EXECUTIVE SUMMARY
- ECB MUST CUT FURTHER WITH DATA DETERMINING PACE, SIMKUS SAYS
- FORMER FED PRESIDENT DUDLEY SEES CASE FOR HALF-POINT FED RATE CUT NEXT WEEK
- BIDEN MEETS STARMER AS PUTIN WARNS OF 'SIGNIFICANT CHANGE' IN CONFLICT
- XI URGES EFFORTS TO HIT 5% GROWTH TARGET AMID RISING DOUBTS
Figure 1: Contributions to Eurozone M/M Industrial Production (%)
Source: MNI/Eurostat
NEWS
FED (BBG): Dudley Sees Case for Half-Point Fed Rate Cut Next Week
Former Federal Reserve Bank of New York President William Dudley said there’s scope for a half-point rate cut at the central bank’s meeting next week. “I think there’s a strong case for 50,” Dudley said on Friday at a forum organized by The Bretton Woods Committee in Singapore. “I know what I’d be pushing for.” Dudley, who led the New York Fed until 2018, is a Bloomberg Opinion columnist and now chair of the Bretton Woods Committee.
FED (FT): Federal Reserve Wrestles With How Aggressively to Cut Interest Rates
The Federal Reserve faces a close call on whether to cut US interest rates by a larger than expected half-point next week or go with a quarter-point move as officials wrestle with how quickly to ease monetary policy. Questions over the size of the cut come as futures markets increasingly price in a more modest quarter-point reduction from the Fed when its pivotal meeting concludes on Wednesday.
US (BBG): Trump Pledges No Taxes on Overtime in Pitch to Blue-Collar Vote
Republican Donald Trump pledged to eliminate taxes on overtime pay at a rally days after a shaky debate performance, as the presidential nominee looked to turn the page with a new populist tax cut proposal. “We will end all taxes on overtime,” Trump said Thursday at a rally in Tucson, Arizona. “The people who work overtime are among the hardest working citizens in our country and for too long, no one in Washington has been looking out for them.”
ECB (BBG): ECB Eyes Risks of Inflation Below and Above Goal, Villeroy Says
The European Central Bank must be careful not to undershoot or overshoot its inflation target as it continues to gradually cut interest rates, Bank of France Governor Francois Villeroy de Galhau said. “Unlike the US, we don’t have a dual mandate - prices/employment - but we have clearly a symmetric mandate around our 2% target,” he said according to prepared remarks for a speech at the Eurofi conference. “We must be attentive to the risk of undershooting our target as much as to the risk of overshooting it.”
ECB (BBG): ECB Must Cut Further With Data Determining Pace, Simkus Says
The European Central Bank must continue to lower borrowing costs, though the pacing of such moves will dependent on incoming data, according to Governing Council member Gediminas Simkus. Inflation is “calming down” and “its trajectory suggests that further rate cuts must happen,” he told Radio LRT on Friday. “Rates will continue declining, but the speed of cuts will depend on data.”
ECB (BBG): ECB Had ‘Good Reasons’ for Rate Cut Amid Slowing Inflation, Rehn Says
The European Central Bank had “good reasons” to ease monetary policy on Thursday and cut interest rates as inflation continues to slow down with expectations for price gains near the central bank’s inflation target, according to Governing Council member Olli Rehn. On the other hand, the growth outlook for the euro area economy is more muted than predicted amid weakness in the industry, Rehn says in a blog post published on the Bank of Finland website on Friday.
ECB (BBG): Confidence Growing That Inflation Is Slowing, Muller Says
Inflation’s momentum is slowing across the euro area and there’s growing confidence that it’s becoming a thing of the past, European Central Bank Governing Council Member Madis Muller said in a written statement. The ECB’s decision to cut its deposit rate by 25bps on Thursday will help support the economy, Muller said Friday. The period of extremely low rates that lasted until the start of 2022 was unusual and probably won’t return, he said.
SECURITY (MNI): Biden Meets Starmer as Putin Warns of 'Significant Change' in Conflict
Ahead of the meeting today between US President Joe Biden and UK PM Sir Keir Starmer at the White House, focus is on the prospect of assent (or at least an indication of assent) being given to Ukraine to use long-range missiles made in the West to target sites in the Russian Federation as part of Kyiv's efforts to repel the invasion. Speaking on 12 Sep, Russian President Vladimir Putin said, when questioned on the prospect by reporters, that "This would in a significant way change the very nature of the conflict...It would mean that NATO countries, the U.S., European countries, are at war with Russia...If that's the case, then taking into account the change of nature of the conflict, we will take the appropriate decisions based on the threats that we will face."
FRANCE (MNI): Barnier Facing Difficulty in Putting Cabinet Together
Prime Minister Michel Barnier is facing difficulty in putting together his cabinet, with another potential minister announcing today that he had been contacted about joining the gov't, only to refuse the invitation. Stéphane Le Foll, who served as Minister of Agriculture under former president Francois Hollande said this morning that in a call on 10 Sep he had been invited by Barnier to become a minister. Le Foll said that he gave "a firm and definitive" no, but wished the new PM "a lot of courage", adding that he expected Barnier to lead a "right-wing gov't".
BOJ (MNI EXCLUSIVE): BOJ Hikes to Weather Weaker Consumption
Weaker consumption will not derail the BOJ's hiking plans. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
CHINA (BBG): Xi Urges Efforts to Hit 5% Growth Target Amid Rising Doubts
Chinese President Xi Jinping called on government officials at all levels to achieve the country’s annual growth target of around 5%, but couched it in less forceful terms than usual. The subtle change sparked speculation over Beijing’s resolve to pursue a goal that many economists see as increasingly out of reach. Officials need to “strive to achieve the full-year economic and social development goals,” Xi told a meeting he chaired in Lanzhou in the country’s northwestern province of Gansu.
CHINA (MNI): China to Extend Retirement Age
MNI (Beijing) China will extend the statutory retirement age by three to five years at a gradual pace over the next 15 years starting from next year as aging demographics weigh on the economy, according to the Standing Committee of the National People's Congress. The statutory retirement age for males will be gradually extended from 60 to 63 years. Regular female workers will see their retirement extended five years to 55, while women in government leadership or management positions will by able to collect a pension at 58, three years later, the country's top legislator revealed.
RBNZ (BBG): RBNZ Board Rejects Code-of-Conduct Claim Against Governor Orr
The Reserve Bank of New Zealand Board has resolved that Governor Adrian Orr did not breach the bank’s code of conduct in his row with a think tank over bank capital requirements. “The Reserve Bank Board has reviewed the complaint and determined not to uphold it,” Chair Neil Quigley said in an emailed response to questions Friday in Wellington. He declined to provide any further comment. The allegation against Orr was made by the New Zealand Initiative, a business-funded think tank, in letters to both Quigley and Finance Minister Nicola Willis in late May. Details of the claim were never disclosed but followed Orr’s response to criticism of the RBNZ by New Zealand Initiative Chair Roger Partridge.
RUSSIA/NORTH KOREA (MNI): Kim Jong Un Meets w/Russia's Shoigu
Russian state media has confirmed that Secretary of the Security Council Sergei Shoigu has met with North Korea's Supreme Leader Kim Jong Un in Pyongyang. A statement from the Security Council said the two held a 'substantive exchange of views...on a wide range of issues on the bilateral and international agenda.' Russian state media said the meeting 'took place in an exceptionally trusting, friendly atmosphere in line with the agreements between the leaders of the two countries.'
COMMODITIES (BBG): Iron Ore Set for Weekly Gain on China Steel-Recovery Speculation
Iron ore headed for its third weekly gain in the past four on speculation Chinese demand may be showing early signs of improvement after a prolonged slump. Futures for the steelmaking staple rose for a third day, to around $95 a ton in Singapore, and were up more than 3% for the week. The uptick has helped boost miners’ shares, with Rio Tinto Group, BHP Group Ltd. and Fortescue Ltd. all advancing in Sydney this week.
DATA
EUROZONE DATA (MNI): Industrial Production Higher Than Exp: Driven by Belgium, Ireland
- EUROZONE JUL IP -0.3% M/M, -2.2% Y/Y
Eurozone industrial production was higher than consensus expectations at -0.3% M/M in-line with MNI's tracking (vs -0.5% consensus, 0.0% revised prior from -0.1%). The annual reading was also higher than expected at -2.2% Y/Y (vs -2.4% consensus, -4.1% revised prior from -3.9%). The reading is largely driven by Ireland and Belgium with the former seeing industrial production jump 9.2% M/M (vs a fall of 7.8% in June) - the highest reading since March 2023. Belgium recorded a 7.3% M/M increase reversing last month's 7.0% fall, and the highest sequential reading since September 2022. We estimate Eurozone ex-Ireland industrial production in July to have fallen 1.1% M/M.
FRANCE DATA (MNI): Final HICP Broadly In-Line With Flash, CPI a Touch Softer
- FRANCE AUG CPI +0.5% M/M, +1.8% Y/Y
- FRANCE AUG HICP +0.6% M/M, +2.2% Y/Y
France Final HICP data for August was broadly in-line with the flash reading at 2.19% (vs 2.23% flash, 2.70% July), and 0.60% M/M (vs 0.64% flash, 0.20% in July). Rounded to 1dp these numbers were unrevised. Recall, flash HICP Y/Y came in 0.1pp above consensus. France national CPI came in 0.05ppt below flash at 1.83% Y/Y (vs 1.88% flash, 2.30% in July), and 0.53% M/M (vs 0.58% flash, 0.18% prior). Rounded to 1dp there was a 0.1ppt downward revision to both Y/Y and M/M. Seasonally adjusted national CPI softened to 0.22% M/M in August from 0.38% in July
RATINGS: Updates on Spain & Greece Headline After Market
Sovereign credit rating reviews of note scheduled for after hours on Friday include:
- Fitch on Germany (current rating: AAA; Outlook Stable) & Malta (current rating: A+; Outlook Stable)
- Moody’s on Greece (current rating: Ba1; Outlook Stable), Luxembourg (current rating: Aaa, Outlook Stable) & Spain (current rating: Baa1, Outlook Positive)
- S&P on Croatia (current rating: BBB+; Outlook Positive) & Spain (current rating: A; Stable)
- Scope Ratings on South Africa (current rating: BB; Outlook Stable)
FOREX: Further Volatile Swings for Japanese Yen, USDJPY Approaches 140.25
- With press articles and ex-Fed commentary boosting the chances of a 50bp FOMC cut next week, the USD index has fallen 0.35% on Friday. As expected, the greenback strength is most noticeable against the Japanese yen, with its sensitivity to moves in core fixed income remaining at elevated levels.
- Accordingly, USDJPY has broadly been on the back foot, trading down to a 140.65 low ahead of the European open and then reaching as low as 140.41 in recent trade. Price action narrows the gap to a key support at 140.25, the Dec 28 low, which would place the pair at its lowest level since July 2023.
- Strength for the low yielders has also boosted the Swiss Franc, with USDCHF down 0.3%, although it is worth noting the pair remain around 50 pips higher on the week.
- Elsewhere, the likes of AUD, NZD and CAD remain broadly unchanged against the dollar, as potential gains are offset by cross/JPY flow.
- EURUSD stands 0.15% stronger on the session, mainly owing to its weighting within the DXY and is more reflective of the adjustment to Fed pricing. EURUSD has breached initial resistance at 1.1091, the Sep 09 high, and the market’s focus will be on key short-term resistance at 1.1155, the Sep 6 high. A break of it would be a bullish technical development.
- Later today, we have preliminary UMich sentiment and inflation expectations data. Chinese activity data will be eyed over the weekend.
EGBS: Supported by Fed Rate Cut Speculation
Bund futures gapped higher overnight, following US Treasuries higher amid growing speculation around a 50bp Fed cut next week. Since then, Bunds have been little changed, leaving futures +22 versus yesterday’s settlement at 134.95.
- Yesterday’s high provides (135.49) the first resistance, shielding the bull trigger which remains at 135.66 (Aug 5 high).
- There have been no less than 7 ECB speakers this morning following yesterday’s meeting, but none have added much new to yesterday’s guidance, where a “data-dependent and meeting-by-meeting” approach was retained. President Lagarde is scheduled to speak at 1030BST too.
- Eurozone industrial production was -0.3% M/M (in line with consensus), but we estimate that it fell 1.1% M/M when excluding the volatile Irish numbers.
- Short-end yields have been pulled lower by post-settlement rally in STIR markets, helping the German 2s10s curve to bull steepen ~1.5bps.
- 10-year peripheral spreads to Bunds are a little tighter. S&P and Moody’s are scheduled to review Spain’s sovereign rating after hours, with the latter also reviewing Greece.
GILTS: Early Rally Holds
Gilts rally alongside core global FI markets
- Dovish press articles and comments from ex-central bankers covering next week’s Fed decision have increased market-implied odds of a 50bp cut at that meeting, supporting bonds.
- Futures stick within yesterday’s range, last +21 at 101.16.
- Technicals in the contract remain bullish. Initial resistance at yesterday’s high (101.51), with support at the Sep 10 high (100.64).
- Yields ~2bp lower across the curve.
- SONIA futures flat to +4.0, just off session highs.
- BoE-dated OIS shows ~48.5bp of cuts through year-end and ~135bp of cuts through mid-’24.
- Outcomes within the BoE/Ipsos inflation attitudes were mixed (0.1ppt lower 1 year out, 0.1ppt higher for longer-run), with little feedthrough into markets, as to be expected.
- Wider cross-market moves and broader headline flow will dictate ahead of the weekend, with the UK calendar essentially empty.
EQUITIES: This Week’s Recovery E-Mini S&P Highlights a Bullish Reversal
Despite a short-term bounce, Eurostoxx 50 futures continue to trade closer to their recent lows. The latest move down has resulted in a break of both the 20- and 50-day EMAs. A resumption of the bear leg would signal scope for weakness towards 4686.53, a Fibonacci retracement point. Initial key short-term resistance has been defined at 4998.00, the Sep 3 high. First resistance is at 4865.79, the 50-day EMA. This week’s recovery in S&P E-Minis, highlights a bullish reversal and the end of the corrective cycle between Sep 3 - 6. The contract is trading above the 20- and 50-day EMAs and a continuation higher would signal scope for a test of 5669.75, the Sep 3 high. Clearance of this level would open 5721.25, the Jul 16 high and bull trigger. On the downside, a reversal lower and a breach of 5394.00, the Sep 6 low, would reinstate a bearish theme.
- Japan's NIKKEI closed lower by 251.51 pts or -0.68% at 36581.76 and the TOPIX ended 21.36 pts lower or -0.82% at 2571.14.
- Elsewhere, in China the SHANGHAI closed lower by 13.033 pts or -0.48% at 2704.09 and the HANG SENG ended 128.7 pts higher or +0.75% at 17369.09.
- Across Europe, Germany's DAX trades higher by 66.06 pts or +0.36% at 18582.62, FTSE 100 lower by 7.84 pts or -0.1% at 8232.55, CAC 40 up 16.28 pts or +0.22% at 7450.54 and Euro Stoxx 50 up 10.59 pts or +0.22% at 4824.
- Dow Jones mini up 23 pts or +0.06% at 41169, S&P 500 mini up 5.5 pts or +0.1% at 5607.75, NASDAQ mini down 3.75 pts or -0.02% at 19443.75.
Time: 09:55 BST
COMMODITIES: Thursday's Gains Reinforce Bullish Structure in Gold
WTI futures remain in a bearish condition. Tuesday’s strong sell-off reinforces current conditions and confirmed an extension of the bear cycle. This suggests that the most recent bounce is a short-term correction. A resumption of the downtrend would open $63.93 next, a Fibonacci projection point, ahead of the psychological $60.00 handle. Firm resistance is at $71.32, the 20-day EMA. A bullish structure in Gold remains intact and yesterday’s gains have reinforced this theme - the metal traded to a new all-time high. This ends the recent consolidation - a pause in the uptrend - and maintains the bullish price sequence of higher highs and higher lows. MA studies are in a bull-mode set-up, highlighting a clear uptrend. The focus is on $2584.0, a Fibonacci projection. Firm support lies at $2501.2, the 20-day EMA.
- WTI Crude up $0.37 or +0.54% at $69.37
- Natural Gas up $0.02 or +0.93% at $2.379
- Gold spot up $11.43 or +0.45% at $2569.12
- Copper up $0.75 or +0.18% at $420.4
- Silver up $0.25 or +0.82% at $30.1195
- Platinum up $5.77 or +0.59% at $987.8
Time: 09:55 BST
MNI (LONDON)
| Date | GMT/Local | Impact | Country | Event |
| 13/09/2024 | - | *** |  CN | Money Supply |
| 13/09/2024 | - | *** | CN | New Loans |
| 13/09/2024 | - | *** | CN | Social Financing |
| 13/09/2024 | - |  EU | ECB's Lagarde in Eurogroup meeting | |
| 13/09/2024 | 1230/0830 | ** |  US | Import/Export Price Index |
| 13/09/2024 | 1230/0830 | ** |  CA | Wholesale Trade |
| 13/09/2024 | 1400/1000 | ** | US | U. Mich. Survey of Consumers |
| 13/09/2024 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 14/09/2024 | 0200/1000 | *** | CN | Fixed-Asset Investment |
| 14/09/2024 | 0200/1000 | *** | CN | Retail Sales |
| 14/09/2024 | 0200/1000 | *** | CN | Industrial Output |
| 14/09/2024 | 0200/1000 | ** | CN | Surveyed Unemployment Rate M/M |