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
- MNI US CPI PREVIEW - LARGE MISS NEEDED FOR FED TO GUIDE 50BP CUTS
- JAPAN SET FOR A NEW LEADER AS PREMIER KISHIDA STEPS ASIDE
- UK HEADLINE INFLATION INCHES HIGHER, CORE DOWN
- RBNZ CUTS OCR 25BPS TO 5.25%
MNI (LODON) - Figure 1: Recent US inflation developments
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.
BOE (BBG): Bank of England Scrutinizing Lenders’ Prime Brokerage Risks
The Bank of England is reviewing lenders’ practices within their prime brokerage businesses as part of a long-running review into their exposure to hedge funds and other non-banks. Starting about six weeks ago, on-site examiners for the central bank’s Prudential Regulatory Authority have asked banks with operations across London how much information their hedge fund clients are disclosing about their business and whether it was enough for them to understand the risks involved in the prime brokerage business, according to people familiar with the matter.
JAPAN (MNI): Kishida Confirms Resignation After Sep Election of New LDP Leader
Prime Minister Fumio Kishida has confirmed that he will step down from office in September after the governing Liberal Democratic Party (LDP)'s election of a new party president. At a presser in Tokyo earlier today, Kishida said "In the upcoming presidential election, it's necessary to show the people that the Liberal Democratic Party will change... A transparent and open election and free and open debate are important. The first easy-to-understand step that indicates that the LDP will change is for me to step back." Since coming to power in Oct 2021 Kishida has struggled to keep his head above water when it came to approval ratings. Kishida's record on defence and foreign policy has been welcomed by the West with regard to support for Ukraine and developing closer relations with South Korea.
CHINA (BBG): China Traders Buy Bonds at Premium to Avoid Regulatory Curbs
Chinese traders are paying a premium for government bonds to evade regulators seeking to tame an unprecedented rally, people familiar with the matter said. Traders from non-bank financial firms, including insurers, are specifying in their orders to brokers that they don’t want to buy from any of the big state banks since regulators have told the nation’s largest lenders to keep records of their counterparties, according to the people, who asked not to be named discussing a private matter.
CHINA (MNI EXCLUSIVE): Sluggish Economy to Hinder PBOC's CGB Interventions
China's slowing economy will challenge the PBOC's attempts to cool the bond market. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
CHINA (MNI): China July Copper Production Increases M/M
MNI (Beijing) China’s copper cathode rod output reached 851,000 metric tonnes in July, up 47,900 mt from June, according to the Shanghai Metals Market (SMM) on Wednesday. The industry operating rate was 65.1%, up 2.6 percentage points m/m and 1.3 pp y/y, after July’s price drop below 75,000 yuan/mt released backlogged orders. SMM forecasted output in August to reach 885,400 mt, with operating rates increasing 2.6 pp m/m, but a possible slowdown in demand could impact production.
RBNZ (MNI): RBNZ Cuts OCR 25bps to 5.25%
The Reserve Bank of New Zealand monetary policy committee cut the official cash rate 25 basis points to 5.25% Wednesday and revised its inflation expectations lower, noting the balance of risks had shifted since May. The RBNZ now expects headline CPI to fall to 2.3% in Q3, 70bp less than its May forecasts, according to the August Monetary Policy Statement. The Reserve also expects the OCR to fall about 100bp by mid-2025, a departure from May’s forecasts, which expected a flat rate following a potential hike. The MPC was expected to discuss a cut this week, however, a move lower was uncertain.
RUSSIA (MNI): Belgorod Gov. Declares State of Emergency Amid Ukrainian Bombardment
The governor of Russia's Belgorod oblast has declared a state of emergency as Ukraine's military advance into the neighbouring Kursk oblast continues. Gov. Vyacheslav Gladkov said the situation in Belgorod was "extremely difficult and tense". The region has come under attack from Ukrainian shelling as well as drones, with Russia claiming to have shot down 117 Ukrainian UAVs overnight in the Kursk, Voronezh, Belgorod and Nizhny Novgorod regions. With the Ukrainian advance into Kursk continuing, there will be significant focus on the next objectives for Kyiv.
RUSSIA/UKRAINE (WSJ): Russia Withdraws Some Forces From Ukraine in Response to Kursk Invasion
Russia is withdrawing some of its military forces from Ukraine to respond to a Ukrainian offensive into Russian territory, U.S. officials said, the first sign that Kyiv's incursion is forcing Moscow to rejigger its invasion force. The officials said the U.S. is still seeking to determine the significance of Russia's move and didn't say how many troops the U.S. assesses Russia is shifting. But the new U.S. assessment bolsters claims by Ukrainian officials who said last week's surprise invasion of Kursk province had drawn Russian forces away from Ukraine, where Moscow's advantage in manpower and equipment is allowing them to grind forward in several places.
THAILAND (MNI): Constitutional Court Deems PM Srettha Guilty of Ethics Violation, Removes Him From Post
The Constitutional Court voted 5-4 to remove Prime Minister Srettha Thavisin from office after finding him guilty of a violation of ethics rules. The verdict applies pressure to Thai assets amid heightened uncertainty around the political outlook, with spot USD/THB close to erasing its intraday loss and the SET Index sinking. The top court argues that Srettha grossly violated ethics norms by appointing Pichit Chuenban to a cabinet position, despite the fact that the lawyer served a prison sentence in the past. Most local observers had expected Srettha to survive the challenge. The verdict implies an immediate dissolution of the government, with the cabinet serving in caretaker capacity, and the House of Representatives will now have to pick a new PM. In the meantime, one of the Deputy Prime Ministers will temporarily preside over cabinet meetings.
COMMODITIES (BBG): Iron Ore Slumps to Lowest Since May 2023 as Mill Warns of Crisis
Iron ore extended a slump to the lowest since May 2023, as the world’s largest steel company flagged an industry-wide crisis in China, intensifying concerns about demand just as major miners boost cargoes. Futures dropped more than 3% in Singapore, down for the sixth time in seven days. Hu Wangming, chairman of China Baowu Steel Group Corp., said the sector now faced a crisis more acute than the downturns of 2008 and 2015, likening conditions to a “severe winter” and highlighting a need to preserve cash.
CORPORATE (BBG): DOJ Mulls Google Breakup Push After Landmark Antitrust Win
A bid to break up Alphabet Inc.’s Google is one of the options being considered by the Justice Department after a landmark court ruling found that the company monopolized the online search market, according to people with knowledge of the deliberations. Less severe options include forcing Google to share more data with competitors and measures to prevent it from gaining an unfair advantage in AI products, said the people, who asked not to be identified discussing private conversations.
DATA
UK DATA (MNI): Volatile Components Drive CPI Surprise; Underlying Print Not That Soft
- UK JUL CPI -0.2% M/M, +2.2% Y/Y
- UK JUL CORE CPI +0.1% M/M, +3.3% Y/Y
- UK JUL SERVICES CPI +0.5% M/M, +5.2% Y/Y
- UK JUL RPI +0.1% M/M, +3.6% Y/Y
UK headline inflation edged higher in July, but at a slower pace than expected by both financial markets and the Bank of England. Food, alcohol and tobacco prices surprised to the upside, while core goods prices were also a bit stronger than expected. Energy was broadly in line with expectations. Overall, we think that the larger reversal in accommodation prices was the source of almost all of the downside surprise here, offset partially by higher food and core goods prices. For the BOE, today's print doesn't really change the narrative too much at first glance. We will look at some of the "core" services prints later, but at first glance today's print if anything doesn't look that soft when you strip out the volatile components.
EUROZONE DATA (MNI): Industrial Production Disappoints With Weakness Driven by Ireland
- EUROZONE JUN IP -0.1% M/M, -3.9% Y/Y
Eurozone industrial production disappointed in June at -0.1% M/M in-line with MNI's tracking (vs 0.5% consensus, -0.9% revised prior from -0.6%). The annual reading was also weak printing -3.9% Y/Y (vs -2.7% consensus, -3.3% prior revised from -2.9%). The June monthly fall was driven by Ireland, which saw production fall 7.8% M/M after rising 5.4% M/M last month - making it the largest decline since January 2024, followed by Belgium which saw its steepest sequential deterioration since April 2023 printing -6.5% M/M.
EUROZONE FLASH Q2 GDP +0.3% Q/Q, +0.6% Y/Y (MNI)
FRANCE JUL CPI +0.2% M/M, +2.3% Y/Y (MNI)
FRANCE JUL HICP +0.2% M/M, +2.7% Y/Y (MNI)
SWEDEN JUL CPIF +1.7% Y/Y (MNI)
FOREX: US CPI at the Forefront
- The Kiwi is still the early worst performer, following the RBNZ Dovish cut, even discussing 50bps.
- NZDUSD has fallen over 1% overnight and remains offered throughout the early European session going into the US session, now down 1.04%, but the 0.6000 figure still holds, printed 0.6003 low today.
- The early focus on the European Cash Govie open was on the UK CPI, which missed consensus, and provided a quick 40 pips sell off in Cable, and broader selling of the Pound.
- Cable continues to recover at the time of typing, now some 33 pips of the low.
- Overall the Dollar is still fairly mixed against G10s, SEK, NOK, EUR and CHF are all leading, while the CAD and AUD are closer to flat.
- The most traded Global pair, EURUSD has extended to its highest level since January, and eye next resistance situated at 1.1046 High Jan 2.
- Looking ahead, ALL EYES are now of course on the US CPI, especially given the US PPI falling below estimates Yesterday.
EGBS: Early Rally Reversed, Bund Resistance Holds
EGBs have more than reversed the early London rally that followed softer-than-expected UK CPI data, although desks highlight subdued summer volumes.
- Bund futures respected initial resistance (135.18) peaking at 135.16, last -28 at 134.78.
- The presence of French (mixed cover ratios, low prices cleared above prevailing mids) & impending German long end supply probably added some weight after that resistance level held.
- Eurozone GDP & industrial production data had no impact.
- German yields are ~2bp higher across the curve.
- Major EGB spreads to Bunds are within 1bp of yesterday’s closing levels.
- An uptick in the Euro Stoxx will be providing some background spread tightening impetus.
- 10-Year BTP/Bunds has traded either side of 140bp in recent sessions after peaking at ~154bp during last Monday’s risk-off trade.
- EUR 3M10Y vol. has stabilised around the middle of its July 23-Aug 5 range.
- U.S. CPI data provides the macro data release of note today, coming in the wake of yesterday’s softer-than-expected U.S. PPI data.
GILTS: Off CPI-Driven Highs, Curve Bull Steepens
Gilt futures last +15 at 100.38.
- Contract traded as high as 100.54 following the softer-than-expected domestic CPI data, before fading from best levels as EGBs came under pressure.
- Yields 2.5-5.0bp lower, curve bull steepens on dovish STIR repricing post-data.
- Last week’s yield lows untested across the curve.
- 2s10s and 5s30s remain below ’24 peaks.
- SONIA futures back from early highs alongside gilts, 0.25-5.5 firmer on the day.
- BoE-dated OIS shows 9bp of cuts for Sep & ~48bp through year end, after the latter showed more than 50bp of cumulative cuts following CPI.
- We believe that today's data doesn't really change the narrative too much, at least from the BoE’s perspective.
- Elsewhere, the DMO announced the syndication of a new long 15-year gilt maturing 15 January 2040 (w/c 2 September).
- This was an interesting choice. There had been some "isolated" calls for such issuance in the last investor/GEMM consultation - but most were divided between a new 25-year gilt or a tap of 30/40 year gilts.
- What’s more, 15s continue to trade closer to the richer end of their ’24 range on the 10-/15-/20-Year butterfly, although haven’t underperformed on that structure since the announcement.
EQUITIES: E-Mini S&P Continues to Trade Just Ahead of 50-Day EMA
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, reinforced 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 4873.36, the 50-day EMA. First resistance is 4777.62, the 20-day EMA. Short-term gains in S&P E-Minis are - for now - considered corrective. However, yesterday’s strong rally delivered a print above the 50-day EMA, at 5453.80. A clear break of this average would undermine the recent bearish theme and instead signal scope for a stronger recovery. This would open 5579.35, a Fibonacci retracement. A reversal lower would refocus attention on the bear trigger at 5120.00, the Aug 5 low.
- Japan's NIKKEI closed higher by 209.92 pts or +0.58% at 36442.43 and the TOPIX ended 28.35 pts higher or +1.11% at 2581.9.
- Elsewhere, in China the SHANGHAI closed lower by 17.292 pts or -0.6% at 2850.654 and the HANG SENG ended 60.7 pts lower or -0.35% at 17113.36.
- Across Europe, Germany's DAX trades higher by 72.52 pts or +0.41% at 17883.98, FTSE 100 higher by 36.56 pts or +0.44% at 8271.44, CAC 40 up 49.53 pts or +0.68% at 7325.4 and Euro Stoxx 50 up 27.5 pts or +0.59% at 4722.42.
- Dow Jones mini up 37 pts or +0.09% at 39926, S&P 500 mini down 0.75 pts or -0.01% at 5458, NASDAQ mini down 21 pts or -0.11% at 19084.75.
Time: 09:50 BST
COMMODITIES: Gold Holds Onto Recent Gains, Trend Structure Remains Bullish
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. Gold is holding on to its latest gains. Recent weakness appears to be corrective and the trend structure remains bullish. Note that the yellow metal has recently pierced support at the 50-day EMA - currently at $2386.6. A clear break of it would signal scope for a deeper retracement towards $2277.4, May 3 low and a key support. Attention is on $2483.7, the Jul 17 high and a bull trigger. Clearance of this hurdle would resume the uptrend.
- WTI Crude up $0.54 or +0.69% at $78.9
- Natural Gas up $0.01 or +0.61% at $2.161
- Gold spot up $9.64 or +0.39% at $2475.76
- Copper up $2.25 or +0.55% at $410.6
- Silver up $0.03 or +0.12% at $27.891
- Platinum down $1.84 or -0.2% at $940.01
Time: 09:50 BST
| Date | GMT/Local | Impact | Country | Event |
| 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 |
| 15/08/2024 | 2350/0850 | *** |  JP | Japan GDP 1st Estimate |
| 15/08/2024 | 0130/1130 | *** |  AU | Labor Force Survey |
| 15/08/2024 | 0200/1000 | *** |  CN | Fixed-Asset Investment |
| 15/08/2024 | 0200/1000 | *** | CN | Retail Sales |
| 15/08/2024 | 0200/1000 | *** | CN | Industrial Output |
| 15/08/2024 | 0200/1000 | ** | CN | Surveyed Unemployment Rate M/M |
| 15/08/2024 | 0430/1330 | ** | JP | Industrial Production |
| 15/08/2024 | 0600/0700 | ** |  GB | UK Monthly GDP |
| 15/08/2024 | 0600/0700 | ** | GB | Trade Balance |
| 15/08/2024 | 0600/0700 | *** | GB | GDP First Estimate |
| 15/08/2024 | 0600/0700 | ** | GB | Index of Services |
| 15/08/2024 | 0600/0700 | *** | GB | Index of Production |
| 15/08/2024 | 0600/0700 | ** | GB | Output in the Construction Industry |
| 15/08/2024 | 0800/1000 | *** |  NO | Norges Bank Rate Decision |
| 15/08/2024 | 1230/0830 | *** | US | Jobless Claims |
| 15/08/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 15/08/2024 | 1230/0830 | ** | US | Import/Export Price Index |
| 15/08/2024 | 1230/0830 | ** |  CA | Wholesale Trade |
| 15/08/2024 | 1230/0830 | *** | US | Retail Sales |
| 15/08/2024 | 1230/0830 | ** | US | Empire State Manufacturing Survey |
| 15/08/2024 | 1230/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 15/08/2024 | 1300/0900 | * | CA | CREA Existing Home Sales |
| 15/08/2024 | 1310/0910 | US | St. Louis Fed's Alberto Musalem | |
| 15/08/2024 | 1315/0915 | *** | US | Industrial Production |
| 15/08/2024 | 1400/1000 | * | US | Business Inventories |
| 15/08/2024 | 1400/1000 | ** | US | NAHB Home Builder Index |
| 15/08/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
| 15/08/2024 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 15/08/2024 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 15/08/2024 | 1710/1310 | US | Philly Fed's Pat Harker | |
| 15/08/2024 | 2000/1600 | ** | US | TICS |
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.