No new borrowings planned in German 2020 budget

Notes/Observations

- German 2020 budget seen not issuing any new debt

- Sweden inflation expectations deteriorated putting a kink in the Riksbank tightening plans (delay normalization)

- UK Weekly earnings beat expectations and rise at its fastest pace since the 2008-09 global financial crisis

- Some concerns that ECB won't be able to live up to huge easing expectations

Asia:

- China Aug CPI Y/Y: 2.8% v 2.7%e; Rising pork prices accounted for 1.08% of CPI

- There is speculation that Trump/Xi could meet in Nov, Trump confirmed trade talks with China to occur next week

- Fitch cut China 2019 and 2020 GDP growth forecast noting that protectionism was choking global growth prospects. Cuts China 2019 GDP growth outlook from 6.2% to 6.1%and 2020 GDP growth outlook from 6.0% to 5.7%

Europe/Mideast:

- Germany reportedly could face a shortfall in tax revenue in 2020 and 2021. Also German fiscal stimulus speculation has gained traction amid several recent reports suggesting the govt was prepared to drop its balanced budget rule if the economic outlook worsened

- Italy PM Conte wins first of two confidence votes in Italian Parliament

- Fitch cut 2019 and 2020 GDP growth forecasts for the euro zone. Cut 2019 GDP growth forecast from 1.2% to 1.1% and 2020 GDP growth forecast from 1.3% to 1.1%

Brexit:

- UK Government stated that it had received legal advice on its rights and obligations when it leaves the EU but publishing the details would damage its negotiating position

- UK House of Commons again rejected PM Johnson's request for an early general elections: 293 in favor (needed 434 to move forward) v 46 against; Parliament to be suspended until Oct 14 (PM Johnson loses 6th vote in 6 days)

- UK Liberal Democrats Leader Swinson said to officially back revoking article 50 in an attempt to position themselves as the most pro-EU political party. (Note: Move would effectively sever the chances of an alliance with Labour at a forthcoming general election)

Americas:

- Fitch trimmed US GDP growth forecasts for 2019 and 2020 citing trade policy. Cut 2019 GDP growth forecast from 2.4% to 2.3% and cut 2020 GDP growth forecast from 1.8% to 1.7%

Energy:

- Russia Central Bank 3-year monetary policy outlook saw potential decline in oil prices to $25/bbl in 2020 as part of risk scenario; could be caused by lower energy product demand and poor global growth

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.36% at 384.66, FTSE -0.16% at 7,223.95, DAX -0.27% at 12,193.24, CAC-40 -0.46% at 5,563.41, IBEX-35 -0.35% at 8,979.25, FTSE MIB -0.42% at 21,897.50, SMI -0.67% at 9,991.50, S&P 500 Futures -0.32%]

Market Focal Points/Key Themes:

Equities

European Equities trade lower tracking a mixed session in Asia and lower US Index futures, as US-China trade talks continue to show slight signs of progress. On the corporate front, shares of UK retailer JD Sports Fashion trades higher on higher profits and Revenue, with Cairn Energy rising on earnings and raised Oil production outlook, while Seche Environment also gains on earnings and upbeat outlook. UK betting names 888.com declines sharply on earnings and weak B2B business; Ashtead Group declines on earnings, with Kiadis Pharma, Partners Group, Gulf Keystone Petroleum and IDHC are among other decliners on earnings. In other news Galliford Try gains sharply on talk of a potential combination of its Housing arm with Bovis Homes, with Bovis homes trading lower on the news as well as earnings. Barclays gains on updates to its PPI provisions, Tesco declines on an analyst downgrade, while Sage Group declines on the evaluation of its Sage Pay business. Looking ahead notable earners include HD Supply Holdings, Francesca's and Christopher & Banks.

- Consumer discretionary: Ashtead [AHT.UK] -2% (earnings), 888 Holdings [888.UK] -6.5% (earnings), JD Sports [JD.UK] +6% (earnings)

- Energy: Cairn Energy [CNE.UK] +8% (earnings)

- Financials: Galliford Try [GFRD.UK] +15%, Bovis Homes Group [BVS.UK] -5% (potential combination), Barclays [BARC.UK] +4% (update on PPI), Partners Group Holdings [PGHN.CH] -4% (earnings)

- Technology: Sage Group [SGE.UK] -2% (looking at options for unit)

 

Speakers

- Germany Fin Min Scholz: To present solid 2020 budget without new debt. The budget was expansionary to stabilize the economy. Doing what was needed without new debt but would react if there was a crisis (**Note: German fiscal stimulus had gained traction amid several recent reports suggesting the govt was prepared to drop its balanced budget rule if the economic outlook worsened)

- France Budget Min Darmanin stated that Govt maintained 2020 GDP growth forecast at 1.4% and saw 2020 budget deficit to GDP between 2.1-2.2% range

- Ireland Europe Min Mcentee reiterated that UK had not provided any real alternative on Irish backstop. EU would approve a Brexit extension for a UK election

- India Fin Min Sitharaman: Fully focused on raising GDP growth

- China FX Regulator SAFE: Removed QFII and RQFII quota limits to open up financial markets

 

Currencies/Fixed Income

- FX markets saw stable price action in the session.

- EUR/USD holding around 1.1040 area and unable to find any momentum higher despite some concerns that ECB won't be able to live up to huge easing expectations on Thursday. France July Industrial Production data kept the stimulus expectations on the front burner.

- USD JPY was at 5-week highs on continued optimism on US-China trade talks. President Trump again confirmed talks with China next week in a recent rally. Pair trades at 107.30 just ahead of the US morning.

- The SEK currency was weaker after Sweden CPI data missed expectations and put some a kink in the Riksbank tightening plans. EUR/SEK higher by 0.9% at 10.76

 

Economic Data

- (FI) Finland July Industrial Production M/M: 0.5% v 1.2% prior; Y/Y: 3.8 v 2.5% prior

- (FR) France Q2 Final Private Sector Payrolls Q/Q: 0.2% v 0.3%e; Total Payrolls: 0.2% v 0.3%e

- (DK) Denmark CPI M/M: -0.4% v +0.6% prior; Y/Y: 0.4% v 0.4% prior

- (DK) Denmark CPI EU Harmonized M/M: -0.4% v +0.7% prior; Y/Y: 0.5% v 0.4% prior

- (NO) Norway Aug CPI M/M: -0.7% v -0.5%e; Y/Y: 1.6% v 1.8%e

- (NO) Norway Aug CPI Underlying M/M: -0.6% v -0.5%e; Y/Y: 2.1% v 2.2%e

- (NO) Norway Aug PPI including Oil M/M: -0.3% v -1.2% prior; Y/Y: -3.5% v -8.6% prior

- (SE) Sweden Prospera Inflation Expectations Survey

- (JP) Japan Aug Preliminary Machine Tool Orders Y/Y: -37.1% v -33.0% prior

- (FR) France July Industrial Production M/M: 0.3% v 0.5%e; Y/Y: -0.2% v +0.5%e

- (FR) France July Manufacturing Production M/M: 0.3% v 0.8%e; Y/Y: -0.3% v +0.1%e

- (CZ) Czech Aug CPI M/M: 0.1% v 0.0%e; Y/Y: 2.9% v 2.8%e

- (CZ) Czech July Export Price Index Y/Y: -0.5% v +0.1% prior; Import Price Index Y/Y: -1.7% v -0.7% prior

- (HU) Hungary Aug CPI M/M: -0.1% v 0.0%e; Y/Y: 3.1% v 3.2%e

- (SE) Sweden July Household Consumption M/M: 0.8% v 0.2% prior; Y/Y: +2.8% v -0.3% prior

- (SE) Sweden Aug CPI M/M: -0.4% v -0.3%e; Y/Y: 1.4% v 1.7%e; CPI Level: 334.39 v 334.89e

- (SE) Sweden Aug CPIF M/M: -0.4% v -0.3%e; Y/Y: 1.3% v 1.5%e

- (SE) Sweden Aug CPIF (ex-energy) M/M: -0.4% v -0.3%e; Y/Y: 1.6% v 1.8%e

- (NO) Norway Aug Region Output Survey (past 3-Months): 1.48 v 1.51 prior; Output Survey (next 6-Months): 1.35 v 1.38e

- (IT) Italy July Industrial Production M/M: -0.7% v -0.1%e; Y/Y: -0.7% v +0.3%e; Industrial Production NSA Y/Y: +2.4% v -4.2% prior

- (UK) Aug Jobless Claims Change: +28.2K v +19.8K prior; Claimant Count Rate: 3.3% v 3.2% prior

- (UK) July Average Weekly Earnings 3M/Y: 4.0% v 3.7%e; Weekly Earnings (ex-bonus) 3M/Y: 3.8% v 3.7%e

- (UK) July ILO Unemployment Rate: 3.8% v 3.9%e; Employment Change 3M/3M: +31K v +55Ke

- (GR) Greece Aug CPI Y/Y: -0.2% v 0.0% prior; CPI EU Harmonized Y/Y: 0.1% v 0.4% prior

**Fixed Income Issuance**

- (UK) DMO opened its book to sell 1.625% Oct 2054 Gilts; guidance seen 0.75bps to 2052 Gilt

- (NL) Netherlands Debt Agency (DSTA) sold €1.54B vs. €1.0-2.0B indicated range in 0.25% July 2029 DSL Bond; Avg Yield: % v -0.205% prior

- (ES) Spain Debt Agency (Tesoro) sold total €4.82Bvs. €4.0-5.0B indicated range in 6-month and 12-month Bills

- (ID) Indonesia sold total IDR23.35T vs.IDR15.0T target in 3-month and 9-month bills and 5-year, 10-year, 15-year and 20-year and 30-year bonds

- (CH) Switzerland sold CHF403.7M in 3-month bills; Avg Yield: -1.002% v -0.983% prior

 

Looking Ahead

- (MX) Mexico Aug ANTAD Same-Store Sales Y/Y: No est v 1.2% prior

- 05:30 (UK) Weekly John Lewis LFL Sales data

- 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 (DE) Germany to sell €0.5B in 0.10 Apr 2046 I/L bonds

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.4-1.8B in 3-month and 12-month Bills

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

- 06:00 (US) Aug NFIB Small Business Optimism Index: 103.5e v 104.7 prior

- 06:00 (IL) Israel Aug Consumer Confidence: No est v 115 prior

- 06:00 (PT) Portugal Employment Report

- 07:00 (ZA) South Africa July Manufacturing Production M/M: +0.4%e v -1.5% prior; Y/Y: -1.5%e v -3.2% prior

- 07:00 (BR) Brazil Sept IGP-M Inflation (1st Preview): -0.2%e v -0.7% prior

- 07:00 (CZ) Czech Central Bank to comment on CPI data

- 07:30 (CL) Chile Central Bank Economists Survey

- 08:00 (BR) Brazil CONAB Crop Report (Soybean)

- (MX) Mexico Aug Nominal Wages: No est v 5.9% prior

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

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

- 08:15 (CA) Canada Aug Annualized Housing Starts: 212.5Ke v 222.0K prior

- 08:30 (CA) Canada July Building Permits M/M: +2.0%e v -3.7% prior

- 08:30 (SE) Sweden Central Bank (Riksbank) Gov Ingves in London

- 08:55 (US) Weekly Redbook LFL Sales data

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:45 (UK) BOE APF Gilt purchase operation

- 10:00 (US) July JOLTS Job Openings: 7.331Me v 7.348M prior

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

- 13:00 (US) Treasury to sell 3-year notes

- 16:30 (US) Weekly API Oil Inventorie