Notes/Observations

- Goodwill gestures between US and China aids risk appetite before they resume trade talks in coming weeks.

- Trump said he would delay the introduction of extra tariffs on Chinese imports by two weeks; China said to considers US farm imports

- ECB expected to announce simulative measures

 

Asia:

- China considers US farm imports as goodwill before talks

- BOJ Gov Kuroda: Did not talk about negative interest rates with PM Abe, exchanged views on economy and financial markets, Abe did not comment on monetary policy

 

Europe/Mideast:

- ECB to cut some growth projections; sees both 2019 and 2020 GDP expansion not much above 1%

- BOE Vlieghe: If you change BOE 2% inflation target, could create higher perceived risk that it will be changed again in the future

 

Brexit:

- PM Johnson: reiterated stance that Irish backstop must be removed from Brexit deal and would not accept Northern Ireland only backstop. To leave EU on Oct 31st

- UK govt published its Operation Yellowhammer document describing its worst-case 'no deal' Brexit planning assumptions as of Aug 2nd. Protests might consume police resources. Saw electricity prices rising in a 'no deal' Brexit and freight delays up to 2 1/2 days. Could see supply chains up to six months and clashes between fishing fleets
Americas: -

- President Trump tweeted that US would delay implementation of next phase of tariffs on $250B of Chinese goods (from 25 to 30%) by two weeks until Oct 15th (Reminder: On Sept 1st, the Trump administration’s 15% tariff on $112B of Chinese goods took effect)

- President Trump said to have ruled out unilaterally indexing capital gains taxes to inflation

 

Energy:

- Iraq Oil Min: doesn't expect deeper oil output cuts to be on the table at Thurs JMMC meeting

- President Trump considered easing sanctions on Iran, which former NSA Bolton argued forcefully against

- US House of Representatives votes to ban offshore oil exploration off the Florida Gulf Coast permanently. Bill now heads to Senate where a similar bill from Sen Rubio (R-FL) would also ban fracking, but not permanently

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.07% at 389.42, FTSE +0.04% at 7,341.29, DAX +0.13% at 12,375.56, CAC-40 -0.06% at 5,614.46, IBEX-35 -0.07% at 9,053.05, FTSE MIB +0.27% at 21,950.50, SMI -0.34% at 10,064.50, S&P 500 Futures +0.19%]

 

Market Focal Points/Key Themes:

European Indices trade mixed coming off the earlier highs following progress in US-China trade talks in which China considers US farm imports as goodwill before talks. Asian Indices traded mixed, while US indices continued the positive tone following on from modest gains seen yesterday.
On the corporate front shares of Anheuser Busch Inbev trade higher as its Asia Pacific subsidiary resumed application for its IPO in Hong Kong; British American Tobacco gains as the company looks to simplify its organization, while Alstom declines as Bouygues sells 29.2M shares at €37/shr.
On the earnings front shares of French traded Rubis gains on a sharp rise in earnings and profits; UK supermarket chain Morrison’s rises on positive H1 numbers, while Rovio is a sharp decliner on a profit warning.
Looking ahead notable earners include Kroger, Palatin, Deluth Holding and Mastercraft Boat Holdings.

 

Equities

- Consumer discretionary: WM Morrison [MRW.UK] +3.5% (earnings; special div), AB InBev [ABI.BE] +4% (Hong Kong IPO), Rovio Entertainment [ROVIO.FI] -22% (outlook cut), Mitie Group [MTO.UK] +1% (contract)

- Financials: London Stock Exchange [LSE.UK] -6% (HSEX offer faces US scrutiny)

- Industrials: Alstom [ALO.FR] -5% (Bouygues to sell stake), Babcock [BAB.UK] +2% (contract), dormakaba [DOKA.CH] -4% (earnings)

- Technology: Ricardo [RCDO.UK] -4.5% (earnings)

 

Speakers

- German IFO Institute updated its economic forecasts which cut both 2019 and 2020 growth outlook. Cut 2019 GDP growth forecasts from 0.6% to 0.5% and 2020 GDP growth forecast from 1.7% to 1.2%. It saw Germany in recession with Q3 GDP contracting and forecasted a slight recovery expected in Q4

- Japan Trade & Industry Min Sugawara: To decide on South Korea trade talks within 10 days. No change to Japan's stance on export controls and adds that its actions in-line were in-line with WTO rules. Urged South Korea to respond appropriately

- Japan Econ Min Nishimura: Govt to do its utmost to support the domestic economy; priority is to increase potential growth rate. Japan-US trade deal should wrap up this month

- Some BOJ members said to believe that JGB yields were close to a tipping point with move below -0.3% would consider action (**Note:10-year JGB yield recently declined to -0.295% for lowest since July 2016 (currently at -0.22%. The most recent BOJ rate decision maintained its policy framework of "QQE with Yield Control" unchanged around 0.00%)

- Malaysia Central Bank (BNM) Policy Statement reiterated stance that monetary policy remained accomodative and supportive of economic activity. Headline inflation seen averaging higher for remainder of 2019 and into 2020 while baseline growth projection for 2019 remained unchanged

- China People's Daily: Trump's tariff delay was 'positive' and called for joint action to resolve trade dispute

- Saudi Energy Min Abdulaziz: OPEC+ goal is to reach stable oil market; our oil policy remain unchanged. Every country should comply with oil output cuts

- Russia Energy Min Novak: OPEC+ actions continue to have a positive effect; all OPEC+ members determined to show full compliance

- Oman Oil Min: JMMC technical committee did not discuss any deeper production cuts during today's meeting. 2020 oil outlook was not very good

- IEA Sept Monthly Oil Report: Maintains 2019 and 2020 global oil demand growth forecasts. Maintained 2019 global oil demand growth forecast at 1.1bpd; maintained 2020 global oil demand growth from at 1.3bpd. It also maintained 2019 Non-Opec supply growth at 1.9M bpd. It cautioned that OPEC+ faced a daunting oil market surplus in 2020

- OPEC-Non-OPEC Joint Ministerial Monitoring Committee (JMMC) statement: Important for all members to full full compliance of agreed upon production cuts. Oil inventories exceeded the 5-year OECD average. Global uncertainties and trade tensions and monetary policies causing instabilities

 

Currencies/ Fixed Income

- EUR/USD holding above the 1.10 level ahead of the ECB rate decision later where more simulative measures are expected to be announced. Some analysts noted that should ECB fail to match market expectations for easing policy, the balance of risks favors higher EUR/USD

 

Economic Data

- (SE) Sweden Aug PES Unemployment Rate: 3.8% v 3.8% prior

- (NL) Netherlands July Trade Balance: €4.1B v €4.8B prior

- (FI) Finland July Final Retail Sales Volume Y/Y: 2.3% v 1.7% prelim

- (DE) Germany Aug Final CPI M/M: -0.2% v -0.2%e; Y/Y: 1.4% v 1.4%e

- (DE) Germany Aug Final CPI EU Harmonized M/M: -0.1% v -0.1%e; Y/Y: 1.0% v 1.0%e

- (CH) Swiss Aug Producer & Import Prices M/M: -0.2% v -0.1% prior; Y/Y: -1.9% v -1.7% prior

- (FR) France Aug Final CPI M/M: 0.5% v 0.5%e; Y/Y: 1.0% v 1.1%e; CPI Ex-Tobacco Index: 104.40 v 104.38e

- (FR) France Aug Final CPI EU Harmonized M/M: 05% v .5%e; Y/Y: 1.3% v 1.2%e

- (MY) Malaysia Central Bank (BNM) left its Overnight Policy Rate unchanged at 3.00%; as expected

- (ES) Spain July House Transactions Y/Y: +3.8% v -9.0% prior

- (ES) Spain July House Transactions Y/Y: +3.8% v -9.0% prior

- (SE) Sweden Aug Average House Prices (SEK): 3.105M v 2.951M prior

- (IT) Italy Q2 Unemployment Rate: % v 10.0%e

- (HK) Hong Kong Q2 PPI Y/Y: 0.8% v 0.7% prior

- (HK) Hong Kong Q2 Industrial Production Y/Y: 0.3% v 1.4% prior

- (EU) Euro Zone July Industrial Production M/M: -0.4% v -0.1%e; Y/Y: -2.0% v -1.3%e

- (IS) Iceland Aug International Reserves (ISK): 838B v 806B prior

- (GR) Greece Q2 Unemployment Rate: 16.9% v 19.2% prior

 

Fixed Income Issuance

- 05:00 (IT) Italy Debt Agency (Tesoro) sold total €7.75B vs. €6.75-7.75B in 3-year, 7-year and 30-year BTP bonds

- Sold €4.0B vs. €3.5-4.0B indicated range in new 0.05% Jan 2023 BTP; Avg Yield: -0.01% (record low) v +0.49% prior; Bid-to-cover: 1.50x v 1.65x prior

- Sold €2.25B vs. €1.75-2.25B indicated range in 2.10% July 2026 BTP bonds; Avg Yield: 0.56% (record low) v 1.24% prior; Bid-to-cover: 1.47x v 1.70x prior

- Sold €1.5B vs. €1.0-1.5B indicated range in 3.85% Sept 2049 BTP bonds; Avg Yield: 2.06% (record low) v 3.65% prior; Bid-to-cover: 1.24x v 1.34x prior

- 0 (IE) Ireland Debt Agency (NTMA) sold €1.0B vs. €1.0B indicated in 1.1% May 2029 IGB bond; Avg Yield: -0.051% (record low) v +0.136% prior; Bid-to-cover: 2.0x v 2.5x prior

 

Looking Ahead

- 05:30 (ZA) South Africa July Total Mining Production M/M: No est v 3.3% prior; Y/Y: +1.0%e v -4.2% prior; Gold Production Y/Y: No est v -16.0% prior; Platinum Production Y/Y: No est v -6.3% prior

- 06:00 (IE) Ireland Aug CPI M/M: No est v -0.2% prior; Y/Y: No est v 0.5% prior

- 06:00 (IE) Ireland Aug CPI M/M: No est v -0.2% prior; Y/Y: No est v 0.5% prior

- 06:00 (IE) Ireland July Property Prices M/M: No est v 0.4% prior; Y/Y: No est v 2.0% prior

- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to cut One-Week Repo Rate by 275bps to 17.00% (2nd straight cut)

- 07:45 (EU) ECB Interest Rate Decision: Expected to add stimulative measures: Expected to leave 7-Day Main Refinancing Rate unchanged at 0.00%; Expected to leave Marginal Lending Facility unchanged at 0.25%; Expected to cut Deposit Facility Rate by 10bps to -0.50%

- 08:00 (IN) India Aug CPI Y/Y: 3.4%e v 3.2% prior

- 08:00 (IN) India July Industrial Production Y/Y: 2.5%e v 2.0% prior

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

- 08:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Floden

- 08:30 (US) Aug CPI M/M: 0.1%e v 0.3% prior; Y/Y: 1.8%e v 1.8% prior

- 08:30 (US) Aug CPI Ex Food and Energy M/M: 0.2%e v 0.3% prior; Y/Y: 2.3%e v 2.2% prior

- 08:30 (US) Aug CPI Index NSA: 256.586e v 256.571 prior; CPI Core Index SA: 264.100e v 263.569 prior

- 08:30 (US) Initial Jobless Claims: 215Ke v 217K prior; Continuing Claims: 1.68Me v 1.662M prior

- 08:30 (US) Aug Real Avg Weekly Earnings Y/Y: No est v 0.8% prior; Real Avg Hourly Earning Y/Y: No est v 1.3% prior

- 08:30 (CA) Canada July New Housing Price Index MM: 0.0%e v -0.1% prior; Y/Y: -0.2%ev -0.2% prior

- 08:30 (US) Weekly USDA Net Export Sales

- 08:30 (EU) ECB Draghi post rate decision press conference

- 09:00 (RU) Russia Gold and Forex Reserve w/e Sept 6th: No est v $530.5B prior

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report

- 13:00 (US) Treasury to sell 30-year notes

- 14:00 (US) Aug Monthly Budget Statement: -$195.0Be v -$119.7B prior

- 15:00 (AR) Argentina Aug National CPI M/M: 4.4%ev 2.2% prior; Y/Y: Y/Y: 55.4%e v 54.4% prior

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