EXECUTIVE SUMMARY
- US STOCK FUTURES TUMBLE AS MEGACAP TECH SELLOFF DEEPENS
- JAPANESE STOCKS TOPPLE INTO BEAR MARKET AS CONFIDENCE CRUMBLES
- BLINKEN TELLS G7 IRAN/HEZBOLLAH ATTACK ON ISRAEL COULD COME MONDAY
- CHINA STEPS UP POLICY FOCUS ON SERVICES IN CONSUMPTION PUSH
MNI (LONDON) - Figure 1: Nikkei 225 plunges 12% Monday as global stock sell-off deepens
Source: MNI/Bloomberg
NEWS
GLOBAL (BBG): Japanese Stocks Topple Into Bear Market as Confidence Crumbles
Japan’s Topix stock index slid 24% from a record high reached last month and the Nikkei 225 Stock Average suffered its worst one-day slump in yen terms as investor confidence evaporated. The Topix and Nikkei 225 tumbled 12% Monday, with both entering bear markets amid a surge in the yen, tighter monetary policy and the deteriorating economic outlook in the US. On a three-day basis, the Topix had its biggest drop in data stretching back to 1959.
GLOBAL (BBG): Nasdaq 100 Futures Tumble as Megacap Tech Selloff Deepens
US stock futures sunk as investors’ concerns deepened over a slowing US economy and an overheated rally in the tech sector. Contracts on the Nasdaq 100 fell as much as 6.5% before quickly paring losses to about 4%. S&P 500 futures were down 2.5% while those tracking the Dow Jones Industrial Average declined 1.6%. Megacap technology stocks bore the brunt of the selloff, with chipmaker Nvidia falling over 7% and Apple down 6%.
MIDEAST (MNI): Blinken to G7 - Iran/Hezbollah Attack on Israel Could Come Monday
Axios reported overnight that US Secretary of State Antony Blinken has told fellow G7 foreign ministers that Iran and/or Hezbollah could attack Israel as soon as today (5 Aug) in response to the killing of Hamas political director Ismail Haniyeh in Tehran last week. In a conference call, Blinken called for as much diplomatic pressure as possible to be exerted on Iran to stop any retaliation, but that if this proved impossible then he "stressed that limiting the impact of their strikes is the best chance to prevent all-out war."
MIDEAST (BBG): Iran Says It Aims to Reestablish ‘Deterrence’ Against Israel
Iran said it wanted to reestablish its deterrence against Israel as the US and world powers brace for a possible attack on the Jewish state. “Reinforcing stability and security in the region will be achieved by punishing the aggressor and creating deterrence against Israel and its adventurism,” a spokesperson for Iran’s foreign ministry said to reporters on Monday in Tehran. The comments may be a signal that Iran is trying to avoid a full-on war with Israel even as it retaliates for what it claims was an Israeli assassination of Hamas’ political leader, Ismail Haniyeh, in Tehran last week.
US (RTRS): US Moves to Ban China Software in Autonomous Cars, Reuters Says
The US may propose barring Chinese software in autonomous vehicles in coming weeks amid security concerns, according to Reuters. The Biden administration plans to propose a rule that would prohibit Chinese software in vehicles in America with Level 3 automation and above, Reuters reported, citing unidentified sources. This would effectively also ban testing on US roads of autonomous vehicles produced by Chinese firms, the report said.
MNI BOE REVIEW - AUGUST 2024: Finely Balanced Delivery
In line with our own and most analysts' base cases, the BOE delivered the first 25bp cut of the cycle through a 5-4 vote in which some members voting for a cut described their decision as "finely balanced." We look in detail at the rationale for the cut, updated forward guidance and the new projections (both short-term and over 2-3 years). We also look at the potential for a (temporary) 8 member MPC and the voting outlook for the September / November meetings.
UK (BBG): Starmer Calls Emergency Meeting After Riots Flare Across UK
Prime Minister Keir Starmer called an emergency security meeting in a bid to quell anti-immigrant protests that rocked communities across the UK and threatened to plunge his month-old government into a polarizing cultural debate. Violence erupted in towns and cities including Rotherham, Blackpool and Bristol over the weekend in the first major test for the new Labour government. The disorder has been fueled by an online misinformation campaign since an attack a week ago left three young girls dead in Southport, northwest England.
CHINA (BBG): China Steps Up Policy Focus on Services in Consumption Push
China announced a sweeping plan to boost consumption by improving the supply of services, seeking to bolster a bright spot in domestic demand as the manufacturing sector’s momentum cools. The State Council, China’s cabinet, on Saturday issued a 20-point proposal aimed at raising the quality of services spanning restaurants, tourism, entertainment and elderly care. The measures are followed by the release of a Caixin survey on Monday showing services expanded for 19th straight months in July.
MNI RBA PREVIEW - AUGUST 2024: Need More Time to Be Confident
Given that Q2 CPI printed broadly in line with the RBA’s May forecasts and other developments since the June meeting have also been close to their thinking, we do not expect a change in rates or statement guidance when the meeting decision is announced on Tuesday August 6. It will include an update of the staff forecasts. The Board is likely to maintain its flexibility that it won't rule "anything in or out" and also that it will "remain vigilant to upside risks to inflation".
TURKEY (BBG): Turkish Consumer Inflation Slows at Sharpest Pace Since 2022
Turkey’s headline inflation saw the sharpest drop in nearly two years in July, a slowdown largely due to base effects that officials may overlook as they focus on more immediate risks to prices. Data on Monday showed headline inflation slipped to 61.8% in July, from 71.6% the previous month. The median forecast of economists surveyed by Bloomberg was for 62%. Monthly price growth, the central bank’s preferred gauge, came in at 3.23% after a gain of 1.64% in June, more than estimated by analysts.
N. KOREA (BBG): North Korea Deploys Hundreds of New Missile Launchers at Border
North Korea said it deployed 250 new mobile launchers for ballistic missiles that can deliver nuclear strikes on South Korea and US bases in the country, in one of its biggest displays of its rocket prowess under leader Kim Jong Un. A commissioning ceremony marked with cheering crowds and fireworks was held in Pyongyang on Sunday to transfer the new mobile launchers to frontline military units, the official Korean Central News Agency said.
BANGLADESH (BBG): Bangladesh PM Hasina Resigns After Deadly Protests, Reports Say
Bangladesh Prime Minister Sheikh Hasina has resigned and fled the country with her sister as anti-government protesters converged on the capital, according to local news reports. Hasina, 76, submitted her resignation on Monday to President Mohammed Shahabuddin, local television channels reported. She had faced pressure to resign for weeks following demonstrations that turned deadly. Bangladesh Army Chief Waker-Uz-Zaman is expected to address the nation shortly.
COMMODITIES (BBG): Copper Swings With Metals as US Economy Fears Spur Turmoil
Copper again dipped below $9,000 a ton as metals were swept up in the turmoil across global equity and currency markets. The week has opened with panic selling across stock markets amid fears of a deeper US economic slowdown, and bets rising on an emergency rate-cut by the Federal Reserve. Metals were steady as the rout deepened, recovering from an earlier slump. Copper fell as much 1.1% to $8,957.50 a ton before trading at $9,059 a ton by 8:47 a.m. London time. Other metals on the London Metal Exchange were mixed, with aluminum and zinc also trading flat after earlier declines.
BITCOIN (BBG): Bitcoin Plunges, Ether Has Worst Drop Since 2021 as Crypto Sinks
Cryptocurrencies reeled from a bout of risk aversion in global markets on Monday, at one point sending Bitcoin down more than 16% and saddling second-ranked Ether with the steepest fall since 2021. Top token Bitcoin traded 11% lower at $52,680 as of 8:39 a.m. in London, adding to a 13.1% drop last week that was the worst since the period when the FTX exchange imploded. Ether shed over a fifth of its value before paring some of the slide to change hands at $2,342. Most major coins nursed losses.
DATA
EUROZONE DATA (MNI): EZ PPI Offers Signs That Non-Energy Industrial Goods Drag Could Be Fading
- EUROZONE JUN PPI +0.5% M/M, -3.2% Y/Y
Eurozone PPI was a touch higher than expected in June at -3.2% Y/Y (vs -3.3% consensus, -4.1% prior) for a thirteenth successive month of deflation, although the 0.5% M/M was as expected for the first monthly increase since September 2023 (vs -0.2% prior). The slowdown in Y/Y deflation was driven by the energy component seeing it's fourth consecutive increase to -9.4% Y/Y (vs -11.3% prior), after the first monthly rise since October 2023 (1.6% M/M vs -1.1% prior). Intermediate goods also remained in Y/Y deflation although outright deflation continued to moderate with -2.2% vs -2.9% prior.
ITALY DATA (MNI): Company Margins Under Pressure in July Services PMI
- ITALY JUL SERVICES PMI 51.7 (FCST: 52.9); JUN 53.7
The Italian July services PMI printed at 51.7 (vs 52.9 cons, 53.7 prior). This represented the slowest rate of expansion seen since January this year, although the metric still logged a 7th consecutive month of expansion. Company margins remained under pressure as firms struggled to pass-on increased cost pressures to consumers, contrasting with findings in the Spanish release.
SPAIN DATA (MNI): Services Sector Still Expansionary Despite Miss in July
- SPAIN JUL SERVICES PMI 53.9 (FCST:55.0); JUN 56.8
The Spanish July services PMI was slightly weaker than expected at 53.9 (vs 55.0 cons, 56.8 prior), but still registered a 12th consecutive month of expansion. The strong demand backdrop enabled firms to pass on increased input costs to consumers, though the rate of inflation continued to fall relative to June. Key note from the release: "Panellists continued to link higher activity to an increase in new order volumes" "both from domestic and international clients".
SPAIN INDUSTRIAL PROD JUN +0.3% M/M, +0.6% Y/Y (MNI)
EUROZONE FINAL JUL SERVICES PMI 51.9 (FLASH: 51.9) (MNI)
GERMANY FINAL JUL SERVICES PMI 52.5 (FLASH: 52.0); JUN 53.1 (MNI)
FRANCE FINAL JUL SERVICES PMI 50.1 (FLASH: 50.7); JUN 49.6 (MNI)
UK FINAL JUL SERVICES PMI 52.5 (FLASH: 52.4); JUN 52.1 (MNI)
CHINA DATA (MNI): China Private Services PMI Up in July
MNI (Beijing) China’ private Caixin Services PMI reached 52.1 in July, up from 51.2 in June, marking the 19th consecutive month above 50, the index provider said on Monday. The results showed the market continued to improve, with business activity and new order sub-indexes also remaining above 50 for the past 19 months, said Wang Zhe, senior economist at Caixin Insight Group. The employment sub-index nudged above 50 for the second time in six months as firms expanded headcount in response to growing market demand, Wang added
FOREX: Japanese Yen Significantly Extends Rally, USDJPY Trades Below 142.00
- Recession fears in the US continue to be the dominating driver of risk-off sentiment across global markets. The sharp moves for both core yields and major equity indices have filtered through to substantial strength for the Japanese Yen, extending its huge rally since Mid-July.
- USDJPY (-3.08%) has registered a near 500-pip range Monday, and lows of 141.70 so far bring the pair’s post US-CPI pullback to an impressive 12.4%. We have significantly narrowed the gap to the December low of 140.25, a level which represents the most notable level of immediate support.
- Non-greenback safe havens continue to be the currencies of choice as the market sees greater scope for bold easing from the Fed. There is non-negligible pricing of an inter-meeting FOMC cut noted and a cumulative ~126bp of easing priced into Fed Funds futures through the Dec FOMC. USDCHF is also down 1% and the pair has traded back below 0.8500. Markets will be eyeing the 0.8333 low from December, which would be the lowest level for the pair since the removal of the EURCHF floor in 2015.
- Elsewhere, risk sensitive currencies in G10 are suffering, with AUD (-0.97%) the major laggard ahead of tomorrow’s RBA decision. The likes of NZD and GBP also trade on the back foot, although losses have been more contained up to this point.
- Bucking the trend, the Euro outperforms which is likely tied to its lofty weighting within the USD index. The single currency is further assisted by EURGBP (0.7%) grinding its way higher, following the close back above the notable 0.8500 pivot.
- In emerging markets, USDMXN currently trades up 3.00% as the risk off theme develops and attractive carry positions such as MXNJPY (-5.4%) continue to plummet. In similar vein USDZAR is up 1.4%.
- The July ISM Services report takes on even greater importance than usual, as the next major US data point after the poor July employment report. A failure to return to expansionary territory above 50.0 would add another notch to the recessionary scorecard.
EGBS: Bunds Pare Overnight Gains But Friday’s Rally Holds
Bund futures have pared the majority of risk-off driven overnight gains, but remain +61 ticks versus Friday’s settlement levels at 135.83
- Bunds reached an intraday high of 136.28 earlier, which provides initial resistance. Beyond that level lies 136.45, the 76.4% of the Dec 27 - May 31 downleg (based on the continuation chart).
- Today’s regional macro data has not been market moving (Eurozone July final services PMI in line with flash at 51.9, and PPI also broadly in line with consensus), with broader cross-asset moves dominating.
- Dovish moves in STIR markets have prompted a bull steepening in EGB cash curves, with the German 2s10s at its steepest since late-2022.
- 10-year spreads to Bunds are wider (albeit off opening wides) with equity markets still under significant pressure.
- The BTP/Bund spread sits at ~150bps, while the OAT/Bund spread is at ~80bps (now just below the widest levels seen amid June’s election uncertainty).
- The US ISM services report at 1500BST headlines the North American calendar today.
GILTS: Front End Continues to Outperform
Futures continue to trade below early highs, with global equity indices off lows and core global STIRs back from dovish extremes.
- +39 at 100.94 after topping out at 101.11.
- Bulls didn’t manage to test resistance at the 2.00 projection of the May 29- Jun 4-10 price swing (101.18).
- Gilt yields are 3-8bp lower on the day, recent bull steepening extends.
- 2s hover just above 3.50% (3.53%) last, falling by 38bp since the July 26 close.
- Bulls looks to force 10-Year yields below 3.80% in a bid to test the Feb low (3.726%).
- 2s10s has registered fresh ’24 highs, 5s30s has been capped ahead of its January peak.
- SONIA futures last +0.5 to +13.0.
- BoE-dated OIS shows ~14.5bp of cuts for next month’s meeting vs. 11bp late Friday, with a cumulative 56.5bp of easing priced through year end.
- The latter briefly pushed beyond 65bp of cuts this morning.
- Expect broader market sentiment to continue to dominate, with little of note on the domestic calendar for the rest of the day.
- Local news flow has seen continued speculation surrounding the potential for methodology tweaks which would give Labour room to deploy further borrowing.
EQUITIES: Sell-Off in E-Mini S&P Extends, Reaches Lowest Since May
A bear threat in Eurostoxx 50 futures remains present and the contract is trading lower today as it starts the week on a bearish note. Last week’s sell-off resulted in a break of 4846.00, the Apr 19 low. The breach highlights a stronger reversal and signals scope for an extension towards 4543.00 next, a Fibonacci projection. Firm resistance is 4940.25, the 50-day EMA. First resistance is 4656.00, today’s intraday high. S&P E-Minis traded lower late last week and the contract is starting this week’s session on a bearish note as the current sell-off extends. The move lower paves the way for a test of 5185.50, a Fibonacci retracement. Clearance of this level would signal scope for an extension towards 5092.00, the May 2 low. Today’s intraday high of 5345.50 marks initial resistance. The 50-day EMA, a firmer level, is at 5494.20.
- Japan's NIKKEI closed lower by 4451.28 pts or -12.4% at 31458.42 and the TOPIX ended 310.45 pts lower or -12.23% at 2227.15.
- Elsewhere, in China the SHANGHAI closed lower by 44.639 pts or -1.54% at 2860.698 and the HANG SENG ended 247.15 pts lower or -1.46% at 16698.36.
- Across Europe, Germany's DAX trades lower by 413.09 pts or -2.34% at 17249.36, FTSE 100 lower by 168.77 pts or -2.06% at 8005.24, CAC 40 down 142.39 pts or -1.96% at 7108.23 and Euro Stoxx 50 down 101.67 pts or -2.19% at 4536.64.
- Dow Jones mini down 609 pts or -1.53% at 39260, S&P 500 mini down 116.75 pts or -2.17% at 5257, NASDAQ mini down 631.25 pts or -3.4% at 17919.5.
Time: 09:50 BST
COMMODITIES: WTI Futures Eye Key Support at $72.23
A bear threat in WTI futures remains present and the contract has traded lower today as it extends the current downtrend. Sights are on the next key support at $72.23, the Jun 4 low. A break of this level would reinforce bearish conditions and pave the way for an extension towards $70.73, the Feb 5 low. On the upside, key resistance is seen at $78.88, the Aug 1 high. Short-term gains would allow an oversold condition to unwind. Gold has traded higher this week. The recent move down appears to have been a correction. The yellow metal did manage to pierce support at the 50-day EMA - at $2370.3. A clear break of this average would signal scope for a deeper retracement towards $2277.4, the May 3 low and a key support. For bulls, this week’s gains are constructive. Sights are on $2483.7, the Jul 17 high, and a bull trigger. Clearance of this hurdle resumes the uptrend.
- WTI Crude down $0.66 or -0.9% at $72.93
- Natural Gas down $0.03 or -1.73% at $1.93
- Gold spot down $16.3 or -0.67% at $2426.18
- Copper down $2.6 or -0.63% at $407.55
- Silver down $0.53 or -1.85% at $28.0294
- Platinum down $28.81 or -3% at $932.06
Time: 09:50 BST
| Date | GMT/Local | Impact | Country | Event |
| 05/08/2024 | 1400/1000 | *** |  US | ISM Non-Manufacturing Index |
| 05/08/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 05/08/2024 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 05/08/2024 | 2100/1700 | US | San Francisco Fed's Mary Daly | |
| 06/08/2024 | 2301/0001 | * |  GB | BRC-KPMG Shop Sales Monitor |
| 06/08/2024 | 0430/1430 | *** |  AU | RBA Rate Decision |
| 06/08/2024 | 0545/0745 | ** |  CH | Unemployment |
| 06/08/2024 | 0600/0800 | ** |  DE | Manufacturing Orders |
| 06/08/2024 | 0630/0830 | ** | CH | Retail Sales |
| 06/08/2024 | 0730/0930 | ** |  EU | S&P Global Final Eurozone Construction PMI |
| 06/08/2024 | 0830/0930 | ** | GB | S&P Global/CIPS Construction PMI |
| 06/08/2024 | 0900/1100 | ** | EU | Retail Sales |
| 06/08/2024 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 06/08/2024 | 1100/1200 | GB | APF Quarterly Report | |
| 06/08/2024 | 1230/0830 | ** | US | Trade Balance |
| 06/08/2024 | 1230/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 06/08/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 06/08/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 06/08/2024 | 1530/1130 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 06/08/2024 | 1700/1300 | *** | US | US Note 03 Year Treasury Auction Result |
| 07/08/2024 | 2245/1045 | *** |  NZ | Quarterly Labor market data |