September begins with risk aversion sentiment intact

Notes/Observations

- Concerns linger over emerging market stability and possible contagion effects; USD on firm footing

- Trade war concerns also simmering; President Trump tweeted that a trilateral NAFTA deal with Canada was not necessary and Congress should not "interfere" with trade negotiations

- Tame Swiss inflation data supports the view that the SNB won't raise rates before the ECB

- UK PMI data continues to miss expectations but holds onto growth territory (both Manufacturing and Construction missed consensus the past few sessions)

Asia:

- (AU) Reserve Bank of Australia (RBA) left Cash Rate Target unchanged at 1.50% (as expected). Statement was little changed from prior. Reiterated stance that low rates were supporting the economy and inflation. Progress on unemployment and inflation expected to be gradual. Saw GDP to average slightly higher than 3% in both 2019 and 2020

- South Korea Aug CPI M/M: 0.5% v 0.4%e; Y/Y: 1.4% v 1.4%e ; Core CPI Y/Y: 0.9% v 1.1%; data doesn’t justify any rate hike

- South Korea Q2 Final GDP Q/Q: 0.6% v 0.7%e Y/Y: 2.8% v 2.9%e

- Japan Fin Min Aso stated that the initial budget request for FY19 was likely around ¥102T (as speculated) but was still finalizing figures for budget;

Europe:

- ECB Weidmann (Germany) said the digital revolution only has a small impact on inflation. Concerns technology had depressed prices by raising competition

- UK Chancellor of the Exchequer Hammond (Fin Min) may unveil the budget by as early as Oct in order avoid clashing with the final stages of Brexit talks. No final decision has been made and article noted that the release of the budget could take place later, potentially in December

- Italy Fin Min Tria reiterated the government is seeking to keep its 2019 budget deficit below 2% of GDP

- UK Aug BRC Sales LFL Y/Y: 0.2% v 0.5% prior

Americas:

- President Trump tweeted: President Bashar al-Assad of Syria must not recklessly attack Idlib Province. The Russians and Iranians would be making a grave humanitarian mistake to take part in this potential human tragedy. Hundreds of thousands of people could be killed. Don’t let that happen!

Energy:

- National Hurricane Center issued a hurricane warning for parts of the Gulf Coast where Storm Gordon is expected to hit late Tuesday

Economic Data:

- (ES) Spain Aug Net Unemployment M/M: +47.0K v -27.1K prior

- (CZ) Czech Q2 Average Real Monthly Wage Y/Y: 6.2% v 5.9%e

- (CH) Swiss Aug CPI M/M: 0.0% v 0.0%e; Y/Y: 1.2% v 1.2%e v 1.2% prior

- (CH) Swiss Aug CPI EU Harmonized M/M: 0.0% v 0.4% prior; Y/Y: 1.3% v 1.2% prior

- (SE) Sweden Q2 Current Account (SEK): 10.0B v 17.6B prior

- (BR) Brazil Aug FIPE CPI (Sao Paulo): 0.4% v 0.3%e

- (UK) Aug Construction PMI: 52.9 v 54.9e (5th month of expansion)

- (EU) Euro Zone July PPI M/M: 0.4% v 0.3%e; Y/Y: 4.0% v 3.9%e

Fixed Income Issuance:

- (ID) Indonesia sold total IDR4.8T vs. IDR4.0T target in 6-month Islamic Bills, 2-year, 4-year, 7-year and 15-year Project-based Sukuk

- (ZA) South Africa sold total ZAR2.4B vs. ZAR2.4B indicated in 2031, 2040 and 2044 bonds

- (CH) Switzerland sold CHF387.4 in 3-month Bills; Yield: -0.864% v -0.849% prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.4% at 381.2, FTSE -0.2% 7493, DAX -0.7% at 12259, CAC-40 -0.7% at 5373, IBEX-35 -0.7% at 9380, FTSE MIB +0.2% at 20436, SMI -0.3% at 8980, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European Indices trade mostly lower coming off the morning highs. The FTSE trades little changed after outperformance yesterday ahead of testimony from BoE members in front of the Treasury select committee. WPP declines sharply this morning after missing estimates and mixed guidance; Illiad, Halfords and DS Smith are among companies trading higher following positive earnings. ING trades higher after a settling with the Dutch Authorities for disgorgement; Scor is another gainer after receiving and rejecting an offer from Covea. Looking ahead notable earnings include Conn's and Napco Security.

Movers

Consumer Discretionary WPP [WPP.UK] -7.1% (Earnings), Halfords [HFD.UK] +5.8% (Earnings)

-Industrials DS Smith [SMDS.UK] +0.5% (Trading update)

-Financials Scor [SCR.FR] +8.3% (Rejects take over bid), ING [INGA.NL] +1.9% (Settlement with Dutch Government)

-Technology Smith Group [SMIN.UK] +1.8% (Board rejects ICU's £2.8B takeover of the British company's medical division)

-Telecom Illiad [ILD.FR] +2.3% (Earnings)

-Healthcare Abivax [ABVX.FR] +11% (Positive trial data)

Speakers

- EU's Barnier said to prefer UK trade deal of Canada plus over PM May's Chequers plan

- Turkey Central Bank: Significant deterioration in general trend of core inflation indicators in Aug. Main driver of August inflation was in basic core goods and energy prices. Rising trend in energy prices to continue in Sept

- Russia Central Bank (CBR) Govr Nabiullina stated that she saw a real discussion on interest rate at the upcoming decision (Friday Sept 14th). inflation picking up faster than expected. Some factors in favor of hike, a lot of factors in favor of holding rate unchanged rather than cut.

- Indonesia Central Bank Gov Warijiyo reiterates to focus on FX stability. Purchased IDR3T of government bonds on Sept 3rd as part of its duel intervention

- Iran President Rouhani: To exert every effort to pump and export oil

Currencies

- USD continued to find some safe-haven flows related to concerns about trade tensions. Over the weekend President Trump tweeted a threat to expel Canada from NAFTA ahead of talks between the two countries this week

- EUR/USD moving back below the 1.16 handle.

- Tame Swiss inflation data supported the view that the SNB won't raise rates before the ECB. USD/CHF higher by 0.4% at 0.9730 area

- GBP/USD was lower for the 5th straight session to probe the lower end of the 1.28 handle as doubts continue to linger on Brexit negotiations. UK PMI data has also come in below expectations the past two sessions (Manufacturing on Monday and Construction earlier today). Focus will be on the BOE Treasury-select testimony where Gov Carney would likely be question on whether he planned to stay on beyond his Jun 2019 term end date.

Fixed Income

- Bund Futures trades at 160.60 down 13 ticks as Italian bond yields tumble as market pessimism over budget recedes. Resistance moves to 161.82 then 163. A downside break of 159.85 sees 158.69 initially.

- Gilt futures trades at 122.60 up 27 ticks as the British pound extends decline ahead of Carney testimony. Continued support at 122.50, with a continued move higher targeting 123.93 then 124.00.

- Tuesday 's liquidity report showed Monday's excess liquidity rose from €T to €1.915T. Use of the marginal lending facility rose from €30M to €44M.

- Corporate issuance saw a refreshing start to September issuance

Looking Ahead

- 05.30 (UK) Weekly John Lewis LFL sales data

- 05:30 (ZA) South Africa Q2 GDP Annualized Q/Q: +0.6%e v -2.2% prior; Y/Y: 1.0%e v 0.8% prior

- 05:30 (AU) RBA Gov Lowe in Perth

- 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 I/L 2030 and 2046 bonds (bundei)

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.4-1.8B in 3-month and 6-month Bills

- 06:00 (IE) Ireland July Industrial Production M/M: No est v -8.9% prior; Y/Y: No est v 8.0% prior

- 06:00 (IE) Ireland Aug Unemployment Rate: No est v 5.1% prior

- 06:30 (EU) ESM to sell €2.0B in 3-month bills

- 06:45 (US) Daily Libor Fixing

- 07:00 (BR) Brazil Aug FGV Inflation IGP-DI M/M: 0.8%e v 0.4% prior; Y/Y: 9.2%e v 8.6% prior

- 07:30 (TR) Turkey Aug Effective Exchange Rate (REER): No est v 76.01 prior

- 08:00 (BR) Brazil July Industrial Production M/M: -1.3%e v +13.1% prior; Y/Y: 2.2%e v 3.5% prior

- 08:05 (UK) Baltic Dry Bulk Index

- 08:15 (UK) BOE Gov Carney with members Haldane, Tenreyro and Saunders testify in Parliament

- 08:30 (CA) Canada July MLI Leading Indicator M/M: No est v 0.2% prior

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

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:00 (MX) Mexico July Leading Indicators M/M: No est v -0.07 prior

- 09:30 (CA) Canada Aug Manufacturing PMI: No est v 56.9 prior

- 09:30 (NZ) Fonterra Global Dairy Trade Auction

- 09:45 (US) Aug Final Markit Manufacturing PMI: 54.5e v 54.5 prelim

- 10:00 (US) July Construction Spending M/M: +0.4%e v -1.1% prior

- 10:00 (US) Aug ISM Manufacturing: 57.6e v 57.4e v 58.1 prior; Prices Paid: 69.5e v 73.2 prior

- 10:00 (DK) Denmark Aug Foreign Reserves (DKK): No est v 468.1B prior

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

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

- 13:00 (NZ) New Zealand Aug QV House Prices Y/Y: No est v 5.1% prior

- 15:00 (AR) Argentina July Industrial Production Y/Y: -5.4%e v -8.1% prior

- 18:00 (CL) Chile Central Bank (BCCH) Interest Rate Decision: Expected to leave Overnight Rate Target unchanged at 2.50%