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4 Sep 2018
GLOBAL MARKETS OVERVIEW:
Europe: Mixed session for the European stock indices. Portugal (-0.23%), Spain (-0.24%) and Germany (-0.14%) suffered losses, while UK (+0.97%), Italy (+0.62%) and France (+0.13%) registered gains on Monday. Stoxx 600 (+0.07%) closed slightly higher, with its 9 sectors closing positive. Insurance (+0.69%) and Oil & Gas (+0.57%) outperformed, while Real Estate (-1.36%) and Auto & Parts (-0.99%) were hit the hardest.
Eurozone sovereign debt market: Mixed session for EGB yesterday. Italian 10-year yield dropped 6.9 bps to 3.153%. Bund traded 0.7bps higher at 0.330%.
ECB Executive Board Member Yves Mersch, EU member states should rebuild fiscal buffers. He added that Europe’s banking sector needs consolidation.
ECB Vice President Luis de Guindos said that vulnerabilities in emerging markets have become more visible now than a few months ago. He considered that Euro-area economic growth remains solid and broad based, although downside risks to growth, notably related to the threat of protectionism and the rise in trade tensions remain prominent. According to Luis de Guindos, the outlook for US monetary policy and vulnerabilities in emerging markets add to the overall uncertainty, as does the limited progress on the BREXIT discussion.
He said that euro area needs reforms, including common deposit insurance, common stabilisation fund and capital market union. On the common deposit insurance theme, Luis de Guindos said that ongoing discussions have been held on the premise that risk reduction must come before risk-sharing. He considered that substantial risk reduction has already taken place.
PSPP net settlements for last week, reported yesterday, came in at €4,447mn. This comes after the previous week’s €4,693mn and brings the net total to €2,059.246bn. ABSPP3 net purchases came out at a negative €252mn in the week ending on 31 August, from net purchases of -€216mn the week before, to a new net total of €27.246bn. CBPP3 net purchases stood at €32mn for the week ending on 31 August (vs. €230mn in the week ending on 31 August), to a new net total of €257,144bn. Finally, net additions in the CSPP reached €472mn, after €174mn the week before. The new net total stood at €166.537bn. Therefore, total net asset purchase settlements reached €4,699mn for the week ending on the 31 August, compared to €4,881mn the week before. The PSPP share in overall net additions stood at 95%, after 96% the week before.
Total net asset purchase settlements stood at €24.8bn in August, which compares to a €30.6bn monthly average for the first 7 months of the year. The PSPP share in overall additions reached 91% in August (6% for CSPP).
For Portugal, PSPP net settlements reached €562mn in August, or 2.8% of the total.
Finally, the ECB updated the data on PSPP realized and forecasted redemptions. Monthly average redemptions are expected to accelerate in 2019.
Portugal: PSI20 lost 0.23% on Monday. Only 5 members closed positive, with Sonae (+1.6%) and Galp (+1.3%) outperforming. Pharol (-6.8%) and Mota-Engil (-3.2%) were the biggest losers.
According to the real-estate report published by S&P, house prices are estimated to rise 9.5% this year in Portugal, on the back of strong national & international demand, and short supply. The agency underlines the importance of programmes such as the “gold visa” that increase foreign demand in the Portuguese real-estate market. S&P estimates, however, that pressure will slow down given slower economic growth. After increasing by 9.5% in 2018, prices are estimated to grow by 7% in 2019, followed by an increase of 6% and 5% in 2020 and 2021.
According to Bank of Portugal statistics, public debt stood at €248.2bn in July 2018, up by €1.6bn from the end of June. This was mainly due to an increase in debt securities. General government deposits rose by €1.5bn, with public debt net of deposits increasing by €0.1 bn from the previous month, to a total of €227.5bn.
FX & Commodities: The first future of Brent finished the day 0.94% higher (+0.05% as we type). Gold closed little changed, +0.01% (-0.47% as we type). EUR/USD finished the day rising 0.15% (-0.34% as we type).
US Equity & Debt Markets: US markets were closed today due to the Labour Day.
Latin America: In Argentina, President Mauricio Macri said in a televised address said that the country will be exposed to financial markets volatility until a solid budget is announced. He mentioned that the country may reach an agreement with the IMF in coming days. Taxes will be set on exporters to boost revenues in 2019, as the government targets a balance budget. President Mauricio Macri said that talks with opposition about the 2019 budget are already advanced. From a primary fiscal gap of 2.6% of GDP projected for 2018, the government expects a primary fiscal surplus of 1% of GDP in 2020. Argentina intends to cut public spending by 0.7% of GDP.
In Brazil, the manufacturing PMI index increased from 50.5 to 51.1 in August. In Mexico, the Manufacturing PMI index fell 1.4 points to 50.7 in August.
In Brazil, vice presidential hopeful Eduardo Jorge said in an interview that former president Luiz Inacio Lula da Silva would effectively still run the show if his replacement, Fernando Haddad, wins the October presidential election. After Brazil’s top electoral court rejected on Friday officially former president Luiz Inacio Lula da Silva as a candidate, the focus is now likely to turn to how many of Lula’s potential votes can shift to Fernando Haddad.
Economy Minister Nicolas Dujovne said that Argentina central bank has numerous tools to intervene. He added that the goal is to get more flexible IMF terms and sees inflation slowing next year.
Asia: stocks traded with a mixed tone overnight: TOPIX -0.12%, HANG SENG +0.79% as we type, SHANGHAI COMPOSITE +1.10%, HSCEI +0.65% as we type, TAIEX +0.52%, KOSPI +0.38% and S&P/ASX200 -0.28%.
OUR TAKE ON THE LATEST MACRO DATA:
UK: August Markit PMI Manufacturing:
The IHS Markit manufacturing PMI index fell by 1.0 point to 52.8 in August (vs. consensus 53.9), the lowest reading since July 2016. The new orders sub-index fell from 53.9 in July to 52.5.
Altri: The company informed that the Competition Authority did not oppose to the agreement reached with EDP to buy 50% of the share capital and voting rights that EDP held in EDP Produção- Bioelétrica, hence assuming the control of 100% of that company (Altri´s filing on CMVM)
EDPR: EDP Renováveis, through its fully owned subsidiary EDP Renewables North America, secured an additional Power Purchase Agreement to sell the energy produced from its Broadlands wind farm project. The long-term PPA for 50 MW has been secured with a company from the energy sector. Broadlands wind farm, is located in the state of Illinois, US, with start of operations expected for 2019. With this arrangement, EDPR increases Broadlands contracted capacity from 150 MW, as announced on 10 May, to 200 MW. Following this PPA, EDPR has achieved more than 2.2GW of wind energy long-term agreements in the US for projects to be installed in 2016-2020, which is above the target of 1.8 GW. Since the beginning of the year, in the US, EDPR has already secured more than 1.2GW of new PPAs. With this new arrangement, EDPR has now contracted more than 3.8 GW of global capacity additions, exceeding the Business Plan target of 3.5GW capacity additions for 2016-2020 period, as announced at EDP Group Capital Markets Day in May 2016 (EDPR’s filing on CMVM)
Portugal: Light-vehicle sales rose by 26.1%y/y in August (+7.8%y/y for the first 8 months of the year), according to the Portuguese Automobile Association ACAP (Bloomberg)
BCP: Marshall Wace reduced its net short position in BCP by 8% to 104.3mn shares or 0.69% of the company’s stock as of 31 August (Bloomberg)
EDP: The Competition Authority has opened a case for abuse of dominant position against EDP, pointing out that the company had manipulated the supply of electricity between 2009 and 2013 (Bloomberg)
EDP: The Chinese government has removed the CEO and CFO of China Three Gorges (ECO)
Sonae/Jerónimo Martins: After announcing an internationalisation project for Portugal in 2016, the Spanish supermarket chain Mercadona decided to increase total investment from €25mn to €100mn and from 4 to 8-10 stores (Jornal Económico)
Media Capital: TVI, the Portuguese channel controlled by Media Capital, had the most viewers among Portugal’s free-to-air channels in August with 18.8% audience share (Bloomberg)
Telefonica: The group intends to hold its first Investor Day since 2011, according to El Confidencial. The Investor Day could take place in late November (Bloomberg)
Spain: Prime-Minister Pedro Sanchez said that the government will push for the tax on financial institutions. He added that Spain will not allow a referendum on Catalan independence (Bloomberg)
Spain: The opinion poll conducted by SocioMetrica showed Socialist Party of Prime Minister Pedro Sanchez leading with 25.8% (vs. 22.7% in June 2016 elections), followed by Ciudadanos with 23.1% of support and Podemos at 16.5% (Bloomberg)
Spain: Support for ruling Socialist party rose to 27.8% (vs. 27.4% in July) and fell to 27.5% for People’s Party (vs. 26.7% in July) in the August poll carried out by NC Report (Bloomberg)
BME: The Spanish stock exchange traded €32.7b in August, in line with the volume of August 2017 (Bloomberg)
Ferrovial: The Company´s rating was affirmed at BBB, with Outlook Stable, by Fitch (Bloomberg)
Italy: Deputy Premier and League head Matteo Salvini said that the 2019 budget law will respect all rules while lowering taxation (Bloomberg)
Unicredit: CEO Jean Pierre Mustier said that the bank is focused on executing its 2019 transformation plan, which is based on organic assumptions (Bloomberg)
Eni: The head of exploration said that the Company is evaluating data on oil, natural gas blocks being offered for exploration in United Arab Emirates sheikhdoms of Abu Dhabi and Ras Al Khaimah (Bloomberg)
WPP: The group reported revenue for 1H18 at GBP7.49bn (vs. consensus GBP7.01bn). 1H18 pretax profit stood at GBP846mn (vs. consensus GBP752.167bn). WPP sees FY revenue ex. Pass-through costs growth similar to 1H, as well as similar PBIT margin (Bloomberg)
WHAT TO WATCH TODAY: The ISM manufacturing index for August is the highlight on the economic calendar today.
In Argentina, the central bank discloses the August monthly survey of expectations, where we will likely see another increase in inflation expectations given the strong weakening of the currency. In Brazil, industrial production for July will be released. We will have a MPC meeting in Chile.
EGB supply is expected to come from Austria (RAGB 0% September 2022 and RAGB 0.75% February 2028, for a total amount of $1.265bn) and Germany (€250mn of 0.1% I/L 2046 and €500mn of I/L 2030).
In the US, Ford Motor will release sales for August.
On the political front, the French Prime Minister Emmanuel Macron is expected to announce a reshuffle of the cabinet following the resignation of environment minister Nicolas Hulot last week. In Italy, officials and economists from the League are likely to meet Deputy Prime Minister Matteo Salvini for initial talks on the economic policy measures they want to be included in the budget for 2019.
BoE Governor Mark Carney, along with MPC members Andy Haldane, Silvana Tenreyro and Michael Saunders testify to the UK parliament's Treasury Select Committee on the August Inflation Report.
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