MNI US OPEN - Riksbank Opens Door to 50bp Cuts After 25bp Move
EXECUTIVE SUMMARY
- RIKSBANK CUTS 25BPS, OPENS DOOR TO MORE CUTS
- ISRAEL INTERCEPTS FIRST HEZBOLLAH MISSILE FIRED AT TEL AVIV
- PBOC CUTS ONE-YEAR MLF RATE BY 30BP
- UK BRIGHTMINE DATA POINT TO LOWER EARNINGS GROWTH THAN PREVIOUSLY EXPECTED
Figure 1: Riksbank policy rate forecast change
Source: MNI/Riksbank
NEWS
US (BBG): Harris to Offer Pitch to Boost Manufacturing in Play for Voters
Kamala Harris will outline a “pragmatic” economic vision and new initiatives to bolster domestic manufacturing in a speech Wednesday in Pittsburgh, as the Democratic presidential nominee looks to counter Republican rival Donald Trump’s polling advantage on the election’s defining issue. The address will emphasize her willingness to work with business leaders to grow the overall economy while also stressing the importance of protecting workers’ wages and benefits, according to a senior campaign official who requested anonymity to detail the speech ahead of the event. She’ll look to draw contrast with Trump, casting his dramatic proposals to overhaul the nation’s tax code as a boon only for the wealthiest.
US (BBG): Biden to Commit Weapons to Ukraine as Authority Expires
President Joe Biden is expected to announce by the end of this month, and likely as soon as Thursday, a large military assistance package that would be sent to Ukraine from US inventories over the coming months, according to a senior congressional aide and a senior administration official. The Biden administration is poised to signal that it found a mechanism to provide about $5.6 billion in military equipment under the Presidential Drawdown Authority, which expires Sept. 30.
ISRAEL (BBG): Israel Intercepts First Hezbollah Missile Fired at Tel Aviv
Hezbollah forces fired a missile at Tel Aviv from Lebanon on Wednesday that Israel managed to shoot down, as the two sides continued their heaviest attacks on one another for around 20 years. Israel activated air sirens in its commercial capital early on Wednesday as the projectile - the first fired by Hezbollah on the city - flew over central parts of the country, the Israeli military said. Hezbollah, an Iran-backed militant group, said it was a ballistic missile aimed at the headquarters of Mossad, Israel’s external-intelligence agency, in Tel Aviv’s suburbs.
IRAN (BBG): Iran’s President Says He Expects Meeting on Nuclear Deal
Iranian President Masoud Pezeshkian said plans are underway to discuss a nuclear deal that has been stalled for years following a “positive” meeting with French leader Emmanuel Macron and ahead of talks with China’s foreign minister. Pezeshkian didn’t provide details on the timing and location of the potential discussions, nor who would participate.
RUSSIA (MNI): Putin to Speak at Security Council on Nuclear Deterrence - Kremlin
Wires carrying comments from Kremlin spox Dmitri Peskov. Peskov says that President Vladimir Putin will chair a meeting of the Security Council today (25 Sep) on the subject of nuclear deterrence. The Russian gov't has previously stated that it is revising its nuclear doctrine, which determines how and when Moscow would use such weapons on the battlefield. Putin will deliver an address at the Council, but the remainder will be behind closed doors. No timing for the meeting has been publicised yet.
RIKSBANK (MNI): Riksbank Cuts 25bps, Opens Door to More Cuts
The Riksbank cut its policy rate 25bps to 3.25% from 3.5% and said that it now expected to cut faster than it had previously anticipated, with a 50bps cut at an upcoming meeting a clear possibility. Analysts had unanimously anticipated the 25bps cut but the Riksbank has stepped up its plans for further easing, shifting policy in a markedly more expansionary direction. If things unfold as expected "he policy rate may also be cut at the two remaining monetary policy meetings this year. A cut of 0.5 percentage points is possible at one of these meetings," the Riksbank Executive Board stated, with the rate path compatible with one or two further cuts in the first half of next year.
MNI SNB PREVIEW - SEPTEMBER 2024: Further Easing Coming
The SNB is expected to cut its policy rate again, with a 25bp cut to 1.00% most likely, as reflected by analyst and market expectations - but there is a risk of a larger cut. Inflation has further slowed since the June meeting, remaining well below the SNB’s target of below 2% (but not deflation) and below its Q3 forecast. There will therefore likely be a downward revision to September’s updated inflation projection, regardless of it being conditional on a new, lower, policy rate.
BOE (MNI): Greene May Vote for November Cut; Still More Hawkish Than Median MPC Member
Overall we Greene's speech such that she may vote for a cut in November, probably not in December, and she is likely to vote for less cuts earlier than other members of the MPC. Short-term she may be more dovish than Mann, but medium-term Greene may be more hawkish. And relative to the wider committee, we still think that Greene sits towards the hawkish end. Greene outlines the 3 thought processes on inflationary developments that Bailey highlighted in his Jackson Hole speech and has since been used in the September MPC Minutes. She says at the moment she sees the case of "a period of economic slack is required to bring inflation sustainably to target in the medium-term" as having the greatest probability.
UK (BBG): Starmer Says He’s Seeking to Meet Trump, Harris Before US Vote
UK Prime Minister Keir Starmer said he’s seeking to meet Vice President Kamala Harris and former President Donald Trump, the two main US presidential candidates, before Americans head to the polling booths in November. Starmer left open the prospect of meeting the Democratic and Republican candidates during his visit this week to the United Nations General Assembly in New York, telling journalists on the plane there with him late Tuesday that “we’ll just see what’s possible.”
FRANCE (BBG): Bank of France Chief Says Bond Markets Are Warning on Debt
Bank of France Governor Francois Villeroy de Galhau said it’s urgent for the country to deal with its deficit and debt challenges as bond markets are increasingly sending warnings about the risks. “In recent days, international lenders, those who lend to France, are also telling us we must now react,” he said on France 2 television on Wednesday. “Before June, we had an interest-rate spread with Germany of around 0.5 percentage points, and now we are close to 0.8, so we really must deal with this sickness.”
GERMANY (BBG): Germany Wants ‘Greatest Possible Independence’ for Commerzbank
The German government reiterated its opposition to a takeover of Commerzbank AG by Italy’s UniCredit SpA, saying it wants the “greatest possible independence” for the country’s second-biggest lender. “We are in the process of considering how we can find a solution that is good for Commerzbank and very good for the federal government, while respecting Commerzbank’s independence,” Florian Toncar, a deputy finance minister, told reporters in Berlin.
CHINA (MNI): PBOC Cuts One-Year MLF Rate by 30bp
MNI (Beijing) The People’s Bank of China cut the one-year medium-term lending facility rate by 30 basis points on Wednesday, draining a net of CNY291 billion from the interbank market, according to a statement on its website. The Bank conducted a CNY300 billion one-year MLF operation even though a total of CNY591 billion matured on Sept 15 in a bid to maintain “reasonable and adequate liquidity” in the banking system, the statement said. The rate was reduced to 2.0% from 2.3%, with a maximum bidding rate of 2.30%, a minimum bidding rate of 1.90%, and the winning rate at 2.0%, the PBOC noted.
CHINA/JAPAN (MNI): Japan Cab Sec Calls ICBM Test 'A Matter of Serious Concern'
MNI (London) The rare launch of an intercontinental ballistic missile (ICBM) in the Pacific by China's People's Liberation Army (PLA) has raised tensions in the Far East, with Japan's Chief Cabinet Secretary Yoshimasa Hayashi saying that the launch 'is a matter of serious concern for Japan and the international community.' It marks the first time since 1980 that the PLA has launched an ICBM into international waters, rather than at a remote inland site.
THAILAND (BBG): Thai Finance Chief Makes Case for Rate Cut Ahead of BOT Talks
Thailand’s new government is piling pressure on the central bank, with its finance chief pushing for lower interest rates and a higher inflation target to help stem the baht’s strongest quarter in more than 25 years. “It’s time to talk about the inflation target, which will lead to policy rate and lead to supporting government polices. They are all related,” Finance Minister Pichai Chunhavajira told reporters on Wednesday in Bangkok, on the sidelines of an event marking the start of the government’s cash handout program.
MNI BANXICO PREVIEW - SEPTEMBER 2024: Further Easing Expected
Banxico is expected to cut the overnight interbank interest rate by 25bp to 10.50%, supported by further progress on the disinflation front and amid ongoing concerns surrounding growth. Domestic uncertainty related to Morena’s constitutional reform initiative has placed pressure on MXN, which could become a concern should there be a further deterioration. However, the Fed’s bolder move to initiate its easing cycle should provide the Banxico committee with the required flexibility to continue with an easing strategy.
DATA
UK DATA (MNI): Brightmine Data Point to Lower Earnings Growth Than Previously Expected
Brightmine pay data was published yesterday (seemingly ahead of the scheduled release time of this morning) and showed a meaningful decline in pay settlements across the past two months. Last month's release saw the median pay rise at 4.5%Y/Y in the three months to July but that data has since been revised down to 4.0% - and the data for the 3-months to August has stayed at 4.0%. In fact there appear to be a number of revisions to the prior data. Looking at private sector data (reading from the graph) it appears as though between Jan-Jun readings were around 4.9%Y/Y before falling to 4.8% in July and 4.7%Y/Y in August. Previously private sector pay in both January and February were above 5% and there was no downtick in July.
FRANCE DATA (MNI): France Consumer Sentiment Slightly Exceeds Expectations
- FRANCE SEP CONSUMER SENTIMENT 95
France Consumer Sentiment slightly exceeded expectations printing at 95 in September (vs 92 consensus and 93 revised prior), at the highest level since February 2022. However, it remains a little below the long run average (from January 1987 to December 2023) of 100. From the sub-components, both general economic situation and financial situation in the next 12 months improved, to -38 (from -44) and -6 (from -9) respectively, making both components the highest since February 2022. Meanwhile, consumer prices in the next 12 months remained unchanged at -53.
SPAIN AUGUST PPI -1.3% Y/Y; +1.5% M/M (MNI)
SWITZERLAND DATA (MNI): KOF Downwardly Revises 2025/26 Inflation Expectations by 0.3pp
In their autumn projections, Swiss think tank KOF has downwardly revised their inflation projections, to +1.2% Y/Y in 2024 (vs 1.3% summer projection), and to +0.7% in 2025/26 (vs 1.0%). The revision equals the downside miss of average Q3 inflation to date vs the current SNB inflation projection (1.2% Jul/Aug average vs 1.5% f'cast), and brings the forecast in in line with the Swiss' governments expectations for 2025. A revision of the SNB's conditional inflation forecast tomorrow along those lines should probably be the base case considering market expectations.
CHINA DATA (MNI): MNI's China Money Market Index Sees Conditions Tighten in September
Introducing the updated MNI China Money Market Index (MMI), formerly the MNI China Liquidity Index, which has been adapted to reflect the PBOC's monetary policy.
- China interbank market liquidity conditions remained ample in September, whilst market participants expect PBOC easing to ease conditions through October, the latest MNI Money Market Index showed.
- The MNI China Money Market Index suggested better liquidity in October.
- The MNI China Money Market Current Conditions Index stood at 86.0 in September.
- The MNI China PBOC Policy Bias Index picked up through September.
Weak credit demand that has trapped interbank liquidity and fuelled the recent bond rally will lead the People's Bank of China to take a more flexible approach to further injections via its open market operations, while it simultaneously attempts to steepen the yield curve via its bond trades, results from MNI's China Money Market Index revealed.
JAPAN DATA (MNI): Japan Aug Services PPI Rises 2.7%, Flat Over July
- JAPAN AUG SERVICES PPI +2.7% Y/Y; JULY REV +2.7%
- JAPAN AUG SERVICES PPI +0.1% M/M: JULY UNREV +0.3%
Japan’s services producer price index rose 2.7% y/y in August, unchanged from July’s revised 2.7%, showing that corporate pass-through of cost increases remained solid but the pace is slowing, preliminary data released by the Bank of Japan on Wednesday showed. The August index was boosted by other services (+3.7% vs. +3.7%), including employment (+3.0% vs. +2.1%), although transpiration and postal activities (+2.2% vs. +2.7%) weighed. The index of services with high labour cost ratio rose 2.8% y/y in August, unchanged from 2.8% in July, while the index of services with a low labour cost ratio rose 2.4% y/y in August, slowing from 2.7% in July.
JAPAN DATA (MNI): Japan's Aug Trimmed Mean Rises 1.8%, Flat vs. July
Japan’s trimmed mean measure of underlying inflation rose 1.8% in August, unchanged from July’s 1.8, indicating the pace of pass-through of cost increases caused by the weak yen is slowing, data released by the Bank of Japan showed on Wednesday. The data showed the mode, or the inflation rate with the highest density in the distribution, stood at 1.3% in August, slowing from 1.5% in July, below the BOJ's 2% price target for the seventh straight month.
AUSTRALIA DATA (MNI): Aussie Monthly CPI Rises Slow
- AUSTRALIA MONTHLY AUG CPI -0.1% MM, 2.7% YY
Australia’s monthly consumer price index indicator printed at 2.7% y/y in August, in line with market expectations, while annual trimmed mean was 3.4%, down from July’s 3.8%, Australian Bureau of Statistics data showed Wednesday. The Reserve Bank of Australia will look through the headline read and focus on the trimmed mean measure, due to the impact of Federal government energy subsidies. RBA Governor Michele Bullock noted Tuesday, following the board’s decision to hold the cash rate at 4.35%, that the Reserve wants to see inflation sustainably within the 2-3% target band.
FOREX: Greenback Finds Support, Helping Bolster USD/JPY Recovery
- The greenback is firmer off this week's pullback lows as markets find support in the USD Index at last week's lows of 100.215. Moves come as European and US equity futures fail to pick up on the strong session for Asia-Pac trade - in which the CSI-300 finished higher by another 1.5%. This keeps markets on track for a modest negative open on Wall Street Wednesday, stemming the renewed test on alltime highs back in mid-September at 5797.50.
- USD/JPY is firming, with JPY comfortably the poorest performer in G10 and tipping the pair toward yesterday's 144.68 high. Clearance here would be fresh multi-week highs and increase the focus on the down-trending 50-dma of 146.73. JPY weakness is also filtering well into CHF, which also nurses losses.
- Sweden's Riksbank cut rates - as expected - by 25bps this morning to 3.25%, in a decision which firmly put the potential for a 50bps rate cut on the table in the near future. EUR/SEK traded higher in response, but the cross is yet to make any material progress toward Monday's 11.3788.
- The Wednesday data schedule is light, with just US New Home Sales and weekly mortgage applications numbers due. Central bank speakers are similarly light, with an uneventful appearance from BoE's Greene coming ahead of a speech from Fed's Kugler on the economic outlook to coincide with the cash equity close.
BONDS: Shallow Rally Fades
Early bid in bonds reversed, with yields now little changed to higher on the day.
- Bund bulls failed to breach yesterday’s highs during the early rally. Futures -24 at 134.71 last vs. highs of 134.98.
- German yields are little changed to 1.5bp higher across the curve, front end leads the weakness after outperforming in recent sessions amid dovish ECB repricing.
- EGB spreads to Bunds little changed to 1.5bp tighter.
- BTP/Bunds continues to trade between 130-135bp. BTP supply passed smoothly. Some signs of cash demand for BTPs this morning.
- OAT/Bunds moves back to ~75bp after threatening to break above 80bp earlier in the week. French Finance Minister Arnaud’s study of potential tax hikes has seemingly helped the move.
- What’s more, there may have been some interest to fade the widening around the round number which protects the ’24 wides in the spread
- Gilt futures didn’t quite manage to close yesterday’s opening gap lower during the early rally, before pulling back alongside peers.
- UK yields little changed to 1.5bp higher, also flattening.
- Weak demand at the latest 7-Year gilt auction factored into recent trade. We had flagged some potential headwinds for demand despite the apparent RV opportunities ahead of the sale.
- ’30 German supply due imminently.
- Little in the way of major event risk scheduled for the remainder of the day, mid-level U.S. data and comments from Fed’s Kugler due.
EQUITIES: Bull Cycle in E-Mini S&P Remains in Play
Eurostoxx 50 futures traded higher last week as the contract extended the recovery from the Sep 10 low. It is still possible that recent gains are corrective. MA studies are in a bear-mode position and this highlights a downtrend. A reversal lower would refocus attention on key support at 4757.00, the Sep 6 / 10 lows. Key resistance is 5024.00, the Sep 3 high. A break would cancel a bearish theme and strengthen bullish conditions. A bull cycle in S&P E-Minis remains in play and price is trading just below its recent high. The contract has traded through a key and major resistance at 5785.00, the Jul 16 high and a bull trigger. A clear breach of this hurdle would confirm a resumption of the long-term uptrend. Sights are on the 5800.00 handle next. First key support is 5622.43, the 50-day EMA. Initial support lies at 5680.47, the 20-day EMA.
- Japan's NIKKEI closed lower by 70.33 pts or -0.19% at 37870.26 and the TOPIX ended 6.23 pts lower or -0.23% at 2650.5.
- Elsewhere, in China the SHANGHAI closed higher by 33.181 pts or +1.16% at 2896.306 and the HANG SENG ended 128.54 pts higher or +0.68% at 19129.1.
- Across Europe, Germany's DAX trades lower by 83.41 pts or -0.44% at 18912.6, FTSE 100 higher by 8.93 pts or +0.11% at 8291.71, CAC 40 down 38.34 pts or -0.5% at 7565.67 and Euro Stoxx 50 down 25.71 pts or -0.52% at 4915.01.
- Dow Jones mini down 42 pts or -0.1% at 42555, S&P 500 mini down 10 pts or -0.17% at 5782, NASDAQ mini down 70.75 pts or -0.35% at 20097.
Time: 10:00 BST
COMMODITIES: WTI Futures Respect Resistance at 50-Day EMA
WTI futures are holding on to their recent gains. The recovery since Sep 9, appears - for now - to be a correction. The 20-day EMA has been pierced and the next resistance to watch is $72.35, the 50-day EMA. It has been pierced, a clear break of it would undermine a bear theme. Note that MA studies are in a bear-mode set-up, highlighting a dominant downtrend. A reversal lower would refocus attention on $64.61, the Sep 10 low and bear trigger. Gold bulls remain in the driver’s seat and the yellow metal has again traded to a fresh all-time high. The move higher confirms a resumption of the primary uptrend and maintains the bullish price sequence of higher highs and higher lows. Moving average studies are in a bull-mode set-up, highlighting a clear uptrend and positive market sentiment. The focus is on $2675.5 next, a Fibonacci projection. Firm support lies at $2558.0, the 20-day EMA.
- WTI Crude down $0.21 or -0.29% at $71.38
- Natural Gas up $0.05 or +1.84% at $2.597
- Gold spot down $1.46 or -0.05% at $2655.83
- Copper down $1.45 or -0.32% at $447.75
- Silver down $0.23 or -0.73% at $31.8762
- Platinum down $4.96 or -0.5% at $985.59
Time: 10:00 BST
Date | GMT/Local | Impact | Country | Event |
25/09/2024 | 1100/0700 | ** | US | MBA Weekly Applications Index |
25/09/2024 | 1300/1500 | EU | MNI Connect Video Conference on ‘The EU and Global Trade Challenges’ | |
25/09/2024 | 1400/1000 | *** | US | New Home Sales |
25/09/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
25/09/2024 | 1530/1130 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note |
25/09/2024 | 1700/1300 | * | US | US Treasury Auction Result for 5 Year Note |
25/09/2024 | 2000/1600 | US | Fed Governor Adriana Kugler | |
26/09/2024 | - | CH | Swiss National Bank Meeting | |
26/09/2024 | 0600/0800 | * | DE | GFK Consumer Climate |
26/09/2024 | 0700/0900 | ** | SE | Economic Tendency Indicator |
26/09/2024 | 0730/0930 | *** | CH | SNB PolicyRate |
26/09/2024 | 0730/0930 | *** | CH | SNB Interest Rate Decision |
26/09/2024 | 0800/1000 | ** | EU | M3 |
26/09/2024 | 0800/1000 | ** | IT | ISTAT Business Confidence |
26/09/2024 | 0800/1000 | ** | IT | ISTAT Consumer Confidence |
26/09/2024 | 0900/1100 | EU | ECB's Elderson remarks at governance & risk meeting | |
26/09/2024 | 1230/0830 | *** | US | Jobless Claims |
26/09/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
26/09/2024 | 1230/0830 | *** | US | GDP |
26/09/2024 | 1230/0830 | * | CA | Payroll employment |
26/09/2024 | 1230/0830 | ** | US | Durable Goods New Orders |
26/09/2024 | 1310/0910 | US | Fed's Susan Collins, Adriana Kugler | |
26/09/2024 | 1315/0915 | US | Fed Governor Michelle Bowman | |
26/09/2024 | 1320/0920 | US | Fed Chair Jerome Powell | |
26/09/2024 | 1325/0925 | US | New York Fed's John Williams | |
26/09/2024 | 1330/1530 | EU | ECB Lagarde address at ESRB Conference | |
26/09/2024 | 1400/1000 | ** | US | NAR Pending Home Sales |
26/09/2024 | 1415/1615 | EU | ECB's De Guindos in macroprudential policy panel | |
26/09/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
26/09/2024 | 1430/1030 | US | Fed Vice Chair Michael Barr | |
26/09/2024 | 1430/1030 | US | Fed Governor Lisa Cook | |
26/09/2024 | 1500/1100 | ** | US | Kansas City Fed Manufacturing Index |
26/09/2024 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
26/09/2024 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
26/09/2024 | 1600/1800 | EU | ECB's Schnabel at Wirtschaftsrat der CDU e.V | |
26/09/2024 | 1700/1300 | US | Fed's Neel Kashkari, Michael Barr | |
26/09/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 7 Year Note |
26/09/2024 | 1900/1500 | *** | MX | Mexico Interest Rate |
26/09/2024 | 2010/1610 | US | New York Fed's Roberto Perli | |
26/09/2024 | 2200/1800 | US | Fed Governor Lisa Cook |