MNI US OPEN - BRICS Invite Six Nations to Become Members

NEWS

MNI JACKSON HOLE PREVIEW: Powell to Emphasize the Job Isn’t Done

Chair Powell’s task in his Jackson Hole keynote speech is to reaffirm the recent turn to a meeting-by-meeting, data-dependent approach to policy while emphasizing that the Fed intends to keep rates in restrictive territory for a lengthy period of time. In this regard it is likely to sound like a bookend to his brief 2022 speech in which he invoked the lessons of the 1970s and 80s to say “we must keep at it until the job is done”, with Powell laying out the “higher for longer” rate landscape for the year ahead. Most analysts expect Powell to deliver a hawkish-on-balance message, and combined with the recent jump in market rates, the bar is set reasonably high for a hawkish reaction.

POLITICAL RISK (MNI): BRICS Invite Six Nations to Become Members, Inc. Saudi & Iran

All BRICS leaders gathered for a special press conference in Johannesburg. South African President Cyril Ramaphosa speaking confirms that the five national leaders have agreed to invite six nations to join the bloc, namely: Argentina, Egypt, Iran, Ethiopia, Saudi Arabia, and the United Arab Emirates. Ramaphosa states that the BRICS membership of the new countries will become effective 1 Jan 2024.

RUSSIA (BBG): Yevgeny Prigozhin, Who Led Wagner Mutiny, is Presumed Dead

Yevgeny Prigozhin, the man who led a mutiny that posed the biggest threat to President Vladimir Putin’s almost quarter-century rule, is presumed dead. Russia’s aviation authority said he was in a deadly plane crash on Wednesday that killed all 10 aboard a flight from Moscow to St. Petersburg. The crash took place exactly two months after Prigozhin’s rebellion, one that Putin denounced as “treason” only to quickly accept a deal that saw the mercenary boss agree to retreat to neighboring Belarus. Many Kremlin observers questioned the truce would ever last long given Putin’s track record.

US (The Telegraph): Donald Trump Insists Ron Desantis ‘A Lost Cause’ in Tucker Carlson Interview

Donald Trump used his 46-minute interview with Tucker Carlson to rail against the “pathetic” 2024 candidates as well as piling into Joe Biden and Fani Willis, the district attorney who brought the indictment against him in Georgia. The “elephant not in the room” at the Republican debate instead lambasted his GOP and Democrat rivals in pre-recorded footage filmed from the comfort of his wood-paneled Bedminster estate. The sit-down chat was posted online five minutes before the debate began, with Mr Carlson and Mr Trump joining forces to dent Fox News’ ratings.

US (BBG): Republicans Target Biden in Trump-Free Debate to Open 2024 Race

Republican candidates battled each other over the economy in their first debate of the 2024 race, waging attacks on President Joe Biden’s policies while seeking to gain ground on the absent GOP frontrunner Donald Trump. Each of the eight contenders on stage in Milwaukee on Wednesday sought to break from the crowded field and present themselves as someone who could beat Biden in a general election, with many praising Trump but saying he couldn’t retake the White House.

ITALY (BBG): Italy Readies New Rules for Bad Loans in Fresh Blow to Investors

Italy’s government is pushing to approve a borrower-friendly measure on bad loans by the end of the year as part of Prime Minister Giorgia Meloni’s drive to help troubled families and firms amid rising interest rates. Meloni’s administration is seeking to finalize a new framework that would allow individuals and small corporate borrowers to repay debts that went sour in previous years for a fraction of their nominal value, according to people familiar with the matter, who asked not to be named before the plan is approved.

CHINA/JAPAN (BBG): China Suspends Seafood Imports from Japan on Water Release

China will stop all seafood imports from Japan, escalating tensions between the two nations as Japan begins a contentious release of treated wastewater from the wrecked Fukushima nuclear power plant. The move to “comprehensively” pause purchases of aquatic products from Japan goes into effect Thursday, the Chinese customs office said in a statement, effectively making good on warnings this week to take “necessary steps” to safeguard food safety and the marine environment.

CHINA (MNI): PBOC Faces Tough Task to Defend Yuan, Advisors Say

MNI (Beijing) The People’s Bank of China faces a tough job to defend the yuan at 7.30 to the dollar as the Chinese economy remains sluggish and the Federal Reserve keeps monetary policy tight, policy advisors and FX traders told MNI, though they added that despite possible further short-term weakness the currency could still strengthen towards the end of the year.

CHINA (Yicai): BRICS Should Oppose Decoupling - President Xi

BRICS nations should oppose decoupling and economic coercion as the group works towards deeper economic, trade and financial cooperation, according to President Xi Jingping. Speaking at the BRICS summit in South Africa, Xi said the group should promote deeper economic exchanges as the global economy's recovery was not stable and may grow less than 3% this year. The world faced increased uncertainty and instability, and BRICS will focus cooperation on the digital economy, green development, artificial intelligence and vocational training.

AUSTRALIA (BBG): LNG Strike Threat Eases as Woodside Unions Endorse Offer

Liquefied natural gas unions in Australia endorsed an in-principle offer from Woodside Energy Group Ltd., easing a strike threat in one of three disputes underway in the key exporting nation. Details of the offer, the culmination of a 15-hour meeting on Wednesday, will be presented to workers at Woodside’s North West Shelf LNG operations later on Thursday, the Offshore Alliance — a group that represents two major unions — said on Facebook. Meanwhile, the unions committed to hold off on giving notice for strikes as they iron out the final details.

BOK (MNI): Weak Economy Keeps Stance Restrictive

The Bank of Korea decided unanimously to keep its policy interest rate unchanged at 3.50% for a fifth consecutive meeting on Thursday, and though Governor Rhee Chang-yong said containing inflation remained the priority he did not rule out a rate cut in the coming months to support the weaker economy. High forecasted inflation, elevated household debt and uncertainty regarding overseas monetary policy drove the widely-expected decision, according to Rhee in a statement.

INDONESIA (BBG): Bank Indonesia Holds Key Rate as Hawkish Fed Bets Sink Rupiah

Indonesia’s central bank stood pat for a seventh straight meeting to help the rupiah weather an emerging-market selloff triggered by the prospect of further tightening by the Federal Reserve. Bank Indonesia kept the seven-day reverse repurchase rate at a four-year high of 5.75% on Thursday, as predicted by 28 of 30 economists surveyed by Bloomberg. Two had expected a quarter-point increase to take the benchmark to 6%, returning to the level last seen in 2019.

MNI CBRT PREVIEW: AUGUST 2023 - Continued Tightening Amid Inflation Resurge

Further tightening from the CBRT is likely this week, with the benchmark one-week repo rate expected to be raised by a further 250bps to 20.00%. The trade-off for the bank remains tightening via the one-week repo rate or, as suggested by local press, tweaking the rules and regulations around FX tools and KKM accounts to manage financial conditions. As such, markets may point to recent macroprudential adjustments as a substitute to the larger rate hike that the economic backdrop requires– an approach mimicked in the July rate decision.

CORPORATE (BBG): Nvidia Soars as Insatiable AI Demand Fuels Blowout Forecast

Nvidia Corp., the chipmaker at the heart of an industrywide race toward artificial intelligence computing, delivered a third-straight sales forecast that surpassed Wall Street estimates, fueled by surging demand for its AI processors. The shares soared more than 6% in extended trading after Nvidia said sales will be about $16 billion in the three months ending in October. Analysts had estimated just $12.5 billion, according to data compiled by Bloomberg. Nvidia’s results last quarter also blew past projections, and it approved an additional $25 billion in stock buybacks.

COMMODITIES (BBG): European Gas Prices Slump as Risk of Australian Strike Recedes

European natural gas prices tumbled on signs that a labor dispute at Australia’s biggest liquefied natural gas export plant will be resolved, easing fears about one of three possible strikes in the key exporting nation. Benchmark futures collapsed as much as 21%, the most since March 2022, on Thursday. Gas prices have been extremely volatile this month as traders await the outcome of threats of industrial action that could impact a tenth of global LNG supplies, at one point surging as much as 40% in response to the risks.

DATA

FRANCE AUG MANUF SENTIMENT AT 96.0 (MNI)

AUSTRALIA DATA (MNI): New CBA Spending Data Point to Soft July Retail Sales

July retail sales print on Monday August 28. They fell 0.8% m/m in June to be up 2.3% y/y. Since that release CBA has published its revamped household spending series, the Household Spending Insights (HSI), which includes seasonal adjustment and covers around 30% of Australia's card transactions. This new data is closely correlated with the ABS' retail sales. The annual rates have a 90% correlation and the monthly ones 92%. In July the HSI was flat on the month to be up 1.3% y/y. A flat reading for July retail sales would result in annual growth easing further to 1.6%.

FOREX: Scandi Currencies Remain Within Range of Multi-Month Lows

• Most major pairs are respecting their recent ranges through the Thursday European morning, with EUR/USD, GBP/USD and USD/JPY all well within the Wednesday range.
• US equity futures are diverging, with the NASDAQ-100 future outperforming notably on the back of the better-than-expected Nvidia earnings release. Their shares trade with gains of over 8% in pre-market trade, signaling a solid open for tech-oriented and high beta names at the Thursday opening bell.
• With risk appetite and the trajectory of equities so key for currency market sentiment this week, markets will be watching stocks closely ahead of the speech from Fed's Powell tomorrow.
• Scandi currencies sit weaker against all others in G10, keeping USD/SEK within range of yesterday's multi-month high posted at 11.0341. Similarly, USD/NOK remains within the multi-week uptrend off the July lows, with 10.7324 marking first resistance ahead of 10.7738.
• Looking ahead, US weekly jobless claims and the prelim July durable goods data are the calendar highlights on top of speeches from Fed's Harker and Collins. The full Jackson Hole summit agenda is set to be released after the US market close, at 2000ET.

BONDS: Curves Lean Flatter, with Jobless Claims and Jackson Hole Ahead

Global core FI curves tilt flatter in early European trade Thursday, with Gilts outperforming. Treasury yields are fairly flat across the curve (+/-1bp), with very slight twist flattening on short-end underperformance; the UK and German curves have bull flattened.

• Despite a relatively bullish tone in equities, driven by Nvidia's strong results after the close, safe havens remain bid as the impact of Wednesday's downside PMI surprises linger. That said, futures have retraced best levels.
• Periphery EGB spreads are slightly wider, with BTPs modestly weighed down by a BBG report that Italy's gov't is eyeing a borrower-friendly measure on bad loans.
• Philly Fed's Harker and Boston Fed's Collins make TV appearances today as we await the release of the full Jackson Hole schedule - Powell's speech Friday remains the focus.
• Soft French confidence surveys out this morning had little impact. Data yet to come in the session includes UK CBI Distributive Trades, with US jobless claims, durable goods, and KC Fed manufacturing.
• The highlight of the supply calendar is $8B US 30Y TIPS reopening.

Latest levels:

• Sep US 10Y futures (TY) down 0.5/32 at 109-28.5 (L: 109-24 / H: 109-31.5)
• Sep Bund futures (RX) up 35 ticks at 132.91 (L: 132.69 / H: 133.36)
• Sep Gilt futures (G) up 72 ticks at 94.74 (L: 94.51 / H: 94.95)
• Italy / German 10-Yr spread 0.2bps wider at 165.4bps

EQUITIES: Recent Recovery in E-Mini S&P Results in Break of 20- and 50-Day EMAs

A bearish theme in Eurostoxx 50 futures remains present, however, for now a corrective cycle remains in play and the contract is trading higher. Resistance to watch is 4338.70, the 50-day EMA. A break of this average would highlight a stronger bullish theme and signal scope for a climb, potentially towards 4420.00, the Aug 10 high. Key support and the bear trigger has been defined at 4187.00, the Aug 8 low. The latest recovery in the E-mini S&P contract has resulted in a break of both the 20- and 50-day EMA values. This signals potential for a stronger short-term recovery. Attention is on resistance at 4493.98, the base of a bull channel that was breached last week. The channel is drawn from the Mar 13 low. Clearance of this level would open 4517.75, the Aug 15 high. Support to watch lies at 4399.50, yesterday’s low. A break would be bearish.

• Japan's NIKKEI closed higher by 276.95 pts or +0.87% at 32287.21 and the TOPIX ended 9.54 pts higher or +0.42% at 2286.59.
• Elsewhere, in China the SHANGHAI closed higher by 3.842 pts or +0.12% at 3082.244 and the HANG SENG ended 366.25 pts higher or +2.05% at 18212.17.
• Across Europe, Germany's DAX trades higher by 104.7 pts or +0.67% at 15833.03, FTSE 100 higher by 33.61 pts or +0.46% at 7354.23, CAC 40 up 57.25 pts or +0.79% at 7303.63 and Euro Stoxx 50 up 34.94 pts or +0.82% at 4301.51.
• Dow Jones mini up 10 pts or +0.03% at 34531, S&P 500 mini up 28.5 pts or +0.64% at 4475.25, NASDAQ mini up 189.5 pts or +1.25% at 15384.5.

COMMODITIES: WTI Futures Breach Support at $78.33, the Aug 3 Low

The uptrend in WTI futures remains intact, however, a corrective cycle is in play for now. Yesterday’s move lower resulted in a print below support at $78.33, the Aug 3 low. A clear break of this support would highlight a stronger bear cycle and pave the way for a deeper retracement. Note that a key support lies at the 50-day EMA, which intersects at $77.42. Initial resistance to watch is $81.75, a break would be a bullish development. The outlook in Gold remains bearish, however, a short-term correction has resulted in a recovery this week. The yellow metal is through resistance at the 20-day EMA and attention turns to the 50-day EMA, at $1932.0. A clear break of this average would strengthen the current bull cycle. For bears, moving average studies continue to highlight a dominant downtrend. Key support and the bear trigger has been defined at $1884.9, the Aug 21 low.

• WTI Crude down $0 or 0% at $78.87
• Natural Gas down $0.03 or -1.04% at $2.471
• Gold spot up $5.87 or +0.31% at $1921.19
• Copper down $2.8 or -0.73% at $380.9
• Silver down $0.13 or -0.55% at $24.174
• Platinum down $1.54 or -0.17% at $931.59