Key risk evets ahead, Chinese manufacturing PMI / EZ CPI - TDS

Analysts at TD Securities noted the key risk events for the day ahead.

Key Quotes:

"China’s August manufacturing PMI is likely to slip slightly to around 51.0 in line with high frequency indicators showing some loss of momentum in the economy. Manufacturing sentiment is likely to continue to be impacted by ongoing trade tensions and implementation of US tariffs, with another $200bn of tariffs likely to go into effect at the beginning of next month unless there is a deal. While targeted easing, fiscal stimulus, and corporate tax will help provide a buffer we expect manufacturing confidence to soften further."

"We look for Eurozone inflation to tick a bit lower in August, with core CPI slipping from 1.1% to 1.0% y/y (mkt 1.1%), and headline CPI from 2.1% to 2.0% y/y (mkt 2.1%). Risks appear balanced as while the Spanish and German figures support the downside miss, rounding to two decimal places puts a slightly higher hurdle to print lower this month. We look for core inflation to start showing a bit more upward momentum once we get into early 2019, which is something that we will eventually need to see in order for the ECB to be comfortable raising rates in the second half of the year.

But for now core CPI should remain rangebound. Fitch is already scheduled to review their ratings of Italy sovereign debt, to be released after European market close. They have flagged earlier this year the risks from political uncertainty and incompatibility of the government's spending and taxation initiatives to do anything but worsen the deficit. But as we don't yet have specifics on the upcoming budget, it may be difficult for Fitch to have any clear direction."