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
- MNI US PAYROLLS PREVIEW: DECIDING 25BP OR 50BP FOR A FIRST CUT
- FED'S GOOLSBEE SAYS ECONOMIC DATA JUSTIFIES MULTIPLE RATE CUTS, STARTING SOON
- US TO PRESENT GAZA PROPOSAL ‘IN COMING DAYS,’ BLINKEN SAYS
- FINAL EUROZONE Q2 GDP Q/Q MARGINALLY SOFTER THAN FLASH
Figure 1: Recent US labour market developments
NEWS
MNI US PAYROLLS PREVIEW: Deciding 25bp or 50bp for a First Cut
Nonfarm payrolls growth is expected to see a partial bounce in August to 165k after a particularly soft 114k, with continued questions over the extent to which the latter was driven by one-off factors. The scope for revisions to the prior two months is high, exacerbated by low response rates, whilst Natixis point out that seven of the past ten years of July payrolls figures were revised higher. Expect particular sensitivity to the unemployment rate, calculated from the separate household survey (a survey effectively of ~40k households for a country with more than 330 million people).
FED (DJ): Fed's Goolsbee Says Trending Economic Data Justifies Multiple Rate Cuts, Starting Soon
In exclusive interview, Goolsbee sees mounting warning signs about outlook of labor market. The longer-run trend of labor-market and inflation data justify the Federal Reserve easing interest-rate policy soon, and then steadily over the next year, Chicago Fed President Austan Goolsbee said Thursday, in an exclusive interview with MarketWatch. "The long arc shows inflation is coming down very significantly, and the unemployment rate is rising faster" than Fed officials had expected in June, Goolsbee said. Given the more favorable inflation data and the less favorable unemployment data, "it is pretty clear that the path is not just rate cuts soon," Goolsbee said, but multiple cuts over the next 12 months, as the Fed has projected in its most recent dot plot.
US (BBG): US to Present Gaza Proposal ‘in Coming Days,’ Blinken Says
The US, Qatar and Egypt will present a new cease-fire proposal to Israel and Hamas in the coming days, Secretary of State Antony Blinken said Thursday, as the Biden administration struggles to find a way to end the war in the Gaza Strip. The top US diplomat said that 90% of the cease-fire deal had been agreed upon and that the remaining issues were Israeli control of the Philadelphi corridor, which runs along the Gaza-Egypt border, and how Israeli hostages and Palestinian prisoners are exchanged.
US (WaPo): Trump Tightens Alliance With Musk, Advocating Broad Role in U.S. Policymaking
Former president Donald Trump on Thursday endorsed a government commission that could give Elon Musk broad responsibilities for auditing federal spending and regulations, tightening their pre-election alliance during a wide-ranging speech in which he also made some misleading or baseless claims on economic policy. Trump's advisers have discussed the commission for months, and Musk has publicly expressed interest in it on X, the social media platform he owns. Trump, the Republican presidential nominee, formally expressed his support during a speech here.
US (WSJ): Trump Proposal to Cut Tax Rate for U.S. Manufacturers Spurs Flurry of Questions
On Thursday, Donald Trump pledged to New York’s business elite that he would “once again turn America into the manufacturing superpower of the world.” To do so, he said, he would cut the corporate tax rate to 15% from 21% for companies that make their products in the U.S., and expand tariffs on foreign-made goods.
US/UKRAINE (MNI): US Announces Additional USD250mn in Military Assistance
Speaking at the Ukraine Contact Defense Group meeting at Ramstein airbase in Germany, US Secretary of Defense Lloyd Austin III confirms that US President Joe Biden is set to approve an additional USD250mn in security assistance for Ukraine. Austin: “It will surge in more capabilities to meet Ukraine’s evolving requirements. And we’ll deliver them at the speed of war,” Teri Schultz at DW: "Austin says the coalition is "laser-focused on Ukraine's priority needs." He cites Biden in insisting "Russia will not prevail... the independent people of Ukraine will prevail and the US and our allies & partners will continue to stand with them every step of the way."
US/JAPAN (BBG): Japan PM Contender Hayashi Holds Out Hope for Nippon Steel Deal
Japan’s top government spokesman still hopes that Nippon Steel’s $14.1 billion takeover bid for US Steel Corp will be resolved in a mutually beneficial way for both companies in comments following news that US President Joe Biden intends to block the deal. “We really hope that even in this political year, both sides will agree with mutual benefit,” said Japan’s chief government spokesman and ruling party leadership contender Yoshimasa Hayashi in an interview with Bloomberg. “It’s still going on and we don’t know the result yet.”
FRANCE (MNI): Focus Shifts to Gov't Formation as NFP Promises Censurve Vote on Barnier
Following the appointment of former foreign minister Michel Barnier as PM on 5 Sep, focus will now turn to the efforts of Barnier and President Emmanuel Macron in putting together a new cabinet. Under Article 8 of the French constitution, it is the president who has the power to appoint gov't ministers, but has to do so "on the proposal of the prime minister." This means the two will have to work together on cabinet appointees and meet today at around 1200CET. Until then, the current cabinet remains in place in a caretaker capacity. There is no deadline to put together a cabinet. For former PM Elisabeth Borne it took four days. For the outgoing PM Gabriel Attal he appointed senior
ministers within two days but then a slew of junior ministers a month later.
CHINA (BBG): China Creates Its Largest Brokerage to Take On Wall Street
China is combining two of its largest state-backed brokerages to create a new behemoth as it seeks to consolidate the $1.7 trillion sector and build stronger investment banks to compete with overseas financial firms. Guotai Junan Securities Co. will merge with smaller rival Haitong Securities Co. through a share swap, according to statements from both companies on Thursday. The combination of the firms, both partly owned by Shanghai’s state assets administrator, will create a new entity with assets of 1.6 trillion yuan ($230 billion), topping Citic Securities Co. as the largest brokerage.
CHINA (MNI): China Needs to Fight Deflation Stress - Yi Gang
MNI (Beijing) China should move immediately to fight deflationary pressure via an accommodative monetary policy and a proactive fiscal stance to address economic growth, said Yi Gang, former governor of the People’s Bank of China, on Friday at the 2024 Bund Summit. The Chinese economy is recovering but at a slow pace due to weak domestic demand reflected by sluggish consumption and investment, he noted, pointing out the country has seen a negative GDP deflator in the past several quarters. Hopefully, the GDP deflator can turn “slightly positive” over a couple of quarters in the future with both CPI and PPI edging up, he continued.
CHINA (MNI): China to Address Consumption in Next Five-year Plan
MNI (Beijing) China’s macroeconomic policy will shift focus to expand consumption from investment in Beijing's next five-year plan (2026-2030) to increase residents' disposable income and improve the proportion of private spending within GDP, said Yang Weimin, deputy director at the Chinese People’s Political Consultative Conference (CPPCC)’s Economic Affairs Committee, on Friday at the 2024 Bund Summit in Shanghai.
CHINA (MNI EXCLUSIVE): China Iron Ore, Steel to Stabilise on Demand Rebound
China commodity analysts share their iron ore and steel outlook. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
CHINA/COMMODITIES (BBG): China’s Steel Crisis Drives Iron Ore to Worst Week Since March
Iron ore edged lower toward its worst week since March, with few signs of a recovery for China’s beleaguered steel market. “There is no significant improvement in demand for steel products, so there’s little room for steel mills to resume production,” Zhang Shaoda, an analyst with China Futures Co., said by email. “The downward trend for iron ore is expected to continue.”
HONG KONG (BBG): Super Typhoon Churns Toward Hainan After Halting Hong Kong Trade
Super Typhoon Yagi barreled toward Hainan Island in southern China packing destructive winds and torrential rain after skirting Hong Kong and shutting the city’s stock market. Yagi - known as Makar in China - has maximum sustained winds of 130 knots (241 kilometers) per hour, according to the Joint Typhoon Warning Center. The system is equivalent to a Category 4 hurricane, which is considered a major storm that has the capacity to inflict catastrophic damage.
BOJ (MNI EXCLUSIVE): BOJ Confidence Grows as Focus Shifts to December
The BOJ's confidence on wages and prices has grown - on MNI Policy MainWire now, for more details please contact sales@marketnews.com.
BOJ (BBG): Kuroda Indicates That BOJ Is Still a Long Way From Neutral Rate
Former Bank of Japan Governor Haruhiko Kuroda signaled that the central bank has a lot of room to raise borrowing costs in its policy normalization process by offering a rough idea of the nation’s neutral interest rate. “A nominal neutral rate, which the Bank of Japan is trying to gradually approach, could be less than 2%,” Kuroda said via video link at the Bund Summit in Shanghai Friday. “A short-term nominal rate may be less than 2%, maybe around 1.5% or maybe less than that.”
JAPAN (BBG): Japan’s Koizumi Enters LDP Race, Vows to Hold Snap Election
Japan’s former Environment Minister Shinjiro Koizumi formally announced his bid to become the nation’s next prime minister Friday, saying he will call a general election if selected and speed up decision making, while also considering a meeting with North Korea’s Kim Jong Un. “I want to make major reforms within a year,” Koizumi said at a press conference Friday as he looks to follow in his father’s footsteps to become prime minister. “It’s time to question why Japan’s decline isn’t stopping.”
NEW ZEALAND (BBG): New Zealand Housing Construction Slump Highlights Recession Risk
New Zealand residential construction slid to a four-year low last quarter, in a further sign the economy may have tipped into another recession. Spending in constant prices - a measure of volume - fell to NZ$5.2 billion ($3 billion) in the three months through June, Statistics New Zealand said Friday in Wellington. That’s the lowest level since the same period in 2020, when the nation was in a lockdown during the pandemic.
CORPORATE (BBG): Seven & I Rejects Couche-Tard’s Takeover Proposal as Too Low
Seven & i Holdings Co. rejected a $39 billion takeover proposal from Alimentation Couche-Tard Inc. as too low and fraught with regulatory risk, while signaling a willingness to consider a sweetened offer. Shares of the Japanese convenience store operator closed 1.4% lower on Friday, after swinging between gains and losses earlier in the session as investors weighed prospects for a deal. The operator of 7-Eleven shops published a letter outlining its response to Couche-Tard following a review of the proposal by a committee of independent outside directors.
CORPORATE (BBG): Intel Is Said to Explore Sale of Part of Stake in Mobileye
Intel Corp. is considering options for its stake in its struggling automated driving systems provider Mobileye Global Inc. as part of a major strategy overhaul, people with knowledge of the matter said. The chipmaker could offload some of its 88% holding in Mobileye on the public market or via a sale to a third party, according to the people, who asked not to be identified because the information was private. Mobileye has a board meeting later this month in New York, where Intel’s plans will be considered, one of the people said.
DATA
EUROZONE DATA (MNI): Final Q2 GDP Q/Q Marginally Softer Than Flash, Y/Y In-Line
- EUROZONE Q2 GDP +0.2% Q/Q, +0.6% Y/Y
Eurozone Final Q2 GDP increased less than expected on a quarterly basis by 0.2% Q/Q (vs 0.3% flash, 0.3% in Q1) whilst printing in-line on a yearly basis at 0.6% Y/Y (vs 0.6% flash, 0.5% in Q1). However, the details were soft with both consumption and investment negative, the majority of the growth fueled by net exports and a small positive
contribution from government expenditure. The marginally lower than expected Q/Q reading was driven by household final expenditure falling 0.1% (vs rising 0.3% in Q1), whilst gross fixed capital formation fell 2.2% (vs -1.8% in Q1). Net exports provided a positive contribution of 0.5% to the quarterly GDP figure (vs 0.8% in Q1) - with exports increasing 1.4% Q/Q (+1.1% in Q1) whilst imports rose 0.5% (vs falling 0.6% in Q1).
GERMANY DATA (MNI): Broad-Based IP Weakness in July More Than Reversing June's Strength
- GERMANY JUL IND PROD -2.4% M/M
German industrial production declined by 2.4% M/M in July, remaining below expectations of -0.5% and more than reversing June's strong +1.7% (upwardly revised from +1.4%). On a 3M/3M basis, industrial production declined by 2.7%. Combined with rather weak July 'core' factory orders data and declining sentiment, this suggests that the strong June was indeed only a one-off for the industrial sector, and weakness is set to continue. On a yearly basis, production declined 5.3% (vs -3.5% cons; -3.7% prior, revised from -3.4%).
GERMANY JUL TRADE BALANCE EUR 16.8BLN (MNI)
GERMANY JUL EXPORTS +1.7% M/M; IMPORTS +5.4% M/M (MNI)
FRANCE DATA (MNI): Industrial Production Disappoints; Driven by Transport Manuf.
- FRANCE JUL INDUSTRIAL PRODUCTION -0.5% M/M, -2.2% Y/Y
- FRANCE JUL MANUFACTURING OUTPUT -0.9% M/M, -3% Y/Y
France Industrial Production again disappointed on both a yearly and monthly basis in July at -2.2% Y/Y (vs -0.9% consensus, -1.7% revised prior) and -0.5% M/M (vs -0.3% consensus, 0.8% prior). The weaker than expected reading was largely due to manufacturing production (weighting 82.53% of total industrial production) which fell 0.9% M/M (vs rising 0.9% in June). Within manufacturing production, 4 of 5 subcomponents deteriorated, with the biggest downward contribution fgrom manufacturing of transport equipment which fell sharply by 4.9% M/M (vs growth of 3.1% in June) - the weakest reading since January.
JAPAN JULY HOUSEHOLD SPENDING +0.1% Y/Y; JUNE -1.4% (MNI)
JAPAN JULY HOUSEHOLD SPENDING -1.7% M/M; JUNE +0.1% (MNI)
RATINGS: Scope on Spain the Highlight of Friday’s Scheduled Sovereign Updates
Sovereign rating reviews of note scheduled for after hours on Friday include:
- Fitch on Turkey (current rating: B+; Outlook Positive)
- Moody’s on Estonia (current rating: A1; Outlook Stable)
- S&P on Norway (current rating: AAA; Outlook Stable)
- Morningstar DBRS on Greece (current rating: BBB (low), Stable Trend)
- Scope Ratings on Norway (current rating AAA; Outlook Stable) & Spain (current rating; Outlook Positive)
FOREX: USD/JPY Eyes Bear Trigger and Pullback Low Pre-NFP
- Ahead of the NFP report for August, JPY has rallied further, extending strength on the week and keeping USD/JPY pinned toward the pullback lows posted in early August at 141.70.
- The August jobs report should prove key Friday and could set the tone for the Fed rate decision on September 18th. Consensus looks for +165k today and a lower U/E rate of 4.2%, but the whisper number looks lower at 152k and the broad USD weakness posted since the beginning of this week makes it clear markets are gearing for a soft number.
- With September pricing pinned between a 25 and a 50bps rate cut from the Fed, conviction in either direction should prove market-moving today, with the USD Index just 0.4% off the bear trigger and key support at 100.514.
- Overnight USD vols were well bid into the Thursday close, suggesting markets ascribe a high likelihood of a sharp market move upon release today. EUR/USD overnight vols topped 14 points yesterday, the highest level since mid-December's central bank deluge, meaning markets price a ~75 pip swing in the pair.
- Outside of the jobs report, the CAD equivalent is also due, and follows a third consecutive BoC rate cut this week. A soft U/E rate (exp. at 6.5% from 6.4% prior) could trigger pricing for further cuts ahead.
EGBS: Stabilise After Early Rally, US Payrolls in Focus
Bund futures have stabilised just above the Aug 22 high after core FI rallied through the morning, currently +55 at 134.60. A clear breach of the Aug 22 resistance (at 134.50) would expose 134.95, a Fibonacci retracement level.
- Soft industrial production data from Germany and France will have supported FI this morning alongside heavy European equity performance.
- The Eurozone Q2 final GDP reading was revised a tenth lower to 0.2% Q/Q, which wasn’t much of a surprise after Irish data saw a downward revision yesterday.
- Meanwhile, compensation per employee growth was 4.3% Y/Y, well below the Eurosystem staff’s 5.1% June projection (but again, this wasn’t a meaningful surprise for markets).
- The German cash curve has lightly bull flattened, while 10-year peripheral spreads to Bunds are slightly wider owing to the weak equity performance.
- The 10-year OAT/Bund spread continues to hover around 70bps, with new PM Barnier now needing to form a Cabinet with President Macron.
- The US payrolls release remains the key focus for global markets this afternoon.
GILTS: Underpinned Into NFPs
Weaker equity markets fuel a rally in core global FI early Friday, with another round of pre-NFP positioning (BBG whisper number has moved lower) seemingly factoring in as well.
- Futures +53 at 100.09. representing session highs.
- Bulls now eye the Aug 14 high and bull trigger (100.30). A break there would further solidify their technical control.
- Yields 3-4bp lower, another round of modest steepening seen on the curve.
- SONIA futures just off highs, last flat to +5.0.
- BoE-dated OIS still shows ~45bp of cuts through year end.
- Expect the NFP release and subsequent Fedspeak to dominate today, with little of note on the UK calendar until Tuesday’s labour market report.
EQUITIES: Bullish Theme in E-Mini S&P Intact Despite Extension of Sell-Off
Eurostoxx 50 futures have reversed course this week and a bearish tone - a correction - remains intact for now. The move down has resulted in a break of both the 20- and 50-day EMAs. This paves the way for a pullback towards 4805.47 initially, a Fibonacci retracement. Initial firm short-term resistance has been defined at 4998.00, the Sep 3 high. Clearance of this level would reinstate the recent bullish theme. A bullish theme in S&P E-Minis remains intact. However, this week’s sharp sell-off highlights the start of a corrective cycle. The pullback has resulted in a breach of the 20-day EMA and the pair has pierced support at the 50-day average, at 5520.21. A clear break of this EMA would signal scope for a deeper retracement towards 5459.75, a Fibonacci retracement. Key near-term resistance has been defined at 5669.75, the Sep 3 high.
- Japan's NIKKEI closed lower by 265.62 pts or -0.72% at 36391.47 and the TOPIX ended 23.34 pts lower or -0.89% at 2597.42.
- Across Europe, Germany's DAX trades lower by 121.38 pts or -0.65% at 18456.08, FTSE 100 lower by 35.36 pts or -0.43% at 8206.31, CAC 40 down 30.96 pts or -0.42% at 7400.66 and Euro Stoxx 50 down 28.7 pts or -0.6% at 4786.21.
- Dow Jones mini down 159 pts or -0.39% at 40672, S&P 500 mini down 36.25 pts or -0.66% at 5476, NASDAQ mini down 217.5 pts or -1.15% at 18748.5.
Time: 09:50 BST
COMMODITIES: WTI Futures Maintain a Softer Tone, Trading Close to Weekly Lows
WTI futures maintain a softer tone following this week’s sharp sell-off. The break lower resulted in a breach of key support at $70.88, the Aug 5 low. The clear break of this level confirms a resumption of the downtrend that started Apr 12 and paves the way for an extension towards $66.66, a Fibonacci projection. MA studies are in a bear-mode position highlighting a clear downtrend. Initial resistance is at $73.66, the 20-day EMA. The trend condition in Gold is unchanged and remains bullish. Moving average studies are in a bull-mode set-up and this continues to highlight a dominant uptrend. Furthermore, a bullish price sequence of higher highs and higher lows remains intact. Sights are on $2536.4 next, a Fibonacci projection. The 20-day EMA has been pierced. The next firm support to watch lies at $2443.9, the 50-day EMA. S/T weakness is considered corrective.
- WTI Crude down $0.04 or -0.06% at $69.16
- Natural Gas up $0.02 or +0.8% at $2.272
- Gold spot up $1.15 or +0.05% at $2517.74
- Copper down $0.45 or -0.11% at $413.25
- Silver down $0.05 or -0.17% at $28.774
- Platinum up $1.16 or +0.12% at $930.76
Time: 09:50 BST
MNI (LONDON)
| Date | GMT/Local | Impact | Country | Event |
| 06/09/2024 | 1230/0830 | *** |  US | Employment Report |
| 06/09/2024 | 1230/0830 | *** |  CA | Labour Force Survey |
| 06/09/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 06/09/2024 | 1245/0845 | US | New York Fed's John Williams | |
| 06/09/2024 | 1400/1000 | * | CA | Ivey PMI |
| 06/09/2024 | 1500/1100 | US | Fed Governor Christopher Waller | |
| 06/09/2024 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
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.