Focus on the UK political maneuvering within Parliament on Brexit; prospect of a UK election adds an extra level of complexity

Notes/Observations

- Lack of progress in U.S

.-China trade talks as both sides said struggle to set a date after tariffs implemented

- Prospect of a UK election adds an extra level of complexity to Brexit process

Asia:

- RBA left the Cash Rate Target unchanged at 1.00% (as expected). Reiterated stance that rates to remain low for an extended period and to monitor developments in the labor markets closely. To ease policy if necessary to support sustainable growth. Inflation pressures likely to remain subdued for some time

- South Korea Q2 Final GDP Q/Q: 1.0% v 1.1%e; Y/Y: 2.0% v 2.1%e

- South Korea Aug CPI data sees annual reading at record low ( YoY: 0.0% v 0.2%e)

- Australia July Retail Sales M/M: -0.1% v +0.2%e

- New Zealand Fin Min Robertson noted that had solid data in the domestic economy as fundamentals remained strong; did not see unconventional policy in NZ in short term

- US and China said to be struggling to set a date for Sept trade talks after US officials rejected China's request to delay Sept 1st tariffs

Europe/Mideast:

- UK PM Johnson: Chances of a new Brexit deal was rising, there was no circumstance in which would ask Brussels for another delay of Oct 31st Brexit date

- Rebel conservative MPs said to introduce legislation to force PM Johnson to seek a 3-month extension of Brexit until Jan 31, 2020

- UK PM Johnson said to have threaten rebels in his own Conservative Party with a general election on Oct 14th if they try to force him delay to Brexit

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.5% at 379.0, FTSE -0.2% at 7267, DAX -0.5% at 11890, CAC-40 -0.6% at 5460, IBEX-35 -0.4% at 8783, FTSE MIB -0.6% at 21321, SMI -0.6% at 9864, S&P 500 Futures -0.8%] Market Focal Points/Key Themes: European equity markets open mixed, turning negative as the session wore on; Materials and consumer discretionary underperforming; Better performing sectors include telecom and healthcare; Materials supported on increase in gold due to risk-off sentiment; Takeaway.com and Just Eat lower after Eminence Capital says will vote against merger; no major US earnings expected later in the session

Equities

- Consumer discretionary: Ferguson [FERG.UK] +1.8% (spin-off, Restaurant Group [RTN.UK] -9.5% (results)

- Consumer staples:

- Energy: BKW AG [BKW.CH] +9.3% (results), Nordex [NDX1.DE] -1.7% (awarded order)

- Financials:

- Healthcare:

- Industrials: Stadler Rail [SRAIL.CH] -3.2% (results), Kloeckner [KCO.DE] -1.2% (analyst action), ThyssenKrupp [TKA.DE] -2.8% (analyst action), Valmet [VALMT.FI] +1.4% (new order), Varta [VAR1.DE] +8.0% (production guidance)

- Technology: IQE [IQE.UK] -2.8% (results), Xaar [XAR.UK] -28.4% (trading update)

- Telecom: Iliad [ILD.FR] +2.1% (results)

Speakers

- SNB's Jordan stated that he expected cash to be around for a long time; negative rates had not led to any radical change in bank notes for savings. Had no final view on Facebook's Libra until all details were known

- UK Conservative member Hammond (former Fin Min) stated that he would support the Brexit delay bill and added he believed it had the numbers to win the vote

- Italy govt program between 5-Star and PD said to be drafting a 24-point agenda. Pledged to avoid a sales tax hikein the 2020 budget and sought an expansionary budget but not pone that would jeopardize public finances in 2020

- Italy 5-Star party leader Di Maio: Govt plan addresses, VAT, minimum wage, tax cuts and highway concessions

- Spain Socialist party policy proposal said to aim getting a govt deal with Podemos party. Failure to agree with Podemos would be basis for new elections

- Fitch on South Korea: Govt had fiscal space but the medium term outlook was a challenge (**Reminder: On Aug 8th Fitch affirmed South Korea sovereign rating at AA- outlook stable)

- Hong Kong & Macau Affairs Office (HKMAO) spokesperson Yang Guang: Seeing positive changes emerging as stopping violence has gained consensus in Hong Kong; situation remain complex and grim

- China Foreign Ministry spokesperson Geng Shuang: Hong Kong needed a constructive dialog and consensus; HK society discussing emergency law. Reiterated that China would not sit by if Hong Kong protests got out of hand and added that by deploying the army would not end the one country - two systems

Currencies/Fixed Income

- GBP/USD: The cable tested below 1.20 to mark its lowest point since the October 2016 'flash crash'. Focus turned to the return of parliament from ist summer recess. Tory rebel MPs were expected to debate on an extension of Brexit deadline past the current October 31st date in an attempt to block a no deal scenario from unfolding. PM Johnson has said that he would call a general election should he lose a vote on the Brexit extension bill.

- EUR/USD: The Euro hit its lowest since May 2017 as the pair traded around the lower end of 1.09 area. Focus remained on European politics with Italy acting PM Conte appealing to Five Star followers to vote in favor of government in their online ballot Tuesday to decide whether to join the PD party in a coalition govt. Reports circulated of a Spain Socialist party policy proposal that aimed to get a govt deal with Podemos party and warned that a failure could see that country go back to fresh elections

- USD/JPY was lower around the 106 level as China upped its rhetoric on Hong Kong protesters. China stated that if it needed to deploy the army such a move would not end the one country - two systems.

Economic Data

- (CH) Swiss Aug CPI M/M: 0.0% v -0.1%e; Y/Y: 0.3% v 0.3%e; CPI Core Y/Y: 0.4% v 0.4%e

- (CH) Swiss Aug CPI EU Harmonized M/M: +0.1% v -0.1%e; Y/Y: 0.5% v 0.4%e

- (ES) Spain Aug Unemployment Change M/M: +54.4K v -4.3K prior

- (CZ) Czech Q2 Average Real Monthly Wage Y/Y: 4.3% v 4.2%e

- (HU) Hungary Jun Final Trade Balance: €0.5B v €0.1Be

- (TR) Turkey Aug CPI M/M: 0.9% v 1.3%e; Y/Y: 15.0% v 15.6%e; CPI Core Index Y/Y: 13.6% v 14.7%e

- (TR) Turkey Aug PPI M/M: -0.6% v -1.0% prior; Y/Y: 13.5% v 21.7% prior

- (NG) Nigeria Q2 GDP Y/Y: 1.9% v 2.5%e

- (SE) Sweden Q2 Current Account Balance (SEK): 37.0B v 59.1B prior

- (BR) Brazil Aug FIPE CPI (Sao Paulo) M/M: 0.3% v 0.3%e

- (UK) Aug Construction PMI: 45.0 v 46.5e (4th straight contraction)

- (UK) Weekly John Lewis Partnership LFL sales w/e Aug 24th: -3.1% v -1.9% prior

- (EU) Euro Zone July PPI M/M: 0.2% v 0.2%e; Y/Y: 0.2% v 0.2%e

**Fixed Income Issuance**

- (ID) Indonesia sold total IDR7.0T in 6-month Islamic bills and 2-year, 4-year, 15-year and 30 Sukuk bonds

- (AT) Austria Debt Agency (AFFA) sold total €1.15B vs. €1.15B indicated in 2024 and 2029 RAGB bonds

Looking Ahead

- 05:30 (ZA) South Africa Q2 GDP Annualized Q/Q: +2.5%e v -3.2% prior; Y/Y: 0.7%e v 0.0% 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 (UK) DMO to sell £3.0B in conventional 0.625% Jun 2025 Gilts

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.8-2.2B indicated range in 3-month and 6-month Bills

- 05:40 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)

- 06:00 (IE) Ireland Aug Unemployment Rate: No est v 4.6% prior

- 06:30 (EU) ESM to sell €3.0B in 3-month bills

- 07:00 (MX) Mexico July Leading Indicators M/M: no est v 0.01 prior

- 08:00 (BR) Brazil July Industrial Production M/M: +0.7%e v -0.6% prior; Y/Y: -1.0%e v -5.9% prior

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

- 08:00 (RU) Russia announces upcoming OFZ Bond issuance

- 08:30 (CA) Canada July MLI Leading Indicator M/M: No est v 0.3% prior

- 08:30 UK Parliament returns from summer recess

- 09:00 (SG) Singapore Aug Purchasing Managers Index: 49.7e v 49.8 prior; Electronics Sector Index: No est v 49.3 prior

- 09:00 (CL) Chile July Retail Sales Y/Y: +3.0%e v -0.9% prior; Commercial Activity Y/Y: No est v 1.9% prior

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:30 (CA) Canada Aug Manufacturing PMI: No est v 50.2 prior

- 09:45 (US) Aug Final Markit Manufacturing PMI: 50.0e v 49.9 prelim

- 10:00 (US) Aug ISM Manufacturing: 51.2e v 51.2 prior; Prices Paid: 47.4e v 45.1 prior

- 10:00 (US) July Construction Spending M/M: +0.3%e v -1.3% prior

- 10:00 (MX) Mexico weekly International Reserve data

- 11:00 (DK) Denmark Aug Foreign Reserves (DKK): No est v 448.1B prior

- 11:00 (CO) Colombia July Exports: $3.5Be v $3.0B prior

- 13:00 (NZ) New Zealand Aug QV House Prices Y/Y: No est v 2.2% prior

- 17:00 (KR) South Korea Aug Foreign Reserves: No est v $403.1B prior

- 17:00 (US) Fed's Rosengren (hawk, dissenter)

- 18:00 (CL) Chile Central Bank (BCCh) Interest Rate Decision: Expected to cut Overnight Rate Target by 50bps to 2.00%