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
- MNI BOC PREVIEW - LOW BAR FOR A THIRD CUT HAS BEEN MET
- KAMALA HARRIS TO PROPOSE EXPANSION OF SMALL-BUSINESS STARTUP TAX DEDUCTION
- ECB’S KAZAKS SAYS INTEREST RATES CAN BE CUT AT NEXT MEETING
- TALKS CONTINUE BUT STILL NO SIGN OF COMPROMISE TO GET FRANCE NEW PM
Figure 1: Eurozone PPI above expectations in July
NEWS
MNI BOC PREVIEW - SEPTEMBER 2024: Low Bar for a Third Cut Has Been Met
The BoC is more than fully priced to opt for a third consecutive 25bp cut on Wednesday to 4.25%. Analysts are on balance marginally more hawkish as 4 of 34 look for no change, although that has recently narrowed and the rest all look for a 25bp cut. It’s a non-MPR meeting although we still of course have a press conference per this year’s new approach. We expect broadly similar dovish language as seen in July. The latest CPI report gives the BoC increased confidence that inflation heads in the right direction, allowing for more focus on widening excess supply.
US (WSJ): Kamala Harris to Propose Expansion of Small-Business Startup Tax Deduction
Vice President Kamala Harris will propose a tenfold-expansion of a tax deduction for new small businesses and announce a goal of 25 million new small-business applications in her first term if elected president, according to campaign officials. Harris, who has been trying to articulate her economic vision for the country, is expected to detail her plan in a speech in Portsmouth, N.H., on Wednesday. It comes more than two weeks after Harris outlined the first economic policy plans of her nascent presidential campaign, which focused on housing, lowering costs for families and an expanded tax credit for parents of newborns.
ECB (MNI): Risk ECB Could Become Too Restrictive - ECB's Cipollone
The latest data confirm the European Central Bank's "direction of travel" on interest rates and although not pre-commited on any rate path, policymakers would hope to be able to remove some restriction before becoming too restrictive, Executive Board member Piero Cipollone told Le Monde in an interview published Wednesday. Although upbeat that inflation will be at target sustainably by H2.
ECB (BBG): ECB’s Kazaks Says Interest Rates Can Be Cut at Next Meeting
The European Central Bank can lower borrowing costs at this month’s meeting, according to Governing Council member Martins Kazaks. “Next week we have the ECB’s council meeting, and to to my mind - looking at the data that we have at available at the moment - we can take the next step in the direction of decreasing rates,” the hawkish Latvian central-bank chief told Latvian TV on Wednesday. “Of course there will be a discussion, as there always is, but for me at this moment this picture is pretty clear.”
ECB (BBG): Even With More Cuts Policy Will Be Restrictive - ECB’s Stournaras
European Central Bank monetary policy “will remain restrictive” - even if interest rates are lowered further, Governing Council member Yannis Stournaras said in an opinion article published in Imerisia. “We’ll continue to make decisions based on available data, assessing all the latest information that emerges, from one monetary-policy meeting to another.” In an environment of increased economic and geopolitical uncertainty, “we’ll continue to move cautiously and remain alert to, if necessary, properly adjust the direction of our monetary policy with gradual reductions in our interest rates.”
UK (RTRS): UK Banks Brace for Possible Tax Hikes as Budget Nears, Sources Say
UK-based banks are stepping up lobbying efforts against possible tax hikes in the government's inaugural Budget on Oct. 30, amid mounting worries it may tap the cash-rich sector to boost Britain's finances, senior industry sources told Reuters. Finance minister Rachel Reeves is due to meet senior representatives of the banking sector in the coming days, where bankers expect a rise in taxes on lenders' profits will be discussed, two of the sources said.
FRANCE (MNI): Talks Continue, But Still No Sign of Compromise to Get New PM
President Emmanuel Macron and the main political forces in the National Assembly show little sign of extricating themselves from France's political quagmire. Speculation over the weekend that an announcement on the identity of a new prime minister could come on 3 September swiftly turned sour as it became clear that - as yet - neither of the two most prominent candidates for office had enough support to avoid an immediate censure vote in the chamber. Former centre-left Socialist Party (PS) PM Bernard Cazeneuve and President of the Hauts-de-France region Xavier Bertrand, from the centre-right Les Republicains, remain the two frontrunners, but both face obstacles.
GERMANY (BBG): Germany Is Said to Target Sale of 3% to 5% Stake in Commerzbank
The German government plans to sell a stake of 3% to 5% in Commerzbank AG in a first step as it seizes on a recent share rally to initiate an exit from the lender it rescued over a decade ago, according to people familiar with the matter. Berlin currently owns about 16.5% in Commerzbank, worth roughly €2.5 billion. The country’s finance agency, which manages the holding, announced on Tuesday that it plans to reduce the investment, without disclosing by how much.
EUROPE (BBG): VW Says Weak Europe Car Sales Leave Two Factories Empty
Volkswagen AG defended plans to consider unprecedented factory closures in Germany, saying flagging car sales have left the company with about two plants too many. Demand in Europe hasn’t recovered since the pandemic, with industry-wide auto deliveries in the region around 2 million short of its peak, Chief Financial Officer Arno Antlitz said at an employee assembly in Wolfsburg. Hundreds of workers heckled Antlitz and Chief Executive Officer Oliver Blume when they took the stage.
CHINA (FT): Investment Banks Cut China GDP Forecasts as Confidence Wanes
Investment banks are cutting their growth forecasts for China, believing Beijing risks undershooting its official target of about 5 per cent as confidence wanes in the world’s second-largest economy. Bank of America on Wednesday lowered its forecast to 4.8 per cent from 5 per cent and Canadian investment bank TD Securities cut to 4.7 per cent from 5.1 per cent. The moves followed a UBS cut last week and a series of similar reductions in recent months.
CHINA (BBG): China Weighs Cutting Mortgage Rates in Two Steps to Shield Banks
China is considering cutting interest rates on as much as $5.3 trillion of mortgages in two steps to lower borrowing costs for millions of families while mitigating the profit squeeze on its banking system. Financial regulators have proposed reducing rates on outstanding mortgages nationwide by a total of about 80 basis points, part of a package that includes an accelerated timeline for when mortgages become eligible for refinancing, according to people familiar with the matter.
RUSSIA/ASIA (BBG): Malaysian PM Visits Russia as Asian Leaders Defy West Over Putin
Russia and Malaysia will discuss collaboration in areas from aerospace to advanced technologies on Wednesday, as Anwar Ibrahim becomes the latest Asian leader to shrug off Western efforts to cast Vladimir Putin as an international pariah. Malaysian Prime Minister Anwar is on a two-day visit to Russia, where he will meet President Putin on Wednesday evening and brief media on Thursday, according to his office. The meeting allow talks on a broad range of topics, from agriculture and food security to trade and investment, Malaysia’s Foreign Ministry said in a statement.
UKRAINE (MNI): Western Lviv Hit in Deadly Attack as Foreign Min Departs in Reshuffle
According to regional officials, at least three have been killed, 30 injured and buildings destroyed in the historic centre of the western city of Lviv in a Russian missile barrage that also hit the capital, Kyiv. For broad swathes of the war, Lviv, just 70km from the Polish border, has not been subjected to significant aerial attacks. However, it now appears to be another city in Russia's sights as the Kremlin steps up its campaign of deliberately targeting civilians as well as key infrastructure. The strike on Lviv comes a day after the deadliest single attack of 2024, when more than 50 were killed when missiles hit a military institute in the central Ukrainian town of Poltava.
MEXICO (BBG): Mexico’s Top Court Justices Join Strike Over Judicial Reform
Mexico’s Supreme Court justices went on strike to protest President Andres Manuel Lopez Obrador’s proposed reform of the judicial system while demonstrations against the controversial plan delayed its debate in congress by a few hours. The strike was approved by eight votes in favor and three against, the top court said in a statement Tuesday. The court will continue to address urgent matters and the justices will review their position on Sept. 9.
MNI NBP PREVIEW - SEPTEMBER 2024: On Hold Until '25
It is highly unlikely that any of the ten members of the MPC will cast their vote in favour of a rate cut this week, with the National Bank of Poland widely expected to stand pat on rates at least through the end of 2024. That being said, a growing number of members have been flagging the potential for interest-rate cuts in 2025, with Governor Adam Glapiński eventually softening his hawkish forward guidance. The official may provide a more formal update on the interest-rate outlook during the upcoming press conference, taking stock of weaker-than-expected macroeconomic data at the start of Q3.
DATA
EUROZONE DATA (MNI): EZ PPI Higher Than Expected
- EUROZONE JUL PPI +0.8% M/M, -2.1% Y/Y
Eurozone PPI was a touch higher than expected in July at -2.1% Y/Y (vs -2.5% consensus, -3.3% revised prior), on a sequential basis the 0.8% M/M reading was also firmer than expected (vs 0.3% consensus, 0.6% revised prior). The headline Y/Y print was less negative largely due to the energy component seeing it's fifth consecutive increase to -6.9% Y/Y (vs -9.6% prior), after a second consecutive monthly rise (2.8% M/M vs 1.8% prior). Intermediate goods also remained in Y/Y deflation although outright deflation continued to moderate to -1.2% vs -2.3% prior. On the other hand, capital goods, durable and non-durable consumer goods continue to see producer prices increase on an annual basis - albeit at a softer pace than seen in June.
EUROZONE DATA (MNI): Bank of Italy Euro-Coin Indicator Rises to 0.29 in August
The Bank of Italy's Euro-coin indicator (nowcast for EZ trend growth) rose to 0.29 in August (from 0.16 in July), after "employment growth and the overall improvement in household and business confidence more than offset the impact of industrial weakness". The trend growth series strips out seasonal variations, measurement errors and short-run volatility, and has been in positive (albeit subdued) territory for the last six months. The increase comes despite a fall in Bloomberg's GDP Nowcast in August to 0.04% from 0.10% in July (though Bloomberg's indicator instead aims to estimate actual Q/Q growth, not trend growth).
SPAIN DATA (MNI): Firms Protect Profit Margins in August Services PMI
- SPAIN AUG SERVICES PMI 54.6 (FCST: 54.9); JUL 53.9
Spanish services firms continued to protect profit margins according to the August PMI, passing on increases in input costs to consumers. However, the overall index remains in expansionary territory (for the 12th consecutive month), driven by continued increases in new business. The services PMI was slightly lower than expected at 54.6 (vs 54.9 cons, 53.9 prior), with the composite index (53.5 vs 54.3 cons, 53.4 prior) also a little below consensus following Monday's manufacturing PMI.
ITALY DATA (MNI): Fall in New Business as Demand Softens
- ITALY AUG SERVICES PMI 51.4 (FCST: 52.5); JUL 51.7
In contrast to Spain, Italian services firms saw falls in new business as a result of subdued demand conditions, according to the August services PMI. However, output charge inflation increased even as input cost inflation "dropped below the long-run average". The rate of expansion in the Italian services sector has fallen for four consecutive months, after the August services PMI was lower than expected at 51.4 (vs 52.5 cons, 51.7 prior).
EUROZONE FINAL AUG SERVICES PMI 52.9 (FLASH: 53.3); JUL 51.9 (MNI)
GERMANY AUG SERVICES PMI 51.2 (FLASH: 51.4); JUL 52.5 (MNI)
UK AUG FINAL SERVICES PMI 53.7 (FLASH: 53.3); JUL 52.5 (MNI)
AUSTRALIA DATA (MNI): Aussie GDP Grows 1% Y/Y Over Q2
- AUSTRALIA Q2 GDP +0.2% Q/Q
- AUSTRALIA Q2 GDP +1% Y/Y
The Australian economy grew 1.0% y/y over Q2, 10 basis points higher than market and Reserve Bank of Australia expectations, while household spending increased 2.9% y/y, 40bp less than anticipated, the Australian Bureau of Statistics noted within its National Accounts Wednesday. GDP grew at 0.2% q/q, 10bp higher than the first quarter and in line with expectations. “Spending on many discretionary categories fell in the June quarter,” said Katherine Keenan, head of national accounts at the ABS. “This followed a relatively strong result in the March quarter, which included a number of sporting, gambling and music events."
FOREX: Scandi Currencies Suffer as Cross-Market Sentiment Remains Shaky
- Fragile market sentiment evident in the lack of any recovery bounce for stocks is keeping currency markets contained, with growth and high beta proxies still trading poorly. Scandi currencies in particular are weaker this morning, with SEK and NOK softer against all others in G10. USD/SEK trades higher for the fifth session in six, while USD/NOK is testing resistance at the confluence of the 100- and 50-dmas at 10.7362-68.
- As a result of the shakier cross-market sentiment, haven currencies are firmer once again, helping the JPY and CHF higher. The trade-weighted JPY index holds close to recent highs, and a further 1.5% gain would put the currency at its strongest since the intervention-inspired bounce off the July low.
- The greenback is more mixed, with softer PMI data from both Spain and Italy doing little to trigger conviction in either direction. EUR/USD is firmer above 1.1050, but yesterday's highs remain out of reach for now.
- Trade balance data from across the US and Canada is set to start the NA session, but it's the JOLTS Job Openings data that could prove more of a needle mover, given the Fed's acute sensitivity to labour market conditions headed into the September decision.
- The Bank of Canada rate decision is expected to see a third consecutive 25bps rate cut, putting the overnight lending rate at 4.25% today. The press conference with governor and deputy governor Macklem and Rogers to be carefully watched for any details on the pace of easing ahead.
EGBS: Bunds Off Highs as Risk Assets Stabilises, Peripherals Still Wider
The stabilisation of European equity and crude oil prices has helped Bunds away from intraday highs, though futures remain +25 ticks today at 134.18.
- The Aug 29 high in Bunds is still intact at 134.49. A breach of this level would strengthen a near-term bullish condition.
- Risk sentiment remains subdued though, which has prompted BTP futures to underperform (+7 today at 119.02) and broader 10-year peripheral spreads to Bunds widen ~1.5bps.
- The Eurozone August final services PMI was slightly weaker than implied by the flash release, though the Olympics-driven French print was confirmed at 55.0.
- Meanwhile, commentary from several ECB speakers continues to point to a rate cut in September, with little firm guidance provided beyond that gathering.
- The German cash curve has bull steepened, with yields -3.5 to -1.5bps lower at typing. The bidding deadline for today’s 15-year Bund supply is at 1030BST/1130CET.
- Broader focus turns to the Bank of Canada decision and US job openings data this afternoon, while BdF’s Villeroy is scheduled to appear on a panel at 1200BST.
GILTS: Yesterday's High In Futures Intact, Wider Themes Eyed
Gilt futures continue to respect yesterday’s high/initial resistance (99.25), bests of 99.23 seen thus far, last 99.07.
- Yields ~2bp lower across the curve.
- Benchmark 2s, 5s & 10s saw modest prints below yesterday’s yield lows, but bulls failed to generate meaningful traction on the breaks.
- Equities and oil markets are off lows, after weakness in both drove the early gilt rally.
- SONIA futures flat to +3.5.
- BoE-dated OIS little changed to 3bp more dovish on the day, showing ~4.5bp of cuts for this month’s MPC, ~26.5bp of easing through the Nov meeting and ~41bp of cuts through Dec.
- Final UK services PMI data was a little firmer than the flash estimate, with the accompanying text little changed.
- Macro/cross-market moves are set to drive things through the remainder of the session, with little of note on the UK schedule & U.S. JOLTS data due.
EQUITIES: E-Mini S&P Breaks Below 20- and 50-Day EMAs
Eurostoxx 50 futures have reversed course and this has resulted in a break of both the 20- and 50-day EMAs. The move lower highlights the start of a corrective cycle, paving the way for a pullback towards 4805.47 initially, a Fibonacci retracement. Initial firm short-term resistance has been defined at 4998.00, the Sep 3 high. A break of this level would reinstate the recent bullish theme. A bullish theme S&P E-Minis remains intact, however yesterday’s sharp sell-off signals the start of a corrective cycle. Price has traded through the 20-day EMA and pierced support at the 50-day average, at 5519.81. A clear break of the 50-day EMA would signal scope for a deeper retracement towards 5459.75, a Fibonacci retracement. Key near-term resistance has been defined at 5669.75, the Sep 3 high. A breach of it would be bullish.
- Japan's NIKKEI closed lower by 1638.7 pts or -4.24% at 37047.61 and the TOPIX ended 99.78 pts lower or -3.65% at 2633.49.
- Elsewhere, in China the SHANGHAI closed lower by 18.701 pts or -0.67% at 2784.278 and the HANG SENG ended 194.15 pts lower or -1.1% at 17457.34.
- Across Europe, Germany's DAX trades lower by 144.96 pts or -0.77% at 18602.08, FTSE 100 lower by 65.77 pts or -0.79% at 8232.95, CAC 40 down 61.88 pts or -0.82% at 7513.22 and Euro Stoxx 50 down 52.6 pts or -1.07% at 4859.92.
- Dow Jones mini down 81 pts or -0.2% at 40937, S&P 500 mini down 21 pts or -0.38% at 5521, NASDAQ mini down 112.75 pts or -0.59% at 18894.25.
Time: 09:55 BST
COMMODITIES: WTI Futures Trading at Lowest Level Since December 2023
WTI futures maintain a softer tone. The contract traded sharply lower Tuesday, resulting in a break of key support at $70.88, the Aug 5 low. The clear break of this level confirms a resumption of the downtrend that started Apr 12 and paves the way for an extension towards $68.92, the Dec 13 ‘23 low. Moving average studies are in a bear-mode position highlighting a clear downtrend. Initial resistance is at $74.65, the 20-day EMA. The trend in Gold remains bullish and the recent sideways move marks a pause in the uptrend. MA studies are in a bull-mode set-up and this highlights a dominant uptrend. The recent breach of $2483.7, Jul 17 high, confirmed a resumption of the primary uptrend and the focus is on $2536.4 next, a Fibonacci projection. Initial support to watch lies at $2483.6, the 20-day EMA. It has been pierced, a move lower would be considered corrective.
- WTI Crude down $0.49 or -0.7% at $69.87
- Natural Gas down $0 or -0.05% at $2.201
- Gold spot down $18.7 or -0.75% at $2474.65
- Copper down $4.25 or -1.04% at $405.05
- Silver down $0.27 or -0.96% at $27.7963
- Platinum down $6.57 or -0.72% at $902.74
Time: 09:55 BST
MNI (LONDON)
| Date | GMT/Local | Impact | Country | Event |
| 04/09/2024 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 04/09/2024 | - | *** | US | Domestic-Made Vehicle Sales |
| 04/09/2024 | 1230/0830 | ** | US | Trade Balance |
| 04/09/2024 | 1230/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 04/09/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 04/09/2024 | 1345/0945 | *** | CA | Bank of Canada Policy Decision |
| 04/09/2024 | 1400/1000 | ** | US | Factory New Orders |
| 04/09/2024 | 1400/1000 | *** | US | JOLTS jobs opening level |
| 04/09/2024 | 1400/1000 | *** | US | JOLTS quits Rate |
| 04/09/2024 | 1400/1000 | US | MNI Connect Video Conference on the U.S. Fiscal Policy Outlook | |
| 04/09/2024 | 1430/1030 | CA | BOC Governor Press Conference | |
| 04/09/2024 | 1800/1400 | US | Fed Beige Book | |
| 05/09/2024 | 0130/1130 | ** |  AU | Trade Balance |
| 05/09/2024 | 0545/0745 | ** |  CH | Unemployment |
| 05/09/2024 | 0600/0800 | ** |  DE | Manufacturing Orders |
| 05/09/2024 | 0730/0930 | ** |  EU | S&P Global Final Eurozone Construction PMI |
| 05/09/2024 | 0830/0930 | ** |  GB | S&P Global/CIPS Construction PMI |
| 05/09/2024 | 0830/0930 | GB | BOE DMP Data | |
| 05/09/2024 | 0900/1100 | ** | EU | Retail Sales |
| 05/09/2024 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 05/09/2024 | 1215/0815 | *** | US | ADP Employment Report |
| 05/09/2024 | 1230/0830 | *** | US | Jobless Claims |
| 05/09/2024 | 1230/0830 | ** | US | Non-Farm Productivity (f) |
| 05/09/2024 | 1400/1000 | *** | US | ISM Non-Manufacturing Index |
| 05/09/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
| 05/09/2024 | 1500/1100 | ** | US | DOE Weekly Crude Oil Stocks |
| 05/09/2024 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 05/09/2024 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
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.