EXECUTIVE SUMMARY
- TENSIONS ON EDGE FOLLOWING KILLING OF HEZBOLLAH LEADER
- CHINESE STOCKS ENTER BULL MARKET AFTER BIGGEST SURGE SINCE 2008
- JAPAN'S ISHIBA FAVORS LOOSE MONETARY POLICY
- MNI PROJECTS GERMAN NATIONAL CPI AT 1.6-1.7% Y/Y
Figure 1: CSI 300 jumps over 8.5% ahead of week-long national holiday
Source: MNI/Bloomberg
NEWS
MIDEAST (MNI): Region on Edge Following Killing of Hezbollah Leader
Wires carrying comments from a spox for the Iranian foreign ministry. Says that Iran will not leave any of "the criminal acts" of Israel unanswered, referring to the killing of Hezbollah leader Hassan Nasrallah in an airstrike on Beirut late last week. The Middle East has been in a state of heightened tensions since the 27 September airstrikes that took out Nasrallah, who had led the Iranian-backed group since his predecessor Abbas al-Musawi was killed in an Israeli airstrike in 1992. The Israeli airstrikes have continued over the weekend, striking the centre of Beirut for the first time since 2006 in a strike believed to have killed three senior figures from the Popular Front for the Liberation of Palestine (PFLP).
US (BBG): Vance, Walz Set to Spar in Final Debate of Tight Election Race
JD Vance and Tim Walz will gather for a vice presidential debate looking to frame the choice between Republican presidential nominee Donald Trump and Democratic rival Kamala Harris, five weeks before Election Day. The two vice presidential hopefuls have taken swings at each other - Vance attacking Walz’s claims about his military service, Walz mocking Vance’s dismissal of powerful Democrats as “childless cat ladies” - and Tuesday’s undercard matchup is expected to be similarly bruising. It’s also likely to be their last high-profile chance to face off.
US (BBG): Kamala Harris Raises $55 Million in California Fundraisers
Kamala Harris raised about $55 million in high-dollar events in California this weekend, according to an official familiar with the matter, a haul that pads her financial advantage over Republican rival Donald Trump. The fundraiser Sunday at the JW Marriott in downtown Los Angeles took in about $28 million, and another one Saturday at San Francisco’s Palace of Fine Arts raised about $27 million, according to the official, who requested anonymity to discuss a private matter.
AUSTRIA (MNI): Far-Right Secures Top Spot, Focus Turns to Coalition Talks
For the first time, the far-right Freedom Party of Austria (FPÖ) has come in first in a federal election and could lead the next governing coalition. According to preliminary results, the FPÖ secured 58 out of 183 seats with 29.2% of the vote, an increase of 27 seats from the 2019 election. The conservative Austrian People's Party (ÖVP) of Chancellor Karl Nehammer fell to second place with 52 seats on 26.5% of the vote, representing a loss of 19 seats. Austria's electoral system makes single-party majority gov'ts all but impossible, requiring coalition negotiations after each election. It is Nehammer's party that sits as kingmakers.
GERMANY (BBG): Germany Is Giving Up Hope of Achieving Any Growth in 2024
Germany’s government is poised to cut its prediction for Europe’s biggest economy and now expects no expansion at all this year, according to people familiar with the matter. Officials in Berlin are set to cut their forecast for growth in 2024 to - at best - stagnation, down from 0.3% previously projected, said the people, who declined to be identified because the predictions remain confidential for now. Such an outcome would mean yet another lost year for an economy that has been weighed down by the weakness of its industrial sector
GERMANY (MNI): Fewer German Companies Looking at Price Hikes - Ifo
Fewer German companies are looking to raise their prices, the Ifo Institute said Monday, with the latest price expectations index dropping to 13.8 in September, down from 16.1 points in August. This month's reading is the lowest since February 2021. “Overall, the inflation rate in Germany in the coming months is likely to remain below the two percent mark targeted by the European Central Bank, as the economic crisis is reducing the scope for companies to raise their prices,” Timo Wollmershäuser, Head of Forecasts at ifo said. Price expectations in the consumer-related sectors of the economy, in particular, play a role in the short-term development of consumer prices. They fell noticeably to 18.2 points, down from 25.0 points in August.
CHINA/EUROPE (BBG): Chinese Carmakers Sell Fewest EVs in Europe in 18 Months
Chinese manufacturers sold the fewest electric cars in 18 months to customers across Europe, with registrations falling by nearly half in August from a year earlier. The 48% drop led to the second straight month of declining share for Chinese brands, based on figures provided by researcher Dataforce. MG, the British nameplate that’s now part of SAIC Motor Corp., lost its top spot across Europe to Chinese rival BYD Co., according to Jato Dynamics, which also tracks the automotive market.
CHINA (BBG): Chinese Stocks Enter Bull Market After Biggest Surge Since 2008
Chinese stocks extended one of their most remarkable turnarounds in history, soaring for a ninth straight day as government stimulus entices investors back to one of the most beaten-down markets worldwide. The CSI 300 Index jumped 8.5% Monday, marking the most since 2008 as traders rushed to buy shares in the last session before a week-long holiday. The index, which lost more than 45% of its value from a 2021 high through mid-September, has since soared more than 20% to enter a technical bull market. Its rally last week was the biggest in 16 years.
CHINA (MNI): China Needs Fiscal Stimulus
MNI (Beijing) Authorities need to expand fiscal policy to boost infrastructure investment and consumption to ensure the 5% annual growth target is met, following the central bank's recent easing, policy advisors at the Tsinghua PBCSF Chief Economists Forum said on Saturday. Boosting infrastructure spending in projects including urban sewers and cables was needed to restart the economy in the short-term, given consumption was weighed down by weak income growth and falling asset prices, said Yu Yongding, a former PBOC advisor.
JAPAN (MNI): Japan's Ishiba Favors Loose Monetary Policy
Japan's incoming prime minister,Shigeru Ishiba, said on Sunday monetary policy must remain accommodative as a trend, signalling the need to keep borrowing costs low to underpin a fragile economic recovery, local media reported. It was not immediately clear whether Ishiba, historically a vocal critic of the Bank of Japan’s past aggressive monetary easing, was taking a more dovish line with his remarks. Ishiba, who was elected president of the ruling LDP on Friday and is set to become prime minister Tuesday in an extraordinary session of the parliament, is set to appoint former Chief Cabinet Secretary Katsunobu Kato the finance minister. He is believed to be looking to dissolve the lower house and call a snap election for Oct. 27.
GLOBAL (BBG): Extreme Weather Around the World Risks Boosting Food Bills
Droughts, downpours and fires from Asia to the Americas are stoking worries about crop harvests, pushing up prices for food staples that could eventually flow through to higher grocery bills. The Bloomberg Agriculture Spot Index - which includes nine major products - is on track for a monthly gain of about 7%, the most since Russia’s invasion of Ukraine sent markets soaring in early 2022. While it remains far from that year’s peak, the rally comes as farms from Brazil to Vietnam and Australia battle both flooding and overly dry weather, threatening sugar, grain and coffee.
COMMODITIES (BBG): Iron Ore Spikes After Top Chinese Cities Ease Home-Buying Curbs
Iron ore spiked almost 11% and base metals rose after three of China’s biggest cities eased curbs on home-buying, bolstering the outlook for demand in Asia’s largest economy as the central government adds stimulus. Shanghai, Guangzhou and Shenzhen loosened rules, following through on Beijing’s latest efforts to prop up the embattled property sector. Futures surged in Singapore to hit the highest since July, while copper and zinc rose on the London Metal Exchange as traders gathered for a major industry meeting.
DATA
GERMANY DATA (MNI): MNI Projects 1.6-1.7% Y/Y German National CPI, Core 2.7-2.8%
- BADEN-WUERTTEMBERG SEP CPI, +0.1% M/M, +1.4% Y/Y (BBG)
- BAVARIA SEP CPI +0.1% M/M, +1.9% Y/Y (BBG)
- BRANDENBURG SEP CPI +0% M/M, +1.4% Y/Y (BBG)
- HESSE SEP CPI +0% M/M, +1.2% Y/Y (BBG)
- NRW SEP CPI +0% M/M, +1.5% Y/Y (BBG)
- SAXONY SEP CPI +0.2% M/M, +2.4% Y/Y (BBG)
From state-level data that equates to 89.1% weighting of the national September flash German CPI print (due at 13:00 BST / 14:00 CET), MNI estimates that national CPI (non-HICP print) rose by around 0.0-0.1% M/M (August -0.1%) and rose 1.6-1.7% Y/Y (August 1.9%). See the tables below for full calculations. Analyst consensus stands at 1.7% Y/Y and 0.1 M/M, so there might be some marginal downside risks to headline inflation, but likely smaller in magnitude than the surprises seen to French and Spanish inflation last week. Current tracking of Core CPI, (ex-energy and food, based on 50% of the national index) implies around 2.7-2.8% (2.8% in August) and 0.0% M/M (0.1% August).
GERMANY DATA (MNI): German IFO Price Expectations Fall Notably in September
Consumer-related IFO price expectations for Germany fell significantly in September, to 18.2 points vs 25.0 points in August. "Both retailers and consumer-related service providers contributed to that", IFO adds. That is a positive note from a disinflationary standpoint, in particular on services CPI, which overall saw no progress since October 2023 in Germany (standing at 3.9% Y/Y in August). A deceleration here will be viewed favourably from the perspective of expected policy easing from the ECB on the
margin. "The only increase was in manufacturing, rising slightly to 6.1 points, up from 5.1 in August."
GERMANY AUG EXPORT PRICE INDEX +0.8% Y/Y, 0.0% M/M (MNI)
GERMANY AUG IMPORT PRICE INDEX +0.2% Y/Y, -0.4% M/M (MNI)
UK DATA (MNI): Details of the UK Q2-24 GDP Revision
- UK Q2 GDP +0.5% Q/Q, +0.7% Y/Y
Services has been revised down to +0.6%Q/Q from +0.8%Q/Q in Q2-24. Biggest revisions were from "Professional Scientific and Technical Activities", "Administrative and Support Service Activities", "Finance and Insurance Activities" and "Human Health and Social Work Activities". This was partly offset by an upward revision to "Information and Communication." 10/14 subsectors grew in Q2-24. Production was also revised down 2 tenths to -0.3%Q/Q from -0.1%Q.Q. This was largely due to a further downward revision to transport equipment manufacturing. The ONS notes that "output has reduced while factories have been repurposing to prepare for increased electric car manufacturing, and also that temporary supply chain issues have restricted commercial vehicle production."
UK AUG M4 MONEY SUPPLY -0.1% M/M, +1.7% Y/Y (MNI)
UK BOE AUG MORTGAGE APPROVALS 64,858 (MNI)
UK BOE AUG SECURED LENDING GBP2.86 BLN (MNI)
UK BOE AUG CONSUMER CREDIT GBP1.29 BLN (MNI)
ITALY DATA (MNI): Headline September Flash HICP In Line, Core Decelerates
Italian September flash core HICP inflation saw a notable deceleration to 1.8% Y/Y (vs 2.3% prior), with both services and non-energy industrial goods easing on an annual basis. Although services inflation fell three tenths to 3.1% Y/Y, it remains within this year's tight 3.1-3.4% range. A 2.1% M/M and 2.2% Y/Y fall in transport inflation was an important driver here, though restaurant and hotel and recreation and culture prices also eased on an annual basis. Services expected prices saw a sizeable fall to 3.6 (vs 7.1 prior) in the European Commission's September survey.
SWEDEN DATA (MNI): Further Real Wage Growth Key to Household Consumption Recovery
- SWEDEN AUG RETAIL SALES +0.5% Y/Y
The National Mediation Institute (NMO) estimated a 4.1% Y/Y rise in whole-economy nominal wages, implying 2.4% Y/Y real pay growth. The Riksbank expects increased real wage growth and improving sentiment to support household consumption into next year, a dynamic which is key to its forecast for an economic recovery in 2025 and 2026. Nominal wage growth has eased a little since the start of this year, as the industrial union wage benchmark fell to 3.3% Y/Y from May 2024 (vs 4.1% prior). However, the sustained pullback in headline inflation has allowed for positive real wage growth since September 2023.
SWITZERLAND DATA (MNI): September KOF Extends Upwardly Revised August Strength
- SWISS KOF SEP ECONOMIC BAROMETER 105.5
The Swiss KOF Economic Barometer rose in September, to 105.5, significantly above consensus of 101.0 and following an upward revision of August's index to 105.0 (initially 101.6). "Almost all indicator bundles for the economic sectors point to a more favourable outlook than before. Above all, the indicators for the manufacturing industry and, to a lesser extent, those for the financial and insurance services, the construction industry and the other services." The strength in manufacturing is especially noteworthy as the sector continues to severely suffer in Switzerland's neighbour Germany.
JAPAN AUG INDUSTRIAL OUTPUT -3.3% M/M; JULY +3.1% (MNI)
JAPAN AUG RETAIL SALES +2.8% Y/Y; JULY +2.7% (MNI)
JAPAN AUG RETAIL SALES +0.8% M/M; JULY +0.2% (MNI)
FOREX: EUR/USD on Cusp of Resuming Underlying Uptrend
- EUR/USD has cleared the Friday high ahead of the NY crossover, with prices now sitting just below the 1.1214 level. A break above this level would mark a resumption of the primary uptrend which is shrugging off both increased speculation of a possible October ECB cut as well as Germany's flagging growth (evident in that last report that official growth expectations are to be revised lower to 0.0% from 0.3% for this year).
- The single currency trigger was aided higher by German regional CPIs which, while soft, don't match the sizeable downside surprises in Spanish, French releases last week. ECB pricing for the October decision has retraced in tandem, with this morning's 22bps rate cut pricing reversing to 19bps at the NY crossover.
- JPY is the poorest performer in G10. We noted USD/JPY upside was the dominant theme overnight, with just over $3 in calls trading for every $2 in puts Monday. Y142.50 call strikes have seen over $1bln notional in interest, despite the modest fade lower to pullback lows of 141.65 at the European open.
- Focus ahead turns to the MNI Chicago PMI release for September (seen at 46.0 from 46.1 prior) as well as the prelim German CPI stats after this morning's regionals. The central bank speaker slate should prove of more interest, with ECB's Lagarde appearing in front of parliament, Fed's Powell in front of the NABE (text and Q&A expected) as well as Fed's Bowman and BoE's Greene after the US close.
EGBS: Bunds Pare Friday’s Gains Post German-State Level Data
Bund futures have essentially fully pared Friday’s gains following the German state-level CPI data, currently -28 ticks today at 134.53.
- Italian flash inflation was in line with consensus at 0.8% Y/Y, while core inflation saw a five tenths deceleration.
- There has been a small unwind of ECB rate cut pricing on the German data, but ECB-dated OIS continue to price a ~70% implied probability of an October cut.
- The German curve has bear flattened as a result, with 2-year yields +4bps and 30-year yields +2.5bps.
- The 10-year OAT/Bund spread remains at ~80bps despite local media suggestions of temporary taxes to support government revenues.
- The BTP/Bund spread is just off intraday wides, but remains ~1.5bps wider at 133bps, with European equities weaker today.
- Focus turns to the German national CPI data at 1300BST and ECB President Lagarde’s presentation to EU Parliament at 1400BST.
GILTS: Futures Test Support, Early Widening vs. Bunds Reversed
Early gilt weakness extends as Bunds sell off on the regional German CPI data.
- Bears threaten initial support in futures, testing Friday’s low (98.31).
- Yields ~4bp higher across the curve in a parallel shift.
- 10-Year Gilt/Bund initially widened beyond last week’s multi-year closing high, seemingly driven by views linked to last week’s dovish ECB repricing.
- The subsequent Bund weakness then pushed the spread back below 185bp, little changed on the day.
- Goldman recommend short 10s on the 2s10s30s fly, while J.P.Morgan issued a long 5s recommendation late Friday.
- BoE-dated OIS also moved in sympathy with EUR peers.
- 23.5bp of cuts now priced for Nov, 36.5bp of cuts price through year-end and 118bp of cuts priced through June ’25. That compares to 24.5bp, 39bp and 126bp early today.
- SONIA futures 0.5-6.5bp lower, at session lows across the strip.
- Today will bring another round of comments from BoE's Greene (21:10, well after market close), although greater focus is likely to fall on Friday comments from BoE chief economist Pill.
- GBP800mln of short-dated BoE APF sales also due today.
- Spill over may come from comments made by ECB President Lagarde (14:00 London), while Fed Chair Powell will speak after the gilt close (18:55 London).
EQUITIES: Bull Cycle in E-Mini S&P Intact After Last Week's Climb to Cycle Highs
Eurostoxx 50 futures traded sharply higher last week resulting in a clear break of 5024.00, the Sep 3 high. This confirms a resumption of the bull leg that started Aug 5 and cancels a recent bearish theme. Scope is seen for a climb towards 5138.24, a Fibonacci projection, and the 5200 handle further out. On the downside, key short-term support is seen at 4912.97, the 50-day EMA. A bull cycle in S&P E-Minis remains intact and last week’s fresh cycle highs, reinforce this theme. Moving average studies are in a bull-mode setup and this also reinforces the bullish theme. Scope is seen for a climb towards 5851.84, a Fibonacci projection, and 5900.00 further out. On the downside, initial support to watch is 5709.39, the 20-day EMA. Key support lies at 5641.58, the Sep 27 low.
- Japan's NIKKEI closed lower by 1910.01 pts or -4.8% at 37919.55 and the TOPIX ended 95 pts lower or -3.47% at 2645.94.
- Elsewhere, in China the SHANGHAI closed higher by 248.968 pts or +8.06% at 3336.497 and the HANG SENG ended 501.38 pts higher or +2.43% at 21133.68.
- Across Europe, Germany's DAX trades lower by 93.48 pts or -0.48% at 19393.69, FTSE 100 lower by 40.56 pts or -0.49% at 8292.67, CAC 40 down 103.92 pts or -1.33% at 7703.53 and Euro Stoxx 50 down 36.02 pts or -0.71% at 5037.33.
- Dow Jones mini down 23 pts or -0.05% at 42631, S&P 500 mini down 2.25 pts or -0.04% at 5790, NASDAQ mini down 28.25 pts or -0.14% at 20202.5.
Time: 09:50 BST
COMMODITIES: Gold Trading Just Below All-Time Highs, Focus on $2690.20 Next
WTI futures have reversed a large part of its recent gains. This affirms the strength of resistance at the 50-day EMA of 71.91, which remains the key upside hurdle for bulls. This price action confirms the recovery since Sep 9 as a correction. Note that moving average studies are in a bear-mode set-up, highlighting a dominant downtrend. A continuation lower would refocus attention on $64.61, the Sep 10 low and bear trigger. Gold bulls remain in the driver’s seat and the yellow metal is trading just below its recent all-time high. Recent gains confirm a resumption of the primary uptrend and maintain 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 $2690.2 next, a Fibonacci projection. Firm support lies at $2585.1, the 20-day EMA.
- WTI Crude up $0.45 or +0.66% at $68.81
- Natural Gas down $0.02 or -0.72% at $2.88
- Gold spot down $4.6 or -0.17% at $2655.77
- Copper up $2.45 or +0.53% at $461.7
- Silver down $0.06 or -0.19% at $31.5233
- Platinum down $11.75 or -1.17% at $993.41
Time: 09:50 BST
| Date | GMT/Local | Impact | Country | Event |
| 30/09/2024 | 1200/1400 | *** |  DE | HICP (p) |
| 30/09/2024 | 1300/1500 |  EU | ECB's Lagarde at ECON hearing | |
| 30/09/2024 | 1345/0945 | *** |  US | MNI Chicago PMI |
| 30/09/2024 | 1430/1030 | ** | US | Dallas Fed manufacturing survey |
| 30/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 30/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 30/09/2024 | 1600/1200 | ** | US | USDA GrainStock - NASS |
| 30/09/2024 | 1755/1355 | US | Fed Chair Jerome Powell | |
| 30/09/2024 | 2010/2110 |  GB | BOE's Greene panellist on 'Perspectives on global MonPol' | |
| 01/10/2024 | 2300/0900 | ** |  AU | S&P Global Manufacturing PMI (f) |
| 01/10/2024 | 2301/0001 | * | GB | BRC Monthly Shop Price Index |
| 01/10/2024 | 2330/0830 | * |  JP | Labor Force Survey |
| 01/10/2024 | 2350/0850 | *** | JP | Tankan |
| 01/10/2024 | 0030/0930 | ** | JP | S&P Global Final Japan Manufacturing PMI |
| 01/10/2024 | 0130/1130 | ** | AU | Retail Trade |
| 01/10/2024 | 0130/1130 | * | AU | Building Approvals |
| 01/10/2024 | 0630/0830 | ** |  CH | Retail Sales |
| 01/10/2024 | 0700/0900 | EU | ECB's De Guindos at 5th Joint BoC - ECB - NY FED Conference | |
| 01/10/2024 | 0715/0915 | ** |  ES | S&P Global Manufacturing PMI (f) |
| 01/10/2024 | 0745/0945 | ** |  IT | S&P Global Manufacturing PMI (f) |
| 01/10/2024 | 0750/0950 | ** |  FR | S&P Global Manufacturing PMI (f) |
| 01/10/2024 | 0755/0955 | ** | DE | S&P Global Manufacturing PMI (f) |
| 01/10/2024 | 0800/1000 | ** | EU | S&P Global Manufacturing PMI (f) |
| 01/10/2024 | 0830/0930 | ** | GB | S&P Global Manufacturing PMI (Final) |
| 01/10/2024 | 0900/1100 | *** | EU | HICP (p) |
| 01/10/2024 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 01/10/2024 | - | *** | US | Domestic-Made Vehicle Sales |
| 01/10/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 01/10/2024 | 1300/1500 | DE | MNI Connect Video Conference on German & Eurozone Economic & Policy Developments | |
| 01/10/2024 | 1345/0945 | *** | US | S&P Global Manufacturing Index (final) |
| 01/10/2024 | 1400/1000 | *** | US | ISM Manufacturing Index |
| 01/10/2024 | 1400/1000 | * | US | Construction Spending |
| 01/10/2024 | 1400/1000 | *** | US | JOLTS jobs opening level |
| 01/10/2024 | 1400/1000 | *** | US | JOLTS quits Rate |
| 01/10/2024 | 1400/1500 | GB | BOE's Pill Speech at Q3 Confederation of British Industry Economic Growth Board | |
| 01/10/2024 | 1430/1030 | ** | US | Dallas Fed Services Survey |
| 01/10/2024 | 1500/1100 | US | Atlanta Fed's Raphael Bostic | |
| 01/10/2024 | 1510/1110 | US | Fed Governor Lisa Cook | |
| 01/10/2024 | 1530/1730 | EU | ECB's Schnabel lecture at Joint BoC - ECB - NY FED Conference | |
| 01/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 01/10/2024 | 1530/1130 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 01/10/2024 | 2215/1815 | US | Fed's Bostic, Barkin, Collins |