Macro focus on Jackson Hole from Thurs onwards

EU mid-market update: Germany looks to pull funding for Ukraine defense aid; Macro focus on Jackson Hole from Thurs onwards.

Notes/observations

- Equities are mixed across Europe as lack of substantial new catalysts leaves focus on upcoming Jackson Hole Economic Symposium beginning on Thurs (Aug 22-24), where Fed Chair Powell and other Central Bank members are expected to speak. Traders will listen for any clues about Fed’s Sept meeting and expected 25bps cut, or whether he will suggest a 50bps cut or none at all. BOJ Gov Ueda also set to speak on Friday.

- German defense stocks fell on press reports that Germany will no longer grant new requests for aid to Ukraine amid Govt spending cuts. Rheinmetall being affected the most.

- Crude oil moved modestly lower on back of hope for Gaza cease-fire talks.

- On Wed, US Bureau of Labor Statistics (BLS) set to release a preliminary benchmark revision to the Apr 2023-March 2024 nonfarm payroll data, which, according to Goldman, could be biggest downward revision in >7 years and thus, may bring volatility to global markets.

- Supply chains in the US could be somewhat disrupted by a strike of Canada's two biggest railroads as soon as this week: Last Friday, Canadian National barred container imports from US partner railroads.

- Economic data calendar is light, with focus on overnight China LPR setting for 1-year and 5-year.

- Asia closed mixed with Nikkei underperforming -2.0%. EU indices are -0.2% to +0.8%. US futures are -0.2% to +0.1%. Gold -0.2%, DXY -0.3%; Commodity: Brent -0.5%, WTI -0.6%; Crypto: BTC -1.9%, ETH -0.2%.

Asia

- Japan Ruling party LDP leadership race to be held on Sept 27th.

Global conflict/tensions

- Hamas rejected new US proposal for Gaza hostage and ceasefire deal and blamed Israeli PM for moving the goalposts.

- Nuclear safety at Zaporizhzhia nuclear power plant said to be deteriorating after drone strike hit a road around the site perimeter; no casualties or impact on any NPP equipment.

Europe

- Moody's raised Ireland outlook from Stable to Positive; Affirmed Aa3 sovereign rating.

Americas

- Fed’s Daly (voter) commented that was time to consider adjusting borrowing costs, but US economy was not in an urgent place.

- Fed's Goolsbee (non-voter for 2024) commented that there was no certainty the Fed would cut interest rates next month but not doing so could damage the labor market Stressed that when one sets a rate high and hold it there while inflation falls, you're actually tightening.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.11% at 512.04, FTSE -0.20% at 8,295.15, DAX -0.12% at 18,306.65, CAC-40 +0.02% at 7,451.18, IBEX-35 +0.85% at 11,042.80, FTSE MIB +0.40% at 33,174.00, SMI +0.10% at 12,197.90, S&P 500 Futures -0.04%].

Market focal points/Key themes: European indices open mixed and failed to gain direction in the early hours of the session; lack of trend in the markets attributed to slow start of the week on the economic front; Hungary closed for holiday; among better performing sectors are financials and materials; while technology and consumer discretionary sectors were among the underperformers; defense stocks under pressure after press reports that Germany would deny new aid to Ukraine amid govt spending cuts; Ericsson sells iconective to Koch Equity Development; Porsche to acquire majority stake in Varta’s V4Drive; Barratt Developments receives CMA waiver on Redrow combination; earnings expected in the upcoming US session include Estee Lauder and Palo Alto Networks.

Equities

- Consumer discretionary: B&S Group [BSGR.NL] -2.0% (earnings)

- Financials: Plus500 [PLUS.UK] +5.5% (H1 results, FY expected ahead of expectations; buyback) - Healthcare: Bavarian Nordic [BAVA.DK] -4.5% (update on supply of mpox vaccines) - Industrials: Rheinmetall [RHM.DE] -4.0%, BAE Systems [BA.UK] -2.5%, Hensoldt [HAGG.DE] -6.5% (German reportedly to halt new Ukraine military aid), Metso [MOCORP.FI] +2.5% (speculation on potential unit merger with Sandvik), Barratt Developments [BDEV.UK] +1.5% (update on combination with Redrow).

Speakers

- Swiss National Bank (SNB) adjusted its remuneration of sight deposits: has no impact on monetary policy stance.

Currencies/fixed income

- Focus on upcoming Jackson Hole Economic Symposium which is often looked to for policy guidance. Fed Chair Powell to deliver his remarks on Friday.

- The USD was softer as the prospect of Fed rate cuts pick up momentum. Market talking notes of various Fed officials commentary for rate path hints.

- EUR/USD at 1.1050 for 7 ½ month highs.

- GBP/USD testing 1-month highs as the pair nudges towards the 1.30 level.

- USD/JPY at 146.05 as policy divergence provided additional momentum for the Yen.

Economic data

- (ES) Spain Jun Trade Balance: -€0.7B v -€2.3B prior.

- (CH) Swiss weekly Total Sight Deposits (CHF): 464.9B v 463.1B prior; Domestic Sight Deposits: 457.2B v 455.5B prior.

Fixed income issuance

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills; Avg Yield: 4.37% v 4.48% prior; bid-to-cover: 3.28x v 2.60x prior.

Looking ahead

- (US) Democratic Party holds Convention (Chicago, IL) (Aug 19-22).

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

- 05:30 (DE) Germany to sell €3.0B in 12-month BuBills.

- 05:30 (NE) Netherlands Debt Agency (DSTA) to sell 3-month and 6-month Bills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (NO) Norway announces details on upcoming bond issuance (held on Wed).

- 06:00 (BE) Belgium Debt Agency (BDA) canceled planned bond auction.

- 06:30 (TR) Turkey to sell Bonds.

- 07:00 (IS) Iceland to sell 3-month and 6-month Bills.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

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

- 08:30 (CL) Chile Q2 GDP Q/Q: -0.6%e v +1.9% prior; Y/Y: 1.6%e v 2.3% prior.

- 08:30 (CL) Chile Q2 Current Account Balance: -$1.8Be v -$0.1B prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.4-7.0B in 3-month, 6-month and 12-month bills(4 tranches).

- 09:00 (US) Mid-Aug Manheim wholesale used vehicle Index.

- 09:15 (US) Fed’s Waller.

- 09:45 (UK) BOE Gilt sale operation.

- 10:00 (US) July Leading Index: -0.3%e v -0.2% prior.

- 10:30 (UK) DMO meeting with Gilts investors.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 16:00 (US) Weekly Crop Progress Report.

- 17:00 (KR) South Korea Aug Consumer Confidence: No est v 103.6 prior.

- 18:45 (NZ) New Zealand July Trade Balance (NZD): No est v 0.7B prior; Exports: No est v 6.2B prior; Imports: No est v 5.5B prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 83.9 prior.

- 21:00 (CN) China PBOC Monthly Loan Prime Rate (LPR) Setting for 1-year and 5-year LPR: Expected to keep rates unchanged at 3.35% and 3.85% respectively.

- 21:30 (AU) Reserve Bank of Australia (RBA) Aug Minutes.

- 23:00 (KR) South Korea Q2 Household Credit (KRW): No est v 1,883T prior.

- 23:00 (TH) Thailand Central Bank to sell THB 55B in 3-month biils.

- 23:35 (JP) Japan to sell 20-year JGB Bonds.