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
- CHINA’S AUG MANUFACTURING CONTRACTS AT 49.7 - MNI BRIEF
- CHINESE MEGA CITIES RELAX MORTGAGE RULES TO SHORE UP HOUSING - BBG
- JAPAN JULY FACTORY OUTPUT FALLS FOR THE FIRST TIME IN TWO MONTHS - MNI BRIEF
- NEW ZEALAND OPPOSITION EYES QUICK CHANGE TO RBNZ’S MANDATE - BBG
Fig. 1: China Manufacturing PMI Y/Y Versus Global IP Y/Y
Source: MNI - Market News/Bloomberg
U.K.
ECONOMY: Britain’s biggest business group said a year-long slump across the private sector is likely to continue for at least three more months, as high inflation and interest rates hold back growth. The Confederation of British Industry said activity has fallen or stagnated for every three-month rolling period in the past year, a trend its survey suggests will continue in the next quarter. Manufacturing output fell sharply in the period through August, while services slid at a pace similar to the previous three months. (BBG)
EUROPE
ITALY: Prime Minister Giorgia Meloni’s coalition is considering selling minority stakes in selected state owned companies to boost Italy’s public finances. Government ministers are evaluating the disposal of some assets, including a stake in the state railway, while still retaining control over the businesses, according to people familiar with the discussions. (BBG)
U.S.
US/CHINA: U.S. Commerce Secretary Gina Raimondo talked up American firms' desire to do business in China and her hopes for further engagement with Chinese officials on market access on Wednesday, after earlier comments over China being "uninvestible." At a press conference in Shanghai, Raimondo said she had not expected any breakthroughs on issues affecting U.S. firms such as Intel, Micron, Boeing, Visa and Mastercard in her first meetings with Chinese officials, but did hope to "see some results" in the next few months as a result of her four-day visit to Beijing and Shanghai. (RTRS)
WAGES: The administration of U.S. President Joe Biden on Wednesday moved to extend mandatory overtime pay to 3.6 million salaried workers, going even further than an Obama-era rule that was struck down in court. (RTRS)
POLITICS: New York's attorney general on Wednesday asked a state judge to declare, even before the start of a trial, that Donald Trump committed fraud by submitting false statements to bankers and insurers and overstating his net worth by up to $2.23 billion. (RTRS)
OTHER
JAPAN: Japan's industrial output fell 2.0% m/m in July for the first drop in two months following June's 2.4% gain, due to lower production of machinery and electronic parts, and devices, although production for motor vehicles rose slightly, data released by the Ministry of Trade and Industry showed on Thursday. (MNI BRIEF)
NORTH KOREA: North Korea conducted a simulated "scorched-earth" nuclear strike on targets across South Korea, state media reported on Thursday, in reaction to allied exercises that it said amounted to plans for a preemptive nuclear attack by the United States. (RTRS)
AUSTRALIA: Australian home prices likely bottomed much earlier than previously expected and will rise for the rest of this year and next, as the Reserve Bank of Australia (RBA) is at or near the end of its tightening cycle, a Reuters poll of analysts found. (RTRS)
AUSTRALIA: Australia and the European Union will resume talks on a free trade agreement on Thursday after negotiations broke down in July amid disagreements over market access for Australian agricultural exports. (BBG)
NEW ZEALAND: New Zealand’s main opposition National Party would quickly remove the central bank’s dual mandate and return it to a sole focus on inflation if it wins the October election. (BBG)
NEW ZEALAND: New Zealand's business confidence index rose to -3.7 in August from -13.1 in July, according to ANZ Bank New Zealand. Many firms appear to have been pleasantly surprised at how well demand has held up'' andthe Reserve Bank has stopped raising the OCR, which may be creating a sense that the worst is over'': (BBG)
CHINA
MANUFACTURING: China's Purchasing Managers' Index contracted for the fifth straight month, registering 49.7 in Aug, rebounding slightly from 49.3 in July though still below the breakeven 50 mark, data from the National Bureau of Statistics showed Thursday. (MNI BRIEF)
DEBT: China will continue to prevent and defuse local government debt risks in H2 which remains a priority, according to the Ministry of Finance. In a recent report on fiscal policy implementation, the ministry said authorities will focus on supervising local governments to resolve hidden debt issues and roll out measures to support reduction in interest burdens. (21st Century Herald)
HOUSING: Two of China’s biggest cities lowered mortgage requirements for some homebuyers following central government guidance, fanning expectations that more will follow suit to arrest a record housing slowdown. Shenzhen, China’s least affordable city for housing, and the southern metropolis of Guangzhou issued notices on Wednesday that they no longer disqualify people who’ve ever had a mortgage — even if fully repaid — from being considered as first-time homebuyers. That would make them eligible for smaller downpayment thresholds and lower mortgage rates. (BBG)
INFLATION: China’s consumer prices are likely to rise year-on-year in August as domestic demand recovers and the base comparison from 2022 drops, the Securities Times reports, citing analysts. (SECURITIES TIMES)
ECONOMY: Pan Gongsheng, governor of the People’s Bank of China, pledged to direct more financial resources to private companies and small- and micro-sized enterprises, according to a report by Securities Times. (SECURITIES TIMES)
ECONOMY: People’s Bank of China organized a meeting on Wednesday with representatives from banks and private companies about financial support for the private sector, Yicai reports. (BBG)
TECH: China Securities Regulatory Commission said it supports eligible internet firms to list domestically and overseas, according to a report by Securities Times. (BBG)
PROPERTY: Shenzhen Stock Exchange has made work plans with aim of keeping property developers’ access to financing in the capital market stable, China Securities Journal reports, citing an unidentified official with the bourse. (CSJ)
CHINA MARKETS
MNI: PBOC Net Injects CNY148 Bln Thursday via OMO
The People's Bank of China (PBOC) conducted CNY209 billion via 7-day reverse repos on Thursday, with the rates unchanged at 1.80%. The operation has led to a net injection of CNY148 billion after offsetting the maturity of CNY61 billion reverse repo today, according to Wind Information.
- The operation aims to keep banking system liquidity stable at the end of the month, the PBOC said on its website.
- The 7-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8831% at 09:26 am local time from the close of 2.2540% on Wednesday.
- The CFETS-NEX money-market sentiment index closed at 39 on Wednesday, compared with 41 on Tuesday.
PBOC Yuan Parity Lower At 7.1811 Thursday Vs 7.1816 Wednesday
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1811 on Thursday, compared with 7.1816 set on Wednesday. The fixing was estimated at 7.2776 by Bloomberg survey today.
MARKET DATA
SOUTH KOREA JULY INDUSTRIAL PRODUCTION M/M -2.0%; MEDIAN -1.0%; PRIOR -1.5%
SOUTH KOREA JULY INDUSTRIAL PRODUCTION Y/Y -8.0%; MEDIAN –6.0%; PRIOR -5.9%
SOUTH KOREA JULY CYCLICAL LEADING INDEX CHANGE 0.4; PRIOR 0.3
JAPAN JULY RETAIL SALES M/M 2.1%; MEDIAN 0.8%; PRIOR -0.6%
JAPAN JULY RETAIL SALES Y/Y 6.8%; MEDIAN 5.5%; PRIOR 5.6%
JAPAN DEPT. STORE, SUPERMARKET SALES Y/Y 5.5%; PRIOR 4.1%
JAPAN JULY P INDUSTRIAL PRODUCTION M/M -2.0%; MEDIAN -1.4%; PRIOR 2.4%
JAPAN JULY P INDUSTRIAL PRODUCTION Y/Y -2.5%; MEDIAN -1.4%; PRIOR 0.0%
JAPAN JULY HOUSING STARTS Y/Y -6.7%; MEDIAN -1.3%; PRIOR -4.8%
JAPAN ANNUALISED HOUSING STARTS 0.778M; MEDIAN 0.824M; PRIOR 0.811M
NEW ZEALAND AUGUST ANZ ACTIVITY OUTLOOK 11.2; PRIOR 0.8
NEW ZEALAND AUGUST ANZ BUSINESS CONFIDENCE -3.7; PRIOR -13.1
AUSTRALIA JULY PRIVATE SECTOR CREDIT M/M 0.3%; MEDIAN 0.3%; PRIOR 0.3%
AUSTRALIA JULY PRIVATE SECTOR CREDIT Y/Y 5.3%; PRIOR 5.6%
AUSTRALIA Q2 PRIVATE CAPITAL EXPENDITURE 2.8%; MEDIAN 1.0%; PRIOR 3.7%
CHINA AUGUST MANUFACTURING PMI 49.7; MEDIAN 49.2; PRIOR 49.3
CHINA AUGUST NON-MANUFACTURING PMI 51; MEDIAN 51.2; PRIOR 51.5
CHINA AUGUST COMPOSITE PMI 51.3; PRIOR 51.1
MARKETS
US TSYS: Muted Session In Asia
TYZ3 deals at 110-28, +0-01, a 0-02+ range has been observed on volume of ~61k.
- Cash tsys sit ~0.5bps richer across the major benchmarks.
- There have been narrow ranges in Asia today with little follow on moves.
- The space looked through the Chinese PMI print, the Mfg Component was firmer than expected and the Composite measure ticked higher.
- Flow wise a TU (2.5k lots)/UXY (1k lots) steepener was the highlight.
- Flash CPI from the Eurozone provides the highlight in Europe. Further out we have Challenger Job Cuts, Initial Jobless Claims, PCE Report and MNI Chicago PMI.
- Fedspeak from Atlanta Fed President Bostic and Boston Fed President Collins crosses.
JGBS: Futures Holding A Small Gain, BoJ Nakamura Comments, Q2 GDP Partials Tomorrow
In the Tokyo afternoon session, JGB futures are holding a small gain, +5 compared to the settlement levels, after trading in a narrow range during the Tokyo session.
- In addition to the previously outlined mixed activity data for July and weekly international investment flow data that showed offshore selling of Japanese bonds, local participants have also had a speech from BoJ Member Nakamura to digest.
- That said, Nakamura’s comments were consistent with the core message from yesterday’s speech from Tamura. Nakamura stated that more time is needed before turning toward tightening policy, given the lack of conviction for achieving the BOJ’s 2% inflation goal in a stable manner. He added that Japan’s inflation is led by cost-push factors and not by wage growth. (See link ICYMI)
- Cash JGBs are mixed, with the 3-5-year zone outperforming. Yield movements range from 0.2-0.6bp lower (3-5-year) to 0.5bp higher (2-year, 20-year and 40-year). The benchmark 10-year yield is 0.1bp higher at 0.653%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
- Swap rates are higher out to the 30-year, with pricing +0.3bp to +0.8bp. The 40-year swap rate is 0.2bp lower. Swap spreads are wider, apart from the 40-year.
- Tomorrow the local calendar sees Capital Spending and Company Profits for Q2, along with Jibun Bank PMI Manufacturing for August (Final).
AUSSIE BONDS: Richer, Mid-Range, Eurozone CPI and US PCE Deflator Due
ACGBs (YM +4.0 & XM +3.5) sit in the middle of the Sydney range. There hasn’t been much in the way of catalysts outside the previously mentioned strong to in-line AU capex and private sector credit data, and mixed China PMIs.
- US tsys sit flat to 1bp lower across benchmarks in Asia-Pac trade.
- Cash ACGBs are 4bp richer, with the AU-US 10-year yield differential 1bp lower at -8bp.
- Swap rates are 4-5bp lower.
- The bills strip bear-flattens, with pricing flat to +7.
- RBA-dated OIS pricing is flat to 6bp softer across meetings.
- Tomorrow the local calendar sees CoreLogic House Prices (Aug) and Housing Finance (Jul).
- Flash CPI from the Eurozone provides the highlight in Europe, after upside surprises to German and Spanish inflation yesterday.
- Further out we have July PCE deflator, MNI Chicago PMI, Challenger Job Cuts and weekly Jobless Claims data, along with Fedspeak from Bostic and Collins. US Non-Farm Payrolls data is due on Friday.
NZGBS: Outperforms The $-Bloc, Consumer Confidence Tomorrow
NZGBs closed at or near session bests, with benchmark yields 4-6bp lower, despite an improvement in business sentiment. With US tsys little changed in Asia-Pac dealing, the catalyst for afternoon strengthening appears to have been solid digestion of weekly supply. Cover ratios across the lines showed a 2.00x to 3.00x range with the longer-dated (May-31 and May-41) issues leading, albeit slightly less than the last time out. The bond lines are 1-2bp richer in post-auction trade.
- The local market’s resilience sees NZGBs outperform the $-bloc with the NZ-US and NZ-AU 10-year yield differentials respectively 3bp and 2bp tighter.
- Swap rates are 4-5bp lower.
- RBNZ dated OIS pricing is flat to 3bp softer across meetings, with May'24 leading.
- The business confidence index rose to -3.7 in August, its highest since June 2021, from -13.1 in July, according to ANZ Bank NZ. Business activity outlook rose to 11.2 from 0.8 in July. Inflation expectations eased to 5.06% from 5.14%. “Many firms appear to have been pleasantly surprised at how well demand has held up' and the Reserve Bank has stopped raising the OCR, which may be creating a sense that the worst is over”: ANZ
- Tomorrow the local calendar sees ANZ Consumer Confidence data.
EQUITIES: Mixed Trends, China Bourses Weighed By Weaker Real Estate Index
Asia Pac equities are mostly lower in Thursday trade to date. Japan markers are the main positive, with most other major indices tracking lower, or close to flat. US futures are a touch higher, Eminis last near 4529, +0.10% firmer and holding close to recent highs. Nasdaq futures are also tracking firmer, last near 15515,
- China shares are weaker at the break. The CSI 300 down 0.54%, with the real estate sub index off 4.37%, nearly unwinding all of the gains seen over the prior 3 sessions. In the past day, 2 China mega cities have eased mortgage rules (see this link) but this hasn't aided sentiment today. Weekend news from the SCMP suggested Shanghai was unlikely to relax restrictions much.
- The official PMI prints were mixed for August, with manufacturing recovering further to 49.7, while services eased more than expected to 51.0.
- The HSI is also down at the break, off by 0.26%. The HSTECH is up by 0.40%, by well down on earlier highs. The authorities reportedly approved public AI rollout for a number of companies. PBoC Governor Pan also vowed further funding support for the private sector.
- Japan stocks are firmer, the Topix last +0.75%, the Nikkei up by a similar amount. Toyota July output was a record and the firm expects to make over 10m cars this year.
- Despite positive tech leads through Wednesday US trade, the Kospi (-0.40%) and Taiex (-0.35%) are both weaker.
- Philippine stocks are also down, by just over 1%., unwinding some of the recent rebound. This market is tracking over 5% lower for August.
FOREX: Narrow Ranges In Asia
The greenback is marginally pressured in Asia today, ranges have been narrow for the most part with little follow through on moves.
- AUD/USD is ~0.2% firmer, last printing at $0.6485/90. The pair briefly firmed above the $0.65 handle after stronger than forecast Chinese Mfg PMI & Q2 Capex before paring gains through the session.
- Kiwi is marginally firmer, however ranges remain narrow in NZD/USD. AUD/NZD is marginally firmer and is consolidating a touch below the $1.09 handle.
- Yen is up ~0.2%, marginally lower US Tsy Yields are weighing on USD/JPY which is dealing in a tight range below ¥146.
- Elsewhere in G-10 GBP and EUR are little changed from opening levels.
- Cross asset wise; BBDXY is down ~0.1% and US Tsy Yields are marginally lower across the curve. E-minis are up ~0.1%.
- Flash CPI from the Eurozone provides the highlight in Europe.
OIL: Crude Unphased By Better China PMIs, Waiting For US Data
Oil prices have been range trading during the APAC session today. Both Brent and WTI are off their intraday lows but little changed on the day. The slight improvement in the August China manufacturing PMI failed to boost crude as it remained in contractionary territory. Friday’s US payroll data is important for the market for direction on Fed policy. The USD index is slightly lower.
- Brent has held above $85 during the APAC session and is trading around $85.23/bbl off the low of $85.09. It reached a high of $85.40 earlier. It is currently slightly higher on the month. WTI is steady around $81.62 after a low of $81.48 and high of $81.81.
- The market appears to be treading water ahead of US data particularly Friday’s payrolls (+170k forecast) but OPEC+ supply cuts and low inventories continue to provide support that has been limited by ongoing concerns re US and China demand. Saudi Arabia is expected to announce an extension to October of its voluntary output reduction soon.
- Barclays revised up its 2024 Brent forecast to $97 and others, including CBA, see upside risks to their forecasts as the market tightens, according to Bloomberg.
- See the MNI Commodity Weekly for more details on energy developments this week.
- Later the Fed’s Bostic and Collins speak and there are US jobless claims, August Challenger job cuts, July income/spending and August MNI Chicago PMI. The ECB’s Schnabel and de Guindos speak, ECB meeting accounts, preliminary August euro area CPI and July unemployment rate are published.
GOLD: Slightly Higher As USD & Yields Slip After Weak US Data
Gold is slightly higher in the Asia-Pac session, after closing +0.2% on Wednesday as the USD and US tsy yields slipped after weaker-than-expected data.
- US economic data was generally softer than expected. Q2 GDP rose at a revised 2.1% annual rate which was below the previous estimate of 2.4%. There were also downside revisions to the GDP deflator, from 2.2% to 2.0%, and core PCE price index from 3.8% to 3.7%. ADP also missed estimates (177k versus 195k expected), albeit with a caveat of an upward revision.
- Near-term Fed Funds implied rates show +3bp for Sept and a cumulative +12bp for Nov to 5.45% terminal, down by 5.5bp from pre-JOLTS levels on Tuesday. Cuts from the terminal are seen at 52bp to Jun’24 and 121bp to Dec’24.
- The focus now turns to the release of the July PCE deflator, MNI Chicago PMI, Challenger Job Cuts and weekly Jobless Claims data later today, along with Fedspeak from Bostic and Collins. US Non-Farm Payrolls data is due on Friday.
- Bullion hit a high of 1949.05 yesterday. This just cleared resistance at $1948.3, the 61.8% retrace of the Jul 20-Aug 21 bear leg, according to MNI's technicals team. A more concerted push higher will now be needed to test the next resistance at $1963.3 (76.4% retrace).
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 31/08/2023 | 0600/0800 | ** |  | DE | Retail Sales |
| 31/08/2023 | 0600/0800 | ** | | DE | Import/Export Prices |
| 31/08/2023 | 0630/0830 | ** |  | CH | Retail Sales |
| 31/08/2023 | 0630/0730 |  | UK | DMO to publish Oct-Dec issuance calendar | |
| 31/08/2023 | 0645/0845 | *** |  | FR | HICP (p) |
| 31/08/2023 | 0645/0845 | ** | | FR | PPI |
| 31/08/2023 | 0645/0845 | *** | | FR | GDP (f) |
| 31/08/2023 | 0645/0845 | ** | | FR | Consumer Spending |
| 31/08/2023 | 0700/0900 |  | EU | ECB's Schnabel Speaks at Conference | |
| 31/08/2023 | 0715/0315 |  | US | Atlanta Fed's Raphael Bostic | |
| 31/08/2023 | 0715/0815 | | UK | BoE's Pill speaks at South African Reserve Bank conference | |
| 31/08/2023 | 0755/0955 | ** | | DE | Unemployment |
| 31/08/2023 | 0900/1100 | *** | | EU | HICP (p) |
| 31/08/2023 | 0900/1100 | ** | | EU | Unemployment |
| 31/08/2023 | 0900/1100 | *** |  | IT | HICP (p) |
| 31/08/2023 | 1130/1330 | | EU | ECB MP Meeting Account Publication | |
| 31/08/2023 | 1230/0830 | ** | | US | Jobless Claims |
| 31/08/2023 | 1230/0830 | ** | | US | WASDE Weekly Import/Export |
| 31/08/2023 | 1230/0830 | * |  | CA | Current account |
| 31/08/2023 | 1230/0830 | * | | CA | Payroll employment |
| 31/08/2023 | 1230/0830 | ** | | US | Personal Income and Consumption |
| 31/08/2023 | 1300/0900 | | US | Boston Fed's Susan Collins | |
| 31/08/2023 | 1342/0942 | ** | | US | MNI Chicago PMI |
| 31/08/2023 | 1345/0945 | *** | | US | MNI Chicago Report |
| 31/08/2023 | 1430/1030 | ** | | US | Natural Gas Stocks |
| 31/08/2023 | 1530/1130 | ** | | US | US Bill 04 Week Treasury Auction Result |
| 31/08/2023 | 1530/1130 | * | | US | US Bill 08 Week Treasury Auction Result |
| 31/08/2023 | 1600/1800 | | EU | ECB's de Guindos Speaks at Conference | |
| 01/09/2023 | 2300/0900 | ** |  | AU | IHS Markit Manufacturing PMI (f) |
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.