EXECUTIVE SUMMARY
- GERMAN FLASH MANUFACTURING PMI HITS LOWEST SINCE SEPTEMBER 2023
- TRUMP, HARRIS TO TURBOCHARGE ECONOMIC PITCHES AT DUELING EVENTS
- ISRAEL STEPS UP ATTACKS ON HEZBOLLAH TARGETS IN SOUTH LEBANON
- ECB’S KAZAKS SAYS SERVICES PRICES BIGGER WORRY THAN SLOW GROWTH
Figure 1: Eurozone Composite PMI re-enters contractionary territory in September flash
NEWS
US (BBG): Trump, Harris to Turbocharge Economic Pitches at Dueling Events
The battle between Kamala Harris and Donald Trump over the economy is set to intensify, with the rival presidential candidates planning dueling addresses this week on one of the campaign’s defining issues. Harris told reporters Sunday she will deliver a speech “to outline my vision for the economy.” Trump, meanwhile, is set to offer remarks Tuesday in swing-state Georgia on a plan to lower taxes for US business owners.
US (BBG): Harris Vows to Aid AI, Crypto Sectors in Pitch to NYC Donors
Vice President Kamala Harris vowed to help grow investment in artificial intelligence and crypto if elected, pitching her economic agenda to donors in New York City on Sunday as one that would bolster innovation and focus regulations on protecting consumers and investors. “I will bring together labor, small business founders and innovators and major companies,” Harris said at a fundraiser at Cipriani Wall Street in Manhattan. “We will partner together to invest in America’s competitiveness, to invest in America’s future. We will encourage innovative technologies like AI and digital assets, while protecting our consumers and investors.”
US (BBG): US Congress Unveils Stopgap Spending Deal to Avert Shutdown
Congressional leaders unveiled a stopgap funding bill Sunday to temporarily keep the US government’s doors open through Dec. 20, as negotiators aim to avert an Oct. 1 shutdown and set the stage for a funding showdown shortly before Christmas. The bill would keep the federal government running at existing funding levels, with few exceptions. The US Secret Service would get extra money to protect presidential candidates after a second assassination attempt on former President Donald Trump. The measure excludes a GOP bill to require voters to show proof of citizenship, after Republicans failed to pass a previous version tied to a stopgap funding bill.
US/CHINA (BBG): US Curbs on Chinese EV Software Tech Could Lead to Retaliation
A US plan that would further limit Chinese electric cars via software and hardware curbs may have ramifications beyond the auto industry and could result in retaliation against US businesses in China, some analysts say. US officials are set to unveil a proposal to ban the use and testing of Chinese and Russian technology and equipment in automated driving and vehicle communications systems, people familiar with the matter told Bloomberg News. The pending restrictions stem from an investigation into cybersecurity risks posed by Chinese vehicle software that President Joe Biden launched in March.
US/UKRAINE (BBG): Zelenskiy Starts US Trip at Munitions Plant in Biden’s Hometown
Volodymyr Zelenskiy began his visit to the US with a stop at an ammunition plant in Pennsylvania, a critical swing state that will help determine the outcome of November’s US presidential election. The trip to Scranton, Joe Biden’s hometown, on Sunday kicked off an intense week of diplomacy as Ukrainian president is set to address the UN General Assembly in New York and unveil his so-called “victory plan” to force Russia to end the war.
US/INDIA (BBG): Biden, Modi Announce Plans for a New Chip Plant in India
The US and India reached an agreement to work together on setting up a semiconductor fabrication plant in the South Asian nation, giving a boost to Prime Minister Narendra Modi’s efforts to bolster manufacturing in the country. The proposed plant will make infrared, gallium nitride and silicon-carbide semiconductors, according to a White House readout that followed a meeting between the US President Joe Biden and Modi in Delaware on Saturday.
ISRAEL (MNI): IDF Launches New Wave of Airstrikes on Hezbollah in Lebanon
Tensions in the Levant remain extremely high amid the risk of a regional escalation. The Israeli Defence Forces (IDF) have confirmed a new wave of airstrikes against Hezbollah targets in southern Lebanon. This follows a weekend of Israeli airstrikes and Hezbollah rocket launches into northern Israel. The IDF has publicly warned Lebanese citizens to move away from buildings or civilian homes linked to Hezbollah, claiming that these buildings will be targets for airstrikes. The US has sought to dissuade Israel from raising the frequency of strikes to the point where an all-out war could break out with Hezbollah. On 22 Sep, US National Security Council spokesperson John Kirby said on ABC “We don’t believe that a military conflict, and we’re saying this directly to our Israeli counterparts . . . we don’t believe that escalating this military conflict is in their best interest.”
UK (MNI): Reeves to Deliver Speech Today at Midday BST
Chancellor Reeves is due to deliver her speech at the Labour Party Conference today around midday BST. It is unlikely that there will be any concrete policy announcements. Indeed, even when asked to rule any fiscal policy in or out senior government officials have stuck to the script and cited little other than the manifesto commitments of no rises to income tax, employee national insurance or VAT. And to protect the pension triple lock (to increase with the state pension with the greatest of 2.5%, inflation or average earnings). The most controversial policy so far has been to restrict the winter fuel payment to those on pension credit (around 2 million pensioners) instead of it being a universal benefit for all pensions (around 8 million).
ECB (BBG): ECB’s Kazaks Says Services Prices Bigger Worry Than Slow Growth
The European Central Bank Governing Council member Martins Kazaks said the danger of persistent services inflation currently outweighs his concerns over the economy. “In my opinion, the risk of service price inflation is still more significant at the moment, but as we move forward step by step, we will see how the situation develops,” the Latvian central banker told Leta newspaper in an interview published Monday. “Undoubtedly, the direction of rates is downward. How quickly the rate cut will happen depends on how the economy develops further.”
GERMANY (MNI): SPD Denies AfD Brandenburg Win, But Problems Not Over for Federal Gov't
The centre-left Social Democrats (SPD) were able to hold off the challenge from the far-right Alternative for Germany (AfD) in state elections in Brandenburg held on 22 September. Opinion polling had shown a surge in support for the SPD in the last days of the campaign, as supporters of other moderate parties shifted to the SPD in an effort to stop the AfD coming in first. Preliminary results show the SPD in first place with 32 out of 88 seats in the regional Landtag, ahead of the AfD on 30 seats. The far-left nationalist Sara Wagenknecht Alliance (BSW) came in third with 14 seats on 13.5% of the vote.
CHINA (MNI): PBOC Cuts 14-day Reverse Repo Rate by 10bp
MNI (Beijing) The People’s Bank of China eased the 14-day reverse repo rate by 10bps to 1.85% on Monday, the first reduction since January 2023, following the 7-day reverse repo rate cut in July, according to a statement on the PBOC’s website. The Bank said the interest rate for the 14-day reverse repo was 15 basis points higher than that of the 7-day reverse repo in open market operations. It was the first time the Bank restarted its 14-day reverse repo since Feb 9 in a bid to “maintain sufficient liquidity in the banking system at the end of the quarter”.
CHINA (MNI): China Consumption Policy Support Working - NDRC
MNI (Beijing) China’s investment in the purchase of equipment and tools increased by 16.8% during the first eight months of the year, demonstrating the government’s success in supporting equipment upgrading and consumer goods trade-ins, Zhao Chenxin, deputy director at the National Development and Reform Commission, said at a press conference on Monday. Sales of refrigerators, washing machines, TVs, air conditioners, and computers on JD.com increased by 128%, 86%, 130% 240% and 52% year-on-year respectively, reflecting policy effects, Zhao added.
MNI RBA PREVIEW - SEPTEMBER 2024: No Reason to Change Hawish Hold
The RBA meets on Tuesday September 24 and is unanimously expected to leave rates at 4.35% despite the OECD trend to cut. RBA Governor Bullock has made it clear that it is too soon to discuss easing and that current conditions mean there won't be a cut in the "near term". With the pause in monetary policy expected to be continued in September, the focus will be on the meeting statement and guidance. But with data since the August 6 meeting printing broadly in line with RBA expectations, and certainly since Bullock’s last speech on September 5, we don’t expect a shift in tone.
COMMODITIES (BBG): Iron Ore Falls as China’s Economic Woes Spotlight Demand Concern
Iron ore fell following fresh signs that China’s economy continues to struggle, hurting the outlook for consumption of the steel-making staple in the world’s largest importer. Futures dropped toward $90 a ton in Singapore after shedding more than 1% last week. Data on Friday showed that local governments in China cut spending as income from land sales fell, while the youth jobless rate hit the highest this year.
DATA
EUROZONE DATA (MNI): Composite PMI Re-enters Contractionary Territory In Sep Flash
- EUROZONE SEP FLASH MANUFACTURING PMI 44.8 (FCST 45.7); AUG 45.8
- EUROZONE SEP FLASH SERVICES PMI 50.5 (FCST 52.3); AUG 52.9
The Eurozone September flash PMI was unsurprisingly weaker than consensus for both services and manufacturing following this morning's German/French data. The September composite PMI was 48.9 (vs 50.5 cons, 51.0 prior), its first month in contractionary territory since February this year. Although output rose in the Eurozone excluding Germany and France, the expansion was weak, suggesting conditions are subdued across the region. Further details will be available in the Spanish and Italian PMIs next week.
GERMAN DATA (MNI): Weakest Manufacturing Reading in 12 Months
- GERMANY SEP FLASH MANUFACTURING PMI 40.3 (FCST 42.3); AUG 42.4
- GERMANY SEP FLASH SERVICES PMI 50.6 (FCST 51.0); AUG 51.2
The German flash manufacturing PMI printed its lowest since September 2023 at 40.3 (vs 42.3 cons, 42.4 prior). Services remained in expansionary territory at 50.6, but consensus had expected a stronger 51.0 print (vs 51.2 prior). Like the French flash reading, the report noted a softening of inflationary pressures. Combined with the weak activity outlook, this may tempt some dovish ECB policymakers into favouring a faster-than-quarterly pace of rate cuts. Key note from the release: "The drag from the manufacturing sector increased as goods production posted its steepest rate of contraction for 12 months (index at 40.5). At the same time, support to the economy from growth in the service sector continued to wane"
FRANCE DATA (MNI): Larger Than Expected Pullback in Flash Sep Services PMI
- FRANCE SEP FLASH MANUF PMI 44.0 (FCST 44.2); AUG 43.9
- FRANCE SEP FLASH SERVICES PMI 48.3 (FCST 53.1); AUG 55.0
The French services PMI fell much more than expected to 48.3 (vs 53.1 cons, 55.0 prior). This was the joint weakest reading since March this year and represents a significant unwind of last-months Olympic-induced bounce. The manufacturing PMI was also a little lower than expected at 44.0 (vs 44.2 cons, 43.9 prior) and has been in contraction since January 2023. Key note from the release: "With the Olympic Games in Paris coming to an end, panel members cited a drop-off in customer numbers, although there were mentions of generally subdued consumption from clients and cautiousness amongst buyers".
UK DATA (MNI): PMIs Soft But Better Than Eurozone Developments
- UK SEP FLASH MANUF PMI 51.5 (FCST 52.2); AUG 52.5
- UK SEP FLASH SERVICES PMI 52.8 (FCST 53.5); AUG 53.7
A miss of 0.6-0.7 points vs consensus for the UK PMIs across manuf, services and composite - but nowhere near the misses seen across the Eurozone, so could in some ways be seen as a marginal positive in the context of this morning's data. Developments in prices and employment are supportive of further cuts in our view, but confidence held up well and there are increasing concerns surrounding shipping costs, fiscal policy and global (particularly EU) demand. This should support a November cut, but shouldn't move the dial too much for December at this stage.
RATINGS: Portugal Positive at Fitch, DBRS Upgrade Ireland & Affirm France
Sovereign rating reviews of note from after hours on Friday included:
- Fitch upgraded Croatia to A-; Outlook Stable
- Fitch affirmed Portugal at A-; Outlook revised to Positive
- Fitch affirmed the United Kingdom at AA-; Outlook Stable
- Morningstar DBRS confirmed Cyprus at BBB (high), Trend changed to Positive
- Morningstar DBRS confirmed Finland at AA (high), Stable Trend
- Morningstar DBRS confirmed France at AA (high), Stable Trend
- Morningstar DBRS upgraded Ireland to AA, Stable Trend
- Morningstar DBRS confirmed Norway at AAA, Stable Trend
- Scope Ratings affirmed Latvia at A-; Outlook Stable
- Scope Ratings affirmed Lithuania at A; Outlook revised to Positive
FOREX: Broad EUR Weakness as Eurozone PMI Data Disappoints
- The Euro has come under substantial pressure on Monday amid a broad set of weaker-than-expected Eurozone PMI data. Concerns regarding the growth outlook in both France and Germany, and the associated dovish ECB repricing, has weighed on the single currency with EURUSD down 0.60% as we approach the US crossover.
- The Euro has weakened in equal proportion against the likes of AUD, NZD and CAD, however, EURJPY is a relative outlier given the ongoing sensitivity of the Japanese yen to adjustments in core fixed income markets.
- EURUSD has slumped back below the 1.11 handle at typing, although is yet to test the post-Fed lows of 1.1069. Spot does trade back below the 20-day EMA, intersecting today at 1.1088. A close below this level is required to signal scope for a deeper retracement. Below here, a key level remains at 1.1002, the Sep 11 low.
- For EURJPY, a bear cycle remains intact and the last week’s recovery is considered corrective. Moving average studies are in a bear-mode position and this continues to highlight a dominant downtrend. An extension lower would refocus attention on the key support at 154.42, the Aug 5 low.
- Continued resilience for the pound sees EURGBP hit the lowest point since August 2022. The break of 0.8400 and key support at 0.8383, the Jul 17 low, are technically significant and represent a resumption of the medium-term downtrend. Initial targets for the moves are 0.8340, the Aug 2 ’22 low and 0.8311, 3.00 projection of the Aug 8 - 13 - 14 price swing.
- US flash manufacturing and services PMI highlights the calendar later today, as markets await further comments from Fed officials. The RBA rate decision is due during APAC on Tuesday.
EGBS: Weak Flash PMI Drive Bull Steepening in Cash Curves, 10-year Spreads Widen
Bund futures are off intraday highs, but remain +72 ticks higher at 134.65 after the September flash PMIs signalled weak developments in output and new orders as well as softening inflationary pressures.
- The French services print saw a notable fall to 48.3 (vs 53.1 cons, 55.0 prior).
- The resulting dovish repricing in EUR STIRs (now 9bps of cuts priced through the October meeting vs 5bps this morning) has driven a bull steepening in cash curves.
- The German 2s10s curve disinverted for the first time since August 2022, currently hovering around zero.
- The weak growth signals from the PMIs have prompted a widening of 10-year EGB spreads to Bunds.
- The 10-year OAT/Bund spread briefly rose above 80bps for the first time since late-June, but has now narrowed back to ~78bps. Concerns around the stability of PM Barnier’s new cabinet continues to promote uncertainty.
- Today’s supply has included 5/20-year EU-bonds, while the ESM are issuing a new 3-year bond via syndication.
GILTS: Pullback From PMI-Driven High Extends
Gilts extend their pullback from session highs.
- Bulls tested 100.00 in futures after UK PMIs added to the soft run of survey readings seen this morning, before easing to 99.60.
- The bullish technical picture remains intact in the contract, despite the recent correction.
- Bulls ultimately need to break the Sep 17 high (101.54) to reignite the uptrend.
- Yields little changed to 2.5bp lower on the day, curve steepening.
- We noted that there was some downside risk to the PMIs on the back of the European readings/UK GfK consumer confidence data, making the miss less of a ‘surprise’ and helping explain the market reaction.
- All in all, the data supports the idea a November cut from the BoE but shouldn't move the dial too much for December at this stage.
- STIR markets agree with this assessment, showing 41bp of cuts through year-end and ~128bp of cuts through June ’25, little changed from early Monday levels.
- SONIA futures last 0.5-6.0 higher on the day, back from highs, with much of the rally coming after settlement on Friday.
- Comments from Chancellor Reeves are now eyed at around midday BST.
EQUITIES: Last Week's Gains Reinforce Bullish Theme in E-Mini S&P
Eurostoxx 50 futures traded higher this week as the contract extends the recovery since Sep 10. It is still possible that recent gains are corrective. MA studies remain in a bear-mode position and this highlights a downtrend. A reversal lower would refocus attention on key short-term support at 4757.00, the Sep 6 and 10 lows. Key resistance to watch is 5024.00, the Sep 3 high. A break would cancel a bearish theme and strengthen bullish conditions. A bull cycle in S&P E-Minis remains in play and last Thursday’s gains reinforce the current bullish condition. The contract has traded through a key and major resistance at 5785.00, the Jul 16 high and a bull trigger. A clear break of this hurdle would confirm a resumption of the long-term uptrend. Sights are on the 5800.00 handle next. First key support is 5608.93, the 50-day EMA. Initial support lies at 5657.35, the 20-day EMA.
- In China the SHANGHAI closed higher by 12.104 pts or +0.44% at 2748.918 and the HANG SENG ended 11.46 pts lower or -0.06% at 18247.11.
- Across Europe, Germany's DAX trades higher by 40.53 pts or +0.22% at 18761.48, FTSE 100 higher by 13.72 pts or +0.17% at 8243.76, CAC 40 down 33.34 pts or -0.44% at 7467.42 and Euro Stoxx 50 down 6.73 pts or -0.14% at 4865.35.
- Dow Jones mini down 23 pts or -0.05% at 42416, S&P 500 mini down 1 pts or -0.02% at 5760, NASDAQ mini up 1.25 pts or +0.01% at 20027.75.
Time: 09:50 BST
COMMODITIES: WTI Futures Maintain a Firm Tone at the Start of the Week
WTI futures traded higher last week and maintained a firmer tone. The recovery since Sep 9, appears - for now - to be a correction. The 20-day EMA, at $70.27, has been pierced. The next key resistance is $72.46, the 50-day EMA. Note that moving average studies are in a bear-mode set-up, highlighting a dominant downtrend. A reversal lower would refocus attention on $64.61, the Sep 10 low and bear trigger. A bullish structure in Gold remains intact and the metal has traded, once again, to a fresh all-time high. The move higher confirms a resumption of the primary uptrend and maintains 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 $2642.7 next, a Fibonacci projection. Firm support lies at $2539.0, the 20-day EMA.
- WTI Crude down $0.08 or -0.11% at $70.94
- Natural Gas up $0.06 or +2.38% at $2.491
- Gold spot down $4.47 or -0.17% at $2616.62
- Copper down $4.3 or -0.99% at $429.65
- Silver down $0.79 or -2.53% at $30.3896
- Platinum down $22.71 or -2.32% at $956.92
Time: 09:50 BST
MNI (LONDON)
| Date | GMT/Local | Impact | Country | Event |
| 23/09/2024 | 1200/0800 |  US | Atlanta Fed's Raphael Bostic | |
| 23/09/2024 | 1300/1500 |  EU | ECB's Cipollone statement on digital euro at Hearing | |
| 23/09/2024 | 1345/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 23/09/2024 | 1345/0945 | *** | US | S&P Global Services Index (flash) |
| 23/09/2024 | 1415/1015 | US | Chicago Fed's Austan Goolsbee | |
| 23/09/2024 | 1530/1730 | EU | ECB's Cipollone in panel discussion at House of the euros | |
| 23/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 23/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 24/09/2024 | - |  SE | Riksbank Meeting | |
| 24/09/2024 | 0030/0930 | ** |  JP | Jibun Bank Flash Japan PMI |
| 24/09/2024 | 0430/1430 | *** |  AU | RBA Rate Decision |
| 24/09/2024 | 0800/1000 | *** |  DE | IFO Business Climate Index |
| 24/09/2024 | 0900/1000 | * |  GB | Index Linked Gilt Outright Auction Result |
| 24/09/2024 | 1230/0830 | ** | US | Philadelphia Fed Nonmanufacturing Index |
| 24/09/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 24/09/2024 | 1300/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 24/09/2024 | 1300/0900 | ** | US | FHFA Home Price Index |
| 24/09/2024 | 1300/0900 | ** | US | FHFA Home Price Index |
| 24/09/2024 | 1300/1500 | ** |  BE | BNB Business Sentiment |
| 24/09/2024 | 1400/1000 | *** | US | Conference Board Consumer Confidence |
| 24/09/2024 | 1400/1000 | ** | US | Richmond Fed Survey |
| 24/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 24/09/2024 | 1700/1300 | * | US | US Treasury Auction Result for 2 Year Note |
| 24/09/2024 | 1710/1310 |  CA | BOC Governor Macklem fireside chat on "Growth During Uncertainty" | |
| 24/09/2024 | 2210/1810 | US | New York Fed's Roberto Perli |