* Cotações com atraso superior a 15 minutos via Bats CHI-X Europe e NASDAQ Basic

PATRIS The Week Ahead - 17 September 2018

17 Sep 2018


Key themes for the coming week:

1.The third round of inter-Korea summits takes place on 18-20 September in Pyongyang. The leaders of North and South Korea have met previously on 27 April and 26 May near the Demilitarised Zone. This week’s summit is likely to focus on easing peninsular military tensions.

2.Markets will watch any news of trade discussion between the US and China, as well as on the timing of further tariff implementation. According to press reports, new tariffs could be announced as early as today by Donald Trump.

3.Last Friday, Standard & Poor’s affirmed Portugal at BBB- and revised the outlook to positive from stable.

4.EU Council meets on Thursday. Market attention should be on BREXIT-related announcements.

5.A Medium-term macroeconomic plan is scheduled to be unveiled in Turkey next Thursday.

6.ISTAT publishes on Friday the latest estimates of Italy’s economic and fiscal indicators for 2017. The government is then expected to approve the Update to the Economic and Financial Document 2018 by 27 September. The document will contain the new macroeconomic and fiscal forecasts for 2018-2021.

7.Galp Energia will trade ex-dividend as of 18 September (Tuesday) for the interim dividend payment (gross amount of €0.275).

8.IGCP will auction on Wednesday two Treasury Bill lines maturing on March 2019 and September 2019, with an indicative global range amount of €1250mn to €1500mn.

9.In Brazil, consensus expects the SELIC rate to remain on hold at 6.50% when the COPOM announces its decision on Wednesday.

10.September Markit flash composite PMI index in the Euro Area and September Empire and Philly Fed indices in the US for the manufacturing sector are the highlights for this week’s data calendar.

11.In Portugal, the Bank of Portugal releases August coincident indicators on Friday.

12.Update to the key risk events calendar for the following months.

Next Friday we will get a credit review for Greece by Moody’s. Fitch could update its view on Norway and Switzerland. We will also have a credit review by Standard & Poor’s for Belgium, Latvia, Malta, Norway and Spain. Finally, DBRS may review Austria.

On 23 March, S&P raised Spain to A- from BBB+ and assigned a positive outlook. S&P said that it could raise the rating on Spain if the government achieves greater consolidation of public finances, there is further improvement in the monetary transmission mechanism (as the ECB influence financial conditions in Spain), and further easing of political tensions in Catalonia.

S&P affirmed Portugal at BBB- on Friday, while revising the outlook to positive from stable. Italy is a BBB for Standard & Poor’s.

S&P could upgrade Portugal if private and public deleveraging proceeds alongside improvements in financial stability. S&P will continue to monitor funding costs and the level of NPLs in the banking sector. Risks to the positive outlook include a weakening in economic growth, a lack of progress in implementing growth-enhancing structural reforms, a deterioration in the government’s budgetary position or a reversal in Portugal’s ongoing external adjustment.

S&P sees the Portuguese economy on track to expand by 2.3% this year, on the back of a strong growth in investment spending on machinery and equipment and the solid evolution of private consumption and exports. S&P highlights the positive trend in labour market, and projects that Portugal’s net general government debt will steadily decline relative to GDP, as a result of continuous budgetary consolidation.

S&P projects that the headline fiscal deficit will narrow to 0.7% of GDP in 2018. The General government debt should reach 113% of GDP this year.

10-year PGBs are already trading at a spread vs. Germany consistent with rating upgrades given the current EGB credit curve.

During the upcoming week, seven S&P500 companies are expected to report results. In Europe, the calendar is very light this week.

According to FactSet, for 3Q18, the consensus expects companies in the S&P500 to report earnings growth of 19.9% and revenue growth of 7.5%. For 4Q18, the consensus sees earnings and revenue growth moderating to 17.5% and 6.0%, respectively. For 2018, analysts are projecting earnings growth of 20.6% and revenue growth of 8.1%. However, they expect more moderate growth next year (earnings growth of 10.3% and revenue growth of 5.3%).

We will have MPC meetings this week in Hungary (Tuesday), Thailand, Brazil and Japan (all on Wednesday), Norway, South Africa and Switzerland (all on Thursday).

In Brazil, and despite the currency depreciation, consensus expects the central bank to keep the SELIC rate on hold at the record low 6.50%, reflecting the weak economic recovery and the below-target inflation rate. Focus should be on comments from COPOM on the impact of market concern with the October presidential and legislative elections on the BRL.

Bank of England Chief Economist Andy Haldane will deliver a speech on Wednesday at the Bank of Estonia’s 100th anniversary. There will be no Fedspeak during the week due to the blackout period ahead of next week’s FOMC decision. In the Euro Area, we will have speeches from Benoît Coeuré, Yves Mersch, Peter Praet and Mario Draghi.

In Chile, the central bank will release on Friday the minutes of the September monetary policy meeting. At that meeting, the MPC decided (in a unanimous decision) to keep the policy rate unchanged at 2.50%, in line with market consensus. The forward guidance pointed towards a rate hike over the coming months.

September Markit flash composite PMI index in the Euro Area and September Empire and Philly Fed indices in the US for the manufacturing sector are the highlights for this week’s data calendar.

Portugal: INE releases on Wednesday the monthly economic survey for August. On Friday, INE discloses the second notification for 2018 of the excessive deficit procedure. Bank of Portugal releases this week current account & international investment position data for 2Q18 (Wednesday), loans to households & non-financial corporations for July (Thursday), and August coincident indicators (Friday).

Euro Area: The key data to watch this week in the region will be the September flash PMIs for the Euro Area, Germany and France on Friday, after the August composite PMI showed a modest gain for the region as a whole. On Thursday, the European Commission releases the September consumer confidence. The index dropped substantially in August. On Monday, Eurostat discloses final August Euro Area-wide core and headline inflation rates.

The number of companies reporting labour and equipment shortages in the European Commission’s quarterly survey for both manufacturing and services is high in a historical context, suggesting a stronger use of resources and lower slack in the Euro Area economy.

UK: We will get this week inflation (Wednesday) and retail sales (Thursday) data for August.

US: The data calendar release is very light this coming week. The Philly Fed index for September will be released on Thursday.

Prospects for fixed investment in the US economy remain positive. The NFIB Small Business Optimism Index reached in July a new record in the survey’s 45-year history. The percentage of small business owners saying it is a good time to expand tied the May 2018 all-time high, reflecting the favourable tax and regulatory landscape.

Latam: In Brazil, the October presidential election will remain in the spotlight, as Ibope is expected to release a new poll during the week. On the data front, IBGE releases mid-month inflation for September on Friday.

Datafolha released on Friday a new 2018 election poll. Jair Bolsonaro (PSL) reached 26%. Fernando Haddad’s (PT) voting intentions continue to increase reflecting votes transference from Lula. He is now in the second place (13%) tied with Ciro Gomes (PDT). Geraldo Alckmin (PSDB) comes fourth with 9% of voting intentions, followed by Marina Silva (REDE) with 8%.

Jair Bolsonaro continues to lead the rejection list (44%), followed by Marina Silva (30%), Fernando Haddad (26%), Geraldo Alckmin (25%) and Ciro Gomes (21%).

According to the second-round simulation, Jair Bolsonaro is still losing against Ciro Gomes (45% vs. 38%), Geraldo Alckmin (41% vs. 37%) and Marina Silva (43% vs. 39%). He is technically tied with Fernando Haddad (40% vs. 41%).

The first round takes place on 7 October (run-off on 28 October). All 513 seats in the Lower House are up for renewal, while 2/3 of the seats of the 81-seat Senate are up for renewal (the other 1/3 will change in 2022).

In Mexico, focus should be on negotiations for the trade deal, as well as on the 2019 budget discussions. In terms of economic data, Thursday will see the release of details for 2Q18 GDP, while on Friday we will get the July retail sales report. In Argentina, market attention should remain on discussion about the 2019 budget. The bill is expected to be voted in the lower house at the beginning of October. INDEC unveils the 2Q18 national account report on Wednesday. The economy is expected to have recorded a sharp contraction in the quarter, reflecting the tightening of financial conditions. We will also get this week the release of the UTDT leading indicator for August (due on Wednesday), the August labour market (Thursday) and the 2Q18 labour market report (Thursday). Negotiations between Argentina and the IMF will continue to be followed, in order to see if they involve tighter fiscal measures or more unorthodox strategies, namely to deal with the weaker currency. Colombia, the tax reform debate will continue this week. On the economic data front, trade numbers for July will be disclosed on Tuesday. On Friday, we will get the GDP proxy for July.

EGB supply this week is expected to come from Belgium (OLO 0.2% October 2023, 0.8% June 2028, 1.6% June 2047 and 2.25% June 2057, on Monday), Germany (Schatz 0% September 2020, €4.0bn on Tuesday, and Bund 0.25% August 2028, €3.0bn on Wednesday), France (OAT 0% 2021, 0% 2024 and 0.5% 2026, as well as linkers 0.1% 2036, 0.7% 2030 and 0.1% 2028, on Thursday) and Spain (SPGB 0.05% 2021, 1.4% 2028, 0.45% 2022 and 1.6% 2025, on Thursday). There are no relevant cashflows to offset the supply scheduled for the coming week.

Netherlands (Monday), France (Monday), ESM (Tuesday), Spain (Tuesday) and Portugal (Wednesday) are expected to sell Treasury Bills this week.

The US Treasury is scheduled to issue around $11bn of 10-year TIPS (reopening) on Thursday. There are no cashflows to offset the supply.

For further information, or to receive the PDF file, please contact +351 912 897 835 or



The information and opinion contained in this report was prepared by PATRIS - SOCIEDADE CORRETORA, SA ("Patris"), which is part of the group of companies whose holding is PATRIS INVESTIMENTOS, SGPS, SA (Patris Group), listed in Alternext, which holds 100% of the share capital and voting rights of REAL VIDA SEGUROS SA which, in turn, holds 100% of the share capital and voting rights of Patris.

The information contained herein is based on publicly available data obtained from sources believed to be reliable and has not been subject to independent verification. To the extent permitted by applicable law, Patris does not expressly or impliedly guarantee the accuracy, completeness and / or correctness of such data, or any omission. This document, or part thereof, may not be (i) modified, (ii) transmitted or distributed or (iii) copied or duplicated by any means or means, without the prior written consent of Patris.

The analysts involved in the preparation of this report did not receive, receive and will not receive any compensation, direct or indirect, based on the information contained in this report.

PATRIS - SOCIEDADE CORRETORA, SA or another company of the Patris Group or its respective shareholders, management, and / or employees may carry out personal transactions on the securities referred to in this report, at any time and without prior notice.

Any opinion contained in this report may be outdated as a result of changes in market conditions, applicable laws and other factors. It should also be considered that the analyst may make changes to the estimates, assumptions and evaluation methodology used.

This report has been prepared for information purposes only, not taking into account the specific investment goals, financial situation and particular needs of any specific person who may receive the report. This report therefore has no specific recipient.

Patris is subject to high internal standards of behavior associated with the capital market, prepared on the basis of the applicable legislation of the Portuguese State and the European Union, which include rules to prevent and avoid conflicts of interest and barriers to the disclosure of information.

Investors should bear in mind that the rate of return on the securities identified in this report - if any reference is made to those returns - may vary and the price of such securities may rise or fall. Investors should thus be aware that they may receive less than initially invested. While this report may refer to the historical performance of securities, past performance is no guarantee of future performance. In addition, market conditions, applicable laws and other factors that have an effect on performance are all likely to change, with the consequent change in the information contained in this report. Patris or any other company of the Patris Group does not accept, to the extent permitted by applicable law, any liability, whether direct or indirect, resulting from losses that may arise due to the use of the information contained in this report.

Patris's activity is overseen by the Bank of Portugal and the Securities Market Commission.