Morning Report – Tuesday 18th August

Main Headlines

Asian stocks and U.S. futures drifted overnight after the S&P 500 Index failed at another attempt to break a record high amid an impasse over U.S. stimulus measures. South Korean stocks underperformed, sinking more than 2%, as the prime minister prepares for a national address amid a surge in coronavirus cases. Stocks were unchanged in Japan, Hong Kong and Shanghai. They rose in Sydney. S&P 500 futures fluctuated while European futures fell. The U.S. benchmark again ended below its February closing record despite rising past that level during trading. Ten-year Treasury yields ticked lower. The offshore yuan reached the strongest level since early March.

A surprise increase in money sent home by overseas workers this year has given Asia’s best performing currency another boost. The Philippine peso has advanced for the fourth straight day to the strongest since November 2016 after the central bank said the previous day that remittances increased 7.7% in June, defying forecasts for a decline. The peso has now appreciated 4.7% in the past three months, compared with 2.3% for its Asian peers.

GBP

Sterling edged up against the dollar but fell against the euro to start the week, with cable mostly driven by a weaker U.S. currency and euro-sterling ahead of a new round of Brexit negotiations. Brexit trade talks will resume on Tuesday. The issue of whether London’s financial sector will be able to access the European Union’s market after Brexit is in focus.

EUR

The Euro may rise if preliminary Q2 GDP data print better-than-expected figures and reinforce the hopeful narrative that economic stabilization is underway. An improvement in the outlook may then reduce the sense of urgency among monetary policymakers to deliver stimulus as aggressively. Analysts estimate for GDP to contract 12.1% on a quarter-on-quarter basis and -15.0% on a year-on-year basis.

USD

The dollar extended its fall to hit fresh lows against a range of currencies overnight, after a triple blow of retreating yields, soft U.S. economic data and a dip in safe-haven demand exerted broad selling pressure. The greenback is also poised to re-test multi-month or multi-year troughs against the euro, pound and Aussie made earlier in the month.

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

9:00 a.m.: Italy Industrial Sales
1:30 p.m.: US Housing Starts
1:30 p.m.: US Building Permits