MNI US OPEN - Weaker UK Retail Sales Unlikely to Impact BOE Path

NEWS

US (BBG): Trump Cancels News Conference to Promote Election Fraud Theories

Former President Donald Trump canceled a news conference he planned to hold on Monday in response to his latest indictment, because, he said, of advice from his lawyers. Earlier this week, Trump on his Truth Social platform said he would release a report bolstering his persistent and unfounded claims of a stolen election in 2020. In Georgia on Monday, Fulton County District Attorney Fani Willis handed up Trump’s fourth indictment this year. That case involves efforts by Trump and his allies to reverse his 2020 election loss to Joe Biden.

US/JAPAN/S.KOREA (MNI): Security, Supply Chains & Chips In Focus At US-Japan-SK Summit

Wires carrying comments from an unnamed senior White House official ahead of today's tripartite summit between US President Joe Biden, Japanese PM Fumio Kishida and South Korean President Yoon Suk-yeol . Leaders will pledge a 'duty to consult' with one another in the event of a crisis or circumstances that affect the security of any one of them. Official states that the duty to consult 'is not a formal alliance commitment or collective defense commitment'.

GERMANY (MNI): Scholz's Ratings Slide Amid Gov't Infighting Over Corporate Tax Relief

Latest opinion polling from state broadcaster ZDF shows more respondents dissatisfied with Chancellor Olaf Scholz's leadership than satisfied for the first time since his coalition came to power in 2021. Fifty-one percent of respondents were dissatisfied with the work of Scholz, compared to 43% satisfied and 6% unsure. The survey comes in the week that Scholz's gov't failed to pass a multi-billion euro programme of corporate tax relief intended to kick-start the German economy, following a veto from Families Minister Lisa Paus who was pushing for additional funds for child benefits.

FRANCE (BBG): France Seeks €2.5 Billion in Transport Taxes for Green Spending

France is looking to raise €2.5 billion ($2.7 billion) through 2030 via higher taxes on the operators of toll road and airport concessions as it seeks to speed up debt reduction and fund the environmental transition, according to a report in Les Echos. The French government wants to generate an additional €100 million as early as next year by lifting taxes on airline tickets, mainly in first and business class, to help finance rail transport, the newspaper added, without identifying the source of its information.

CHINA (BBG): China Steps Up Efforts to Stabilize Markets as Confidence Slumps

Chinese authorities have stepped up efforts in recent days to bolster financial markets in a sign that Beijing is growing uncomfortable with the pace of declines in stocks and the yuan. Mainland exchanges this week asked some investment funds to avoid net selling equities. Officials requested state-owned banks to escalate intervention to support the yuan, while also encouraging companies listed on the tech-heavy Star Board to buy back shares. Earlier this month, China’s central bank met with private-sector property firms and pledged funding.

CHINA (BBG): Evergrande Seeks Shelter From Creditors in US Ahead of Votes

China Evergrande Group, the real estate giant whose default two years ago accelerated a broader property debt crisis in the country, sought Chapter 15 bankruptcy protection in New York on Thursday. The move protects it from creditors in the US while it works on a restructuring deal elsewhere. The Chinese homebuilder’s Chapter 15 petition references restructuring proceedings being carried out in Hong Kong and the Cayman Islands.

BOJ (MNI): Weak Yen Adds to Pressure for Yield Curve Move

Persistent yen weakness would add to political pressure on the Bank of Japan to further loosen its yield curve control framework later this year, MNI understands. While the Bank does not target the exchange rate and would be wary of being seen to do so, it does monitor its effect on inflation. Possible responses could include raising the effective cap on 10-year bond yields from 1.0% or suspending daily fixed-rate bond purchases.

AUSTRALIA (BBG): LNG Turmoil Endures as Unions Begin Australia Strike Votes

Unions have set dates for members to vote on potential industrial action at Chevron Corp. and Woodside Energy Group Ltd. liquefied natural gas facilities in Australia. Any outages would threaten about 10% of global supply and a local export sector that generated an estimated A$92 billion ($59 billion) in earnings in the year to June 30.

COMMODITIES (BBG): Iron Ore Extends Climb as Pessimism Over Steel Cuts Tempered

Iron ore extended its climb in Singapore, with demand optimism in the ferrous market growing in the absence of firm directives for output cuts from China. Prices jumped as much as 1.5% after closing almost 5% higher Thursday as the market clung to hopes that steel-control goals might not be implemented soon. That would lend more time for blast furnaces to maintain output and operating rates.

DATA

EUROZONE DATA (MNI): HICP Data Largely Unrevised; M/M Services Print a Tenth Lower than Flash

The final print of Eurozone HICP was unrevised from the flash print at 5.3%Y/Y while core CPI was also unrevised at 5.5%Y/Y. The main components of the Y/Y data were all unrevised from the flash but there were some small revisions to the M/M prints: services inflation rose +1.3%M/M (flash +1.4%M/M), energy -0.2%M/M (flash -0.3%M/M) and food, alcohol and tobacco increase +0.1%M/M (flash 0.2%M/M). The continued rise in services inflation remains a concern for the ECB - it has risen from +4.8%Y/Y in February 2023 to +5.6% Y/Y in July.

EUROZONE JUN CONSTRUCTION OUTPUT -1% M/M, -0.3% Y/Y (MNI)

UK DATA (MNI): Disappointing but Unlikely to Alter MPC's Reaction

• UK JUL RETAIL SALES -1.2% M/M, -3.2% Y/Y
• UK JUL RETAIL SALES EX-FUEL -1.4% M/M, -3.4% Y/Y

The ONS notes that wet weather impacted sales - the wettest July since 2009 and the sixth wettest on record. And this also led to the highest proportion of online sales since February 2022. It is a disappointing print and there were also some minor downward revisions to prior months - but the UK retail sales data is very volatile so this is unlikely to have much impact on the MPC's reaction in September. Labour / inflation data remain much more important. GBPUSD initially dipped just under 20 pips on the release (but had moved around 10 pips higher just ahead of the release).

JAPAN DATA (MNI): July Inflation as Expected, but Sticky Core & Services Uptick Likely BoJ Watchpoints

• JAPAN JULY CORE CPI +3.1% Y/Y; JUNE +3.3%
• JAPAN JULY CORE-CORE CPI +4.3% Y/Y; JUNE +4.2%
• JAPAN JULY CPI FOOD EX-PERISHABLES +9.2% Y/Y; JUNE +9.2%
• JAPAN JULY CPI ENERGY COST -8.7% Y/Y; JUNE -6.6%

Japan national July CPI data printed in line with market expectations. The headline printed at 3.3% y/y, which was also the June outcome. The ex fresh food print was 3.1%y/y (prior 3.3%), while ex fresh food and energy was 4.3%y/y, also in line with expectations (prior 4.2%). The core measure which strips out all food and energy was 2.7% y/y, versus 2.6% in June. In m/m terms, the headline CPI rose 0.4% (0.2% prior), with goods up 0.3%, while services inflation spiked 0.5% in seasonally adjusted terms (versus flat outcomes back to the start of the year).

FOREX: GBP Softens Following Weak UK Retail Sales, USDCNH Recovers

• GBP has traded on a softer note since the weaker set of July retail sales data. Cable remains around 0.2% lower on the session but has yet to test Thursday’s low print of 1.2703. The trend direction for GBPUSD remains down with the Aug 14 low of 1.2621 marking the short-term bear trigger.
• GBPJPY was the early notable mover, registering losses of 0.60% at its lowest point, having snapped an eight-day winning streak on Thursday. However, the pair has since bounced back above the 185 handle and remains just moderately lower on the session.
• Early JPY strength was a key feature of the session, amid weakness across European equity markets. USDJPY fell just shy of testing the initial support which lies between 145.07-11, a key pivotal area that after breaking earlier this week, provoked an impressive rally to yesterday’s 146.56 high print.
• Since then, a general bid for the greenback has seen USDJPY bounce around 45 pips to 145.60 as of typing, reinforcing the technical uptrend that remains intact, with short-term pullbacks considered corrective at this juncture. Topside focus is on 147.49, a Fibonacci projection.
• Coinciding with the stronger dollar, USDCNH has extended its recovery from the overnight lows of 7.2825, now trading in positive territory above 7.31. This follows China delivering its strongest ever pushback against a weaker yuan via its daily reference rate for the managed currency, as it seeks to restore confidence to a market spooked by disappointing data and heightened credit risks.
• There was no reaction to the final Eurozone data which were in line with expectations for unchanged main aggregate measures. September ECB hike pricing steady at 13bp and the general greenback bid in recent trade sees EURUSD hover at session lows of 1.0864. There are no further major data releases this week.

BONDS: Risk-Off Mood Drive Bund Yields Down Almost 10bps

• This morning has seen some decent moves higher across core FI with a risk-off mood to markets.
• Bunds are the biggest movers today with Bund futures hitting an intraday high of 131.67 (matching the high of the week seen on Monday). The German curve has bull flattened with 10-year Bund yields down almost 10bp on the day.
• The gilt curve has seen a similar move (albeit on a smaller scale) with the disappointing UK retail sales helping drive the strongest open in a month (we have since faded off that level somewhat).
• Eurozone final HICP data was in line with the flash print and didn't move the market while there are no other data releases or key speeches pencilled in for the rest of the day.
• TY1 futures are up 0-16 today at 109-25 with 10y UST yields down -4.8bp at 4.230% and 2y yields down -1.8bp at 4.912%.
• Bund futures are up 0.84 today at 131.46 with 10y Bund yields down -9.3bp at 2.614% and Schatz yields down -7.0bp at 3.030%.
• Gilt futures are up 0.43 today at 919.93 with 10y yields down -6.7bp at 4.676% and 2y yields down -6.1bp at 5.194%.

EQUITIES: Eurostoxx 50 Futures Extend Losses to 4-Month Lows

A bearish theme in Eurostoxx 50 futures remains present and this week’s sell-off reinforces current conditions. The contract has breached support at 4276.00, the Aug 8 and 15 low. The break of this level strengthens a bearish threat and exposes 4220.00, the Jul 7 low. Key short-term resistance is unchanged at 4420.00, the Aug 10 high. Initial resistance is 4353.20, the 50-day EMA. A bearish theme in the E-mini S&P contract remains intact and yesterday’s move lower reinforces this theme. This week’s bearish price action has resulted in a break of the 50-day EMA and the contract has breached channel support drawn from the Mar 13 low. The clear breakout signals scope for a continuation lower and opens 4368.50 next, the Jun 26 low. Initial firm resistance to watch is at the 50-day EMA - at 4459.03.

• Japan's NIKKEI closed lower by 175.24 pts or -0.55% at 31450.76 and the TOPIX ended 15.77 pts lower or -0.7% at 2237.29.
• Elsewhere, in China the SHANGHAI closed lower by 31.786 pts or -1% at 3131.953 and the HANG SENG ended 375.78 pts lower or -2.05% at 17950.85.
• Across Europe, Germany's DAX trades lower by 124.47 pts or -0.79% at 15561.14, FTSE 100 lower by 60.06 pts or -0.82% at 7254.86, CAC 40 down 66.46 pts or -0.92% at 7129.43 and Euro Stoxx 50 down 32.53 pts or -0.77% at 4198.16.
• Dow Jones mini down 32 pts or -0.09% at 34503, S&P 500 mini down 5 pts or -0.11% at 4378.75, NASDAQ mini down 33 pts or -0.22% at 14742.

COMMODITIES: Gold Remains Close to Thursday's Multi-Month Lows

The uptrend in WTI futures remains intact and the latest pullback appears to be a correction. Firm support to watch lies at $78.69, 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 $87.43, a Fibonacci projection. Moving average studies are in bull-mode condition, highlighting an uptrend. Gold remains bearish and this week’s move lower has reinforced current conditions. 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 $1937.6, the 50-day EMA.

• WTI Crude up $0.21 or +0.26% at $80.61
• Natural Gas down $0.05 or -1.79% at $2.575
• Gold spot up $2.57 or +0.14% at $1891.56
• Copper down $1.3 or -0.35% at $372.15
• Silver up $0.08 or +0.36% at $22.7583
• Platinum up $2.6 or +0.29% at $899.17