EXECUTIVE SUMMARY
- HARRIS MAKES PITCH TO UNION VOTERS IN ‘BLUE WALL’ STATES
- ECB CUTS SET TO BECOME TRICKIER ONCE KEY RATE FALLS TO NEAR 3%
- UEDA REITERATES THAT BOJ WILL LIFT RATES IF OUTLOOK REALIZED
- SWISS CPI LOWER THAN EXPECTED IN AUGUST, IMPORTS DRIVEN
Figure 1: Contribution to Swiss CPI (%, Y/Y)
NEWS
US (WaPo): Harris Makes Pitch to Union Voters in ‘Blue Wall’ States
Vice President Kamala Harris held Labor Day campaign events with union chiefs in two critical swing states, including a joint appearance with President Joe Biden in Pennsylvania, as she seeks to strengthen her standing with blue-collar workers. Speaking at a union local in Pittsburgh, Harris came out against the planned sale of United States Steel Corp. to a Japanese buyer, an issue that’s aroused opposition among labor groups. She said the company should remain domestically owned, echoing Biden’s view.
US/ISRAEL (AFP): Biden says Netanyahu Not Doing Enough on Hostage Deal Ahead of Key Meeting
US President Joe Biden on Monday said Israeli Prime Minister Benjamin Netanyahu was not doing enough to secure a deal for the release of hostages taken by Palestinian armed group Hamas. Asked by reporters at the White House -- where Biden was arriving for a meeting with US negotiators -- if he thought the Israeli leader was doing enough on the issue, the president responded: "No." Biden's meeting with the negotiators on the hostage-release deal comes after the deaths on Saturday of six captives in Gaza, including an American citizen. The president said negotiators were "very close" to a final proposal to be presented to Israel and Hamas.
US/CHINA (BBG): China-US Climate Talks to Resume From Wednesday in Beijing
Climate negotiators from the US and China will resume talks Wednesday in Beijing on deepening emissions cuts and transition funding, as the top two polluters aim to find agreement on key issues ahead of November’s global UN summit. John Podesta, the US senior adviser to the president for international climate policy, and China climate envoy Liu Zhenmin will co-chair meetings from Wednesday through Friday as part of a working committee between the two nations established earlier this year, China’s Ministry of Ecology and Environment said in a statement.
ECB (BBG): ECB Cuts Set to Become Trickier Once Key Rate Falls to Near 3%
Decisions at the European Central Bank are set to get a lot more contentious once interest rates fall to about 3% and clashes emerge over what’s still needed to keep inflation in check, according to people familiar with the matter. While the next two or three reductions in the deposit rate from its current level of 3.75% are unlikely to cause major friction, the debate will then encounter differing views of both the price outlook and the point where monetary policy stops restraining economic growth, the people said, asking not to be identified as the discussions are private.
RIKSBANK (MNI): Thedeen Puts Neutral Rate Estimate Around 2.5%
Riksbank Governor Thedeen re-iterated his view from the August minutes, that policy rates can be cut three more times this calendar year (i.e. at each of the September, November and December meetings). However, of more interest was his estimate of the neutral rate, said to be "around 2.5%". We have written previously on the increasing importance of the neutral rate (r*) for the Riksbank, as it embarks on a more aggeressive easing cycle than many other G10 central banks. This is the first point estimate/indication we have seen from Executive Board members in the present cycle.
FRANCE (BBG): French Government Warns of Wider Budget Deficit: Les Echos
France’s deficit risks being wider than expected this year unless the next government makes further savings, Les Echos and other French media reported, citing official documents. According to notes sent to lawmakers at parliamentary committees, the budget gap could rise to 5.6% of economic output this year from 5.5% in 2023, newspapers including Les Echos and Le Monde said. The current government had forecast a decline to 5.1% in April.
UK/ISRAEL (BBG): UK Halts Some Arms Licenses to Israel on Risk of Law Breach
The UK suspended some arms licenses to Israel after concluding the use of British components in Gaza risks violating international humanitarian law, in a break with allies by Prime Minister Keir Starmer’s new Labour government. The 30 suspended licenses - out of around 350 - cover components used in F-16 fighter aircraft, helicopters, drones and naval systems, as well as items that facilitate ground targeting, Foreign Secretary David Lammy told the House of Commons on Monday.
UK (BBG): UK’s New Bond Sale Is First Big Test of Demand Since Labour Win
The UK pulled in more than £100 billion ($131 billion) of orders for a bond sale Tuesday, in the first real test of investor appetite for government debt since Labour won a landslide election in July. The country’s Debt Management Office is offering a gilt maturing in January 2040 with a 4.375% coupon. The security, the first new bond sold via banks since the election, is expected to price at 4 basis points over comparable notes.
JAPAN (BBG): Ueda Reiterates That BOJ Will Lift Rates If Outlook Realized
Bank of Japan Governor Kazuo Ueda reiterated Tuesday that the central bank will continue to raise interest rates if the economy and prices perform as expected by the BOJ, a comment that supported further gains in the yen. Ueda made the remark in a document submitted to a government panel chaired by outgoing Prime Minister Fumio Kishida in which he explained the BOJ’s July policy decision.
CHINA (MNI): China to Open Dumping Inquiry Over Canada Canola
MNI (Beijing) China will open an anti-dumping investigation into canola and chemical products from Canada, a notice from the Ministry of Commerce said on Tuesday. The ministry suspects Canada has dumped canola after imports reached USD3.5 billion in 2023, up 170% y/y, causing domestic firms to lose money. Beijing will also launch an anti-discrimination investigation into the recent Canadian tariffs and take measures against Canada, MOFCOM continued.
SOUTH KOREA/JAPAN (MNI): Yoon to Host Kishida in Seoul for Final Time 6-7 Sep
President Yoon Suk-yeol's office has confirmed that Japanese PM Fumio Kishida will visit Seoul for a two-day visit from 6-7 September. The visit will seemingly take a valedictory air for Kishida, who will step down as PM around the end of the month. A statement from Yoon's office said "Both sides will look back on the achievements of cooperation they have made through 11 rounds of summits and discuss the future direction of development of bilateral, regional and global cooperation."
TURKEY (BBG): Turkish Inflation Slows Sharply After Interest Rate Hikes
Turkey’s annual inflation eased sharply in August, as 50% borrowing costs filter through to the economy and dampen demand. Price growth slowed to 52% year-on-year from 62% the previous month, state statistics office data showed Tuesday. That was in line with analysts’ forecasts, according to a Bloomberg survey. While the data shows that high interest rates are starting to slow one of the world’s highest rates of inflation, the latest figure is still more than 10 times the central bank’s official target. The decrease is also partly due to base effects, with readings having spiked in 2023.
VENEZUELA (BBG): Venezuela Orders Arrest of Opposition’s Edmundo Gonzalez
Venezuela ordered the arrest of the opposition’s Edmundo Gonzalez, according to a warrant posted on Instagram. The Venezuelan Public Prosecutor’s office had warned it would issue the warrant against the opposition leader and former presidential candidate if he failed to comply with a summons regarding a criminal investigation. Gonzalez ran against President Nicolas Maduro in the July 28 vote.
DATA
SWITZERLAND DATA (MNI): Swiss August CPI Lower Than Expected, Imports Driven
- SWISS AUG CPI +0% M/M, +1.1% Y/Y
Swiss CPI inflation printed lower than consensus at 1.1% Y/Y in August (vs 1.2% cons; 1.3% prior), and 0.0% M/M (vs +0.1 cons; -0.2% prior). Core CPI came in as expected, at 1.1% Y/Y (vs 1.1% cons and prior) and 0.1% M/M. This brings in the Q3 running average Y/Y headline rate at +1.2%, below SNB Q3 expectations of +1.5% Y/Y. Housing rental inflation, which has seen its quarterly update this month, increased from +3.4% Y/Y (July) to +4.0%. Excluding housing rentals, which the SNB appears to view as a lagged function of its policy rate, CPI was only +0.4% Y/Y in August - significantly lower than July's rate of +0.8% Y/Y.
SWISS Q2 GDP +0.7% Q/Q, +1.8% Y/Y (MNI)
UK DATA (MNI): BRC-KPMG Retail Sales Growth Sees Mild Acceleration
- UK BRC AUG BY VALUE SHOP SALES LFL +0.8% YY, TOTAL +1% YY
UK total retail sales growth accelerated in August to 1.0% Y/Y after 0.5% Y/Y in July, now at the highest since March 2024 but still significantly below the March reading. It compares with a 3-month average of 0.4% Y/Y and a 12-month of 1.2% Y/Y. Like-For-Like sales rose 0.8% Y/Y (vs 0.3% prior); whilst an improvement, it is in-line with the year-to-date average (excluding volatile Easter-affected data for April). Although this is a value rather than volume series, the continued improvement combined with other recent data including PMIs suggests growing demand in the economy, and potential upside risk for core goods inflation.
AUSTRALIA Q2 CURR ACCT BALANCE -10725M (MNI)
FOREX: JPY Reverses Monday Weakness as US Returns to Soft Equity Trade
- JPY is outperforming all others in G10 to wholly reverse the entirety of yesterday's weakness. USD/JPY is back below the Y146.00 handle and through yesterday's low to return trade back to broadly neutral after Monday's soft start. Equities are turning softer headed into the NY crossover, with volumes picking up as the US returns from Labor Day public holiday market closures. the e-mini S&P is already off by 0.5% ahead of the cash open, taking European stock markets with it.
- Infitting with the risk-off theme, Antipodean and growth-led currencies are underperforming and tipping AUD and NZD offered. This returns NZD back below the $0.62 mark and through first support at 0.6198 - the 23.6% retracement for the upleg off the August low.
- EUR/USD's correlation with risk has pressed the pair through overnight lows into NY hours. As a result, the USD trades well and the USD Index is now north of last week's highs - extending the bounce off the mid-August low to just over 1.3%.
- ISM data is set to take focus for the duration of Tuesday trade, with markets expecting manufacturing to have ticked up to 47.5 from 46.8 previously. Last week's MNI Chicago PMI came in modestly ahead of expectations, which may be setting the tone here.
BONDS: Tight Ranges Amid Light Calendar, Books Closed for Gilt Synd
Bund and Gilt futures have traded in tight ranges this morning, with few notable data releases scheduled and generally light headline flow. US labour market data remains the primary focus across global markets this week.
- Bund futures are +16 ticks at 133.44, while Gilts are +20 at 98.38.
- Books for the new 4.375% Jan-40 Gilt have closed above GBP107bln (broadly in line with the GBP110bln book size for the 4.25% Jul-34 Gilt launched in June).
- RAGB and German Schatz supply were well digested on the EGB front.
- The short-end of the German curve underperforms as a result of the Schatz supply, with 2-year yields little changed and 30-year yields ~1.5bps lower.
- 10-year peripheral spreads to Bunds are generally wider, with European equity markets off intraday highs.
- BoE Deputy Governor Breeden moderates a panel on “Global supervisory cooperation in times of turbulence” at 1345BST, though comments surrounding the BoE’s policy outlook may be limited.
EQUITIES: Bullish Theme in E-Mini S&P Intact With Contract at Recent Highs
Eurostoxx 50 futures traded higher last week and the contract is holding on to its latest gains. This means all key retracement points of the Jul 12 - Aug 5 bear leg have been cleared. Sights are on 4997.00 next, the Jul 17 high, where a break would open 5087.00, the Jul 12 high. Initial firm support to watch is seen at 4888.95, the 20-day EMA. A break of this average would signal scope for a corrective pullback. A bullish theme S&P E-Minis remains intact and the contract is trading at its recent highs. A resumption of gains would pave the way for a climb towards key resistance and the bull trigger at 5721.25, the Jul 16 high. Clearance of this level would resume the primary uptrend. Support to watch lies at 5518.91, the 50-day EMA. A clear breach of it is required to instead highlight a potential bearish threat.
- Japan's NIKKEI closed lower by 14.56 pts or -0.04% at 38686.31 and the TOPIX ended 17.28 pts higher or +0.64% at 2733.27.
- Elsewhere, in China the SHANGHAI closed lower by 8.056 pts or -0.29% at 2802.979 and the HANG SENG ended 40.48 pts lower or -0.23% at 17651.49.
- Across Europe, Germany's DAX trades lower by 27.58 pts or -0.15% at 18904.02, FTSE 100 lower by 6.59 pts or -0.08% at 8356.96, CAC 40 up 5.16 pts or +0.07% at 7651.23 and Euro Stoxx 50 down 7.11 pts or -0.14% at 4965.62.
- Dow Jones mini down 114 pts or -0.27% at 41538, S&P 500 mini down 9.5 pts or -0.17% at 5651.5, NASDAQ mini down 50.5 pts or -0.26% at 19573.25.
Time: 09:50 BST
COMMODITIES: WTI Futures Trading Close to Monday's Lows
WTI futures have pulled back from last week's high. A continuation down would expose the $70.88 key support, the Aug 5 low. A break of this level would confirm a resumption of the bear cycle that started Apr 12. For bulls, a reversal higher would once again refocus attention on key resistance at $78.54, the Aug 12 high. Clearance of this hurdle would be a bullish development. Trend conditions in Gold remain bullish and the recent sideways move marks a pause in the uptrend. The breach of $2483.7, the Jul 17 high, confirmed a resumption of the primary uptrend. Note that MA studies are still in a bull-mode set-up and this highlights a dominant uptrend. The focus is on a climb towards $2536.4 next, a Fibonacci projection. Initial support to watch lies at $2483.6, the 20-day EMA. A pullback would be considered corrective.
- WTI Crude down $0.1 or -0.14% at $73.45
- Natural Gas up $0.05 or +2.54% at $2.18
- Gold spot up $6.4 or +0.26% at $2505.63
- Copper down $7.3 or -1.73% at $413.9
- Silver down $0.07 or -0.23% at $28.472
- Platinum down $6.63 or -0.71% at $923.45
Time: 09:50 BST
MNI (LONDON)
| Date | GMT/Local | Impact | Country | Event |
| 03/09/2024 | 1245/1345 |  GB | BOE's Breeden moderating ECB and European Banking Authority panel | |
| 03/09/2024 | 1345/0945 | *** |  US | S&P Global Manufacturing Index (final) |
| 03/09/2024 | 1400/1000 | *** | US | ISM Manufacturing Index |
| 03/09/2024 | 1400/1000 | * | US | Construction Spending |
| 03/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 03/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 03/09/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 03/09/2024 | 1700/1300 | * | US | US Treasury Auction Result for Cash Management Bill |
| 04/09/2024 | 0130/1130 | *** |  AU | Quarterly GDP |
| 04/09/2024 | 0700/0900 |  EU | ECB's Elderson at Joint European Banking Authority and ECB conference | |
| 04/09/2024 | 0900/1100 | ** | EU | PPI |
| 04/09/2024 | 1100/0700 | ** | US | MBA Weekly Applications Index |
| 04/09/2024 | - | *** | US | Domestic-Made Vehicle Sales |
| 04/09/2024 | 1230/0830 | ** | US | Trade Balance |
| 04/09/2024 | 1230/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 04/09/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 04/09/2024 | 1345/0945 | *** | CA | Bank of Canada Policy Decision |
| 04/09/2024 | 1400/1000 | ** | US | Factory New Orders |
| 04/09/2024 | 1400/1000 | *** | US | JOLTS jobs opening level |
| 04/09/2024 | 1400/1000 | *** | US | JOLTS quits Rate |
| 04/09/2024 | 1400/1000 | US | MNI Connect Video Conference on the U.S. Fiscal Policy Outlook | |
| 04/09/2024 | 1430/1030 | CA | BOC Governor Press Conference | |
| 04/09/2024 | 1800/1400 | US | Fed Beige Book |