MNI US OPEN - China Wealth Manager's Missed Payments Alarm Regulators

NEWS

UK (The Times): Welfare Cuts Loom After Forecast for Inflation to Climb Again

The Treasury is braced for a surprise increase in inflation this summer, posing a headache for Jeremy Hunt in his attempt to curb government spending. Internal government warnings of a rebound this month mean officials fear the annual increase in the state pension, which is linked to inflation, could cost the exchequer billions more than hoped. It also risks eating further into the chancellor’s fiscal headroom before a budget this autumn. The predicted dip in spending power has forced ministers to begin searching for steeper cuts elsewhere.

EU COMMISSION (MNI): State of the EU Address Confirmed for September 13

The European Commission has confirmed that President Ursula von der Leyen will deliver her annual State of the European Union (SotEU) address on 13 September. The address is an opportunity for the Commission president to review the EU's actions over the past year and outline the Commission's priorities for the next 12 months. A number of significant items of focus for the EU and its member states in 2024, observers will be watching to see if von der Leyen addresses them directly in the speech.

GERMANY (BBG): Scholz Sees Green Tech Investment Rousing Germany’s Slow Economy

Chancellor Olaf Scholz sees upcoming green tech investments in Germany helping revive growth in Europe’s largest economy. Spending on renewable energy sources, hydrogen production as well as related networks will “have an impact on the entire economy,” Scholz said Sunday in an interview with public broadcaster ZDF. “We’ve moved at an incredible speed and have amended a range of legislation so that finally sufficient construction for our needs has gotten off the ground,” he said.

CHINA (BBG): China Sets Up Taskforce After Top Wealth Manager Misses Payments

China’s banking regulator has set up a taskforce to examine risks at Zhongzhi Enterprise Group Co., one of the nation’s top private wealth managers, after a unit missed payments on multiple high-yield investment products. The National Financial Regulatory Administration established a working group last month to gauge the outstanding debt and risks at one of the main financing arms of Beijing-based Zhongzhi, which oversees more than 1 trillion yuan ($138 billion) of assets, according to people familiar with the matter, who asked not to be identified discussing a private matter.

CHINA (BBG): China Hedge Funds in Crisis After Losses, US Investor Retreat

Foreign investors are losing interest in China, and hedge funds that target the world’s second-biggest economy are paying the price. The number of active China-focused hedge funds has slipped for the first time since at least 2012, with only five new funds launched this year as of June, according to data from Preqin Ltd. Another 18 funds were liquidated, the data show.

CHINA PRESS (MNI): New Measures to Support FDI - State Council

China's State Council has unveiled 24 policy measures to attract foreign direct investment into the country to overcome adverse conditions such as weak global economic recovery and shrinking external demand, according to Yicai. Policymakers aim to support foreign firms by offering more financial and tax support, stronger IP rights and ensuring equal treatment. Bai Ming from the Research Institute of the Ministry of Commerce said China's high quality development will benefit from FDI and foreign companies will find opportunities in China's large market. (Source: Yicai)

CHINA PRESS (MNI): PBOC Likely to Further Loose as Government Bond Sales Peak

The People's Bank of China will likely increase liquidity injections in August and September as sales of new local government bonds could soar due to local authorities aiming to finish selling their full quota of special bonds by the end of Q3. A total of CNY1.58 trillion new special bonds are expected to be issued in Q3, and CNY196 billion were sold in July. The PBOC may increase the amount of open market operations, roll over maturing medium-term lending facilities with excessive amounts, or cut the reserve requirement ratio, said Wang Yifeng, chief financial analyst at Everbright Securities. (Source: China Securities Journal)

JAPAN (BBG): Japan Faces Another Typhoon With Trains, Flights Canceled

Japan is preparing for its second typhoon in a week, with airline companies canceling flights and rail operators halting some operations. Typhoon Lan is forecast to make landfall Tuesday in central Japan near Osaka, the country’s second largest metropolitan area, triggering travel disruptions just as domestic travelers start to make their way home after an annual holiday break. The Japan Meteorological Agency has called for precautions against heavy rain, mudslides and strong winds.

RBA (MNI): RBA Soft Landing Banks on Productivity Improvement

The Reserve Bank of Australia is betting that growth in productivity will return to pre-pandemic levels and employee inflation expectations remain contained as it considers whether it needs to hike rates again while it steers the economy towards what it hopes will be a soft landing. Though the RBA believes the country’s low wage growth sets it apart from peer economies struggling with strong services prices, this situation will only persist if productivity returns to 2019 levels, an assumption which it has factored into its forecasts for inflation to fall back to the 2-3% target range by 2025.

RUSSIA (BBG): Russia Opens Fire to Force Black Sea Cargo Ship Inspection

The Russian navy opened fire on a cargo vessel in the Black Sea to force it to stop for checks, the defense ministry said, the first such confirmed incident since Moscow withdrew from a key grain export deal in July. The navy ordered the vessel to stop for inspection and when the operators of the Sukru Okan didn’t respond, opened fire, Russia’s ministry said. When the vessel finally stopped, Russia sent a group of soldiers in a helicopter to board it for inspection. They later allowed the ship to resume its journey to Ukraine, the ministry said, without elaborating what cargo — if any — it was carrying.

ARGENTINA (MNI): Strong Milei Performance in PASO Creates Chaotic Election Outlook

Right-wing libertarian Javier Milei secured a strong result in Argentina's PASO presidential primaries on 13 August, exceeding his suggested support in opinion polls substantially to emerge with 31.6% of the vote with almost all ballots counted. Milei's poll-topping performance comes at the expense of both the governing Peronist alliance but also the main opposition conservative bloc, both of whom have faced public anger amid triple-digit inflation.

CORPORATE (BBG): Tesla Cuts China Prices Again, Triggering Slump in Auto Stocks

Tesla Inc. rolled out a new round of price cuts in China, sending auto stocks tumbling on concerns the move will respark a bruising price war that had showed signs of abating. The automaker reduced the price of the top-end Long-Range and Performance versions of the Model Y sport utility vehicle by 14,000 yuan ($1,900) to 299,900 yuan and 349,900 yuan respectively, according to a post on its Weibo account on Monday.

COMMODITIES (BBG): Copper Near One-Month Low as China Demand Pessimism Builds

Copper traded near the lowest close in more than a month as China’s worsening property slump dampened market sentiment and the commodities demand outlook.Base metals have broadly fallen this month as investors weigh persistent signs of economic weakness in the top metal-consuming economy, even amid pledges from authorities to support the hardest-hit sectors including the property market.

FOREX: Muted Activity Elsewhere Fails to Prevent New High in USD/JPY

• Markets are muted early Monday, with most G10 currencies respecting their recent ranges and holding well within sight of the Sunday opening levels.
• SEK is the minor standout, with EUR/SEK higher and printing at 11.8882, the highest level since July 10th. Equity volatility remains a key driver, however weakness across Chinese equity markets failed to prevent another cycle high print in USD/JPY, which showed above Y145.07 for the first time since November and further into the territory at which the Japanese authorities last intervened in currency markets.
• GBP is very modestly outperforming, largely driven by GBP/USD recovering off the overnight low of 1.2667 to re-take 1.27 ahead of NY hours. Domestic newsflow remains light, with markets focusing on UK jobs and inflation data later in the week.
• CFTC CoT data shows markets trimmed the USD Index net long further last week, putting the net position at the closest to flat since mid-2021, while markets continue to be the most net long MXN, GBP and EUR, with JPY positioning the most notable net short.
• Datapoints and speakers are few and far between Monday, keeping focus on the datapoints later in the week including the Norges Bank and RBNZ rate decisions, as well as Canadian and Japanese CPI releases.

BONDS: Off Cheaps, Volumes Low

The Asia/early European weakness in core global FI markets has faded, although moves remain contained.

• Core global FI futures generally trade around unchanged levels.
• The German curve bull steepens at the margin, while Tsys & gilts twist flatten a little
• That comes even with oil and global equity benchmarks off lows.
• Weakness in Chinese & HK equities helped limit downside in Asia, before that move faded into the local market closes.
• Macro news flow has been light, outside of headlines surrounding familiar areas of risk in China and Italian PM Meloni pointing to her reasoning behind the banking tax move deployed last week.
• A quick reminder that the presence of Tuesday’s Assumption Day holiday will be a limiting factor for participation in some European markets today.
• Accordingly, the bulk of observable traded volumes in benchmark Eurozone assets run below respective norms at present.

• TY1 futures are up 0-0+ today at 110-06+ with 10y UST yields up 0.5bp at 4.160%.
• Bund futures are up 0.01 today at 131.48 with 10y Bund yields down -0.6bp at 2.616%.
• Gilt futures are down -0.11 today at 935.52 with 10y yields up 0.7bp at 4.531%.

EQUITIES: Bearish Conditions Remain Present in E-Mini S&P Despite Recent Spike

A bearish threat in Eurostoxx 50 futures remains present following the reversal from 4513.00, the Jul 31 high. Last week’s gains appear to have been a correction. Price is once again trading below both the 20- and 50-day EMAs and attention is on support at 4276.00, the Aug 8 low. A break of this level would strengthen a bearish threat and expose 4220.00, the Jul 7 low. Initial firm resistance is 4424.00, Aug 2 high. Bearish conditions in the E-mini S&P contract remain intact and price is trading closer to its recent lows. Friday’s move lower resulted in a test of the 50-day EMA at 4462.48. A clear break of this average would expose 4450.90, the base of a bull channel drawn from the Mar 13 low. Clearance of this support would strengthen a bearish threat. Resistance to watch is 4560.75, Aug 4 high.

• Japan's NIKKEI closed lower by 413.74 pts or -1.27% at 32059.91 and the TOPIX ended 22.62 pts lower or -0.98% at 2280.89.
• Elsewhere, in China the SHANGHAI closed lower by 10.821 pts or -0.34% at 3178.427 and the HANG SENG ended 301.64 pts lower or -1.58% at 18773.55.
• Across Europe, Germany's DAX trades higher by 75.21 pts or +0.48% at 15908.17, FTSE 100 lower by 9.32 pts or -0.12% at 7515.53, CAC 40 up 14.95 pts or +0.2% at 7355 and Euro Stoxx 50 up 13.14 pts or +0.3% at 4334.84.
• Dow Jones mini up 58 pts or +0.16% at 35407, S&P 500 mini up 11 pts or +0.25% at 4491.75, NASDAQ mini up 64 pts or +0.42% at 15160.

COMMODITIES: Recent Pullback in WTI Futures Appears Technically Corrective

The uptrend in WTI futures remains intact and the latest pullback appears to be a correction. Last week’s gains confirmed a resumption of the bull cycle. Price breached resistance at $83.59, the Nov 7 2022 high. The break strengthened a bullish condition and has paved the way for a climb towards $87.43, a Fibonacci projection. Moving average studies are in bull-mode condition highlighting an uptrend. Initial firm support lies at $78.69, Aug 3 low. Gold remains bearish and the yellow metal has traded lower again today, maintaining the bear cycle that started Jul 20. The focus is on a move towards key support at $1893.1, the Jun 29 low. A break of this level would strengthen bearish conditions. On the upside, initial firm resistance to watch is $1944.6, the 50-day EMA. A break of this level would highlight a possible short-term reversal.

• WTI Crude down $0.35 or -0.42% at $82.85
• Natural Gas up $0.03 or +1.12% at $2.801
• Gold spot up $0.25 or +0.01% at $1914.26
• Copper up $0.25 or +0.07% at $372.45
• Silver up $0.02 or +0.09% at $22.7102
• Platinum down $1.18 or -0.13% at $915.17