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23 Aug 2018
GLOBAL MARKETS OVERVIEW:
Europe: With the exception of Italy (-0.40%), the European main stock indices registered slight gains in the session. Stoxx 600 closed almost unchanged (-0.03%), with 11 out of 19 sectors finishing the day positive. Oil & Gas (+0.85%) and Basic Resources (+0.63%) outperformed, while Auto & Parts (-2.75%) was hit the hardest on the back of President Donald Trump´s repeated threats on implementing 25% tariffs on every automobile imported into the US from the European Union.
Eurozone sovereign debt market: with the exception of Greece (-2.9bps to 4.134%), the 10-year EGB yields increased. Italy (+7.4bps to 3.051%) and Portugal (+2.3bps to 1.781%) underperformed.
10yr USTs vs. Bunds spread remains close to its historical highs.
Portugal: PSI20 gained 0.22% on Wednesday, with only 8 members closing positive. Sonae Capital (+2.1%), BCP (+1.9%) Altri (+1.7%) outperformed, while Sonae (-2.6%), Semapa (-2.1%) and Ibersol (-1.0%) were the biggest losers.
According to August’s Statistical Bulletin released yesterday by the Bank of Portugal, Maastricht debt fell by 1.5%m/m to €246.673bn in June (or -€3.64bn m/m). In annual terms, Maastricht debt declined by 0.9% y/y (or -€2.3bn y/y). Maastricht debt stood at 125.8% of GDP as of June 2018 (vs. -0.6pp q/q, +0.1pp vs. 4Q17 and -5.9pp y/y).
Maastricht net debt of assets in deposits of general government rose by €1.149bn m/m to €227.473bn in June (or +0.5% m/m). In annual terms, net debt increased by €3.641bn (or +1.6% y/y). Net debt stood at 116.0% of GDP in June (+1.2pp q/q, +0.6pp vs. 4Q17 and -2.4pp y/y).
FX & Commodities: oil prices traded higher, with the first future of Brent up by 2.96% (-0.20% as we type), on bigger-than-expected US inventory draw. Gold closed almost unchanged, -0.02% (-0.28% as we type). EUR/USD finished the day +0.22% higher (-0.26% as we type).
Saudi Arabia is said to have called off both the domestic and international stock listing of Saudi Aramco, as the group focuses on the Sabic deal.
US Equity & Debt Markets: S&P500 finished the day little changed (-0.04%). Energy (+1.20%), Technology (+0.48%), Consumer Discretionary (+0.12%) and Health Care (+0.11%) were the only sectors that closed positive. Telecommunications (-2.02%) was hit the hardest. 10-yr UST yields declined by 1.1bps to 2.820%.
The Federal Reserve released yesterday the minutes for the 31 July / 1 August FOMC meeting. Fed officials noted that rates are moving closer to estimates of neutral, but acknowledged that another rate hike is likely to be appropriate soon. The minutes showed that the Federal Reserve discussed the appropriate timing to stop calling rates accommodative. Moreover, the discussion on the balance sheet should continue over coming months.
All Fed officials saw trade as an important source of uncertainty. Housing and emerging markets were also mentioned as downside risks. The FOMC discussed the implication of yield-curve flattening. Some Fed officials mentioned strong economic momentum as upside risk. Some saw fiscal stimulus as an upside risk, but a few fed officials considered fiscal stimulus as a downside risk in the future.
Many Fed officials saw inflation stable near 2% in the medium-term.
Latin America: In Brazil, according to the poll released yesterday by Datafolha (covering the period between 20 and 21 of August), former president Lula (in jail for more than 4 months) leads with 39% of voters’ intentions in the first round. He would also win against any contender in the second round according to this poll. Meanwhile, 48% of respondents said they would not vote in a candidate appointed by Lula, while 31% of respondents said they could vote in a candidate appointed by Lula.
Excluding Lula in the first-round simulation, Jair Bolsonaro leads with 22% of voters’ intentions, followed by Marina Silva (16%), Ciro Gomes (10%) and Geraldo Alckmin (9%). Null and blank votes remain high (22%), vs. 11% if we include Lula, which confirms the idea that excluding Lula the election is even more uncertain.
Over coming weeks, the expected decline in the number of undecided voters will be decisive to increase visibility ahead of the 2018 presidential elections that are scheduled to take place in October (7 October - first round & 28 October - second round).
Second round simulations excluding Lula show that Jair Bolsonaro would lose to Marina Silva (34% vs. 45%), Geraldo Alckmin (33% vs. 38%) and Ciro Gomes (35% vs. 38%). However, against PT’s likely candidate, Fernando Haddad, if Lula is not allowed to run, Jair Bolsonaro would win (38% vs. 29%). Geraldo Alckmin would win against Ciro Gomes (37% vs. 31%), against Jair Bolsonaro (38% vs. 33%) and against Fernando Haddad (43% vs. 20%). However, according to this poll, he would lose against Marina Silva (33% vs. 41%). TV and radio campaigns start on 31 August (and ends on 4 October)
Asia: stocks traded with a mixed tone overnight, as investors await the beginning of the annual Jackson Hole Symposium: TOPIX -0.01%, HANG SENG -0.45% as we type, SHANGHAI COMPOSITE +0.31%, HSCEI -0.27% as we type, TAIEX +0.55%, KOSPI +0.41% and S&P/ASX 200 -0.34%.
In Japan, the PMI manufacturing index rose 0.2 points in the preliminary reading for August to 52.5.
OUR TAKE ON THE LATEST MACRO DATA:
US: July Existing Home Sales
July existing home sales decreased 0.7% m/m in July, vs. market expectations of an increase of 0.4% m/m, to an annualized pace of 5.34mn. Sales of single family houses dropped 0.2% m/m, while condos plummeted 4.8% m/m in July.
Recent housing data have disappointed market expectations, probably reflecting the impact of higher mortgage interest rates.
BPI: Caixa Bank acquired 20.83k shares (0.001% of capital) of Banco BPI at an average price of €1.45 per share, increasing its participation to 94.949% (BPI filing on CMVM)
Portugal: Portugal’s Competition Authority accused 5 insurers for forming a cartel to share the market and price setting, following the investigation opened in May 2017. The insurers are Fidelidade, Lusitania, Multicare, Seguradoras Unidas and a Portuguese unit of Zurich Insurance (Bloomberg)
NOS: Eleven Sports has concluded an agreement to broadcast German football league in Portugal, starting this season (Bloomberg)
Angola: The IMF confirmed to have received a request by the Angolan Government to initiate discussions on an economic programme that could be supported by the Extended Fund Facility (Bloomberg)
ACS: ACS is seeking advisers to sell Spanish toll roads concessions managed through its subsidiary Iridium, according to El Economista. According to the same sources, assets may be valued at more than €500mn. Funds to be used to finance Abertis takeover (Bloomberg)
Inditex: Uterque brand starts operating on Alibaba-owned marketplace Tmall in China (Bloomberg)
Enel: The company started the construction of a 34MW solar plant in Zambia. Enel will invest $40mn into the project, mainly through a $34mn finance deal with Zambia’s Industrial Development Corporation. When fully operational, Enel expects it to produce 70 gigawatt-hours a year (Bloomberg)
Fiat Chrysler: Private equity firm KKR is in talks to buy the company´s Magneti Marelli auto-parts subsidiary (Bloomberg)
Atlantia: The Italian government is considering involving state lender Cassa Depositi e Prestiti in a public takeover of the highway concession Autostrade per l’Italia following the Genoa bridge collapse (Bloomberg)
WHAT TO WATCH TODAY: The ECB will publish the account of its 26th July Policy Meeting. We will get preliminary Markit PMI indices in the Eurozone and the US for August. The European Commission publishes the flash reading for August consumer sentiment in the euro area.
The UK government is set to publish today the first in a series of technical notices providing advice for businesses and citizens in the event no deal is reached with the EU.
Argentina will publish economic activity index for June, while in Brazil and Mexico we will get the inflation numbers.
In the US, HP, Autodesk and Gap will release their quarterly earnings, after market-close.
US-China trade talks continue today. Tariffs on US$16bn of Chinese imports - the last tranche of levies imposed under the Section 301 investigation into China’s technology transfer practices - went into effect today.
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