EXECUTIVE SUMMARY
- MNI BOE PREVIEW - QT AND VOTE SPLIT IN FOCUS
- HOUSE VOTES TO REJECT GOP BILL TO AVERT GOVERNMENT SHUTDOWN
- NORGES BANK HOLDS, SEES CUTS STARTING Q1 2025
- AUSTRALIA JOB CREATION PICKING UP MOMENTUM, BUT UNDEREMPLOYMENT RISES
Figure 1: Norges Bank September MPR policy rate forecast changes
Source: Norges Bank/MNI
NEWS
MNI BOE PREVIEW - SEPTEMBER 2024: QT and Vote Split in Focus
This week’s MPC meeting is expected to see Bank Rate left on hold at 5.00% (after the first cut of the cycle in August). However, there will be focus on the vote split, any change in guidance and the QT decision. For the vote split we would not be surprised to see a return to either 8-1 or 7-2 for Bank Rate to be left on hold (with Dhingra and potentially Ramsden dissenting in favour of a further immediate cut). However, if there was a surprise the other way – a 6-3 vote with an additional internal MPC member or new external member Taylor joining Dhingra and Ramsden in voting for a cut at this meeting, that would be a clear sign that there is a potential for the pace of rate cuts to be ramped up at future meetings.
MNI FED REVIEW - SEPTEMBER 2024: “Strong Move”, But “No Rush"
Surprises at the September FOMC were actually relatively limited outside of the decision itself, which went in favor of a 50bp cut to 4.75-5.00% instead of a 25bp cut – and even then, either outcome was priced at roughly 50/50 going into 2pm ET. If anything the limited surprises in the communications leaned marginally hawkish to us versus what might have been expected in the context of an outsized rate cut to start the easing cycle, from Powell’s caginess over the cadence of future cuts in the press conference, to some subtleties in the Dot Plot. We think this interpretation is borne out by the market reaction, which went from very dovish on the semi-surprise cut size at the time of release, to reversing much of the initial move by the end of the press conference.
US (WaPo): House Votes to Reject GOP Bill to Avert Government Shutdown
The House on Wednesday rejected Speaker Mike Johnson's plan to fund the government for six months, cranking up tensions around a fast-approaching government shutdown deadline not only throughout Congress but also within Republicans' brittle House majority. Fourteen Republicans joined with Democrats to block Johnson's bill, which combined a six-month extension of federal funds at current spending levels with a measure the House already passed requiring proof of citizenship to register to vote in national elections. The Democratic-controlled Senate and the White House oppose the House bill, because of the length of the extension and because of the registration provisions.
US (BBG): Trump Pledges to Restore SALT Write-Off at Long Island Rally
Donald Trump pledged to lift a cap on the state and local tax deduction valuable to many New York homeowners that he imposed as president. “I will cut taxes for families, small businesses and workers, including restoring the SALT deduction, saving thousands of dollars for residents of New York, Pennsylvania, New Jersey and other high cost states,” Trump said, referring to the acronym for the state and local tax write-off, at a rally Wednesday.
US/UKRAINE (BBG): Harris Plans Meeting With Zelenskiy in Washington Next Week
Kamala Harris plans to meet with Ukrainian President Volodomyr Zelenskiy in Washington next week, according to a person familiar with the matter, as the Democratic nominee tries to broaden her foreign policy profile. Harris has strongly supported President Joe Biden’s steadfast support of Ukraine in its defense against Russia’s invasion, which began in February 2022. The encounter comes at a crucial time as Russian forces have made some gains in the deadlocked conflict as winter approaches.
ISRAEL (BBG): Israel Sees ‘New Phase’ in Regional War After Lebanon Blasts
Israeli Defense Minister Yoav Gallant declared what he called a “new phase” in the war with regional Islamist groups and said troops would be diverted to the Lebanese border, an indication that long-held fears of a wider conflict may soon be realized. More military resources will be deployed to the north of the country, where Israel has been exchanging rocket fire with Hezbollah militants for almost a year, Gallant told forces at the Ramat David airbase on Wednesday. His comments came after waves of exploding telecommunications devices in Lebanon killed 26 people over two days and wounded more than 3,000, according to Lebanon’s health ministry.
NORGES BANK (MNI): Norges Bank Holds, Sees Cuts Starting Q1 2025
Norges Bank left its policy rate on hold at 4.5%, as widely expected, and said the first cut this cycle was likely to come in the first quarter of 2025. Analysts have been split over whether the Norwegian central bank will begin easing in late 2024 or early 2025 but its own projections show a tilt to the latter, with Governor Ida Wolden Bache stating policymakers "will probably keep the interest rate at 4.5% for the rest of the year," but adding "the time to lower the interest rate is approaching."
ECB (BBG): ECB’s Knot Is Comfortable With Market’s Rate-Cut Expectations
European Central Bank Governing Council member Klaas Knot said he’s comfortable with investor bets on further interest-rate cuts. Markets see one or two additional quarter-point moves in 2024, with borrowing costs settling at 2% after six more next year. Knot told an event in Istanbul that he sees room for the ECB to continue easing monetary policy — assuming inflation cools as projected. “As long as that’s the case, I’m more or less fine with market expectations of further cuts,” the hawkish Dutch official said Thursday.
ECB (MNI): ECB's Schnabel Wary of Services Inflation
Board member Schnabel doesn't explicitly express a view on appropriate monetary policy but her slides appear consistent with her comments Aug 30 that "policy should proceed gradually and cautiously" and become increasingly cautious as policy rates get to the upper band of neutral estimates. She is clearly still wary of services inflation: "Sticky services inflation is keeping headline inflation at elevated level", "Price pressures in the services sector are broad-based and global" and "Momentum in services remains high and above levels consistent with price stability".
ECB (Politico): ECB May Have to Accelerate Rate Cuts, Centeno Tells Politico
The European Central Bank may have to quicken the pace that it lowers interest rates to avoid inflation falling short of forecasts, Governing Council member Mario Centeno told Politico. “Given the position in which we are today, in the monetary policy cycle, we have really to minimize the risk of undershooting, because that’s the main risk,” Centeno was cited as saying.
GERMANY (MNI): Merz Rules Out Coalition w/Greens as CDU Scores Best Polling Since 2021
Earlier this week Friedrich Merz, leader of the main opposition centre-right Christian Democratic Union (CDU) was all-but-confirmed to be the chancellor candidate for the 'Union' in the upcoming 28 Sep 2025 federal election. In federal elections the CDU runs as part of the 'Union' with the Christian Social Union (CSU), the CDU's Bavarian sister party. Prior to elections, the Union parties choose a chancellor candidate. In 2021, a bitter contest between the CDU's Armin Laschet and CSU's Markus Soeder highlighted divisions within the Union, hampering its election campaign and (among other factors) contributing to the party's poor performance.
MNI BOJ PREVIEW - SEPTEMBER 2024: Wait-and-See Approach for Now
The Bank of Japan (BoJ) Policy Board will meet on September 19-20, with markets closely watching for any signals regarding future monetary policy normalisation. Consensus unanimously expects no change to the 0.25% target rate at this meeting. Several factors suggest the BoJ may favour a wait-and-see approach for now. Uncertainty around the US economic outlook and downside risks to overseas economies persist. Additionally, Governor Ueda’s parliamentary testimony, along with speeches by Deputy Governors Uchida and Himino, have emphasised that the BoJ will not hike further while financial markets remain "unstable”.
BOJ (MNI EXCLUSIVE): Fed Cut No Obstacle for BOJ Hiking Path
The BOJ's hiking path remains intact. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
JAPAN (BBG): Tokyo Shares’ Volatility May Rise After Trading Hour Extension
Japanese equities may become more volatile after the Tokyo Stock Exchange extends its trading hours in November, with the risk that investors might be scared off as it comes on the heels of last month’s market crash. The Japanese bourse will increase the equities trading hours by 30 minutes beginning Nov. 5, pushing back the cash market’s close to 3:30 p.m. and lengthening the daily session to 5 1/2 hours. The exchange will also introduce a closing auction session to accommodate the increased trading volumes at the end of the day.
CHINA (MNI): China Pledges to Boost Macro Policy Efforts
MNI (Beijing) China's top economic planner said Thursday it will increase policy reserves and launch a batch of additional measures that are operational and effective in a timely manner, according to Jin Xiandong, spokesman of the National Development and Reform Commission. Authorities will step up macroeconomic policies and strengthen countercyclical adjustment, Jin told reporters.
CHINA/JAPAN (BBG): Death of Japanese Boy Stabbed in China Risks Inflaming Tensions
A 10-year-old Japanese child who was stabbed in southern China has died, a development that could further strain relations between the two countries. On Thursday morning Japan’s Foreign Minister Yoko Kamikawa confirmed the death of the child, adding that the government was asking China to provide details of what happened and do its utmost to ensure the safety of Japanese citizens. “We understand that the attacker is in custody, and his motivations will become clearer following interrogation,” Kamikawa told reporters. “This sort of incident shouldn’t happen in any country.”
MNI SARB PREVIEW - SEPTEMBER 2024: SARB to Start Cutting Rates
The South African Reserve Bank (SARB) is expected to fire the starting pistol on its monetary easing cycle, trimming the repo rate by 25bp and bringing it to 8.00%. Macroeconomic developments since the previous monetary policy meeting have been dovish on balance, upside risks to the inflation outlook have partially receded, while the Fed is widely expected to cut rates on the eve of the SARB meeting. The vote split may shed some light on the positionality of the Monetary Policy Committee’s (MPC’s) collective sentiment on the dovish/hawkish spectrum amid the relative scarcity of communications from individual members.
MNI CBRT PREVIEW - SEPTEMBER 2024: Too Early to Start Easing
The CBRT is expected to keep its one-week repo rate unchanged at 50% and maintain a hawkish tilt to its communication. Among sell-side, analysts remain divided over the timing of the first rate cut. Some see an easing cycle commencing as soon as the October or November meetings, while others expect rates to remain on hold through the remainder of the year. Guidance in the policy statement will therefore be closely watched, in particular whether officials will stick with its tightening bias or shift to a more neutral stance.
CORPORATE (BBG): Apple Faces EU Warning to Open Up iPhone Operating System
Apple Inc. is set to be warned by the European Union to open up its highly guarded iPhone operating system to rival technologies, or eventually risk significant fines. EU watchdogs are due to announce under the bloc’s new Digital Markets Act that the Cupertino, California-based firm must step into line with strict new rules on making operating systems fully functional with other technologies, according to people familiar with the matter, who spoke under condition of anonymity.
DATA
JAPAN DATA (MNI): Japan H’hold Assets Reach JPY2,212 Trln End-June
The balance of financial assets held by Japanese households stood at a record high of JPY2,212 trillion at the end of June, up 4.6% y/y and for the 17th straight quarterly rise, preliminary fund circulation data released by the Bank of Japan on Thursday showed. The balance of cash and deposits held by Japanese households at the end of June stood at JPY1,127 trillion, up 0.8% from a year earlier. The balance of cash and deposits accounted for 51.0% of the total financial assets, showing Japanese households continued to refrain from buying financial assets.
AUSTRALIA DATA (MNI): Aussie Unemployment Steady, Job Creation Strong
- AUSTRALIA AUG UNEMPLOYMENT RATE +4.2%
- AUSTRALIA AUG LABOR PARTICIPATION RATE +67.1%
- AUSTRALIA AUG EMPLOYED PERSONS CHANGE 47.5K
- AUSTRALIA AUG F-T EMPLOYED PERSONS CHANGE -3.1K
Australia unemployment printed at 4.2% over August, steady from July and in line with market expectations, however, the economy added 47,500 jobs, higher than the 26,000 expected, according to data released by the Australian Bureau of Statistics Thursday. “The growth in employment increased the employment-to-population ratio by 0.1 percentage point to 64.3%, which is just below the November 2023 historical high of 64.4%,” said Kate Lamb, head of labour statistics at the ABS. The Reserve Bank of Australia updated its assessment on the labour market and demand within the economy following its August meeting, which could lead the bank to hold the cash rate at 4.35% for longer.
NEW ZEALAND DATA (MNI): NZ GDP Shrinks 0.2% Q/Q Against Expected 0.4%
The New Zealand economy shrank by 0.2% q/q over Q2, 20 basis points less than market expectations and 30bp less than the Reserve Bank of New Zealand’s most recent projections, Stats NZ data showed Thursday. GDP per capita fell 0.5% q/q, while real gross national disposable income was flat at 0.0%. The move lower follows Q1’s 0.1% growth. Retail trade and accommodation fell 1.3%, while the agriculture, forestry, and fishing sector was down 1.4%.
FOREX: Rally for Equities Underpins Antipodean FX Strength, NOK Outperforms
- The strong recovery and extension higher for major equity benchmarks on Thursday has underpinned notable outperformance for the likes of AUD and NZD, both rising around 1% against the dollar. In contrast, the risk on tone has worked against the Japanese Yen. USDJPY is 0.3% higher on the day, however, remains well off the overnight 143.95 highs.
- Outperforming in G10 is the Norwegian Krone, following a relatively hawkish tilting Norges Bank. The central bank left its policy rate on hold at 4.5%, as widely expected, and said the first cut this cycle was likely to come in the first quarter of 2025. As such, USDNOK is down 1.4% as we approach the NY crossover, with the NOK also benefitting from the risk on tone.
- The USDNOK has now broken below the August low, and Market Participant's attention will now turn to the June low situated at 10.4354 (prices are according to BGNE).
- A clear break through, would open to 10.3865, this is not only the March low, but also the 76.4% retrace of the Dec/July range.
- Contrasting price action across G10 leaves the USD index unchanged on the session, following some impressive two-way swings. The post-Fed recovery for the index to 101.40 has been well sold into and the DXY has been edging steadily lower across the European morning and trades just 35 pips away from the year’s lows printed just yesterday at 100.22.
- Focus today turns to the Bank of England, where an unchanged decision is expected. Policy decisions in Turkey and South Africa are also expected, as well as jobless claims data in the US.
BONDS: German & UK Curves Steepen Following Fed, Peripherals a Touch Tighter
EGBS and gilts recover from session lows alongside Tsys.
- Reaction to yesterday’s 50bp Fed cut and Chair Powell’s warning against the assumption that the move sets a precedent for the pace of subsequent easing dominates thus far. Curves twist steepen.
- Bund futures -15 at 134.17.
- German yields 2bp lower to 3bp higher.
- EUR3m10y prints another fresh cycle low, promoting modest peripheral spread tightening, further aided by a bid in equities.
- Demand at the latest round of Spanish supply wasn’t particularly strong, with covers on the softer side and amount sold at the lower end of the target range. Solid pricing provided some counter, ultimately limiting market reaction.
- French supply saw better demand.
- ECB-speak stuck to the data-dependent theme.
- Gilt futures little changed at 100.26.
- UK yields 3bp lower to 1bp higher.
- The BoE decision headlines the regional calendar today.
- No change in rates expected, with the MNI baseline looking for 2 dovish dissenters (7-2 vote split) and a slightly more aggressive than consensus GBP110bln announcement for QT between Oct ’24 & Sep ’25.
- We have provided plenty of colour on vote split and QT pace scenarios throughout the morning, please see the relevant bullets for deeper insight.
EQUITIES: E-Mini S&P Narrows Gap to Key Resistance at $5730.50
Eurostoxx 50 futures have traded higher today as the contract extends the recovery that started Sep 10. It is still possible that the latest move higher is a correction. Moving average studies remain in a bear-mode position and this highlights a downtrend. A reversal lower would refocus attention on the key short-term support at 4729.00, the Sep 10 low. The next resistance to watch is 4934.52, a Fibonacci retracement. S&P E-Minis traded to a fresh short-term high Wednesday and the contract maintains a firmer tone. Last week’s gains highlight a bullish reversal and the end of the Sep 3 - 6 corrective cycle. The contract is trading above the 20- and 50-day EMAs and resistance at 5730.50, the Sep 3 high, remains exposed. This level has been pierced, a clear break of it would open 5785.00, the Jul 16 high and a bull trigger. First support is 5595.52, the 50-day EMA.
- Japan's NIKKEI closed higher by 775.16 pts or +2.13% at 37155.33 and the TOPIX ended 51.5 pts higher or +2.01% at 2616.87.
- Elsewhere, in China the SHANGHAI closed higher by 18.741 pts or +0.69% at 2736.022 and the HANG SENG ended 353.14 pts higher or +2% at 18013.16.
- Across Europe, Germany's DAX trades higher by 158.44 pts or +0.85% at 18870.33, FTSE 100 higher by 72.79 pts or +0.88% at 8326.47, CAC 40 up 106.71 pts or +1.43% at 7551.49 and Euro Stoxx 50 up 58.62 pts or +1.21% at 4894.07.
- Dow Jones mini up 386 pts or +0.93% at 41912, S&P 500 mini up 76.25 pts or +1.36% at 5697, NASDAQ mini up 345.5 pts or +1.79% at 19695.5.
Time: 09:50 BST
COMMODITIES: WTI Futures Holding Onto This Week's Gains, Remain Above 20-Day EMA
WTI futures are holding on to their latest gains. The move higher since Sep 9, appears - for now - to be a correction. Recent weakness reinforced a bearish condition and note that moving average studies are in a bear-mode set-up, highlighting a dominant downtrend. A resumption of the downtrend would open $64.61 next, a Fibonacci projection point. The 20-day EMA, at $70.09, has been pierced. A clear break of it would open $72.58, the 50-day EMA. A bullish structure in Gold remains intact and the metal traded, once again, to a fresh all-time high, yesterday. Last week’s gains confirmed a resumption of the primary uptrend and marked the end of the recent period of consolidation - a pause in the uptrend. Moving average studies are in a bull-mode set-up, highlighting a clear uptrend and positive market sentiment. The focus is on $2613.3 next. Firm support lies at $2542.3, the 20-day EMA.
- WTI Crude up $0.63 or +0.89% at $71.58
- Natural Gas up $0.03 or +1.09% at $2.31
- Gold spot up $25.18 or +0.98% at $2583.99
- Copper up $6.65 or +1.55% at $436.7
- Silver up $1.06 or +3.52% at $31.135
- Platinum up $17.12 or +1.76% at $990.17
Time: 09:50 BST
MNI (LONDON)
| Date | GMT/Local | Impact | Country | Event |
| 19/09/2024 | 1100/1200 | *** |  GB | Bank Of England Interest Rate |
| 19/09/2024 | 1100/0700 | *** |  TR | Turkey Benchmark Rate |
| 19/09/2024 | 1100/1200 | GB | BOE's Monetary Policy Summary and minutes | |
| 19/09/2024 | 1100/1200 | *** | GB | Bank Of England Interest Rate |
| 19/09/2024 | 1200/0800 |  CA | BOC Deputy Vincent speech. | |
| 19/09/2024 | 1230/0830 | *** |  US | Jobless Claims |
| 19/09/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 19/09/2024 | 1230/0830 | * | US | Current Account Balance |
| 19/09/2024 | 1230/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 19/09/2024 | 1400/1000 | *** | US | NAR existing home sales |
| 19/09/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
| 19/09/2024 | 1440/1640 |  EU | ECB's Schnabel chairs Jean Monnet Lecture at ECB Conference | |
| 19/09/2024 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 19/09/2024 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 19/09/2024 | 1700/1300 | ** | US | US Treasury Auction Result for TIPS 10 Year Note |
| 20/09/2024 | 2301/0001 | ** | GB | Gfk Monthly Consumer Confidence |
| 20/09/2024 | 2330/0830 | *** |  JP | CPI |
| 20/09/2024 | 0200/1100 | *** | JP | BOJ Policy Rate Announcement |
| 20/09/2024 | 0600/0700 | *** | GB | Retail Sales |
| 20/09/2024 | 0600/0700 | *** | GB | Public Sector Finances |
| 20/09/2024 | 0600/0800 | ** |  DE | PPI |
| 20/09/2024 | 0645/0845 | ** |  FR | Manufacturing Sentiment |
| 20/09/2024 | 0830/0930 | GB | BOE's Mann Speech at Central Bank Research Association | |
| 20/09/2024 | 1215/0815 | CA | BOC Governor Macklem speech at AI conference | |
| 20/09/2024 | 1230/0830 | * | CA | Industrial Product and Raw Material Price Index |
| 20/09/2024 | 1230/0830 | ** | CA | Retail Trade |
| 20/09/2024 | 1230/0830 | ** | CA | Retail Trade |
| 20/09/2024 | 1400/1600 | ** | EU | Consumer Confidence Indicator (p) |
| 20/09/2024 | 1500/1700 | EU | ECB's Lagarde Banking Lecture Organised by the IMF | |
| 20/09/2024 | 1530/1730 | EU | ECB's Lagarde converses with IMF Georgieva | |
| 20/09/2024 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 20/09/2024 | 1800/1400 | US | Philly Fed's Pat Harker |