European Outlook: Markets started to recover from the latest bout of risk aversion during the late U.S. session and after Wall Street managed to close with slight gains, Nikkei and Hang Seng bounced back in Asia overnight. CSI 300 and ASX are little changed on the day and at least yesterday’s sell off was halted. U.K. stock futures are also higher, pointing to a rebound on European equity markets, which sold off Tuesday. Bund futures already started to come down from highs during yesterday’s late and after hour session and core yields should move up from yesterday’s lows, especially in the Eurozone where the expected pick up in German HICP and a still strong ESI economic sentiment reading should provide support. The U.K. has money supply and consumer credit data and Switzerland releases the latest KOF leading indicator.
New Zealand: The Statistics New Zealand released yesterday Building Permits data for July,which arrived at -0.7% from -1.0% last month. According to statistics manager Melissa McKenzie: ” July’s fall was driven by the number of consented apartments, townhouses, and retirement units, which fluctuates from month to month. The fall for multi-unit dwellings was partly offset by an increase for stand-alone houses” . The RBNZ Governor Wheeler had a scheduled speech titled “Reflections on the stewardship of the Reserve Bank”, via Reuters, in which it highlighted that, a lower New Zealand dollar is needed to increase tradables inflation and help deliver more balanced growth and also “to spook the market” as he particularly mentioned. “The appreciation in the exchange rate has been a headwind for the tradables sector and, by reducing already weak tradables inflation, made it more difficult to reach the Bank’s inflation goals,” Wheeler said. The Reserve Bank of New Zealand meets next on September 28 and it is expected to keep the current 1.75% rate setting through year-end.
US reports: U.S. consumer confidence rise to 122.9 from 120.0 (was 121.1) in July and 117.3 in June left consumer confidence at its strongest level since the 16-year high of 124.9 in March, and at its second highest level since December of 2000. All the confidence surveys show a big climb into 2017 despite small pull-backs from Q1 peaks, and with a surprising resumed updraft in August. The Michigan sentiment index popped to 97.6 from 93.4 in July, versus a 13-year high of 98.5 in January. The IBD/TIPP index rose to 52.2 from 50.2 in July and 51.3 in both May and June, versus a 56.4 cycle-high in February. The weekly Bloomberg Consumer Comfort index rose to a cycle-high 52.8 in the third week of August, and is averaging a solid 52.1 thus far in the month, which would also mark a monthly cycle-high, versus a 48.3 average in July. Confidence, producer sentiment and small business optimism have climbed since October despite setbacks in the face of surprising inventory weakness, but a factory rebound that is trimming excess capacity, equity and home price gains, and residual hopes for tax cuts and stimulus spending.
Main Macro Events Today
- German HICP – The German HICP rate expected to pick up to 1.7% y/y from 1.5% y/y in the previous month
- UK Consumer Credit & Mortgage Approvals – The net consumer credit expected to come in unchanged at GBP 1.5 bln and mortgage approvals to tick up to 65.4k from 64.7k. The consumer confidence eroding to show a new low of -14 from -12 in the month prior, while the manufacturing PMI has us anticipating a 55.2 outcome after 55.0 in the prior month.
- EU ESI- ESI Economic Confidence indicator is expected to nudge higher to 111.4 from 114.2, helped by an improvement in consumer confidence and an expected rise in industrial sentiment.
- Canadian Current Account- The current account is expected to post a -C$18.0 bln deficit in Q2, worsening from -C$14.1 bln in Q1, courtesy of a deepening in the nominal goods deficit in Q2 relative to Q1.
- US ADP and GDP- August ADP employment data should post a 185k headline following a 178k headline in July and 191k in June. Meanwhile, Prelim GDP q/q for Q2 expected to rise 0.1% from 2.6% released last time.
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