Notes/Observations - RBA appears less dovish with easing bias removed from the statement; removed phase that further AUD currency depreciation seemed both likely and necessary - Spain Net Unemployment continues to improve showing that domestic economy was racing ahead as the reform measures take effect
Economic data - (AU) RBA left its Cash Rate Target unchanged at 2.00% (as expected) - (IE) Ireland July Manufacturing PMI: 56.7 v 54.6 prior - (IN) India Central Bank (RBI) left its key rates unchanged (as expected) with Repurchase Rate unchanged at 7.25%; Reverse Repo Rate unchanged at 6.25% (by default); Cash Reserve Ratio (CRR) unchanged at 4.00% - (UK) July Nationwide House Prices (in line) M/M: 0.4% v 0.4%e; Y/Y: % v 3.5%e - (NO) Norway July Manufacturing PMI (beat): 45.8 v 44.0e (3rd month of contraction) - (ES) Spain July Net Unemployment (beat) M/M: -74.0K v -44.5Ke (six straight months of improvement) - (BR) Brazil July Monthly FIPE CPI (Sao Paulo): 0.9% v 0.8%e - (UK) July Construction PMI (miss): 57.1 v 58.5e (29th month of expansion nut lowest since May) - (EU) Euro Zone Jun PPI M/M: 0.0% v 0.0%e; Y/Y: -2.2% v -2.2%e - (RO) Romania Central Bank (NBR) left Interest Rates unchanged at 1.75% (as expected)
Fixed Income Issuance: - (AT) Austria Debt Agency (AFFA) sold total €1.2B vs. €1.2B indicated in 2025 and 2044 RAGB bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM Equities Indices [Stoxx50 -0.4%, FTSE 100 +0.3% at 6,710, DAX +0.1% at 11,456, CAC-40 -0.3% at 5,107, IBEX-35 -0.6% at 11,203, FTSE MIB -1.0% at 23,468, SMI +0.3% at 9,494, Athens Stock Exchange -7%, S&P 500 Futures flat at 2,090.70]
- Market Focal Points/Key Themes: European equities open lower but later pare losses; commodity producers (Anglo American, Rio Tinto) offest energy and banking; Greek index continues to tumble in second day of trading; crude traded below $50/bbl pushing down BP and Total
Speakers - BOJ said to view inflation as improving even if GDP contracts in Q2. To watch summer rebound to gauge inflation outlook and saw no need to increase its monetary stimulus (**Reminder: Next Bank of Japan (BOJ) Policy Statement is on Friday, Aug 7th) - China PBoC said to be determined to hold CNY exchange rate at current levels despite mounting pressures from within to weaken the Yuan. Several govt ministries believe economic growth remains under downward pressure and Yuan should be allowed to depreciate
Currencies - GBP/USD slipped below the 1.56 level in quiet trade following the miss in its July PMI Construction data. Dealer to focus on BoE's 'super-Thursday', which will see the simultaneous release of the policy meeting's minute (instead of being delayed for being two weeks), and the latest quarterly inflation report. - AUD/USD rose by 1.5% for its biggest gain in 2 months following the RBA statement towards the 0.74 area as dealers and analysts noted a change in RBA rhetoric with some believing that RBA easing bias had been removed from the statement. Specifically the comments regarding the AUD currency was also noted with RBA statement noting the currency was adjusting to declines in commodity prices (REMOVED view that "further depreciation seemed both likely and necessary.
Fixed Income: - Bund futures trade at 154.72 up 16 ticks on the day, as Bond markets continue to trade higher, with yields now below 0.6%. Analysts look for near term resistance at 155.28 followed by 155.44 the June high. A continuation at this point would target 155.79. Downside support is at 154.09 , followed by 153.71, with 153.32 forming the base. Austria tapped its 10y and 29y RAGB for around €1.1bn combined which brings the equivalent of around 18k Bund contracts supply to the market. - UK Gilt futures trades 117.50 up 17 ticks on the day after weaker construction PMI helped maintain the upward ascent. Analysts see 117.13 as near term support followed by 116.90, with 116.33 needed to halt the uptrend. To the upside a break of todays highs at 117.75 could target 118.14 next, the 200 day moving average. We could also see the £3.0B gilt issuance today bringing to market the equivalent of 29K Gilt futures worth of supply. - Tuesday's liquidity report showed Monday's excess liquidity rose to €465.9B a rise of €29.4B from €436.5B prior. This was due primarily to a fall of €29.4B in AFs and MonPol portfolios to negative €35.2B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €92M from €138M prior. -Corporate Issuance saw Celgene coming to market with a $8B multi tranche offering, which accounted for the bulk of yesterdays IG offerings. This week sees analysts estimating deals to be in the $20B range.
Political/In the Papers: - (GR) Greece Central bank unlikely to ask for more ECB liquidity for weeks to come because its liquidity buffer has risen. The bank liquidity buffer has grown to about €5.0B from €1-2B at the height of Greece's debt crisis - (ES) Spain region of Catalan president said to call for early elections to be held Sept. 27th - (CN) Shanghai and Shenzhen stock exchanges revise rules on short selling to curb market volatility. Under the new T+1 rule, investors who borrowing shares have to wait one day to pay back instead of same day transaction.
Looking Ahead All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent) - (BR) Brazil Jun CNI Capacity Utilization: No est v 80.1% prior - (EU) ECB allotment in 7-Day Main Refinancing Tender - 05:30 (UK) DMO to sell £3.0B in 2% 2025 Gilts - 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills - 05:30 (ZA) South Africa to sell 2032, 2035, 2037 and 2044 bonds - 05:30 (IT) Italy Fin Min Padoan in Rome - 06:30 (EU) ESM to sell €2.0B in 3-Month Bills - 06:45 (US) Daily Libor Fixing - 07:00 (RU) Russia announces weekly OFZ bond auction - 07:45 (US) Chain Store Sales - 08:00 (BR) Brazil Jun Industrial Production M/M: -0.7%e v +0.6% prior; Y/Y: -5.0%e v -8.8% prior - 08:15 (US) Baltic Dry Bulk Index - 08:55 (US) Weekly Redbook Sales - 09:00 (EU) Weekly ECB Forex Reserves - 09:00 (MX) Mexico May Gross Fixed Investment: 2.5%e v 5.3% prior - 09:30 (NZ) Fonterra Global Dairy Trade auction - 09:30 (CA) Canada July RBC Manufacturing PMI: No est v 51.3 prior - 09:45 (US) July ISM New York: No est v 63.1 prior - 10:00 (US) Aug IBD/TIPP Economic Optimism: 47.6e v 48.1 prior - 10:00 (US) Jun Factory Orders: +1.7%e v -1.0% prior; Factory Orders Ex Trans: No est v 0.1% prior - 10:00 (US) Possible revisions to Jun Durable Goods data - 10:00 (DK) Denmark July Foreign Reserves (DKK): No est v 626.3B prior - 10:00 (MX) Mexico Weekly International Reserves: noe st v $190.7B prior - 11:30 (US) Treasury to sell 4-Week Bills - 16:30 (US) Weekly API Oil Inventories - 17:00 (KR) South Korea July Foreign Reserves: No est v $374.8B prior - 17:00 (CO) Colombia July PPI Domestic M/M: No est v 0.9% prior; Y/Y: No est v 2.1% prior - 18:45 (NZ) New Zealand Q2 Unemployment Rate: 5.9%e v 5.8% prior - 19:01 (UK) July BRC Shop Price Index Y/Y: No est v -1.3% prior - 20:30 (TW) Taiwan July CPI Y/Y: -0.6%e v -0.6% prior; WPI Y/Y: -9.4%e v -9.3% prior - 21:00 (PH) Philippines July CPI M/M: 0.2%e v 0.1% prior; Y/Y: 0.8%e v 1.2% prior; CPI Core Y/Y: 1.9%e v 2.0% prior - 21:35 (JP) Japan July PMI Services: No est v 51.8 prior; PMI Composite: No est v 51.5 prior - 21:45 (CN) China July Caixin PMI Services: No est v 51.8 prior; PMI Composite: No est v 50.6 prior - 22:15 (SG) Singapore July PMI Services: No est v 51.1prior - 22:30 (HK) Hong Kong July PMI Services: No est v 49.2 prior - 22:35 (CN) China to sell CNY30B in 10-Year Bonds - 23:35 (JP) Japan to sell 6-Month Bills
Economic Data - (AU) RBA LEAVES CASH RATE TARGET UNCHANGED AT 2.00%; AS EXPECTED - (AU) AUSTRALIA JUNE RETAIL SALES M/M: 0.7% V 0.4%E; 4-month high - (AU) AUSTRALIA JUNE TRADE BALANCE: -A$2.9B V -A$3.0BE; 14th straight deficit - (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 112.9 V 112.5 prior - (JP) JAPAN JUNE LABOR CASH EARNINGS Y/Y: -2.4% (biggest decline in 5 years) V +0.9%E; REAL (EX-INFLATION) EARNINGS Y/Y: -2.9% V 0.0% PRIOR - (JP) JAPAN JULY MONETARY BASE Y/Y: 32.8% (2-year low) V 34.2% PRIOR; MONETARY BASE END OF PERIOD: ¥325.7T V ¥325T PRIOR - (NZ) NEW ZEALAND JULY ANZ COMMODITY PRICE M/M:-11.2% V -3.1% PRIOR - (NZ) NEW ZEALAND JULY QV HOUSE PRICES Y/Y: 10.1% V 9.3% PRIOR; Biggest increase since Nov 2007 - (KR) SOUTH KOREA JULY CPI M/M: 0.2% V 0.2%E; Y/Y: 0.7% V 0.7%E; CPI CORE Y/Y: 2.0% V 2.0% PRIOR
Index Snapshot (as of 02:30 GMT) - Nikkei225 -0.2%, - S&P/ASX +0.6%, - Kospi +0.4%, - Shanghai Composite +0.1%, - Hang Seng -0.5%, - Sept S&P500 flat at 2,090
Commodities/Fixed Income - Dec gold -0.7% at $1,082/oz, Sept crude oil +0.7% at $45.47/brl, Sept copper -0.2% at $2.34/lb - (CN) PBoC to inject CNY50B in 7-day reverse repos (12th consecutive injection) - JGB: (JP) Japan MoF sells ¥2.19T in 0.4% (0.4% prior) 10-yr notes; Avg Yield: 0.400% v 0.513% prior; bid-to-cover: 2.84x (highest since Jan) v 2.62x prior - (KR) South Korea sells 30-yr govt bond, avg yield at 2.680%
Market Focal Points/FX - Australian dollar is sharply higher in the session, first helped by better than expected economic data and then a more hawkish set of comments from the RBA in today's statement. Retail sales hit a 4-month high, while trade deficit was lower than expected thanks to multi-month highs in export value of iron ore and coal, sending AUD/USD up some 30pips to $0.73. The exchange rate added another 40pips on RBA decision, as it removed a key phrase in the statement calling for "further AUD depreciation as both likely and necessary" in place of a much more neutral "currency is adjusting to declines in commodity prices."RBA was also a bit more upbeat on employment, noting "economy is associated with somewhat stronger growth of employment and a steady rate of unemployment over the past year." S&P/ASX was off its highs on the statement but still up 0.3% at 5,700, while the yield on Aussie 10-year rose some 3bps above 2.70%
- Shanghai Composite has entered its midday break at the highs up 1.3% on further steps by Beijing to slow down the selloff. Securities regulators announced a revision to the rules on short selling whereby investors borrowing shares must wait one day to pay back loans - currently investors can do so on the same day - thereby reducing single day-trading momentum activity that exacerbates volatility. Separately PBoC injected another CNY50B into the system via 7-day reverse repos, while a press report citing BoCom chief economist called for more RRR reductions to boost liquidity.
- Japan pursuit of a virtuous cycle is knocked for a loop with a notable disappointment in today's wage inflation data. Labor cash earnings posted its biggest y/y decline in 5 years of -2.4%, while ex-inflation drop was even more severe at -2.9%. Expansion of monetary base is also slowing despite BOJ officials consistently maintaining they are prepared to adjust policy in response to economic developments. BOJ Dep Gov Iwata said further JPY weakness may not materialize as rate differentials shift with tighter Fed policy, since some of that adjustment may have already been factored in.
Equities US equities / ADRs: - IDTI: Reports Q1 $0.31 v $0.29e, R$161M v $161Me; +8.8% afterhours - CTRP: Reports Q2 $0.15 v -$0.03e, R$408M v $408Me; +4.0% afterhours - DPLO: Reports Q2 $0.16 v $0.12e, R$808M v $737Me; +2.7% afterhours - CYH: Reports Q2 $1.01 v $0.91e, R$4.88B v $4.98Be; Plans to Spin off 38 Hospitals and Quorum Health Resources; +1.2% afterhours - MCHP: Reports Q1 $0.69 v $0.71e, R$534M v $556Me; -1.9% afterhours - CAR: Reports Q2 $0.84 v $0.68e, R$2.17B v $2.26Be; -3.0% afterhours - ALL: Reports Q2 $0.63 v $0.94e, R$8.98B v $7.88Be; -4.9% afterhours
Notable movers by sector: - Consumer discretionary: Car Inc 699.HK -0.7% (issue notes); Lifestyle International Holdings 1212.HK +1.9% (H1 result); Japan Tobacco Inc 2914.JP -2.9% (H1 result) - Consumer staples: Haoxiangni Jujube Co 002582.CN -3.8% (H1 result) - Financials: China Vanke Co 2202.HK +1.6% (July result); Guangzhou R&F Properties 2777.HK -1.3% (July result); Hang Seng Bank 11.HK -0.3% (H1 result); Dalian Wanda Commercial Properties 3699.HK -1.5% (to close stores and exit karaoke); Bank of East Asia 23.HK -2.8% (H1 result); Beijing Capital Land 2868.HK-2.5% (July result); Suncorp-Metway SUN.AU +2.0% (FY15 result); CITIC Securities 6030.HK -1.7% (suspends short selling) - Industrials: Anhui Ankai Automobile Co 000868.CN +0.4% (H1 result); CIMC Enric Holdings 3899.HK -9.2% (H1 guidance); Jiangling Motors Corp Ltd 000550.CN -3.4% (July result); Suzuki Motor Corp7269.JP +4.6% (Q1 result); Kia Motors Corporation 000270.KR +1.9% (July car sales); Hyundai Motor Co 005380.KR -0.4% (July car sales) - Technology: Tencent 700.HK -1.3% (going private bid for Elong) - Materials: Jiangsu Aucksun Co 002245.CN +1.1% (H1 result); Aluminum Corporation of China Limited 2600.HK -1.1% (investment in China Rare Earth) - Energy: Shanxi Lanhua Sci-Tech Venture Co 600123.CN +0.6% (H1 result); Shanghai Taisheng Wind Power Equipment 300129.CN +3.3% (H1 result) - Healthcare: Guangdong Zhongsheng Pharmaceutical Co 002317.CN +4.2% (H1 result)