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Patris Daily - 21 August 2018

21 Aug 2018

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GLOBAL MARKETS OVERVIEW:

Europe: the principle European stock indices increased on Monday, fueled by hopes of easing tariffs ahead of a US visit by China´s Commerce Deputy Minister, scheduled for 22-23 August. German Dax outperformed, rising 0.99%. Stoxx 600 increased 0.57%, with its 18 sectors closing positive. Chemicals (+1.10%) and Auto & Parts (+0.94%) outperformed, while Utilities (-0.05%) was the only sector that closed negative.

Eurozone sovereign debt market: 10-year EGB yields declined across the board. Italy outperformed, decreasing 10.4bps to 3.005%. Bund closed 0.3bps lower at 0.299%. Greek government 10-year yields dropped 2.9bps to 4.254% on the day Greece exited the final 3-year bailout program, agreed in August 2015.

Portugal: PSI20 gained 0.32% on Monday, with its 13 titles registering gains. Ramada (+2.0%), Sonae (+1.9%) and CTT (+1.5%) outperformed, while Pharol (-2.1%) was hit the hardest.  

FX & Commodities: oil prices traded higher, with the first future of Brent up by 0.53% (-0.01% as we type). Gold increased 0.53% during the session (+0.31% as we type). EUR/USD finished the day +0.38% higher (+0.30% as we type).

US Equity & Debt Markets: S&P500 finished 0.24% higher, with its 8 sectors closing positive, Materials (+0.71%) outperforming. Utilities (-0.35%), Technology (-0.15%) and Consumer Staples (-0.03%) closed on the red. 10-year UST yields stood at 2.8190%.

Latin America: in Chile, GDP expanded 5.3% y/y in the 2Q18, above survey expectations of 5.2% y/y. From the previous quarter, the Chilean economy expanded 0.7% q/q, in line with consensus.

Nafta negotiations between Mexican Economy Minister Ildefonso Guajardo and US Trade Representative Robert Lighthizer are due to resume today in Washington.

Brazil’s jailed former president Luiz Inacio Lula da Silva garnered 37.7% of voting intention in the MDA poll released yesterday, compared to 32.4% in its previous May survey. The poll showed former Army captain Jair Bolsonaro backed by 18.8%, up from 16.7% in May. In the meantime, a separate poll conducted by Idope showed Bolsonaro in the first place with 20% in a scenario without Lula, who is widely expected to be barred from running.

Asia: stocks traded with a mixed tone overnight: TOPIX -0.40%, HANG SENG +0.34% as we type, SHANGHAI COMPOSITE +1.31%, HSCEI +0.97% as we type, TAIEX +0.87%, KOSPI +0.99% and S&P/ASW 200 -0.96%

Zhu Hexin, deputy governor of the PBOC, said the policies will be more flexible, resolve problem of high financing costs for companies, ample liquidity without flooding the financial system.

Turkey filed WTO dispute proceedings against the US, alleging that levies on steel and aluminum violate rules of international commerce amid an escalating trade spat between the two trading partners.

OUR TAKE ON THE LATEST MACRO DATA:

Eurozone: June Construction output

Eurozone seasonally adjusted production in the construction sector increased by 0.2% m/m in June. Building and civil engineering have both registered gains over the month (+0.1% m/m and +0.3% m/m respectively). When compared to the same month of 2017, the construction output increased 2.6% y/y. May´s reading was revised upwards from 1.8% y/y to 2.0% y/y.

GLOBAL HIGHLIGHTS:

Linde: Linde and Praxair won conditional European Union approval for their $45bn merger, as the European Commission said its competition concerns were addressed after the companies agreed to sell Praxair´s entire gas business in Europe, as well as the Danbury, Connecticut-based company´s stake in an Italian joint venture and several helium sourcing contracts (Bloomberg)

Saipem: the company gets $700mn of offshore contracts in Guyana, Congo for the 2nd phase of Liza´s field development, led by Exxon Mobil and for a project related to Congo´s electricity utility Centrale Electrique du Congo (Bloomberg)

Total: Iran's oil minister said that the company has officially pulled out of Iran after cancelling its $5bn, 20-year agreement to develop the country's massive South Pars offshore natural gas field over renewed U.S. sanctions (Bloomberg)

Generali: the company may have raised its stake in the Russian insurer Ingosstrakh to over 50% (Bloomberg)

Leonardo: the company said it made effective a contract for the supply of 28 NH90 medium twin-engine multirole military helicopters to Qatar Defense Ministry. The group confirmed its full year 2018 guidance (Bloomberg)

Alitalia: Cerberus Capital Management will evaluate potential investment in Alitalia, when its reorganization plan is more clear (Bloomberg)

Atlantia: Prime Minister Giuseppe Conte said that Atlantia´s offer of €500mn relief funds is modest, and the company should increase it up to approximately €2.5bn (Bloomberg)

WHAT TO WATCH TODAY: no relevant economic data will be released today.

In the US, Coty, Medtronic and Kohl´s publish their quarterly earnings, while in Europe we shall get the numbers of Persimmon and BB Biotech.

Today Germany will sell €4bn in Sept 2020 bonds.

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

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