German GDP outperforms on growth of private consumption

US stocks started the week in the green buoyed by anticipation of more dovish tones from the Fed at Jackson Hole as well as formal approval of the Pfizer-BioNTech vaccine by the FDA. The NASDAQ led gains, up 1.55% while the S&P and the DOW rose 0.85% and 0.61% respectively. Yield on 10Y USTs was little changed at 1.2517%.

The German economy beat expectations in Q2, with GDP coming at 1.6% against an expected 1.5% on the back of a surge in private consumption. Flash PMI figures by IHS Markit on Monday showed services have become the main growth driver with the 61.5 reading topping estimates. The euro opens little changed from closing levels on Monday while yield on 10Y DBRs was up, about -0.465% at 7AM GMT.

Asian markets were firmer on Tuesday, continuing with yesterday’s momentum as the market expects more dovish undertones at the Jackson Hole meeting. The HANG SENG led gains up 2.22% while the CSI was up 1.09%. The NIKKEI also rose 0.87% while the ASX rose a comparatively muted 0.17%.

Promises of another 100bps rate hike by the BCB in September did little to contain inflation expectations with Brazilian economists upping their inflation estimates in the weekly survey. End-2021 inflation is expected at 7.11% while the end-2022 figure is forecast at 3.93%, some way from the BCB’s 3.5% target for 2022. Political noise with President Bolsonaro losing ground to former president da Silva in polls ahead of 2022 elections also adding to uncertainties, with high energy costs having been at play already. BRAZIL 30s traded firmer, yielding about 3.89% while the real was little changed, trading about 5.3805 to the dollar.

President Saied extended the state of emergency indefinitely late on Monday deepening political uncertainty. The measures which saw cabinet fired and Parliament suspended appear to have the support of the population as protests which preceded the emergency measures are all but gone. Yield on BTUN 27s were up, about 10.39% at 8AM GMT.