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Patris Daily - 11 July 2018 part 2

11 Jul 2018

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OUR TAKE ON THE LATEST MACRO DATA:

US: June Small Business Optimism

The National Federation of Independent Business index of small business optimism fell by 0.6 points in June to 107.2. The index remains near its highs for the history of the survey.

The consensus expected and slightly stronger decline on the month to 106.9. The labour market portions of the survey showed further improvement in hiring, with plans to hire (from 18% to 20%) and firms reporting positions not able to fill right now (from 33% to 36%, a new high for the current expansion) both up in June, but mixed signs on earnings, with a net 31% of firms reporting a rise in compensation (vs. previous 35%) and another 21% plan to raise compensation in coming months (vs. previous 20%).

Optimism about future economic activity weakened in June, with 33% of firms expecting a better economy (vs. previous 37%) and 26% of survey respondents expecting higher sales (vs. previous 31%). 29% of firms plan to increase capital spending over coming months (vs. previous 34%).

Germany: July ZEW survey

The ZEW assessment of the current situation declined in July, falling by 8.2 points, below consensus expectations of 88.0 and at the lowest level since December 2016. The expectations of the future economic situation fell 8.6 points to -24.7, below consensus expectation of -18.9, and at the lowest level since August 2012. Economic performance is expected to deteriorate according to this indicator.

Profit expectations of financial experts deteriorated across most sectors on the month. The automobile sector registered a strong decline (-22.1 points), from a balance of -35.7 in June to a lower balance of -57.8 in July. Services also fell (-3.2 points to a balance of 28.5).

Italy: May Industrial Production

Industrial production excluding construction came out slightly weaker than expected at +0.7% m/m in May (vs. consensus +0.8% m/m), following a 1.3% m/m decline the month before. In terms of the main industrial sectors, manufacturing posted a 0.7% m/m growth in May. Meanwhile, production in mining contracted by 0.2% m/m, while growth in electricity & gas production reached 0.8% m/m. In terms of the main industrial groups, consumer goods (+0.2% m/m), investment goods (+0.4% m/m) and intermediate goods (+0.9% m/m) all recorded gains.

April/May readings stand 0.4% below the 1Q18 average level (vs. -0.2% q/q in the first 3 months of the year) suggesting that the industrial sector continues to show a weak evolution. The 3M/3M rate of change improved from -0.7% in April to -0.4% in May.

France: May Industrial production

Industrial production fell by 0.2% m/m in May, after declining 0.5% in April, well below market expectations (+0.7% m/m). Manufacturing output showed an even stronger fall (-0.6% m/m, vs. consensus +0.3% m/m), which more than offset the 0.4% m/m rise recorded the month before, reflecting the large fall (-13.9% m/m) posted by the coke & refined petroleum products segment. The energy subcomponent rose 1.9% m/m. Construction posted a 3.4% fall in production. The April/May reading stand 0.6% below the 1Q18 average level (broadly flat in terms of manufacturing sector).

US: May JOLTS Report

The US Job Openings and Labour Market Survey reported that total job openings fell from April’s post-recession high of 6.840mn (revised from 6.698mn) to 6.638mn in May, outpacing consensus expectations (6.620mn). This decline brought the job opening rate down by one-tenth to a still strong 4.3% in May. The separations rate was unchanged at 3.7%, while the quits rate, usually viewed as an indicator of labour market confidence, increased one-tenth to 2.4%, a new high for the current expansion. The hires rate rose by one-tenth to 3.9%, a new all-time high, while the layoffs rate fell by one-tenth to 1.1%.

The number of unemployed job seekers per job opening dropped to 0.91 in May, a new low for the current expansion, supporting the idea of favourable conditions in the job market.

GLOBAL HIGHLIGHTS:

Portugal: The Portuguese Treasury and Debt Management Agency announced on Tuesday that it has revised upwards the amount of the OTRV offer. The amount of the offer doubled from €500mn to €1,000mn (Negócios)

Mota-Engil: The Company is looking at projects in Nigeria worth as much as €1.5bn after signing a joint-venture with a local company (Bloomberg)

Portugal: The Secretary of State told the Parliament that the government is working to alternative ways of ensuring electronic notification, in addition to ViaCTT. Adhesion to electronic notification via ViaCTT has been mandatory for self-employed and business since2012, but a recent audit by the Tax Authority concluded that this obligation was not being met (Bloomberg)

Spain: The Spanish Ribeiras family seeks to sell wind producer Elawan, awaiting the offers for a company that has assets spread over 10 countries (Bloomberg)

Spain: The government is said to summon a meeting this week of the Financial Stability Committee with the goal of reactivating a plan to name a macroprudential authority (Bloomberg)

Euskaltel: CEO Francisco Arteche said that the Company doesn’t see the need for M&A at this time (Bloomberg)

Santander: Apollo Global Management and Bain Capital are amongst funds that submitted non-binding offers for the bank´s €650mn portfolio of Portuguese bad loans. Binding offers are due in September (Bloomberg)

Spain: Deputy Prime Minister Carmen Calvo said that the Spain-Catalonia bilateral committee and its working groups are to restart working soon as part of efforts to normalise relations (Bloomberg)

Spain: The Catalan regional president Joaquim Torra said that the government still seeks to reach independence (Bloomberg)

Spain: Total will enter the Spanish electricity market, according to Expansion, with offers aimed at companies and self-employed workers. Total has also obtained a natural gas trading license in Spain (Bloomberg)

Bankia: Spanish Economy Minister Nadia Calvino says there is no urgency to make any decision on Bankia (Bloomberg)

Belgium: the debt agency chief Anne Leclercq said that it is planning to sell 40- and 50-year bonds if the current market conditions persist (Bloomberg)

Italy: Finance Minister Giovanni Tria said that the government is committed to work with other euro-area governments to improve monetary union governance and to make progress in the integration (Bloomberg)

Italy: European Affairs Minister Paolo Savona reiterated the need for Italy to be ready if other members exit euro (Bloomberg)

Alstom: Alstom, together with the CTCI, won the contract from Taipei City Government to supply metro system for first phase of metro line 7. The total value is estimated at €378mn, with Alstom share worth approximately €220mn (Bloomberg)

France: The government is no longer aiming for the budget surplus by 2022, seeking, instead, a balance in public financing. The main reason for the revision was the elimination of the housing tax by 2020 that will cut the revenue by approximately €6.5bn. According to the finance ministry document prepared for the parliamentary discussion of the draft budget for 2019, the public spending is to increase by 0.4% in 2019, including inflation (Bloomberg)

WHAT TO WATCH TODAY: Portugal is going to auction PGBs maturing on October 2028 and on April 2034, with an indicative global range amount of €750mn to €1000mn.

INE releases perspectives on exports of goods and June CPI data. We will have the June´s PPI released in the US.

Mario Draghi delivers a speech at the ECB’s Statistics Conference.

In the US, the Treasury will reopen its 10-year bond.

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