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(Z1) Bearish Focus


Some Reasoning For The Risk-Off Feel


(Z1) Volatile But Remains Bearish


(Z1) Needle Still Points South


Risk-Off Flows Seen

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Fig. 1: US Inflation Seen Slowing Again In August

Source: BLS, MNI


OIL (BBG): The world will have to wait until October for additional oil supplies as output losses from Hurricane Ida wipe out increases from OPEC+, the International Energy Agency said. Consumers should have been enjoying "solid gains" in production as the Organization of Petroleum Exporting Countries and its allies continued their revival of idle capacity, the agency said in its monthly report. Instead, global supply fell by 540,000 barrels a day in August due to unexpected disruptions and will be flat this month."Unplanned production outages have temporarily halted an uptrend in world oil supply that began in March, but growth is set to resume in October," said the Paris-based IEA, which advises developed economies on energy policy.

ECB (BBG): Bank of France Governor Francois Villeroy de Galhau say the European Central Bank is "vigilant" regarding stronger inflation but still expects it to be temporary. "It's true that it's gone up and there is a kind of spike in temperature due to supply difficulties and oil and input prices like semiconductors. We think it is a temporary spike and inflation will come back below 2% as soon as next year," Villeroy says on France 2 television. "We are vigilant without being worried"

AMAZON / US LABOR MARKET (RTRS): Inc has increased its average starting wage in the United States to more than $18 an hour and plans to hire another 125,000 warehouse and transportation workers, an executive told Reuters. The world's largest online retailer has raised pay from around $17 since May. In some locations, the company is giving signing bonuses of $3,000, said Dave Bozeman, vice president of Amazon Delivery Services, or triple what the company offered four months ago. The fatter paycheck shows how big employers are desperate to draw workers in an increasingly tight U.S. labor market. Fewer Americans are seeking jobless claims just as openings have hit a record in the reopening economy.

UK / COVID (BBG): Boris Johnson will confirm Tuesday that booster vaccinations against coronavirus will be rolled out to the most vulnerable people this fall, as he sets out the U.K.'s new approach to tackling the virus. The British prime minister will hold a press conference outlining who will be eligible for the booster shot, soon after Health Secretary Sajid Javid gives a statement on the issue to the House of Commons.

SOFR (BBG/FT): Bank of America has started marketing the first leveraged loan tied to the Secured Overnight Financing Rate, the main U.S. Libor replacement, the Financial Times reported. ,The bank has helped prepare a $3.25 billion financing package that includes a $750 million syndicated loan based on SOFR to fund the takeover of chicken producer Sanderson Farms, the FT said, citing people familiar with the matter.


SWEDEN DATA: CPI surprises to the upside

  • CPIF at 2.4%Y/Y in August (consensus 1.9%, Riksbank 1.43%, previous 1.7%)
  • CPIF ex-energy at 1.4%Y/Y in August (consensus 1.1%, Riksbank 0.95%, previous 0.5%)
  • CPI at 2.1%Y/Y in August (consensus 1.6%, previous 1.4%)
  • Inflation has surprised to the upside ahead of next week's Riksbank meeting with Statistics Sweden noting that "The inflation rate was mainly affected by rising housing costs, in which higher electricity prices was the key driver" while timber prices doubled compared to last year, transport prices were pushed higher by fuel prices and clothing and footwear remained high.
  • EURSEK moved from around 10.17 to a low of 10.1324 (lowest level since 6 July), before settling around 10.15.

UK DATA: Payrolls Top Pre-Pandemic Levels

Payroll employment rose by a record-high 241,000 in August, taking the number of people with salaried jobs 1,000 above the level seen in February 2020, the Office for National Statistics said Tuesday. The series, which dates back to July 2014, measures PAYE data and leads official employment statistics by a month . Job vacancies also rose to a fresh record high, up 269,000 in the three months to August, taking the number of job openings to 1.034 million.According to LFS data, which captures a wider range of workers, employment rose by 183,000 in the three months to July, the biggest gain since the three months to 2020. That pushed the unemployment rate down to 4.6% from 4.7% in the second quarter, in line with expectations. The jobless rate for August fell to 4.4%, according to experimental statistics, the lowest since June 2020. The overall employment rate rose to 75.1% in the three months to July, while the inactivity rate remained stuck at 21.2%, still well below the 20.2% held before the pandemic.

Source: ONS

FIXED INCOME: Heavy European issuance weighed this morning but focus switching to US CPI

Core fixed income has been under pressure this morning, particularly in Europe which sees some heavy supply this morning.

  • The EU has held a syndication for a E9bln 7-year NGEU issue, the Netherlands sold almost E2bln of its 30-year DSL via auction, Italy sold E5.75bln of 3/7/30-yera BTPs while Germany looks to sell E5bln Schatz. In addition, the UK has sold GBP3bln of 5-year gilts.
  • Economic data so far today has been focused on the UK with labour market data showing the number of payrolled employees overtook the pre-pandemic peak in August.
  • The focus is now squarely on the US CPI print, with both headline and core inflation expected to fall a tenth from last month's levels in Y/Y terms.
  • TY1 futures are down -0-4+ today at 133-05 with 10y UST yields up 1.2bp at 1.340% and 2y yields up 0.2bp at 0.216%.
  • Bund futures are down -0.28 today at 171.52 with 10y Bund yields up 1.6bp at -0.316% and Schatz yields up 0.4bp at -0.718%.
  • Gilt futures are down -0.33 today at 127.65 with 10y yields up 3.2bp at 0.776% and 2y yields up 2.1bp at 0.246%.

FOREX: AUD Softer as Lowe Talks Down Rates Market Pricing

  • AUD sold off following a speech from the RBA Governor, in which he downplayed the near-term risks of market pricing pointing to rate hikes throughout 2022 and 2023, reaffirming the Bank's well-trodden guidance. The speech pressed AUD/USD through yesterday's lows of 0.7336, and now trades in a holding pattern below the 0.7356 50-dma.
  • The USD index trades lower, with the market edging through yesterday's lows to narrow the gap with Friday's 92.33. Inflation data later today will likely prove key for the greenback, with today's release the last look ahead of the September FOMC.
  • GBP trades solidly, with markets buoyant following jobs data showing UK payrolls figures erasing the entirety of the pandemic dip. GBP/USD traded at the week's highs in response, targeting the first upside target at 1.3889.
  • The US CPI release is the calendar highlight Tuesday, with markets expecting a moderation in price pressures - although the Y/Y figure is still seen north of 5.0%. Elsewhere, BoE's Bailey is due to speak at 1400BST/0900ET.

EQUITIES: U.S. Futures Are Off Overnight Lows

  • Asian stocks closed mixed, with Japan's NIKKEI up 222.73 pts or +0.73% at 30670.1 and the TOPIX up 21.16 pts or +1.01% at 2118.87. China's SHANGHAI closed down 52.77 pts or -1.42% at 3662.602 and the HANG SENG ended 311.58 pts lower or -1.21% at 25502.23.
  • European markets are off early highs, with the German Dax up 33.75 pts or +0.21% at 15701.42, FTSE 100 down 14.03 pts or -0.2% at 7068.43, CAC 40 down 32.96 pts or -0.49% at 6676.93 and Euro Stoxx 50 down 3.43 pts or -0.08% at 4185.45.
  • Conversely, U.S. futures are flat, having bounced from overnight lows, with the Dow Jones mini up 64 pts or +0.18% at 34934, S&P 500 mini up 7.75 pts or +0.17% at 4476.75, NASDAQ mini up 6.5 pts or +0.04% at 15443.25.

COMMODITIES: WTI Remains Above $70, But Metals Weaken

  • WTI Crude up $0.41 or +0.58% at $70.93
  • Natural Gas down $0.02 or -0.34% at $5.187
  • Gold spot down $5.1 or -0.28% at $1792.66
  • Copper down $3.55 or -0.81% at $433.6
  • Silver down $0.06 or -0.23% at $23.7078
  • Platinum down $9.87 or -1.02% at $960.59