Source: MNI - Market News/Bloomberg
UK
BREXIT (BBC): “Brexit red tape on British businesses has caused UK-EU goods trade to slump and the problem is getting worse, economists have warned. The findings from a report by the Birmingham-based Aston University Business School cover the three-year period after the Brexit trade deal was signed.”
EU
ECB (BBG): “The European Central Bank will ease monetary policy further, though it shouldn’t do so too hastily due to lingering inflation risks, according to Governing Council member Martins Kazaks.”
EU (POLITICO): “European Commission President Ursula von der Leyen still “hopes” to present her top team of commissioners in Strasbourg on Tuesday, according to spokesperson Arianna Podestà.”
FRANCE (BBG): “President Emmanuel Macron is in talks with the European Commission to carve out a new, more powerful position for France that would see his nominee overseeing all of the bloc’s efforts to boost its competitiveness.”
EU (BBG): “ Former European Central Bank President Mario Draghi’s proposal to strengthen European Union’s competitiveness by taking on joint debt is a risky strategy that could divert attention from the more consequential reforms that the bloc needs, Sweden’s Prime Minister Ulf Kristersson warned.”
BUSINESS (POLITICO): “Brussels is setting up a club of "trusted" tech investors that could help with the European Union's push to fund more high-risk tech ventures.”
TRADE (EURONEWS): “Amid escalating trade tensions, China’s commerce minister, Wang Wentao, and the European Commission’s trade commissioner, Valdis Dombrovskis, are set to meet on Thursday to discuss trade relations between the two parties.”
NETHERLANDS (THE ECONOMIST): “Tuesday is “Prinsjesdag” in the Netherlands, the start of the political year. It is the first big chance for the Dutch to learn what to expect from their new coalition government, the most right-wing since the second world war. Details come later, when the finance minister presents parliament with a ceremonial briefcase containing the new budget.”
RUSSIA (POLITICO): “Western allies bought roughly $2 billion in fuel made from Russian oil in the first half of 2024, using a sanctions loophole that enables Moscow to pay its soldiers in Ukraine, an upcoming report seen by POLITICO has found. The analysis, set to be unveiled jointly on Tuesday by the Center for Research on Energy and Clean Air and the Center for the Study of Democracy, determined that shipments of products made from Russian crude oil have grown as a result of imports from just three Turkish refineries.”
US
CORPORATE (RTRS): “Boeing is freezing hiring and weighing temporary furloughs to cut costs as a strike by more than 30,000 workers entered its fourth day on Monday.”
CORPORATE (BBG): “Microsoft Corp. unveiled a new $60 billion stock-buyback program, matching its largest-ever repurchase authorization, and raised its quarterly dividend 10%.”
CORPORATE (BBG): “Intel Corp. Chief Executive Officer Pat Gelsinger has landed Amazon.com Inc.’s AWS as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker.”
OTHER
JAPAN (MNI BOJ WATCH): The Bank of Japan board will consider leaving its policy interest unchanged at 0.25% when it hands down its decision on Friday, despite the belief among policymakers that the economy and prices are largely moving in line with projections.
ISRAEL (JERUSALEM POST): “Israel's security cabinet has expanded its war objectives to include the safe return of evacuated residents to their homes in northern Israel, according to a statement from the Prime Minister's Office (PMO) early Tuesday morning.”
AUSTRALIA (DOW JONES): “Australian consumer confidence rose to an eight-week high last week in a sign that income-tax cuts in July and other government measures to help offset rising living costs might at last be beginning to lift some of the gloom that has hung over the economy this year.”
AUSTRALIA (BBG): “The Australian government has reached a trade pact with the United Arab Emirates which is expected to boost bilateral trade in agricultural products and minerals, as well as facilitating greater access to investment by Abu Dhabi in green energy and critical minerals.”
NEW ZEALAND (BBG): “The economy likely contracted by 0.4% in the 2q, down from a forecast of 0.2% growth in the Budget update “The cumulative impact of 12 months of weak demand points to a sustained decline in output into the second quarter”
MARKET DATA
JAPAN JULY TERTIARY INDUSTRY INDEX M/M 1.4%; MEDIAN 0.9%; PRIOR -1.2%
MARKETS
US TSYS: Tsys Futures Steady Ahead Of Retail Sales
- It has been a very subdued trading session across all markets today, with China, Taiwan & South Korea out for public holidays. Later today we have US Retail Sales, BBG consensus has retail sales dropping 0.2% m/m in August, following a 1% rise in July.
- Tsys futures are little changed today TUZ4 is -00⅜ at 104-14⅛, while TYZ4 is -01 at 115-17
- Earlier, there was a Block 2s10s steepener, and an block sell of FV.
- Cash tsys yields are flat to 1bps higher, the curve has steepened slightly. The 2yr is +0.2bps at 3.553%, while the 10yr is +0.4bps at 3.621%.
- Projected rate cuts have firmed 2-3bps throughout the session with the moves coming just post NY close and have continued throughout the Asian session vs. Monday levels (*) : Sep'24 cumulative -43.3bp (-40.6bp), Nov'24 cumulative -80.5bp (-79.1bp), Dec'24 -121.0bp (-120.0bp).
- Today we have Retail Sales, Industrial Production and a 20y bond auction
JGBS: Cash Bond Yields Mostly Lower, US Retail Sales Later Today
JGB futures are stronger, currently mid-range, trading at +16 compared to settlement levels following yesterday’s public holiday.
- (MNI) The BoJ board will consider leaving its policy interest unchanged at 0.25% when it hands down its decision on Friday, despite the belief among policymakers that the economy and prices are largely moving in line with projections.
- The upside risk to prices driven by high import costs – a key concern for policymakers in July – has fallen due to the yen's appreciation, allowing the Bank more time to watch price moves without the need to raise the policy rate for now.
- Cash US tsys are flat to 1bp cheaper in today’s Asia-Pac session. Today's US calendar sees Retail Sales, Industrial Production and a 20y bond auction.
- The cash JGB curve continues to hold a twist-flattening, pivoting at the 2-year, with yields 1.8bps higher to 3.1bps lower.
- Swap rates are flat to 1bp lower out to 30-year and 2bps higher beyond.
- The local data calendar has been light today, with the July tertiary industry index due later.
- Tomorrow, the local calendar will see Trade Balance and Core Machine Orders data alongside 1-year supply and BoJ Rinban Operations covering 1-25-year JGBs.
AUSSIE BONDS: Treading Water Ahead Of US Retail Sales Later Today
ACGBs (YM -2.2 & XM flat) are slightly weaker after a data-light session.
- Cash US tsys are flat to 1bp cheaper, with a slight steepening bias, in today’s Asia-Pac session after yesterday’s modest rally. Today's US calendar sees Retail Sales, Industrial Production and a 20y bond auction.
- Cash ACGBs are flat to 2bps cheaper, with the AU-US 10-year yield differential at +19bps.
- Swap rates are flat to 2bps higher, with the 3s10s curve flatter.
- The bill strip has bear-steepened, with pricing flat to -3 across contracts.
- RBA-dated OIS pricing is slightly mixed. A cumulative 20bps of easing is priced by year-end.
- Tomorrow's local calendar will see Westpac Leading Index and a speech from Brad Jones, RBA Assistant Governor (Financial System). The calendar’s highlight will be August’s Employment Report on Thursday.
- Tomorrow, the AOFM plans to auction A$1.0bn of the 3.75% 21 April 2037 bond, followed by a sale of A$500mn of the 3.25% 21 April 2029 bond on Friday.
BONDS: NZGBS: Closed Slightly Cheaper After A Subdued Session
NZGBs closed on a weak note with yields 3bps higher. Dealings were subdued on a data light session ahead of tomorrow’s FOMC policy decision.
- Cash US tsys are slightly cheaper in today’s Asia-Pac session after yields fell 2-5bps yesterday. Today's US calendar sees Retail Sales, Industrial Production and a 20y bond auction.
- NZGBs held by international investors increased to 60% from a month earlier in August, according to the RBNZ.
- In its Fortnightly Economic Update, the NZ Treasury said “With migration levels normalising, weakness is emerging across more services industries. House sales continue to drop and, while interest rates are falling, average mortgage rates are still elevated limiting retail spending and house price growth.” (per BBG)
- Swap rates closed 2bps higher.
- RBNZ-dated OIS pricing closed flat to 3bps firmer across meetings. However, year-end expectations, currently at 4.40%, remain just 6bps above the cyclical low of 4.34% set in late December last year.
- Tomorrow, the local calendar will see Current Account Balance and Westpac Consumer Confidence data, ahead of Q2 GDP on Thursday.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 1.50% May-31 bond, NZ$200mn of the 4.25% May-34 bond and NZ$50mn of the 2.75% Apr-37 bond.
FOREX: Tight Ranges Prevail Ahead Of Key Event Risks
G10 FX trends have been reasonably steady in the first part of Tuesday trade. There is a modest bias towards a slightly firmer USD, but gains are very modest for the most part. The BBDXY USD index was last 1222.9, slightly up on end NY levels on Monday.
- USD/JPY had an early spike higher, the pair getting to 141.23 but quickly dipped back below the figure level. Lows were at 140.32 and we last tracked around 140.70/75, slightly weaker in yen terms for the session.
- News flow as the market awaits key event risks later in the week, with the Fed the main focus point, but we also have the BoJ meeting outcome.
- US equity futures sit down a touch, while regional equity markets are mixed (Japan down, but Hong Kong higher). China markets remain closed today.
- In the US Tsys space we have seen yields move a touch higher, but gains are less than 1bps at this stage, with outright levels close to recent lows. US data later on, particularly the retail sales print, may help firm expectations around the Fed outcome, although central banks tend to focus on trends rather than one data point.
- AUD and NZD sit down a touch. AUD/USD last near 0.6740/45, while NZD/USD is off around 0.20% to 0.6190, but there has been little movement in these pairs outside of some earlier softness.
- Looking ahead, the ECB’s Buch, McCaul and Elderson appear. Later the Fed’s Logan gives opening remarks but is unlikely to speak on policy this close to an FOMC meeting. US August retail sales, IP and September NY Fed services print as well as August Canadian CPI.
ASIA STOCKS: Asian Equities Mixed, Yen Weighs On Japanese Stocks
- Markets are trading mixed today as investors focus on upcoming monetary policy decisions from the Fed and BoJ. In Japan, the Nikkei 225 fell 2%, driven by a sell-off in semiconductor and tech stocks following the decline in the Nasdaq, while the stronger yen continues to weigh on export-oriented companies like automakers and electronics firms.
- In Hong Kong, the debut of Midea Group shares saw a strong surge, reflecting revived hopes for the city’s stock market. Property stocks have seen a bit of a bounce, although we still trade near all time lows (Mainland Property Index +1.25%, HS Property Index +2.50%) with investors hoping lower US rates will spur a rebound in the struggling sector, the HS Tech Index trades +1.25%, HS Mainland Banks Index is +1.90% while the HSI is +1.40% and the China Enterprise Index is also +1.40%
- Australia Equities are slightly higher today, Real Estate names are the top performing. The ASX200 is 0.30% higher.
- China, South Korea & Taiwan all have public Holidays today with equity markets closed.
OIL: Crude Continues To Rally Ahead Of Fed Decision, Demand Concerns Persist
Oil prices have continued to rise during APAC trading today after rallying around 2% on Monday. WTI is up 0.7% to $70.56/bbl after a high of $70.65 and Brent is 0.4% higher at $73.08 after rising to $73.12. The expected Fed rate cut on Wednesday with the possibility of as much as 50bp has driven oil prices higher as well as the continued dispute in Libya reducing output. The USD index is slightly higher.
- Technical and speculative selling exacerbated this month’s move lower in crude but ahead of the Fed, prices have been supported by short covering. Concerns over global demand for oil, especially from China remain close by.
- Iraq has said that the closure of a pipeline because of a dispute over payment in the country’s northern oil fields continues but has made it easier to achieve its OPEC quota. The Iraqi PM said that the budget allows it to pay foreign firms $8 per barrel produced but contracts with Kurdistan’s government allow for $26.
- With around 12% of oil production in the Gulf of Mexico still shut in following Hurricane Francine, US inventory data will likely be a focus. Industry figures are released today and the official EIA ones on Wednesday.
- Later the Fed’s Logan gives opening remarks but is unlikely to speak on policy this close to an FOMC meeting. US August retail sales, IP and September NY Fed services print as well as August Canadian CPI. The ECB’s Buch, McCaul and Elderson appear.
GOLD: Fresh All-Time High Ahead Of The Fed’s Policy Decision
Gold is 0.2% lower in today’s Asia-Pac session, after closing 0.2% higher at $2582.45 yesterday. Earlier in the session bullion hit a fresh all-time high of $2,586.10/oz, aided by further dollar weakness and the dovish rate outlook for the US Federal Reserve.
- US tsys finished richer yesterday as the market speculated that the US Fed could cut by more than 25bps on Wednesday. Lower rates are typically positive for gold, which doesn’t pay interest.
- BofA strategists led by Michael Hartnett wrote on Friday that “gold at all-time highs is the best hedge against 2025 inflation reacceleration.” (per BBG)
- According to MNI’s technicals team, a bullish structure in gold remains intact, with the focus on $2,600.0.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 17/09/2024 | - |  | US | FOMC Meeting / S.E.P. | |
| 17/09/2024 | 0900/1100 | *** |  | DE | ZEW Current Conditions Index |
| 17/09/2024 | 0900/1100 | *** | | DE | ZEW Current Expectations Index |
| 17/09/2024 | 0900/1000 | ** |  | UK | Gilt Outright Auction Result |
| 17/09/2024 | 1215/0815 | ** |  | CA | CMHC Housing Starts |
| 17/09/2024 | 1230/0830 | *** | | CA | CPI |
| 17/09/2024 | 1230/0830 | *** | | US | Retail Sales |
| 17/09/2024 | 1255/0855 | ** | | US | Redbook Retail Sales Index |
| 17/09/2024 | 1300/1500 |  | EU | ECB's Elderson in supervisory effectiveness panel | |
| 17/09/2024 | 1315/0915 | *** | | US | Industrial Production |
| 17/09/2024 | 1400/1000 | * | | US | Business Inventories |
| 17/09/2024 | 1400/1000 | ** | | US | NAHB Home Builder Index |
| 17/09/2024 | 1530/1130 | * | | US | US Treasury Auction Result for Cash Management Bill |
| 17/09/2024 | 1700/1300 | ** | | US | US Treasury Auction Result for 20 Year Bond |
| 17/09/2024 | 2200/1800 | | CA | BOC Sr Deputy Rogers fireside chat on women in finance. |