MNI US OPEN - JPY Off Lows as Ministers Talk Up Currency Defence

NEWS

US (BBG): Biden to Take Victory Lap on Ports Deal as UAW Strike Looms
President Joe Biden will celebrate a labor deal for port workers at the White House on Wednesday, a bid to showcase his support for unions even as another contract dispute involving the auto industry threatens to rattle the US economy and upend supply chains.

US (BBG): Trump Eyes More Tariff-Heavy Policy If He Wins Back White House
Donald Trump and his advisers are mapping out an economic agenda with harsher trade policies and deeper tax cuts if he returns to the White House, stirring anxiety within the US business community of potential retaliatory measures.

ECB (BBG): ECB’s Knot Says Markets Risk Underplaying Hiking Chances
Investors largely betting against a European Central Bank interest-rate increase next week are “maybe” underestimating the likelihood of it happening, according to Governing Council member Klaas Knot. While a slowdown in the euro zone’s 20-nation economy is sure to damp demand, updated inflation projections won’t differ much from the last round in June, the Dutch central bank chief said.

ECB (BBG): ECB’s Options Remain Open at Coming Meetings, Villeroy Says
European Central Bank Governing Council member Francois Villeroy de Galhau said interest rates are near a peak, but declined to indicate if that means the institution should hike or hold next week. “I’m not going to say today what we will decide Sept. 14, all the more so because our options are open for this meeting as they are for following meetings,” the Bank of France Governor said on BFM Business.

JAPAN (BBG): Kanda: Won’t Rule Out Any Options if FX Moves Continue
Japan’s top currency official says he won’t rule out any options if current moves in the exchange rate continue, speaking to reporters in Tokyo on Wed. Vice Finance Minister for International Affairs Masato Kanda says he’s watching forex moves with high sense of urgency

JAPAN (Kyodo): Japan eyes fresh economic stimulus package in October
The Japanese government is set to announce a fresh economic stimulus package in October to support companies' wage hikes and mitigate energy bills, the Kyodo news agency reported on Wednesday. Prime Minister Fumio Kishida is expected to order his government agencies to draft the package by the end of September, with an aim of compiling an extra budget to fund the measures.

JAPAN (MNI): April YCC Removal Window Possible On Wage Data
Data confirming the sustainability of wage hikes in fiscal 2024 could create conditions conducive to the removal of yield curve control next April, MNI understands. The opportunity could arrive once Bank of Japan policymakers update their economic growth and inflation projections, following fiscal 2024 wage data that encompasses smaller firms in particular. Sustainable wage hikes will enable policymakers to revise up core and core-core consumer price indexes from 1.6% and 1.8% in fiscal 2025, close to the bank’s 2% target, potentially paving the way for the BOJ to drop YCC.

JAPAN (MNI): BOJ's 2% Target Far, Easing Needed - Takata
Bank of Japan Board Member Hajime Takata said on Wednesday that the BOJ must continue patiently with easy policy as the economy remains far from achieving the Bank's 2% inflation target in a sustainable and stable manner. The performance of overseas economies also poses a downside risk, Takata told business leaders in Shimonoseki City. “If overseas economies decelerate sharply as a result of the rate hikes in the U.S. and Eurozone, downward pressure on Japan’s economy will strengthen,” he added.

CHINA (BBG): China’s Distressed Developers Soar in Wave of Speculative Buying
Speculative bets that Chinese authorities will widen support for its property sector sent some of the country’s ailing developers surging by the most on record. A Bloomberg Intelligence gauge tracking Chinese builders gained nearly 10% Wednesday, the most in more than a month. Heavily indebted developers with depressed valuations were among those to rally the most, with Sunac China Holdings Ltd. soaring 68% alongside a spike in trading volume. China Evergrande Group closed up 83% — capping the biggest gain since its 2009 listing.

AUSTRALIA (MNI): RBA Needs Prudential Tools, More Fiscal Sight
The Reserve Bank of Australia should regain control of macroprudential regulatory tools, while Treasury should have greater representation on the yet-to-be created monetary policy board to streamline monetary policy coordination, a former RBA board member told MNI.

DATA

AUSTRALIA (MNI): Aussie GDP Grows 0.4% Q/Q, Beats Expectations
Australia’s economy grew 0.4% over Q2, compared with 0.2% noted in Q1, beating market expectations of a 0.3% rise, data from the Australian Bureau of Statistics showed Wednesday. GDP grew 2.1% on an annual basis, higher than the 1.8% expected, but down from Q1’s 2.3%. “This was the seventh straight rise in quarterly GDP, and annual growth remained above trend, reflecting the absence of significant COVID-19 disruptions, such as lock downs, in 2022-23," said Katherine Keenan, ABS head of national accounts. “Capital investment and exports of services were the main drivers of GDP growth this quarter.”

MNI: EUROZONE JUL RETAIL SALES -0.2% M/M, -1% Y/Y

MNI: GERMANY JUL FACTORY ORDERS -11.7% M/M

UK (BBG): Construction Orders Slump at the Sharpest Pace in Three Years
UK construction companies suffered the biggest plunge in new orders in more than three years after a prolonged slump in housebuilding weighed heavily on the sector. S&P Global’s construction purchasing managers’ index slipped to 50.8 in August from 51.7 the month before, signaling that the industry is close to stagnation. However, the reading was still stronger than the 49.8 expected by economists, which would have indicated a contraction.

EGBs: Light Twist Flattening Early Today, Corporate Supply & ECB’s Knot Eyed

Bunds recover from worst levels of the day, even with the impending round of 10-year 2.60% Aug-33 supply eyed (EUR5bn).

• Another swift start to the day for €IG supply and overhang surrounding Bund supply were touted as early sources of pressure for the space, which saw Bunds back from their post-German factory orders highs (prints were softer than expected).
• Initial hawkish comments from ECB’s Knot provided some knee-jerk cheapening, before the details surrounding some of his more guarded/non-committal musings allowed the space to base.
• ECB-dated OIS pricing is little changed to a touch firmer on the day post-Knot, off initial highs.
• A downtick in oil & global equity benchmarks will have supported the longer end a little.
• Bunds last -15, around 40 ticks off lows.
• German cash benchmarks run 1bp cheaper to 0.5bp richer, twist flattening.
• The German 5s30s curve moves back from yesterday’s multi-week steeps.
• Most closely watched EGB curves see similar moves.
• While most of the core/semi-core spreads vs. Bunds are little changed on the day, BTPs and GGBs narrow, with the former outperforming peers.

GILTS: Off Lows Alongside Wider Bonds, Supply Sees Decent Enough Demand

Gilts have generally followed wider moves in core global FI markets thus far, with initial technical support in the futures contract breached, while some concession ahead of 5-Year supply will have factored in as well.

• Futures last sit -40, roughly 25 ticks off lows, after some stabilisation in wider core global FI markets was seen.
• Cash benchmarks sit 2bp cheaper across most of the curve.
• 4.50% Jun-28 Gilt supply saw decent enough demand metrics.
• SONIA futures are +0.5 to -7.0 through the blues, twist steepening, with greens leading the weakness.
• BoE-dated OIS is flat to incrementally firmer on the day.
• A raft of BoE speakers will appear in front of parliament this afternoon (Treasury Select Committee Hearing for the July Financial Stability Report and the August Monetary Policy Report).

FOREX: JPY Off Lows as Japanese Authorities Reiterate Willingness to Act

• JPY tops the G10 table headed into the NY crossover, with several Japanese representatives stepping in to verbally defend the beleaguered JPY currency. The chief cabinet secretary Matsuno spoke most recently, reiterating the importance of currency rates moving stably to reflect fundamentals. Matsuno also stressed that sharp currency moves are undesirable, and the authorities are watching FX moves with a high sense of urgency, not ruling out any options to respond to market prices.
• In response, USD/JPY faded off the overnight cycle high of 147.82, reverting back below the Y147.50 level.
• Rates are expected unchanged at the Bank of Canada, with the board seen keeping policy unchanged at 5.00%. Markets watch USD/CAD, which continues to trade within range of multi-month highs at 1.3672. A break north of here puts the pair at the best levels since late March.
• SEK is the poorest performer, keeping EUR/SEK within range of 11.9421, the week's highs and the bull trigger of 11.9633.
• The ISM Services Index takes focus going forward, with markets expecting the data very moderately fade to 52.5 from 52.7. The next update to the Atlanta Fed GDPNow is also due, within which markets look for any further signs of near-term economic strength after yesterday's better-than-expected factory orders release.
• The central bank speaker slate picks up Wednesday after a quieter start to the week, with ex-Fed's Bullard speaking as well as Fed's Logan & Collins, BoE's Bailey and ECB's Visco.

EQUITIES: EuroStoxx 50 Pullback Exposes Key Support

The E-mini S&P contract maintains a firmer tone and the contract is trading closer to its recent highs. Price has traded above resistance at 4537.06, the base of a bull channel, drawn from the Mar 13 low that was breached on Aug 16. Eurostoxx 50 futures have pulled back from their recent highs. A continuation lower would expose support at 4225.00, the Aug 24 low. Clearance of this level would signal scope for a test of the key support at 4187.00, the Aug 18 low and bear trigger.

• Japan's NIKKEI 225 closed higher by 204.26 pts or +0.62% at 33241.02 and the TOPIX ended 14.68 pts higher or +0.62% at 2392.53.
• Elsewhere, in China the SHANGHAI closed higher by 3.708 pts or +0.12% at 3158.077 and the HANG SENG ended 6.93 pts lower or -0.04% at 18449.98.
• Across Europe, Germany's DAX trades lower by 39.34 pts or -0.25% at 15732.11, FTSE 100 lower by 50.65 pts or -0.68% at 7386.9, CAC 40 down 46.61 pts or -0.64% at 7207.94 and Euro Stoxx 50 down 19.67 pts or -0.46% at 4249.12.
• Dow Jones mini down 40 pts or -0.12% at 34637, S&P 500 mini down 10.75 pts or -0.24% at 4492, NASDAQ mini down 54.75 pts or -0.35% at 15479.25.

COMMODITIES: Gold Pullback Considered Corrective

A bull cycle in Gold remains in play and for now, the latest pullback is considered corrective. Recent gains resulted in a move above the 50-day EMA - at $1932.0. This highlights a stronger short-term bull leg and signals scope for a climb towards $1963.3. The uptrend in WTI futures remains intact and yesterday’s extension reinforces this condition. The recent break of resistance at $84.16, the Aug 10 high, confirmed a resumption of the uptrend and this maintains the bullish price sequence of higher highs and higher lows.

• WTI Crude down $0.62 or -0.72% at $86.18
• Natural Gas down $0.01 or -0.19% at $2.576
• Gold spot down $2.75 or -0.14% at $1923.95
• Copper down $3.6 or -0.94% at $381.45
• Silver down $0.16 or -0.67% at $23.4003
• Platinum down $11.03 or -1.18% at $922.08