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Patris Daily - 9 August 2018

9 Aug 2018

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GLOBAL MARKETS OVERVIEW:

Europe: the session was negative for the major European stock indices, with exception of Portugal (+0.09%) and UK (+0.75%) that closed positive. Stoxx600 finished 0.20% lower, with its seven sectors registering gains. Auto & Parts (+0.62%) and Technology (+0.60%) outperformed, while Healthcare (-0.96%) was hit the hardest.

Eurozone sovereign debt market: 10-year EGB yields increased on the session, with exception of UK (-1.2bps to 1.311%) and Germany (-0.8bps to 0.395%). Italy (+4.1bps to 2.903%) underperformed.

Portugal: PSI20 closed 0.09% higher, driven by gains of CTT (+3.18%), Jerónimo Martins (+1.23%), Ibersol (+1.05%), Navigator (+0.88%), NOS (+0.41%) and Sonae (+0.10%). The remaining titles closed on the red, with Semapa (-1.23%) as the biggest loser.

Asia: stocks traded with a mixed tone overnight: TOPIX -0.26%, HANG SENG +0.80 as we type, SHANGHAI COMPOSITE +1.83%, HSCEI +0.97% as we type, TAIEX -0.43%, KOSPI +0.10% and S&P/ASW 200 +0.46%

China will impose 25% tariffs on additional $16bn worth of US products that will go into effect on 23rd August. The tariffs will target cars, crude oil, natural gas and coal.

OUR TAKE ON THE LATEST MACRO DATA:

Brazil: July IPCA Consumer Prices Index:

IPCA inflation printed at 0.33% m/m in July (vs. consensus 0.26%), which compares to 1.26% m/m in June IPCA. Among the components that registered declines in July were food & beverages (-0.12% m/m), clothing (-0.60% m/m) and education (-0.08%). Transportation (+0.49% m/m) and housing (+1.54% m/m) increased in July.

IPCA inflation increased 4.48% y/y in July, just below the midpoint of the central bank’s target range, slightly above consensus of 4.40% and the print of June of 4.39%.

France: July Bank of France Sentiment Indicator:

The industry sentiment remained unchanged at 101 in July, in line with survey expectations. Services sentiment indicator fell from 103 in June to 102 in July, as well as the construction sentiment indicator that declined from 105 in June to 104 in July. Bank of France sees the 3Q18 GDP growth at 0.4% q/q (vs. 0.2% q/q in 2Q18)

Portugal: 2Q18 Labour Market Statistics (INE):

The unemployment rate (not seasonally adjusted) for the 2Q18 stood at 6.7%, 1.2pp lower than 7.9% registered in the previous quarter and 2.1pp lower than in the 2Q17.

The unemployed population, estimated at 351.8k, decreased by 14.2% q/q (23.7% y/y). The employed population  was estimated at 4874.1k, recorded a quarterly increase of 1.4% (67.4k people) and an annual growth of 2.4% (113.7k people).

The youth (15-24 years old) unemployment rate was 19.4%, the lowest value of the data series, started in 1Q2011. The labour underutilisation rate was 13.3%, 1.9pp lower than in the previous quarter and 3.3pp lower than in the same quarter of 2017.

Spain: June Industrial Production

Spanish industrial production came out below the market expectations, decreasing 0.6% m/m (vs. consensus -0.2% m/m). The print of May was revised downwards from 0.9% to 0.8%. The IP decline in June was driven by energy (-3.8% m/m), durable goods (-1.4% m/m), non-durable goods (-0.5% m/m) and consumer goods (-0.1% m/m). On the other hand, capital goods increased 0.1% m/m, while intermediate goods were flat on the month.

GLOBAL HIGHLIGHTS:

Italy: Finance Minister Giovanni Tria said Italy needs growth to gain the trust of financial markets and the government’s spending plans won’t jeopardize its commitment to cut the country’s debt nor membership in the euro zone (Bloomberg)

Banca Carige: the bank will start exclusive talks with Bain Capital to sell a package of up to €400mn unlikely-to-pay loans (Bloomberg)

Fraport: 2Q18 revenue stood at €850.5mn, vs. estimate of €849.8mn. The revenue reached €1.53bn, above the estimate of €1.49bn (Bloomberg)

Munich Re: 2Q18 operating profit stood at €977mn, missing estimate of €1.1bn.The group confirmed 2018 net profit target of €2.1- €2.5bn (Bloomberg)

Italy: Deputy Prime Minister said the Italian government is ready to repeat the tough tactics it used to win concessions from the European Union on migration in the forthcoming battle over the budget (Bloomberg)

Italy: Prime Minister Giuseppe Conte said Italy won’t back out of agreements already made with Iran, but it is open to reviewing its approach to the country (Bloomberg)

Italy: Prime Minister Giuseppe Conte said the budget will be serious and rigorous. He added that the flat tax and citizen’s incomes promised by the two parties will be introduced gradually, and will be complemented by sweeping measures aimed at cutting red tape and favoring economic growth (Bloomberg)

Italy: Deputy Prime Minister Luigi Di Maio urges the flat tax and citizen income immediately (Bloomberg)

Germany: Foreign Minister Hieko Maas warned that President Trump's decision to reimpose sanctions on Iran could further destabilise the Middle East and boost radical forces in the region (Bloomberg)

Alitalia: Prime Minister Giuseppe Conte said market conditions will be key to any plan on Alitalia (Bloomberg)

E.ON SE: the company slashed its debt pile further, in preparation for its asset swap with RWE AG (Bloomberg)

WHAT TO WATCH TODAY: July´s PPI report in the US will be the highlight of the day. INE will release the trade balance in Portugal for June. In Mexico we will get the CPI for July.

Today the US will sell $18bn in 30-year bonds.

Viacom and News report their quarterly results in the US, while in Europe we should get the numbers from Freenet, Zurich Insurance Group, KBC Group, TAG Immobilien, Duerr, Cineworld Group, Kerry Group, G4S, Legal & General Group.

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

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