MNI US OPEN - Mixed UK Labour Data Muddies Water for BOE

NEWS

FRANCE/GERMANY (BBG): France Pushes Germany to Shield EU Industry in China, US Contest

French Finance Minister Bruno Le Maire will travel to Berlin on Wednesday to push Germany for a tougher measures to protect European industry in a global race against China and the US. The French minister said he will tell the German government that moves in recent years to allow state aid for nascent sectors are now insufficient and a new efforts are required.

CHINA (RTRS): Country Garden Secures Bondholder Reprieve, Sources Say

China's largest private property developer Country Garden won approval from its creditors to extend repayments on six onshore bonds by three years, two sources familiar with the matter said on Tuesday, sending shares up as much as 10%. The bondholder reprieve came as investors are closely monitoring whether China's latest government stimulus measures including lowering existing mortgage rates and offering preferential loans for first-home purchases in big cities might be enough to restore consumer confidence and sow the seeds for an eventual property market recovery.

CHINA (MNI): More Stimulus Needed to Counter China Slowdown

MNI (Beijing) The Chinese government needs to adopt more aggressive expansionary macroeconomic policies, including more fiscal spending and rate cuts, to bolster demand as factory orders shrink rapidly, while authorities should implement recently announced supply-side policies as soon as possible, a former member of the People's Bank of China's Monetary Policy Committee told MNI.

JAPAN (BBG): Japan Five-Year Debt Draws Solid Demand as Higher Yields Attract

An auction of five-year government notes in Japan met solid demand in the nation’s first sale since central bank Governor Kazuo Ueda jolted markets with comments that suggested negative interest rates may be on the way out. The Ministry of Finance sold ¥2.5 trillion ($17 billion) of debt maturing in June 2028, and will offer ¥1.2 trillion of new 20-year bonds Thursday. The five-year auction drew a higher-than-expected cut-off price and its bid-to-cover ratio rebounded from the prior sale of similar securities on Aug. 15.

NEW ZEALAND (MNI): Poll Shows Incumbent Labour Party Falling Further Behind

Another poll is signalling that there will be a change of government in New Zealand following the October 14 election. The latest Newshub-Reid Research poll showed support for the opposition National Party rising 4.3pp to 40.9% and while its potential coalition ally the ACT Party fell 2pp to 10.1%, the two together have enough support to form a majority government with around 66 seats. 61 seats are required to form government.

NEW ZEALAND (BBG): New Zealand Sees Wider Budget Deficits, Long Road to Surplus

New Zealand will avoid a double-dip recession but faces larger budget deficits and a longer road back to surplus, according to the nation’s Treasury Department. Releasing the Pre-election Economic and Fiscal Update Tuesday in Wellington, Treasury said the deficit will widen to NZ$11.4 billion ($6.7 billion) in the year ending June 2024 compared with a NZ$7.6 billion gap forecast in May’s budget. The books don’t show a surplus until 2027, a year later than previously projected.

RUSSIA/NORTH KOREA (MNI): Putin to Meet Kim "In Coming Days"

Russia's Interfax news agency has confirmed that Russian President Vladimir Putin will meet North Korean leader Kim Jong-un, "in coming days" on the margins of the Eastern Economic Forum in Vladivostok, Russia. IFX reports that Defence Minister Sergei Shoigu will also attend. The meeting could be a highly significant geopolitical event for the security environment of the Korean Peninsula. Although US officials have downplayed the significance of the meeting, an enhanced military alliance between Moscow and Pyeongyang could increase North Korea's access to high-tech components required to accelerate its nuclear and ballistic missile programmes.

RUSSIA (MNI): Putin Appears to Reject Reports of Russian Mobilisation

Russian President Vladimir Putin has appeared to nix the prospect of a widespread mobilisation of Russian troops following Ukrainian military reports yesterday. The Ukrainian General Staff said yesterday: "A mass forced mobilisation of the population is expected soon in the Russian Federation and temporarily occupied territories of Ukraine due to the occupiers' catastrophic losses." According to Reuters, the General Staff said the mobilisation campaign could target between 400,000 and 700,000 recruits but declined to provide evidence to support the assertion.

DATA

UK DATA (MNI): Mixed UK Labour Data Muddies Water for BOE

• UK JUL AVE WEEKLY EARNINGS +8.5% YY
• UK JUL AVE WEEKLY EARNINGS EX-BONUS +7.8% YY
• UK JUL ILO UNEMPLOYMENT RATE +4.3%
• UK AUG CLAIMANT RATE +4%

The UK labour market continued to contract in the three months to July, the latest data from the Office for National Statistics showed Wednesday, although wage growth continues to push ahead, with real total pay turning positive for the first time since October 2021.According to the ONS, unemployment rose to 4.3% -- a near two-year high -- in the latest reporting period, while vacancies across the economy fell below a million for the first time since the end of the pandemic.

GERMANY SEPT ZEW EXPECTATIONS -11.4; CURRENT CONDITIONS -79.4 (MNI)

SPAIN AUG HICP +0.5% M/M, +2.4% Y/Y (MNI)

NORWAY JUL MAINLAND GDP +0.2% M/M, AGG GDP +0.3% M/M (MNI)

AUSTRALIA DATA (MNI): Confidence Depressed as Inflation Worries Households

Westpac's consumer confidence index fell 1.5% m/m in August after 0.4%, the first consecutive monthly falls since November last year. The RBA on hold since July has not outweighed the impact of cost of living pressures, including the recent rises in petrol and electricity prices, and higher mortgage payments on sentiment, although mortgage holders' sentiment rose 7.8% and house price expectations increased further.

FOREX: Greenback Recoups Monday Losses, GBP Fades Alongside BoE Terminal Pricing

• The greenback is furtively firmer just ahead of NY hours, with the USD Index recouping a large part of yesterday's losses, which are deemed corrective at these levels. The USD Index remains comfortably inside the medium-term uptrend drawn off the July low, and the trend will resume on gains back above 105.157.
• Meanwhile, the single currency is among the poorest performers, largely a function of USD strength and the proximity to Thursday's ECB release. Markets remain evenly split on those seeing further tightening from the governing council this week, and those seeing a pause for policy rates at this juncture. EUR/USD printed a pullback low at 1.0712, but steered clear of fresh weekly lows.
• Rates rallied on the back of the UK labour market report, with some BoE-dated OIS contracts shedding as much as 6bps, prompting the terminal policy rate to slip back below 5.65%. Rate differentials and some broader USD demand have weighed on cable, with spot slipping as low as 1.2463, taking out the first downside level at 1.2472,. 1.2446 is the next notable support, marking last week's base and the lowest print since the 8 June.
• There are few datapoints or macro releases due Tuesday, with both the ECB and Federal Reserve inside their pre-decision media blackout periods. The next data of note crosses tomorrow, with the US CPI release for August.

EGBS: Generally a Little Firmer on Weaker Equities & Bid in Gilts, Before German ZEW Trims Gains

A bid in UK bonds, in the wake of domestic labour market data, helped Bunds away from worst levels of the day, which allowed Monday’s low in futures to hold after an early test.

• Weakness in benchmark European equity indices also aided the bid in FI.
• The expectations component of the latest German ZEW survey wasn’t as soft as expected, but was still negative, while the current conditions metric saw a more pronounced deterioration vs. exp. The expectations component has allowed Bunds to move away from best levels.
• Bund futures last +10.
• German cash benchmarks bull flatten, sitting flat to 2bp richer.
• Most core/semi-core EGB curves see similar moves.
• Peripherals are mixed in spread terms, with BTPs (1bp tighter, July Wides holding) & GGBs (1bp wider) providing the extremes to the range of spread moves (vs. Bunds). Peripheral curves have generally twist flattened.
• Dutch Jan-26 DSL supply was digested smoothly, with Schatz supply and the EU 7-Year syndication providing the other regional rounds of issuance to note today.

GILTS: Off Labour Market-Induced Bests, Breeden Comments Eyed

The post-data move away from best levels in EGBs helps gilts further away from session bests.

• That leaves gilt futures +50, after a brief and limited foray above last week’s highs failed to result in a break of 95.00 (short-term technicals remain bearish sub-95.79).
• Cash gilts 1-6bp richer, bull steepening.
• The initial rally & steepening impulse was fuelled by labour market data that revealed the latest signs of loosening, although wages remain at elevated levels.
• BoE-dated OIS softened in the wake of the release. The liquid contracts now sit off dovish extremes, +0.5bp to -5bp as the strip twist flattens.
• ~21.5bp of tightening is priced for this month’s meeting, while terminal policy rate pricing is below 5.65% i.e. markets continue to price less than 2 further 25bp hikes from the BoE.
• SONIA futures sit flat to +8.5, with greens outperforming.
• Comments from BoE MPC nominee Breeden have pointed to weak UK economic activity, along with upside risks to the Bank’s inflation outlook. Her appearance in front of the Treasury Select Committee is ongoing. No market reaction thus far.
• Next week’s CPI release presents the next major point of note on the domestic data docket, with monthly economic activity data slated for tomorrow.

EQUITIES: Recent Gains in E-Mini S&P Considered Corrective

Despite the latest recovery, a bear cycle in Eurostoxx 50 futures remains in play. Price has recently pierced key support at 4187.00, the Aug 18 low and a bear trigger. A clear break of this level would strengthen bearish conditions and open 4177.40 next, a Fibonacci retracement. Key resistance has been defined at 4358.00, the Aug 30 high. Initial firm resistance is seen at 4282.20 the 20-day EMA. The E-mini S&P contract traded higher Monday. For now, gains are considered corrective and a bear cycle remains in play. Key resistance has been defined at 4597.50, the Sep 1 high. A break is required to reinstate the recent bullish theme. A resumption of weakness would signal scope for a move towards the key support and bear trigger at 4397.75, the Aug 18 low. Clearance of this support would highlight a short-term reversal.

• Japan's NIKKEI closed higher by 308.61 pts or +0.95% at 32776.37 and the TOPIX ended 19.43 pts higher or +0.82% at 2379.91.
• Elsewhere, in China the SHANGHAI closed lower by 5.72 pts or -0.18% at 3137.059 and the HANG SENG ended 70.56 pts lower or -0.39% at 18025.89.
• Across Europe, Germany's DAX trades lower by 59.45 pts or -0.38% at 15741.72, FTSE 100 higher by 37.7 pts or +0.5% at 7534.48, CAC 40 down 11.61 pts or -0.16% at 7266.66 and Euro Stoxx 50 down 8.7 pts or -0.2% at 4245.63.
• Dow Jones mini down 55 pts or -0.16% at 34627, S&P 500 mini down 11.25 pts or -0.25% at 4479, NASDAQ mini down 45.75 pts or -0.3% at 15429.5.

COMMODITIES: WTI Futures Remain Close to Recent Highs

The uptrend in WTI futures remains intact and price is trading closer to its latest highs. 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. Note that MA studies are in a bull mode position, highlighting positive sentiment. Sights are on the $90.00 handle. Initial firm support to watch lies at $83.39, the 20-day EMA. Gold is consolidating and trading closer to last week’s lows. Key support to watch lies at $1903.9, the Aug 25 low. A break of this level would be viewed as a bearish development and highlight the fact that the recovery between Aug 21 - Sep 1 has been a correction. This would expose $1884.9, the Aug 21 low. On the upside, initial firm resistance is seen at $1930.2, the 50-day EMA. Key resistance is at $1953.0, the Sep 4 high.

• WTI Crude up $0.65 or +0.74% at $87.91
• Natural Gas up $0.01 or +0.54% at $2.622
• Gold spot down $1.83 or -0.1% at $1920.49
• Copper down $0.4 or -0.11% at $380.1
• Silver up $0.01 or +0.05% at $23.1033
• Platinum down $1.77 or -0.2% at $901.88