MNI US OPEN - Norges Bank Hike 25bps and Signal Next Move in September

NEWS

NORGES BANK (MNI): Norges Hikes 25bp, Next Move Likely in September

Norges Bank hiked 25 basis points to 4.0% at its August meeting with Governor Ida Wolden Bache stating that if the economy evolved as expected the next hike would come in September. The 25bp hike was widely expected although analysts were divided over if and when the Norwegian central bank would hike next. The August meeting was not accompanied by any fresh forecasts with the Bank stating that developments since its June forecast round had been broadly as expected, with inflation edging down and underlying inflation proving resilient.

US/JAPAN/S.KOREA (WaPo): Biden to Host Stand-alone Summit With Japan And South Korea, a First

President Biden will host his Japanese and South Korean counterparts at Camp David in Maryland on Friday, the first time the three nations' leaders will hold a stand-alone meeting to discuss trilateral issues. The summit reflects the way rising threats in the region — notably from China and North Korea — are drawing the United States and its two most important Asian allies steadily closer together. The three leaders are expected to affirm publicly for the first time that their nations' security is linked, and commit to consulting each other in the event of a regional security crisis.

US/CHINA (CNBC): China is Considering Countermeasures to Biden’s Executive Order

China’s Ministry of Commerce signaled Thursday it would respond, if needed, to the Biden administration’s executive order to restrict U.S. investments in advanced Chinese technology. China’s Ministry of Commerce has met with businesses to understand the order’s impact, spokesperson Shu Jueting said in Mandarin, translated by CNBC.

US/CHINA (BBG): Biden’s China Investment Rules May Benefit US Intelligence

President Joe Biden’s plan to limit certain investments in China may prove a boon for US intelligence agencies. Companies planning to invest in sensitive Chinese technology such as semiconductors, quantum computing and artificial intelligence would have to share details with the government, according to an executive order Biden signed last week. In the process, it would provide economic intelligence on China that’s eagerly sought by US spy agencies.

US/MEXICO (BBG): US Set to Escalate Claim Mexico Corn Policy Violates Trade Deal

The US is preparing to accelerate its complaint that Mexico’s ban on genetically modified corn violates the nations’ free-trade deal, heightening tensions between neighbors. The US Trade Representative’s office plans to request the formation of a dispute resolution panel under the US-Mexico-Canada Agreement on Thursday, according to people familiar with the matter, who asked not to be identified without permission to speak publicly. The USTR press office declined to comment.

SPAIN (MNI): Armengol Wins Speaker's Position in First Sign of PSOE-Junts Cooperation

Former Regional President of the Balearic Islands Francina Armengol has been elected as the next President of the Congress of Deputies (speaker) in the first concrete sign of cooperation between the leftist bloc of parties led by acting PM Pedro Sanchez and the hard-line Catalan separatist Together for Catalonia (Junts). Armengol won in the first round with 178 votes, above the 176 required for an absolute majority. She beat the centre-right Popular Party (PP) candidate Cuca Gamarra on 139 votes, and right-wing nationalist Vox nominee Ignacio Gil Lzaro with 33.

CHINA (BBG): China’s Housing Slump Is Much Worse Than Official Data Shows

Judging by China’s official statistics, the nation’s housing market has been remarkably resilient in the face of tepid economic growth and record defaults by developers. New-home prices have slipped just 2.4% from a high in August 2021, government figures show, while those for existing homes have dropped 6%. But the picture emerging from property agents and private data providers is far more dire.

CHINA (BBG): China Leaders Vow to Lift Consumption Without Detailing How

China’s top leaders pledged to expand domestic consumption and support the private sector without detailing any new stimulus measures, the latest in a series of rhetorical attempts to boost confidence in the economy as markets sink and growth disappoints. The nation’s State Council promised to meet annual economic targets via “targeted and forceful” macroeconomic adjustments and strengthened policy coordination, China National Radio reported, citing a plenary meeting led by Premier Li Qiang on Wednesday.

RBNZ (MNI): No "Rush" to Change Rates but "Higher for Longer" to Contain Inflation

RBNZ Governor Orr has spoken to Bloomberg TV and stated that the RBNZ doesn't feel a "rush" to change rates any time soon but that it is firmly in the "higher for longer" camp. Its OCR profile published yesterday has rates around 5.5% for almost two years, which the central bank believes is "restrictive". Orr said today that that should be enough to return inflation to target but the RBNZ is in a position to tighten or loosen policy depending on its assessment of new information. These comments, in addition to Tuesday's, signal that the RBNZ is on hold for now.

MNI RBNZ REVIEW - AUGUST 2023: Prolonged Pause

The RBNZ left the cash rate at 5.5% at its August meeting as was widely expected as restrictive policy is constraining domestic demand but it needs to remain “restrictive” for the “foreseeable future” in order to bring inflation back to target. The revised OCR profile showed rates around 5.5% for almost two years, which Governor Orr is “confident” should be enough to return inflation to target. His comments signal that the RBNZ is on hold for now but continues to “watch, worry and wait”. But Orr doesn’t feel a “rush” to change rates in either direction.

PHILIPPINES (BBG): Philippines Keeps Key Rate Steady as Economic Growth Falters

The Philippine central bank left its benchmark interest rate unchanged for a third straight meeting after economic growth floundered and inflation cooled. The Bangko Sentral ng Pilipinas held its overnight reverse repurchase rate at 6.25% on Thursday during Eli Remolona’s first policy decision as governor. The move was predicted by 22 of 24 economists in a Bloomberg survey, with two expecting a rate hike.

COMMODITIES (BBG): Iron Ore Jumps on Questions on Extent of China Steel Output Cuts

Iron ore jumped by as much as 5% in Singapore amid uncertainty over how much steel mills would cut output by, and as gains in Chinese stocks aided broader economic sentiment. The price spike, which happened in afternoon trading, comes after the steelmaking staple lost around 12% since late July due to growing pessimism on China’s economic prospects, particularly its moribund property sector. Expectations that domestic steel producers will reduce output have also been weighing on prices.

DATA

JAPAN DATA (MNI): Trade Figures Close to Expectations, Exports to China Weaken

• JAPAN POSTS JPY78.7 BLN TRADE DEFICIT IN JULY
• JAPAN JULY EXPORTS -0.3% Y/Y; JUNE +1.5%
• JAPAN JULY IMPORTS-13.5% Y/Y; JUNE -12.9%

July trade figures were close to expectations. The trade deficit printed at -78.7bn, versus a 47.9bn forecast. In adjusted terms we were also slightly below expectations, -557.2bn, versus -460.9bn projected. This deficit was very similar to the June print. Exports eased to -0.3% y/y, close to the -0.2% forecast, while the prior outcome was +1.5%. This was the first y/y fall since early 2021. By region, export volumes were firm to the US, +2.5% y/y, but weakened to China, -15.9% y/y. We are above earlier 2023 lows in terms of export momentum to China, but lost ground versus the June pace.

JAPAN JUNE CORE MACHINE ORDERS +2.7% M/M; MAY -7.6%
JAPAN Q3 CORE MACHINE ORDERS SEEN -2.6% Q/Q; Q2 -3.2%

AUSTRALIA DATA (MNI): Disappointing Jobs Data Impacted by Holidays

• AUSTRALIA JUL UNEMPLOYMENT RATE +3.7%
• AUSTRALIA JUL F-T EMPLOYED PERSONS CHANGE -24.2K
• AUSTRALIA JUL EMPLOYED PERSONS CHANGE -14.6K
• AUSTRALIA JUL LABOR PARTICIPATION RATE +66.7%

July employment was weaker and the unemployment rate higher than expected but it seems to be driven by school holidays, just as the softer April data was. We will need the August data to ascertain if there has been a turn in employment. The RBA noted in its August minutes that there have been "early signs that the labour market might be at a turning point" and the July data probably have not made this statement more definite but have made it even more likely the RBA will be on hold in September.

FOREX: AUD/USD Touches New Pullback Low on Soft Jobs Release

• The USD is furtively stronger early Thursday, with FX volumes data showing a slight pick up in participation relative to quieter Wednesday trade. Activity is led by Antipodean currencies after the jobs data overnight, with Australian employment change and the unemployment rate coming in below expectations, denting the currency and putting AUD/USD at a new 2023 low of 0.6365.
• GBP also saw some order-based price action, with a spike in volumes through a quiet morning putting the pair at new daily lows just ahead of the NY crossover. With news and data flow light, attention turned to a sizeable uptick in volumes, with trade amounting to $121mln across futures pressuring spot prices.
• JPY is outperforming, aided by modest weakness across European cash equity markets as well as the verbal interjection from finance minister Suzuki earlier in the week. Nonetheless, USD/JPY managed to touch a fresh cycle high in Asia-Pac trade, touching Y146.56 before fading.
• Lastly, the Norges Bank rate decision came in alongside expectations, with the bank raising the policy rate by 25bps to 4.00% and flagging the September meeting as the next most likely hike. Markets remain on watch for whether the September rate rise could mark the peak in the policy cycle.
• Weekly US jobless claims data crosses later Thursday, with leading index for July set to follow. There are no notable central bank speakers due.

US TSYS: Off Lows, Curve Steepening Holds

Tsys have stabilised after the cheapening linked to the FOMC meeting minutes and soft 20-Year JGB auction.

• TYU3 last -0-05+, 0-07 off lows, while cash Tsy Yields are little changed to 4bp higher as the curve bear steepens. A quick reminder that 5+-Year yields hit fresh YtD highs in Asia, before the move moderated.
• The moderation came as global equity benchmarks found a base and the broader USD moved back from best levels.
• A sizable block buy in FV futures (+15,629/DV01 ~$644K) also provided support.
• FOMC-dated OIS shows terminal rate pricing of 5.44%, a touch firmer than this time yesterday (owing to FOMC minutes), with ~48bp of cuts then showing through June ’24, meaning that some easing has been priced out over the last 24 hours.

EGBS: Bonds Back from Session Lows, Curves Generally Bear Steepen

Core global FI markets consolidate off early Thursday cheaps, with global equity benchmarks off lows and the broader USD off highs.

• That leaves the major German cash benchmarks running 2-4bp cheaper as the curve bear steepens.
• Bund futures are -45, bouncing after bears failed to force a challenge of Tuesday’s low.
• Headline flow has been relatively limited since European trading got underway.
• The only real news we have seen came in the form of a Catalan outlet reporting that acting Spanish PM Sanchez's PSOE and the Catalan separatist Together for Catalonia (Junts) have reached an agreement for the latter to back the former's nominee for speaker of the Congress of Deputies (see more on that here).
• 10-Year EGB spreads are generally little changed to a touch wider vs. Bunds. GGBs provide the exception, with ~1bp of tightening seen there.

EQUITIES: Bearish Theme in E-Mini S&P Remains Intact

A bearish threat in Eurostoxx 50 futures remains present and this week’s sell-off reinforces current conditions. The contract has breached support at 4276.00, the Aug 8 and 15 low. The break of this level strengthens a bearish threat and exposes 4220.00, the Jul 7 low. Key short-term resistance is unchanged at 4420.00, the Aug 10 high. Initial resistance is 4357.9, the 50-day EMA. A bearish theme in the E-mini S&P contract remains intact and this week’s move lower has reinforced current conditions. The contract has cleared the 50-day EMA and breached channel support drawn from the Mar 13 low - the base is at 4467.06 today. The clear breakout signals scope for a continuation lower and opens the 4400.00 next. Initial firm resistance to watch is at the 20-day EMA - at 4506.36

• Japan's NIKKEI closed lower by 140.82 pts or -0.44% at 31626 and the TOPIX ended 7.78 pts lower or -0.34% at 2253.06.
• Elsewhere, in China the SHANGHAI closed higher by 13.611 pts or +0.43% at 3163.739 and the HANG SENG ended 2.67 pts lower or -0.01% at 18326.63.
• Across Europe, Germany's DAX trades lower by 20.32 pts or -0.13% at 15768.14, FTSE 100 lower by 22.71 pts or -0.31% at 7333.46, CAC 40 down 11.56 pts or -0.16% at 7248.52 and Euro Stoxx 50 down 14.25 pts or -0.33% at 4269.82.
• Dow Jones mini up 42 pts or +0.12% at 34869, S&P 500 mini up 5.25 pts or +0.12% at 4426, NASDAQ mini up 18.75 pts or +0.13% at 14964.5.

COMMODITIES: WTI Futures Off Intraday Lows, Recent Pullback Still Considered Corrective

The uptrend in WTI futures remains intact and the latest pullback appears to be a correction. Initial firm support lies at $78.69, the Aug 3 low. A clear break of this level would signal scope for a deeper short-term retracement. For bulls, a resumption of gains would refocus attention on the next objective at $87.43, a Fibonacci projection. Moving average studies are in bull-mode condition highlighting an uptrend. Gold remains bearish and the yellow metal is trading lower. Price has pierced key support at $1893.1, the Jun 29 low. A clear break of this level would strengthen bearish conditions and signal scope for $1885.8, the Mar 15 low ahead of $1871.6, the Mar 13 low. Moving average studies remain in bear mode condition, highlighting current sentiment. On the upside, initial firm resistance to watch is $1939.6, the 50-day EMA.

• WTI Crude up $0.1 or +0.13% at $79.56
• Natural Gas up $0 or +0.04% at $2.589
• Gold spot up $2.04 or +0.11% at $1894.03
• Copper up $1.8 or +0.49% at $371.45
• Silver up $0.16 or +0.7% at $22.5765
• Platinum up $1.75 or +0.2% at $888.8