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MNI US OPEN - Presidential Debate Seen Favouring Harris

EXECUTIVE SUMMARY

Figure 1: Recent US inflation developments

NEWS

MNI US CPI PREVIEW - AUGUST 2024: Potential Tiebreaker for 25bp vs 50bp Cut

Consensus sees core CPI at 0.2% M/M in August after a slightly softer than expected 0.165% M/M in July. MNI’s survey of analysts, including multiple unrounded estimates, suggests it is firmly centered at 0.20%. Headline CPI is primed for a ‘low’ 0.2% M/M reading but note an almost even split between 2.5/2.6% Y/Y reading which could easily drive what appears a beat for the 2.5 Bloomberg consensus. We expect rental inflation and especially the smaller weighted primary tenants’ rent category to play a particularly big role this month, with analysts looking for an almost full reversal of last month’s surprise strength. We feel there could be some upside risk here.

US (MNI): Debate Not Decisive as Trump/Biden, But Moves Needle in Harris' Direction

The debate between Vice President and Democratic nominee Kamala Harris and Republican candidate former President Donald Trump did not deliver any knockout blows or election-defining moments. What this debate did do was move the needle of the election in Harris' direction after a period in which the finely balanced election contest had been shifting back to Trump. We will have a full review of the debate in our US Daily Brief to be published later today. 

For the most part, it was Harris who was able to put Trump on the defensive. Trump sought to label Harris as weak on immigration, a major issue but digressed into stories of immigrants eating people's pets. On the economy, Trump also failed to deliver any significant blows. Harris on the other handwas able to push Trump on the issue of abortion, a major wedge issue in the election.

MNI ECB PREVIEW - SEPTEMBER 2024: September Cut, October Pause

The ECB will cut the deposit rate by 25bp at this week's meeting. Having previously indicated that the trajectory for policy rates is lower provided that incoming data supports the baseline scenario, the weakening growth outlook and signs of moderating wage pressure provide sufficient cover for the ECB to cut. We would not expect any signs of the ECB pre-committing to another cut in October as with inflation close to target there is no urgency to do so. Moreover, indications of back-to-back cuts would undermine President Lagarde's previous assertion that policy rates will not necessarily move lower in a linear fashion, in turn triggering a dovish re-pricing that would be at odds with the ECBs cautious approach to normalisation.

US/UKRAINE (MNI): Biden Could Lift Long-Range Missile Ban Within Weeks - Reports

A number of media reports suggest that US President Joe Biden could lift his administration's ban on Ukraine firing Western-made long-range missiles at military targets in the Russian Federation. Comes as UK Prime Minister Sir Keir Starmer, who is believed to favour a lifting of the ban, is set to visit the White House on 13 September. At a presser in London on 10 Sep, US Secretary of State Antony Blinken said, when asked about lifting the ban, that Biden was “not ruling it out”

EU/CHINA (BBG): Sanchez Urges EU to Drop Chinese EV Tariffs After Talks With Xi

The European Union should reexamine its plan to impose additional tariffs on Chinese-made electric vehicles, Spanish Prime Minister Pedro Sanchez said during a visit to the Asian nation, underlining simmering EU divisions over the trade measure. “I have to be blunt and frank with you that we need to reconsider - all of us, not only member states but also the Commission - our position towards this movement,” Sanchez told reporters Wednesday in Kunshan, China, following a four-day trip in which he met with President Xi Jinping

UK (BBG): Amazon to Invest £8 Billion in UK, Continuing AWS Expansion

Amazon.com Inc. said it would spend £8 billion ($10.5 billion) in the UK to grow its cloud business, adding to a string of recent expansion moves in Europe and giving Britain’s new Labour government a welcome investment boost. The five-year investment by Amazon Web Services in data centers will support up to 14,000 jobs and contribute £14 billion to UK GDP between 2024 and 2028, Britain’s Treasury said in an e-mailed statement. 

BOJ (MNI): Cautious Policy Adjustments Eyed - BOJ's Nakagawa

Bank of Japan board member Junko Nakagawa said on Wednesday that the BOJ will adjust the degree of easy policy if the economy realises the bank’s forecast for economy and prices as real interest rates remain at considerably low levels. However, Nakagawa in speech to business leaders in Akita City, added the BOJ needs to assess and judge rate hikes cautiously, taking the impact of volatile markets on economy and prices into consideration.

CHINA (MNI): China Risks Losing European Firm Confidence

Beijing risks losing the confidence of European firms operating in China unless more is done to boost domestic demand and address market access, Jens Eskelund, president of the European Union Chamber of Commerce in China, told reporters on Wednesday. “Although established firms were not leaving yet, some companies increasingly see the risk of investing in China outweighs the returns,” Eskelund noted while launching the chamber’s 2024 position paper.

CHINA (BBG): China’s Bond Intervention Sinks Short-End Rates, Boosts Trading

China’s intervention in the nation’s government bond market is leading to abnormalities across the curve, from a surge in trading of non-benchmark “special” securities to a slump in yields on short-maturity debt. Transaction volume of a 10-year bond the central bank may have sold in order to intervene in the market surged eightfold on Tuesday and it’s now the second most actively traded sovereign note, according to official data. Meanwhile, suspected buying by the authorities sent one-year yields below the overnight borrowing rate. 

RBA (BBG): RBA ‘Surprised’ by Limited Easing in Job Gauges, Hunter Says

Australia’s central bank has been surprised by the “limited” easing this year in some key employment indicators, Assistant Governor Sarah Hunter said, reinforcing its view that the labor market is still operating above full capacity. “Conditions in the labor market have eased since late 2022, but our assessment is that the labor market is still tight relative to full employment,” Hunter told an economic forum in Sydney on Wednesday. “We also expect employment to continue to increase, but at a slower pace than population growth.”

MEXICO (BBG): Mexico Passes Judicial Reform Cementing Morena’s Power

Mexico’s Senate approved the general text of President Andres Manuel Lopez Obrador’s plan to overhaul the country’s judicial system, bringing his party closer to controlling the only branch of government that eluded the outgoing leader during his six-year term. The constitutional reform proposal, whose core goal is to elect all federal judges by popular vote, was approved early Wednesday with 86 votes in favor and 41 votes against.

COMMODITIES (BBG): Iron Ore Tests Floor as Plunge to $90 a Ton Puts Mines at Risk

Iron ore’s plunge is about to test the view that the steelmaking material can find solid price support at $90 a ton or more as high-cost mines are nudged out of the market. Futures in Singapore briefly sank below $90 earlier this week to their lowest in almost two years, as China’s steel slowdown leaves the market awash with too much of the raw material. Prices have slumped by about a third this year, fueling discussion about how low they must go to force mine closures and bring supply back in line with demand. 

CORPORATE (BBG): UniCredit Makes Move on Commerzbank as Germany Starts Exit

UniCredit SpA built a 9% stake in Commerzbank AG and plans to enter into talks with the lender, raising the possibility of a takeover that could reshape Europe’s banking landscape. The Italian bank acquired 4.5% from the German government, with the rest bought on the market, it said Wednesday, confirming a Bloomberg report. That makes it the second-largest shareholder behind Germany, which has announced plans to exit its holding. 

DATA

UK DATA (MNI): No Growth for UK in July as Economy Flatlines

  • UK JUL GDP +0% M/M, +0.5% 3MM, +1.1% 3M Y/Y
  • UK JUL IND PROD -0.8% M/M, -1.2% Y/Y
  • UK JUL MANUF OUTPUT -1% M/M, -1.3% Y/Y
  • UK JUL SERVICES INDEX +0.1% M/M, +0.6% 3MM
  • UK JUL TRADE BALANCE GBP -7.51BN

The UK economy saw no growth in July for a second straight month, the Office for National Statistics said Wednesday, although GDP is standing 1.2% higher than in the same month a year ago. It was the second straight month of flat growth, but the rolling three-month quarter to July saw the economy expand by 0.5% on the three months to April. The ONS could make no inference as to whether the data was impacted by the early July election, with returns from stakeholders coming in across the month.

Services rebounded less than expected at +0.1%M/M (after falling -0.1%M/M in June, consensus was +0.2%). The ONS notes that "The largest negative contribution to services growth in July 2024 came from professional, scientific and technical activities, down by 1.3%, following five consecutive monthly increases." Industrial production of -0.8%M/M reversed last month's +0.8%M/M gain
(consensus was +0.3%) with manufacturing particularly weak - falling -1.3%M/M following a -1.5%M/M fall in June (consensus wsa -0.1%). Manufacturing appears to have broadly flatlined since Q4-23.

FOREX: JPY Volatility in Firm Focus as US Inflation Data Approaches

  • Despite USDJPY extending its recovery off the lows to roughly 100 pips, the pair remains 0.6% lower on the session amid the extended decline for core yields on Wednesday. Heightened volatility following last night’s US presidential debate is evident by JPY futures volumes roughly 40% above average for midway through the European morning.
  • Adding to the most recent theme of yen strength, BoJ board member Junko Nakagawa reiterated overnight that the BoJ will adjust the degree of easy policy if the economy realises the bank’s forecast for the economy and prices as real interest rates remain at considerably low levels. Yield differentials are underpinning the moves with US-JP lower at the front, the spread at +319bps, levels last seen in August 2022.
  • Ahead of the significant US CPI release, downside focus will remain on intra-day lows of 140.71 and then 140.25, the Dec 28 low from last year and key support. Resistance is not seen until 143.71, the Sep 9 high.
  • Worth noting that MXNJPY briefly extended the year’s range to or 26% as the cross slipped below 7.00, and the lowest level since March 2023 as the Morena party’s judicial reform plan makes further progress through congress.
  • The greenback is underperforming the broader G10 basket, although adjustments across other major pairs remain contained ahead of the data. EUR, AUD and CAD are between 0.15-0.20% higher, whereas NZD underperforms at the margin.
  • US CPI up next where consensus sees core CPI at 0.2% M/M in August after a slightly softer than expected 0.165% M/M in July.

EGBS: Firmer Alongside Core FI, Markets Eye US CPI

Bund futures followed USTs higher overnight and currently trade just short of intraday highs, +35 ticks at 135.12. This week’s rally has exposed key resistance and the bull trigger at 135.66, the August 5 high.

  • Vice President Harris was deemed the winner of last night’s presidential debate, prompting an unwind of “Trump trades” centred around reflation and fiscal easing.
  • Today’s regional calendar has otherwise been light, with primary macro focus on the US CPI report at 1330BST/1430CET.
  • Today’s 10-year Bund supply was digested smoothly, but pre-auction hedging pressure may have contributed to the intraday tightening in broader EGB spreads (alongside a move off overnight lows in European equities).
  • A reminder that the ECB are unanimously expected to cut rates by 25bps at tomorrow’s meeting.

GILTS: Rally Extends Further, Curve Bull Steepens

The rally in gilt futures has extended through round number resistance at 101.00, with the contract trading as high as 101.26.

  • Softer-than-expected UK data added to the broader FI bid that was seen in Asia following the Harris-Trump debate.
  • The data allowed the recent cross-market outperformance vs. Bunds to extend.
  • Bullish technical control deepens further on the move, with next resistance in futures noted at the August 5 high (101.46).
  • The lack of concession for 10s made for relatively soft pricing and cover metrics at the latest DMO 10-Year supply, although pullbacks were limited.
  • Yields 4.0-6.5bp lower, bull steepening.
  • 30s and 50s probed early August risk-off lows, but gilt bulls have failed to force meaningful breaks there as of yet.
  • SONIA futures have extended their early rally, last flat to +10.0, a little off session highs. M5 through H6 through early August peaks.
  • BoE-dated OIS shows 48bp of cuts through year-end and ~134bp through Jun ’25 vs. closer to 45bp and 128bp late Tuesday.
  • U.S. CPI dominates the macro calendar today.

BoE Meeting

SONIA BoE-Dated OIS (%)

Difference Vs. Current Effective SONIA Rate (bp)

Sep-24

4.918

-3.2

Nov-24

4.647

-30.3

Dec-24

4.468

-48.3

Feb-25

4.196

-75.4

Mar-25

3.970

-98.0

May-25

3.739

-121.1

Jun-25

3.609

-134.1

EQUITIES: Eurostoxx 50 Futures Remain Below 20- and 50-Day EMAs

Eurostoxx 50 futures traded lower last week and a bearish tone - a correction - remains intact for now. The latest move down has resulted in a break of both the 20- and 50-day EMAs. Last Friday’s sharp sell-off signals scope for an extension lower and sights are on 4686.53, a Fibonacci retracement point.  Initial key short-term resistance has been defined at 4998.00, the Sep 3 high. First resistance is at 4872.22, the 50-day EMA. Recent weakness in S&P E-Minis highlighted the start of a corrective cycle. The contract remains in a bear-mode condition, despite this week’s gains, and scope is seen for a deeper retracement near-term. An extension lower would open 5330.00, 61.8% retracement of the Aug 5 - Sep 3 bull leg. Key resistance has been defined at 5669.75, the Sep 3 high. Initial firm resistance to watch is 5535.19, the 20-day EMA.

  • Japan's NIKKEI closed lower by 539.39 pts or -1.49% at 35619.77 and the TOPIX ended 45.87 pts lower or -1.78% at 2530.67.
  • Elsewhere, in China the SHANGHAI closed lower by 22.397 pts or -0.82% at 2721.795 and the HANG SENG ended 125.38 pts lower or -0.73% at 17108.71.
  • Across Europe, Germany's DAX trades higher by 56.02 pts or +0.31% at 18322.1, FTSE 100 lower by 11.3 pts or -0.14% at 8194.81, CAC 40 up 13.51 pts or +0.18% at 7421.06 and Euro Stoxx 50 up 22.19 pts or +0.47% at 4769.39.
  • Dow Jones mini down 161 pts or -0.39% at 40639, S&P 500 mini down 19.5 pts or -0.35% at 5484.75, NASDAQ mini down 80.5 pts or -0.43% at 18783.

Time: 09:50 BST

COMMODITIES: Tuesday's Sell-Off Reinforces Bearish Theme for WTI Futures

WTI futures remain in a bearish condition. Tuesday’s strong sell-off reinforces current conditions and confirms an extension of the bear cycle. This also maintains the price sequence of lower lows and lower highs. A continuation lower would open $63.93 next, a Fibonacci projection point, ahead of the psychological $60.00 handle. Short-term gains would be considered corrective. Firm resistance is at $72.01, the 20-day EMA. Gold continues to trade inside a range but remains closer to its recent highs. The trend condition is unchanged and the primary direction remains up. Note too that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend. Sights are on $2536.4 next, a Fibonacci projection. The 20-day EMA has recently been pierced. The next firm support to watch is $2451.0, the 50-day EMA. Short-term weakness is considered corrective.

  • WTI Crude up $1.14 or +1.73% at $66.89
  • Natural Gas up $0.01 or +0.45% at $2.243
  • Gold spot up $8.39 or +0.33% at $2525.24
  • Copper up $4.5 or +1.1% at $414.4
  • Silver up $0.39 or +1.36% at $28.7943
  • Platinum down $1.18 or -0.13% at $942.09

Time: 09:50 BST

MNI (LONDON)

DateGMT/LocalImpactCountryEvent
11/09/20241100/0700**us USMBA Weekly Applications Index
11/09/20241230/0830***us USCPI
11/09/20241230/0830*ca CAIntl Investment Position
11/09/20241400/1000*us USServices Revenues
11/09/20241400/1000 us USMNI Connect Video Conference on ‘Fed Balance Sheet – Comparison with Other Central Banks’ 
11/09/20241430/1030**us USDOE Weekly Crude Oil Stocks
11/09/20241700/1300**us USUS Note 10 Year Treasury Auction Result
12/09/2024- eu EUEuropean Central Bank Meeting
12/09/20240600/0800***se SEInflation Report
12/09/20240700/0900***es ESHICP (f)
12/09/20241000/1100**gb GBGilt Outright Auction Result
12/09/2024- gb GBOBR Fiscal Risks and Sustainability Report
12/09/20241215/1415***eu EUECB Deposit Rate
12/09/20241215/1415***eu EUECB Main Refi Rate
12/09/20241215/1415***eu EUECB Marginal Lending Rate
12/09/20241230/0830***us USJobless Claims
12/09/20241230/0830**us USWASDE Weekly Import/Export
12/09/20241230/0830***us USPPI
12/09/20241230/0830*ca CABuilding Permits
12/09/20241230/0830*ca CAHousehold debt-to-income
12/09/20241245/1445 eu EUECB Monetary Policy Press Conference
12/09/20241345/1545 eu EUEurosystem staff macroeconomic projections publications
12/09/20241415/1615 eu EUECB Podcast: Lagarde presents the latest monetary policy decisions
12/09/20241430/1030**us USNatural Gas Stocks
12/09/20241530/1130*us USUS Bill 08 Week Treasury Auction Result
12/09/20241530/1130**us USUS Bill 04 Week Treasury Auction Result
12/09/20241600/1200***us USUSDA Crop Estimates - WASDE
12/09/20241700/1300***us USUS Treasury Auction Result for 30 Year Bond
12/09/20241800/1400**us USTreasury Budget

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