Source: European Commission/Bloomberg
NEWS
EUROZONE (MNI): EU Forecasts See Reduced Growth Momentum in 2023-24
The euro Area economy is expected to continue growing this year and next but at a “reduced momentum”, according to the EU Commission’s Summer Interim Forecast released Monday. Growth for the EA was revised down to 0.8% this year from 1.1% in the Spring Forecasts and down to 1.3% from 1.6%.Inflation in the euro zone is revised down to 5.6% from 5.8% in the Spring and and the outlook for 2024 is edged up up to 2.9% from a previous 2.8%.
ECB (BBG): ECB Will Remove Leveraged Loan Capital Charge for Some Banks
The European Central Bank will remove a capital surcharge on some lenders after they addressed shortcomings in their leveraged finance businesses. “Some banks have fixed the problems and will see the capital add-on go away,” Andrea Enria, who chairs the ECB’s Supervisory Board, said in an interview in Frankfurt. “Others have not and will keep it for a bit longer.”
US (BBG): Biden Showcases Boeing, Chip Deals as US and Vietnam Draw Closer
US President Joe Biden announced a series of semiconductor, aerospace and infrastructure deals with business leaders in Vietnam, part of a push by the White House to deepen economic integration with Indo-Pacific nations that can provide a bulwark to China. Biden touted a “new stage” in the ties between the two countries to a meeting of officials and with executives from Vietnam and top US firms including Boeing Co., Intel Corp. and Marvell Technology Inc. in Hanoi. “My message today is quite simple: Let’s keep it up,” he said.
UK (The Times): Waitrose Cuts the Cost of 250 Products as Price War Heats Up
The supermarket price war will intensify this week, with Waitrose set to cut the prices of 250 household staples. From Wednesday the upmarket grocer will reduce the price of products including chicken, pasta, potatoes and sausages by an average of 10 per cent.
PBOC (MNI): PBOC Pledges to Safeguard a Stable Yuan
MNI (Beijing) The People’s Bank of China pledged to ensure the stability of the yuan exchange rate as the currency slumped to its weakest level since 2007 against the U.S dollar. According to a statement following a meeting held by the National Foreign Exchange Market Self-regulation Mechanism published on the Bank’s website on Monday, the financial regulator “has the ability, confidence, and conditions to maintain the basic stability of the yuan exchange rate”, and the PBOC will “take action when necessary” to correct any one-way and pro-cyclical transactions and “firmly guard against the risk of exchange-rate overshot.”
CHINA (RTRS): China's Central Bank to Peruse Bulk Dollar Purchases
China's central bank is tightening its scrutiny of bulk dollar purchases by domestic firms, three sources with direct knowledge of the matter said on Monday, at a time when the Chinese currency faces mounting depreciation pressure. Companies that need to purchase $50 million or more will now need approval from the People's Bank of China (PBOC), which convened a meeting with some commercial banks over the weekend on the matter, the sources said.
BOJ (BBG): Ueda Says BOJ May Know Enough About Wages by Year-End: Yomiuri
Bank of Japan Governor Kazuo Ueda said it’s possible the central bank will have enough information and data by the year-end to judge if wages will continue to rise, a condition for adjusting stimulus, according to an interview with the Yomiuri newspaper. Ueda said the central bank is still some distance away from achieving its price stability target and would continue its patient monetary easing. If the BOJ becomes confident prices and wages will keep going up sustainably, ending its negative interest rate is among the options available, Ueda said in the interview published Saturday.
BOJ (MNI): BOJ to Offer 5-Year Fund-Providing Operation Thursday
The Bank of Japan said Monday it will conduct a funds supplying operation against pooled collateral on Thursday. The operation will start on Friday and end Sept. 15 2028, a move aimed at curbing higher bond yields. The 10-year JGB yield rose to 0.700% on Monday, its highest level since January 2014, as speculation over an early end of the negative interest rate increased following a report that BOJ Governor Kazuo Ueda indicated such a move was possible in an interview with a local newspaper on Saturday.
SECURITY (MNI): Putin-Kim Meeting May Take Place as Soon as Tomorrow
Wires reporting that North Korean leader Kim Jong-un has departed North Korea ahead of an expected meeting with Russian President Vladimir Putin which may take place as soon as Tuesday, September 12 on the margins of the 8th Eastern Economic Forum in Vladivostok. The White National Security Council took steps last week to declassify intelligence suggesting the two leaders planned to meet and discuss an arms deal which they claim would violate UN Security Council resolutions on North Korea.
RUSSIA/BRAZIL (BBG): Lula Backs Off Pledge Putin Won’t Be Arrested If He Visits
President Luiz Inacio Lula da Silva backed off a pledge that Russian leader Vladimir Putin would be safe to travel to next year’s Group of 20 summit in Brazil without fear of arrest, saying that issue is up to his country’s judiciary. “If Putin decides to go to Brazil, it will be the courts who decide whether or not he will be arrested, not me,” Lula told a news conference in New Delhi on Monday following this year’s G-20 summit.
DATA
ITALY JUL IP -0.7% M/M, -2.1% Y/Y (MNI)
NORWAY DATA (MNI): CPI-ATE Surprises to the Downside
- NORWAY AUG CPI -0.8% M/M, +4.8% Y/Y
- NORWAY AUG CORE CPI -0.6% M/M, +6.3% Y/Y
Norway CPI-ATE inflation for August was +6.3% Y/Y and -0.6% M/M (vs 6.4% Y/Y and 0.9% M/M prior). Consensus was for a +6.6% Y/Y rise, while the Norges Bank expected +6.4% in its June MPR. Headline CPI was +4.8% Y/Y and -0.8% M/M, driven by a sequential -1.3% monthly fall in housing, water, electricity, gas and other fuels. The sell-side previews we had read expected a higher CPI-ATE reading on the back of buoyant food prices, so the -1.0% sequential monthly fall in food prices in August is a downside surprise.
CHINA DATA (MNI): China Aug New Loans Beat Estimate, M2 Slows Further
- CHINA END-AUG M1 +2.2% Y/Y VS +2.3% Y/Y END-JUL
- CHINA END-AUG M2 +10.6% Y/Y VS MEDIAN +10.7%; JUL +10.7% Y/Y
- CHINA AUG NEW LOANS CNY1.36 TRLN VS MEDIAN CNY1.1 TRLN
- CHINA AUG TSF CNY3.12 TRLN VS MEDIAN CNY2.6 TRLN
MNI (Beijing) China’s aggregate finance jumped in Aug from the previous month as new loans and government bonds issue rose, with M2 continuing to decelerate and shadow banking data surging, the People's Bank of China data showed Monday. New loans grew CNY1.36 trillion from CNY345.9 billion in July, beating the CNY1.1 trillion expectation. Total social financing grew by CNY3.12 trillion, compared with CNY528.2 billion in July, also higher than the market consensus of CNY2.6 trillion. The outstanding TSF rose by 9% in Aug from the 8.9% growth registered in July.
FOREX: USD/JPY Opens 1% Gap With Cycle Highs
- Comments from Bank of Japan governor Ueda have been the focus for the Monday session so far, after Ueda was cited in the Yomiuri newspaper as saying that it's possible the Bank of Japan will have enough data and information by the end of 2023 to confirm the trajectory of wages into next year, thereby helping the council come to a decision on whether to exit negative interest rate policy.
- The JPY rallied in response, tipping USD/JPY back below the Y146.50 mark to open a 1% gap with the cycle high printed last week at Y147.87. This keeps the JPY as the strongest performing currency headed into the NY crossover.
- The greenback is the poorest performer so far, as the roll off overnight highs for the US 10y yield keeps the USD in check. Despite the pullback in spot, prices remain inside the well-defined uptrend channel drawn off the mid-July lows, keeping the medium-term outlook bullish for the USD Index.
- The strength across Chinese currencies have also been a factor in the poor USD performance: USD/CNH sits just above session lows, last around 7.3000 and tracking lower thanks to a stronger than expected CNY fix. The PBOC stated it has confidence in maintaining a stable yuan, and source reports suggest that dollar bulk buying will now have to be pre-approved by the central, with $50mln the reported limit. Better than expected August lending figures have also aided onshore equities after the break.
- Data points are few and far between, with the speakers slate also quiet as both the ECB and Fed are within their pre-decision media blackout periods. The NY Fed inflation expectations release takes focus ahead, last seen at +3.55% for July.
EGBS: Off Lows, GGBs Marginally Tighter after DBRS Upgrade
Bunds find a base alongside U.S. Tsys as the BoJ-driven weakness seen in Asia-Pac hours moderates a touch.
- That leaves Bund futures -20, while German cash benchmarks are 0.5bp richer to 1.5bp cheaper, twist steepening.
- Bears couldn’t force a challenge of initial technical support in Bund futures (130.35, the Sep 7 low).
- Most other EGB curves twist/bear steepen a little.
- Core/semi-core paper little changed when it comes to spreads vs. Bunds.
- Greek paper is the outperformer, although only marginally so, as 10-Year GGBs tighten by ~1.5bp vs. Bunds post-Greece’s (widely expected) IG status attainment at DBRS Morningstar on Friday. A reminder that achievement isn’t a gamechanger for GGBs on the index inclusion front.
- The regional docket is limited today.
- Eurozone commission marked down Eurozone GDP projections, while lowering its CPI forecast for ’23 & lifting it’s CPI outlook for ’24.
- While there is nothing formally slated on the EGB issuance front on Monday, we remain on the lookout for details of a possible EU syndication after the recent RFP and guidance (some desks look for a new 7-Year line).
- We also note that the net issuance backdrop is much more supportive for EGBs this week (negative net supply when accounting for coupons/maturity repayment).
GILTS: Stabilising Alongside Broader Core Global FI, Early Cross-Market Widening Holds
Gilts also find a bit of a base alongside wider core global FI markets, but still sit wider vs. U.S. Tsys and Bunds across the curve.
- Futures last -50, while cash benchmarks are 3-5bp cheaper as the curve bear steepens.
- Offshore matters have generally dominated thus far (cross-market moves and BoJ hawkishness).
- As we flagged earlier, DMO confirmation that it plans to auction the 1.125% ‘73 gilt on Wednesday 27 September (after last week’s consultation) will have aided the steepening bias at the margin.
- SONIA futures are also off lows, last 0.5-5.5bp cheaper through the blues, with reds leading the weakness.
- BoE-dated OIS firms and steepens given global core FI moves, showing 22bp of tightening for this month’s meeting, while terminal policy rate pricing is a little over 5.65%.
- Note that BoE’s Pill was previously scheduled to give an address today, but that event was cancelled last week.
- That leaves BoE QT sales of the short maturity bucket as the only point of note on the local docket today.
- Domestic focus is on the release of the monthly labour market report, scheduled for tomorrow.
EQUITIES: E-Mini S&P Bear Cycle Remains in Play
A bear cycle in Eurostoxx 50 futures remains in play and the contract traded lower Friday before finding support. Price has pierced key support at 4187.00, the Aug 18 low and bear trigger. A clear break of this level would strengthen bearish conditions and open 4177.40 next, a Fibonacci retracement. Key resistance has been defined at 4358.00, the Aug 30 high. Initial firm resistance is seen at 4284.8, the 20-day EMA. The E-mini S&P contract traded lower last week and a bear cycle remains in play. Key resistance has been defined at 4597.50, Sep 1 high. A break is required to reinstate the recent bullish theme. A resumption of weakness would signal scope for a move towards the key support and bear trigger at 4397.75, the Aug 18 low. A break of this support would highlight a short-term reversal. For bulls, clearance of 4597.50 would open 4685.25, Jul 27 high.
- Japan's NIKKEI closed lower by 139.08 pts or -0.43% at 32467.76 and the TOPIX ended 1.46 pts higher or +0.06% at 2360.48.
- Elsewhere, in China the SHANGHAI closed higher by 26.06 pts or +0.84% at 3142.779 and the HANG SENG ended 105.62 pts lower or -0.58% at 18096.45.
- Across Europe, Germany's DAX trades higher by 67.25 pts or +0.43% at 15807.54, FTSE 100 higher by 33.4 pts or +0.45% at 7509.74, CAC 40 up 45.12 pts or +0.62% at 7286.17 and Euro Stoxx 50 up 24.92 pts or +0.59% at 4262.05.
- Dow Jones mini up 66 pts or +0.19% at 34682, S&P 500 mini up 16.25 pts or +0.36% at 4478.75, NASDAQ mini up 85.75 pts or +0.56% at 15388.75.
COMMODITIES: Uptrend in WTI Futures Intact
The uptrend in WTI futures remains intact. The recent break of resistance at $84.16, the Aug 10 high, confirmed a resumption of the uptrend and this maintains the bullish price sequence of higher highs and higher lows. Note that moving average studies are in a bull mode position, highlighting current positive sentiment. Sights are on the psychological $90.00 handle. On the downside, initial firm support to watch lies at $82.98, the 20-day EMA. Gold is trading closer to last week’s lows. Key support to watch lies at $1903.9, the Aug 25 low. A break of this level would be viewed as a bearish development and highlight the fact that the recovery between Aug 21 - Sep 1 has been a correction. This would expose $1884.9, the Aug 21 low. On the upside, initial firm resistance is seen at $1930.5, the 50-day EMA. Key resistance is at $1953.0, the Sep 4 high.
- WTI Crude down $0.61 or -0.7% at $86.91
- Natural Gas down $0.04 or -1.57% at $2.562
- Gold spot up $7.49 or +0.39% at $1926.31
- Copper up $6.65 or +1.79% at $378.45
- Silver up $0.23 or +1.01% at $23.158
- Platinum up $9.05 or +1.01% at $904.52
| Date | GMT/Local | Impact | Flag | Country | Event |
| 11/09/2023 | 1500/1100 | ** |  | US | NY Fed Survey of Consumer Expectations |
| 11/09/2023 | 1530/1130 | * | | US | US Treasury Auction Result for 13 Week Bill |
| 11/09/2023 | 1530/1130 | * | | US | US Treasury Auction Result for 26 Week Bill |
| 11/09/2023 | 1700/1300 | *** | | US | US Note 03 Year Treasury Auction Result |
| 12/09/2023 | 2300/0000 |  | UK | BOE's Mann to Speak in Canada | |
| 12/09/2023 | 0600/0700 | *** | | UK | Labour Market Survey |
| 12/09/2023 | 0600/0800 | ** |  | NO | Norway GDP |
| 12/09/2023 | 0700/0900 | *** |  | ES | HICP (f) |
| 12/09/2023 | 0900/1000 | * | | UK | Index Linked Gilt Outright Auction Result |
| 12/09/2023 | 0905/1105 | *** |  | DE | ZEW Current Conditions Index |
| 12/09/2023 | 0905/1105 | *** | | DE | ZEW Current Expectations Index |
| 12/09/2023 | 1000/0600 | ** | | US | NFIB Small Business Optimism Index |
| 12/09/2023 | 1255/0855 | ** | | US | Redbook Retail Sales Index |
| 12/09/2023 | 1530/1130 | * | | US | US Treasury Auction Result for Cash Management Bill |
| 12/09/2023 | 1600/1200 | *** | | US | USDA Crop Estimates - WASDE |
| 12/09/2023 | 1700/1300 | ** | | US | US Note 10 Year Treasury Auction Result |