German trade components disappoint, little reaction seen in price action

Notes/Observations

- German exports and imports slump in Jun. Exports saw their 1st decline in 6 months and largest fall since Aug 2015 while imports saw its biggest decline since January 2009 (Exports M/M: -2.8% v +0.2%e; Imports: M/M: -4.5% v +0.2%e)

- Focus on South Africa's secret ballot no confidence vote on President Zuma

Overnight

Asia:

- China July Trade Balance higher than expectations ($46.7B v $45.0Be) while components underwhelmed. Exports slowed for the 5th consecutive month (+11.2% v +15.2%e)

Europe:

- UK July BRC Sales LFL Y/Y: 0.9% v 0.9%e

Americas:

- Fed's Bullard (non-voter, dove): June unemployment data represents a good report; ready to start Fed balance sheet reduction in Sept

- Fed's Kashkari (dove, voter): US economy is doing pretty well overall. Did not believe shrinking the balance sheet will disrupt markets

Economic Calendar

- (NL) Netherlands July CPI M/M: +0.7% v -0.3% prior; Y/Y: 1.3% v 1.1% prior

- (NL) Netherlands July CPI EU Harmonized M/M: +0.8% v -0.3% prior; Y/Y: 1.5% v 1.1%e

- (CH) Swiss July Unemployment Rate: 3.0% v 3.0%e; Unemployment Rate (Seasonally Adj): 3.2% v 3.2%e

- (DE) Germany Jun Current Account Balance: €23.6B v €24.5Be; Trade Balance: €22.3B v €23.0Be; Exports M/M: -2.8% v +0.2%e; Imports M/M: -4.5% +0.2%e

- (NO) Norway Jun Credit Growth Indicator Y/Y: 5.7% v 5.4%e

- (CH) Swiss Q2 UBS Real Estate Bubble Index: 1.38 v 1.38 prior

- (FR) France Jun Trade Balance: -€4.7B v -€5.1Be

- (FR) France Jun Current Account Balance: -€2.1B v -€1.9B prior

- (FR) France Jun YTD Budget Balance: -€62.3B v -€66.4B prior

- (CZ) Czech July Unemployment Rate: 4.1% v 4.1%e

- (HU) Hungary July CPI M/M: 0.0% v 0.0%e; Y/Y: 2.1% v 2.0%e

- (TW) Taiwan July CPI Y/Y: 0.8% v 0.9%e; WPI Y/Y: -0.7% v -1.8% prior

**Fixed Income Issuance:

- (ID) Indonesia sold total IDR22.0T vs. IDR15T indicated in 2-year, 4-year, 7-year and 15-year Project-based Sukuk (PBS)

- (AT) Austria Debt Agency (AFFA) sold total €1.1B vs. €1.1B indicated in 2023 and 2047 RAGB bonds (**Note: retained €100M as usual)

- Sold €700MM in in 1.75% Oct 2023 RAGB bond; Avg Yield: -0.012% v +0.022% prior; Bid-to-cover: 2.02x v 2.10x prior

- Sold €300M in 1.5% Feb 2047 RAGB; Avg Yield: 1.495% v 1.600%% prior; Bid-to-cover: 2.84x v 2.57x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 flat at 3,503, FTSE -0.2% at 7,520, DAX -0.1% at 12,250, CAC-40 flat at 5,206, IBEX-35 +0.1% at 10,690, FTSE MIB -0.1% at 22,011, SMI -0.1% at 9,146, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes: European equities open down but turn around as the morning progressed; commodities, including gold and oil, taking investor interest; macro data had little impact on market direction; risk sentiment remains unmotivated; upcoming US earnings include Sealed Air, TravelCenters and Ralph Lauren

Equities

- Consumer discretionary: Air France AF.FR % (July metrics), Intercontinental Hotels IHG.DE % (earnings), Paddy Power Betfair PPB.UK % (earnings), International Workplace IWG.UK % (earnings)

- Industrials: Oerlikon OERL.CH % (earnings), Wacker Neuson WAC.DE % (earnings)

- Financials: Aegon AGN.NL % (divestment), Standard Life SL.UK % (earnings)

- Healthcare: Vifor Pharma VIFN.CH % (earnings), Clinigen CLIN.UK % (receives regulatory approval)

- Energy: Uniper UN01.DE % (earnings)

Speakers

- EU's Moscovici stated that the region needed work on harmonizing tax base, not rate. Possible that France 2017 Budget Deficit to GDP ratio came in under 3%

- Romania Central Bank Gov Isarescu: Inflation to enter target bank in Q3

- IMF cuts Philippines 2017 GDP growth forecast from 6.8% to 6.6%. Current monetary policy stance was appropriate

- China PBoC adviser said to be calling for implementation of a real estate tax

- Iran President Rouhani submitted a list for new Cabinet which reappointed Zanganeh as Oil Minister for another term and Zarif as Foreign Minister

Currencies

- USD trying to hold on to its small gains registered after Friday payroll report. However, Markets are pricing in less than a 50 percent chance that another Fed hike will come in 2017. The price action was tepid on Tuesday with market participants looking ahead to the US CPI data on Friday for more guidance on rates.

- EUR/USD was steady and holding above the 1.18 level despite some disappoint data out of Germany. Dealers believe that the disappointment of the German export economy could weigh on the Euro.

- South Africa's secret ‘no confidence vote' against President Zuma will keep ZAR volatility high. The ZAR firmed over 1,5% on Monday after the Parliamentary speaker announced the secret ballot. If the vote does oust President Zuma, then view South Africa could be the next Brazil and push the ZAR significantly higher in the short term

Fixed Income

- Bund futurestrades at 163.39 up 8 ticks in light volume with further upside momentum targeting 163.78. Downside targets 162.67 followed by 162.56.

- Gilt futurestrades at 126.98 down 5 ticks in quiet Summer trade, with continuation to the downside eyeing 126.51 then 125.97. A move back above 127 targets 127.20.

- Tuesday's liquidity report showed Monday's excess liquidity rose €1.734T down €11B from €1.745T prior. Use of the marginal lending facility fell to €257M from €174M prior.

- Corporate issuance saw $14.5B come to market via 13 issuers headlined by UBS $3.25B 2 part offering, Heinz $1.5B 3 part offering and Enterprise Products $1.7B 2 part offering. Monday marked the busiest day so far this year in terms of deal numbers, in what analysts expect to be a busy week. Issuance is expected between $35-40B.

Looking Ahead

- OPEC/Non-Opec committee finish a 2-day compliance meeting

- (PT) Bank of Portugal Releases Data on Banks

- (UR) Ukraine July CPI M/M: -0.3%e v 1.6% prior; Y/Y: 15.1%e v 15.6% prior

- 05.30 (UK) Weekly John Lewis LFL sales data

- 05:30 (ZA) South Africa July BER Business Confidence: No est v 94.9 prior

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

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

- 05:30 (UK) DMO to sell £1.0B in 0.125% in Inflation-Linked 2026 Gilts

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €2.5B in 3-Month and 12-Month Bills

- 06:00 (US) July NFIB Small Business Optimism: 103.5e v 103.6 prior

- 06:30 (EU) ESM to sell €1.3B in 3-month Bills; Avg Yield: % v -0.622% prior; Bid-to-cover: x v 5.1x prior (July 4th 2017)

- 06:45 (US) Daily Libor Fixing

- 07:00 (BR) Brazil July FGV Inflation IGP-DI M/M: -0.4%e v -1.0% prior; Y/Y: -1.5%e v -1.5% prior

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

- 08:00 (CL) Chile July CPI M/M: 0.1%e v -0.4% prior; Y/Y: 1.6%e v 1.7% prior

- 08:00 (CL) Chile July CPI (Ex-food&energy) M/M: -0.1%e v -0.4% prior; Y/Y: No est v 1.8% prior

- 08:00 (UK) Baltic Dry Bulk Index

- 08:00 (ZA) South Africa parliament 'no confidence' vote on President Zuma via secret ballot

- 08:15 (CA) Canada July Annualized Housing Starts: 205.0Ke v 213.2K prior (revised from 212.7K)

- 08:55 (US) Weekly Redbook Sales

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:00 (RU) Russia announces weekly OFZ bond auction

- 10:00 (US) Jun JOLTS Job Openings: 5.77Me v 5.67M prior

- 10:00 (MX) Mexico weekly International Reserves

- 11:00 (BR) Brazil to sell 2022, 2026, 2035 and 2055 I/L bonds

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

- 12:00 (US) DOE Short-Term Crude Outlook

- 13:00 (US) Treasury to sell $24B in 3-year notes

- 15:00 (AR) Argentina July National CPI M/M: No est v 1.2% prior

- 16:30 (US) Weekly API Oil Inventories