MNI US OPEN - Fed's Bostic "Open" to Sept Rate Cut
EXECUTIVE SUMMARY
- FED’S BOSTIC ‘OPEN’ TO SEPTEMBER RATE CUT AS INFLATION COOLS
- NORGES BANK UNCHANGED, ONLY MINOR TWEAKS TO LANGUAGE
- UK GDP DATA BROADLY IN-LINE WITH EXPECTATIONS; UNDERLYING DATA A BIT SOFTER
- CHINA JULY OUTPUT, INVESTMENT SLOWS ON WEAK DEMAND
MNI (LONDON) - Figure 1: UK GDP expands 0.6% Q/Q, in-line with expectations
![](https://media.marketnews.com/image_6c5ce98a3b.png)
Source: ONS
NEWS
FED (FT): Bostic ‘Open’ to September Rate Cut as Inflation Cools
A top Federal Reserve official has said he is “open” to an interest rate cut in September as he warned that the US central bank can’t “afford to be late” to ease monetary policy amid signs of cooling in the labour market. Atlanta Fed president Raphael Bostic, a voting member of the central bank’s rate-setting committee, told the Financial Times that as price pressures eased officials also needed to be conscious of their mandate of maintaining full employment. “Now that inflation is coming into range, we have to look at the other side of the mandate, and there, we’ve seen the unemployment rate rise considerably off of its lows,” Bostic said.
US (WaPo): Robert F. Kennedy Jr. Tried to Meet With Kamala Harris to Discuss Cabinet Job
Independent presidential candidate Robert F. Kennedy Jr. sought a meeting last week with Democratic nominee Kamala Harris to discuss the possibility of serving in her administration, perhaps as a Cabinet secretary, if he throws his support behind her campaign and she wins, according to Kennedy campaign officials. Harris and her advisers have not responded with an offer to meet or shown interest in the proposal, say people familiar with the conversations. The Kennedy outreach, made through intermediaries, follows a meeting in Milwaukee last month between Kennedy and Republican nominee Donald Trump to discuss a similar policy role and endorsement that resulted in no agreement.
US (BBG): Trump Downplays Economy’s Significance as He Shifts Strategy
Republican nominee Donald Trump cast doubt on the economy as the most important election issue, one in which he has a significant voter trust advantage over his rival, Kamala Harris, who is planning to make a speech about consumer prices later this week. “Now this is a little bit of a different day, because we’re talking about a thing called the economy. They wanted to do a speech on the economy,” Trump said at a rally in Asheville, North Carolina, on Wednesday, in an apparent reference to his campaign aides. “They say it’s the most important subject, I’m not sure it is, but they say it’s the most important subject. Inflation is the most important but that’s part of the economy,” Trump said.
US (BBG): Harris Will Propose ‘Price Gouging’ Ban on Food and Groceries
US Vice President Kamala Harris will call for a federal ban on food and grocery price gouging as part of a broader set of proposals intended to reduce consumer costs, her campaign said in a preview of the first policy speech of her nascent presidential bid. The Democratic nominee is promising to target price gouging and price-fixing within her first 100 days in office, along with other measures to ease the burden of high prices that have weighed on American households and contributed to many voters’ low marks for President Joe Biden’s handling of the economy.
NORGES BANK (MNI): Rates Unchanged, With Only Minor Tweaks to Language
Norges Bank keep policy rates unchanged, as expected, with the statement broadly inline with expectations. They note: "Based on our current assessment of the outlook, the policy rate will likely be kept at the current level for some time ahead." On the currency: "Committee was particularly concerned with developments in the krone exchange rate and the potential implications for inflation." They add the word "particularly" there from prior guidance in June, where they said: "we are concerned with the krone exchange rate." Policy rate kept at current level "for some time ahead" - fits with the up-rated language from June ("at today's level for some time and somewhat longer than we had envisaged earlier.")
UK (The Times): Tories Accuse Government of ‘Caving In’ with 15% Rail Pay Offer
Two years of rail strikes appeared to be nearing their end after ministers offered drivers a 15 per cent pay rise to settle the dispute. Union bosses said the offer had “no strings” and have recommended the deal to members in a move that raises hopes for resolving strikes that have caused months of misery for commuters. Ministers argue that a rise worth thousands of pounds to the average driver is a price worth paying for resolving industrial disputes that have cost hundreds of millions of pounds.
EUROPE (BBG): Italy and Balkans on Heat Alert as Greece Braces for Wildfires
Heat warnings are in place for Italy and large parts of the Balkans, with extreme rain forecast for the Spanish island of Mallorca. There are red alerts across southern Italy, including Sicily and Calabria, plus the Lazio region around Rome. The temperature will climb to as high as 42C (108F) on Thursday in mainland Greece, which is bracing for more wildfires as winds pick up in the Aegean Sea. Croatia, Serbia and Hungary are also under heat warnings.
CHINA (MNI): PBOC Delays Monthly Operation, Weakens MLF Role
MNI (Beijing) The People’s Bank of China has delayed the monthly operation of its medium-term lending facility, further downplaying its role as a key policy rate. The PBOC will conduct the operation on Aug 26, while a total of CNY401 billion of one-year MLF will mature this month, according to a statement on the central bank’s website on Thursday. The Bank typically conducts its MLF exercise on the 15th of each month as long as it is a trading day. This is the second time it has broke with tradition after it unexpectedly operated CNY200 billion MLF on July 25 with a 20 basis point cut of the rate to 2.3%.
CHINA (MNI): China July Daily Crude Steel Output Down
MNI (Beijing) China’s daily crude steel output averaged 2.68 million tonnes in July, down 12.4% from June, according to Mysteel calculations based on official data released on Thursday. Mills reduced output and increased maintenance to deal with falling profits caused by lower demand and prices, Mysteel said. China's crude steel production overall fell 9% to 82.9 million tonnes in July, bringing overall output to 613.7 million tonnes so far this year, 2.2% lower y/y, National Bureau of Statistics data released earlier on Thursday showed.
RBNZ (BBG): Orr Says RBNZ In Different Monetary Policy Position to Australia
RBNZ Governor Adrian Orr addresses Australian monetary policy in response to a question at parliament’s finance and expenditure select committee Thursday in Wellington. “We are in a very different monetary policy position, different inflation control position and having some different things going on in our economy.” Says Australia has got different starting positions to NZ. “Their spare capacity is less, they still have some asset price challenges, net immigration has been continuing to be stronger, and they do not have the same level of monetary restraint on the economy at the moment. And they have a strong fiscal expansionary fiscal budget.”
RUSSIA/UKRAINE (MNI): Ukraine Not Interested In Occupying Russian Territory - Pres. Adviser
Ukraine's assault into Russia's Kursk oblast continues amid a fog of war that makes verifying any claims of territorial gain or defence by either side a difficult prospect. A short time ago, Russian state-run RIA reported comments from Chechen Akhmat special forces commander Apti Alaudinov claiming that Ukrainian troops do not have full control over the town of Sudzha. Given the strategically important gas transit terminal located outside the town, the status of fighting in and around Sudzha has critical importance for eastern European gas supplies in particular.
PHILIPPINES (BBG): Philippines Pivots to Easing as Price Worries Take Backseat
The Philippines cut interest rates for the first time in almost four years and signaled more to come, as policymakers look to preserve the momentum of economic growth. The Bangko Sentral ng Pilipinas reduced the target rate by 25 basis points to 6.25% on Thursday, as expected by 13 of 23 economists in a Bloomberg survey. The rest had seen no change. The central bank said risks to inflation are tilted to the downside, supporting the case for the easing to continue. The BSP had delivered 450 basis points worth of tightening to tame consumer prices post-pandemic.
COMMODITIES (BBG): Iron Ore Hits Lowest Since 2022 as Steel Crisis Rattles Market
Iron ore hit the lowest level since 2022 on concern that global supply is running ahead of demand, with China’s steelmakers mired in a crisis and cutting output just as major miners boost exports. Futures sank for a fourth day in Singapore, falling below $94 a ton, as data from China showed mills reduced steel production to about 83 million tons last month, 9% lower than a year earlier. The country is the largest importer of seaborne iron ore, and sets the tone in the global market.
HEALTH (RTRS): WHO Declares Mpox a Global Public Health Emergency for Second Time in Two Years
The World Health Organization on Wednesday declared mpox a global public health emergency for the second time in two years, following an outbreak of the viral infection in Democratic Republic of Congo that has spread to neighbouring countries.
DATA
UK DATA (MNI): Headline GDP Data Broadly In-Line; Underlying Data a Bit Softer
- UK JUN GDP +0% M/M, +0.6% 3MM, +0.9% 3M Y/Y
- UK Q2 PRELIM GDP 0.6% Q/Q, 0.9% Y/Y
- UK JUN IND PROD +0.8% M/M, -1.4% Y/Y
- UK JUN MANUF OUTPUT +1.1% M/M, -1.5% Y/Y
- UK JUN TRADE BALANCE GBP -5.32BN
No real market reaction with the headline quarterly GDP and monthly GDP both in line with consensus expectations. The breakdown is disappointing for quarterly GDP. Consumption was softer than expected, as was investment while government spending was higher. Exports were stronger, but imports also grew significantly. Looking at the monthly breakdown, services were soft (falling -0.1% M/M, driven by soft retail / wholesale trade) while manufacturing and construction were both stronger than expected). The monthly trade balance was a bit worse than expected. The ONS does note that there was industrial action in some industries - highlighting the junior doctors strikes impacting human health output (within services).
CHINA DATA (MNI): China July Output, Investment Slows on Weak Demand
- CHINA JUL RETAIL SALES +2.7% Y/Y VS MEDIAN +2.7% Y/Y
- CHINA JUL INDUSTRIAL OUTPUT +5.1% Y/Y VS MEDIAN +5.4% Y/Y
- CHINA JUL UNEMPLOYMENT RATE +5.2% VS JUN +5.0%
MNI (Beijing) China's economy slowed further in July with weak demand taming production and investment more than expected, though consumption rebounded moderately on summer vacation, data released by the National Bureau of Statistics on Thursday showed. Retail sales grew 2.7% y/y in July, accelerating from June's 2.0% gain and in line with the 2.7% forecast. Retail sales grew 3.5% y/y in Jan-Jul, lower than the 3.7% in H1. Industrial production rose 5.1% y/y in July, decelerating for the third month from June's 5.3% growth but underperforming the expected 5.4%. Industrial output grew 5.9% in Jan-Jul, compared to the 6.0% in H1.
JAPAN DATA (MNI): Japan Q2 GDP Grows 0.8% Q/Q, Stronger Than Expected
- JAPAN Q2 REAL GDP +3.1% ANNUALIZED; MNI MEDIAN +2.2%
- JAPAN Q2 REAL GDP +0.8% Q/Q; MNI MEDIAN +0.5%
- JAPAN Q2 CONSUMPTION +1.0% Q/Q; +0.5 PP CONTRIBUTION
Japan's economy grew 0.8% q/q in Q2, or an annualised 3.1%, the first growth in two quarters and higher than market expectations, following strong recovery in, private consumption and capital investment, preliminary GDP data released by the Cabinet Office Thursday showed. The result follows Q1's revised -0.6% q/q, or an annualised 2.3%, fall in Q1. The print was in line with Bank of Japan officials view, which had expected private consumption to rebound, and was higher than MNI's median forecast which pointed to a 0.5% q/q rise, or an annualised 2.2%.
AUSTRALIA DATA (MNI): Aussie Unemployment at 4.2%, Job Creation Strong
- AUSTRALIA JUL EMPLOYED PERSONS CHANGE 58.2K
- AUSTRALIA JUL F-T EMPLOYED PERSONS CHANGE 60.5K
- AUSTRALIA JUL LABOR PARTICIPATION RATE +67.1%
- AUSTRALIA JUL UNEMPLOYMENT RATE +4.2%
Australia’s unemployment rate rose to 4.2% in July, up 20 basis points over June and 10bp higher than anticipated, while over 58,000 jobs were created, almost 40,000 more than market expectations. Over 60,000 fulltime jobs were created last month, while part-time employment decreased by 2,300. The participation rate also grew to 67.1% from 66.9%. “The employment-to-population ratio rose by 0.1 percentage point to 64.3%, indicating employment growth was faster than population growth, and was just below the historical high of 64.4% in November 2023,” said Kate Lamb, head of labour statistics at the ABS.
NEW ZEALAND DATA (MNI): Monthly CPI Data Mixed
July monthly prices, which account for around 40% of the CPI basket, were mixed with most showing lower or steady inflation rates except food which picked up. Rental and petrol inflation also moderated. The data are a good start to Q3 and though food picked up, food inflation remains low. The RBNZ revised down its Q3 CPI expectations to 2.3% y/y. Food prices rose 0.4% m/m bringing the annual rate up to +0.6% y/y from -0.3% and ex fresh fruit & veg it eased to 2.0% y/y from 2.3%. Grocery inflation moderated in the month too.
FOREX: EUR/USD Consolidating, But Keeping Pressure on USD Index
- Having faded off the Wednesday high (and best level since January 1st) into yesterday's close, EUR/USD is consolidating, but holding just above the $1.10 handle. We wrote earlier this week that Fed pricing need not revisit the pricing extremes from earlier in the month of 125bps cuts this year in order for the USD Index to return lower - and yesterday's price action supports that theory. The USD Index bottomed out at 102.270 before recovering slightly - leaving this level, and 102.160, as key near-term support.
- CHF is the poorest performer in G10 at typing, as markets continue to sell the sharp rally in the currency into the start of August. With AUD faring better on more stable equities, AUD/CHF is pressuring the weekly highs and horizontal resistance layered between 0.5750-51. Clearance here puts the cross clear of the 50% retracement for the downleg posted off the July high, opening 0.5809 and above.
- Lastly, NOK has seen some buying interest following the Norges Bank rate decision, which kept policy unchanged - as expected, but moderately uprated their concern over the course of the currency, stating that the committee are "particularly concerned" with developments in currency rates.
- US July retail sales data takes focus for the session ahead, with markets expecting advance sales to pick up to +0.4% from 0.0% previously. Import and export price indices are also due, as well as the weekly jobless claims release and July industrial production numbers. Central bank speaker highlights include Fed's Musalem, who address the economy and policy, followed by Harker at the Philly Fed.
BONDS: Gilts Unwind Some of Yesterday’s Outperformance vs. EGBs
Bunds -27 at 134.82, German yields 1-2bp higher.
- EGB spreads vs. Bunds are within 1bp of yesterday’s closing levels, some light outperformance for OATs & BTPs.
- Redeployment of backflows from coupon payments and redemptions may be providing support for Italian paper.
- The Assumption Day holiday will be limiting activity in EGBs.
- Gilt futures -35 at 100.41, comfortably within yesterday’s range.
- Technical setup in that contract remains bullish, initial resistance at yesterday’s high (100.80).
- Yields 2-3bp higher across the curve.
- Gilts didn’t react to UK GDP data which matched wider expectations.
- UK paper gives back some of yesterday’s CPI-driven outperformance vs. EGBs.
- ECB & BoE-dated OIS pricing little changed vs. levels seen late yesterday, showing ~25bp & ~8.5bp of cuts for respective Sep meetings.
- Little of note on the European & UK schedules through the remainder of the day, which will leave focus on U.S. weekly jobless claims and retail sales data.
- Fedspeak from Musalem & Harker is also due.
EQUITIES: Bear Threat in Eurostoxx 50 Futures Remains Present Despite Recovery
A bear threat in Eurostoxx 50 futures remains present and the latest climb appears to be a correction - for now. Attention is on first resistance at 4774.23, the 20-day EMA. A break of this hurdle would signal scope for a stronger retracement, towards key resistance at the 50-day EMA, at 4868.21. For bears, a reversal lower would signal the end of the correction and refocus attention on the bear trigger at 4494.00, the Aug 5 low. Short-term gains in S&P E-Minis are - for now - considered corrective. However, Tuesday’s strong rally delivered a print above the 50-day EMA, at 5454.71. A clear break of this average would undermine the recent bearish theme and instead signal scope for a stronger recovery. This would open 5579.35, a Fibonacci retracement. A reversal lower would refocus attention on the bear trigger at 5120.00, the Aug 5 low.
- Japan's NIKKEI closed higher by 284.21 pts or +0.78% at 36726.64 and the TOPIX ended 18.85 pts higher or +0.73% at 2600.75.
- Elsewhere, in China the SHANGHAI closed higher by 26.704 pts or +0.94% at 2877.358 and the HANG SENG ended 4.22 pts lower or -0.02% at 17109.14.
- Across Europe, Germany's DAX trades higher by 59.45 pts or +0.33% at 17944.88, FTSE 100 higher by 0.36 pts or +0% at 8281.52, CAC 40 up 8.15 pts or +0.11% at 7341.55 and Euro Stoxx 50 up 11.39 pts or +0.24% at 4738.74.
- Dow Jones mini up 69 pts or +0.17% at 40187, S&P 500 mini up 1.5 pts or +0.03% at 5478.5, NASDAQ mini up 11.75 pts or +0.06% at 19127.5.
Time: 09:50 BST
COMMODITIES: WTI Futures Trading Close to This Week's Lows
WTI futures rallied sharply higher Monday. The move undermines a recent bearish theme and price has traded through both the 20- and 50-day EMAs. A continuation higher would signal scope for a climb towards $80.77, a Fibonacci retracement. Clearance of this level would open $83.58, the Jul 5 high. On the downside, the contract has pulled back from the recent high. A stronger sell-off would refocus attention on key support at $71.67, Aug 5 low. Gold is holding on to its latest gains. Recent weakness appears to be corrective and the trend structure remains bullish. Note that the yellow metal has recently pierced support at the 50-day EMA - currently at $2389.0. A clear break of it would signal scope for a deeper retracement towards $2277.4, the May 3 low and a key support. Attention is on $2483.7, the Jul 17 high and a bull trigger. Clearance of this hurdle would resume the uptrend.
- WTI Crude up $0.21 or +0.27% at $77.22
- Natural Gas up $0 or +0.18% at $2.223
- Gold spot up $8.01 or +0.33% at $2455.88
- Copper up $6.2 or +1.52% at $413.55
- Silver up $0.46 or +1.68% at $28.0311
- Platinum up $11.69 or +1.26% at $939.35
Time: 09:50 BST
Date | GMT/Local | Impact | Country | Event |
15/08/2024 | 1230/0830 | *** | ![]() | Jobless Claims |
15/08/2024 | 1230/0830 | ** | ![]() | WASDE Weekly Import/Export |
15/08/2024 | 1230/0830 | ** | ![]() | Import/Export Price Index |
15/08/2024 | 1230/0830 | ** | ![]() | Wholesale Trade |
15/08/2024 | 1230/0830 | *** | ![]() | Retail Sales |
15/08/2024 | 1230/0830 | ** | ![]() | Empire State Manufacturing Survey |
15/08/2024 | 1230/0830 | ** | ![]() | Philadelphia Fed Manufacturing Index |
15/08/2024 | 1300/0900 | * | ![]() | CREA Existing Home Sales |
15/08/2024 | 1310/0910 | ![]() | St. Louis Fed's Alberto Musalem | |
15/08/2024 | 1315/0915 | *** | ![]() | Industrial Production |
15/08/2024 | 1400/1000 | * | ![]() | Business Inventories |
15/08/2024 | 1400/1000 | ** | ![]() | NAHB Home Builder Index |
15/08/2024 | 1430/1030 | ** | ![]() | Natural Gas Stocks |
15/08/2024 | 1530/1130 | ** | ![]() | US Bill 04 Week Treasury Auction Result |
15/08/2024 | 1530/1130 | * | ![]() | US Bill 08 Week Treasury Auction Result |
15/08/2024 | 1710/1310 | ![]() | Philly Fed's Pat Harker | |
15/08/2024 | 2000/1600 | ** | ![]() | TICS |
16/08/2024 | 0600/0700 | *** | ![]() | Retail Sales |
16/08/2024 | 0900/1100 | * | ![]() | Trade Balance |
16/08/2024 | 1215/0815 | ** | ![]() | CMHC Housing Starts |
16/08/2024 | 1230/0830 | * | ![]() | International Canadian Transaction in Securities |
16/08/2024 | 1230/0830 | ** | ![]() | Monthly Survey of Manufacturing |
16/08/2024 | 1230/0830 | *** | ![]() | Housing Starts |
16/08/2024 | 1400/1000 | ** | ![]() | U. Mich. Survey of Consumers |
16/08/2024 | 1700/1300 | ** | ![]() | Baker Hughes Rig Count Overview - Weekly |