Friday’s main event, Ukraine’s alleged attack of a Russian military convoy, has come and gone, and as we mused on Friday has promptly faded into the memory of all other fabricated headlines released by the country engaged in a major civil war and an even more major disinformation war. To be sure, Germany’s DAX has recovered virtually all losses, US futures are up about 9 points, and the 10 Year is back to 2.37%. One wonders what algo-slamming headline amusement Ukraine has in stock for us today, although anyone hoping for a quick “de-escalation” (there’s that word again) will have to wait following yesterday’s meeting of Russian, Ukraine, German and French ministers in Berlin where Russia’s Lavrov said he saw no progress on Ukraine cease-fire, Foreign Minister Sergei Lavrov says in Berlin, adding that a cease-fire should be unconditional.
“As long as they’re betting on a military solution, and as long as the authorities in Kiev are using military victories over their own people to shore up their position in Kiev, I don’t think there’s any point to what we’re trying to do now.” He also said that Russia takes full responsibility for ensuring there are no illegal border crossings and Russia doing all it can to control border, sees progress. He concluded that he expects humanitarian aid to be delivered soon. In other words, nothing new.
Asian equities are a bit of a mixed bag this morning following a fairly volatile session for US and European markets on Friday. Chinese stocks are the notable outperformers overnight despite headlines of weaker home prices in China. Indeed new home prices fell in 64 of the 70 Chinese cities in July, the most since January 2011. Beijing (-1%) also posted its first decline since April 2012. The CSI 300 and Shanghai Composite are both up about six tenths of a percent as we type. Elsewhere, the Hang Seng and KOSPI are moderately lower whilst the Nikkei is flat on the day. Asian IG credit spreads are mostly unchanged overnight amid the absence of major news flows and supply. Bond investors of China’s first onshore corporate defaulter Chaori Solar meets in Shanghai today so we’ll see anything interesting comes out from that. Asian stocks little changed with the Sensex outperforming and the Kospi underperforming MSCI Asia Pacific at 148. Nikkei 225 little changed, Hang Seng up 0%, Kospi down 0.5%, Shanghai Composite up 0.6%, ASX up 0.4%, Sensex up 1.1%. 6 out of 10 sectors rise with energy, telcos outperforming and consumer, tech underperforming
European equity futures gapped higher at the open, however are still yet to test Friday’s best levels, indicating markets still remain somewhat nervy despite modest progress made between Russia and Ukraine. The top gainers today include airlines and steelmakers (some of last week’s poorest performers), however UK supermarket name Tesco (TSCO LN) has fallen sharply on fears the Co. could cut their dividend. US stock futures indicate a higher open on Wall Street, with earnings season looking to come to a close as of this week. German 10yr bond yields rise; French yields increase. 19 out of 19 Stoxx 600 sectors rise; autos, chemicals outperform, insurance, utilities underperform. 92.5% of Stoxx 600 members gain, 7% decline. Eurostoxx 50 +1.1%, FTSE 100 +0.6%, CAC 40 +1.1%, DAX +1.4%, IBEX +1.1%, FTSEMIB +1%, SMI +0.9%.
Away from Russia, we can expect more coverage on the Israel-Hamas negotiations in Cairo as we approach a 5-day temporary truce which expires at midnight on Monday. Leaders from both sides traded some fairly aggressive rhetoric over the weekend and it looks like there is still a sizeable gap between the two sides to bridge before a deal could be reach before the deadline. A member of the Palestinian delegation told the AP on Sunday that he is less optimistic than before on a deal. A key sticking point remains Hamas’s insistence that Israel pledge to end its Gaza blockade before the talks conclude.
Looking at the week ahead, we also expect a fairly eventful week for data watchers. In Europe the focus will likely be on the flash August PMI readings. The readings for the Euro area, Germany and France are due on Thursday. Markets are expecting a modest 0.4pt decline for the Euro area composite PMI but we suspect plenty of focus will be on the flash manufacturing PMI reading for Germany given the softening data momentum over there. The other notable European releases this week also include the Euroarea trade balance today, UK inflation tomorrow, and German PPI on Wednesday. In the US, we will get the NAHB housing market index today, July CPI and housing permits/starts on Tuesday and the Philly Fed survey on Thursday. We will also get the latest FOMC and BoE’s meeting minutes on Wednesday. In Asia, the focus will be on China’s HSBC flash manufacturing PMI for August on Thursday. Still, all eyes (and minds) will be on Jackson Hole this week.
