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News & Views: Wednesday, August 27


What you need to know for today's trading day.


Putin Says Ukraine Summit Positive as Talks Begin (Bloomberg)

UBS Wealth ramps up allocation to North American stocks, cuts Europe (Reuters)

Snapchat Fetches $10 Billion Valuation (WSJ)

Japan Abe aide Hamada: Could do next sales tax hike in stages (Reuters)

Christine Lagarde, I.M.F. Chief, Under Investigation in France (NYTimes)

There is no major news catalyst overnight and instead the market continues to price in a higher level of accommodation - most likely QE - in the Eurozone. The German Bund continues to march lower, dropping the yield another 3bps to 91bps. Italy and Spain continue to perform strongly, notching another 4bps (to 2.37%) and 8bps (to 2.09%), respectively. That's going to continue to be a positive for risk assets. Yesterday afternoon TD upgraded its assessment for next week's meeting saying that a 10bps cut is warranted. That is the third strategist to make that call this week, following Nomura and JPM. Goldman sees the ECB on hold at the next meeting and instead thinks that the ECB will talk up the June measures to support the economy. They don't think they'll move until the December meeting - after the Asset Quality Review (AQR) bank stress tests are completed.

While on the subject, in an interview with Risk magazine, dovish ECB Board member Benoit Coeure said that Europe (and I assume he means the ECB) is facing a very fundamental choice if it wants to move to an ABS market that is as deep and liquid as the US market. He thinks it would require a significantly different amount of public sponsoring to gain market share. He refers to the Fannie Mae and Freddie Mac-type agencies that help facilitate mortgage lending. The Eurozone should go this route, but it would require further defragmentation of the monetary and fiscal systems, and possibly alterations to the Maastricht Treaty.

Oddly, German Finance Minister Schaeuble said in an interview with regional paper Passauer Neue Presse that Mario Draghi's comments at Jackson Hole were overinterpreted, which was viewed as an emphasis that governments should provide greater fiscal stimulus rather than austerity. He was also less than pleased that France's now-resigned economy minister Montebourg that Germany has an obsession with austerity,.

According to the New York Times, the US floated a trial balloon - that it is beginning to gather a coalition of allies that would be behind a potential military action in Syria against Islamic State militants. The US is likely getting pressure from European countries to act, namely Germany. The first move would be an extended air campaign, not dissimilar from the one in Libya I assume.

Overnight Data:
- German GfK consumer confidence (Sep) down to 8.6 vs 8.9 expected, prior 8.9
- French manufacturing confidence (Aug) down to 96 vs 96 exp, prior 97
- German import price index YoY (July) down -1.7% vs -1.4% exp, prior -1.2%
- New Zealand food prices MoM (July) down -0.7%, prior 1.4%
- Bank of Turkey on hold at 8.25%

US Economics (Time Zone: EST)

07:00 MBA Mortgage Apps
11:00 Fed to purchase $950m-$1.15b bonds in 22 to 30-year range
11:30 Treasury to sell $13b 2-year FRN (reopening)
1:00 Treasury selling $35b 5-year notes


Express (EXPR)
Michaels Co (MIK)
Lannett (LCI)
Workday (WDAY)

Tiffany's (TIF)

Twitter: @MichaelSedacca

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