Recent rise in yields weighs on risk appetite

Notes/Observations

- Recent move higher in bond yields take some momentum out of equity prices.

Asia

- Japan Q2 Final GDP Q/Q: 0.5% v 0.4%e; Annualized Q/Q: 1.9% v 1.6%e.

Europe

- France Stats Agency (Insee) raises French 2021 GDP growth from 6.0% to 6.25%, on the verge over moving past impact of COVID.

- PM Johnson: Do not want any more tax increases during this Parliament, but can't rule out further tax increases for the UK (*Reminder: On Sept 7th PM Johnson stressed the need to help the NHS recover from the pandemic and confirmed plan for a 1.25% health and social care tax; dividend income to be taxed 8.75% starting in April 2022 (prior 7.5%).

House of Commons to vote on PM Johnson's proposal to raise National Insurance to pay for health and social care on Wed, Sept 8th.

Americas

- Fed's Bullard said to be pushing for a quick taper after weaker than expect jobs data (Reminder: previously noted that he would like to begin tapering now and finish by Q1 2022).

- Sen Manchin (D-WV) said to have privately warned the White House and Congressional leaders he has specific policy objections the President Biden’s $3.5T spending plans. Would support as little as $1.0T of it with $1.5T at the high end.

- House Republicans said to be facing increased pressure to oppose a bipartisan infrastructure bill when they return to DC later this month.

Energy

- IAEA stated it was increasingly concerned that issues around undeclared Iran nuclear sites remained unresolved. Noted that Iran had produced 10kg of near weapons grade 60% enriched uranium.

- US wanted to consult with partners on best path forward as it did not know when indirect nuclear discussions with Iran might resume.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 -1.25% at 466.96, FTSE -1.18% at 7,065.20, DAX -1.50% at 15,605.55, CAC-40 -1.28% at 6,640.31, IBEX-35 -1.29% at 8,779.50, FTSE MIB -1.02% at 25,808.00, SMI -1.45% at 12,165.40, S&P 500 Futures -0.29%].

Market Focal Points/Key Themes: European indices open down across the board; all sectors open the day in the red, but the least negative include consumer discretionary and technology; sectors leading to the downside inclue industrials and energy ; automotive sector dragged by Renault CEO saying a full merger with Nissan not possible; Morrisons starts auction procedure between Fortress and Market; Sanofi acquires Kadmon; Dongfeng sells stake in Stellantis; Smisths Group sells medical unit to ICU; earnings expected during the upcoming US session include GameStop and Lululemon.

Equities

- Consumer discretionary: Smiths Group [SMIN.UK] +4% (divestment), Bakkavor [BAKK.UK] +5% (earnings), Asos [ASC.UK] -2% (block trade), Interparfums [ITP.FR] -5% (earnings).

- Consumer staples: Clas Ohlson [CLASB.SE[] -9% (earnings).

- Healthcare: Sanofi [SAN.FR} -2% (acquires Kadmon).

Speakers

- ECB's Holzmann (Austria; hawk) stated that saw potential significant upside inflation risks; could be able to normalize policy sooner than previously thought.

- ECB Vasle (Slovenia) reiterated Council view of continued need highly accomodative monetary policy. New waves of pandemic might slow recovery.

- ECB's Enria (SSM chief) stated that saw signs that the deterioration of asset quality caused by the pandemic had yet to peak.

- Russia govt official stated that could reduce planned 2021 borrowings due to higher revenues.

- Turkey Central Bank (CBRT) Gov Kavcioglu reiterated view that transitory CPI levels to dissipate and would take steps for stronger TRY currency (Lira). Current policy stance was tight enough to lower inflation in Q4.

- BOJ Gov Kuroda stated that easing to continue after pandemic.

- China Foreign Ministry spokesperson Wang Wenbin stated that might release the foreign investment negative list by end-2021.

- China State Planner (NDRC) reiterated pledge to promote steady investment growth.

- US Pacific fleet stated that the carrier strike group entered the South China Sea.

Currencies/Fixed income

- USD rebounded as higher Treasury yields and continued taper talk from hawkish Fed members.

- EUR/USD moved to 1-week lows at 1.1820 as markets awaited the ECB rate decision on Thursday.

- European yields have moved higher during the week as dealers noted that evidence was mounting that the Euro Zone economy would recover more quickly from the pandemic than previously thought. Some hawkish ECB speak failed to provide any redemption for the Euro ahead of Thursday’s policy decision.

Economic data

- (SE) Sweden July Maklarstatistik Housing Prices Y/Y: 16% v 18% prior; Apartment Prices Y/Y: 10% v 12% prior.

- (FR) France Q2 Final Private Sector Payrolls Q/Q: 1.4% v 1.2%e; Total Payrolls: 1.1% v 1.0%e.

- (DK) Denmark July Current Account Balance (DKK): 16.6B v 20.1B prior; Trade Balance: B v 6.7B prior.

- (FR) France July Trade Balance: -€7.0B v -€6.2Be; Current Account Balance: -€3.5B v -€0.9B prior.

- (ES) Spain Q2 INE House Price Index Q/Q: 2.4% v 0.5% prior; Y/Y: 3.3% v 0.9% prior.

- (HU) Hungary Aug CPI M/M: 0.2% v 0.1%e; Y/Y: 4.9% v 4.7%e (5th month above target range).

- (HU) Hungary July Preliminary Trade Balance: -€0.2B v €0.6B prior.

- (SE) Sweden July GDP Indicator M/M: 0.5% v 0.4%e; Y/Y: 7.8% v 10.5% prior.

- (SE) Sweden Private Sector Production M/M: % v 1.3% prior; Y/Y: % v 10.7% prior.

- (SE) Sweden July Industrial Orders M/M: -1.4% v +0.1% prior; Y/Y: 13.5% v 22.3% prior.

- (SE) Sweden July Industry Production Value Y/Y: 13.3% v 15.5% prior; Service Production Value Y/Y: 10.0% v 10.4% prior.

- (SE) Sweden July Household Consumption M/M: 0.7% v 0.3% prior; Y/Y: 6.4% v 7.8% prior.

- (IT) Italy July Retail Sales M/M: -0.4% v -0.2%e; Y/Y: 6.7% v 4.9%e.

- (CZ) Czech Aug International Reserves: $170.6B v $167.8B prior.

- (HU) Hungary Aug YTD Budget Balance (HUF): -1.9001T v -1.804T prior.

Fixed income issuance

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

- (SI) Slovenia Debt Agency opened book to sell EUR-denominated Feb 2031 bond; guidance seen +8bps to mid-swaps.

- (DK) Denmark sold total DKK1.56B in 3-month, 6-month, 9-month and 12-month bills.

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3% Mar 2024 bonds; Avg Yield: 0.85% v 0.72% prior; Bid-to-cover: 4.78x v 1.74x prior.

- (SE) Sweden sold total SEK3.5B vs. SEK3.5B indicated in 2023 and 2032 bonds.

- (UK) DMO sold £1.0B in 0.125% Aug 2031 Inflation-linked Gilts (UKei); Real Yield: -3.009% v -2.687% prior, bid-to-cover: 2.33x v 2.77x prior.

Looking ahead

- (PL) Poland Central Bank (NBP) Interest Rate Decision (no set time).

- 05:15 (CH) Switzerland to sell 2025, 2032 and 2045 Bonds.

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

- 05:30(DE) Germany to sell €3.5B in 0.0% Aug 2031 green Bunds.

- 05:30 (GR) Greece Debt Agency (PDMA) to sell €625M in 12-month Bills.

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

- 06:00 (ZA) South Africa Q3 BER Business Confidence: 49e v 50 prior.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (RU) Russia to sell 2032 and 2036 OFZ Bonds.

- 07:00 (US) MBA Mortgage Applications w/e Sept 3rd: No est v -2.4% prior.

- 07:00 (CL) Chile Aug CPI M/M: 0.3%e v 0.8% prior; Y/Y: 4.7%e v 4.5% prior.

- 07:00 (BR) Brazil Aug FGV Inflation IGP-DI M/M: 0.1%e v 1.5% prior; Y/Y: 28.4%e v 33.4% prior.

- 07:00 (UK) Weekly PM Question time in House.

- 08:00 (HU) Hungary Central Bank (MNB) Aug Minutes.

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

- 08:55 (US) Weekly Redbook LFL Sales data.

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

- 10:00 (US) July JOLTS Job Openings: 10.049Me v 10.073M prior.

- 10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: expected to leave Interest Rates unchanged at 0.25%.

- 10:00 (CA) Canada Aug Ivey Purchasing Managers Index (seasonally adj): No est v 56.4 prior; PMI (unadj): No est v 59.8 prior.

- 11:00 (UK) BOE Gov Bailey with members Braodbent, Ramsden, Tenreyro and Hall.

-12:00 (RU) Russia Aug CPI M/M: 0.1%e v 0.3% prior; Y/Y: 6.7%e v 6.5% prior.

-12:00 (RU) Russia Aug CPI Core M/M: 0.4%e v 0.5% prior; Y/Y: 6.9%e v 6.8% prior.

- 13:00 (US) Fed’s Williams.

- 13:00 (US) Treasury to sell 10-Year Notes.

- 14:00 (US) Federal Reserve Beige Book.

- 15:00 (US) July Consumer Credit: $25.0Be v $37.7B prior.

- 16:30 (US) Weekly API Oil Inventories.

- (CO) Colombia Aug Consumer Confidence Index: No est v -7.5 prior.

- 18:00 (NZ) New Zealand Aug Heavy Truckometer M/M: No est v -1.1% prior.

- 18:00 (US) Fed’s Kaplan.

- 18:45 (NZ) New Zealand Q2 Manufacturing Activity Q/Q: No est v 2.1% prior.

- 19:01 (UK) Aug RICS House Price Balance: 75%e v 79% prior.

- 19:50 (JP) Japan Aug M2 Money Supply Y/Y: 4.6%e v 5.2% prior; M3 Money Supply Y/Y: 4.1%e v 4.6% prior.

- 21:00 (PH) Philippines July Trade Balance: -$3.0Be v -$2.8B prior; Exports Y/Y: 15.6%e v 17.6% prior; Imports Y/Y: 21.7%e v 34.2% prior.

- 21:30 (CN) China Aug CPI Y/Y: 1.0%e v 1.0% prior; PPI Y/Y: 9.0%e v 9.0% prior.

- 22:00 (JP) Japan Aug Tokyo Avg Office Vacancies: No est v 6.28 prior.

- 23:00 (TH) Thailand Aug Consumer Confidence: No est v 40.9 prior; Economic Confidence: No est v 35.3 prior.

- 23:30 (JP) Japan to sell 6-Month Bills.

- 23:35 (JP) Japan to sell 5-Year JGB Bonds.