Sterling rises as EUs Juncker welcomes Brexit proposal

Notes/Observations

- Euro weakens on reports the ECB Technical committee slightly downgrades growth forecasts

- Oil prices rise on lower US crude inventories, slowing production and looming Iran sanctions

- UK Conservatives Party members openly discussing ousting May at an ERG meeting last night

Asia:

- Japan PM Abe in Russia for bilateral talks with Putin, Xi; Japan and Russia to sign peace treaty by end of this year -India PM Modi may hold economic review meeting over the weekend to discuss measures on the Rupee and OIL, does not rule out rate hike by the RBI

Europe:

-(EU) ECB Technical Committee: said to keep inflation outlook unchanged; Sees downside risks to growth (prior view broadly balance)

-Reportedly UK Conservative members openly discussing ousting May at an ERG meeting last night; MP Steve Baker later denies plotting to remove May -

-EUs Juncker in state union address says will work 'day and night' to reach Brexit deal; welcomes PM May's Brexit proposal

-Downing street said to drop Chequers plan if it is rejected by the EU

- BOE Carney has agreed to extend his term (by an additional 7-months) until end-Jan 2020

Americas:

-According to sources Canada ready to include access to Canadian diary market to the US as a concession in NAFTA negotiations

-Canadian Foreign Min says NAFTA talks are intense and constructive, deal is still possible

Energy:

Russian Energy Min Novak: OPEC + will discuss whether more supply needed in Algiers

 

Economic Data:

(EU) EURO ZONE JULY INDUSTRIAL PRODUCTION M/M: -0.8% V -0.5%E; Y/Y: -0.1% V 1.0%E

(SG) Singapore July Retail Sales M/M: -2.9% v 1.3% prior; Y/Y: -2.6% v 0.7%e

(ES) Spain Aug Final CPI M/M: 0.1% v 0.2%e; Y/Y: 2.2% v 2.2%e

(IT) Italy July Industrial Production M/M: -1.8% v -0.3%e; Y/Y: 1.8% v 1.4% prior

(IT) Italy Q2 Unemployment Rate: 10.7% v 10.8%e

(CN) China Aug M2 Money Supply Y/Y: 8.2% V 8.6%E

(CN) China Aug New Yuan Loans (CNY): 1.280T V 1.350TE

(CN) China Aggregate (total social) Financing (CNY): 1.52T V 1.297TE

Fixed Income Issuance:

(DK) Denmark sells total DKK3.9Bin 3-month and 6-month Bills

(IT) Italy Debt Agency (Tesoro) sells €6.0B vs. €6.0B indicated in 12-month Bills; Avg Yield: 0.436% v 0.679% prior; Bid-to-cover: 1.91x v 1.79x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 +0.2% at 3,317, FTSE flat at 7,270, DAX +0.2% at 11,999, CAC-40 +0.6% at 5,313; IBEX-35 -0.1% at 9,280, FTSE MIB flat at 20,859, SMI +0.4% at 8,954, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European indices open mixed but moves higher as the session wore on; UK equities flat despite reports potential secret plans to dump Chequers Brexit agreement; Materials and Energy among top performer sectors; utilities underperforming; UK utilities dragged down following profit warning by SSE; Iberia A350 plane suffers technical engine problem, impacting Rolls Royce; upcoming events expected in the US session include traffic figures from major airlines

Equities

- Consumer discretionary: Casino Guichard-Perrachon CO.FR -1.4% (analyst action), Hermes RMS.FR +2.3% (results), Salvatore Ferragamo SFER.IT +4.6% (denies remors of potential M&A deal)

- Energy: Centrica CNA.UK -2.2% (SSE profit warning), Nordex NDX1.DE +5.3% (resumed contracts in South Africa)

- Technology: Nexans NEX.FR -7.8% (analyst action), Solutions 30 ALS30.FR +6.8% (analyst action)

- Telecom: Telecom Italia TIT.IT -1.6%(analyst action)

- Utilities: SSE SSE.UK -8.0% (results)

 

Speakers

(EU) EU's Juncker: UK can't stay a member in parts of single markets only; welcomes PM May's proposal on EU partnership

-(IT) Italy Deputy PM Di Maio (Five Star party leader): Italy could face a crisis without citizens income. Reiterates no need for Italy to breach its 3% EU budget deficit limit

(CN) China President Xi: China and Japan should uphold multilateralism; both countries should defend the free trade system - Comments from Russia

-(EU) EU's Juncker: Europe united has become an unavoidable force in world trade; United EU allows bloc to impose its will on others

(CZ) Czech Central Bank Gov Rusnok: next Czech rate move is close; 2 more rate hikes is possible this year

(IN) India official: PM Modi may hold economic review meeting this weekend; Not ruling out a rate hike by the RBI

(RU) Russia Energy Min Novak: OPEC + will discuss whether more supply needed in Algiers

(SE) Swedish Moderate Party leader Kristersson: calls for government to resign

 

Currencies

-Euro weakens following source reports of the ECB downgrading European growth forecasts before fading some of the move low. EURUSD currently trades below 1.16.

-The Indian Rupee strengthened over a report of PM Modi holding an economic review. With the USD/INR hitting a record low yesterday, the pair has rebounded approaching the 71 handle.

 

Fixed Income

- Bund Futures trades at 159.51 up 18 ticks with the focus on Thursday's ECB meeting, the 10-year bund yield trades steady above 0.40%. Resistance moves to 161.82 then 163. A downside break of 159.85 sees 158.69 initially.

- Gilt futures trades at 121.73 down 22 ticks following the move in Treasuries. Continued support at 122.50, with a continued move higher targeting 123.93 then 124.00.

- Wednesday 's liquidity report showed Monday's excess liquidity fell from €1.921T to €1.901T. Use of the marginal lending facility rose from €35M to €41M.

- Corporate issuance saw 3M and Enel lead issuance as momentum continues

 

Looking Ahead

- 06:00 (PT) Portugal Aug Final CPI M/M: No est v -0.3% prelim; Y/Y: No est v 1.2% prelim

- 06:00 (PT) Portugal Aug Final CPI EU Harmonized M/M: No est v -0.7% prelim; Y/Y: No est v 1.3% prelim

- 07:00 (US) MBA Mortgage Applications w/e Sept 7th: No est v -0.1% prior

- 07:00 (ZA) South Africa July Retail Sales M/M: +0.3%e v -1.2% prior; Y/Y: 1.6%e v 0.7% prior

- 08:00 (IN) India Aug CPI Y/Y: 3.8%e v 4.2% prior

- 08:00 (IN) India July Industrial Production Y/Y: 6.5%e v 7.0% prior

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (US) Aug PPI Final Demand M/M: 0.2%e v 0.0% prior; Y/Y: 3.2%e v 3.3% prior

- 08:30 (US) Aug PPI (Ex Food and Energy) M/M: 0.2%e v 0.1% prior; Y/Y: 2.7%e v 2.7% prior

- 08:30 (US) Aug PPI (Ex Food, Energy, Trade) M/M0.2%e v 0.3% prior; Y/Y: No est v 2.8% prior

- 08:30 (CA) Canada Aug Teranet/National Bank HPI M/M: No est v 0.8% prior; Y/Y: No est v 1.8% prior, HPI Index: No est v 225.57 prior

- 08:30 (CA) Canada Q2 Capacity Utilization Rate: 86.8%e v 86.1% prior

- 10:30 (US) Weekly DOE Crude Oil Inventories

- 14:00 (US) Federal Reserve Beige Book