UK July CPI reading back at target while Eurozone confirms move back above it

Notes/Observations

- Various July readings of inflation showed signs of easing (UK, South Africa).

- UK July CPI lower-than-expected and moved back to target.

- EU CPI confirmed that annual pace moves back above ECB's target.

- Markets debate over whether the spread of the delta Covid-19 variant might derail the economic rebound.
Fed July Minutes signals on how soon the U.S. central bank will begin paring back on economic stimulus.

Asia

- New Zealand Central Bank (RBNZ) left Official Cash Rate (OCR) unchanged at 0.25% (not expected) due to recent lockdown measures.

- Japan July Trade Balance: ¥441.0B v ¥196.4B; Exports Y/Y: 37.0% v 39.4%e; Imports Y/Y: 28.5% v 35.3%e.

- South Korea FX Authority: Cautiously watching possible overshoot in USD/KRW.

Europe

- UK Dept for International Trade confirmed it was in pre-negotiation scoping phase of a free trade agreement with India.

- UK Cabinet ministers said to be advising PM Johnson to temporarily change the long held tradition of 7% increase to state pensions deeming it would not be affordable.

Mid-East

- IAEA stated that Iran had nearly doubled its enrichment capacity dedicated to purifying uranium close to the levels required for nuclear weapon.

Americas

- Fed Chair Powell noted that covid was still with us and would likely be for a while; Not clear yet if the Delta strain would have important effects on the economy.

- Fed's Rosengren (non-voter): Massive bond purchases ill suited for US; reiterates would support beginning tapering in Sept.

- Fed's Kashkari (dove, non-voter): Last jobs report was very strong report. but still 6-8M jobs short of pre-pandemic levels. Monitoring data closely to see if high inflation would be temporary or persistent. Saw high price right now but still a lot of slack in labor market. Best guess was that we were a few years away from a rate hike.

Energy

- Weekly API Crude Oil Inventories: -1.2M v -0.8M prior.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 -0.04% at 473.58, FTSE -0.34% at 7,156.85, DAX -0.27% at 15,879.50, CAC-40 -0.35% at 6,795.81, IBEX-35 +0.03% at 8,868.00, FTSE MIB -0.08% at 26,204.50, SMI +0.28% at 12,511.90, S&P 500 Futures -0.11%].

Market Focal Points/Key Themes: European indices open broadly flat but later traded mixed with a downward bias; lack of risk appetite supports safe haven assets; sectors trending higher include health care and real estate; sectors trending lower include energy and financials; Lundbeck results dragging on oil & gas subsector despite increase in crude prices; Good Energy rejects offer from Ecotricity; M&G to acquire Santringham Financial; BHP’s plan to delist from London encounters resistance; focus on release of FOMC minutes later in the session; earnings expected during the upcoming US session include Lowes, Target, Brinker and Analog Devices.

Equities

- Consumer discretionary: Carlsberg [CARLB.DK] +3% (earnings), Matas [MATAS.DK] +9% (earnings).

- Healthcare: Lundbeck [LUN.DK] -8% (earnings).

- Industrials: Balfour Beatty [BBY.UK] -6% (earnings), Persimmon [PSN.UK] -3% (earnings).

Speakers

- ECB noted that the bank sector was planning prudent dividends for Q4.

- Philippines cut its 2021 GDP growth forecast from 6.0-7.0% range to 4.0-5.0% range citing virus restrictions . Maintained it growth outlook for 2022-24 period.

- IAEA says Iran has nearly doubled its enrichment capacity dedicated to purifying uranium close to the 60% levels required for nuclear weapon (**Note: Move by Iran viewed that t would not de-escalate its atomic activities before meeting again with world powers).

Currencies/Fixed Income

- USD holding onto recent gains with focus on upcoming FOMC July Minutes for any clues around the timing or speed of plans to taper asset purchases. Market debating whether the spread of the delta Covid-19 variant might derail the economic rebound.

- EUR/USD tested 9-month lows during the Asian session at 1.1702 (lowest since November 2020). Pair drifted higher in quiet trading.

- GBP/USD drifted higher despite improvement on the inflation front. Pair at 1.3755 by mid-session.

Economic data

- (UK) July CPI M/M: 0.0% v 0.2%e; Y/Y: 2.0% v 2.3%e ; CPI Core Y/Y: 1.8% v 2.0%e; CPIH Y/Y: 2.1% v 2.3%e.

- (UK) July RPI M/M: 0.5% v 0.3%e; Y/Y: 3.8% v 3.6%e v 3.9% prior; RPI-X (ex-mortgage interest payments) Y/Y: 3.9% v 3.7%e; Retail Price Index: 305.5 v 305.0e.

- (UK) July PPI Input M/M: 0.8% v 0.5%e; Y/Y: 9.9% v 9.1%e.

- (UK) July PPI Output M/M: 0.6% v 0.5%e; Y/Y: 4.9% v 4.4%e.

- (AT) Austria July Final CPI MM: 0.3% v 0.1% prelim; Y/Y: 2.9% v 2.7% prelim.

- (PL) Poland July Employment M/M: 0.0% v 0.2%e; Y/Y: 1.8% v 2.0%e.

- (PL) Poland July Average Gross Wages M/M: 0.9% v 0.7%e; Y/Y: 8.7% v 8.9%e.

- (PL) Poland Aug Consumer Confidence: -14.6 v -13.5 prior.

- (ZA) South Africa July CPI M/M: 1.1% v 1.1%e; Y/Y: 4.6% v 4.7%e (5th straight reading within target band).

- (ZA) South Africa July CPI Core M/M: 0.5% v 0.5%e; Y/Y: 3.0% v 3.2%e.

- (UK) Jun ONS House Price Index Y/Y: 13.2% v 9.8% prior.

- (HK) Hong Kong July Unemployment Rate: 5.0% v 5.3%e.

- (EU) Euro Zone July Final CPI Y/Y: 2.2% v 2.2%e; CPI Core Y/Y: 0.7% v 0.7%e; CPI M/M: -0.1% v -0.1%e.

- (EU) Euro Zone Jun Construction Output M/M: -1.7% v -0.4% prior; Y/Y: 2.8% v 12.2% prior.

- (CY) Cyprus July CPI Harmonized M/M: 0.2% v 1.0% prior; Y/Y: 2.7% v 2.2% prior.

Fixed income Issuance

- (IN) India sold total INR170B vs. INR170B indicated in 3-month, 6-month and 12-month bills.

- (ID) Indonesia sold total IDR30.0T vs. IDR33.0T target in bills and bonds.

- (DK) Denmark sold total DKK4.18B in 2024, 2031 and 2052 DGB bonds.

- (SE) Sweden sold SEK5.0B vs. SEK5.0B indicated in 3-month bills; Avg Yield: -0.1957% v -0.1999% prior; bid-to-cover: 3.17x v 2.55x prior.

Looking Ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell €1.0B in 0% Aug 2050 Bunds.

- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €0.75-1.0B in 3-month and 12-month bills.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (PT) Portugal July PPI M/M: No est v 1.6% prior; Y/Y: No est v 8.9% prior.

- 06:00 (CZ) Czech Republic to sell CZK100M in 0% 2027 Bonds.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (RU) Russia to sell 2031 and 2041 OFZ Bonds.

- 07:00 (US) MBA Mortgage Applications w/e Aug 13th: No est v 2.8% prior.

- 07:00 (ZA) South Africa Jun Retail Sales M/M: -0.5%e v +2.1% prior; Y/Y: 9.5%e v 15.8% prior.

- 07:00 (UK) No Weekly PM Question time in House (summer holiday).

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

- 08:30 (US) July Housing Starts: 1.600Me v 1.643M prior; Building Permits: 1.610Me v 1.594M prior (revised from 1.598M).

- 08:30 (CA) Canada July CPI M/M: 0.3%e v 0.3% prior; Y/Y: 3.4%e v 3.1% prior; Consumer Price Index: 141.9e v 141.4 prior.

- 08:30 (CL) Chile Q2 GDP Q/Q: 0.7%e v 3.2% prior; Y/Y: 17.4%e v 0.3% prior.

- 08:30 (CL) Chile Q2 Current Account Balance: No est v -$1.6B prior.

- 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (7-20 years).

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

- 12:00 (RU) Russia July PPI M/M: 2.0%e v 2.9% prior; Y/Y: 27.8%e v 31.1% prior.

- 13:00 (US) Treasury to sell 20-Year Bonds.

- 14:00 (US) FOMC July Minutes.

- 21:00 (CN) China July Swift Global Payments (CNY): No est v 2.5% prior.

- 21:30 (AU) Australia July Employment Change: -43.1Ke v +29.1K prior; Unemployment Rate: 5.0%e v 4.9% prior; Full Time Employment Change: No est v +51.6K prior; Part Time Employment Change: No est v -22.5K prior; Participation Rate: 66.0%e v 66.2% prior.

- 22:00 (SL) Sri Lanka Central Bank (CBSL) Interest Rate Decision: Expected to leave Key rates unchanged; Standing Lending Rate currently at 5.50%; Standing Deposit Rate currently at 4.50%.

- 23:00 (KR) South Korea Q2 Short-Term External Debt: No est v $165.7B prior.

- 23:00 (TH) Thailand Central Bank to sell THB30B in 2023 Bonds.

- 23:30 (JP) Japan to sell 12-Month Bills.