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
- US, ISRAEL VIEW AN ATTACK BY IRAN AS ‘INCREASINGLY LIKELY’
- CHINA GOES TO NEW EXTREME IN CRACKDOWN ON BOND-MARKET FRENZY
- UK EARNINGS GROWTH SLOWS, BUT BOE STILL ON WATCH
- AUSSIE WAGES RISE 4.1% Y/Y IN Q2, ABOVE EXPECTATIONS
MNI (LONDON) - Figure 1: UK earnings growth slow again in the three months to June
Source: ONS
NEWS
MNI US CPI PREVIEW - AUGUST 2024: Large Miss Needed for Fed to Guide 50bp Cuts
Consensus sees core CPI at 0.2% M/M in July after the far softer than expected 0.065% M/M in June, with a mild skew towards a “low” 0.2% per MNI’s compilation of sell-side previews. The main two dovish takeaways from the June report were from housing and non-housing aspects of core services, although the latter was aided by some non-PCE relevant categories. For July, analysts look for only a partial reacceleration in the key housing series to a rate still comparable with pre-pandemic averages.
MNI UK CPI PREVIEW - AUGUST 2024: Volatile Services in Focus
The story for July inflation is expected to be disinflation of a couple of tenths for both services and FAT (food, alcohol and tobacco). Utilities prices have seen their quarterly rebasing, however, and are expected to see less of a negative drag on headline inflation, contributing around 0.5ppt of upside to the Y/Y print while core goods prices may see the first non-negative contribution to CPI since May 2023. The Bank of England’s August MPR pencilled in a forecast for July headline CPI of 2.37% Y/Y, while the median of the previews that we have read comes in at 2.3% Y/Y (with a very small downward skew to 2.29% YY).
US/MIDEAST (BBG): US, Israel View an Attack by Iran as ‘Increasingly Likely’
The US believes an Iranian attack against Israel has grown even more likely and may come as soon as this week, officials said, as allied leaders sought to head off all-out war and the Pentagon deployed more forces to the region. Briefing reporters Monday, White House spokesman John Kirby said the US and its allies “have to be prepared for what could be a significant set of attacks.” Israel believes it’s “increasingly likely that there’ll be an attack” by Iran and its proxies, Kirby said. “We share those concerns.”
US (BBG): Pro-Trump PAC Plans $100 Million Ad Blitz as Harris Gains Steam
A super political action committee backing Republican Donald Trump plans to spend $100 million on advertising between now and Labor Day in seven swing states in what polls show is a newly competitive race against Vice President Kamala Harris. The spending figure marks more than half of the total $198 million the super PAC, Make America Great Again Inc., has raised since 2023, according to the latest Federal Election Commission filings, highlighting how the presidential contest is entering a critical stretch with less than three months left until Election Day.
US (BBG): Biden Invests $100 Million to Fuel More Housing Production
The White House is announcing $100 million in grants to state and local governments to spur the construction of new housing, one of a host of new administrative actions to boost housing supply. The Biden administration has witnessed record levels of housing production, driven by a pandemic-era boom in apartment buildings. More housing units are under construction now than at any point in half a century - some 60,000 multifamily units were completed in June alone - and rents are stabilizing in some areas as a result.
US/ASIA (BBG): US, Japan Keen on $15-Billion Philippine Projects as Ties Grow
The US and Japan are very interested to help fund at least $15 billion worth of projects on the Philippines’ main island, in signs that enhanced security ties are leading to greater economic benefits, according to President Ferdinand Marcos Jr.’s investment czar. The three nations will prioritize five major projects in the Luzon Economic Corridor plan which may well turn out to be Marcos’ flagship investment program, said Secretary Frederick Go who advises the president on the economy. The list includes a cargo rail linking Luzon’s major ports estimated at $11 billion and a renewable energy project, he said.
AUSTRIA (BBG): Austria Sees ‘Massive Risk’ From Halt to Russian Gas Flows
Austria sees a “massive risk” from a sudden stoppage of Russian natural gas flows, which continue to feed the central European nation’s export-oriented heavy industries. European fuel prices have soared after an incursion by Ukrainian troops near a key cross-border transit point in Russia, prompting energy officials and traders to reassess the probability of a supply interruption.
CHINA (BBG): China Goes to New Extreme in Crackdown on Bond-Market Frenzy
Chinese authorities are going to extraordinary lengths to tighten their grip on the world’s third-largest government bond market. In a highly unusual move on Friday, regulators told rural banks in China’s Jiangxi province not to settle recent purchases of government bonds, an order to effectively renege on their market obligations. It was the latest in a string of interventions designed to cool a market rally that sent yields to record lows and stoked official concerns that banks have become too exposed to interest-rate risk.
JAPAN (BBG): BOJ’s Ueda Set to Explain July Rate Hike Decision on Aug. 23
Bank of Japan Governor Kazuo Ueda will be called to parliament on Aug. 23 to answer questions on monetary policy, likely facing questions related to a July 31 rate hike amid criticism that his hawkish tone last month contributed to recent market turmoil. Ueda will speak at a parliamentary committee from 9:30 a.m. on that day, lawmakers decided on Tuesday. Finance Minister Shunichi Suzuki will also attend the session. The move was initiated by the main opposition party, which criticized the BOJ for last month’s rate increase on grounds that it contributed to the yen’s surge and a rout in stocks.
JAPAN (BBG): Tokyo Cuts Bond Issuance Plan in Sign of Interest-Rate Jitters
The Tokyo Metropolitan Government is planning to cut bond sales this fiscal year, in another sign that Japan’s credit market is bracing for weaker investor demand for debt after the central bank raised interest rates. Tokyo, one of Japan’s biggest issuers of municipal debt, is reducing its planned public bond sales in the year started April 1 to about ¥470 billion ($3.2 billion) from the previous plan of around ¥520 billion. It cited factors including recent interest-rate fluctuations, the burden of interest payments and funding needs.
RUSSIA/UKRAINE (The Times): Zelensky Tells Putin War is ‘Coming Home’ to Russia
President Zelensky warned on Monday night that war was “coming home” to Vladimir Putin as the week-long Ukrainian assault inside Russia forced tens of thousands to flee. Zelensky said in his nightly address: “Russia brought war to others, now it’s coming home. Ukraine has always wanted only peace, and we will certainly ensure peace.” Putin had earlier said that “with the help of its western masters” Kyiv was trying to gain a bargaining chip for future negotiations to end the war.
RUSSIA/UKRAINE (BBG): Ukraine and Russia Plan to Keep Gas Flowing Amid Fighting
Russia and Ukraine intend to keep pipeline gas flowing to Europe even as fighting continues near a key cross-border transit point for the fuel. Both sides have no intention of halting flows via the Sudzha gas-intake station in Russia’s Kursk region, people with knowledge of the matter said, asking not to be identified due to the sensitivity of the information.
ISRAEL (BBG): Israel’s Rating Cut by Fitch as War Seen Lasting Into 2025
Israel’s sovereign debt was cut by one notch by Fitch Ratings, which kept a negative outlook on the credit as continued military conflict weighs on the country’s public finances. The ratings firm lowered the country’s score to A from A+, citing “continued war” and geopolitical risk as drivers, according to a statement Monday. The Israeli sovereign dollar bond due 2031 fell 0.4 cent on the dollar Tuesday, with most other securities of the nation posting losses. The equity benchmark in Tel Aviv fell the most in a week.
COMMODITIES (BBG): Iron Ore Extends Drop Below $100 as Steel Industry Mood Darkens
Iron ore dropped for the fifth time in six days ahead of data this week that’ll shed light on Chinese steel output, as mills in the biggest market battle slumping product prices and challenged domestic demand. Futures reversed an early move higher, after shedding almost 2% in the week’s opening session. With steel supply in the first half running below last year’s pace, Beijing will release industrial-production data for July on Thursday, including steel output in the world’s largest market.
DATA
UK DATA (MNI): Wage Data In-Line, Unemployment and Claimant Data Conflict
- UK JUN AVE WEEKLY EARNINGS +4.5% YY
- UK JUN AVE WEEKLY EARNINGS EX-BONUS +5.4% YY
- UK JUN UNEMPLOYMENT RATE 4.2%
- UK JUL CLAIMANT RATE +4.7%
- UK JUL PAYROLLS +24K TO 30.4 MLN
UK earnings growth slowed again in the three months to June, but regular pay levels are still sitting at levels uncomfortable for the Bank of England. The unrounded 3-month private AWE was 5.242% in the 3-months to June. This was down from 5.590% in the 3-months to May (which was revised up marginally from 5.561%). The single month Y/Y was 4.90% in June, down from 4.98%Y/Y in May (revised from 4.90%) and 5.85% in April (unrevised). This is the lowest unrounded single month Y/Y since February 2022. There are some administrative changes to the claimant count that have increased that - and may increase it further in future months - but it is still unusual to have the unemployment rate and claimant count rate move in different directions to such an extent.
GERMANY ZEW AUG ECONOMIC EXPECTATIONS 19.2 (MNI)
GERMANY AUG ZEW CURRENT CONDITIONS -77.3 (MNI)
SPAIN JUL HICP -0.7% M/M, +2.9% Y/Y (MNI)
CHINA JAN-JUL NEW LOANS CNY13.53 TRLN VS JAN-JUN CNY13.27 TRLN (MNI)
CHINA JAN-JUL TSF CNY18.9 TRLN VS JAN-JUN CNY18.1 TRLN (MNI)
CHINA END-JUL M2 +6.3% Y/Y VS MEDIAN +6.0%; END-JUN +6.2% Y/Y (MNI)
JAPAN DATA (MNI): Japan July CGPI Rises 3.0% Y/Y, Higher Import Price
- JAPAN JULY CORP GOODS PRICE INDEX +3.0% Y/Y; JUNE UNREV
- JAPAN JULY CORP GOODS PRICE INDEX +0.3% M/M; JUNE UNREV +0.2%
FOREX: EUR/GBP Drifts Further Off Highs as BoE/ECB Gap Widens
- EUR/GBP's drift off the August recovery continues, with the cross fading another 30 pips this morning on the better-than-expected UK unemployment rate data for June. The rate unexpectedly slipped from 4.4% to 4.2%, against expectations for a 0.1ppts rise, prompting EUR/GBP to make a clean break of the 200-dma support and exposure lower levels.
- 0.8411 undercuts as support here, and while the 0.8383 bear trigger is still some way off, market focus remains on the ECB-BoE pricing differential for their respective September meetings. An ECB cut remains fully priced while a similar move from the BoE sits at ~35%. A solid inflation print from the UK tomorrow could open this gap, reduce September MPC pricing, and work in favour of a revisit to recent lows.
- JPY is the poorest peformer in G10 as the corrective bounce in USD/JPY off the pullback low persists. Stronger equities across Europe and the US so far are weighing on funding currencies and haven FX, pressuring both CHF and JPY to the bottom of the G10 pile.
- US inflation takes focus for the duration of the Tuesday session. PPI numbers are expected to show 0.2% reads across all PPI indices - and any hotter-than-expected read will pressure Sept Fed pricing and lessen the odds of a 50bps cut step next month. The USD Index is rangebound, with technical parameters intact at last week's hi/lo. Fed's Bostic is set to speak on the US economy at 1815BST/1315ET - the only CB speaker of note today.
EGBS: Sticking to a Tight Range Ahead of US PPI
- Bund futures have stuck to around a 20 tick range this morning, trading largely sideways after moving higher ahead of the European cash close yesterday. Spreads are generally a little tighter in line with global risky assets with equities a bit higher on the day.
- The final Spanish HICP print was unrevised from the flash while the German ZEW survey disappointed - expectations falling to their lowest level since January while the current situation also moved a little lower.
- We still have a Schatz auction (results upcoming shortly) but the biggest risk for EGBs today is likely to be US PPI at 13:30BST / 14:30CET.
- Bund futures are up 0.11 today at 134.52 with 10y Bund yields up 0.3bp at 2.226% and Schatz yields down -0.3bp at 2.383%.
- BTP futures are up 0.13 today at 119.18 with 10y yields down -1.2bp at 3.627% and 2y yields down -1.5bp at 2.886%.
- OAT futures are up 0.07 today at 126.39 with 10y yields down -0.3bp at 2.968% and 2y yields down -0.7bp at 2.624%.
EQUITIES: E-Mini S&P Extends Gradual Recovery Off Last Week's Lows
A bear threat in Eurostoxx 50 futures remains present and the latest climb appears to be a correction - for now. The sell-off between Aug 1 - 5, reinforces the bearish condition. A key support at 4846.00, the Apr 19 low, has been cleared. This highlights a stronger reversal and opens 4478.81 next, a Fibonacci projection. Firm resistance is 4879.91, the 50-day EMA. First resistance is 4784.42, the 20-day EMA. Short-term gains in S&P E-Minis are - for now - considered corrective and the 50-day EMA marks a firm resistance, at 5453.59. Clearance of this average is required to alter the picture and signal scope for stronger gains. The contract traded lower on Aug 5 and this confirmed an extension of the bear cycle. The move down resulted in a print below 5185.50, 76.4% of the Apr 19 - Jul 16 bear leg. A clear break of this level would open 5092.00 next, the May 2 low.
- Japan's NIKKEI closed higher by 1207.51 pts or +3.45% at 36232.51 and the TOPIX ended 70.25 pts higher or +2.83% at 2553.55.
- Elsewhere, in China the SHANGHAI closed higher by 9.741 pts or +0.34% at 2867.946 and the HANG SENG ended 62.41 pts higher or +0.36% at 17174.06.
- Across Europe, Germany's DAX trades higher by 15.49 pts or +0.09% at 17742.15, FTSE 100 lower by 6.65 pts or -0.08% at 8203.41, CAC 40 down 5.8 pts or -0.08% at 7245.01 and Euro Stoxx 50 up 4.92 pts or +0.11% at 4677.17.
- Dow Jones mini up 67 pts or +0.17% at 39547, S&P 500 mini up 18.25 pts or +0.34% at 5388, NASDAQ mini up 102.75 pts or +0.55% at 18741.
Time: 09:50 BST
COMMODITIES: Sharp Rally in WTI Futures Undermines Recent Bearish Theme
WTI futures rallied sharply higher Monday. The move undermines a recent bearish theme and price has traded through both the 20- and 50-day EMAs. A continuation higher would signal scope for a climb towards $80.77, a Fibonacci retracement. Clearance of this level would open $83.58, the Jul 5 high. On the downside, a return to bearish price action would expose key support at $71.67, the Aug 5 low. Recent weakness in Gold appears to be corrective and the trend structure remains bullish. Note that the yellow metal has recently managed to pierce support at the 50-day EMA - currently at $2383.4. A clear break of this average would signal scope for a deeper retracement towards $2277.4, May 3 low and a key support. For bulls, attention is on $2483.7, the Jul 17 high and a bull trigger. Clearance of this hurdle would resume the uptrend.
- WTI Crude down $0.41 or -0.51% at $79.66
- Natural Gas down $0 or -0.14% at $2.186
- Gold spot down $12.18 or -0.49% at $2460.79
- Copper down $3.9 or -0.95% at $406.5
- Silver down $0.24 or -0.86% at $27.7335
- Platinum down $6.64 or -0.7% at $937.89
Time: 09:50 BST
| Date | GMT/Local | Impact | Country | Event |
| 13/08/2024 | - | *** |  CN | Money Supply |
| 13/08/2024 | - | *** | CN | New Loans |
| 13/08/2024 | - | *** | CN | Social Financing |
| 13/08/2024 | 1230/0830 | *** |  US | PPI |
| 13/08/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 13/08/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 13/08/2024 | 1715/1315 | US | Atlanta Fed's Raphael Bostic | |
| 14/08/2024 | - |  NZ | Reserve Bank of New Zealand Meeting | |
| 14/08/2024 | 0200/1400 | *** | NZ | RBNZ official cash rate decision |
| 14/08/2024 | 0600/0700 | *** |  GB | Consumer inflation report |
| 14/08/2024 | 0600/0700 | *** | GB | Producer Prices |
| 14/08/2024 | 0600/0800 | *** |  SE | Inflation Report |
| 14/08/2024 | 0645/0845 | *** |  FR | HICP (f) |
| 14/08/2024 | 0900/1100 | ** |  EU | Industrial Production |
| 14/08/2024 | 0900/1100 | *** | EU | GDP (p) |
| 14/08/2024 | 1100/0700 | ** | US | MBA Weekly Applications Index |
| 14/08/2024 | 1230/0830 | *** | US | CPI |
| 14/08/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
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.