MNI US OPEN: Energy Crisis Drags Down German Confidence

MNI: UK JULY PAYROLLS +73,000 AT 29.7 MLN: HMRC/ONS

• **UK JUN ILO UNEMPLOYMENT RATE +3.8%
• *MNI: UK JUL CLAIMANT CHG -10600
• *UK JUL CLAIMANT RATE +3.9%
• **UK JUN AVE WEEKLY EARNINGS +5.1% YY
• *UK JUN AVE WEEKLY EARNINGS EX-BONUS +4.7% YY

MNI BRIEF: UK Real Earnings Fall At Fastest Pace On Record

UK real earnings fell sharply in the three months to June, with inflation adjusted pay excluding bonuses falling at the fastest rate since comparable records began, the Office for National Statistics said Tuesday. Ex-bonuses, wages declined 3.0% year-on-year, while wages including bonuses declined by 2.5%. Unadjusted total wages rose 5.1% y/y, slightly exceeding analysts expectations.

The ONS data is inflation adjusted again the CPIH inflation measure. Against CPI, real wages ex-bonuses fell 4.1% y/y, also a record decline.

"Excluding bonuses, it is still dropping faster than at any time since comparable records began in 2001,” ONS director of economic statistics Darren Morgan said.

The data underlines the difficulties both the Bank of England and the government face, with the cost-of-living crisis being amplified by slowing real incomes. With inflation not set to peak until later in Q4 - even Q1 2023 in some estimates - the squeeze on household budgets is unlikely to improve anytime soon.

Source: ons

GERMAN DATA: ZEW Mixed, Expectations Drops to Lowest Since GFC

• German ZEW Survey Expectations (Aug) M/M -55.3 vs. Exp. -52.7 (Prev. -53.8)
• Current Situation (Aug) M/M -47.6 vs. Exp. -49.0 (Prev. -45.8)

FIXED INCOME: EGBs Under Early Pressure Amid Supply, Firm Equities

• Core EGBs traded under pressure from the open, with bond supply from Germany and the UK weighing on prices as well as the late rally in US equities Monday, which put the e-mini S&P above 4,300 for the first time since late April.
• The UK DMO sold GBP 2.75bln in 2029 Gilts this morning, with the auction producing a modest tail of 0.5bps. Decent demand was noted, bumping the bid/cover up to 2.65x from 2.48x at the previous sale. Germany aim to allot EUR 4bln in 5y bonds imminently.
• Core/Peripheral yield spreads trade wider, with the Italian/German 10y spread wider by close to 5bps on further signs of a deteriorating economy on the continent: The German ZEW survey fell below forecast, with the expectations component dropping to its lowest level since the Global Financial Crisis.

Latest levels:

• Germany: The 2-Yr yield is up 2.3bps at 0.553%, 5-Yr is up 2.9bps at 0.707%, 10-Yr is up 2.7bps at 0.927%, and 30-Yr is up 2.8bps at 1.183%.
• UK: The 2-Yr yield is up 5.5bps at 2.087%, 5-Yr is up 3.9bps at 1.894%, 10-Yr is up 4bps at 2.057%, and 30-Yr is up 4.9bps at 2.484%.
• Italy / German 10-Yr spread 4.5bps wider at 212bps

FOREX: EUR Sinks as ZEW Points to Lowest Expectations Since GFC

• The greenback makes modest progress early Tuesday, putting the USD Index north of the Monday highs and nearing the August highs of 106.93.
• EUR trades under pressure against most others, with EUR/USD printing a new intraday low of 1.0125 following another dire read for the German ZEW survey. The expectations component was a particular source of weakness, dropping to -55.3 from -53.8, the lowest level for the index since the Global Financial Crisis. Today's -55.3 read came in just above the -63.0 from Oct'08. A break below 1.0123 for EUR/USD would be fresh August lows, opening 1.0097 as the next support.
• USD/JPY is making solid gains on the day, breaking back above the Y134 handle for the first time since the US CPI release last week. JPY is weaker against all others in G10 so far Tuesday. CAD/JPY eyes the 50-dma at 104.98 for direction, a break above which could see the cross break out of the tight August range.
• US building permits data for July cross later today, as well as Canadian and US housing starts and the July Canadian CPI release. Prices are expected to have risen 0.1% on the month, and 7.6% on the year. US industrial production follows a little later in the session. There are no central bank speakers of note.

EQUITIES: European Stocks Continue To Edge Higher

• Asian markets closed flat/lower: Japan's NIKKEI closed down 2.87 pts or -0.01% at 28868.91 and the TOPIX ended 3 pts lower or -0.15% at 1981.96. China's SHANGHAI closed up 1.798 pts or +0.05% at 3277.885 and the HANG SENG ended 210.34 pts lower or -1.05% at 19830.52.
• European stocks continue to gain, with Utilities, Communications, Energy and Financials stocks leading: German Dax up 92.49 pts or +0.67% at 13797.86, FTSE 100 up 27.58 pts or +0.37% at 7492.74, CAC 40 up 33.11 pts or +0.5% at 6552.29 and Euro Stoxx 50 up 19.01 pts or +0.5% at 3781.1.
• U.S. futures are off just a touch, with the Dow Jones mini down 11 pts or -0.03% at 33861, S&P 500 mini down 6 pts or -0.14% at 4292.25, NASDAQ mini down 18.25 pts or -0.13% at 13663.

COMMODITIES: Oil Extends Decline Amid Broader Weakness

• WTI Crude down $0.84 or -0.94% at $88.54
• Natural Gas up $0.23 or +2.59% at $8.687
• Gold spot down $4.14 or -0.23% at $1776.99
• Copper down $1.15 or -0.32% at $361.5
• Silver down $0.16 or -0.78% at $20.3164
• Platinum down $7.7 or -0.82% at $938.94