Market buzz: BoE set for August hike?, Goldman tips England football team

1530: Rabobank sees euro/dollar at 1.12 on a 12-month view.

"We also see potential for further USD outperformance vs. the EUR based on a dovish ECB and the expectations of strains within the EU on immigration and within the EMU stemming from budgetary concerns," the Dutch broker says.

1501: Credit Suisse: "We expect the PBOC will have to cut the RRR by at least another 50bps in the coming months, and with fewer prescriptions for use of the liquidity, to stimulate credit and money growth. Trade Wars (Impact of US tariffs remains small for now). We estimate the worst case direct cost to China's economy to be about 0.2% of GDP this year. This would rise to about 1.3% on a full year 2019 basis, again, probably as a worst case estimate."

1500: Conference Board consumer confidence index slips from 128.8 for May to 126.4 in June.

1458: Richmond Fed manufacturing sector shipments index falls from 16 for May to 17 in June.

1457: Citi/YouGov index for inflation expectations one-year ahead edges higher, from 2.5% to 2.6%.

1456: For Andrew Goodwin at Oxford Economics, several of Haskel's comments "hinted" at a more dovish bias than embedded in the MPC's central projection.

Among those, Goodwin explained, was Haskel's reference to the recent paper authored by Hugo Erken, according to whom a 'hard' Brexit might slash the annual rate of growth in so-called total factor productivity in the UK from 1.1% to 0.5%, with a 'soft' Brexit reducing it to 0.8%.

"So we see this switch of personnel as being consistent with our call that interest rates will rise only once in 2019 (following a hike in August 2019), with the risks skewed to the downside."

Regarding the August 2018 hike in Bank Rate, Goodwin said: "That McCafferty will again vote for higher interest rates in August is virtually a foregone conclusion and, provided that the monthly GDP data evolves in line with our expectations, we expect at least two of his fellow Committee members to switch their votes and allow him to sign off with a rate hike."

1415: Credit Suisse on Carnival's US-listed shares: "Great buying opportunity: We see the share price reaction after Q2's results as a great buying opportunity. We leave estimates unchanged, still highlighting scope for upgrades and note just 4% downside to trough multiples and 34% upside to through cycle."

1252: In a comment on Global Mining following Monday's downdraft in shares and commodity prices, analysts at RBC comment: "After this recent sell off, stocks are now trading at a 9.9% discount to NAVPS at forward curve prices, and historically at or below a 20% discount has been a good entry point."

1249: He ain't done yet.

....We are finishing our study of Tariffs on cars from the E.U. in that they have long taken advantage of the U.S. in the form of Trade Barriers and Tariffs. In the end it will all even out - and it won’t take very long!

— Donald J. Trump (@realDonaldTrump) June 26, 2018

1108: Haskel tells the Treasury Select Committee that unwinding QE, if done gradually, would tend to have minimal effects.

1059: England are likely to play Brazil in the World Cup final, according to economists at Goldman Sachs.

....We are getting other countries to reduce and eliminate tariffs and trade barriers that have been unfairly used for years against our farmers, workers and companies. We are opening up closed markets and expanding our footprint. They must play fair or they will pay tariffs!

— Donald J. Trump (@realDonaldTrump) June 26, 2018

Having been written off as also-rans before the tournament, England’s victory over Tunisia and the emphatic 6-1 defeat of Panama have set the team on course for the country's first final since winning the World Cup in 1966, Goldman's economists reckon.

1056: One missed yesterday, Diageo said they have proposed upping their stake in Sichuan Shuijingfang Company (SJF) from approximately 39.71% to up to 60% at an offer price of RMB62 per share.

SJF has made an announcement in respect of such proposal on the website of the Shanghai Stock Exchange saying the proposal does not constitute the announcement of an offer and creates no obligation on Diageo and/or any Diageo subsidiary to make an offer.

Talks continue.

1051: Haskel asked about past comments to FT that interest rates would stay low because wage pressures weak [...] why does he differ from stance of someone like Saunders.

Answer from Haskel: Difference on judgement about degree of slack in economy, possibly.

1038: Haskel: There may well be much more slack than you think in this much more varied labour market.

If that is so, it would weaken arguments in favour of rate hikes.

1037: When asked whether he believes BoE is fueling a debt bubble at the moment, Haskel answers his sense is that households have been paying down their debt since th GFC, balance sheets in much stronger position.

1025: Pound at session low of 1.3243, off by 0.29%, as Jonathan Haskel speaks before Treasury Select Committee.

0955: Don’t panic about trade wars, "prepare", says Richard Turnill, BlackRock’s global chief investment strategist, still seeing fundamentals as underpinning global growth in the short term.

"Trade tensions are here to stay. Even without a full-blown trade war, escalating frictions could weigh on business confidence – and growth. Economic fundamentals are still running strong and underpinning our risk-on view in the short term, but we advocate building increased resilience into portfolios as macro uncertainty rises."

Turnill acknowledges that geopolitical risks such as trade tensions are amplifying macro uncertainty. "Portfolio resilience is crucial now. We prefer up-in-quality exposures in fixed income, favoring investment-grade debt. We also like hard-currency emerging market debt while avoiding highly leveraged assets. We like companies with strong balance sheets and earnings growth in equities, mostly in the US. Diversification and broad style factor exposures can also help buffer portfolios against potential market regime changes."

0951: After the mortgage approvals data showed a recovered further in May following the Q1 decline, economists at Pantheon Macroeconomics note that the pick-up over the last few months has occurred despite a hefty increase in mortgage rates, partly due to the closure of the Term Funding Scheme in February.

For instance, the averaged quoted interest rate for a 2-year fixed 75% LTV mortgage increased to 1.72% in May, from 1.49% in February. The average mortgage size also increased to £203.8K in May—the first time it has ever exceeded £200K—from £197.4K in April, so the proportion of buyers’ incomes absorbed by interest payments is now rising sharply.

"We suspect that first-time buyers, who exclusively benefited from the Chancellor’s decision in the November Budget to cut stamp duty, have driven the increase in lending. Even so, a further recovery in mortgage approvals from here isn’t likely. Mortgage rates likely will rise a little further over the coming months."

More recent indicators of demand remain weak, with RICS' new buyer enquiries balance falling to -7 in May, from -3 in April.

0940: RBC Capital Markets comments on BHP's Samarco update: "Although not a definitive agreement this does provide a context for eventual resolution. It does not appear as if there will be a punitive aspect which should be a relief (if not already inline with market expectations). We would expect this agreement clears the path for a renegotiation of ownership structure and the eventual restart of the Samarco operations. We continue to maintain a cautious short term approach to BHP and Vale with potential for lower iron ore prices."

0932: UK Finance mortgage update, the artist formerly known as BBA, has revealed mortgage loans in May increased to 39.244k from 38.3k last time, beating the consensus estimate of 38.15k.

0846: Correction: Carnival is top of the FTSE leaderboard this morning, bouncing back from a bit of an overreaction to yesterday's update, while Inmarsat is a big faller after a spike yesterday afternoon.

The satellite group was up yesterday as Eutelsat confirmed it was mulling a possible offer yesterday but today stated that "it does not intend to make an offer for Inmarsat".

0845: Tuesday's London open market report finds stocks edged higher in early trade following heavy losses in the previous session, but trade war concerns were expected to remain firmly on investors’ minds.

At not long ago, the FTSE 100 was up 0.2% to just over 7,525, after suffering its worst day of losses since February on Monday amid escalating tensions between the US and China. The pound was up 0.1% against the euro at 1.1353 and flat against the dollar at 1.3283.

Analyst Jasper Lawler at London Capital Group says: “With no change to fundamentals, there is little hope that this is anything more than a mere dead cat bounce."

0829: Looking at trade tariffs, market analyst Naeem Aslam at Think Markets says it is "a funny one" to trade, as recent months have shown the market has bought the dips and sold it on top.

"If the US stops Chinese investment in certain US sector, it will have a strong counteraction. Treasury secretary, Steven Mnuchin has said that more details on this would follow by the end of this week and this is going to keep investors even more nervous. On top of this, Trump administration is further adding to this uncertainty by keep sending conflicting statements; one person would say it is fake news and another would say more details on the topic would emerge sooner than later."

0801: London makes an initial move higher in spite of weak trading on Wall Street overnight and in Asia. The US tech sector was broadly hurt by White House threats to restrict investments in sensitive US technology companies.

"This trade spat story looks to have good legs on it everyone. Buckle up," says Mike van Dulken at Accendo Markets.

He also notes that a US federal judge has dismissed lawsuits by San Francisco and Oakland alleging oil companies, including BP and Shell, should pay to protect residents from the impacts of climate change.

"In focus today is UK data including BBA Home Loans at 9.30am which can serve as an indicator of both housing market strength and consumer confidence when growing. Forecasts are for a small increase in May, continuing to bottom out from March’s low. Later in the morning, CBI sales data at 11am for June is forecast flat."