Quiet start to week

Notes/Observations

- ECB sees inflation rate below 1% in early 2018 citing a statistical quirk

 

Overnight

Asia:

- Japan PM Abe: To decide on dissolving Diet and election after current US visit (**Note: Earlier reports circulated that PM Abe was considering snap election as soon as Oct)

- UN Sec Council statement (from Friday) condemned 'highly provocative' North Korean missile launch

- US Ambassador to UN Haley: UN Security Council may run out of options with regard to North Korea. Iran, Syria and North Korea will be major focus at UN Gen Assembly next week

- US Sec of State Tillerson: increasingly aggressive North Korean threatens the region and endangers the world

- North Korea said to be aiming to establish "military equilibrium" with US; "will make the US rulers dare not talk about military option"

Europe:

- ECB's Praet (Belgium): Reiterates Council view that euro zone still needs substantial stimulus to get back to the near 2% inflation target; will also respond if inflation were to get too high

- ECB reportedly estimates 2018 QE reinvestment average at €15B/month (**Reminder: current QE program of €60B/month in bond purchases is expected to be wound down during 2018)

- Bank for International Settlements (BIS) Quarterly Review: Strong outlook with low inflation spurs risk-taking

- Forza Italia party chief Berlusconi (former PM) lays policy priorities in marking a formal return to Italy's political stage

- Foreign Sec Johnson laid out his vision for Brexit; believes it can still deliver £350M a week extra for the NHS (**Note: Various cabinet colleagues accuse Johnson of "backseat driving" on Brexit)

- UK Interior Sec Rudd: Johnson was not starting a leadership bid by setting out his plans for Brexit in a newspaper article, adding that his intervention was "absolutely fine"

Sovereign rating actions from Friday:

- S&P raised Portugal sovereign rating to investment grade, raises one notch to BBB- from BB+; outlook Stable

- Moody's raised Ireland's sovereign rating to A2 from A3; outlook revised to Stable from Positive

- S&P affirmed Cyprus sovereign rating at BB+; outlook revised to Positive from Stable

- S&P affirmed Russia sovereign rating at BB+; outlook Positive

- S&P affirmed Austria and Finland sovereign ratings at AA+; outlook Stable

 

Economic data

- (AT) Austria Aug CPI M/M: -0.1% v -0.3% prior; Y/Y: 2.1% v 2.0% prior

- (CZ) Czech Aug PPI Industrial M/M: 0.2% v 0.1%e; Y/Y: 1.4% v 1.3%e

- (HK) Hong Kong Aug Unemployment Rate: 3.1% v 3.1%e

- (EU) Euro Zone Aug CPI M/M: 0.3% v 0.3%e; Y/Y (final reading): 1.5% v 1.5%e; CPI Core (final reading) Y/Y: 1.2% v 1.2%e

**Fixed Income Issuance:

- (NO) Norway sold total NOK6.0B vs. NOK6.0B indicated in 12-month Bills; Avg Yield 0.39% v 0.41% prior; Bid-to-cover x v 2.42x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx600 +0.5% at 382.5, FTSE +0.3% at 7235, DAX +0.6% at 12591, CAC-40 +0.4% at 5235, IBEX-35 +0.7% at 10391, FTSE MIB +0.7% at 22381, SMI +0.4% at 9061, S&P 500 Futures +0.2%]

Market Focal Points/Key Themes: European Indices start the week of on the front foot continuing the momentum from the end of last week, with the dollar reach an 8 week high against the yen ahead of the FOMC rate decision mid week. On the corporate front Fingerprint cards continue to fall after guiding Q3 Rev short of expectations, whilst Ryanair trades lower after cancelling over 150 flights after 'Messing up' Pilot holidays. Elsewhere Petra Diamonds trade sharply lower after prelim results, whilst in the healthcare space Thrombogenics trade higher after regaining rights to JETREA.

 

Equities

- Consumer discretionary [(Ryanair [RYA.UK] -3.4% (Flight cancellations)]

- Materials: [Petra diamonds [PDL.UK] -8.6% (Prelim FY17 results)]

- Financials: [Esure [ESUR.UK] +6.8% (Controlling shareholder mulling sale), Hiscox [HSX.UK] -2% (Hurricane Harvey claims estimates)]

- Technology: [Fingerprint Cards -22% (FINGB.SE] -21% (Q3 guidance)]

- Telecom: [Nokia [NOKIA.FI] +1.2% (Received decision in patent license arbitration with LG Elec)]

- Healthcare: [Thrombogenics [THR.BE] +17.5% (Regains global rights to JETREA (ocriplasmin))]

- Energy: [Seabird Exploration [SBX.NO] -59% (Private placement)]

 

Speakers

- ECB noted that base effect seen affecting inflation in coming quarters. Combined impact of base effects from the energy and unprocessed food HICP components will lower headline inflation in the first quarter of 2018, but raise it in the following quarter. September staff projections foresaw a V-shaped path for headline inflation

- ECB's Hansson (Estonia): ECB steps could involve new refinancing operations, reworked guidance and more details on reinvestments

- France Budget Min Darmanin: 2017 GDP growth seen at 1.7% vs. 1.5% official govt target

- Spain Fin Min de Guindos: No market impact from any instability resulting in Catalonia region. Companies were leaving Catalonia due to high taxes. Unemployment is falling faster than govt projections as domestic economy was growing over 3%

- Italy Fin Min Podoan: Domestic banks efficiency has improved due to govt measures; NPLs were falling at a faster rate. Pubic backstop and deposit insurance is needed for EU banking union

- Greece PM Tsipras: Optimistic to see above target primary surplus in 2017. Country needed to complete 3rd bailout review asap despite technical and political difficulties. Aiming to complete prior actions by November

- China PBOC Adviser Sheng Songcheng: Now is not the time to change the CNY currency (Yuan) regime

- China PBoC said to be working on draft proposal for foreign access to financial sector

- China FX Regulator SAFE reiterated view that CNY currency (Yuan) exchange rate was stable even with recent FX appreciation

 

Currencies

- USD/JPY was at a 2-month high with the pair above 111.30 ahead of the NY Morning. Dealers were eyeing the upcoming FOMC policy meeting mid-week meeting for clues on whether interest rates could rise again by year-end

- EUR/USD was little changed at 1.1940 area with dealers seeing little impetus for movement before Wednesday's Fed policy meeting

- Yields on 10-year Portuguese government bonds drop faster than their euro zone counterparts early Monday after the sovereign's upgrade to BBB-, an investment-grade rating, by S&P after the close Friday

 

Fixed Income

- Bund futures trade little changed at 161.37 as investors await a number of speeches by European and U.K. central bankers this week, as well as the US Federal Reserve's meeting. Continued downside targets 161.03 while upside resistance stands initially at 162.07, followed by 163.27.

- Gilt futures trade at 125.42 up 12 ticks with little in the way of UK economic data, Gilts will take their lead from the performance of core European government bonds.. Continued downside eyeing 124.91. Upside targets 127.90 then 128.24.

- Monday's liquidity report showed Friday's excess liquidity fell to €1.7655T from €1.7660T and use of the marginal lending facility fell to €109M from €115M.

- Corporate issuance saw $42.8B last week via 66 tranches, bringing YTD issuance to above $1.03T. For the week ahead analysts forecast around $25B to come to market. In Euro denominated issuance ~€35B came to market via 39 issuers and 49 tranches

 

Looking Ahead

- (UR) Ukraine Q2 Final GDP Q/Q: 0.6%e v 0.6%prelim; Y/Y: 2.4%e v 2.4%

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €3.5B in 2024, 2027 and 2034 OLO Bonds

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-Month and 6-month Bills

- 06:00 (PT) Portugal Aug PPI M/M: No est v -0.3% prior; Y/Y: No est v 2.2% prior

- 06:45 (US) Daily Libor Fixing - 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)

- 07:00 (BR) Brazil Sept IGP-M Inflation (2nd Preview): 0.4%e v 0.3% prior

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey

- 08:00 (PL) Poland Aug Employment M/M: 0.1%e v 0.3% prior; Y/Y: 4.6%e v 4.5% prior

- 08:00 (PL) Poland Aug Average Gross Wages M/M: -1.1%e v -0.1% prior; Y/Y: 5.7%e v 4.9% prior

- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (CA) Canada July Int'l Securities Transactions (CAD): No est v -0.9B prior

- 08:30 (CH) Swiss Government question time in Parliament

- 09:00 (FR) France Debt Agency (AFT) to sell combined €4.0-5.2B in 3-month, 6-month and 12-month Bills

- 09:30 (EU) ECB announces Covered-Bond Purchases - 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

- 09:50 (UK) BOE to buy £1.125B in in APF Gilt purchase operation (3-7 years)

- 10:00 (US) Sept NAHB Housing Market Index: 67e v 68 prior

- 10:30 (DE) ECB's Lautenschlaeger (Germany) in Basel

- 11:00 (UK) BOE Gov Carney at IMF in Washington DC

- 11:00 (CO) Colombia July Trade Balance: -$0.6Be v -$0.1B prior

- 11:30 (US) Treasury to sell 3-month and 6-month bills

- 14:15 (DE) SPD's Schulz takes questions at Televised Town-Hall Event in Luebeck

- 14:15 (CA) Bank of Canada (BOC) Dep Gov Lane

- 16:00 (US) July Total Net TIC flows: No est v $7.7B prior; Net Long-Term Tic Flows: No est v $34.4B prior

- 16:00 (US) Weekly Crop Progress Report