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22 Aug 2018
GLOBAL MARKETS OVERVIEW:
Europe: with the exception of the UK (-0.34%), the main European stock indices registered gains yesterday, with the Italian FTSEMIB outperforming (+1.53%). Stoxx 600 finished 0.24% higher, with 14 out of 19 sectors closing positive. Auto & Parts (+0.99%) outperformed on the back of trade-tensions relief.
Eurozone sovereign debt market: 10-year EGB yields dropped in the periphery (Greece outperforming with -9.2bps to 4.162%), while they increased in the core of Eurozone (Germany +2.9bps to 0.328%).
Portugal: PSI20 gained 0.48% in the second session of the week, with 12 out of 18 members closing positive. Sonae (+2.6%), CTT (+2.5%), Mota-Engil (+2.3%) and Navigator (+1.7%) outperformed, while Pharol (-1.2%) was hit the hardest.
Bank of Portugal published yesterday the data regarding balance of payments for June 2018. In the first 6 months of the year, the combined current and capital account balance stood at - €1,678mn, compared with -€836mn in the same period in 2017. Compared with the same period in 2017, the goods and services accounts had mixed developments. The goods account deficit increased by €1,062mn, while the services account surplus grew by €662mn. Up to June, exports of goods and services grew by 7% (6.8% in goods and 7.4% in services). Imports increased by 8.1% (8.9% in goods and 4.5% in services). The primary income account deficit rose by €451mn, to €3,611mn. In the first half of 2018, the financial account balance saw a decrease in net foreign assets in Portugal of €1,334mn. In particular, there was an increase in liabilities of non-financial corporations, as a result of investment in equity securities by non-residents.
Bank of Portugal also released yesterday statistics on the international investment position (IIP) for June 2018. At the end of the first half of 2018, Portugal’s IIP stood at -€209.5bn (-106.8% of GDP), a negative change of 1.1pp from the end of 2017. Changes in the IIP were due to the negative impact of price changes, transactions, and exchange rate changes. In the case of price changes, the negative impact reflected the valuation of shares of resident firms in Portugal held by non-residents. In the case of exchange rate changes, there were two complementary effects: a reduction in the value of external assets held by residents due to the depreciation of the kwanza, the Brazilian real and the Venezuelan bolivar and an increase in Portugal’s external liabilities as a result of the appreciation of the US dollar and the Japanese yen. Net transactions made a negative contribution of €1,334 million to net foreign assets in Portugal.
Net external debt of Portugal, the result of the IIP excluding mostly capital instruments, gold bullion and financial derivatives, reached €183.1bn at the end of June 2018. Compared to the end of 2017, net external debt increased from 92.5% of GDP to 93.4% of GDP.
FX & Commodities: oil prices traded higher, with the first future of Brent up by 0.58% (+0.36% as of the time of writing). Gold rose 0.46% during the session (-0.07% as we type). EUR/USD finished the day +0.78% higher (+0.04% as we type), after President Trump criticised the Federal Reserve for raising interest rates.
US Equity & Debt Markets: S&P500 finished 0.21% higher, closing at the highest level since 26 January 2018. 7 out of its 11 major sectors closed positive, with Consumer Discretionary (+0.89%), Industrials (+0.75%) and Telecoms (+0.67%) outperforming. Real Estate (-0.92%), Consumer Staples (-0.77%), Utilities (-0.72%) and Healthcare (-0.01%) closed on the red. 10-year UST yields stood at 2.831% (+1.1bps).
Latin America: In Mexico, according to the economy ministry, FDI stood at $6.73bn in 2Q18 (+14%y/y to $17.8bn in 1H18). In Colombia, in the presentation of the 2019 budget, the finance minister said that the economy is showing signs of recovery and will grow more in 2019. For next year, he sees real GDP growing in line with the potential rate (3.4%-3.5%). In the same presentation, the central bank governor mentioned that he sees GDP growing 2.7%-3.0% in 2018 and 3.3%-3.5% in 2019.
A weaker BRL remains a key risk to Brazil’s equity market.
Asia: stocks traded with a mixed tone overnight: TOPIX +0.77%, HANG SENG +0.17% as we type, SHANGHAI COMPOSITE -0.76% as we type, HSCEI +0.84% as we type, TAIEX +0.11%, KOSPI +0.14% and S&P/ASX 200 -0.29%.
Li Bo, director of the People’s Bank of China’s monetary policy department, said that China won’t use competitive currency devaluation or the foreign exchange rate as a tool to cope with trade frictions. Li said the PBOC has taken measures to prevent pro-cyclical activities in the foreign exchange market and the good fundamentals of China’s economy supports the currency.
OUR TAKE ON THE LATEST MACRO DATA:
No relevant economic data was released yesterday
Portugal: Portugal-based Green Swan and management team bought Toys “R” Us operations in Portugal and Spain. Green Swan will hold a 60% stake, while the management team will control 40% of the businesses (Bloomberg)
Spain: The Abu Dhabi owner of Spanish energy company Cepsa is expected to opt for an IPO instead of a private stake sale and plans to launch the listing as early as September (Reuters)
Telefonica: The group is said to be in talks with Amazon to add Prime Video streaming to its phone, TV and internet packages (Bloomberg)
NH Hotel: HNA group sold 32.9mn in shares to Minor International Public, the Chinese company said in securities filing (Bloomberg)
Europe: President Emmanuel Macron and German Chancellor Angela Merkel will meet in Paris at the beginning of September to discuss European matters and Brexit (Bloomberg)
Atlantia: Autostrade per l’Italia approved an initial €500 million in funding to help victims of the Genoa bridge disaster and support the region (Bloomberg)
GlaxoSmithKline: The group has requested bids by mid-September for its $4.3bn Indian consumer-health unit (Bloomberg)
WHAT TO WATCH TODAY: The Minutes of the FOMC 1st August meeting will be published in the US. We will also get the existing home sales for July. In Mexico, retail sales for June will be published, while Argentina will release its trade balance for July.
US-China trade talks are reported to take place on 22-23 August. Meanwhile, tomorrow we will have the imposition of tariffs by the US on US$16bn of Chinese imports, the last tranche of levies imposed under the Section 301 investigation into China’s technology transfer practices.
In the US, L Brands publish its quarterly earnings.
Germany will sell €3bn of 0.25% 2028 bonds.
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