European data suggests that slowdown in Q1 was temporary

EU Mid-Market Update: Some calm returns to emerging markets; European data suggests that slowdown in Q1 was temporary

Notes/Observations

- Upcoming Turkey investor call (Thursday) helps to calm emerging markets; President Erdogan remained deficient in believing his country was under an economic attack

- German Q2 GDP data mixed but hints that momentum was regaining its posture

- German Aug ZEW Survey improved

- Euro Zone Q2 GDP revised higher in its 2nd reading

- No revision to July CPI data for Germany, France and Spain

Asia:

- China July data misses market expectations amid trade frictions and deleveraging e?orts; Industrial Production Y/Y: 6.0% v 6.3%e; Retail Sales Y/Y: 8.8% v 9.1%e

- China July Surveyed Jobless Rate 5.1% v 4.8% prior with seasonal factors attributed for the increase

Europe:

- Italy govt official: any speculation of Fin Min Tria possibly resigning is baseless; Tria is Italy's only ECB interlocutor

- Italy League Party official Borghi (budget committee): the Euro system cannot be at the mercy of the market without an ECB shield

- Conservative Brexiteers said to publish their own blueprint. MP Jacob Rees-Mogg said to be planning to challenge UK PM May by publishing their own blueprint for a hard Brexit. The paper is due to be published next month and was expected to have the backing of between 60-80 MP’s

Americas:

- Argentina Central Bank raises key 7-day LELIQ rate to by 500bps to 45.00%

Economic Data:

- (FR) France Q2 ILO Unemployment Rate: 9.1% v 9.2%e; Mainland Unemployment Rate: 8.7% v 8.9%e; Change in Mainland Unemployment: -48K v +85K prior

- (DE) Germany Q2 Preliminary GDP Q/Q: 0.5% v 0.4%e; Y/Y: 2.0% v 2.1%e; GDP NSA Y/Y: 2.3% v 2.5%e

- (DE) Germany Jun Final CPI M/M: 0.3% v 0.3%e; Y/Y: 2.0% v 2.0%e

- (DE) Germany Jun Final CPI EU Harmonized M/M: 0.4% v 0.4%e; Y/Y: 2.1% v 2.1%e

- (DK) Denmark Q2 GDP Indicator Q/Q0.3% v 0.3% prior

- (FI) Finland July CPI M/M: -0.1% v +0.2% prior; Y/Y: 1.4% v 1.2% prior

- (FI) Finland Jun GDP Indicator WDA Y/Y: 3.0% v 3.5% prior

- (FI) Finland Jun Final Retail Sales Volume Y/Y: -0.3% v -0.3% prelim

- (RO) Romania Q2 Advance GDP Q/Q: 1.4% v 1.5%e v 0.1% prior; Y/Y:
4.1% v 4.0%e

- (IN) India July Wholesale Prices (WPI) Y/Y: 5.1% v 5.2%e (pace slowed for the 1st time since March)

- (FR) France July Final CPI M/M: -0.1% v -0.1%e; Y/Y: 2.3% v 2.3%e

- (FR) France July Final CPI EU Harmonized M/M: -0.1% v -0.1%e; Y/Y: 2.6% v 2.6%e , CPI Ex-Tobacco Index: 102.96 v 102.97e

- (ES) Spain July Final CPI M/M: -0.7% v -0.7%e; Y/Y: 2.2% v 2.2%e

- (ES) Spain July Final CPI EU Harmonized M/M: -1.2% v -1.2%e; Y/Y: 2.3% v 2.3%e

- (ES) Spain July CPI Core M/M: -0.8% v +0.1% prior; Y/Y: 0.9% v 1.1%e

- (CZ) Czech Q2 Advance GDP Q/Q: 0.5% v 0.8%e; Y/Y: 2.3% v 2.7%e

- (HU) Hungary Q2 Preliminary GDP Q/Q: 0.9% v 0.8%e; Y/Y: 4.6% v 4.1%e

- (CH) Swiss July Producer & Import Prices M/M: 0.1% v 0.2% prior; Y/Y: 3.6% v 3.5% prior

- (NL) Netherlands Q2 Preliminary GDP Q/Q: 0.7% v 0.6%e; Y/Y: 2.9% v 2.6%e

- (NL) Netherlands Jun Trade Balance: €4.8B v €4.7B prior

- (PL) Poland Q2 Preliminary GDP Q/Q: 0.9% v 1.0%e; Y/Y: 5.2% v 5.1%e

- (PL) Poland July Final CPI M/M: -0.2% v -0.1% prelim; Y/Y: 2.0% v 2.0% prelim

- (UK) Jun Average Weekly Earnings 3M/Y: 2.4% v 2.5%e; Weekly Earnings (ex Bonus) 3M/Y: 2.7% v 2.7%e

- (UK) July Jobless Claims Change: +6.2K v +9.0K prior; Claimant Count Rate: 2.5% v 2.5% prior

- (UK) Jun ILO Unemployment Rate: 4.0% v 4.2%e; Employment Change 3M/3M: +42K v +93Ke

- (PT) Portugal Q2 Preliminary GDP Q/Q: 0.5% v 0.3%e; Y/Y: 2.3% v 2.1% prior

- (DE) Germany Aug ZEW Current Situation: 72.6 v 72.1e; Expectations Survey: -13.7 v -21.3e

- (EU) Euro Zone Q2 Preliminary GDP (2nd reading) Q/Q: 0.4% v 0.3%e; Y/Y: 2.2% v 2.1%e

- (EU) Euro Zone Jun Industrial Production M/M: -0.7% v -0.4%e; Y/Y: 2.5% v 2.4%e

- (EU) Euro Zone Aug ZEW Expectations Survey: -11.1 v -18.7 prior

Fixed Income Issuance:

- (ES) Spain Debt Agency (Tesoro) sold total €B vs. €4.0-5.0B indicated range in 6-month and 12-month Bills

- (IN) India sold total INR180B vs. INR180B indicated in 3-month, 6-month and 12-month bills

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 +0.4% at 3,246, FTSE +0.1% at 7,655, DAX +0.5% at 12,415, CAC-40 +0.4% at 5,432; IBEX-35 +0.2% at 9,550, FTSE MIB +0.4% at 21,047, SMI +0.4% at 9,0.42, S&P 500 Futures +0.3%]

Market Focal Points/Key Themes: European indices open higher across the board and largely remained positive as the session wore on; concerns over geopolitical issues, as well as improved outlook over Turkey, help support risk sentiment; Portugal and UK indices underperforming; Esure confirms receipt of unsolicited takeover offer from Bain; earnings newsflow dominated by German companies; financials and automobile sectors among best performers; upcoming earnings expected in the US session include Home Depot, Advance Autoparts and Tapestry

Equities

- Consumer discretionary: Brunel BRNL.NL -5.0% (results), KSB KSB.DE -3.7% (results), Rockwool International ROCKA.DK +2.6% (Prelim results), Straumann STMN.CH +4.2% (results)

- Energy: RWE RWE.DE +1.8% (results), Saipem SPM.IT +2.8% (analyst action)

- Financials: Esure ESUR.UK +4.0% (takeover offer, results), Flow Traders FLOW.NL -3.7% (analayst action)

- Healthcare: Curetis CURE.NL -5.3% (results)

- Industrials: Geberit GEBN.CH -2.1% (results)

- Materials: Antofagasta ANTO.UK -5.0% (results), K+S SDF.DE -2.6% (results)

- Technology: Siltronic WAF.DE -3.8% (analyst action)

- Telecom: TKH Group TK.NL +4.4% (results)

Speakers

- Italy PM Conte and top ministers (Di Maio, Salvini and Tria) held conference call on Monday to continue discussion on 2019 budget; said to reiterate need to reduce debt load. Also examined the macroeconomic situation

- German ZEW Economists stated that recent trade agreement between US and EU had lifted investor sentiment significantly but growth outlook for German economy had deteriorated nonetheless

- Turkey President Erdogan reiterated that the country was under an explicit economic attack, taking all technical measures needed. Have to maintain a strong political stance as our character was not one of flop-flopping. Economy was being used as a weapon against Turkey. To stand firm against the USD and FX rates and had begun converting FX to TRY currency (Liras)

- Turkey State-owned utility Botas said to have fixed the TRY currency (Lira) exchange rate at 6.5 for power plants

- India Economic Affairs Sec Garg: Not concerned about decline in INR currency (Rupee) at this time; move related to external factors

- India Central Bank (RBI) again suspected of FX currency intervention to support INR currency (Rupee), helped to move Rupee off record lows (**Note: USD/INR trade at 70.12 for a fresh record low in

Currencies

- FX markets stabilized a bit on Tuesday aided by reports that the Turkey Finance Ministry scheduled an investor call for Thursday, Aug 16th. Also aiding the situation was reports that White House: NSA Bolton met with Turkey Ambassador today to discuss the detention of Pastor Brunson. Some of the luster of safe-haven plays from last week saw a bit of reversal in today’s session. USD/TRY was lower by over 5% with the pair testing below 6.44 after hitting a record high above 7.20 on Monday. Turkey President Erdogan remain defiant in hid believe that Turkey was under an economic attack and assailed the US for its sanctions.

- EUR/USD held above the 1.14 handle for the most part of the session after German Q2 GDP data suggested that the slowdown in Q1 was temporary. Headwinds for the Euro remains the Italian discussions on 2019 budget as the 10-year Italian BTP yield remained above the 3% level. The 1.15 level will provide stiff resistance for the Euro in the short-run. The pair was just under 1.14 ahead of the NY morning

- GBP/USD saw its best levels of the session erode despite its ILO Unemployment falling to its lowest level since 1975. Pair holding under the 1.28 level.

Fixed Income

- Bund Futures trades at 163.24 down 24 ticks as Indices rebound following a rebound in the Turkish Lira and other emerging currencies.
A move above today's high targets 163.63 then a push for 164. Continued retracement targets 162.69 initially.

- Gilt futures trades at 123.26 down 26 ticks continuing to pull back from the recent highs with initial support at 123.12, while a higher sees 123.63 then 124.00.

-Tuesday 's liquidity report showed Monday's excess liquidity rose from €1.908T to €1.889T. Use of the marginal lending facility rose from €30M to €31M.

- Corporate issuance saw the week start with three issuers raising $14.3B.

Looking Ahead

- (PT) Bank of Portugal Reports July ECB financing to Portuguese Banks

- (UR) Ukraine Q2 Preliminary GDP Q/Q: No est v 0.9% prior; Y/Y: 3.2%e v 3.1% prior

- 05.30 (UK) Weekly John Lewis LFL sales data

- 05:30 (ZA) South Africa Jun Total Mining Production M/M: No est v 5.0% prior; Y/Y: No est v -2.6% prior; Gold Production Y/Y: No est v -16.2% prior; Platinum Production Y/Y: No est v 9.6% prior

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)

- 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills

- 05:30 (ZA) South Africa to sell combined ZAR2.4B in 2023, 2035 and 2048 bonds

- 06:00 (US) July NFIB Small Business Optimism: 106.8e v 107.2 prior

- 06:00 (IE) Ireland Jun Property Prices M/M: No est v 0.6% prior; Y/Y: No est v 12.4% prior

- 06:00 (PT) Portugal Q2 Labour Costs Y/Y: No est v -1.5% prior

- 06:00 (TR) Turkey to sell Bonds (2 tranches)

- 06:45 (US) Daily Libor Fixing

- 07:45 (US) Weekly Goldman Economist Chain Store Sales

- 08:00 (BR) Brazil Jun IBGE Services Sector Volume Y/Y: -0.4%e v -3.8% prior

- 08:00 (IS) Iceland July Unemployment Rate: No est v 2.1% prior

- 08:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (US) July Import Price Index M/M: 0.0%e v -0.4% prior; Y/Y: 4.5%e v 4.3% prior; Import Price Index ex Petroleum M/M: +0.1%e v -0.3% prior

- 08:30 (US) July Export Price Index M/M: 0.2%e v 0.3% prior; Y/Y: No est v 5.3% prior

- 08:30 (CA) Canada July Teranet/National Bank HPI M/M: No est v 0.9% prior; Y/Y: No est v 2.9% prior, HPI Index: No est v 223.82 prior

- 08:55 (US) Weekly Redbook Sales

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:00 (BE) Belgium Jun Trade Balance: No est v -€0.5B prior

- 11:00 (US) NY Fed Q2 Household Debt & Credit report:

- 11:00 (CO) Colombia Jun Industrial Production Y/Y: 2.0%e v 2.9% prior

- 11:00 (CO) Colombia Jun Retail Sales Y/Y: 4.6%e v 5.9% prior

- 11:00 (CO) Colombia Jun Trade Balance: -$0.8Be v -$0.6B prior; Total Imports: $4.4Be v $4.5B prior

- 11:30 (US) Treasury to sell 4-Week and 52-Week Bills

- 16:30 (US) Weekly API Oil Inventories