- EUR/USD hits highest level since January 2015 after Jackson Hole Symposium
- Gasoline futures gap higher after Hurricane Harvey reaches Texas; refineries closed
- Brexit negotiations set to resume in Brussels
ASIA-PACIFIC
Asia stocks traded mixed with most bourses dampened after a lack of fireworks at last week’s Jackson Hole symposium, while participants also digested North Korean concerns and the devastation from tropical storm Harvey. ASX 200 (-0.6%) and Nikkei 225 (unch) traded subdued with the former underperforming amid weakness in its largest-weighted financials sector, as CBA shares declined on reports the APRA is to undertake an inquiry into the governance at the bank. KOSPI (-0.2%) was also cautious on further provocation by North Korea. Chinese markets bucked the trend as the Shanghai Comp. (+0.9%) advanced and Hang Seng (+0.1%) briefly broke above 28,000 for the 1st time since 2015, amid earnings including Sinopec which reported an over 40% increase in H1 net. 10yr JGBs initially gained amid the cautious risk tone in the region and with the BoJ also present in the market for JPY 710bln of government debt concentrated in the short-end, although prices then failed to sustain the upside and gradually returned flat.
Chinese Industrial Profits (Jul) Y/Y 16.5% (Prev. 19.1%); slowest growth in 3 months. (Newswires)
PBoC set CNY mid-point at 6.6353 (Prev. 6.6579)
EUROPE
ECB’s Draghi, at Jackson Hole, stated that a significant degree of accommodation is still warranted and that Euro area inflation convergence not yet self-sustained. (Newswires)
EU Money-M3 Annual Grwth (Jul) 4.5% vs. Exp. 4.9% (Prev. 5.0%)
Italian Consumer Confidence (Aug) 110.8 (Prev. 106.7)
UK
UK markets closed for a public holiday.
UK PM May has pencilled in August 30th 2019 as the date she will quit as PM, giving her two years to see the UK through Brexit. (Mirror)
EQUITIES
European equity markets are lower with all the sectors trading in negative territory. Reinsurers in Europe are lower after Hurricane Harvey battered Houston and other cities in Texas, although Hannover Re have said they do not expect damage from the Hurricane to be as large as that seen from Katrina.
FIXED INCOME
European bonds have opened the week with little fanfare, as the German benchmark 10y yield is mostly unchanged at 0.38%. French yields are higher by over a basis point as Macron’s popularity continues to decline, according to recent polls. Italian yields are lower by over a basis point as Italian economic confidence hits its highest level since the financial crisis.
Italy sold EUR 2.0bln of 2019 CTZ: avg. yield -0.14% (Prev. -0.16%), Bid to cover 1.68 (Prev. 1.64)
FX
The USD remains under pressure although as EUR/USD reached its highest level since January 2015 after the Jackson Hole Symposium. Draghi’s comments were light on details but markets have viewed his refusal to comment on the strength of the EUR as an opportunity to push the pair higher. Cable also gapped higher at the open, although this has been due to general USD weakness rather than any UK specific news, given the public holiday in the UK today. USD/JPY has also drifted lower but has so far found support ahead of 109.00 where there are said to be strong domestic bids.
COMMODITIES
Hurricane Harvey caused a spike in gasoline futures, up as much as 6% at the open of electronic trade, as refining capacity along the east coast was shut down. Platts estimates that 2.2mln bpd of capacity is shut or in the process of being shut because of the flooding. The WTI/Brent spread also continues to widen with supply disruptions in Libya continuing to support Brent as the Sharara and El Feel oil fields remain shut.
GEOPOLITICS
North Korea conducted another missile test in which it launched short-range projectiles into the sea which travelled around 250km. (Newswires)
Separately, there were some reports on social media that suggested that South Korea had said that North Korea has completed preparations for a nuclear test. (Spectator Index)
US
Fed’s Mester (non-voter, hawk) said weak US inflation should not interrupt the Fed’s rate-rise strategy. (FT)
US President Trump tweeted that both Mexico and Canada were being difficult in NAFTA renegotiation talks and questioned whether the deal should be terminated. (Twitter)
