: No est v 2.0% prior, CPI Core- Trim Y/Y: No est v 2.0% prior, Consumer Price Index: No est v 133.6 prior

- 08:30 (CA) Canada Jun Int'l Securities Transactions (CAD): No est v 2.2B prior

- 08:30 (US) July Philadelphia Fed Non-Manufacturing General Regional Business Conditions: No est v 39.1 prior

- 09:00 (RU) Russia July Unemployment Rate: 4.7%e v 4.7% prior; Real Disposable Income: 0.5%e v 0.2% prior; Real Wages Y/Y: 7.0%e v 7.2% prior

- 09:00 (RU) Russia July Real Retail Sales Y/Y: 3.0%e v 3.0% prior

- 09:00 (RU) Russia July PPI M/M: 1.1%e v 3.4% prior; Y/Y: 17.4%e v 16.1% prior

- 10:00 (US) Aug Preliminary University of Michigan Confidence: 98.0e v 97.9 prior

- 10:00 (US) July Leading Index: 0.4%e v 0.5% prior

- 11:00 (EU) Potential Sovereign ratings after European close (Hungary and Turkey Sovereign Debt to be rated by S&P; Russia Sovereign Debt to be rated by Fitch; Egypt Sovereign Debt to Be Rated by Moody's

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