* Cotações com atraso superior a 15 minutos via Bats CHI-X Europe e NASDAQ Basic
17 Sep 2018
GLOBAL MARKETS OVERVIEW:
Europe: The session was positive for the main European stock indices, with the exception of Portugal that lost 0.56%. STOXX600 closed 0.35% higher, with 15 out of 19 sectors closing positive. Auto & Parts (+1.24%) and Basic Resources (+0.98%) outperformed. Amongst the sectors that suffered losses, Retail (-0.54%) and Utilities (-0.31%) were hit the hardest.
All the principal European stock indices registered gains over the week. Italy outperformed with an increase of 2.1%.
Eurozone sovereign debt market: 10-year EGB yields increased on Friday, with the exception of Portugal that closed 0.6bps lower at 1.843%. Greece (+6.0bps to 4.044%) and France (+3.4bps to 0.763%) underperformed. 10-year Bund yields closed 2.8bps higher at 0.448%.
ECB Governing Council member and Central Bank of France President François Villeroy de Galhau sees the French economy catching up with the euro area by 2020. He attributed the underperformance of the French economy to the need of implementing reforms. However, he recognised that the economy is still growing above its historical average. In his interview to a French radio, he added that the rise in inflation this year is due to energy.
Portugal: PSI20 lost 0.56% in the last session of the week. Only 6 out of 18 members closed positive on Friday, with Jeronimo Martins (+0.9%) and Altri (+0.4%) outperforming. F. Ramada (-3.5%) and Semapa (-2.3%) were hit the hardest.
FX & Commodities: The first future of Brent finished the day falling by 0.12% (+0.17% as we type). Gold closed slipping 0.55% (+0.07% as we type). EUR/USD finished the day 0.56% lower (+0.05% as we type).
US Equity & Debt Markets: S&P500 finished the session on Friday little changed (+0.03%). Financials (+0.66%), Energy (+0.56%) and Industrials (+0.52%) outperformed. Real Estate (-0.91%) and Utilities (-0.54%) suffered the biggest losses. 10-year UST yields rose by 2.6bps to 2.997% (2.989% as we type).
Federal Reserve Bank of Chicago President Charles Evans (a non-voter this year on the rate-setting FOMC) said that the yield curve has in the past shown good predictive power. He added that one of the challenges of assessing the yield curve as a predictor of downturns is that longer term interest rates have been falling on a secular basis. Therefore, he questioned if the yield curve has not naturally gone flatter without any implications for cyclical dynamics. In the end, he considers that it is premature to put too much weigh on that indicator, although he recognised that is being monitored.
Charles Evans sees the projections for gradual interest rate increases as consistent with a strong US economy. He expects the strong fundamentals for growth to continue and inflation to reach the FOMC’s target. He highlighted that Fed projections show a funds fed rate for 2019 and 2020 that is mildly restrictive. Charles Evans stressed that such a policy stance would be quite normal, given an unemployment rate forecast below the natural rate.
He sees US GDP growth in 2018 of around 3% and unemployment declining to 3.5% by the end of 2020. On inflation, Charles Evans said he was more comfortable with the inflation outlook than he has been for the past several years. He expects inflation to rise a bit further over the next few years but not anything high enough to be inconsistent with the inflation target.
Charles Evans said that he would not be surprised if inflation goes up a little over 2%, and views 3 to 4 rate hikes this year as reasonable. Given that data remain strong (strong economy and very strong labour market), he would not be surprised with a total of 4 hikes.
Dallas Fed President Robert Steven Kaplan (a non-voter this year on the rate-setting FOMC) still expects 3% GDP growth in 2018. The pace of expansion is likely to fade a bit next year, as some fiscal stimulus will begin to decrease. He highlighted that the US consumer is very strong. Robert Steven Kaplan believes that the Fed should continue to raise interest rates gradually and patiently. He does not see an acceleration of inflation, consistent with an increase of interest rates to a neutral level.
Meanwhile, the Federal Reserve Bank of San Francisco named Mary Daly President, effective 1 October. She will cast San Francisco Fed’s vote this year on FOMC starting in November, with Kansas City Fed Chief Esther George continuing to vote as San Francisco’s alternate at the meeting next week.
Asia: With Japanese markets closed for a public holiday, stocks in the region traded mostly with a negative tone: HANG SENG -1.36% as we type, SHANGHAI COMPOSITE-1.11%, HSCEI -1.27% as we type, TAIEX -0.36%, KOSPI -0.66% and S&P/ASX200 +0.32%.
In China, the NBS 70-City housing data showed that prices increased m/m in 68 cities during August, or 96% of the total.
President Tayyip Erdogan said on Friday that Turkey is freezing new government investment projects, to rein in spending and stem double-digit inflation after a 15-year construction boom fueled by debt.
OUR TAKE ON THE LATEST MACRO DATA:
US: August Retail Sales
US nominal retail sales rose by 0.1%m/m in August (vs. +0.7%m/m in July). Sales ex-autos increased by 0.3%m/m (vs. +0.9%m/m in July), as nominal motor vehicle sales dropped by 0.8%m/m in August. Higher gasoline prices explain the 1.7%m/m increase in station sales. Non-store retailers’ sales rose by 0.7%m/m in August (vs. +1.5%m/m in July and +0.9%m/m in June), which support the view that US consumer spending trends remain healthy.
Core retail sales rose by 0.1%m/m in August (vs +0.8%m/m in July). The 3M/3M rate of change slowed from 6.8% in July to a still solid 5.4% in August. The July/August readings stand 1.1% above the 2Q18 average, consistent with a robust evolution of consumer spending in 3Q18.
US: August Industrial Production
Industrial production rose by 0.4% m/m in August, stronger than expected (+0.3% m/m). July data were revised upwards from +0.1% m/m to +0.4% m/m.
The manufacturing sector came out below expectations at +0.2% m/m in August, following +0.3% m/m in July. Production of motor vehicles & parts advanced by +4.0% m/m, after contracting -1.4% m/m the month before. Excluding motor vehicles & parts, manufacturing output was flat in August. Mining rose 0.7% m/m in August, after +0.7% m/m in July. Utilities output increased by 1.2% m/m.
The July/August readings for industrial production stand 0.7% above the 2Q18 average level (+0.6% for manufacturing, unchanged vs. the previous quarter), which suggests a weaker pace of expansion for the sector in 3Q18.
Eurozone: August Trade Balance
Seasonally adjusted trade balance of goods decreased from €16.5bn in June to €12.8bn in August. Exports dropped slightly reaching €189.2bn (-0.8% m/m), while imports stood at €176.5bn, a monthly increase of 1.3%.
Mota-Engil: The company informed it had acquired own shares on 13 September. As a result, it holds now 1.6405% of its share capital (Mota-Engil’s filing on CMVM)
Portugal: The Competiton Authority accuses 5 companies (units of Mota-Engil, Comsa, Somague, Teixeira Duarte and Vossloh) of taking part in a cartel to bid in tenders for railway maintenance contracts by state-owned firm Infraestruturas de Portugal between 2014 and 2015 (Bloomberg)
Impresa: The group informed that through its associated company SIC has made an investment in Zaask, acquiring close to 5%, the first of its media-for-equity investments led by SIC Ventures (Impresa’s filing on CMBM)
ACS: The company was awarded a Potomac Yard Metrorail station contract in Washington worth $213.7mn (Bloomberg)
Spain: House prices accelerated and rose 1.0% m/m in August, after a rise of +0.7% m/m in July. When compared to the same month of 2017, prices increased by 7.5% y/y (Bloomberg)
Volkswagen: The company´s Board is working towards a decision to list its heavy-truck division (Bloomberg)
Enagas: Enagás and Reganosa signed an agreement to jointly take part in the bidding process for the provision of operation and maintenance services of the Al-Zour regasification plant in Kuwait (Bloomberg)
Eletropaulo: Moody´s upgraded the company´s rating to Ba1, with a stable outlook (Bloomberg)
H&M: 3Q sales reached SEK55.82bn (vs. consensus SEK54.03bn) (Bloomberg)
WHAT TO WATCH TODAY: Focus should be on speeches from Benoît Coeuré, Peter Praet and Yves Mersch. On the data front, Eurostat releases the final Euro Area HICP inflation for August. In the US, the Empire Manufacturing index for September will be disclosed.
Brazil will release its July Economic activity index, while Colombia will publish the consumer confidence index for August.
Fedex and Oracle releases quarterly earnings in the US.
In Italy, 2019 budget discussions remain at centre stage. A meeting between Prime Minister Giuseppe Conte, the finance minister Giovanni Tria and the two deputy prime ministers, Luigi Di Maio and Matteo Salvini is likely to take place today.
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