German business confidence falls further

The German IFO business climate index fell further in August, to reach its lowest level since February, highlighting the difficulties currently facing the economy. While the headline measure fell to a value of 86.6, from 87.0 in July, there were declines in both the current assessment and expectations sub-components. On a sectoral basis, the business climate dropped sharply in the manufacturing sector.

Orders for US durable goods moved sharply higher in July, jumping 9.9% m/m, rebounding from a downwardly revised 6.7% m/m decline in June. The outturn was significantly higher than consensus expectations for 5% m/m growth. The headline measure was entirely driven by orders related to transportation, which jumped 34.8%, due to a rise in aircraft orders. Goods orders ex-transport in contrast fell 0.2% m/m.

The IMF published its third review on Egypt’s Extended Fund Facility (EFF) programme yesterday, following a staff report that was completed on June 26. This enables Egypt to immediately draw down on a further USD 820mn which will bolster Egypt’s finances. The review commended Egypt for progress on a number of structural reforms and urged a continuation of the flexible exchange rate regime that was pledged as part of the programme. However, it urged greater efforts on implementing the State Ownership Policy of divesting state assets, and to make greater progress on ensuring a ‘level playing field’ for private sector companies. The fourth review is reportedly going to be pushed back to October, from September previously, potentially in order to take account of expected tax reforms that month, and the completion of amendments to competition laws also due in October.

Consumer price inflation in Bahrain slowed to a 1.1% annual pace of growth in July, down from 1.4% y/y in June. The latest outturn was the first y/y deceleration in price growth in 4 months.

Today’s Economic Data and Events

• 10:00 GE GDP (2Q final). Forecast: -0.1 q/q
• 18:00 US Conference Board consumer confidence (Aug). Forecast: 100.6

Fixed Income

• US Treasury yields moved marginally higher on Monday, offsetting some of the fall at the end of last week. Markets are waiting for further US data to assess the likelihood of a 25bps versus 50bps cut from the Fed in September. Both the 2yr and 10yr yield gained 2bps to reach 3.9358% and 3.8160%, respectively.
• Yields were broadly higher across major European bond markets on Monday. The 10yr German Bund rose 2bps to 2.245%.

FX

• The dollar spot index rose 0.13% on Monday, reversing some of Friday’s decline, as heightened geo-political risks spurred safe haven buying. EURUSD fell 0.28% to 1.1161 and GBPUSD declined 0.2% to 1.3188. USDJPY rose 0.11%, closing at 144.53.
• Commodity currency moves were more mixed. AUDUSD fell 0.34% to 0.6772 and NZDUSD declined 0.47% to 0.6204, while USDCAD dropped 0.16% to reach 1.3487.

Equities

• Moves in US equity markets were mixed on Monday, following Friday’s rally. The Dow Jones gained 0.16%. The S&P 500 and the NASDAQ fell 0.32% and 0.85%, respectively, with investors in tech-heavy indices waiting for Nvidia results due out on Wednesday.
• European market moves were similarly mixed. The Eurostoxx 50 fell 0.25%, the CAC 40 gained 0.18%, and the DAX fell 0.1%. The UK’s FTSE 100 added 0.48%.
• Locally, the DFM added 0.75% and the DFM fell 0.1%.

Commodities

• Oil prices moved higher on Monday, following threats of production shutdowns in Libya as the country’s two governments wrestle for control of the central bank. Brent futures gained 3.05% to USD 81.43/b, while WTI rose 3.46% to USD 77.42/b.