EXECUTIVE SUMMARY
- MNI FED PREVIEW - “CLOSE CALL” TILTS TO 50BP CUT
- ECB SHOULD CONTINUE TO REDUCE INTEREST RATES, VILLEROY SAYS
- PBOC DELAYS ONE-YEAR LOAN OPERATION AGAIN AS POLICY GETS REVAMP
- UK CPI AS CLOSE TO CONSENSUS AS POSSIBLE; LITTLE IMPACT FOR MPC
Figure 1: UK CPI in-line with expectations, Y/Y unchanged from July's reading
Source: ONS
NEWS
MNI FED PREVIEW - SEPTEMBER 2024: “Close Call” Tilts to 50bp Cut
Fed leadership has made it abundantly clear that the FOMC will initiate a rate cutting cycle at the September meeting, with pre-blackout developments pointing toward a 25bp reduction as opposed to an outsized 50bp. But subsequent media reports that it’s a “close call” have pushed market pricing to imply a split decision vs a 50bp cut, and to MNI’s Markets Team, it suddenly looks more likely than not that Chair Powell will persuade the FOMC to opt for a slightly more front-loaded cutting cycle. The apparent last-minute indecision underlines uncertainty over how the Committee currently sees the likely extent and pace of cuts, beyond “data dependent”, as it assesses what it sees as a shifting balance of risks between rising unemployment and above-target inflation.
MIDEAST (MNI): Egypt Pres Warns Against Escalation as IDF Moves Elite Division North
Egyptian President Abdel Fattah al-Sisi has said to US Secretary of State Antony Blinken in a meeting in Cairo that 'Egypt rejects any attempts to escalate the situation in the region', and that 'all parties should act responsibly'. Says that Egypt 'supports Lebanon' following the mass pager blasts that hit Hezbollah figures on 17 Sep. Blinken is in Cairo ostensibly to discuss the (diminishing) prospect of a ceasefire in Gaza, but events have taken over with the risk of a major escalation between Israel and Hezbollah in the wake of the pager explosions.
US/INDIA (BBG): Trump Says He Will Meet With India’s Modi Next Week
Former President Donald Trump said Indian Prime Minister Narendra Modi plans to meet with him next week - the latest visit from a foreign leader or official as nations grapple with the possibility of the Republican returning to power after November’s election. “He happens to be coming to meet me next week, and Modi, he’s fantastic,” the Republican presidential nominee said Tuesday during a town hall in Flint, Michigan, as he revealed the visit during a winding answer that touched on free trade and protecting US jobs.
ECB (BBG): ECB Should Continue to Reduce Interest Rates, Villeroy Says
The European Central Bank should continue to lower rates as inflation is set to return durably to 2% next year, Governing Council member Francois Villeroy de Galhau said. While there’ll be some volatility in price data over the coming months, victory over inflation is “within sight,” the Bank of France chief said Wednesday. “We have cut rates twice and we should continue to cut them,” he told BFM TV.
ECB (BBG): ECB’s Vasle to Seek Second Term as Slovenian Central-Bank Head
European Central Bank Governing Council member Bostjan Vasle said he’d seek a second six-year term at the helm of Slovenia’s central bank. Vasle, whose current mandate ends on Jan. 8, told journalists at a briefing Wednesday in Ljubljana, that he’d run “based on track record in the first mandate.” His bid is likely to face stiff competition. Local media have listed potential replacements including former Prime Minister Anton Rop, Finance Ministry state secretary Sasa Jazbec and several serving central-bank vice governors.
MNI NORGES BANK PREVIEW - SEPTEMBER 2024: Don’t Expect a Dovish Tilt
The Norges Bank is unanimously expected to leave the policy rate on hold at 4.50% at its September meeting. This meeting comes with an updated MPR and set of projections. We think there is scope for a small downward revision to the rate path, which could re-open the door to a rate cut in December (after the June MPR rate path pushed the likelihood of the first rate cut into early 2025). However, we don’t expect the policy statement to see wholesale changes.
AUSTRIA (MNI): Chancellor Pledges Additional EUR1bn to Flood Fund
Chancellor Karl Nehammer has pledged a EUR1bn increase to the federal catastrophe fund to assist with alleviating the impact of the massive floods that have struck Austria and other central European states in the wake of Storm Boris. Nehammer also confirms that companies that were severely affected by the floods can postpone tax payments. In his post on X, Nehammer also says "Austria will try to see whether the EU Solidarity Fund can be activated and whether financial support from Brussels is possible".
CHINA (BBG): PBOC Delays One-Year Loan Operation Again as Policy Gets Revamp
China’s central bank announced it will inject one-year liquidity to domestic lenders on Sept. 25, marking another delay amid a broad overhaul of its policy toolkit. The People’s Bank of China will renew the medium-term lending facility funds maturing Sept. 18 later this month, according to a statement Wednesday. It postponed the operations in August to around the 25th from its previous practice of around mid-month. In July, the central bank announced an MLF rate cut toward the end of the month.
CHINA (BBG): China Prepares for Another Typhoon After Bebinca Lashes East
Parts of China are preparing for a fresh tropical storm, just days after the country’s eastern seaboard, including Shanghai, was hit by the strongest typhoon it had seen in decades. Starting late Thursday, Typhoon Pulasan is expected to make landfall in coastal areas, threatening to disrupt transport and roil production in a key economic hub. Northern Zhejiang, Shanghai, southeastern Anhui and southern Jiangsu province will be affected, according to a report from China Meteorological Administration. Zhejiang province has activated its emergency response in anticipation of the storm, the 14th of the year.
JAPAN (BBG): Japan Govt Keeps Economic View, Tweaks Corp Goods Price
Japan’s government left its overall economic assessment and view of major economic components, such as private consumption, exports and capital investment, in September, the Cabinet Office revealed on Wednesday. But the government tweaked its assessment on the corporate goods price index, saying “the rising tempo is slowing,” the first tweak since May 2024. The previous view was that CGPI was rising moderately. Japanese economy is recovering at a moderate pace, although it appears to have pause in part for the second straight month, the government noted.
INDONESIA (BBG): Indonesia Surprises With Quarter-Point Cut Before Fed Move
Indonesia’s central bank unexpectedly cut its key interest rate for the first time in more than three years, easing ahead of its own guidance and just hours before the Federal Reserve’s expected dovish tilt. Bank Indonesia lowered the BI-Rate by a quarter-point to 6%, a decision seen by only 10 of 36 analysts in a Bloomberg News Survey, with the rest expecting a hold. Governor Perry Warjiyo signaled last month that BI would wait until the fourth quarter, when Fed cuts are underway.
N. KOREA (BBG): North Korea Cozying Up to Russia With Missile Test, Envoy Visit
North Korea fired multiple short-range ballistic missiles Wednesday, displaying military hardware it has been suspected of sending to Russia in a test that came soon after it dispatched its foreign minister to Moscow. North Korea fired multiple missiles starting around 6:50 a.m. toward waters off its east coast that flew about 400 kilometers (250 miles), South Korea’s Joint Chiefs of Staff said in a message sent to reporters. Japan’s Coast Guard said separately at least two ballistic missiles were fired and they landed outside of the country’s exclusive economic zone.
CORPORATE (BBG): Google Wins Fight Over €1.5 Billion EU Antitrust Fine Over Ads
Google won a court fight with the European Union over a €1.5 billion ($1.7 billion) fine for thwarting competition for online ads, partly atoning for last week’s crushing defeat in a separate judgment for abusing its monopoly powers. Judges at the EU’s General Court in Luxembourg ruled on Wednesday backed the Alphabet Inc. unit’s challenge to fine doled out in 2019, saying regulators made mistakes in their probe.
DATA
UK DATA (MNI): CPI as Close to Consensus as Possible; Little Impact for MPC
- UK AUG CPI +0.3% M/M, +2.2% Y/Y
- UK AUG CORE CPI +0.4% M/M, +3.6% Y/Y
- UK AUG SERVICES CPI +0.4% M/M, +5.6% Y/Y
- UK AUG OUTPUT PPI -0.3% M/M, +0.2% Y/Y
- UK AUG INPUT PPI -0.5% M/M, -1.2% Y/Y
Looking at some of the drivers there was a decent downside contribution from accommodation services - which had been one of the main potential upside risks here. Note that the survey date was 13 August (so didn't coincide with a Swift concert). Air fares was the largest upside driver - rising 11.87%Y/Y vs -10.36%Y/Y in July (after the July print was strongly impacted by an earlier survey date). As expected fuel prices were a downside contributor. Food prices were a bit softer than expected and core goods rose more than expected (the two largely balancing out their impacts on headline CPI). Within core goods second hand cars and furniture were solid but clothing prices were soft.
EUROZONE AUG FINAL HICP +0.1% M/M, +2.2% Y/Y (MNI)
EUROZONE AUG FINAL CORE HICP +0.3% M/M, +2.8% Y/Y (MNI)
SWEDEN DATA (MNI): LFS Data Consistent With Reduced Pace of Labour Market Weakening
- SWEDEN AUG UNEMPLOYMENT 7.9%
The Swedish LFS unemployment rate was two tenths below consensus in August at 8.3% (vs 8.6% prior). Taken alongside last week's Public Employment Service data, we believe the pace of Swedish labour market weakening has reduced, but the overall state remains subdued. This is in line with the Riksbank's view from the August policy decision. As such, the data still supports the Riksbank's plans to cut rates two or three more times this year, including at next week's meeting.
CHINA DATA (MNI): Beijing Consumption Up 3.3%
MNI (Beijing) Beijing municipality consumption increased 3.3% y/y between January and August, unchanged from the first seven months of the year, the capital’s data department said on Wednesday. While services consumption increased by 7.3% y/y, an acceleration from the previous 7.2%, retail sales decreased 0.9% y/y to CNY910.2 billion, widening from the previous 0.8% decline during January to July. The city's industrial added value increased by 6.7% y/y between January and August, a slowdown from the 7.6% growth recorded from January to July.
CHINA DATA (MNI): Beijing's August Newly Built Sales Worsen
MNI (Beijing) Beijing house buyers bought 6.5 million square meters of newly built commercial housing between January and August, down 5.1% y/y, and declining further from the 4.1% drop seen during the first seven months of the year, data from the capital’s statistics department showed on Wednesday. Developers completed 5.5 million square meters of housing in the city during the first eight months, a 22.7% y/y decrease, widening from the 15% decline seen from January to July, the statistics showed.
JAPAN DATA (MNI): Japan Exports Rise Slows, Autos Decline
- JAPAN POSTS JPY695.3 BLN TRADE DEFICIT IN AUG
- JAPAN AUG EXPORTS +5.6% Y/Y; JULY +10.2%
Japan’s exports rose 5.6% y/y in August for the ninth straight rise but slowed from July's 10.2% gain as automobile shipments fell 9.9% following the prior month's 4.4% growth, data released by the Ministry of Finance showed on Wednesday. However, semiconductor manufacturing equipment exports rose 55.2% in August, up from July's 27.8%. The print was within the Bank of Japan’s latest assessment that exports have been more or less flat. Imports rose 2.3% y/y in August for their fifth straight increase, but also slowed from July's 16.6% rise.
JAPAN DATA (MNI): BOJ Aug Real Export Index Rises 1.3% M/M
The Bank of Japan's real export index, calculated using Ministry of Finance trade data, rose 1.3% m/m in in August for the third straight rise following a revised 1.3% increase in July, data released by the BOJ showed on Wednesday.
The figures were calculated by MNI based on BOJ data and confirmed by bank officials. The BOJ will release details of the index on Tuesday. Bank officials are focused on how August's real export index to the U.S. is recovering from July's 5.3% fall as they focus on the evolving U.S. economy.
JAPAN JULY CORE MACHINE ORDERS -0.1% M/M; JUNE +2.1% (MNI)
NEW ZEALAND (MNI): Current Account Improvement Stalls as Imports Rise
The Q2 current deficit was wider than expected at $4.83bn after a downwardly-revised $3.83bn in Q3. This resulted in the YTD holding steady at 6.7% of GDP, which remains elevated and suggests that the improvement begun over a year ago has stalled. There was a widening of the goods and primary income deficits, while services narrowed. The goods deficit widened by $110mn to $2.6bn driven by stronger imports of transport equipment, especially aircraft. The services deficit narrowed $28mn to $0.5bn.
FOREX: Some Disconnect Between FX and Rates Ahead of the Fed
- The dollar is still trading in the red going into the US session ahead of the key event for the day, the Fed, which at minimum will cut by 25bps while a 50bp cut option is still being debated among desks.
- Despite the pullback lower in treasury futures and higher yields, as investors trim long positions in bonds following the in-line retail sales data yesterday, the dollar has not really benefitted from the cross asset price action.
- The Yen was the overnight and the early best performer in G10 during the European session, but has been taken over by the Kiwi, now up 0.53% vs the greenback.
- Higher yields have also not been supportive of USDJPY, as the pair trades closer to the intraday low, just 40 pips off at the time of typing.
- There seems to be some disconnect between FX and rates markets, as Govies and rates futures see more of hawkish price action so far in early trades going into the US session.
- The UK CPI was bang in-line with consensus, but this was still taken on the hawkish side since market participants were most likely looking for a miss.
- Cable is pushing back above 1.3200, and has gained 58 pips since the data. Resistance remains at the US NFP peak of 1.3238, after a failed test yesterday.
EGBS: Bund Futures at Intraday Lows Following UK CPI
Bund futures are -31 ticks today at 134.50, close to intraday lows alongside OAT and BTP futures. The 20-day EMA at 134.28 provides initial firm support in Bunds.
- Although UK CPI was in line with analyst consensus, the lack of downside surprise resulted in hawkish adjustments in UK rate markets, which has spilled over into EGBs.
- Broader macro focus remains on this evening’s Fed decision.
- Eurozone final August HICP confirmed flash estimates on the headline and core metrics, but services inflation was revised a tenth lower (on a rounded basis) to 4.1% Y/Y.
- The German cash curve has bear steepened, with yields 1.2 to 4.0bps higher today. Impending 30-year Bund supply is likely weighing at the long-end (bidding deadline at 1030BST).
- 10-year peripheral spreads to Bunds are wider, led by BTPs and GGBs. Both Greece and Italy have issued bonds today, with the results of Italy’s Specialist tap still to be released.
GILTS: Early Sell Off Extends Alongside Reduction in Pricing of BoE Cuts
The early sell off in gilts has extended a little further.
- UK CPI data was in line with expectations, with the subsequent sell off a product of the recent build-up of long positioning.
- Although the technical set up remains bullish, bears have broken initial support in futures (100.64), last trading 100.58.
- An extension lower would target the Sep 10 low (99.83).
- Yields are 3-6bp higher across the curve, bear flattening as GBP STIRs see a hawkish adjustment.
- BoE-dated OIS now price ~2bp of cuts for this week and ~47bp of cuts through year end vs. ~4.5bp and ~50.5bp late yesterday.
- SONIA futures 2.0-6.5 lower.
- The latest Fed decision provides the next meaningful input ahead of tomorrow’s BoE decision. An unusually high degree of uncertainty is priced into U.S. STIRs, as the market balances the likelihood of a 25bp of 50bp cut.
- Further out, the BoE is expected to leave bank rate unchanged tomorrow. In that case, GBP STIRs are set to look to the vote split and any accompanying guidance. Our macro team has identified a baseline of 2 MPC members voting for a cut.
- Gilts will also have to react to any alterations to the BoE’s QT scheme. Consensus looks for a GBP100bln stock reduction, while we look for a slightly more aggressive GBP110bln.
EQUITIES: E-Mini S&P Retains Firmer Tone After Trading Higher Again Tuesday
Eurostoxx 50 futures are holding on to their recent gains. Despite the latest recovery, a bear threat remains present. The sell-off between Sep 3 - 10, highlights a potential reversal and note that moving average studies remain in a bear-mode set-up. A resumption of the bear leg would signal scope for weakness towards 4686.53, a Fibonacci retracement point. First resistance is at 4863.45, the 50-day EMA. This EMA has been pierced, a clear break of it would strengthen a bullish condition. S&P E-Minis traded higher again Tuesday, and the contract maintains a firmer tone. Last week’s gains highlight a bullish reversal and the end of the Sep 3 - 6 corrective cycle. The contract is trading above the 20- and 50-day EMAs and resistance at 5730.50, the Sep 3 high, remains exposed. This level has been pierced, a clear break of it would open 5785.00, the Jul 16 high and a bull trigger. First support is 5592.07, the 50-day EMA.
- Japan's NIKKEI closed higher by 176.95 pts or +0.49% at 36380.17 and the TOPIX ended 9.61 pts higher or +0.38% at 2565.37.
- Across Europe, Germany's DAX trades lower by 21.64 pts or -0.12% at 18707.43, FTSE 100 lower by 35.82 pts or -0.43% at 8269.76, CAC 40 down 19.19 pts or -0.26% at 7464.84 and Euro Stoxx 50 down 13.1 pts or -0.27% at 4845.81.
- Dow Jones mini up 35 pts or +0.08% at 41673, S&P 500 mini down 0.25 pts or 0% at 5638.75, NASDAQ mini down 8.25 pts or -0.04% at 19428.25.
Time: 09:50 BST
COMMODITIES: Gold Holding Onto Bulk of Recent Gains, Bullish Structure Intact
WTI futures are holding on to their latest gains. The move higher since Sep 9, appears - for now - to be a correction. Recent weakness reinforced a bearish condition and note that moving average studies are in a bear-mode set-up, highlighting a dominant downtrend. A resumption of the downtrend would open $63.93 next, a Fibonacci projection point. The 20-day EMA, at $70.99, has been pierced. A clear break of it would open $73.51, the 50-day EMA. A bullish structure in Gold remains intact and the metal traded, once again, to a fresh all-time high, Monday. Last week’s gains confirmed a resumption of the primary uptrend and marked the end of the recent period of consolidation - a pause in the uptrend. Moving average studies are in a bull-mode set-up, highlighting a clear uptrend and positive market sentiment. The focus is on $2600.0 next. Firm support lies at $2520.6, the 20-day EMA.
- WTI Crude down $0.87 or -1.22% at $70.38
- Natural Gas down $0 or -0.17% at $2.322
- Gold spot down $0.02 or 0% at $2568.66
- Copper up $2.4 or +0.56% at $429.8
- Silver down $0.09 or -0.3% at $30.5995
- Platinum down $4.74 or -0.48% at $982.96
Time: 09:50 BST
MNI (LONDON)
| Date | GMT/Local | Impact | Country | Event |
| 18/09/2024 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 18/09/2024 | 1230/0830 | * |  CA | International Canadian Transaction in Securities |
| 18/09/2024 | 1230/0830 | *** | US | Housing Starts |
| 18/09/2024 | 1300/1500 |  EU | MNI Connect Video Conference on Euro Area Macro Projections | |
| 18/09/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 18/09/2024 | 1730/1330 | CA | BOC Minutes (Summary of Deliberations) | |
| 18/09/2024 | 1800/1400 | *** | US | FOMC Statement |
| 18/09/2024 | 2000/1600 | ** | US | TICS |
| 19/09/2024 | 2245/1045 | *** |  NZ | GDP |
| 19/09/2024 | - |  NO | Norges Bank Meeting | |
| 19/09/2024 | - |  JP | Bank of Japan Meeting | |
| 19/09/2024 | 0130/1130 | *** |  AU | Labor Force Survey |
| 19/09/2024 | 0800/1000 | ** | EU | EZ Current Account |
| 19/09/2024 | 0800/1000 | *** | NO | Norges Bank Rate Decision |
| 19/09/2024 | 0900/1100 | EU | ECB's Schnabel participates on Monetary Policy discussion | |
| 19/09/2024 | 1100/1200 | *** |  GB | Bank Of England Interest Rate |
| 19/09/2024 | 1100/0700 | *** |  TR | Turkey Benchmark Rate |
| 19/09/2024 | 1100/1200 | GB | BOE's Monetary Policy Summary and minutes | |
| 19/09/2024 | 1100/1200 | *** | GB | Bank Of England Interest Rate |
| 19/09/2024 | 1200/0800 | CA | BOC Deputy Vincent speech. | |
| 19/09/2024 | 1230/0830 | *** | US | Jobless Claims |
| 19/09/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 19/09/2024 | 1230/0830 | * | US | Current Account Balance |
| 19/09/2024 | 1230/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 19/09/2024 | 1400/1000 | *** | US | NAR existing home sales |
| 19/09/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
| 19/09/2024 | 1440/1640 | EU | ECB's Schnabel chairs Jean Monnet Lecture at ECB Conference | |
| 19/09/2024 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 19/09/2024 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 19/09/2024 | 1700/1300 | ** | US | US Treasury Auction Result for TIPS 10 Year Note |