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Patris Daily - 10 August 2018

10 Aug 2018

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GLOBAL MARKETS OVERVIEW:

Europe: with exception of UK (-0.45%) and Italy (-0.72%), the major European stock indices registered slight gains on the session. Stoxx 600 finished 0.09% higher, with its 13 sectors closing positive. Retail (+1.26%) and Travel & Leisure (+0.62%) outperformed.

Eurozone sovereign debt market: the EGB yields dropped on the session, with the exception of Portugal (+0.5bps to 1.755%) and Greece (+10.5bps to 4.061%).

Portugal: PSI20 increased 0.11% with its 10 members closing positive. Mota-Engil (+3.0%) and CTT (+1.5%) outperformed, while F. Ramada (-1.0%) and Galp (-0.9%) were the biggest losers. 

FX & Commodities: oil prices traded lower, with the first future of Brent down by 0.29% (-0.72% as we type). Gold dropped 0.12% during the session (-0.38% as we type). EUR/USD finished the day 0.71% lower (-0.62% as we type).

US Equity & Debt Markets: S&P500 finished the day 0.14% lower, with five of its main 11 sectors closing positive on the day. Telecommunication (+0.98%) and Materials (+0.50%) registered the strongest gains, while Energy (-0.89%) was the main underperformer. 10-year UST yields dropped 3.4bps to 2.9276%.

Latin America: according to the report released by the national statistics institute, the Mexican inflation accelerated for a second consecutive month, as fuel prices rose. The prices rose 0.54% m/m in July (vs. consensus of 0.53%m/m). The annual rate increased from 4.65% y/y in June to 4.81% y/y in July, slightly above the survey expectations of 4.80% y/y. Excluding food and energy, the prices rose 0.29% m/m in July, vs. June print of 0.23% m/m and consensus of 0.30% m/m.  

Asia: stocks traded with a rather negative tone overnight: TOPIX -1.15%, HANG SENG -0.91 as we type, SHANGHAI COMPOSITE +0.03%, HSCEI -0.79% as we type, TAIEX -0.40%, KOSPI -0.91% and S&P/ASW 200 +0.31%

In China, CPI inflation accelerated from 1.9% y/y in June to 2.1% y/y in July, above consensus of 2.0%. PPI inflation increased 4.6% y/y in July after 4.7% y/y in June (vs. consensus 4.5% y/y).

In Japan, PPI inflation accelerated from 0.2% y/y in June to 0.5% y/y in July, above the consensus of 0.2% y/y. In annual terms, PPI increased 3.1% in July, after a print of 2.8% in June, and above survey expectations of 2.9%. According to the first preliminary estimate, the economy grew 0.5% q/q in the 2Q18, vs consensus of 0.3% q/q. Private consumption increased 0.7% q/q (vs. consensus 0.2% q/q), while business spending expanded 1.3% q/q (vs, consensus 0.6% q/q). Annualized GDP grew 1.9% q/q, also above the consensus of 1.4% q/q.

OUR TAKE ON THE LATEST MACRO DATA:

Portugal: June Trade Balance

In June 2018, exports and imports recorded a growth rate of 8.6% y/y and 18.1% y/y respectively, both accelerating when compared to the previous month (+6.2 y/y and +0.6% y/y in May). Excluding fuels and lubricants, exports increased by 6.8% y/y and imports grew by 10.3% y/y in June. The trade balance deficit amounted to €1682mn in June 2018, increasing by €641mn y/y.

In the 2Q18, exports and imports grew by 10.5% y/y and 10.4% y/y respectively, while in the 1H18, exports and imports increased by 6.6% y/y and 8.8% y/y respectively.

US: Initial Jobless Claims

Initial jobless claims decreased 6k in the week ending 4 August 218 to 213k (vs. consensus 220k). The four-week moving average declined to 214.25k. Continuing unemployment claims for the week ending on 28 July increased 29k to 1.755mn (vs. consensus of 1.730mn). The four-week moving average increased to 1.745mn. The insured unemployment rate remained stable at 1.2%, a historical low for the series.

GLOBAL HIGHLIGHTS:

Italy: Italian Prime Minister Giuseppe Conte warned that it will take five years to fully implement the flat tax and citizen’s income promised by the two populist parties that his government is built on (Bloomberg)

Italy: Italian banks´ gross bad loans fell from €163.2bn in May to €131.8bn in June (Bloomberg)

Saipem: the company won a front-end engineering design contract of $68mn for Uganda’s planned oil refinery (Bloomberg)

Spain: Prime Minister Pedro Sanchez has told banks that a plan to introduce a special tax for the sector is no longer a priority (Bloomberg)

Europe: the ECB has grown concern about the exposure of some euro zone banks to Turkey after lira´s plunge. The ECB’s Single Supervisory Mechanism has begun over the past couple of months to look more closely at European banks’ ties to the country. BBVA, BNP Paribas and UniCredit are among the banks that are particularly exposed (Bloomberg)

Spain: the budget watchdog AIReF sees a slight slowdown going into the Spanish economy in the 3Q18 (Bloomberg)

Zurich Insurance: 1H18 net income stood at $1.79bn, 2.9% above the average analysts’ estimate of $1.74bn. The group is confident in its ability to deliver targets set for 2017-2019 (Bloomberg)

WHAT TO WATCH TODAY: in the US, the CPI report for July will be released today. We will also get the preliminary estimate of the 2Q18 GDP growth, June trade balance an industrial and manufacturing production in the UK. Italy will make public its trade balance for June, while in France the industrial and manufacturing production is scheduled to be released.

We will get June retail sales report in Brazil and June industrial production in Mexico. Colombia´s central bank will release Monetary Policy Minutes.

In Europe, Innogy and Porsche are scheduled to publish their quarterly results.

For further information, or to receive the PDF file, please contact +351 912 897 835 or research@fincor.pt

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The information and opinion contained in this report was prepared by PATRIS - SOCIEDADE CORRETORA, SA ("Patris"), which is part of the group of companies whose holding is PATRIS INVESTIMENTOS, SGPS, SA (Patris Group), listed in Alternext, which holds 100% of the share capital and voting rights of REAL VIDA SEGUROS SA which, in turn, holds 100% of the share capital and voting rights of Patris.

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