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Patris Daily - 6 July 2018 part 2

6 Jul 2018

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OUR TAKE ON THE LATEST MACRO DATA:

Germany: May Factory Orders

Price, seasonally and calendar adjusted new orders in the manufacturing sector increased by 2.6% m/m, in June (vs. consensus 1.1% m/m), following four monthly consecutive declines. The figure in the previous month stood at -1.6% m/m, after revision from an initially reported decline of 2.5%.

Excluding big-ticket items, new orders rose by 2.2% m/m in June. Domestic orders increased by 4.3% m/m, while foreign orders rose by 1.6% m/m. New orders from the euro area were up by 6.7% m/m, while new orders from other countries fell 1.3% m/m.

Price, seasonally and calendar adjusted turnover in manufacturing was up by 0.9% m/m in May, with April’s print revised to -0.1% m/m from +0.3% m/m, suggesting a rebound in industrial production for June.

April/May readings stand 0.3% below the 1Q18 average, following -1.7% q/q in the first three months of the year.

US: Initial Jobless Claims:

Initial claims rose by 3k to 231k in the week ending on the 30th of June 2018 (vs. consensus 231k). The 4-week moving average that smooths through the weekly volatility rose to 224.5k.

Continuing claims increased 32k to 1.739mn in the week ending on the 23th of June 2018 (vs. consensus 1.739mn). The 4-week moving average fell by 1.75k to 1.718mn, a new best to the current expansion. The insured unemployment rate held steady at its all-time low of 1.2%.

Spain: May Industrial Production

Spanish industrial production came out broadly in line with market expectations, increasing by 0.9% m/m (vs. consensus +1.0% m/m), following the strong decline recorded in the previous month (-1.76% m/m). The IP increase in May was driven by a 1.7% m/m increase in capital goods and a 1.9% m/m increase in intermediate goods. Meanwhile, energy was down by 1.4% m/m, while consumer goods were flat on the month.

Assuming a flat reading in June, industrial production would remain broadly flat in 2Q18, following a 0.7% q/q decline in 1Q18 and a 2.2% q/q rise in 4Q17. This evolution is consistent with lower readings posted by HIS Markit manufacturing PMI. The 3M/3M rate of change improved from -0.2% in April to 0.1% in May, supporting the idea of weak momentum in Spanish industrial sector.

US: ISM Non-Manufacturing Survey

The headline composite for the ISM non-manufacturing survey increased from 58.6 in May to 59.1 in June. The consensus expected a decline to 58.3.

The new orders index rose by 2.7 points to 63.2 and remains near the highs for the survey, while the business activity index increased by 2.6 points to 63.9, one of the highest readings in the current expansion. One a more negative note, the employment index fell by 0.5 points on the month to 53.6, well below the highs recorded in the current expansion.

The ISM index for all the US economy is still consistent with a higher y/y pace of economic growth.

GLOBAL HIGHLIGHTS:

Portugal: The national regulatory agency forced MEO to reduce by more than 15% the prices that it charges to RTP, SIC and TVI for the services of the Digital terrestrial television (Eco)

CTT: The group has agreed to allow rivals to have greater access to its distribution network of traditional mail, according to Portugal’s competition authority. The move will increase the amount of mail services available to consumers (Bloomberg)

EDP: Iberdrola and Endesa consider bidding for concessions to explore Portuguese low voltage electricity networks, which are currently held by EDP and expire in 2019, according to El Confidencial. EDP also plans to bid to renew the concessions (Bloomberg)

Spain: The Spanish renewable energy producer Solarpack has hired the Greentech Capital to pick financial advisers for IPO (Bloomberg)

Spain: The Budget Minister Maria Jesus Montero said that the government will seek to raise the spending ceiling by applying new forms of taxation to raise revenues (Bloomberg)

Generali: The group has agreed to sell 89.9% of Generali Leben in Germany, with the total cash-in estimated to approximately 1.9 billion euros (Bloomberg)

Mediaset: CEO Pier Silvio Berlusconi said that the ad sales increased 2% in the 1st half of 2018, beating the market trend. The company may pay dividend on 2018 results (Bloomberg)

Italy: The Court suspended the government´s fine of €74.3mn against Telecom Italia related to Vivendi´s control until 8 May 2019 (Bloomberg)

WHAT TO WATCH TODAY: The Bank of Portugal is scheduled to release the 1Q18 Financial Stability Report today. In Chile, the June inflation will be published. However, the highlight on the data front will be the US nonfarm payrolls for June.

The US and China are set to introduce today tariffs of $34bn on each other’s imported products.

This morning we already had Germany’s industrial production for May. Industrial production rose by 2.6% m/m, well above consensus expectations of +0.3% m/m. The May reading more than offset the fall recorded the month before (-1.3% m/m) and points to better momentum in 2Q18 vs. 1Q18.

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