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Patris Daily - 17 August 2018

22 Aug 2018

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GLOBAL MARKETS OVERVIEW:

Europe: European major stock indices recovered on Thursday after China stated it would hold trade talks with the US later this month. FTSE MIB was the only one to close negative (-1.83%), dragged down by Atlantia (-22.26%). STOXX 600 closed 0.46% higher, with all its sectors registering gains. Technology (+1.07%) and Real estate (+1.02%) outperformed.

Eurozone sovereign debt market: with exception of Italy (-4.7bps to 3.105%) and Spain (-0.3bps to 1.435%), the 10-year EGB yields edged higher on Thursday. German bund closed 1.4bps higher, at 0.315%.  

Portugal: PSI20 gained 1.29% on the session. With exception of EDP, that closed unchanged, all the members registered gains. Navigator (+4.2%) and CTT (+2.4%) outperformed. 

FX & Commodities: oil prices traded higher, with the first future of Brent up by 0.95% (+0.04% as we type). Gold dropped 0.06% during the session (+0.26% as we type). EUR/USD finished the day recovering +0.28% (+0.05% as we type).

US Equity & Debt Markets: S&P500 finished 0.79% higher. All the sectors closed positive, telecommunications (+2.01%) and consumer staples (+1.52%) outperforming.

Treasury Secretary Steven Mnuchin said the U.S. is ready to slap Turkey with more sanctions if President Recep Tayyip Erdogan refuses the quick release of an American pastor.

Latin America: in Colombia, GDP rose 0.6% q/q in the 2Q18, below the market expectations of 0.9% q/q. Seasonally adjusted GDP increased 2.5% y/y, in line with consensus. The expansion was boosted by increase in agriculture (+5.9% y/y), manufacturing (+3.7% y/y) and utilities (+2.3% y/y). Mining (-2.7% y/y) and construction (-7.6% y/y) both contracted in the 2Q18.

In Argentina, the national CPI came out at 3.1% m/m in July, above consensus expectations of 3.0% m/m, moderating from previous month (3.7% m/m). Core inflation market 3.2% m/m. Headline annual inflation accelerated to 31.2% y/y in July (vs. 29.5% y/y in June).

Asia: stocks traded with a mixed tone overnight: TOPIX +0.62%, HANG SENG +0.21% as we type, SHANGHAI COMPOSITE -1.34%, HSCEI +0.04% as we type, TAIEX +0.07%, KOSPI +0.28% and S&P/ASW 200 +0.75%

OUR TAKE ON THE LATEST MACRO DATA:

US: July Housing Starts:

Housing starts rebounded in July, rising 0.9% to 1168k saar (vs. consensus 1260k saar), with increases in both single-family (+0.9%) and multifamily (-+0.7%). The prior month growth was revised lower from 1273k to 1292k. Building permits rose 1.5% m/m to1311k in July. 

US: Initial Jobless Claims

Initial jobless claims decreased 2k in the week ending 11 August 218 to 212k (vs. consensus 215k). The four-week moving average increased to 215.5k. Continuing unemployment claims for the week ending on 4 August decreased 39k to 1.721mn (vs. consensus of 1.740mn). The four-week moving average dropped to 1.739mn. The insured unemployment rate remained stable at 1.2%, a historical low for the series.

Eurozone: June Trade Balance

Seasonally adjusted trade balance of goods decreased from €16.9bn in May to €16.7bn in June. Exports rose reaching €190.8bn (+1.6% m/m), while imports stood at €174.0bn, a monthly increase of 1.8%.

UK: July Retail Sales

Retails sales advanced 0.7% m/m in July (above the market expectations of 0.2% m/m), after a decline of 0.5% m/m in June. When compared to the same month of 2017, retail sales accelerated and increased 3.5% y/y, above consensus of 2.9% y/y and June reading of 2.9% y/y. Excluding auto fuel, retail sales increased 0.9% m/m in July, after a contraction of 0.6% m/m in June.

US: August Empire State Manufacturing

New York Fed Empire Index increased by 3 points to 25.6 in August, vs. 22.6 in July, above the market expectations of 20.0, jumping to the highest level of the year. The details showed increases in prices paid (from 42.7 to 45.2), shipments (from 14.6 to 25.7), unfilled orders (from 0.0 to 11.1) and average workweek (from 5.6 to 8.9). Prices received and new orders both registered slipped in August. 

The 6-month expectations index climbed from 31.3 in July to 34.8 in August, driven by increases in prices paid, shipments, technology spending and capital expenditures. New orders, prices received, number of employees and average workweek have all registered declines in August.

US: July Industrial Production

Industrial production rose by 0.1% m/m in July, weaker than expected (+0.3% m/m). June data were revised to upwards from +0.6% m/m to +1.0% m/m.

The manufacturing sector came out in line with expectations at +0.3% m/m in July, following +0.8% m/m in June. Production of motor vehicles & parts advanced +0.9% m/m, after +7.6% m/m the month before. Excluding motor vehicles & parts, manufacturing output rose by 0.1% m/m in July. Mining decreased by 0.3% m/m in July, following five straight months of gains. Utilities output contracted by 0.5% m/m, the third consecutive decline.

US: July Retail Sales

US nominal retail sales increased by 0.5% m/m in July (vs. 0.2% m/m in June, revised downward from the +0.5% m/m initial print), above the consensus expectations of 0.1% m/m. Sales ex-autos advanced 0.6% m/m (vs. 0.2% m/m in June, revised from +0.4% m/m), above consensus expectations of 0.3% m/m. The retail control group (i.e. total sales excluding autos, gasoline, building materials and food services) increased 0.5% m/m, after a decline of 0.1% m/m in June. 

Details showed increases in 9 of 13 major categories over the month:

The major categories showed a positive evolution on the month: motor vehicles & parts +0.2% m/m, electronics +0.1% m/m, building materials +0.0% m/m, gasoline stations +0.8% m/m, clothing +1.3% m/m department stores +1.2% m/m, food & beverages +0.6% m/m and non-store retailers +0.8% m/m.

Brazil: June IBC-Br Economic Activity Index

The central bank’s monthly indicator of Brazil’s real GDP pointed to a 3.29% m/m expansion, following a contraction of 3.28% in May (revised from -3.34% m/m), (vs. consensus +3.30% m/m). In annual terms, activity rose by 2.82% y/y, after a decline of 2.91% y/y in June (vs. consensus +1.80% y/y). Overall June´s reading shows a recovery in economic activity after the truckers´ strike.

GLOBAL HIGHLIGHTS:

BPI: Caixa Bank acquired 80.33k shares of BPI at an average price of 1.45€/ share, increasing its participation to 94.948% of BPI social capital (BPI filling on CMVM)

France: French President Emmanuel Macron assured Turkish President Recep Tayyip Erdogan of France’s support as far as Turkey’s economic and financial situation is concerned (Bloomberg)

Germany: Chancellor Angela Merkel stated to the Turkish President Recep Tayyip Erdogan that he has a potential ally in Berlin, offering Germany’s credibility to avert a spillover of economic turmoil (Bloomberg)

Generali: the group plans to split up three parts of its investment businesses, as part of a larger plan to reorganize the Generali group (Bloomberg)

Atlantia: Italian government said it could impose a heavy fine or revoke company´s concession over a bridge collapse from 14th of August that killed at least 38 people (Bloomberg)

Henkel: 2Q18 adjusted Ebit stood at €926mn, below the estimate of €938mn. Henkel lowers its 2018 outlook, sees EPS increase between 3-6%, vs. 5-8% previously (Bloomberg)

WHAT TO WATCH TODAY: leading index for July and University of Michigan sentiment indicator for August are the key economic data to be released today in the US.

Deere will publish its quarterly results today.

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

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