FRIDAY – 25TH – AUGUST – 2017
European cash equity markets are making modest gains (FTSE +0.4%, DAX +0.4%, CAC +0.4%) as traders count down the hours to Jackson Hole speeches by the Fed’s Yellen and ECB’s Draghi. The Stoxx Europe 600 Index is 0.4% higher, with gains in auto and mining shares offsetting retailer declines after Amazon announced its plan to cut prices at Whole Foods. In fixed, core EU bonds are underwater in the aftermath of the August German IFO data where the business climate and expectations components beat the 115.5/106.8 forecasts at 115.9 and 107.9 respectively, but current conditions declined to 124.6 from 125.4 and even missed the 125.0 consensus. Elsewhere on the data front, German GDP was bang in line with forecasts but import prices were very soft, French consumer confidence eased a fraction to 103 as did Spanish PPI at 0% m/m. The euro saw a modest uptick in the wake of better than expected IFO data, while we’ve seen some US dollar supply as the Jackson Hole speeches draw closer. Of the two, Yellen is the more likely to make an impact given it could be her last speech at the annual event before she steps down. Meanwhile, ECB sources have already played down the chances of Draghi making any major policy change comments. In the energy space, oil prices are edging higher as the US petroleum industry prepares itself for Hurricane Harvey. The storm which is headed for the heart of the nation’s oil industry is reported to be the biggest hurricane to hit the US mainland in 12-years, sparking fears of damage and disrupted production. Looking ahead, besides the aforementioned Jackson Hole speeches, we also get US durable goods orders.
Key Headlines/Data:
* German newspaper RND reporting that the ECB will discuss an exit to QE in September and embark on an exit at their October 26th meeting.
* German IFO Data (Aug):
Business Climate 115.9 versus 115.5 expected, previous 116.0

Current Assessment 124.6 versus 125.0 expected, previous 125.4

Expectations 107.9 versus 106.8 expected, previous 107.3

* German GDP Data (Q2 F):
GDP Q/Q +0.6% versus +0.6% expected, previous +0.6%

GDP WDA Y/Y +2.1% versus +2.1% expected, previous +2.1%

GDP NSA Y/Y +0.8% versus +0.8% expected, previous +0.8%

* German Import Price Data (Jul):
Import Price Index M/M -0.4% versus +0.1% expected, previous -1.1%

Import Price Index Y/Y +1.9% versus +2.4% expected, previous +2.5%

* In an exclusive interview with the FT, Gary Cohn said that President Trump will launch a major push on tax reform next week with a speech in Missouri, as he shifts focus to fiscal policy in an effort to secure a badly needed first big legislative victory by the end of the year.
* Spanish PPI Data (Jul) M/M 0.0%, previous +0.1% | Y/Y +3.2%, previous +3.2%
* French Consumer Confidence (Aug) 103 versus 103 expected, previous 104
* UK Foreign Secretary Johnson said the UK will certainly meet its legal obligations on the Brexit bill, but some of the sums that he’s seen seemed to be very high.