MNI US OPEN - Markets Watch Pre-JH Fedspeak

NEWS

US-CHINA (MNI): China Opposed To US Abusing Export Controls - MOFCOM
China opposes any U.S. abuse of export controls and Beijing will take measures to safeguard the legitimate rights and interests of Chinese enterprises, Shu Jueting, spokeswoman of the Ministry of Commerce, said at a briefing Thursday.

GREECE (MNI): Greece Mulling Further FRN Sale In 2022 - Debt Chief
Athens is considering another floating rate note issue by the end of the year despite a cut in its annual borrowing target, Dimitris Tsakonas, director general at the Public Debt Management Agency told MNI in an interview in which he also predicted positive GDP and debt surprises.

CHINA (MNI): PBOC Seen Tolerating USDCNY Through 7 If Steady Glide
Beijing traders and analysts anticipate the People's Bank of China is likely to stay on the sidelines should the yuan, largely stable against most other currencies, drift steadily below the key 7.0 level to the U.S. dollar - unless the authorities see clear one-way sentiment and shorting of the yuan building.

SOUTH KOREA (MNI): BOK Hikes 25bps As Inflation Seen Higher
The Bank of Korea raised its policy interest rate to 2.50% from 2.25% on Thursday, as policymakers continue their fight with the growing inflationary pressures, signaling further hikes down the line.

FED (MNI): Philadelphia's Harker To Be Interviewed By MNI, CNBC Today
@philadelphiafed (on Twitter): "Philadelphia Fed President Patrick Harker joins Market News International at 9:25 am ET and @CNBC at 10 am ET to discuss his economic outlook and monetary policy views. Be sure to check out the article on @MNIMarketNews and tune in to Harker's live interview on @CNBC at 10 am ET." Note that Harker hasn't commented on monetary policy since June 22, well before the end-July FOMC.

FED: MNI 2022 Jackson Hole Preview - Premature To Pivot

• Fed Chair Powell is unlikely to signal a major policy "pivot" in his 2022 Jackson Hole speech. He could reiterate that slower hikes will likely be appropriate "at some point", but is very unlikely to endorse market pricing for 2023 cuts, or to provide concrete guidance for future decisions.
  
• Recent rate repricing raises risks that expectations have gotten too hawkish in the run-up to Jackson Hole.
  
• MNI's Preview of Jackson Hole includes what we know so far is scheduled for the event, sell-side analysis, a run-down of recent Fed communications, and our policy team's interviews and podcasts with ex-Fed officials on what to watch for at the symposium.
  
• Click: https://marketnews.com/mni-jackson-hole-preview-xxx for full pdf analysis.

FED (MNI): Bostic Says More Strong Data Could Tip Fed Toward 75 Basis Point Rate Increase
Federal Reserve Bank of Atlanta President Raphael Bostic said the U.S. central bank still has some way to go on raising interest rates this year and cautioned it is too soon to say the inflation surge has peaked, although he noted there are some hopeful signs on that front. "We all, as policy makers, understand that inflation is a big problem and is a challenge that we're going to do all that we can to handle," Mr. Bostic said in a Wall Street Journal interview Wednesday.

DATA

GERMANY Q2 GDP +0.1%r Q/Q, +1.7%r WDA Y/Y (MNI)

GERMANY AUG IFO CURRENT ASSESSMENT 97.5 (MNI)

GERMANY AUG IFO EXPECTATIONS 80.3 (MNI)

GERMANY AUG IFO BUSINESS CLIMATE INDEX 88.5 (MNI)

SPAIN JULY PPI +0.0% M/M. +40.4% Y/Y (MNI)

EUROZONE: "Soft" Data Pointing To A Very Hard Manufacturing Recession

• Today's German August IFO release provides another reminder that the "soft" data hasn't fully translated into weaker hard data in the Euro area just yet.
• The Eurozone industrial production index for the manufacturing industry actually picked up to a post-2017 high in June.
• However, the German IFO Manufacturing Expectations index has been firmly negative for the past six months (since February, the start of the Russia-Ukraine conflict).
• Those expectations point to a substantial drop in Eurozone manufacturing output in H2 2022 to a degree not seen on a sustained basis since just after the global financial crisis.
• Loosening supply chain bottlenecks (as noted by IFO) could help provide some welcome relief, but energy woes, poor prospects for trade / demand, and broad inflationary pressures suggest that the "soft" data may not be exaggerating the potential for manufacturing downside.

BOND SUMMARY: Bull steepening and retracing yesterday's moves

Core fixed income has been moving higher this morning, reversing some of yesterday's losses (but remaining within yesterday's trading range). The moves have been led by a repricing of near-term rate expectations with curves bull steepening. SONIA futures have led the moves higher (and gilts have led the German and UST curves). The larger moves in UK markets are in response to retracing yesterday's larger moves.

• This morning's data has focused on confidence data - with both French confidence data and the German IFO coming in higher-than-expected. However, this has not been enough to have any discernable impact on markets. The data later today is centered on the US - with the second print of Q2 GDP due for release alongside jobless claims. We will also receive the Accounts of the July ECB meeting, which saw the 50bp hike (against prior communications of 25bp).
• TY1 futures are up 0-4+ today at 117-12+ with 10y UST yields down -2.6bp at 3.081% and 2y yields down -3.8bp at 3.354%.
• Bund futures are up 0.49 today at 150.75 with 10y Bund yields down -3.6bp at 1.331% and Schatz yields down -5.2bp at 0.857%.
• Gilt futures are up 0.47 today at 111.16 with 10y yields down -6.6bp at 2.629% and 2y yields down -8.9bp at 2.828%.

FOREX: AUD Nearing $0.70, With Key Test Just Above

• Growth proxy currencies are outperforming early Thursday, with AUD/USD on track to print a third higher low on the day and put the pair within range of $0.70. A break above this mark opens initial firm resistance at 0.7040, the Aug 16 high where a break is required to ease the current bearish pressure.
• High beta currencies are gaining ahead of the NY crossover while the greenback trades generally weaker. This puts the USD Index further off the recovery high printed earlier this week at 109.27, but pullbacks are expected to remain shallow ahead of the Jackson Hole Policy Symposium which formally kicks off this evening. Markets watch for confirmation of the full agenda, with a speech from Fed's Powell the focus on Friday.
• Support for the dollar could slow any weakness going forward at 107.5036, the 38.2% Fib retracement for the August upleg.
• NZD is gaining in sympathy with the AUD, while EUR continues to trade heavy. Energy costs continue to add to the stagflation narrative, with 2023 power costs across Germany rising to new record highs ahead of the NY open.
• On the docket for Thursday, markets watch the secondary Q2 GDP read (expected to be revised higher to -0.7% from -0.9%). MNI also speak with Philly Fed's Harker, who hasn't commented on monetary policy directly since late June.

EQUITIES: Stocks Extends Mini Recovery Off Weds Low

• Japan's NIKKEI 225 closed up 165.54 pts or +0.58% at 28479.01, while the TOPIX ended 9.42 pts higher or +0.48% at 1976.6.
• Meanwhile, China's SHANGHAI COMP closed up 31.045 pts or +0.97% at 3246.248 and the HANG SENG ended 699.64 pts higher or +3.63% at 19968.38.
• Across Europe, Germany's DAX up 87.53 pts or +0.66% at 13306.47, FTSE 100 up 52.84 pts or +0.71% at 7523.82, CAC 40 up 36.2 pts or +0.57% at 6423.05 and EuroStoxx50 up 22.65 pts or +0.62% at 3689.98.
• In futures space, Dow Jones mini trades higher by 193 pts or +0.59% at 33166, S&P 500 mini up 32.75 pts or +0.79% at 4178.75, NASDAQ mini up 118.75 pts or +0.92% at 13050.5.

COMMODITIES: Industrial Metals Gain, Mimicking AUD, NZD Price Action

• WTI Crude up $0.42 or +0.44% at $95.31
• Natural Gas down $0.04 or -0.39% at $9.3
• Gold spot up $12.34 or +0.7% at $1763.4
• Copper up $5.4 or +1.48% at $370.15
• Silver up $0.27 or +1.41% at $19.3819
• Platinum up $7.61 or +0.86% at $887.71