MNI US OPEN - Deposit Rate Cuts Reportedly Latest Part of China Stimulus Drive

NEWS

US/CHINA (BBG): US-China Ties ‘Critical’ to Manage Responsibly, Raimondo Says

US Commerce Secretary Gina Raimondo and Chinese Vice Premier He Lifeng spoke Tuesday afternoon in Beijing to discuss ties between the world’s two largest economies as the nations seek to ease strains. “The US-China commercial relationship is one of the most globally consequential,” Raimondo told He, according to an Associated Press video feed of remarks ahead of the mostly closed-door meeting. “Managing that relationship responsibly is critical to both of our nations and indeed to the whole world.”

US/S.KOREA (BBG): US, South Korea and Japan Hold Drill to Counter Kim’s Missiles

The US, Japan and South Korea held a joint military drill to practice hunting for missiles from the likes of North Korea in their first such exercise since the leaders of the three nations pledged to improve security cooperation. Destroyers equipped with the Aegis system to track and shoot down missiles were used in the drills Tuesday south of South Korea’s Jeju Island, South Korea’s military said.

UK/CHINA (MNI): Foreign Minister's China Visit Confirmed

Finbarr Bermingham at SCMP: "UK gov confirms James Cleverly will visit Beijing tomorrow. He will look to further UK national interests including cyber, international security and human rights As well as cooperating to face global problems such as climate change. Cleverly will meet FM Wang Yi and VP Han Zheng. First visit since Jeremy Hunt more than 5 years ago."

CHINA (BBG): China Mega Banks Weigh Further Deposit Rate Cuts to Boost Growth

China’s biggest state-owned banks are considering lowering deposit rates for at least the third time in a year, according to people familiar with the matter, as they ramp up efforts to boost the economy and protect margins. Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and other lenders may cut rates on local currency deposits across key tenors by between 5 and 20 basis points, said the people, asking not to be identified discussing a private matter. Regulators have signed off on the plan, the people added. The cut may come as soon as Friday, one of the people said.

CHINA (BBG): China Pledges to Speed Up Fiscal Spending to Boost Economy

China vowed to strengthen policy support and speed up government spending as the economy’s recovery comes under strain. Finance Minister Liu Kun and Zheng Shanjie, chairman of the National Development and Reform Commission, made the pledges in reports to the country’s legislature on Monday, according to the official Xinhua News Agency. The comments were largely a repeat of Beijing’s policy stance, with Zheng reiterating the government would beef up counter-cyclical measures and policy reserves, and strengthen the coordination of various policies in the second half of this year.

CHINA (BBG): Country Garden Seeks to Add Grace Period for Maturing Yuan Bond

Country Garden Holdings Co. has proposed a grace period of 40 calendar days for a maturing yuan bond, marking the distressed Chinese developer’s latest effort to avoid what would be its maiden default. The property giant made the proposal for holders of the note to vote at a meeting to be held on Aug. 31 by the latest, according to a filing to the Shanghai Stock Exchange’s private disclosure platform that was seen by Bloomberg News. The bond, which carries an original maturity date of Sept. 2, a Saturday, will effectively come due on Sept. 4.

JAPAN (BBG): Japan’s Government Highlights Progress Toward End of Deflation

The Japanese government highlighted progress toward stamping out deflation after battling it for a quarter century, and urged close cooperation with the Bank of Japan in its latest annual white paper on the economy. The Cabinet Office subtitled this year’s paper “inflation, wages getting into motion,” mentioning inflation for the first time in around 50 years.

RBA (BBG): RBA’s Bullock Says Rate Calls a Month-by-Month Prospect Til 2024

Australia’s incoming central bank governor Michele Bullock said that policymakers may need to raise interest rates further, reinforcing that decisions will be taken on a month-by-month basis until 2024.Responding to a question after she delivered a speech at the Australian National University in Canberra on Tuesday, Bullock said inflation is “still too high in Australia” and her first priority after taking the helm at the Reserve Bank is to keep bringing it down.

AUSTRALIA/CHINA (BBG): Australia Sends Barley Shipment to China After Tariffs End

Australia has sent its first shipment of barley to China after Beijing scrapped tariffs this month, with the nation’s trade minister confident that restrictions on other products will be removed as relations improve. “The first shipment has been dispatched from Kwinana and it’s gradually working its way towards China,” Agriculture Minister Murray Watt said during a press conference in Western Australia on Tuesday. Kwinana is a major export terminal for grains south of Perth that’s operated by CBH Group.

AUSTRALIA (MNI): Fiscal Stance More Restrictive than Rates - Ex RBA

Australian fiscal policy remains contractionary and may do more to increase the country’s unemployment rate and slow the economy over next year than interest rates, which will likely hold circa 4.1%, a former Reserve Bank of Australia board member told MNI. The government has increased its tax take this fiscal year, shifting the balance between fiscal and monetary policy, said Bob Gregory, emeritus professor at the ANU’s Research School of Social Sciences, who served on the RBA board between 1985-1995.

RUSSIA/INDIA (BBG): Putin Touts Close India-Russia Ties in Phone Call With Modi

President Vladimir Putin touted Russia’s close ties with India in a phone call with Prime Minister Narendra Modi as world leaders prepare to gather in New Delhi next week for the Group of 20 summit. Relations between the countries are “developing progressively in the spirit of a specially privileged strategic partnership,” according to a statement from the Kremlin on Monday. Both nations plan to carry out large-scale energy projects and expand transport and logistics infrastructure, the statement said.

DATA

UK AUG BRC SHOP PRICES +0.5% M/M, +6.9% Y/Y (MNI)

FRANCE AUG CONSUMER SENTIMENT 85 (MNI)

SWEDEN Q2 GDP -1% Y/Y (MNI)
SWEDEN JUL RETAIL SALES -2.1% Y/Y (MNI)

JAPAN DATA (MNI): July Labor Market Data Weaker than Expected

• JAPAN JULY JOBLESS RATE RISES TO 2.7% VS. JUNE 2.5%

Japan's July unemployment rate rose top 2.7%, versus 2.5% forecast (prior was2.5%). The job to applicant ratio eased to 1.29, versus 1.30 expected, which was also the prior result. At face value the data suggest a loss of momentum in terms of the labor market.

AUSTRALIA DATA (MNI): SEEK Salary Growth Shows Labour Market Remains Tight

The SEEK advertised salary index rose 0.4% m/m in July up from 0.3% the previous three months. This brought the annual rate to 4.6% from 4.5% in June. While advertised pay is off its December peak of 5% y/y, it remains elevated and with the 3-month rate steady at about 1% signals that labour shortages persist in a tight market. The tick up also coincided with an increase in job ads suggesting a pickup in labour demand.

FOREX: Greenback Recovers Off Lows as Treasury Rally Moderates

• Asia-Pac trade kicked off with the dollar under pressure, a move triggered by the moderation in US yields, with the 10y yield bottoming out at 4.1726% alongside the European open. The greenback has recovered off lows headed into NY hours, with few macro datapoints or speakers to distract. As a result, some market focus may be being paid to potential USD demand from corporates later today, with Tuesday marking value-date month-end.
• Headed into the NY crossover, US yields recovering further off lows, further assisting the bounce in the greenback.
• The single currency is the poorest performer, with the EUR fading ahead of Thursday's August CPI Estimate. CPI is again expected to fade to 5.1% from 5.3%, marking the lowest reading since late 2021. EUR/GBP remains pinned to the 50-dma, dipping below the mark that crosses at 0.8585 today.
• AUD, NZD are among the best performers, benefiting from further signs of Chinese stimulus. Bloomberg reports that China's largest banks are considering a further deposit rate cut to support domestic growth.
• US JOLTS job openings figures take focus later today, released alongside consumer confidence for August. Fed's Barr appears for a second consecutive session, speaking on banking services.

BONDS: Bunds Pull Core FI Higher

• Bunds started the European session on the front foot and helped pull TY1 futures higher and saw gilt futures also open higher. Bunds have faded off their early highs but remain up on the day while gilt and TY1 futures have seen smaller moves higher.
• There has been a decent amount of corporate issuance this morning in the Eurozone in particular, with Germany holding a 30-year syndication and Bobl auction.
• Looking ahead we will receive JOLTS and US consumer confidence data later today.
• TY1 futures are up 0-2+ today at 109-23 with 10y UST yields down -0.8bp at 4.197% and 2y yields down -0.6bp at 5.003%.
• Bund futures are up 0.37 today at 132.28 with 10y Bund yields down -2.0bp at 2.541% and Schatz yields down -1.1bp at 3.040%.
• Gilt futures are up 0.01 today at 945.56 with 10y yields up 0.7bp at 4.446% and 2y yields up 0.6bp at 5.290%.

EQUITIES: Short Term Gains in E-Mini S&P Considered Corrective

A bearish condition in Eurostoxx 50 futures remains intact despite this week’s gains. Last Thursday’s sharp sell-off reinforces a bearish theme. The move lower signals the end of the recent corrective bounce between Aug 18 - 24. Key support and the bear trigger lies at 4187.00, the Aug 8 low. A break of this level would confirm a resumption of the downtrend. Resistance to watch is 4330.50, the 50-day EMA. A clear break would signal a short-term reversal. A sharp sell-off on Aug 24 in the E-mini S&P contract reinforces a bearish theme and signals the end of the Aug 18 - 24 corrective bounce. Short-term gains are considered corrective and attention is on support at 4350.00, the Aug 18 low and bear trigger. A break would confirm a resumption of the current bear cycle. Resistance to watch is 4556.73 - the base of a bull channel, drawn from the Mar 13 low that was breached on Aug 16.

• Japan's NIKKEI closed higher by 56.98 pts or +0.18% at 32226.97 and the TOPIX ended 3.6 pts higher or +0.16% at 2303.41.
• Elsewhere, in China the SHANGHAI closed higher by 37.251 pts or +1.2% at 3135.887 and the HANG SENG ended 353.29 pts higher or +1.95% at 18484.03.
• Across Europe, Germany's DAX trades higher by 53.47 pts or +0.34% at 15845.15, FTSE 100 higher by 99.06 pts or +1.35% at 7437.12, CAC 40 up 18.37 pts or +0.25% at 7343.08 and Euro Stoxx 50 up 10.15 pts or +0.24% at 4303.84.
• Dow Jones mini up 9 pts or +0.03% at 34603, S&P 500 mini up 1.5 pts or +0.03% at 4443.75, NASDAQ mini up 2.25 pts or +0.01% at 15095.75.

COMMODITIES: WTI Future Uptrend Remains Intact

The uptrend in WTI futures remains intact and recent weakness is considered corrective. Last week’s move lower resulted in a print below support at $78.33, the Aug 3 low. A clear break of this level would highlight a stronger bear cycle and pave the way for a deeper retracement. Note that a key support also lies at the 50-day EMA, which intersects at $77.67. Initial resistance to watch is $81.75, a break would be a bullish development. The uptrend in WTI futures remains intact and recent weakness is considered corrective. Last week’s move lower resulted in a print below support at $78.33, the Aug 3 low. A clear break of this level would highlight a stronger bear cycle and pave the way for a deeper retracement. Note that a key support also lies at the 50-day EMA, which intersects at $77.67. Initial resistance to watch is $81.75, a break would be a bullish development.

• WTI Crude up $0.36 or +0.45% at $80.47
• Natural Gas down $0 or -0.16% at $2.575
• Gold spot up $3.1 or +0.16% at $1923.77
• Copper up $1.9 or +0.5% at $381.25
• Silver up $0.03 or +0.14% at $24.282
• Platinum down $3.34 or -0.34% at $968.74