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German factory and PMI - EMEA brief 6 August

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  • Fresh trade war chat causes Asian equity markets to see red as investors remain spooked.
  • PBoC helps support Chinese assets by raising the reserve requirements on some forward FX positions, effectively making it more expensive to bet against the the Chinese currency.
  • US dollar remains steady on the US jobs data on Friday, with currency markets focusing on the yuan.
  • Saudi crude production printed a surprising dip in July, and with American shale production seemingly plateauing oil prices saw a welcome rise.
  • Gold is off it's 17 month lows but still hovers around the $1200 area of key support. 
  • German factory orders the key thing to note on a macro front.

Asian overnight: A mixed affair overnight saw Australian and Hong Kong stocks shrug off fears of a deepening trade war between the US and China, while Japanese and Chinese indices traded in the red at the end of the session. Rhetoric within the two sides stepped up once more, with China threatening a retaliatory set of tariffs on $60 billion of US exports. One of the key reasons for the strength in Australian indices was the gains we have seen in Iron Ore overnight, with the likes of BHP Billiton and Rio Tinto both enjoying a positive session. Asian equity markets are trading firmer this morning, although China's Shanghai Composite trades 1.3% lower and the Nikkei flat. In retaliation to Trump's tariff retorts, China has said that it is ready for a "protracted war" in the wake of what they believe to be unreasonable demands from the US.

UK, US and Europe: Looking ahead, there are precious few economic events of note, with the German factory orders deterioration (-4% from 2.6%) already seen this morning providing one of the only releases of interest. Also keep an eye out for the Sentix investor confidence figure for the eurozone. A similar story for the US session, with a Canadian bank holiday adding to the calm of the day.

South Africa: The rand is slightly softer and base metal prices trade mostly firmer this morning, while precious metal prices trade mixed. We are expecting the Jse to open up marginally firmer this morning. BHP Billiton is up 2.16% in Australia, suggestive of a positive start for local diversified resource counters. Tencent is 0.34% higher in Asia suggestive of a similar start for major holding company Naspers this morning. 

Economic calendar - key events and forecast (times in BST)


Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • HSBC saw adjusted profits fall 2% over the first six months of the year, with an 8% rise in adjusted operating expenses denting overall profitability. Pre-tax profits (~$6 billion) came in marginally below estimates too, while adjusted revenue rose by $2 billion compared with the same time last year. With the bank in a transitional period, the higher operating expenses come amid significant investments in both the retail and investment arms of the business.
  • easyJet saw passengers rise 4.5% in July compared with the same time last year. On an annual basis, the number of passengers flying with the airline in the 12-months to July rose 6.2% compared with the same time of year in 2017.
  • Vedanta Resources saw a 26% YoY jump in EBITDA for the first quarter ending in June 2018, driven by higher volumes and commodity prices. Standout operational highlights included record quarterly aluminium production (up 37% YoY), Gamsberg Zinc production to commence in September, and average Oil & Gas production up 4% YoY.
  • Wizz Air said that passenger numbers rose in July by 23%, thanks to new routes to Moldova, Romania and Austria. Load factor jumped 0.8 points to 95.4%.  

BMW upgraded to neutral at JPMorgan
Morgan Advanced upgraded to buy at Berenberg
Norsk Hydro upgraded to neutral at Goldman
Proximus upgraded to neutral at Citi

Banco BPM cut to reduce at Kepler Cheuvreux
DNB downgraded to hold at Jefferies
Osram downgraded to hold at HSBC
Safilo downgraded to reduce at Kepler Cheuvreux

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