MNI US OPEN - Regional Figures Point to In-Line Germany CPI Print

NEWS

Livestreamed MNI Connect with BOE's Hauser

You are invited to listen to speech and Q&A in real-time by Andrew Hauser, Executive Director for Markets at the Bank of England. Topic of discussion: 'A journey of 1000 miles begins with a single step: filling gaps in the central bank liquidity toolkit'

• Date: Thursday 28th September, 10:30am-12pm London time
• This event is on the record and will run as a Zoom Webinar
• To register please go to: MNI Webinar Registration

US (BBG): Last-Minute US Shutdown Deal Unlikely as McCarthy Lacks Leverage

A late deal to avert a US government shutdown beginning this weekend isn’t likely — with House Speaker Kevin McCarthy making big demands of President Joe Biden and bringing little leverage to the clash. The Republican leader counts as one of his proudest achievements an agreement on long-term spending cuts he extracted from Biden in last spring’s showdown over a potential US debt default and now he wants to use a shutdown to get more concessions.

US (BBG): Trump Rivals Attack Each Other But Fail to Shake His Dominance

Seven of the Republican contenders for the presidential nomination spent two hours hammering each other, President Joe Biden and the absent frontrunner in a debate that often felt close to chaos. None of them managed to deliver a defining moment that could pull them decisively away from the pack, further establishing Donald Trump’s dominant position in the race.

US/CHINA (BBG): China Says US Ties Improved Recently, Urges Stop in Sanctions

Relationship between China and the US improved recently with efforts from both sides, Chinese ambassador to the US Xie Feng said at an event marking the Asian country’s National Day in the US Wednesday. The achievement “should be cherished with special care” as they did not come by easily, Xie said, according to an embassy statement. Xie urged the US to stop sanctioning Chinese companies and individuals

EU/CHINA (BBG): China Shies Away From Confrontation With EU Over EV Probe

As Europe’s top trade chief headed to Beijing this month shortly after announcing a probe into China’s electric vehicle subsidies, some in the bloc braced for fiery criticism and any hint of retaliation. Instead, the Europeans found President Xi Jinping’s government ready to talk, make promises and avoid aggressive rhetoric that could inflame an economic relationship worth $900 billion.

GERMANY (MNI): 2023 German GDP Outlook Downgraded By Almost 1%

Germany's economy will shrink by 0.6% this year, according to the Joint Economic Forecast published on behalf of the Federal Ministry for Economic Affairs and Climate Action on Thursday, a downward revision of 0.9% from the spring forecast, before expanding by 1.3% for 2024 -- 0.2 percentage points below the previous assessment.

UK (BBG): London Pushes UK Home Price Cuts to Biggest Since 2019

London and southeast England are seeing the biggest UK home discounts as buyers across the country secure the largest price cuts nationwide in almost five years. The average discount to asking price for a newly agreed home sale was nearly 5% in London and southeast England this month, according to a report from property portal Zoopla. That compared with a 2.8% discount for properties elsewhere in the UK and a national average of 4.2%, the biggest reduction since March 2019.

UK/UKRAINE (NYT): New British Defense Minister Asks Zelensky ‘What He Needs to Win.’

Britain’s new defense secretary visited Kyiv and held talks with President Volodymyr Zelensky of Ukraine to discuss ongoing defense support and bolstering the country’s air defenses, the Ukrainian president’s office said Thursday. Grant Shapps traveled to the Ukrainian capital a month after he replaced Ben Wallace. Mr. Wallace is a respected former soldier who was a central advocate of Britain’s steadfast support for Ukraine in the war, but also offhandedly responded in July to Kyiv’s drumbeat of requests for weapons by saying, “You know, we’re not Amazon.”

CHINA (MNI): Tariff Cuts Hard, Despite Refreshed China-U.S. Dialogue

MNI (Beijing) The resumption of regular economic China-U.S. dialogue via the creation of working groups shows both countries want to avoid a costly decoupling, but any substantial breakthrough – such as tariff reduction – remains a distant prospect, policy advisors and market analysts told MNI. “Having a communication mechanism can resolve some misjudgments between the two countries, but it requires arduous effort should there be any substantial breakthrough,” said an advisor from a government-backed think tank asking for anonymity.

JAPAN (BBG): ‘Mr. Yen’ Says Japan Will Fret If Rate Hits 155, May Intervene

Japan’s government may step into foreign exchange markets again if the yen goes beyond 150 against the dollar with officials likely to get concerned if it reaches 155, according to former top forex official Eisuke Sakakibara.“The level is quite important, despite whatever other people might say,” said Sakakibara, who is known as ‘Mr Yen’ for his past influence on the currency. “So that if it goes beyond 150, that may result into some kind of intervention.”

SECURITY (MNI): US Conducted 'Provocative' Military Drills, Will Not Sit By - China MoD

Wires carrying comment attributed to the Chinese Defence Ministry regarding the joint drills in the Yellow Sea by the US and its allies. States that "The conducted provocative military activities on China's doorstep, China will not sit idly by." Ships from the navies of the US, Canada, and South Korea have recently engaged in drills in the Yellow Sea in what South Korean navy Cmdr. Kim Hyunseok said was in response to increased aggression from North Korea.

MNI BOJ REVIEW - SEPTEMBER 2023: Steady as She Goes, Current Policy Stance Maintained

On September 21-22, the Bank of Japan (BOJ) conducted its Monetary Policy Meeting (MPM), and as widely anticipated, it unanimously opted to maintain its current policy stance. This decision encompassed its recently introduced more flexible framework for yield curve control (YCC), the 1.0% yield for its fixed-rate purchase operations, and its large-scale bond purchases designed to shape the yield curve appropriately.

DATA

GERMAN DATA (MNI): MNI Projects National CPI In Line at 4.5-4.6% Y/Y, Core 4.6%

• GERMANY NRW SEP CPI 0.2% M/M, 4.2% Y/Y
• GERMANY BAVARIA SEP CPI 0.3% M/M, 4.1% Y/Y
• GERMANY BADEN WUERT SEP CPI +0.2% M/M, +5.1% Y/Y
  
• GERMANY SAXONY SEP CPI +0.3% M/M, +5.4% Y/Y

We have now received state data that equates to 86.7% weighting of the national German CPI print (due at 1300 BST / 1400 CET). MNI calculations estimate that national CPI rose by 0.27% m/m and 4.54% y/y. This is based on the published index values for available state data. The data implies readings a touch below expectations for the y/y print of 4.6%, rounded to 0.3% m/m and 4.5% y/y. The significant deceleration was driven as expected by the 9 EUR transport ticket base effect, and continued disinflation of food and energy prices.

SPAIN SEP FLASH HICP +0.6% M/M, +3.2% Y/Y (MNI)
SPAIN SEP FLASH CPI +0.2% M/M, +3.5% Y/Y (MNI)
SPAIN SEP FLASH CORE CPI +5.8% Y/Y (MNI)

ITALY SEP CONSUMER CONFIDENCE 105.4 (MNI)
ITALY SEP BUSINESS CONFIDENCE 104.9 (MNI)

NORWAY DATA (MNI): Sequential Fall in August Retail Sales

Norway retail sales (seasonally adjusted) for August printed at -0.3% M/M (vs -0.9% prior and -0.4% expected). The fall is consistent with the indications from the September Regional Network Survey, which pointed to a fall in Q3 retail trade of -0.6% Q/Q. The survey respondents also expected a -0.7% Q/Q fall in retail trade in Q4. The sequential fall in retail sales highlights the cost-conscious nature of Norwegian households as interest rate hikes bite.

FOREX: EUR Shrugs Off Softer German Regional CPIs, Takes Lead from Yields

• Focus ahead turns to the national German CPI print after this morning's regional releases pointed toward an inline-with-expectations print. Consensus looks for 0.3% M/M and 4.6% Y/Y. Markets generally shrugged off the softer-than-previous North-Rhine Westphalia and Bavaria inflation data, with EUR instead watching the inexorable rise in 10y yields across Germany: the 10y Bund yield has risen to fresh cycle highs, touching the best level since 2011.
• GBP/USD defying the bearish near-term outlook to rise to a session high of 1.2175 in recent trade, benefiting from the softer USD backdrop and allowing EUR/GBP to post a second session of losses after the cross rejected a test of the key 200-dma resistance at 0.8710.
• Any further faltering of the USD rally should allow overbought technical conditions to subside: EUR/USD, GBP/USD (and to a lesser extent, USD/JPY) had posted their most oversold technical backdrop since April last year earlier this week - meaning markets are likely undergoing a corrective recovery, but the medium-term USD uptrend remains intact regardless.
• The AUD is outperforming modestly, allowing AUD/USD to bounce off the cycle lows posted yesterday at 0.6331. Nonetheless, yesterday's highs remain intact for now at 0.6409.
• Outside of Europe, weekly US jobless claims are on the docket as well as the tertiary read for Q2 GDP - expected to be notched slightly higher to 2.2% from 2.1% previously.

BONDS: Gilts Lead Global Rout

Global core FI has sold off relentlessly in European morning trade Thursday in a continuation of the recent "higher-for-longer" bearish price action, with Gilts leading the way lower in a steepening move.

• UK yields are up double-digits across most of the curve, and rates markets are beginning to re-price another full 25bp hike from the BoE in this cycle. MNI's event with BoE's Hauser has just gotten underway; we hear from the MPC's Greene later.
• Bund yields have hit fresh post-2011 highs and 10Ys starting to eye the 3% mark amid heavy futures trading volumes.
• The highlight of the schedule coming into the session was Spanish and German preliminary September inflation, which has come in line if not a touch below expectations, but that's done little to stem the broader bond rout.
• Periphery spreads are a little wider, led by BTPS (10Y/Bund up 2+bp).
• The Tsy curve is also bear steepening but yield moves have been relatively modest, with yields up 1-3bp through 10Y but 30s up 4bp.
• On the US data docket, Initial jobless claims and final Q2 GDP (including historic comprehensive revisions), with Fed speakers including Goolsbee, Cook, and Powell. $37B in 7Y supply is coming up as well.

Latest levels:

• Dec US 10Y futures (TY) down 1.5/32 at 107-17 (L: 107-15.5 / H: 107-27)
• Dec Bund futures (RX) down 94 ticks at 127.70 (L: 127.60 / H: 128.59)
• Dec Gilt futures (G) down 143 ticks at 93.47 (L: 93.43 / H: 94.74)
• Italy / German 10-Yr spread 1.8bps wider at 196.4bps

EQUITIES: Price Action Wednesday Marks Extension of Current Downleg in E-Mini S&P

Eurostoxx 50 futures maintain a softer tone following last week’s move lower. This week’s extension also reinforces current conditions. Key support at 4210.00, the Sep 8 low, has been breached. The clear break confirms a resumption of the downtrend that started late July and paves the way for a move towards 4109.90, a Fibonacci projection. Key short-term resistance has been defined at 4359.00, the Sep 15 high. A break would be bullish. A bear cycle in S&P E-minis remains in play and the contract traded lower Wednesday, extending the current downleg. Last week’s sell-off resulted in a break of support at 4397.75, the Aug 18 low. This breach reinforced bearish conditions and signals scope for a continuation lower. Sights are on 4300.62, a Fibonacci retracement point. Initial firm resistance is 4485.10, the 50-day EMA. Short-term gains would be considered corrective.

• Japan's NIKKEI closed lower by 499.38 pts or -1.54% at 31872.52 and the TOPIX ended 34.02 pts lower or -1.43% at 2345.51.
• Elsewhere, in China the SHANGHAI closed higher by 3.159 pts or +0.1% at 3110.475 and the HANG SENG ended 238.84 pts lower or -1.36% at 17373.03.
• Across Europe, Germany's DAX trades lower by 23.04 pts or -0.15% at 15194.44, FTSE 100 lower by 45.76 pts or -0.6% at 7547.26, CAC 40 down 2.11 pts or -0.03% at 7069.61 and Euro Stoxx 50 down 8.53 pts or -0.21% at 4123.12.
• Dow Jones mini down 36 pts or -0.11% at 33757, S&P 500 mini down 2.25 pts or -0.05% at 4311.25, NASDAQ mini down 22.75 pts or -0.15% at 14716.

COMMODITIES: WTI Futures Eye Resistance at $97.08 Next

The uptrend in WTI futures remains intact and this week’s recovery has confirmed a resumption of the trend - resistance at $92.43, Sep 19 high, has been cleared. This maintains the bullish price sequence of higher highs and higher lows and note that moving average studies are in a bull-mode position, reflecting the market's positive sentiment. Sights are on $97.08 next, a Fibonacci projection. Key support has been defined at $88.19, the Sep 2 low. Gold sold off sharply yesterday, reinforcing bearish conditions. This week’s move lower has resulted in a break of support at $1901.10 and this has been followed by a move through $1884.9, the Aug 21 low. The break confirms a resumption of the downtrend that started off the early May high. Attention turns to $1865.8, a Fibonacci retracement point. On the upside, initial resistance is at yesterday’s high of $1903.9.

• WTI Crude up $0.16 or +0.17% at $93.85
• Natural Gas down $0.01 or -0.41% at $2.887
• Gold spot down $1.13 or -0.06% at $1873.94
• Copper up $4.25 or +1.17% at $367.7
• Silver down $0.02 or -0.07% at $22.525
• Platinum up $0.73 or +0.08% at $892.44