EU Midmarket Update: Nvidia beats expectations but fails to impress investors with high expectations; Europe's “sick man” takes dovish stance on ECB; German inflation in focus.
Notes/Observations
– German state CPIs suggest national figures will fall below ECB target: Lower-than-expected CPI figures for the states of North Rhine-Westphalia, Hesse, Bavaria and Baden-Württemberg raised expectations of an ECB interest rate cut from September onwards, pushing the DAX to a new record high and the euro back below 1.11 from recent highs.
– Investors are analyzing Nvidia's earnings: Despite sales and profits beating expectations and strong guidance also being provided, the market is reading signs of comment on the outlook for mid- to long-term gross margins, which fell short of expectations due to competitive concerns acting as a headwind. NVDA was choppy in after-hours trading, closing down around -8% in after-hours trading. Currently at -4.5% in premarket, concerns over future margin performance and Super Micro's accounting issues (SMCI is one of NVDA's largest customers) appear to be outweighing Blackwell's chip delays and easing concerns over AI demand. European chip stocks are up slightly for now.
– Looking ahead, the second release of US Q2 GDP is scheduled for 8:30am ET, along with preliminary trade balance, preliminary wholesale inventories and weekly jobless claims.
– Asia ended mixed with KOSPI down -1.0%, EU Index +0.3-0.8%, US Futures +0.0-0.5%, Gold +0.5%, DXY +0.2%. Commodities: Brent -0.6%, WTI -0.5%. Cryptocurrencies: BTC -0.6%, ETH -0.5%.
Asia
– New Zealand ANZ Business Confidence Index for August: 50.6 (up 27.1 m/m, the highest level in a decade).
– Private capital investment in Australia in the second quarter recorded its biggest decline since the third quarter of 2021 (-2.2% vs. +1.0%e).
– China's Ministry of Commerce (MOFCOM): Some Chinese experts have proposed raising import tariffs on large-engine vehicles, arguing that such tariffs would be in line with WTO rules.
Europe
– The Italian government is said to be due to confirm its commitment to bring its budget deficit-to-GDP ratio below the EU's 3% cap in 2026.
Americas
– Fed hawk Bostic (2024 voter) noted that inflation still has a long way to go, but stressed that the Fed cannot wait until it's 2% before abandoning its tightening stance.
Speakers/Fixed Income/FX/Commodities/Errata
stock
Indices (Stoxx600 +0.48% to 523.08, FTSE +0.22% to 8,361.80, DAX +0.39% to 18,862.95, CAC-40 +0.47% to 7,613.52, IBEX-35 +0.41% to 11,377.95, FTSE MIB +0.61% to 34,087.00, SMI +0.42% to 12,395.73, S&P 500 Futures +0.01%).
Market Focus/Key Themes: European indexes opened mixed with modest gains and maintained the trend through the first half of the session. Communication Services and Consumer Discretionary sectors performed well. Sectors still in the red include Energy and Technology. Technology stocks fell following disappointment in Nvidia's earnings yesterday. Concentric received a takeover bid from its Moller Holding division. Attention focused on preliminary German CPI figures later in the day. Expected earnings in the next US session include Best Buy, Campbell's Soup and AutoDesk.
stock
– Consumer Discretionary: Delivery Hero (DHER.DE) +4.5% (second quarter results and preparations for IPO of Talabat business on Dubai Stock Exchange).
– Consumer Staples: Pernod Ricard (RI.FR) +3.5% (earnings, outlook), Diageo (DGE.UK) +1.0% (quote from Pernod Ricard), Corbion (CRBN.NL) +4.5% (analyst upgrades).
– Energy: Equinor (EQNR.NO) -1.5% (analyst downgrade), Repsol (REP.ES) -1.5% (analyst downgrade).
– Financials: Adler (ADJ.DE) -10.0% (first half results).
– Industrial: Concentric (COIC.SE) +58.5% (to be acquired) – Technology: ASML (ASML.NL) +1.5%, Infineon (IFX.DE) +1.0% (quoted by Nvidia).
speaker
– Sweden's central bank governor, Bunge, reiterated his commitment to two to three more interest rate cuts this year, with inflation stabilising at target and the country in a mild recession.
– The Turkish government is said to be ready to lower its growth forecast (**Note: Turkey's Q2 GDP data is due to be released on Monday, September 2nd).
– The Central Bank of Russia (CBR) reiterated its commitment to maintaining tight monetary policy for the long term in order to achieve a sustained decline in inflation.
– Chinese President Xi Jinping met with White House National Security Advisor Sullivan. President Xi expressed his hope that the United States would seek a compromise to get along with China. He also expressed his hope that the United States would view China in a positive and rational manner.
– Chinese President Xi Jinping called for all-out efforts in carrying out the reform agenda.
The Cabinet Office's monthly economic report revised its economic assessment upward for the first time in 16 months, saying the economy is recovering slowly, although some areas are showing signs of slowing down.
Currency/Bonds
– The US dollar is expected to continue correcting recent losses as attention turns to US data due later in the session that could bolster expectations of a Fed rate cut.
– Keep an eye on inflation data to see if it is steadily progressing towards target. Spain's CPI fell to a one-year low of 2.2%, likely supporting a rate cut at the ECB's next meeting. EUR/USD fell from 1.1130 to below 1.11 as Germany's CPI appears to be on target for the first time since April 2021.
Economic Data
– (EU) New car registrations in EU27 July: 0.2% (previously 4.3%)
– (NL) Dutch August producer confidence index: -.9 (previously -2.7).
– (SE) Swedish Q2 GDP QoQ: -0.3% (-0.8%e QoQ), YoY: 0.5% (0.0%e QoQ).
– (SE) Swedish retail sales in July m/m: +0.5% (m/m -0.8%), y/y: -0.5% (m/m -1.4%).
– (NO) Norway July retail sales (excl. motor vehicles) m/m: +1.2% vs. -5.1% m/m.
– (ES) Spain August preliminary CPI m/m: 0.0% v 0.2%e; y/y: 2.2% v 2.4%e; core CPI y/y: 2.7% v 2.6%e.
– (ES) Spain August Preliminary CPI EU Harmonised MoM: 0.0% (0.2%e), YoY: 2.4% (2.5%e).
– (SE) Sweden August Consumer Confidence: # 96.2 vs. last Manufacturing Confidence: 97.1 vs. 97.0 vs. Economic Survey: 94.7 vs. 94.9 last.
– (TR) Turkey's economic confidence in August: 93.1 (previous month: 94.4).
– (DE) Germany August North Rhine-Westphalia CPI m/m: -0.1% (previous +0.3%), y/y: 1.7% (previous 2.3%) (below the ECB's 2% target for the first time since spring 2021).
– (DE) Germany August CPI Hesse m/m: -0.1% vs. +0.3% m/m. YoY: 1.5% vs. 1.8%.
– (DE) Germany August CPI Bavaria m/m: -0.1% vs. +0.3% y/y. y/y: 2.1% vs. 2.5% y/y.
– (DE) Germany August CPI Brandenburg m/m: -0.2% vs. p.a. +0.3%. Y/Y: 1.7% vs. p.a. 2.6%.
– (DE) Germany August CPI Saxony m/m: -0.2% vs. p/a +0.6%. Y/Y: 2.6% vs. p/a 3.1%.
– (DE) Germany August CPI Baden-Wurttemberg m/m: -0.3% vs. +0.3% y/y. y/y: 1.5% vs. 2.1% y/y.
– (PL) Poland's Q2 GDP final growth: 1.5% (provisional 1.5%), y/y growth: 3.2% (provisional 3.2%).
– (PT) Portugal August consumer confidence: -14.3 (previous -15.4). Economic climate index: 1.7 (previous 1.8).
– (EU) Euro area August economic confidence: 96.6 vs. 96.0e; industrial confidence: -9.7 vs. -10.8e; services confidence: 6.3 vs. 5.2e; consumer confidence (final): -13.5 vs. -13.4.
– (IS) Iceland August CPI m/m: 0.1%, previous 0.5%, y/y: 6.0%, previous 6.3%.
Bond Issuance
– (IT) The Italian Debt Agency (Tesoro) sold five- and 10-year BTP bonds for a total amount of €7.75 billion, against an expected range of €6.75-7.75 billion.
– New 3.00% October 2029 BTP bond sale for €4.5bn (range €4bn-4.5bn). Average yield: 3.08% (previous 3.18%), bid ratio: 1.48x (previous 1.55x, less than July 2029 BTP 3.35%) (July 30, 2023).
– Sale of €3.25 billion of 3.85% BTP bonds due February 2035 in a range of €2.75-3.25 billion. Average yield: 3.68% (previous: 3.76%), bid ratio: 1.62x (previous: 1.42x).
– (IT) Italian State Credit Agency (Tesoro) sold its April 2032 floating rate bond (CCTeu) for €1.5 billion against an expected range of €1.0-1.5 billion. Effective yield: 4.94% (previously 4.89%). Bid ratio: 1.92x (previously 1.68x).
Looking to the future
– (BR) Brazil's July total federal debt (BRL): no forecast, compared to the previous forecast of $7.068 trillion.
– (BE) Belgium August CPI, m/m: no forecast, 0.7% m/m; y/y: no forecast, 3.6% m/m.
– (AR) Argentina August Consumer Confidence: No forecast, previous 39.1.
– (BR) Brazil July central government budget balance (BRL): -38.8 billion from previous, no estimate.
– 05:15 (IE) ECB's Philip Lane (Chief Economist, Ireland).
– 05:25 (EU) Daily ECB liquidity statistics.
– 05:30 (ZA) South Africa July Producer Price Index (PPI) m/m: +0.1% expected, previous -0.3%, y/y: 4.5% expected, previous 4.6%.
– 05:30 (HU) The Hungarian State Debt Agency (AKK) sells 12-month government bonds.
– 05:40 (UK) BOE allocations in 7-day short-term repo operations (STRs).
– 06:00 (IE) Ireland August Flash CPI EU Harmonised y/y: no forecast, previous 1.5%.
– 06:00 (IE) Ireland July PPI m/m: no forecast, previous 2.3%. Y/Y: no forecast, previous 2.8%.
– 06:00 (PT) Portugal July Retail Sales MoM: No forecast, -0.9% MoM. Y/Y: No forecast, previously 4.0%.
– 06:00 (FI) Finland sells bonds through the Ori auction.
– 07:00 (CA) Canada August CFIB Business Barometer: Below previous forecast of 55.4.
– 07:00 (BR) Brazil August FGV inflation IGPM m/m: 0.5% expected, previous 0.6%; y/y: 4.4% expected, previous 3.8%.
– 07:30 (BR) Brazil's total outstanding loans (BRL) in July: previous estimate 6.019T, MoM: previous estimate 1.2%, personal default rate: previous estimate 5.5%.
– 08:00 (DE) Germany August CPI flash m/m: 0.0% prev: 0.3%, y/y: 2.1% prev: 2.3%.
– 08:00 (DE) Germany EU Harmonized CPI flash for August m/m: 0.0% prev: 0.5%, y/y: 2.2% prev: 2.6%.
– 08:00 (UK) Daily Baltic Dry Bulk Index.
– 08:30 (US) Q2 GDP preliminary figure (annualized, 2nd of 3 announcements) Q2: 2.8%ev 2.8% announced ahead of schedule. Personal consumption: 2.2%ev 2.3% announced ahead of schedule.
– 08:30 (US) Q2 GDP Price Index Preliminary (2nd of 3): 2.3%ev 2.3% ahead of schedule. Core PCE Price Index QoQ: 2.9%ev 2.9% ahead of schedule.
– 08:30 (US) Previous month merchandise trade balance for July: -$97.9 billion (revised from previous -$96.6 billion) (revised from -$96.8 billion).
– 08:30 (US) Wholesale inventories flash for July: 0.3% m/m (previous 0.2%), retail inventories flash: 0.5% m/m (previous 0.7%).
– 08:30 (US) Initial unemployment claims: 232K (previously 232K), Continuing unemployment claims: 1.87M (previously 1.863M).
– 08:30 (CA) Canada Q2 current account balance: -$6 billion, last quarter -$5.4 billion.
– 08:30 (CL) Trader survey from the Central Bank of Chile.
– 08:30 (US) Weekly net export sales from the US Department of Agriculture.
– 09:00 (RU) Russia's gold and foreign exchange reserves for the week of August 23: no forecast against the previous figure of $609.9 billion.
– 09:00 (CL) Chilean unemployment rate in July: 8.5% (previously 8.3%)
– 10:00 (US) July Home Sales Estimates Month-on-month: 0.2% expected (previously 4.8%); Year-on-year: -2.0% expected (previously -7.8%).
– 10:30 (US) Weekly EIA Natural Gas Inventories.
– 11:30 (US) The Treasury sells 4-week and 8-week Treasury bonds.
– 12:00 (CH) SNB Governor Jordan.
– 13:00 (DE) Nagel from the ECB (Germany).
– 13:00 (US) The Treasury sells 7-year bonds.
– 15:30 (US) Bostic, Federer.
– 18:00 (NZ) New Zealand August ANZ Consumer Confidence Index: Up from previous 87.9, no forecast.
– 18:45 (NZ) New Zealand July building permits M/M: No forecast, -13.8% compared to previous.
– 19:00 (KR) South Korea's July industrial production m/m: no forecast, up 0.5% from previous; year-on-year: no forecast, up 3.8% from previous; change in leading economic index: no forecast, up 0.2% from previous.
– 19:01 (UK) Lloyds Business Barometer for August: 46e v 50 last time.
– 19:30 (JP) Japan's July unemployment rate: 2.5% expected (previously 2.5%), job offer ratio: no forecast (previously 1.23%).
– 19:30 (JP) Japan August Tokyo Consumer Price Index (CPI) YoY: 2.3% Previous: 2.2%, Consumer Price Index (excluding fresh food) YoY: 2.2% Previous: 2.2%, Consumer Price Index (excluding fresh food and energy) YoY: 1.4% Previous: 1.5%.
– 19:50 (Japan) Japan July retail sales m/m: 0.4% m/m vs. 0.6%. Year-on-year: 2.8% m/m vs. 3.7%; Department store and supermarket sales y/y: no forecast, previously 6.6%.
– 19:50 (JP) Preliminary estimate of Japan's July industrial production. Month-on-month: +3.5% expected (previous -4.2%); year-on-year: +2.7% expected (previous -7.9%).
– 21:30 (AU) Australian July retail sales m/m: no estimate, up 0.5% from previous.
– 21:30 (Australia) Australian July Private Sector Credit Monthly: No forecast, previous 0.6%. Y/Y: No forecast, previous 5.6%.
– 22:00 (Singapore) Singapore July M2 Money Supply YoY: No forecast, previous 1.4%. Y/Y: No forecast, previous 4.0%.
– 23:30 (JP) Japan sells 3-month government bonds.
