Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY
- US COMMERCE SECRETARY IN ‘PRODUCTIVE’ TALKS WITH CHINA ENVOY BEFORE TRIP - RTRS
- LNG STRIKES IN AUSTRALIA LOOM IF NO PROGRESS IN TALKS WEDNESDAY - BBG
- IRON ORE APPROACHES MONTH-HIGH AHEAD OF CHINA BUILDING SEASON- BBG
- NEW ZEALAND RETAIL SALES SLUMP POSES DOWNSIDE RISK FOR GDP - BBG
Fig. 1: AUD/USD & Singapore Iron Ore Futures
Source: MNI - Market News/Bloomberg
EUROPE:
RUSSIA: President Vladimir Putin demanded steps to control the outflow of capital from Russia and to reduce volatility in financial markets, warning of the threat from rising prices following the slump in the ruble. (BBG)
U.S.
US/CHINA: U.S. Commerce Secretary Gina Raimondo met Chinese Ambassador Xie Feng on Tuesday and had a "productive discussion" ahead of her trip to China, the U.S. Commerce Department said in a statement. (RTRS)
POLITICS: The first of Donald Trump's co-defendants in Georgia's criminal case accusing the former U.S. president and his associates of subverting his 2020 election loss surrendered at an Atlanta jail on Tuesday. (RTRS)
LOANS: The Biden administration on Tuesday said it was overhauling student loan repayment plans, seeking to make payments more affordable by reducing the amount owed each month and curbing unpaid interest. (RTRS)
OTHER
JAPAN: Japan’s Prime Minister Fumio Kishida is facing pressure to increase spending, even as bond yields at a nine-year high and earlier political promises test his ability to secure further funding for the world’s most indebted developed economy. (BBG)
AUSTRALIA: Australia is considering appointing an outsider as the new deputy governor of its central bank, as an overhaul of the institution gets underway. Following the appointment of long-time Reserve Bank of Australia stalwart Michele Bullock as the central bank’s new governor, the government’s looking at external candidates to fill the deputy role, people close to the discussions said. Outside candidates are on the rough short list being prepared by the government, they added. (BBG)
AUSTRALIA: Talks to avoid strikes at Australia’s biggest liquefied natural gas export terminal began Wednesday morning, with the threat to supply set to continue rocking global markets for the fuel. (BBG)
COMMODITIES: Iron ore gained for a fifth day to near its highest in a month, amid increasing speculation Chinese steel mills will ramp up output ahead of the nation’s usual pick-up in construction activity during September and October. (BBG)
NEW ZEALAND: An unexpectedly large decline in New Zealand retail sales suggests gross domestic product may be weaker than anticipated. Sales adjusted for inflation and seasonal effects fell 1% in the second quarter from the first, Statistics New Zealand said Wednesday in Wellington. That’s more than twice the 0.4% drop estimated by economists and represents the third straight quarterly contraction. (BBG)
BRICS: BRICS leaders met on Tuesday to plot the future course of the bloc of developing nations but divisions re-emerged ahead of a critical debate over a potential expansion of the group intended to boost its global clout. Heightened tensions in the wake of the Ukraine war and Beijing's growing rivalry with the United States have pushed China and Russia - whose President Vladimir Putin will attend the meeting virtually - to seek to strengthen BRICS. (RTRS)
BRICS: Chinese President Xi Jinping attended a leaders’ dinner hosted by his South African counterpart on Tuesday after skipping an earlier scheduled appearance at a business forum. (BBG)
CHINA
CHINA/US: Chinese and American companies will benefit from the U.S. action to remove 27 Chinese entities from its "unverified list" of export control which will help normalise trade between the two countries, according to a statement from the Ministry of Commerce. China and the U.S. made joint efforts prior to the decision, which was in the common interests of both parties, the ministry said. (MNI)
PROPERTY: Authorities should loosen restrictions on lowering sale prices by cash-strapped developers to help boost their cash flow and ease funding pressure, according to a front-page commentary published in the Securities Times Wednesday. (BBG)
PROPERTY: The distressed Chinese developer that rattled markets by missing interest payments on dollar bonds earlier this month is leaving investors in the dark about the exact date a key grace period ends, the latest sign of opaqueness in a market that’s lost $87 billion in the past two years. (BBG)
EQUITIES: China needs to keep improving its oversight on program trading in the capital markets as trading orders generated or executed by computer programs may increase fluctuations in a volatile market, according to a commentary in Securities Daily. (BBG)
EQUITIES: Institutional investors in Chinese stocks should stick to value investing amid market volatility and help stabilize sentiment, Securities Daily said in a commentary on Wednesday. Some institutional investors only focus on their own results, at the expense of a negative impact on the wider market. (BBG)
TECH: The leading association of global chip companies is warning that Huawei Technologies Co. is building a collection of secret semiconductor-fabrication facilities across China, a shadow manufacturing network that would let the blacklisted company skirt US sanctions and further the nation’s technology ambitions. (BBG)
CHINA MARKETS
MNI: PBOC Net Injects CNY2 Bln Wednesday via OMO
The People's Bank of China (PBOC) conducted CNY301 billion via 7-day reverse repos on Wednesday, with the rates unchanged at 1.80%. The operation has led to a net injection of CNY2 billion after offsetting the maturity of CNY299 billion reverse repo today, according to Wind Information.
- The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.
- The 7-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8133% at 09:54 am local time from the close of 1.8319% on Tuesday.
- The CFETS-NEX money-market sentiment index closed at 44 on Tuesday, compared with 42 on Monday.
PBOC Yuan Parity Higher At 7.1988 Wednesday Vs 7.1992 Tuesday
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1988 on Wednesday, compared with 7.1992 set on Tuesday. The fixing was estimated at 7.2943 by Bloomberg survey today.
MARKET DATA
SOUTH KOREA SEPTEMBER BUSINESS SURVEY MANUFACTURING 69; PRIOR 69
SOUTH KOREA SEPTEMBER BUSINESS SURVEY NON-MANUFACTURING 76; PRIOR 76
SOUTH KOREA 2Q EXTERNAL DEBT $161.9bn; PRIOR $173.7BN
NEW ZEALAND 2Q RETAILS SALES EX-INFLATION Q/Q -1.0%; MEDIAN -0.4%; PRIOR -1.6%
AUSTRALIA AUGUST P JUDO BANK MANUFACTURING PMI 49.4; PRIOR 49.6
AUSTRALIA AUGUST P JUDO BANK SERVICES PMI 46.7; PRIOR 47.9
AUSTRALIA AUGUST P JUDO BANK COMPOSITE PMI 47.1; PRIOR 48.2
JAPAN AUGUST P JIBUN BANK MANUFACTURING PMI 49.7; PRIOR 49.6
JAPAN AUGUST P JIBUN BANK SERVICES PMI 54.3; PRIOR 53.8
MARKETS
US TSYS: Curve Marginally Flatter In Asia
TYU3 deals at 109-04+, +0-02+, a 0-06+ range has been observed on volume of ~70k.
- Cash tsys sit flat to 2bps richer across the major benchmarks, light bull steepening is apparent.
- In a data light session Tsys ticked higher alongside a bid US Equity Futures and pressure on the USD as sentiment improved in Asia.
- The move higher didn't follow through and Tsys pared gains to deal in a narrow range through the session. Little meaningful macro newsflow crossed.
- Flash PMIs from France, Germany and the Eurozone provide the highlight in todays European session, further out we have US new home sales and S&P Global PMIs. The latest 20-Year Supply is also due.
JGBS: Futures Holding In Positive Territory, New Post-YCC Tweak High For 10Y Yield
In the Tokyo afternoon session, JGB futures are holding in positive territory, +4 compared to the settlement levels, after trading in a relatively narrow range in the morning session.
- There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Jibun Bank PMIs.
- US tsys sit flat to 2bp richer across the major benchmarks, with a light bull steepening apparent. There has been little meaningful macro newsflow.
- The cash JGB curve has twist steepened, pivoting at the 3s, with yields 0.1bp lower to 0.9bp higher. The benchmark 10-year yield is 0.9bp higher at 0.675%, close to the post-YCC tweak high.
- The swap curve has bear steepened, with rates flat to 0.9bp higher. Swap spreads are wider, after being tighter in the morning session.
- Tomorrow the local calendar sees Weekly International Investment Flow data, ahead of Tokyo CPI data for August on Friday. Later today sees Machine Tool Orders for July (Preliminary).
- Flash PMIs from France, Germany and the Eurozone provide the highlight in today's European session, further out we have US new home sales and S&P Global PMIs. The latest 20-year supply is also due.
- Tomorrow the MoF plans to conduct Liquidity Enhancement Auctions for OTR 15-5-39.9-year JGBs.
AUSSIE BONDS: Richer, Near Session Highs, PMIs Portray A Weak Economy
ACGBs (YM +2.0 & XM +4.5) are richer, dealing at or near Sydney session highs.
- There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Judo Bank PMIs for August, which showed that private sector output continued to contract in August, especially in the important services sector.
- A strengthening by US tsys in Asia-Pac trade assisted the local market’s move away session cheaps. Little meaningful macro news flow has crossed. US tsys sit 1-3bps richer across the major benchmarks.
- Cash ACGBs are 3-4bp richer, with the AU-US 10-year yield differential 2bp tighter at -8bp.
- ACGB Nov-33 supply sees strong demand, with average yield printing below the prevailing yield. The cover ratio showed above the 4.00x mark.
- Swap rates are 1-4bp lower, with the 3s10s curve flatter.
- The bills strip has bull flattened, with pricing flat to +3.
- RBA-dated OIS pricing is flat to 2bp softer across meetings. The market continues to attach a 5% chance of a 25bp hike at the September meeting. Terminal rate expectations sit at 4.21%.
- The local calendar is empty for the rest of the week.
- The US calendar sees new home sales and S&P Global Manufacturing PMI later today.
NZGBS: Closed On A Strong Note, Q2 Real Retail Sales Misses
NZGBs closed at the richest level of the local session, with benchmark yields 7-8bp lower. The richening through the session received a boost from weaker-than-expected Q2 retail sales volumes.
- Q2 retail sales ex-inflation declined 1% q/q but since the series has contracted 5 of the last 6 quarters the annual rate improved to -3.4% from -4.3%. Q1 was revised down 0.2pp to -1.6%. Nominal sales fell 0.2% q/q to be up 2.7% y/y. This data shows that spending remained subdued in Q2 which the RBNZ said is needed to “reduce inflation pressure”. It should be reassured at this point that with rates at 5.5%, it can achieve this.
- US tsys are holding onto early gains in the Asia-Pac session. Little meaningful macro news flow has crossed. US tsys sit flat to 2bp richer across the major benchmarks.
- Swap rates are 9-12bp lower, with the 2s10s curve steeper and implied swap spreads sharply tighter.
- RBNZ dated OIS pricing closed 2-8bp softer across meetings beyond October, with terminal OCR expectations at 5.67%.
- The local calendar is empty for the rest of the week.
- Tomorrow the NZ Treasury plans to sell NZ$250mn of the 4.5% Apr-27 bond, NZ$150mn of the 2.0% May-32 bond and NZ$100mn of the 2.75% May-51 bond.
FOREX: Dollar Marginally Pressured In Asia
The USD has been marginally pressured in Asia today as risk sentiment improves, US Equity Futures are higher and US Tsy Yields have ticked lower. There was another strong Yuan fixing by the PBOC which also weighed on the greenback.
- AUD is the strongest performer in the G-10 space at the margins, stronger metals are aiding the AUD outperformance. SGX Iron Ore Futures are up ~1.4%, and are ~13% above levels seen last week. Resistance comes in at $0.6480, high from Aug 16.
- Kiwi is lagging in the space, NZD/USD has trimmed an earlier ~0.3% gain to sit up ~0.1%. Bulls look to regain the $0.60 handle to target the 20-Day EMA ($0.6039). Q2 Retail Sales were softer than expected, adding to concerns about the domestic economy.
- The Yen is firmer benefiting from lower US Tsy Yields, USD/JPY is ~0.2% lower and last prints at ¥145.65/70. Technically the uptrend in USD/JPY remains intact, resistance comes in at ¥146.56 (Aug 17 high) and ¥146.93 (8 Nov 22 high). Support comes in at ¥144.93 (low from Aug 18).
- Elsewhere in G-10, EUR and GBP are up ~0.1%.
- Cross asset wise; e-minis are ~0.3% firmer and BBDXY is down ~0.1%. 10 Year US Tsy Yields are ~2bps lower.
- Flash PMIs from France, Germany and the Eurozone provide the highlight in todays European session.
EQUITIES: China Shares Tracking Lower, Positive US Futures Aiding Sentiment Elsewhere
Regional equities are presenting a mixed backdrop in Wednesday Asia Pac trade to date. China equities have tracked lower in the first part of trade, but HK shares are higher. Other parts of the region are mixed. A positive US futures backdrop, with Eminis last tracking around 4410 (+0.25%) and Nasdaq futures +0.35% has helped sentiment at the margins.
- A lot of the Wednesday US stock market focus is likely to rest on Nvidia's results, with bullish sentiment around the AI sector a key underpinning of the rally seen through parts of Q1/Q2 of this year in the tech related space.
- China markets haven't been able to see positive follow on after yesterday's late session rally. The CSI 300 is back off by ~0.70% at the break, with the index around 3731, which is above intra-day lows from yesterday near 3700. A number of onshore media articles have highlighted potential support points/regulatory changes for local equities (see here and here for more details).
- The HSI is faring better, the index up 0.35% at the break. Trade has been volatile, while the tech sub index is modestly underperforming, albeit up from session lows.
- Japan stocks are a touch firmer, the Topix last +0.10%. Bank stocks were weaker in early trade (following US bank weakness in Tuesday trade post rating downgrades), but the firmer US futures backdrop has helped turn sentiment around.
- The Kospi is down 0.55% at this stage, while the Taiex is faring better, +0.70%.
- In SEA, Thai stocks are a touch higher, following yesterday's +1% gain as the political impasse came to an end. Trends are mixed elsewhere.
OIL: Crude Stabilises On US Inventory Drawdown & Lower USD
Oil prices are off their lows earlier in the session to be moderately higher as the risk tone has improved, the dollar is slightly weaker (USD index -0.1%) and API crude inventories fell. Brent is up 0.2% to $84.16/bbl after trading below $84 earlier in the session. It is just off its high of $84.26. WTI is approaching $80 rising 0.2% to $79.83, close to the intraday high of $79.91.
- Crude is down around a percent this week as demand concerns, especially from China, have outweighed supply tightening. The market is also jittery about the chance of further US rate hikes which Friday’s Jackson Hole speech by Fed Chairman Powell may shed light on. But the market is still projected to be in deficit in H2 2023.
- Bloomberg reported that API data showed US crude inventories fell a further 2.4mn barrels in the latest week, according to people familiar with the data. This has helped to stabilise oil prices. The official EIA data is out later which fell 5.96mn barrels in the latest data.
- Later there are preliminary US and European PMIs for August. There are no Fed speakers.
GOLD: Slightly Firmer But Remains Around Five-Month Lows
Gold is slightly higher in the Asia-Pac session, after closing +0.1% at $1897.48 on Tuesday. The yellow metal briefly pushed to its highest level since Aug 16 on Tuesday but didn’t trouble resistance at $1918.3 (20-day EMA), according to MNI's technicals team.
- Bullion regained some lost ground after a paring of earlier intraday USD strength and the push higher in US tsy yields.
- Nevertheless, gold remained near a five-month low on increasing signs that US interest rates will need to stay higher for longer.
- The pivotal economic event of this week centres on the speech by Fed Chair Powell at the Jackson Hole gathering on Friday. The prevailing concern is that Powell might undermine investors' optimistic expectations, specifically the notion that the Federal Reserve has concluded its interest rate hikes and is poised to initiate rate cuts in the early months of the upcoming year.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 23/08/2023 | 0715/0915 | ** |  | FR | S&P Global Services PMI (p) |
| 23/08/2023 | 0715/0915 | ** | | FR | S&P Global Manufacturing PMI (p) |
| 23/08/2023 | 0730/0930 | ** |  | DE | S&P Global Services PMI (p) |
| 23/08/2023 | 0730/0930 | ** | | DE | S&P Global Manufacturing PMI (p) |
| 23/08/2023 | 0800/1000 | ** |  | EU | S&P Global Services PMI (p) |
| 23/08/2023 | 0800/1000 | ** | | EU | S&P Global Manufacturing PMI (p) |
| 23/08/2023 | 0800/1000 | ** | | EU | S&P Global Composite PMI (p) |
| 23/08/2023 | 0830/0930 | *** |  | UK | S&P Global Manufacturing PMI flash |
| 23/08/2023 | 0830/0930 | *** | | UK | S&P Global Services PMI flash |
| 23/08/2023 | 0830/0930 | *** | | UK | S&P Global Composite PMI flash |
| 23/08/2023 | 1100/0700 | ** |  | US | MBA Weekly Applications Index |
| 23/08/2023 | 1230/0830 | ** |  | CA | Retail Trade |
| 23/08/2023 | 1345/0945 | *** | | US | IHS Markit Manufacturing Index (flash) |
| 23/08/2023 | 1345/0945 | *** | | US | S&P Global Services Index (flash) |
| 23/08/2023 | 1400/1000 | *** | | US | New Home Sales |
| 23/08/2023 | 1400/1600 | ** | | EU | Consumer Confidence Indicator (p) |
| 23/08/2023 | 1430/1030 | ** | | US | DOE Weekly Crude Oil Stocks |
| 23/08/2023 | 1530/1130 | ** | | US | US Treasury Auction Result for 2 Year Floating Rate Note |
| 23/08/2023 | 1700/1300 | ** | | US | US Treasury Auction Result for 20 Year Bond |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.