Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY
- FOCUS ON FED CHAIR POWELL’S SPEECH AT JACKSON HOLE 10:00 ET
- ISRAELI TEAM TRAVELS TO CAIRO WITH GAZA TALKS SET TO RESUME
- BOJ’S UEDA STATES CURRENT POLICY RATE FAR BELOW LIKELY NEUTRAL RATE
- ECB’S VUJCIC SEES GRADUAL INTEREST-RATE CUTS BUT URGES CAUTION
Figure 1: ECB Consumer Expectations Survey - Inflation
Source: MNI/ECB
NEWS
MNI JACKSON HOLE PREVIEW: August 2024
At Jackson Hole, Fed Chair Powell is expected to reiterate his July press conference message that a rate cut "could be on the table as soon as September", thus aligning with market pricing for easing at least 25bp at the next meeting. Expect him to emphasize that the progress made on inflation and rising risks to the employment side of the Fed's dual mandate warrant dialling back the restrictiveness of monetary policy. He may tie this into the theme of the Symposium by arguing that the lagged impact of earlier tightening is finally being seen more convincingly. While he's unlikely to deviate from the script too much - emphasizing data dependence and a meeting-by-meeting approach - any reference to the envisaged tempo of cuts or the eventual destination for rates would be market-moving. Jackson Hole schedule here.
US (BBG): Kamala Harris Accepts Democratic Presidential Nomination
Vice President Kamala Harris accepts the Democratic presidential nomination during remarks at the party’s national convention in Chicago. “The path that led me here in recent weeks was no doubt unexpected,” she says, “but I’m no stranger to unlikely journeys.”
US (NYT): Kennedy Withdraws From Presidential Contest in Arizona
Robert F. Kennedy Jr. has filed paperwork to withdraw from the presidential race in Arizona, a spokesman for the Arizona secretary of state’s office said on Thursday night. The move comes a day before Mr. Kennedy, an independent candidate, is set to give an address in Arizona about the future of his struggling campaign. He is expected to end his candidacy and possibly to endorse former President Donald. J. Trump following weeks of discussion between their camps, although people close to Mr. Kennedy say an endorsement is not yet certain. On Thursday Mr. Trump’s campaign announced that the former president would have a “special guest” at his rally in Glendale, Ariz., on Friday.
ISRAEL/MIDEAST (BBG): Israeli Team Travels to Cairo With Gaza Talks Set to Resume
Israeli negotiators arrived in Cairo for another round of talks aimed at cementing a cease-fire in the Gaza war even as an agreement remained elusive and US officials warned time was running out. Israeli officials said David Barnea, the head of Israel’s Mossad intelligence agency, was in the Egyptian capital with his team. The US’s top envoy for the region, Brett McGurk, was also there, according to US National Security Council spokesman Eduardo Maia Silva.
ECB (BBG): ECB’s Vujcic Sees Gradual Interest-Rate Cuts But Urges Caution
The European Central Bank probably has room to slowly lower interest rates as inflation converges toward 2%, but risks remain and officials must proceed carefully, according to Governing Council member Boris Vujcic. “As long as data fall in line with our projections which foresee inflation to fall to 2% in 2025, that increases our confidence that we can gradually ease the restrictiveness of our monetary policy,” the Croatian central-bank chief said in an interview. “But we should remain cautious and move very gradually.” Speaking on the sidelines of the Federal Reserve’s annual conference in Jackson Hole, Vujcic signaled a rate reduction in September widely expected by investors - is possible.
UK (MNI): 10% Rise in Energy Price Cap Matches Wider Expectations
This 10% rise in Ofgem's energy price cap appears pretty much in line with closely followed forecasts from Cornwall Insights. There is a big base effect working through utilities prices currently having large impacts on headline CPI. Indeed, as we noted in last week's Inflation Insight, the increase in utilities prices in July added 0.45ppt to headline CPI relative to June (but overall still contribute around -0.9ppt to headline CPI). Based on Cornwall Insight's latest forecasts for the price cap to rise to 1714 we estimated that a further 0.63ppt would be added to headline CPI from October onwards. This would be a slightly larger upward change in Oct vs Sep than the BOE's MPR forecast (0.51ppt).
BOJ (MNI): Ueda States Current Policy Rate Far Below Likely Neutral Rate
BoJ Governor Ueda hasn't sounded as dovish as Deputy Governor Uchida (relative to remarks from early August), as Ueda's appearance before both houses of parliament continues. The Governor stated early in his appearance that market shifts need to be watched closely. Such developments can also impact the economic outlook. He also noted that the central bank needs to communicate its thinking/outlook carefully. These points were a likely nod from the Governor to the early August market rout, of which the late July BoJ rate rise, was partially attributed to (weaker US NFP the other big driver).
JAPAN (BBG): Chipmaker Kioxia Aims to List in Tokyo in October, Nikkei Says
Japanese chipmaker Kioxia has filed for an October initial public offering on the Tokyo exchange, Nikkei reported, pulling the trigger on a long-anticipated debut at a time AI development is fueling semiconductor demand. The company is expected to command a valuation of more than 1.5 trillion yen ($10.3 billion), the Nikkei reported, without citing its sources. Kioxia had considered an October timeframe earlier this year.
CANADA (BBG): Railways Prepare to Restart as Canada Intervenes in Lockout
Canada’s two largest railways are preparing to restart operations after Prime Minister Justin Trudeau’s government stepped in to try to end a labor dispute that had halted work. Labor Minister Steven MacKinnon said Thursday afternoon in Ottawa that he has asked the Canada Industrial Relations Board to impose binding arbitration on Canadian National Railway Co., Canadian Pacific Kansas City Ltd. and the Teamsters union. He also ordered the board to direct the parties to extend their current labor contract, and said the railways should resume operations “forthwith.”
CHINA (BBG): China Vows to Quicken Buying Unsold Homes for Public Housing
China’s housing regulator pledged to swiftly implement a program to purchase unsold apartments and turn them into affordable housing, its latest effort to cushion a record property slump. The government will also push forward renting and selling public housing units as soon as possible when conditions are right, Vice Minister of Housing and Urban-Rural Development Dong Jianguo said in a briefing in Beijing on Friday. The ministry didn’t unveil a volume target.
CHINA (BBG): China Puts Brakes on New Steel Mills With Industry in Crisis
China has abruptly suspended its system for approving new steel plants, as the government responds to a deep demand slump that’s crushed industry profits and fueled a surge of exports. Beijing has for years required the elimination of existing capacity as a condition of building new plants. Those rules will no longer apply from Friday and the government will develop an alternative program, the Ministry of Industry and Information Technology said in a statement.
CHINA (BBG): China Bond Trading Collapses Amid PBOC Crackdown on Record Rally
China’s attempts to cool a record bond rally have stalled a drop in yields, but at the cost of a collapse in trading activity to an extent that may create more headaches for policymakers. Trading in the most active 10-year government bond has steadily decreased over the last two weeks, with the average daily volume on Wednesday and Thursday some 90% below the average of August 7th and 8th, according to data from the official trading system CFETS. The volume slump comes as Beijing ramps up measures to crack down on speculation in longer-dated bonds, including a warning this week against “illegal” trading.
RBA (MNI EXCLUSIVE): RBA Labour Market Rethink Seen Making Cuts More Distant
Economists are debating the RBA's updated view on excess demand and the labour market - On MNI Policy MainWire now, for more details please contact sales@marketnews.com
RUSSIA (MNI): Ukraine Committing 'Nuclear Terrorism' w/Kursk NPP Strikes - TASS
Russian state outlet TASS reporting that according to sources within law enforcement, Ukraine "has chosen the Kursk Nuclear Power Plant as a target for committing acts of nuclear terrorism." Reports claims that Ukrainian kamikaze drones were shot down in the vicinity of the Kursk NPP on the night of 22 August, adding "Law enforcement agencies recalled that this is not the first time that Russian electronic warfare systems have suppressed Ukrainian drones in the area of the Kurchatov NPP. Similar events occurred on August 14 and 16, 2024." The Russian Foreign Ministry says that the attack "requires a swift response" from the UN's International Atomic Energy Agency (IAEA).
DATA
EUROZONE DATA (MNI): Firmer Than Expected Inflation Expectations and Softer Growth
- ECB 1-YEAR CONSUMER INFLATION EXPECTATIONS 2.8%
- ECB 3-YEAR CONSUMER INFLATION EXPECTATIONS 2.4%
Eurozone consumer inflation median expectations on both the 1 and 3-year ahead horizon came a touch above expectations; the 1-year ahead print remained at 2.8% Y/Y for the third consecutive month (vs 2.7% consensus - but only from 3 analyst estimates), whilst the 3-years ahead increased to 2.4% Y/Y (vs 2.3% consensus from 5 analyst estimates and prior), as measured by the ECB's CES survey. The 1-year ahead median inflation expectation therefore remained at the lowest level since September 2021, whilst the 3-year measure returned to March's level.
FRANCE DATA (MNI): French Manufacturing Sentiment Rebounds Above Expectations
- FRANCE AUG MANUF SENTIMENT AT 99
French Manufacturing Sentiment exceeded expectations printing at 99 in August (vs consensus 96 and prior of 95), returning to June levels after falling to the lowest level since December 2020 in July. The metric remains a touch below its long term average of 100 and below the pre-covid (2014-19) average of 103.7. The data contracts with yesterday's flash PMI data, which showed a deeper rate of contraction for the manufacturing sector.
UK DATA (MNI): GfK Unchanged; Economy Expectations Fell for the First Time Since Feb
- UK AUG GFK CONSUMER CONFIDENCE INDEX -13
UK GfK Consumer Confidence remained unchanged in August, broadly in line with consensus ( -12 consensus) - remaining at the highest level since September 2021. 3 of 5 subcomponents improved, with all subcomponents above levels seen in August 2023. In particular, the 'Personal Financial Situation over next 12 months' score rose 3 points to 6, and Major Purchase Index also rose 3 points to -13. Meanwhile, the 'General economic situation over next 12 months' score fell 4 points to -15 - down for the first time since February. August's survey was conducted among a sample of 2,003 individuals from August 1 to August 15.
SWEDEN DATA (MNI): Pace of Labour Market Weakening Might Be Easing
- SWEDEN JUL UNEMPLOYMENT 7.7%
The Swedish July LFS unemployment rate was 8.6% after 8.2% in June. The Bloomberg consensus of 8.4% was formed of just four analysts. The 3mma of the unemployment rate, which smooths out some of the monthly volatility), remained at 8.3%, after reaching a cycle high of 8.4% in April/May. A Sahm rule calculation of the unemployment rate eased to 0.6 (vs 0.8 prior, and a cycle high of 1.2 in April), which suggests that the pace of labour market weakening appears to be easing somewhat. This shouldn't stand in the way of the Riksbank's planned easing cycle though, following the dovish tilt in guidance at Tuesday's meeting.
CHINA DATA (MNI): China Freight Index Shows Demand Has Picked Up
MNI (Beijing) China’s Road Logistics Freight Rate Weekly Index, a measure of road freighter charges across China, reached 1042.6 this week, up 0.08% from last week, according to the China Logistics Information Center on Friday. The index has averaged 1,030.2 so far this year, up from 1,029.7 during the same time last year, according to MNI calculations based on Choice data. The data showed road logistics demand has picked up slightly and transport capacity supply was generally stable, the association said.
JAPAN DATA (MNI): CPI Close to Expectations, Core-Core Sub 2% Y/Y
Japan national July CPI was close to expectations. Headline rose 2.8%, against a 2.7% forecast. (June's print was 2.8%). Ex fresh food was 2.7% in line with market expectations, 2.6%y/y was the June outcome. Core, ex fresh food and energy, printed in line with market forecasts at 1.9%y/y but this was a step down from the June 2.2% pace. In m/m seasonally adjusted terms momentum was still reasonable. Headline CPI rose 0.2%, slightly down from June, while core ex fresh food was 0.3%, ex fresh food and energy 0.1%. Good prices rose 0.5%, while services were up 0.1%, although this is at risk of being revised away if history is a guide.
RATINGS: Ireland, Austria & Sweden Up for Review Later
Potential sovereign rating reviews of note schedule for after hours on Friday include:
- Moody’s on Austria (current rating: Aa1; Outlook Stable) & Sweden (current rating: (current rating: Aaa; Outlook Stable))
- S&P on Austria (current rating: AA+; Outlook Stable)
- Scope Ratings on Ireland (current rating: AA-; Outlook Positive) and Sweden (current rating: AAA; Outlook Stable)
FOREX: Yen Paring Gains Going Into the US Session
- The Dollar traded in the red overnight and into the European session, as market participants await on the main event for the day, Fed Powell and BoE Bailey at Jackson hole, although we could get disappointed with plenty more important data releases ahead of the next Fed meeting.
- The Yen has again seen a volatile session, over 100 pips range overnight against the Greenback on the back of Hawkish comments from BoJ's Ueda.
- But the Yen is now coming under some pressure as we head into the US session, at session low against EUR, GBP and the AUD.
- Market participants are also closely watching Cable this morning, with the 2023 high of 1.3142 just 5 pips away, this was also the highest print since April 2022.
- Above the 2023 high, would open to 1.3193 2.236 proj of the Apr 22 - May 3 - 9 price swing.
- Looking ahead, All eyes will be on Mr Powell and potential comment on a weakening Labour sector, and hints for the September meeting.
EGBS: Weaker as Oil Recovery, Inflation Expectations Above Consensus
Bund futures have drifted back towards yesterday’s lows, pulled lower by Brent crude futures extending yesterday's recovery and slightly higher than expected ECB inflation expectations data.
- Position squaring ahead of Fed Chair Powell and BoE Governor Bailey’s Jackson Hole speeches may also be at play.
- ECB hawks Kazaks and Vujcic both leant towards a September rate cut, though had little market impact with ESTR OIS already fully pricing a 25bp cut at that meeting.
- Bund and OAT futures are -9 and -5 ticks lower respectively today, while BTPs outperform a little as European equities recovery off lows.
- Broader 10-year peripheral spreads to Bunds are tighter as a result, though the OAT/Bund spread is steady at 70bps ahead of today’s gathering of parliamentary party group leaders for talks on how to agree on a new PM and form a gov't.
- The aforementioned Jackson Hole speeches provide the main focus for global markets heading into the weekend.
GILTS: Oil Bid & European Data Counter Early Rally
A bid in oil markets and firmer-than-expected ECB inflation expectations data counters the early rally in gilts.
- Futures +8 at 99.56 after a close below the 20-day EMA increased the threat to the underlying bullish technical picture. Bears will look to force a test of the Aug 8 low (99.20) next, while initial resistance remains a last week’s high (100.80).
- Roll activity accounts for most of today’s futures volume ahead of next week’s first notice.
- Yields flat to 1bp higher across the curve.
- SONIA futures flat to -1.5. BoE-dated OIS shows ~39bp of cuts through year end, little changed on the day.
- Comments from BoE Governor Bailey (16:00 text, 20:00 speech) are eyed.
- The BoE has so far been reluctant to commit to follow up rate cuts following its August move.
EQUITIES: Eurostoxx 50 Futures Hold Onto Latest Gains
Eurostoxx 50 futures have traded higher this week and the pair is holding on to its latest gains. The contract has pierced the 50-day EMA, at 4870.23. An extension higher would undermine the recent bearish theme and highlight a stronger reversal. This would open 4951.00 next, the Jul 31 high. For bears, a reversal lower would refocus attention on the bear trigger at 4494.00, the Aug 5 low. A bullish theme in S&P E-Minis remains intact and the contract has traded higher this week. Price has cleared resistance at 5600.75, the Aug 1 high and this signals scope for an extension towards key resistance and the bull trigger at 5721.25, the Jul 16 high. A break would resume the primary uptrend. On the downside, support to watch lies at 5487.03, the 50-day EMA. A clear break of it is required to instead highlight a potential bearish threat.
- Japan's NIKKEI closed higher by 153.26 pts or +0.4% at 38364.27 and the TOPIX ended 13.32 pts higher or +0.5% at 2684.72.
- Elsewhere, in China the SHANGHAI closed higher by 5.595 pts or +0.2% at 2854.367 and the HANG SENG ended 28.9 pts lower or -0.16% at 17612.1.
- Across Europe, Germany's DAX trades higher by 69.98 pts or +0.38% at 18563.23, FTSE 100 higher by 17.48 pts or +0.21% at 8305.27, CAC 40 up 22.2 pts or +0.3% at 7546.31 and Euro Stoxx 50 up 11.58 pts or +0.24% at 4896.58.
- Dow Jones mini up 101 pts or +0.25% at 40929, S&P 500 mini up 20.5 pts or +0.37% at 5614.5, NASDAQ mini up 116 pts or +0.59% at 19694.25.
Time: 09:50 BST
COMMODITIES: This Week's Fresh Cycle Highs Reinforces Bullish Conditions in Gold
WTI futures have been unable to hold on to recent gains and the contract has traded lower this week, extending the latest bearish reversal. The recent move down exposes key support at $70.88, the Aug 5 low and the bear trigger. A break would resume the downtrend that started Apr 12. On the upside, initial resistance to watch is $75.04, the 20-day EMA. Key short-term resistance has been defined at $78.54, the Aug 12 high. Gold remains in a bull-mode condition and this week’s fresh cycle high reinforces current conditions. The recent breach of resistance at $2483.7, the Jul 17 high, confirmed a resumption of the primary uptrend. Note that moving average studies remain in a bull-mode set-up and this continues to highlight a dominant uptrend. The focus is on a climb towards $2536.4 next, a Fibonacci projection. Initial support to watch lies at $2455.9, the 20-day EMA.
- WTI Crude up $0.52 or +0.71% at $73.53
- Natural Gas down $0.01 or -0.63% at $2.04
- Gold spot up $14.76 or +0.59% at $2499.56
- Copper up $3.3 or +0.79% at $421.9
- Silver up $0.46 or +1.6% at $29.438
- Platinum up $4.24 or +0.45% at $953.23
Time: 09:50 BST
MNI (LONDON)
| Date | GMT/Local | Impact | Country | Event |
| 23/08/2024 | 1230/0830 | * |  CA | Quarterly financial statistics for enterprises |
| 23/08/2024 | 1230/0830 | ** | CA | Retail Trade |
| 23/08/2024 | 1230/0830 | ** | CA | Retail Trade |
| 23/08/2024 | 1400/1000 | *** |  US | New Home Sales |
| 23/08/2024 | 1400/1000 | US | Fed Chair Jerome Powell | |
| 23/08/2024 | 1400/1000 | *** | US | US Fed Chair Speech |
| 23/08/2024 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 23/08/2024 | 1900/2000 |  GB | BOE's Bailey Speech at Jackson Hole | |
| 24/08/2024 | 1625/1825 |  EU | ECB's Lane in panel at Jackson Hole | |
| 25/08/2024 | 1500/1700 | EU | ECB's Cipollone in panel at the Rimini Meeting |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.