EXECUTIVE SUMMARY
- BOJ DECIDES UNANIMOUSLY TO KEEP POLICY RATE AT 0.25%
- TRUMP DECRIES FED RATE CUT AS ‘POLITICAL MOVE’ THAT WON’T WORK
- ISRAEL WIDENS STRIKES AGAINST HEZBOLLAH IN ‘NEW PHASE’ OF WAR
- ECB’S DE GUINDOS SAYS "DOOR WIDE OPEN" FOR OCTOBER RATE CUT
Figure 1: Germany PPI Ex-Energy Inflation Accelerates for 5th Consecutive Month
NEWS
BOJ (MNI): BOJ Decides Unanimously to Keep Rate at 0.25%
Republican presidential candidate Donald Trump said the Federal Reserve’s decision to lower its benchmark interest rate by a half percentage point was a “political move” and that a smaller cut would have been preferable. “It really is a political move. Most people thought it was going to be half of that number, which probably would have been the right thing to do,” Trump said in an interview with Newsmax on Thursday. “So it’s a political move to try and keep somebody in office, but it’s not gonna work, because the inflation has been so bad.” The former president appeared to then level criticism at Fed Chairman Jerome Powell, saying he “missed the inflation.”
US (BBG): Biden Awards $3 Billion to Boost Domestic Battery Production
American Battery Technology Co. and lithium-producer Albemarle Corp., are among 25 companies getting more than $3 billion in funding from the Biden administration to boost domestic production of advanced batteries and components. The funding - part of a broader White House goal of creating an American battery supply chain - is going to projects that are building, expanding or retrofitting facilities to process critical minerals, build components and batteries and recycle materials, the Energy Department said Friday.
ISRAEL/MIDEAST (MNI): Israel Widens Strikes Against Hezbollah in ‘New Phase’ of War
Israel carried out extensive air strikes across southern Lebanon on Thursday, stepping up hostilities after it declared a “new phase” of war against militant group Hezbollah in the area. The Israel Defense Forces said it hit 100 sites where the Iran-backed militant group could launch attacks “in the immediate future.” Lebanon’s state media said 52 strikes were carried out on four areas. There were no immediate reports of casualties.
ECB (MNI): "Door Wide Open" for October ECB Rate Cut - Guindos
The European Central Bank has left "the door totally open" for a potential interest rate cut at its October meeting, ECB Vice President Luis de Guindos said in an interview with Expresso on Friday. However, he noted that while the ECB remains flexible, it will have more data and fresh projections by the time of the December meeting, but any decision will depend on how the economic data evolves. De Guindos attributed the Eurozone's sluggish growth to factors beyond monetary tightening, identifying consumption as the key factor in the region’s economic trajectory.
ECB (BBG): ECB’s Rehn Says Easing Pace and Scope Depend on Fresh Data
The European Central Bank has “a clearly easing direction for its monetary policy, with the pace and scope dependent on fresh economic data and analysis,” Governing Council Member Olli Rehn told Finnish newspaper Kauppalehti in an interview. The ECB has progressed well in reaching its inflation target, Rehn said. “In addition, we noted in our statement that there are downside risks to the economic outlook” and that “risks of an even weaker development are material,” he said, adding that “this was one of the reasons why we decided to cut rates in last week’s meeting.”
BOE (MNI): Mann Sounds Less Hawkish; Don't Rule Out Her Voting for a Nov Cut
Mann sounds a lot less hawkish in her speech today than she has in previously. Note that she was always in favour during the hiking cycle of a more aggressive and fast paced increase in Bank Rate, making the point that if needed these hikes could be quickly reversed. Now her view seems to be that we are close to cutting but she would prefer to hold rates higher a little longer to be sure before potentially embarking on a more aggressive cutting cycle. There is now uncertainty over her November vote. She may vote for a cut then no one would have expected that before this speech. It shouldn't change the outcome in November.
EU/UKRAINE (FT): Ursula von der Leyen in Kyiv to announce €35bn EU loan to Ukraine
European Commission president Ursula von der Leyen travelled to Kyiv on Friday to announce a €35bn EU loan for Ukraine as part of a G7 plan to raise $50bn on the back of future profits from frozen Russian state assets, three people with knowledge of the plan told the Financial Times. On her eighth visit to Ukraine, von der Leyen wrote on X upon arrival that she would meet leaders in Kyiv to discuss a range of issues from “winter preparedness to defence, to [EU] accession and progress on the G7 loans”. The loan announcement comes at a time of additional and urgent need of aid for Ukraine due to Russia’s repeated attacks on its energy infrastructure, and after months of negotiations with G7 partners about their share and structure of the loan.
FRANCE (BBG): French Premier Pitches New Cabinet to Exit Political Impasse
French Prime Minister Michel Barnier met with President Emmanuel Macron in Paris late on Thursday to propose a new government after two weeks of tense consultations with rival political groups. Barnier’s office said the talks with the president were “constructive” and that the final makeup of his team would be announced by Sunday. Getting the balance right will be crucial for the survival of the new administration, which could easily be ejected by a no-confidence vote in the divided National Assembly where no group has a majority following snap elections in July.
GERMANY (MNI): Econ Min Visits VW Plant as Gov't Plans Auto Summit
Economy Minister Robert Habeck says the gov't, "Wants to help VW get through this period without site closures [and] ensure that personnel policy measures remain within the normal collective bargaining framework". Habeck: "A large part of VW's problems must be solved by the company itself." Habeck is speaking on a long-planned visit to the VW plant in Emden, Lower Saxony. The comments come as Habeck convenes an auto summit in Berlin on Monday 23 Sep. Originally reported in Bild, the automobile association VDA, the IG Metall Union, car manufacturers and suppliers are set to attend.
CHINA (MNI): China’s Sept Loan Prime Rate Unchanged
MNI (Beijing) China's Loan Prime Rate remained unchanged on Friday according to a People's Bank of China statement, in line with market expectation and as the central bank held its key 7-day reverse repo rate stable. The Loan Prime Rate was held at 3.35% for the one-year maturity and 3.85% for the over five-year tenor. Both rates unexpectedly fell last month by 10 basis points after the central bank lowered the 7-day reverse repo rate by the same level.
CHINA (BBG): China Keeps 2024 Fuel Export Quota Level Similar to Last Year
China issued the third and what’s likely to be the final batch of fuel export quota for this year, keeping the level very similar to 2023 in a sign it doesn’t want to encourage refiners to boost activity. Seven refiners and traders received permission to export 8 million tons of gasoline, diesel and jet fuel in the tranche, according to industry consultant JLC and Mysteel OilChem. That takes the total issuance for the year to 41 million tons, compared with 40 million tons in 2023. The batch will likely be the last for the year, according to JLC.
CHINA (MNI): China's August Electricity Growth Up 8.9% Y/Y
MNI (Beijing) China’s electricity consumption grew 8.9% y/y in August to 964.9 billion kWh, the National Energy Administration announced on Friday. From January to August, electricity demand reached 6561.9 billion kWh, up 7.9% y/y, with primary industry consumption up 7.0%, secondary rising 6.3%, tertiary increasing 11.0%, and urban and rural residents up 10.9%. China's crude oil refinery processing and crude imports will increase in the second half by 3.2% and 4.5% respectively over H1 levels as consumption rises, but both are set to fall during 2024 amid a weak economy and the switch to electric vehicles, a leading Chinese oil expert recently told MNI.
COMMODITIES (BBG): Base Metals Enjoy Strong Week With Boost From Fed, China Demand
Copper surged to a two-month high to cap a strong week for metals, helped by the Federal Reserve’s half-point rate cut. Base metals have advanced with other global risk assets after Fed Chair Jerome Powell kicked off the bank’s easing cycle on Wednesday, while US jobless data reinforced expectations of a soft landing for the world’s biggest economy. In China, too, conditions in metals market are showing signs of improvement. Premiums on imported copper rose to the highest since the start of 2024 this week, and inventories have been coming down.
DATA
UK DATA (MNI): UK Consumer Unnerved by Tough Fiscal Talk - Gfk
- UK SEP GFK CONSUMER CONFIDENCE INDEX -20
UK consumer confidence fell sharply in September, a key survey showed on Friday, as government warnings of tough economic decisions weighed on the outlook. "With clear warnings from government of further difficult decisions ahead on tax, spending and welfare, consumers are nervously awaiting the Budget decisions in late October,” Neil Bellamy, Consumer Insights Director at GfK, told MNI in an interview.
UK DATA (MNI): Borrowing Higher Than Expected; CGNCR GBP16.8bn Higher YTD vs OBR Forecast
- UK AUG CGNCR GBP10.93 BN
- UK AUG PSNB GBP+13.73 BN
- UK AUG PSNB-X GBP+13.73 BN
- UK AUG PSNCR GBP4.88 BN
On the public finances, that's another month where both CGNCR and PSNBex were higher than OBR forecasts. CGNCR ex is now running at GBP98.1bln YTD (OBR GBP81.3bln). This is the metric that is most important for the gilt remit and is running GBP16.8bln higher through the first 5 months of the fiscal year than forecast. We haven't got confirmation from the OBR, but we assume these numbers will form the baseline forecasts used for the Budget (next month's release will likely be beyond the data cutoff). PRNBex at GBP64.1bln YTD (OBR GBP57.8bln) is also higher-than-expected but to a much smaller extent.
UK DATA (MNI): Retail Sales Better Than Expected; But Should Have Little Impact on MPC
- UK AUG RETAIL SALES +1% M/M, +2.5% Y/Y
- UK AUG RETAIL SALES EX-FUEL +1.1% M/M, +2.3% Y/Y
Retail sales better than exp with some supermarkets and retailers reporting a boost because of warmer weather and end-of-season sales. This is a decent print but shouldn't really change the opinion of any MPC member (particularly due to the volatility of this release).
GERMANY DATA (MNI): PPI Ex-Energy Inflation Accelerates for 5th Consecutive Month
- GERMANY AUG PRODUCER PRICES -0.8% Y/Y
- GERMANY AUG PRODUCER PRICES +0.2% M/M
German August PPI was a little higher than consensus at 0.2% M/M (vs 0.0% cons, 0.2% prior) and -0.8% Y/Y (vs -1.0% cons, -0.8% prior). Producer prices excluding energy, which should provide a better read-through to core goods HICP, rose 1.2% Y/Y from 0.9% in July. This was the fifth consecutive acceleration in annual PPI ex-energy inflation. While this may suggest a stalling in core goods HICP disinflation in the coming months, weak manufacturing sector demand may keep consumer price inflation under pressure.
FRANCE SEP MANUF SENTIMENT AT 99 (MNI)
JAPAN DATA (MNI): Japan Aug Core CPI Rises 2.8% vs. July's 2.7%
- JAPAN AUG CORE CPI +2.8% Y/Y; JULY +2.7%
- JAPAN AUG CORE-CORE CPI +2.0% Y/Y; JULY +1.9%
- JAPAN AUG SERVICES PRICES +1.4% Y/Y; JULY +1.4%
The year-on-year rise of Japan's annual core consumer inflation rate accelerated to 2.8% in August from July’s 2.7% due to higher household durable goods and food excluding perishables, data released by the Ministry of Internal Affairs and Communications showed on Friday. August’s index stayed above the Bank of Japan’s 2% target for the 29th consecutive month. Household durable goods rose 7.7% from July's 5.2%, while food excluding perishables increased 2.9% vs. 2.6%.
RATINGS: Busy Ratings Schedule, Focus on France, Ireland & Portugal
Potential sovereign credit rating reviews scheduled for after hours include:
- Fitch on Croatia (current rating: BBB+; Outlook Positive), Portugal (current rating: A-; Outlook Stable) & the United Kingdom (current rating: AA-; Outlook Stable)
- Moody’s on Poland (current rating; A2; Outlook Stable)
- S&P on Germany (current rating: AAA; Outlook Stable)
- Morningstar DBRS on Cyprus (current rating: BBB (high), Stable Trend), Finland (current rating: AA (high), Stable Trend), France (current rating: AA (high), Stable Trend), Ireland (current rating: AA (low), Positive Trend) & Norway (current rating: AAA, Stable Trend)
- Scope Ratings on Latvia (current rating: A-: Outlook Stable) & Lithuania (current rating: A; Outlook Stable)
FOREX: USDJPY Rallies 200 Pips on Ueda Comments, GBPUSD Fresh Cycle High
- USDJPY is extending its impressive bounce on Friday as Bank of Japan Governor Ueda acknowledged that “the upside risk to prices does appear to be easing given the recent yen strength”.
- Ueda added that time remains to confirm certain points when making policy decisions, indicating that the BOJ will assess the incoming data and economic conditions overseas in the coming months, especially in the US.
- USDJPY bounced significantly on the comments from 141.74 lows and continues to press fresh session highs above 143.80 at typing. It is worth noting this is within close proximity of the post-FOMC high, located at 143.95. Price action sees us back above the 20-day EMA, an average that was pierced on Thursday and a close above this point will be a bullish development. Above here, markets would focus on a move back towards 145.57, the September 04 high.
- This has tilted the USD index into positive territory, although price action for other major pairs has been relatively contained.
- GBPUSD rose to a fresh cycle high of 1.3340 following stronger-than-expected retail sales data in the UK. The move higher this week has resulted in a print above key resistance at 1.3266, the Aug 27 high. The break confirms a resumption of the medium-term uptrend. Note too that moving average studies are in a bull-mode position, reflecting a clear uptrend. Sights are on 1.3362 next, a Fibonacci retracement point.
- Bank of Canada’s Macklem is due to speak before Canada retail sales data. There may also be comments from ECB’s Lagarde and Fed’s Harker to round off the week.
EGBS: Bund Futures Just Above the 20-EMA
Bund futures trade just above prior support at the 20-day EMA, currently +9 today at 134.41. Wednesday’s high at 134.86 provides the first resistance, shielding the Sep 11 high at 135.49 and the bull trigger at 135.66.
- BoJ Governor Ueda’s cautious comments (with respect to the bank’s hiking cycle) likely helped Bunds away from intraday lows this morning, while less hawkish than usual remarks from BoE’s Mann had little impact.
- Meanwhile, ECB’s de Guindos and Rehn aligned with the status quo of a “data-dependent and meeting-by-meeting” approach.
- The German cash curve has bull flattened, with 2s10s -0.6bps today at -3.3bps.
- The pullback in equities prompted 10-year peripheral spreads to move away from opening tights, with the BTP/Bund spread now 0.5bps wider at 136bps.
- Several ratings announcements are due after market, while any updates around French PM Barnier’s cabinet formation will also be of interest. The 10-year OAT/Bund spread has drifted to ~74bps this week, its widest since mid-August.
GILTS: Equity Pullback & Mann Softening Hawkish Tone Provide Support
A pullback in equities has supported core global FI, gilt futures briefly topped 100.00.
- Our macro team believe that the latest comments from BoE MPC member Mann were a lot less hawkish, providing further support.
- We can’t rule out Mann voting for a cut in November.
- While that wouldn’t change the outcome of the meeting (markets fully discount a 25bp cut) it could change the tone of BoE discussions further out, given that Mann was previously viewed as the most hawkish MPC member.
- The technical bull cycle remains in play for futures.
- Initial support seen at yesterday’s low (99.55), which protects the September 9 low (99.29). Initial resistance at the Sep 18 high (101.06).
- Yields ~2bp lower across the curve.
- STIRs saw some modest dovish adjustments in the wake of Mann’s comments.
- BoE-dated OIS show 26bp of cuts through the Nov MPC, ~40.5bp of easing through year-end and 125bp of cuts through June ’25.
- SONIA futures last -0.5 to +3.0.
- Elsewhere, retail sales data was firmer than expected but shouldn’t change the path of BoE policy.
- Public finance data for August revealed another round of higher-than-expected government borrowing, with risks already tilted to a move higher in the gilt issuance remit.
- Little of note on the UK calendar for the rest of the day.
EQUITIES: E-Mini S&P Bull Cycle Extends, Recent Gains Reinforce Bullish Set-Up
Eurostoxx 50 futures have traded higher this week as the contract extends the recovery since Sep 10. It is still possible that recent gains are corrective. MA studies remain in a bear-mode position and this highlights a downtrend. A reversal lower would refocus attention on key short-term support at 4729.00, Sep 10 low. Key resistance to watch is 4998.00, Sep 3 high. A break would cancel a bearish theme and strengthen bullish conditions. A bull cycle in S&P E-Minis remains in play and Thursday’s gains reinforce the current bullish condition. The contract has traded through a key and major resistance at 5785.00, the Jul 16 high and a bull trigger. A clear break of this hurdle would confirm a resumption of the long-term uptrend. Sights are on the 5800.00 handle next. First key support is 5602.68, the 50-day EMA. Initial support lies at 5638.14, the 20-day EMA.
- Japan's NIKKEI closed higher by 568.58 pts or +1.53% at 37723.91 and the TOPIX ended 25.48 pts higher or +0.97% at 2642.35.
- Elsewhere, in China the SHANGHAI closed higher by 0.792 pts or +0.03% at 2736.814 and the HANG SENG ended 245.41 pts higher or +1.36% at 18258.57.
- Across Europe, Germany's DAX trades lower by 186.78 pts or -0.98% at 18814.87, FTSE 100 lower by 43.5 pts or -0.52% at 8285.26, CAC 40 down 70.71 pts or -0.93% at 7544.27 and Euro Stoxx 50 down 47.82 pts or -0.97% at 4895.22.
- Dow Jones mini down 19 pts or -0.05% at 42038, S&P 500 mini down 11.75 pts or -0.21% at 5706.25, NASDAQ mini down 60.75 pts or -0.31% at 19789.5.
Time: 09:50 BST
COMMODITIES: WTI Futures Target Resistance at $72.52, the 50-Day EMA
WTI futures have traded higher this week. The recovery 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 $63.89 next, a Fibonacci projection point. The 20-day EMA, at $70.20, has been pierced. The next key resistance is $72.52, the 50-day EMA. A bullish structure in Gold remains intact and the metal traded, once again, to a fresh all-time high, on Wednesday. Last week’s gains confirmed a resumption of the primary uptrend and an extension of the bullish price sequence of higher highs and higher lows. 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 $2530.2, the 20-day EMA.
- WTI Crude down $0.25 or -0.35% at $71.7
- Natural Gas down $0 or -0.13% at $2.344
- Gold spot up $24.34 or +0.94% at $2611.42
- Copper up $1.1 or +0.25% at $435.75
- Silver up $0.49 or +1.61% at $31.2863
- Platinum up $1.49 or +0.15% at $989.5
Time: 09:50 BST
MNI (LONDON)
| Date | GMT/Local | Impact | Country | Event |
| 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 |