Morning Report – Thursday 3rd September

Main Headlines

Boris Johnson demanded an explanation from Moscow after Germany determined that an adversary of Vladimir Putin was poisoned with novichok. “It’s outrageous that a chemical weapon was used” on Alexey Navalny, the PM wrote on Twitter. “The Russian government must now explain what happened – we will work with international partners to ensure justice is done.” France and the EU also condemned the poisoning, and U.S. Senator Tom Cotton called for halting the Nord Stream 2 project.

A Fox poll showed Joe Biden leads Donald Trump in three swing states: Arizona, Wisconsin and North Carolina. The survey taken after party conventions showed the Democratic nominee is being buoyed by women and suburbanites. A Quinnipiac University poll had Biden ahead by 10 percentage points, while a CNN poll put him in front by 8 points.

France unveiled its long-awaited 100 billion-euro stimulus plan, which includes wage subsidies, tax cuts for businesses and funding for environmental projects. Dubbed “France Relaunch,” the plan aims to shift away from emergency spending to addressing the longer term problems of weak investment and job creation. The stimulus will add 160,000 jobs next year.

Gobal stocks continue to soar. Asian stocks and European futures got a boost after U.S. equities set a fresh record on signs gains are broadening across sectors. S&P 500 contracts were steady. Oil, gold and Treasuries fell.

GBP

Sterling fell against a rebounding U.S. dollar on overnight but steadied against the euro as Bank of England policymakers warned that Britain’s economy could suffer more damage than anticipated by the central bank last month. The BoE said in August it expected Britain’s economy to recover to its pre-COVID-19 size by the end of next year, but Bank of England Deputy Governor Dave Ramsden told lawmakers economic output would permanently be about 1.5 percentage points lower than it would have been without the pandemic and another interest-rate setter, Gertjan Vlieghe, warned of “a material risk” it could take several years for Britain’s economy to return to full capacity. BoE governor Andrew Bailey told the lawmakers in Wednesday’s closely watched online session that inflation might not be as weak as estimated by the BoE last month, citing evidence that many businesses had not passed on a value-added tax cut to customers. The BoE said last month negative rates are part of their monetary tool box but that it saw no immediate case to cut interests rates below zero.

EUR

The euro was sold off overnight after the Financial Times reported that several members of the ECB’s governing council were concerned that the euro’s rise could weigh on European growth. That followed remarks on Tuesday from ECB’s chief economist Philip Lane, who said the exchange “does matter” for monetary policy, which had begun the euro’s descent from above $1.20. A speech from ECB board member Isabel Schnabel at 1600 BST today will be closely watched for any comments on the currency.

USD

The dollar’s bounce extended in early trade this morning as investors trimmed bets against the greenback particularly against the euro. Few analysts expect it to hold for too long, but it gained broadly in Asia and if sustained would be the first time the dollar has climbed three sessions in a row since May.

Main Economic Data/Central Banks/Government (All Times BST)

8:00 a.m.: Turkey Aug. CPI
8:15 a.m.: Spain Aug. services, composite PMI
8:45 a.m.: Italy Aug. services, composite PMI
8:50 a.m.: France Aug. services, composite PMI
8:55 a.m.: Germany Aug. services, composite PMI
9:00 a.m.: Euro-Area Aug. services, composite PMI
9:30 a.m.: U.K. Aug. services, composite PMI
10:00 a.m.: Euro-Area July retail sales
12:00 p.m.: Ukraine rate decision
1:30 p.m.: U.S. initial jobless claims
3:00 p.m.: BOE’s Bailey, Ramsden speak
4:00 p.m.: ECB’s Schnabel speaks

Corporate Events

Earnings include Capgemini, EDP, Exor, Iliad, Broadcom