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MNI US OPEN - Trump Widens Lead in Pre-Debate Poll

EXECUTIVE SUMMARY:

Figure 1: European hike pricing consolidates after busy week

NEWS

MNI POLITICAL RISK ANALYSIS - BRICS Summit Preview

The 15th annual BRICS summit is due to take place August 22-24 in Johannesburg, South Africa. It will be the first in-person summit since 2019 after virtual editions during the COVID-19 pandemic. The summit is set to be the largest yet, with the attendance of around forty heads of state confirmed and up to ten more pending, and a queue of countries lining up to formally apply for membership. MNI's Political Risk team presents a preview of the summit with a roundup of the key objectives, the prospect of expansion of the bloc, intra-bloc relations, the implications for trade, and the question of de-dollarisation.

US (BBG): Trump Supporters Brush Off Atlanta Indictment in Pre-Debate Poll

Donald Trump’s lead over his Republican primary rivals widened in a poll conducted after his fourth indictment, showing the kind of support that’s prompting him to deride this week’s GOP debate. The CBS News/YouGov poll of likely Republican primary voters found 62% support for the former president and 16% for Florida Governor Ron DeSantis, his closest competitor in the race for the GOP nomination, who declined 7 percentage points from a CBS poll in June. Trump polled 61% in the earlier survey.

US (BBG): Trump Weighs Skipping GOP Debate for Tucker Carlson Sitdown

Donald Trump is considering skipping the first Republican debate to instead sit for an interview with former Fox News host Tucker Carlson, according to people familiar with the GOP frontrunner’s plans. An interview with Carlson, who exited Fox News earlier this year, would be a snub to the network, which is hosting Wednesday’s debate. Trump has criticized the network in recent days for its coverage of his campaign. The people familiar requested anonymity to discuss Trump’s planning.

CHINA (MNI): China Loan Prime Rate Cut Smaller Than Expected

MNI (Beijing) China's one-year Loan Prime Rate was cut to 3.45% from 3.55% on Monday to guide down funding costs, but the reduction was smaller than expected as five-year LPR remained stable. The cut to the one-year LPR, based on the PBOC’s Medium-term Lending Facility rate and quotes submitted by 18 banks, was the second reduction this year, while the five-year plus maturity remained unchanged at 4.2%, according to a People's Bank of China statement.

CHINA (MNI): Country Garden Bigger Blow than Evergrande - Fund Managers

MNI (Beijing) A new wave of debt problems hitting Chinese property developers has shaken the confidence of foreign investors in what they had assumed was an implicit guarantee for high-quality developers following the introduction of the government’s “three arrow” support plan in 2022, fund managers and lawyers told MNI. Country Garden, previously China’s largest developer by sales, missed USD22.5m of coupon payments on Aug 6 and then suspended 11 onshore bonds, indicating last year’s “three-arrow” policy support aimed at easing access to credit, bond, and equity financing has not saved the sector’s supposed high quality developers from a liquidity crunch.

CHINA (BBG): China Urges More Loans, Debt Risk Reduction as Woes Compound

China’s central bank and financial regulators met with bank executives and told lenders again to boost loans to support a recovery, adding to signs of heightened concern from policymakers about the deteriorating economic outlook. Authorities also urged for adjustments and an optimization of policies for home mortgages at the meeting on Friday, according to a statement from the People’s Bank of China on Sunday, without elaborating on the housing initiatives.

CHINA (MNI): China Seen Boosting Property Market, Not Bailing Out Firms

MNI (Beijing) China seems inclined to deal with property developers’ debt risks using broad stimulus to boost home sales and ensure delivery of unfinished housing projects, rather than by bailouts which risk fomenting moral hazard, advisors told MNI after a warning over missed bond payments from Country Garden, formerly the country’s largest developer by sales.

CHINA (MNI): MoFA - Representations Made Following US-Japan-SK Criticism

MNI (London) Wires carrying comments from the Chinese Ministry of Foreign Affairs regarding the criticisim of China at the tripartite summit involving the leaders of the US, Japan and South Korea at Camp David on August 18. States that 'China has lodged representations with relevant parties.' The joint statement issued after the summit referred to Chinese actions "regarding the dangerous and aggressive behavior supporting unlawful maritime claims that we have recently witnessed by the People's Republic of China (PRC) in the South China Sea, we strongly oppose any unilateral attempts to change the status quo in the waters of the Indo-Pacific."

RUSSIA (NYT): Russia’s Lunar Lander Crashes Into the Moon

The robotic Luna-25 spacecraft appeared to have “ceased its existence” after a failed orbital adjustment, the space agency Roscosmos said. A Russian robotic spacecraft that was headed to the lunar surface has crashed into the moon, Russia’s space agency said on Sunday, citing the results of a preliminary investigation a day after it lost contact with the vehicle. It is the latest setback in spaceflight for a country that during the Cold War became the first nation, as the Soviet Union, to put a satellite, a man and then a woman in orbit.

COMMODITIES (BBG): Iron Ore Dips on Growing Demand Concerns Before Building Season

Iron ore dipped - following a 4% jump last week — as investors assessed still-tepid demand ahead of China’s usual two-month construction season that starts in September. The steel-making staple traded near $106 a ton in Singapore after dropping as much as 2.9% earlier in the session. Construction activity typically accelerates in September and October with better weather, prompting mills to restock inventories, but this year the flailing Chinese recovery and a beleaguered property market are creating fresh concerns.

DATA

GERMAN DATA (MNI): July Producer Prices Point to Further Disinflation in Pipeline

  • GERMANY JUL PRODUCER PRICES -6% Y/Y; EST: -6.0%
  • GERMANY JUL PRODUCER PRICES -1.1% Y/Y; EST: -0.2%

The fall in German producer prices was larger than expected in July, at -1.1%(-0.2% expected, -0.3% June), and -6.0% Y/Y (-5.1% expected, 0.1% prior). The largest Y/Y decline since 2009 amid the Global Financial Crisis was due mostly to the huge base effect (Jul 2022 saw PPI rise 5.3% M/M on wholesale energy prices) meaning energy prices fell 19.3% Y/Y (and 2.5% M/M). But in the latest month, falling intermediate goods prices and disinflation in consumer and capital goods also were notable. Ex-energy producer prices rose 2% Y/Y (slowest since Feb 2021) and fell 0.4% M/M.

FOREX: USDJPY Edges Higher Following Corrective Pullback

  • Currency markets have had a subdued session on Monday with the USD index holding a very narrow 20 pip range, sliding into moderate negative territory as we approach the NY crossover.
  • The Japanese Yen remains on the back foot with USDJPY trading at fresh session highs of 145.73 in recent trade, edging further away from the 144.93 pullback lows on Friday. The overall technical uptrend in USDJPY remains intact and short-term pullbacks are considered corrective. Moving average studies are in a bull mode condition, highlighting current positive sentiment. The focus is on 147.49, a Fibonacci projection.
  • USDCNH reached as high as 7.3361 overnight as concerns surrounding the Chinese economy continue to dampen sentiment. Reactions were exacerbated by no change in the 5-yr LPR rate, which kept onshore equities on the back foot on Monday with consensus looking for a 15bps cut to boost the under pressure growth backdrop.
  • However, in recent trade the Yuan has been bolstered by source reports that major state-owned banks were seen mopping up offshore yuan liquidity on Monday and a large squeeze in front end CNH forward points. In similar vein, the likes of the Euro and AUD have recovered off the lows and are now trading in positive territory.
  • The Fed's Jackson Hole conference is the week's key event, with announced speakers so far including Chair Powell and ECB Pres Lagarde on Friday. Key data will be Wednesday’s European flash PMIs.

BONDS: Curves Lean Steeper, With Gilts Outperforming

Global core FI has bounced from lows set in early European trade, with Gilts outperforming. Futures are trading within last week's ranges.

  • Core FI began coming under pressure in Asian trade after China held the 5-Year LPR steady at 4.20% (vs 15bp cut expected), with 1-Year LPR cut 10bp (vs 15bp cut expected). We note that while there have been some outsized price movements this morning, they have come on low volume.
  • The German and US curves have bear steepened while the UK's is bull steepening - the latter curve's outperformance looking like a pullback after last week's selloff. Periphery EGB spreads are a little tighter, led by Italy - Corriere reporting Italian banks could get future tax credits on windfall profit taxes.
  • The only data of note on Monday's calendar is German producer prices which were more deflationary than expected (see our note here) but had little market impact. While we get some 2nd tier data Tuesday, most attention this week is on Wednesday's flash Aug PMIs.
  • The Fed's Jackson Hole conference is the week's key event, with announced speakers so far including Chair Powell and ECB Pres Lagarde on Friday. There are no central bank speakers of note, and the only bond supply today is Belgian OLOs.

Latest levels:

  • Sep US 10Y futures (TY) down 6/32 at 109-14.5 (L: 109-09 / H: 109-22)
  • Sep Bund futures (RX) down 24 ticks at 131.17 (L: 130.97 / H: 131.41)
  • Sep Gilt futures (G) up 20 ticks at 92.11 (L: 91.58 / H: 92.14)
  • Italy / German 10-Yr spread 2.9bps tighter at 167.8bps

EQUITIES: Bearish Theme in E-Mini S&P Remains Present

A bearish theme in Eurostoxx 50 futures remains present and last week’s sell-off reinforces current conditions. The contract last week breached support at 4276.00, the Aug 8 and 15 low and Friday’s move lower resulted in a break of 4220.00, the Jul 7 low. This opens 4177.40, a Fibonacci retracement. Key short-term resistance is unchanged at 4420.00, the Aug 10 high. Initial firm resistance is 4348.20, the 50-day EMA. A bearish theme in the E-mini S&P contract remains intact and Friday’s sell-off reinforces this theme. Last week’s extension lower resulted in a break of the 50-day EMA and the contract breached channel support drawn from the Mar 13 low. 4368.50, the Jun 26 low, was breached Friday and attention turns to 4344.28, a Fibonacci retracement. Initial firm resistance to watch is at the 50-day EMA - at 4455.92.

  • Japan's NIKKEI closed higher by 114.88 pts or +0.37% at 31565.64 and the TOPIX ended 4.2 pts higher or +0.19% at 2241.49.
  • Elsewhere, in China the SHANGHAI closed lower by 38.975 pts or -1.24% at 3092.978 and the HANG SENG ended 327.56 pts lower or -1.82% at 17623.29.
  • Across Europe, Germany's DAX trades higher by 110.73 pts or +0.71% at 15685.82, FTSE 100 higher by 32.57 pts or +0.45% at 7295, CAC 40 up 80.48 pts or +1.12% at 7244.59 and Euro Stoxx 50 up 40.34 pts or +0.96% at 4253.29.
  • Dow Jones mini up 76 pts or +0.22% at 34641, S&P 500 mini up 15.5 pts or +0.35% at 4398.25, NASDAQ mini up 83.5 pts or +0.57% at 14827.75.

COMMODITIES: Gold Trading Close to Recent Lows with Outlook Bearish

The uptrend in WTI futures remains intact and the recent pullback appears to be a correction. Firm support to watch lies at $78.33, the Aug 3 low. A clear break of this level would signal scope for a deeper short-term retracement. For bulls, a resumption of gains would refocus attention on the next objective at $85.24, a Fibonacci projection. Moving average studies are in bull-mode condition, highlighting an uptrend. Gold is trading at its recent lows and the outlook remains bearish. Price has breached key support at $1893.1, the Jun 29 low. The clear break strengthens bearish conditions and signals scope for $1865.8, a Fibonacci retracement. Moving average studies remain in bear mode condition, highlighting current bearish sentiment. On the upside, initial firm resistance to watch is $1935.7, the 50-day EMA.

  • WTI Crude up $0.56 or +0.69% at $81.77
  • Natural Gas up $0.06 or +2.43% at $2.616
  • Gold spot down $0.2 or -0.01% at $1889.03
  • Copper down $1.25 or -0.33% at $373
  • Silver up $0.04 or +0.16% at $22.7846
  • Platinum down $6.56 or -0.72% at $908.79

DateGMT/LocalImpactFlagCountryEvent
21/08/20231530/1130*USUS Treasury Auction Result for 13 Week Bill
21/08/20231530/1130*USUS Treasury Auction Result for 26 Week Bill
22/08/20230600/0700***UKPublic Sector Finances
22/08/20230600/0800**NONorway GDP
22/08/20230800/1000**EUEZ Current Account
22/08/20230900/1000*UKIndex Linked Gilt Outright Auction Result
22/08/20231000/1100**UKCBI Industrial Trends
22/08/2023-*FRRetail Sales
22/08/20231230/0830**USPhiladelphia Fed Nonmanufacturing Index
22/08/20231255/0855**USRedbook Retail Sales Index
22/08/20231400/1000***USNAR existing home sales
22/08/20231400/1000**USRichmond Fed Survey
22/08/20231530/1130*USUS Treasury Auction Result for Cash Management Bill
22/08/20231830/1430USChicago Fed's Austan Goolsbee
23/08/20232300/0900***AUJudo Bank Flash Australia PMI

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