BOE quarterly inflation report highly anticipated

EU Market Update: BOE quarterly inflation report highly anticipated; UK employment picture continued its improving trend but soft wage data might put a wrench in first rate hike timing

Notes/Observations

- Japan Q2 Preliminary GDP registers its biggest quarterly decline in 5 years (Q/Q: -1.7% v -1.8%e; Y/Y: -6.8% v -7.0%e

-Bank of Japan (BOJ) July 14-15 meeting minutes shows standard rhetoric that recovery continues; negative impact from sales tax increase should decrease

- (CN) China lending slumps as July New Yuan Loans come in well below expectation (385.2B v 780Be) to its lowest level since Jan 2010; PBoC stressed that its monetary policy direction was not changing and continue prudent monetary policy with timely fine-tuning

- Canada's Stats office has admitted a mistake in its July jobs report (revision on Friday)

- Germany July Final CPI confirmed at a 4-year low (YoY at 0.8% vs. 0.8% prelim reading)

- UK employment picture continued its improving trend but soft wage data might put a wrench in first rate hike timing

Key Economic Data in session

- (CN) China July YTD Urban Assets Y/Y: 17.0% v 17.4%e

- (CN) China July Retail Sales Y/Y: 12.2% v 12.5%e; Retail Sales YTD Y/Y: 12.1% v 12.2%e

- (CN) China July Industrial Production Y/Y: 9.0% v 9.2%e; Industrial Production YTD Y/Y: 8.8% v 8.8%e

- (DE) Germany July Final CPI M/M: 0.3% v 0.3%e; Y/Y: % v 0.8%e

- (DE) Germany July Final CPI EU Harmonized M/M: % v 0.3%e; Y/Y: % v 0.8%e

- (DE) Germany July Wholesale Price Index M/M: _0.1% v 0.0%; Y/Y -0.7 v -0.5% prior

- (FR) France July CPI M/M: -0.3% v -0.3%e; Y/Y: 0.5% v 0.5%e; CPI Ex-Tobacco Index: 125.8 v 125.9e

- (FR) France July CPI EU Harmonized M/M: -0.4% v -0.3%e; Y/Y: 0.6% v 0.6%e

- (HU) Hungary Jun Final Industrial Production M/M: 1.8% v 1.8% prelim; Y/Y: 11.3% v 11.3% prelim

- (ES) Spain July CPI M/M: -0.9% v -0.9%e; Y/Y: -0.3% v -0.3%e

- (ES) Spain July CPI EU Harmonized M/M: -1.5% v -1.5%e; Y/Y: -0.4% v -0.3%e

- (ES) Spain July CPI Core M/M: -1.1% v 0.0% prior; Y/Y: 0.0% v 0.0%e

- (EU) ECB €638M borrowed in overnight loan facility vs. €154.0M prior; €25.4B parked in deposit facility vs. €22.2B prior - Daily Eurosystem Liquidity Conditions

- (NL) Netherlands Jun Retail Sales Y/Y: -1.9% v +0.9% prior

- (NO) Norway Jun Retail Sales W/Auto Fuel M/M: 1.2% v 0.4%e

- (CZ) Czech Jun Current Account Monthly (CZK): -0.3B v -3.8Be

- (UK) July Jobless Claims Change: -33.6K v -30.0Ke; Claimant Count Rate: 3.0% v 3.0%e

- (UK) Jun Average Weekly Earnings 3M/Y: -0.2% v -0.1%e; Weekly Earnings ex Bonus 3M/Y: 0.6% v 0.7%e

- (UK) Jun ILO Unemployment Rate: 6.4% v 6.4%e; Employment Change 3M/3M: +167K v +270Ke

- (IT) Italy Jun General Government Debt: €2.168T v €2.166T prior

- (EU) Euro Zone Jun Industrial Production M/M: -0.3% v +0.4%e; Y/Y: 0.0% v 0.2%e

- (GR) Greece Q2 Advance GDP Y/Y: -0.3% v -0.5%e

- (CH) Swiss Aug Credit Suisse ZEW Expectations Survey: 2.5 v 0.1 prior

- (IS) Iceland Q2 Unemployment Rate: 5.9% v 5.8% prior

Fixed Income:

- (IN) India sold total INR128.3B vs. INR150B indicated in 3-month and 6-month Bills

- (EU) ECB allotted $75M in 7-day USD Liquidity Tender at fixed % vs. $75M prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities***

Indices [FTSE 100 flat at 6,633, DAX +0.9% at 9,153, CAC-40 +0.7% at 4,189, IBEX-35 +0.5% at 10,288, FTSE MIB +0.5% at 19,510, SMI +0.5% at 8,372, S&P 500 Futures +0.4% at 1,937]

- By Sector/Market Focal Points: Markets open higher following Tuesday's losses, DAX supported by earnings from E.ON and Salzgitter, FTSE 100 gains capped by ex-dividends (Shell, Rio Tinto, Standard Chartered), E.ON gains on better than expected EBITDA, Swiss Life H1 profits above ests, Copper lower amid weaker China lending and production data

By Sector

- Financials [Swiss Life SLHN.CH +3% (H1 profits above ests); Admiral Group ADM.UK -3% (H1 sales declined), Standard Chartered STAN.UK -1% (ex dividend)]

- Basic Materials/Resources [Aurubis NDA.DE +5% (Q2 profits above ests), Salzgitter SZG.DE +2% (reported Q2 pretax profit); Rio Tinto RIO.UK -2.5% (ex dividend)]

- Industrials [Heidelberger Druck HDD.DE -3% (Q1 sales below ests)]

- Utilities [E.ON EOAN.DE +4.5% (H1 EBITDA above ests)]

- Energy [Shell RDSA.UK -0.5% (ex dividend)]

- Stoxx50 Sectors [Utilities +2%, Telecom +1.2%, Financials +0.9%, Basic Materials +0.9%, Industrials +0.8%, Consumer Non-Cyclical +0.6%, Energy +0.6%, Consumer Cyclical +0.4%; Technology -0.1%]

Speakers:

- ECB's Weidmann (Germany) stressed that it must wait and see the effects from the June measures. He reiterated France must set budget example. France needed to stop asking Germany for measures to enhance growth and focus on structural reforms. He also reiterated his view that euro region crisis was not over

- Russia Deputy PM Dvorkovich: Russia won't see sharp increase in food prices as domestic harvest looking good. He also saw potential to increase food imports from New Zealand and Asia.

- South Africa Central Bank's (SARB) Mminele: Growth forecasts were insufficient to create jobs

- Japan PM Adviser Hamada stated that the country's monetary and fiscal stimulus measures were 'losing momentum'. He added that more careful consideration on sales tax needed after Q3 data. If Q3 GDP too weak, more gradual tax increases would be adopted. And the second phase of the increase would be postponed.

- Philippines Central Bank (BSP) Gov Tetangco: Bank prepared to use all tools needed to safeguard price stability

Currencies/Fixed Income:

- The session saw a plethora of European July inflation data. German July final CPI confirmed a 4-year low with the YoY reading at 0.8%. Inflation has been unusually low across the Euro Zone, fuelling concern the region could slip into deflation

- The GBP currency was off its session highs after the key employment and wage data. UK employment picture continued its improving trend but soft wage data might put a wrench in first rate hike timing. Weekly earnings registered their first fall since 2009. The quarterly inflation report will come later in today's session. The Inflation report is speculated to lay the ground work for the potential tightening of monetary policy once spare capacity was exhausted. GBP/USD hovering around the 1.6800

- The JPY currency was softer after the initial estimate of Japan Q2 GDP saw the economy contract by the biggest margin since the great earthquake over 3 years ago, Japanese officials continued to downplay the effects of the April sales tax hike and stressed that the gradual recovery trend was continuing. USD/JPY

Political/In the Papers:

- (GR) Eurogroup chairman Dijsselbloem: Greece has met targets for next €1B aid disbursement

- China PBoC: Monetary policy direction is not changing; to continue prudent monetary policy with timely fine-tuning. China money supply, credit level and aggregate financing growth were still within a reasonable range. Weaker Loan demand due to slowdown of economy and property market.

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)

- 05:30 (UK) Bank of England (BOE) Quarterly Inflation Report

- 05:30 (DE) Germany to sell €4.0B in 1.5% 2024 Bunds

- 06:00 (IS) Iceland to sell Bills

- (IT) Italy PM Renzi in Milan

- 06:30 (SE) Sweden PM Reinfeldt

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia cancelled planned OFZ Bond auction

- 07:00 (US) MBA Mortgage Applications w/e Aug 8th: No est v +1.6% prior

- 07:00 (IE) Ireland July Consumer Confidence Index: No est v 81.1 prior

- 07:00 (ZA) South Africa Jun Retail Sales M/M: 0.3%e v 0.8% prior; Y/Y: 2.0%e v 2.4% prior

- 08:00 (PL) Poland Jun Current Account Balance: -€280M v +€280M prior; Trade Balance: €585Me v €175M prior; Exports: €13.8Be v €13.6B prior; Imports: €13.3Be v €13.5B prior

- 08:00 (PL) Poland July CPI M/M: -0.2%e v 0.0% prior; Y/Y: -0.2%e v +0.3% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) July Advance Retail Sales M/M: 0.2%e v 0.2% prior; Retail Sales Ex Auto M/M: 0.4%e v 0.4% prior; Retail Sales Ex Auto and Gas: 0.4%e v 0.4% prior; Retail Sales Control Group: 0.4%e v 0.6% prior

- 08:30 (CL) Chile Central Bank's Traders Survey

- 09:00 (CA) Canada July Teranet/National Bank HPI M/M: No est v 0.9% prior; Y/Y: No est v 4.4% prior; House Price Index: No est v 163.98 prior

- 09:05 (US) Fed's Dudley speaks on Wholesale Funding in New York

- 09:20 (US) Fed's Rosengren speaks on Wholesale Funding in New York

- 10:00 (US) Jun Business Inventories: 0.4%e v 0.5% prior

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

- 11:00 (US) Fed to Purchase $0.35-0.45B in Notes

- 11:30 (BR) Brazil Currency Flows Weekly

- 12:00 (CA) Canada to sell 2-Year Bonds

- 13:00 (US) Treasury to sell $24B in 10-Year Notes

- 13:30 - (MX) Mexico Central Bank Quarterly Inflation Report

- 13:55 (CA) Canadian Min Moore speaks in Edmonton

- 21:00 (KR) Bank of Korea (BoK) Interest Rate Decision: Expected to leave 7-Day Repo Rate unchanged at 2.50%

- 21:40 (AU) RBA Senior Manager Hancock speaks on panel