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
- HARRIS BACKS PLAN TO RAISE US CORPORATE TAX RATE TO 28%
- RIKSBANK CUTS 25BPS, SEES 2 OR 3 MORE CUTS IN 2024
- ECB’S REHN SAYS GROWTH RISKS BOLSTER CASE FOR SEPTEMBER CUT
- CHINA WEIGHS LETTING LOCAL GOVERNMENTS ISSUE BONDS TO BUY HOMES
MNI (LONDON) - Figure 1: Bloomberg Asia Dollar Index extends August rally
Source: MNI/Bloomberg
NEWS
US (FT): Harris Backs Plan to Raise US Corporate Tax Rate to 28%
Kamala Harris is aiming to increase the US corporate tax rate to 28 per cent if she wins the White House in November, a move designed to raise government revenues from corporate America that is likely to draw criticism from business. Harris’s presidential campaign said on Monday that she planned to stick by a proposal put forward by President Joe Biden in recent years to bring the corporate tax rate up from 21 per cent to 28 per cent.
US (BBG): Emotional Biden Touts Legacy and Harris at Convention’s Open
President Joe Biden delivered an emotional and bittersweet call for Democrats to rally behind Kamala Harris, as his party used the first night of its national convention in Chicago to celebrate his presidency while simultaneously passing the torch to a new generation. The president’s remarks, stretching late into the night, served as a coda to one of the most tumultuous stretches in presidential history. Biden cast his decision to exit the race less than a month ago - following a calamitous debate performance and intense pressure from party officials - as the natural conclusion of a five-decade political career.
RIKSBANK (MNI): Cuts 25bps, Sees 2 or 3 More Cuts in 2024
The Riksbank cut its key policy rate by 25 basis points to 3.5% as widely expected and stated that if inflation unfolded as expected it can cut two or three times more this year. In June, the Riksbank Executive Board had stated that “If the inflation outlook holds, the interest rate may be lowered two or three times in the second half of the year,” so Tuesday’s announcement adds one more. The latest cut had been seen as near-inevitable given subdued inflation data. "Inflation has developed as expected and economic activity is weak," said the Board, which is placing more weight on Sweden’s economic output now that inflation is back around target.
ECB (BBG): ECB’s Rehn Says Growth Risks Bolster Case for September Cut
Increasing risks to Europe’s growth outlook have reinforced the case for a policy adjustment when the European Central Bank meets next month, according to Governing Council member Olli Rehn. “In my view, the recent increase in negative growth risks in the euro area has reinforced the case for a rate cut at the next ECB monetary policy meeting in September - provided that disinflation is indeed on track,” the Finnish central bank chief said Monday at an event in New York.
MIDEAST (MNI): Blinken in Egypt as Whistlestop Visits to Push Ceasefire Deal Continue
US Secretary of State Antony Blinken has arrived in Egypt as part of his latest whistlestop tour intended to push for a ceasefire agreement between Israel and Hamas in Gaza. Blinken will meet with President Abdel Fattah al-Sisi in El Alamein, before traveling to Doha for talks with Qatar's Emir, Sheikh Tamim bin Hamad Al-Thani. As MNI noted on 19 Aug, it would appear that Israel has accepted the latest 'bridging proposal' from the US. Hamas, however, maintains that the deal is not acceptable due to changes demanded by the Israeli side.
CHINA (MNI): China’s Aug Loan Prime Rate Unchanged
MNI (Beijing) China's Loan Prime Rate remained unchanged on Tuesday according to a People's Bank of China statement, in line with market's expectation, and as the central bank continued to hold the key 7-day reverse repo rate stable. The Loan Prime Rate remained at 3.35% for the one-year maturity and 3.85% for the over five-year tenor. Both rates unexpectedly fell last month by 10 basis points after the central bank lowered the 7-day reverse repo rate by the same level.
CHINA (BBG): China Weighs Letting Local Governments Issue Bonds to Buy Homes
China is considering a new funding option for local governments to buy unsold homes after a series of rescue packages failed to prop up the market, according to people familiar with the matter. The latest proposal would allow local governments to fund their home purchases by issuing so-called special bonds, the proceeds of which are currently restricted to uses including infrastructure and environmental projects, the people said, asking not to be named discussing private information.
CHINA (BBG): Chinese Regulator Asks Banks to Survey Impact of Stronger Yuan
China’s foreign-exchange regulator is gauging the impact of a stronger yuan on exporters, according to people familiar with the matter, as the currency rebounds from an eight-month low against the dollar. At least three regional branches of state-owned lenders were asked by the State Administration of Foreign Exchange to assess the situation their clients face in surveys, said the people who asked not to be identified discussing private matters. Questions included hedging costs, currency risks and the impact of a stronger yuan on orders and profit, they said.
CHINA (BBG): China Unleashes Rapid Drop in New-Home Prices With Easing
A price war is spreading across China’s new-home market, as local governments dial back on intervention and developers race to recoup cash. In Beijing, a sudden 18% price cut in May at a mid-sized residential project on the city’s outskirts has forced adjacent new developments to follow suit, according to people familiar, who requested not to be named because the matter is private. Near the southern border, the Shenzhen government approved a 29% cut in unit prices for a complex compared with a year ago, according to other people familiar.
BOJ (MNI): BOJ Research Notes Indicate Interest Rate Hike Is Still on Table
The Bank of Japan released a pair of research papers highlighting the persistence of inflationary pressure in the economy, indicating there is still a case to be made for another interest rate hike. The notes released Tuesday highlight the potential impact of the nation’s chronic labor shortage on wages and the shift in corporate behavior with regards to setting prices in the services sector. The papers were compiled by officials in the bank’s economics department and, as is customary, they came with a standard disclaimer that the views belong to the authors and don’t necessarily reflect the BOJ’s official stance.
RBA (MNI): Market Cash Rate Pricing Off - RBA Minutes
The Reserve Bank of Australia board believes market pricing of the cash rate would not see inflation return to the 2.5% mid-point of its target by 2026, noting the rate may need to stay at 4.35% for longer to achieve its CPI goal, according to the minutes of the August meeting published Tuesday. The board noted the RBA and the market since early 2023 had consistently underpredicted inflation. “Based on what they knew at the time of the meeting, members agreed that monetary policy would need to be tighter than this implied path in order to bring inflation sustainably back to target within a reasonable timeframe,” the board stated.
INDIA/UKRAINE (BBG): Modi to Visit Ukraine for First Time Since Russia’s Invasion
Indian Prime Minister Narendra Modi is scheduled to visit Kyiv on Friday in an attempt to balance ties with Washington and Moscow, but has ruled out a role mediating an end to Russia’s war in Ukraine, according to people familiar with the matter. The South Asian nation has, however, agreed to relay messages between Russian President Vladimir Putin and Ukraine’s Volodymyr Zelenskiy, the people said, asking not to be named as discussions are private. Indian officials have called for dialog and diplomacy to end the war that began with Russia’s Feb. 2022 invasion of Ukraine.
UKRAINE (BBG): Zelenskiy Urges Ukraine’s Allies to Remove Limits on Weapons Use
Ukrainian President Volodymyr Zelenskiy called on US and European allies to lift restrictions on the use of long-range weapons against Russia, saying his military’s cross-border incursion had exposed as “illusory” Kremlin threats of retaliation. The two-week-old operation to seize Russian territory in the Kursk region would have been viewed as crossing “the strictest of all red lines” for Russian President Vladimir Putin only a few months ago, Zelenskiy said in an address to Ukrainian diplomats late Monday. “The whole naive, illusory concept of so-called red lines regarding Russia, which dominated the assessment of the war by some partners, has crumbled these days.”
MNI CBRT PREVIEW - AUGUST 2024: Alternate Tools Still in Focus
The CBRT is widely expected to keep its one-week repo rate unchanged at 50% and maintain a hawkish tilt to its guidance. The Bank have and will likely continue to make further adjustments to its macroprudential toolkit in order to drain excess lira liquidity to supplement its tight stance on monetary policy. Among sell-side, some analysts see rate cuts commencing at the November meeting.
DATA
EUROZONE DATA (MNI): Final Data Broadly Confirms Flash HICP Details
- EUROZONE JUL FINAL HICP +0% M/M, +2.6% Y/Y
- EUROZONE JUL FINAL CORE HICP -0.2% M/M, +2.9% Y/Y
Eurozone Final HICP confirmed the July flash prints, at 2.6% Y/Y (vs 2.5% in June) and 0.0% M/M (vs 0.2% in June). Energy inflation increased for the third consecutive month, whilst Processed food, alcohol & tobacco and non-energy industrial goods (NEIG, or core goods) remained broadly at June levels, and services disinflated a touch Y/Y. Core inflation printed in line with flash at 2.9% Y/Y (2.9% prior) and -0.2% M/M from 0.4% in June. The final reading shows the contribution from services fell marginally although it remains stubborn, as the contribution range has remained between 1.82 to 1.84pp in the last three consecutive months.
EUROZONE JUN CONSTRUCTION OUTPUT +1.7% M/M, +1% Y/Y (MNI)
GERMANY DATA (MNI): July PPI Shows First Positive Intermediate Goods Inflation Since Apr'23
- GERMANY JUL PRODUCER PRICES -0.8% Y/Y
German July producer prices came in in line with expectations - both on a sequential and yearly comparison, falling 0.8% Y/Y (-1.6% prior) and increasing 0.2% M/M (+0.2% prior). Looking at the individual categories, energy base effects continue to taper off (-4.1% Y/Y, highest rate since June 2023 vs -5.9% prior). Note that despite the fading base effects, if energy prices stayed constant at their July level they would still not be positive until April 2025.
CHINA DATA (BBG): China’s Gold Imports Tumble Again as Record Prices Deter Buyers
Chinese consumers continued to pull back on gold purchases last month, as record prices and a sustained economic slowdown curbed demand in the world’s biggest bullion-buying nation. Gold imports in July fell 24% to 44.6 tons, the lowest in more than two years, according to customs data released on Tuesday. That follows an even sharper decline in June, when shipments plunged 58% from the previous month.
FOREX: Funding Currencies Bounce, Gold Surges
- EUR/CHF is softer, erasing yesterday's modest gains, with the cross finding resistance and failing to break higher on the approach toward the 50- and 200-dmas of 0.9588/0.9596. Importantly, these dmas have now formed a 'death cross' for the first time since May last year - signalling that short-term momentum is pointed lower, despite the recovery off the August low.
- Haven and funding currencies are favoured early Tuesday, aiding the outperformance in both JPY and CHF. USD/JPY faded toward overnight lows to trade either of the 146.50 level as markets eye the publication of two research papers from the Bank of Japan - writing in favour of inflation persistence in Japan, citing chronic labour shortages as being supportive of wages and a marked shift in corporate pricing strategies.
- Separately, gold is well bid, with spot clearing $2,500/oz to hit new alltime highs. A volume surge on the way through $2,550/oz resistance helped support prices higher, with futures markets showing near 1,500 lots trade inside 60 seconds - cash equivalent of north of $380mln.
- Canadian CPI numbers take focus Tuesday - providing one of the last major releases prior to the BoC's next decision on Sept 4th. It would likely take a particularly large upside surprise to see expectations of a pause but there could be greater sensitivity to the subsequent path, with the market looking for two additional 25bp cuts to follow in October and December.
- Both Fed's Bostic and Barr are set to speak, however neither are expected to address monetary policy.
EGBS: Futures Slightly Stronger, But Ranges Tight Amid Light Regional News flow
Core/semi-core EGBs are a little stronger this morning, though Bund and OAT futures remain comfortably within yesterday's range. Market focus remains on Wednesday's FOMC minutes and Thursday's flash PMIs/Q2 negotiated wages data, leaving broader market sentiment at the fore for EGBs.
- Bank of Finland Governor Rehn's endorsement of a September rate cut yesterday evening prompted little reaction in EGBs/STIRs at the open, given ECB-dated OIS already fully price a 25bp cut at that gathering.
- Regional news flow has otherwise been light, with the continued pullback in oil futures providing modest support to core FI.
- Eurozone final July CPI confirmed flash estimates, while German PPI was also in line with consensus earlier today.
- German and French cash yields are little changed across the curve, as are 10-year peripheral spreads to Bunds.
- Canadian CPI may provide some spillover potential this afternoon.
GILTS: Tight Range, Slightly Underperforming Bunds
Gilt futures have traded comfortably within yesterday's range, though lightly underperform Bunds.
- The DMO's consultation with GEMMs and investors on its FQ3 operations generally aligned with our expectations, though we had thought there might have been a bit more support for the 0.875% Jul-33 green gilt.
- Gilt futures are +16 at 99.85, with Bunds +23 at 134.38. The 10-year Gilt/Bund spread has thus widened just over 1bp to 169bps.
- The technical trend condition in Gilt futures remains bullish, with first resistance at 100.80 (Aug 14 high) before the bull trigger at 101.46 (Aug 5 high).
- Gilt yields are generally little changed across the curve.
- SONIA futures are flat to 2.0 ticks through the blues, while BoE-dated OIS price 39bps of easing through the remainder of this year.
- Domestic focus remains on Thursday's August flash PMI and Governor Bailey's appearance at Jackson Hole on Friday.
EQUITIES: Gains for E-Mini S&P Reinforce Current Bull Cycle
Eurostoxx 50 futures have traded higher, starting the week on a bullish note and extending the recovery that started Aug 5. The contract has traded through the 50-day EMA, at 4867.41. An extension higher would undermine the recent bearish theme and highlight a stronger reversal. This would open 4951.00 next, the Jul 31 high. For bears, a reversal lower would refocus attention on the bear trigger at 4494.00, the Aug 5 low. S&P E-Minis traded higher Monday, reinforcing the current bull cycle and confirming an extension of the reversal that started Aug 5. Price has cleared resistance at 2600.75, the Aug 1 high and this signals scope for an extension towards key resistance and the bull trigger at 5721.25, the Jul 16 high. A break would confirm a resumption of the primary uptrend. On the downside, support to watch lies at 5470.32, the 50-day EMA.
- Japan's NIKKEI closed higher by 674.3 pts or +1.8% at 38062.92 and the TOPIX ended 29.4 pts higher or +1.11% at 2670.54.
- Elsewhere, in China the SHANGHAI closed lower by 27.013 pts or -0.93% at 2866.661 and the HANG SENG ended 58.49 pts lower or -0.33% at 17511.08.
- Across Europe, Germany's DAX trades higher by 20.81 pts or +0.11% at 18443.02, FTSE 100 lower by 48.51 pts or -0.58% at 8308.39, CAC 40 up 13.07 pts or +0.17% at 7515.44 and Euro Stoxx 50 up 11.8 pts or +0.24% at 4883.22.
- Dow Jones mini down 25 pts or -0.06% at 40999, S&P 500 mini down 2.25 pts or -0.04% at 5628.25, NASDAQ mini down 4.25 pts or -0.02% at 19855.5.
Time: 09:55 BST
COMMODITIES: Move Lower in WTI Futures Could Expose Key Support
WTI futures have been unable to hold on to recent gains and the contract continues to trade lower. The move down undermines a recent bullish theme and this has exposed key support at $71.67, the Aug 5 low and the bear trigger. A break would resume the downtrend that started Apr 12. On the upside, initial resistance to watch is $76.94, the 20-day EMA. Key short-term resistance has been defined at $80.16, the Aug 12 high. Gold remains bullish and is holding on to its latest gains. Last Friday's rally delivered a fresh all-time high and the breach of resistance at $2483.7, the Jul 17 high, confirmed a resumption of the primary uptrend. Note that moving average studies remain in a bull-mode set-up and this continues to highlight a dominant uptrend. The focus is on a climb towards $2528.4, a Fibonacci projection. Initial support to watch lies at $2439.4, the 20-day EMA.
- WTI Crude down $0.87 or -1.17% at $73.5
- Natural Gas down $0 or -0.13% at $2.233
- Gold spot up $16.24 or +0.65% at $2521.08
- Copper up $0.6 or +0.14% at $422.25
- Silver up $0.24 or +0.82% at $29.6866
- Platinum up $5.75 or +0.6% at $965.89
Time: 09:55 BST
| Date | GMT/Local | Impact | Flag | Country | Event |
| 20/08/2024 | 1100/0700 | *** |  | TR | Turkey Benchmark Rate |
| 20/08/2024 | 1230/0830 | *** |  | CA | CPI |
| 20/08/2024 | 1230/0830 | ** |  | US | Philadelphia Fed Nonmanufacturing Index |
| 20/08/2024 | 1255/0855 | ** | | US | Redbook Retail Sales Index |
| 20/08/2024 | 1530/1130 | * | | US | US Treasury Auction Result for Cash Management Bill |
| 20/08/2024 | 1845/1445 | | US | Fed Governor Michael Barr | |
| 21/08/2024 | 2301/0001 | * |  | UK | Brightmine pay deals for whole economy |
| 21/08/2024 | 2350/0850 | ** |  | JP | Trade |
| 21/08/2024 | 0600/0700 | *** | | UK | Public Sector Finances |
| 21/08/2024 | 0900/1000 | ** | | UK | Gilt Outright Auction Result |
| 21/08/2024 | 1100/0700 | ** | | US | MBA Weekly Applications Index |
| 21/08/2024 | 1230/0830 | * | | CA | Industrial Product and Raw Material Price Index |
| 21/08/2024 | 1400/1000 | * | | US | Services Revenues |
| 21/08/2024 | 1430/1030 | ** | | US | DOE Weekly Crude Oil Stocks |
| 21/08/2024 | 1700/1300 | ** | | US | US Treasury Auction Result for 20 Year Bond |
| 21/08/2024 | 1800/1400 | *** | | US | FOMC Minutes |
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.