MNI US OPEN - BOE's Mann Says Wage Growth Still a Concern
EXECUTIVE SUMMARY:
- U.S. OFFICIALS TO VISIT CHINA FOR ECONOMIC TALKS AS TRADE TENSIONS RISE
- BOE'S MANN SAYS UK WAGE GROWTH STILL A CONCERN FOR INFLATION
- CHINESE BROKERS CURB BOND TRADING AMID PBOC WARNINGS ON RALLY
- RBNZ HOLD LIKELY, BUT MPC TO CONSIDER CUTS
MNI (LONDON) - Figure 1: MSCI APAC index extends recovery following steep sell-off
Source: MNI/Bloomberg
NEWS
US (BBG): Harris Follows Swing-State Tour With Fundraiser in San Francisco
Vice President Kamala Harris tapped donors in her political home base of San Francisco after a swing-state tour introducing running mate Tim Walz, raising more than $12 million at an event attended by top California Democrats, her campaign said. Guests at the Sunday afternoon fundraiser included billionaire investor Tom Steyer, San Francisco Giants CEO Larry Baer and Hollywood mogul Jeffrey Katzenberg. Former House Speaker Nancy Pelosi and Governor Gavin Newsom also were among the attendees.
UK (FT): BOE's Mann Says UK Wage Growth Still a Concern for Inflation
The UK should not be “seduced” into thinking the battle against inflation is over after a short-term drop in the headline measure the Bank of England targets, a ratesetter at the central bank has warned. Catherine Mann, an external member of the BoE’s monetary policy committee, said she was still concerned about upside risks to inflation despite the main rate remaining at the bank’s 2 per cent target in June. Goods and services prices were set to rise again, Mann told the Financial Times’ Economics Show podcast, and wage pressures in the economy could take years to dissipate. Survey evidence suggested that companies were still expecting to make relatively big increases to both wages and prices, she said, and “that says to me right now I’m looking at a problem for next year”.
UKRAINE (BBG): Zaporizhzhia Nuclear Power Plant Is Safe, IAEA Says
The Russian-occupied Zaporizhzhia nuclear power plant in southern Ukraine reported normal radiation levels following a fire and explosions, according to the global nuclear watchdog. Thick dark smoke was seen over one of the plant’s cooling towers, the Vienna-based International Atomic Energy Agency said in a statement on its website on Monday. Ukraine and Russia traded blame for the incident. While there was no risk of elevated radiation levels in the area, any fire on the site posed a risk because it can spread to other parts and compromise safety, the IAEA said.
CHINA (BBG): Chinese Brokers Curb Bond Trading Amid PBOC Warnings on Rally
At least four Chinese brokerages have started fresh measures to cut back trading of domestic government bonds beginning last week, people familiar with the matter said. The brokers reduced the trading of sovereign debt with one of them even suspending transactions in some maturities, the people said, requesting not to be named discussing private matters. While most of the firms called it a voluntary move, one person said the change came following guidance from the authorities.
CHINA (BBG): Foreign Investors Pull Record Amount of Money From China
Foreign investors pulled a record amount of money from China last quarter, likely reflecting deep pessimism about the world’s second-largest economy. China’s direct investment liabilities in its balance of payments dropped almost $15 billion in the April-June period, marking only the second time this figure has turned negative, according to data from the State Administration of Foreign Exchange released Friday. It was down about $5 billion for the first six months.
CHINA (MNI): China Based German Firms Expect Slower Wage Growth
MNI (Beijing) German companies operating in China expect salary growth to reach 3.8% in 2025, down from 2024's previous 4.5% forecast, the German Chamber of Commerce said on Monday. “The slowdown in salary growth in 2025 indicates relatively low business confidence heading into the coming year,” said Moritz Berrenberg, chairperson at the chamber’s south China chapter. Effective salary growth has hit 3.9% this year, the lowest increase since data began in 2019.
RBA (BBG): RBA No. 2 Hauser Warns Against ‘Overconfidence’ in Forecasting
Australian central bank Deputy Governor Andrew Hauser warned against “overconfidence” in forecasting the economy and monetary policy, saying a more mature approach is to learn from errors and acknowledge how little is known about the future. “Such learning can be difficult for those who treat forecast ‘misses’ as failures,” the Reserve Bank No. 2 said in a speech on Monday titled Beware False Prophets. “A more mature approach – and one long adopted by the RBA and other central banks – seeks instead to recognise that where forecasts are carefully constructed to make the best use of current data, ‘misses’ contain vital information about an intrinsically complex and stochastic world.”
RBNZ (MNI): Hold Likely, But MPC to Consider Cuts
Copper extended its rebound from the lowest close in five months as fears over a possible global recession eased. The metal rose late last week following signs of resilience in the US labor market, paring a fifth week of losses driven by fears rippling through global markets over worsening economies including the world’s biggest. Sentiment improved further on Monday with markets shifting focus to key US data prints this week, including a consumer price index, for further insight into the economic health of the US.
COMMODITIES (BBG): Iron Ore Takes Fresh Hit as Concerns Over Global Glut Exact Toll
Iron ore slumped - following its fourth weekly loss in five - on concerns that a slowdown in steelmaking at Chinese mills, combined with record shipments from Australia and Brazil, would lead to a glut. Futures dropped below $99 a ton in Singapore after shedding almost 3% last week. Chinese steel demand has been hurt this year as economic growth has slowed and the property crisis drags on. That’s driven benchmark product prices to multiyear lows, hurting mills’ profitability.
FOREX: Risk-On Tone Weighs on JPY & CHF, Outperformance Seen for NZD
- A firmer tone for risk has translated into major equity benchmarks pushing higher on Monday, weighing on the likes of JPY and CHF, while the antipodeans are given a boost.
- Price action echoes that of the latter half of last week as risk stabilised, putting a lid on significant volatility and unwind of the most recent popular carry trades. Both USDJPY and USDCHF have risen roughly half a percent, and USDJPY stands out as having risen nearly 100 pips off the overnight session lows.
- Note that the bear trend remains in an extreme oversold condition, and the latest recovery - a correction - is allowing this condition to unwind. Initial firm resistance is seen at 151.10, the 20-day EMA.
- Elsewhere, AUD and NZD trade well and are approaching last week’s best levels against the dollar. For NZD, focus will fall on Wednesday’s RBNZ decision, expected to be a close call.
- Despite an overall bearish theme remaining intact for AUDUSD, a corrective cycle is in play and price is through the 20-day EMA, turning attention to the 50-day EMA, at 0.6615. A clear break of this average would undermine a bearish theme and signal scope for stronger gains.
- Crude markets have extended gains from last week, helping the Norwegian krone to rise around 0.25% as we approach the Norges bank later this week, where we expect the policy statement to acknowledge the improved inflation outlook, but fall short of any meaningful tilt in guidance.
- The focus for global markets remains squarely on US inflation data due Wednesday, with no notable speakers on the docket today.
EGBS: Tight Ranges, Awaiting Drivers
- EGBs have broadly pared what were only modest losses as the EuroStoxx 50 has reversed gains seen with the open for little changed on the day.
- The front end sees some mixed peripheral performance, with Greece particularly underperforming (2YY +3.7bps) but Italy (-0.4bp) and Portugal (+0.4bp) outperforming.
- The long end sees more uniform performance though, with 10Y yields all circa 1.5bps higher.
- Most spreads to Bunds are at the higher end of the ytd range but within post-French political driven highs from June, including the OAT-Bund spread currently at 74bps vs sustained highs of 75-76bps.
- RXU4 at 134.37 (-21) is within tight ranges and doesn’t trouble support at 133.77 (Aug 1 low) or resistance at 134.84 (Aug 7 high). Declines are deemed corrective.
- ESTR OIS is back to pricing in two full ECB cuts for the remainder of 2024, having last week gone as far as to price in three including an October cut. Last week's dovish re-pricing was risk-driven and did not reflect a material shift in fundamentals facing the ECB.
- It’s a quiet start to the week for data: Portugal final July CPI lands at 1100BST before Spain final CPI tomorrow, with greater Eurozone focus on Wednesday’s 2nd Q2 GDP release and monthly industrial production.
EQUITIES: Short-Term Gains for E-Mini S&P Still Considered Corrective
A bear threat in Eurostoxx 50 futures remains present and the latest climb appears to be a correction. The sell-off between Aug 1 - 5, reinforces the bearish condition. A key support at 4846.00, the Apr 19 low, has been cleared. This highlights a stronger reversal and opens 4478.81 next, a Fibonacci projection. Firm resistance is 4887.78, the 50-day EMA. First resistance is 4720.53, a Fibonacci retracement. S&P E-Minis traded lower on Aug 5 and this confirmed an extension of the bear cycle. The move down has resulted in a print below 5185.50, 76.4% of the Apr 19 - Jul 16 bear leg. A clear break of this level would open 5092.00 next, the May 2 low. Short-term gains are - for now - considered corrective and the 50-day EMA marks a firm resistance, at 5457.01. Clearance of this average is required to alter the picture and signal scope for stronger gains.
- In China the SHANGHAI closed lower by 3.989 pts or -0.14% at 2858.205 and the HANG SENG ended 21.42 pts higher or +0.13% at 17111.65.
- Across Europe, Germany's DAX trades higher by 55.9 pts or +0.32% at 17780.27, FTSE 100 higher by 41.86 pts or +0.51% at 8210.28, CAC 40 up 14.39 pts or +0.2% at 7284.52 and Euro Stoxx 50 up 13.91 pts or +0.3% at 4689.57.
- Dow Jones mini down 10 pts or -0.03% at 39633, S&P 500 mini up 7 pts or +0.13% at 5377.25, NASDAQ mini up 43.75 pts or +0.24% at 18657.75.
Time: 09:50 BST
COMMODITIES: Bear Threat in WTI Futures Remains Present Despite Latest Recovery
A bear threat in WTI futures remains present despite the latest recovery - a correction - that is allowing an oversold trend reading to unwind. A resumption of weakness would again expose the next key support at $72.23, the Jun 4 low. It has been pierced, a clear break would reinforce bearish conditions and pave the way for an extension towards $70.73, the Feb 5 low. Key near-term resistance to watch is seen at $78.88, the Aug 1 high. Recent weakness in Gold appears to be a corrective. Note that the yellow metal has managed to pierce support at the 50-day EMA - currently at $2379.7. A clear break of this average would signal scope for a deeper retracement towards $2277.4, the May 3 low and a key support. For bulls, a resumption of gains would open $2483.7, the Jul 17 high and a bull trigger. Clearance of this hurdle would resume the uptrend.
- WTI Crude up $0.6 or +0.78% at $77.4
- Natural Gas up $0.11 or +4.9% at $2.247
- Gold spot up $12.2 or +0.5% at $2442.19
- Copper up $5.1 or +1.28% at $404.15
- Silver up $0.42 or +1.54% at $27.868
- Platinum up $16.82 or +1.82% at $941.07
Time: 09:50 BST
Date | GMT/Local | Impact | Country | Event |
12/08/2024 | 1230/0830 | * | CA | Building Permits |
12/08/2024 | 1500/1100 | ** | US | NY Fed Survey of Consumer Expectations |
12/08/2024 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
12/08/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
12/08/2024 | 1600/1200 | *** | US | USDA Crop Estimates - WASDE |
12/08/2024 | 1800/1400 | ** | US | Treasury Budget |
13/08/2024 | 0130/1130 | *** | AU | Quarterly wage price index |
13/08/2024 | 0600/0700 | *** | GB | Labour Market Survey |
13/08/2024 | 0700/0900 | *** | ES | HICP (f) |
13/08/2024 | 0900/1100 | *** | DE | ZEW Current Conditions Index |
13/08/2024 | 0900/1100 | *** | DE | ZEW Current Expectations Index |
13/08/2024 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
13/08/2024 | 1000/0600 | ** | US | NFIB Small Business Optimism Index |
13/08/2024 | - | *** | CN | Money Supply |
13/08/2024 | - | *** | CN | New Loans |
13/08/2024 | - | *** | CN | Social Financing |
13/08/2024 | 1230/0830 | *** | US | PPI |
13/08/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
13/08/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
13/08/2024 | 1715/1315 | US | Atlanta Fed's Raphael Bostic |