Modest amount of ECB speakers supporting to hold rates steady

EU mid-market update: IFO survey reinforced under-performing German economy; Modest amount of ECB speakers supporting to hold rates steady; Focus on potential US govt shutdown next week.

Notes/observations

- Germany IFO weakened for a 5th straight month, but crucially, the expectations survey missed consensus, turning European indices lower as ongoing concerns about Germany being the ‘sick man of Europe’ remain. IFO economists said Q3 contraction is likely.

- Elsewhere, macro events in the session were quiet as we sit between last week’s rate decisions and earnings season a little over 2 weeks away.

- On the speaker front, commentary from ECB’s Villeroy, De Cos and Kazaks comments were in line with council stance of holding rates at current levels and to pause in Oct. BOJ Gov Ueda reiterated need to continue with monetary policy easing patiently and said he can't preset timing of policy change.

- Asia closed mixed with Hang Seng under-performing at -2.0%. EU indices are -0.2% to -1.0%. US futures are -0.2% to -0.3%. Gold -0.2%, DXY +0.2%; Commodity: Brent +0.3%, WTI +0.4%, TTF +9.1%; Crypto: BTC -1.7%, ETH -1.0%.

Asia

- China PBOC Adviser Liu Shijin [member of monetary policy committee] said China has limited room for further monetary policy easing; Further easing in monetary policy 'unlikely'.

- China Pres Xi said to welcome a Summit between China, South Korea, Japan "at opportune time"; Will seriously consider visiting South Korea, as he meets with South Korea PM Han Duck-soo.

- China Foreign Ministry Daily Briefing said EU planned measures on EVs are not in anyone's interests.

- Philippines 'strongly condemns' China Coast Guard's installation of a 300-meter floating barrier preventing Filipino boats from entering Scarborough Shoal in South China Sea.

- China upgrades relationship with East Timor to a comprehensive strategic partnership - China Foreign Ministry statement.

- Japan gov't considering 5-10-yr tax benefits for firms producing semiconductors and storage batteries as part of upcoming economic stimulus package.

- Japan METI Minister Nishimura: Japan and other countries agreed at aiming to create global hydrogen demand of 150M metric tons by 2030.

- Thailand PM Sretta expects Tesla, Google, Microsoft to invest $5B into the country.

- Indonesia Ministry of Energy's Bambang Suswantono: Expects coal production to start declining in 2030; Western countries are not ready to finance the early retirement of coal-fired power plants.

- Australia said to consider new and more broad definition of full employment; cites new policy paper.

- Australia extends punitive tariffs on Russia and Belarus goods to Oct 2025.

- Philippines National Security Advisor: China's placement pf a barrier preventing Filipino boats from entering Scarborough Shoal in South China Sea violates fishing rights of Filipino fishermen.

- Reserve Bank of Australia (RBA) Assistant Gov of Financial Systems Brad Jones: Keeping an 'open mind' on prospects for a retail CBDC.

- India Food Sec Chopra said all options are open to control wheat prices in India; May sell more wheat in open market.

Mid-East

- France Pres Macron: France to withdraw troops from Niger by end of 2023 and will soon recall its Ambassador after military coup.

Ukraine conflict

- Canada PM Trudeau pledges C$650M of military aid for Ukraine over the next 3 years.

Europe

- EU's Dombrovskis (Trade Chief) said EU has no intention to decouple from China but needs to protect itself when its openness is abused - speech in Shanghai.

- Reportedly Italian banks will be allowed to avoid paying a windfall tax introduced in Aug if they set aside additional capital reserves.

- German Gov't to scrap stricter building insulation standards to help prop up struggling property industry.

- France Pres Macron: Ask oil industry to sell gasoline and diesel at cost.

- EU's Dombrovskis (Trade Chief) said EU will do anti-subsidy EV probe work in consultation with China authorities - Follow up comments on Beijing trip.

- German Bundesbank faces job cuts as consultants plan modernization.

- Bank of England (BOE) to delay implementing global banking reforms for a further 6 months.

- UK Govt Min Shapps said inheritance tax is unfair and punitive.

- France said to request that insurers limit 2024 tariff hikes.

- Canadian ratings agency DBRS affirms France at 'AA' (higher); Outlook stable.

- Italian Competition Authority said to begin probe into hearing device markets - press.

- German Chancellor Scholz: Want investments in Germany for A320 successor programme.

Americas

- US GOP representative Graves: Republicans are considering a stopgap US govt funding measure that would range from 14 to 60 days; Letting funding lapse would be mistake.

- US House Financial Services Chair McHenry (R-NC) said House won't hold Credit Card Competition Act hearings.

- US WaPo-ABC poll: Trump leads Biden 52-42 in 2024 presidential race; More than 3 in 5 Democrats and Democratic-leaning independents say they would prefer a nominee other than Pres Biden.

- US White House is in early stage discussions for a large arms transfer to Vietnam, which could include F-16 fighter jets - press.

- Canada's Unifor union members ratify new three-year collective agreement with Ford Motor; Base hourly wage increase of nearly 20% for production and 25% for trades over lifetime of agreement.

- Writers Guild of America (WGA) reaches 3-year agreement with the AMPTP (Alliance of Motion Picture and TV Producers), terms not disclosed; the agreement still needs to be approved by union members.

- Canada PM Trudeau: Expect interest rates to drop by mid-2024.

Energy

- EU energy official said Europe will have to rely on US fossil fuels for decades.

- Russia said to approve exempting bunker fuel, gasoils and some middle distillates from its fuel ban; To keep ban on exports of diesel and gasoline.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.03% at 453.40, FTSE -0.75% at 7,625.97, DAX -0.91% at 15,415.75, CAC-40 -0.83% at 7,125.30, IBEX-35 -0.90% at 9,416.35, FTSE MIB -0.94% at 28,308.00, SMI -0.17% at 10,996.20, S&P 500 Futures -0.17%].

Market focal points/Key themes: European indices open lower across the board and remained subdued through the early part of the session; all sectors start the day in the red; less negative sectors include real estate and telecom; sectors leading the trend lower include materials and industrials; Novartis confirms to spin-off Sandoz unit; Aviva to acquire Corebridge from AIG; Pendragon receives another unsolicited offer from Hedin Mobility; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Ubisoft [UBI.FR] +6.5% (analyst action), Entain [ENT.UK] -6.5% (trading and strategy update), Stockmann [STCBV.FI] -1.5% (strategic review).

- Financials: Unicredit [UCG.IT] +0.5%, Banco BPM [BAMI.IT] +3.0% (reportedly Italian banks will be allowed to avoid paying a windfall tax introduced in Aug if they set aside additional capital reserves).

- Industrials: Stellantis [STLA.NL] -1.0% (UAW strike continues), Volkswagen [VOW3.DE] -0.5% (Germany said to probe unit Man Energy Solutions asset sale to China).

- Real Estate: Samhallsbyggnadsbolaget [SBBB.SE] +22.5% (divestment; cash infusion), Adler Group [ADJ.UK] -3.5% (German govt said to scrap stricter building insulation standards to help prop up struggling property industry).

Speakers

- ECB's Villeroy (France) said patience is more important than raising rates further; Recent increase in oil prices won’t derail the ECB's fight to tame inflation; Sees risk ECB could do too much in the future; If markets fully incorporate our strategy, they shouldn't expect cuts before a sufficiently long time.

- ECB's Kazaks (Latvia, hawk) said latest hike in Sept may allow for a pause in Oct.

- ECB's De Cos (Spain, dove) said must avoid insufficient and excessive tightening; If rates kept at current 4.0% long enough, we should reach 2% goal.

- EU's Dombrovskis (Trade Chief) said EU will do anti-subsidy EV probe work in consultation with China authorities - Follow up comments on Beijing trip.

- Canada PM Trudeau said he expects interest rates to drop by mid-2024.

- BOJ Gov Ueda reiterated need to continue with monetary policy easing patiently; Inflation target not yet within sight; Can't preset timing of policy change; FX should reflect fundamentals; BOJ will not conduct policy to directly affect FX; End of Yield Curve Control (YCC) to be in sight when 2% price target is in sight.

- Japan PM Kishida said he sensed that overseas investor interest is rising in Japan.

- Japan BOJ Dep Gov Uchida said Japanese economy is recovering moderately.

- Japan Chief Cabinet Sec Matsuno: Japan strongly opposes any conduct to heighten tensions in South China sea.

Currencies/fixed income

- Risk off puts additional tailwinds to USD as USD/JPY trades pushes to around 148.50 following Gov Ueda comments. GBP and EUR trade slightly lower with EUR selling off due to weakness seen in German IFO. GBP/USD at 1.2220, EUR/USD at 1.0630.

Economic data

- (UR) Ukraine Q2 GDP Y/Y: 19.3% v 20.3%e.

- (TW) Taiwan Aug Industrial Production Y/Y: -10.5% v -13.2%e.

- (PH) Philippines Aug Budget Balance (PHP): -133.0B v -47.8B prior.

- (ID) Indonesia Aug M2 Money Supply Y/Y: 5.9% v 6.4% prior.

- (SG) Singapore Aug CPI M/M: +0.9% v -0.2% prior; Y/Y: 4.0% v 4.0%e; CPI Core Y/Y: 3.4% v 3.5%e.

- (FI) Finland Aug PPI M/M: +1.8% v -0.9% prior; Y/Y: -8.4% v -10.0% prior.

- (JP) Japan Aug Nationwide Dept Sales Y/Y: 11.8% v 8.6% prior; Tokyo Dept Store Sales Y/Y: 10.0% v 12.2% prior.

- (NO) Norway Aug Credit Indicator Growth Y/Y: 4.0% v 4.2% prior.

- (HU) Hungary July Average Gross Wages Y/Y: 15.3% v 15.8%e.

- (ES) Spain Aug PPI M/M: +1.2% v -0.2% prior; Y/Y: -10.0% v -8.6% prior.

- (CZ) Czech Sept Business Confidence: 0.4 v 5.5 prior; Consumer Confidence: -20.5 v -18.0 prior; Composite Confidence (Consumer & Business): -3.8 v +0.8 prior.

- (TR) Turkey Sept Real Sector (Manufacturing) Confidence (Adj): 105.1 v 104.6 prior; Real Sector Confidence (unadj): 104.4 v 105.0 prior.

- (TR) Turkey Sept Capacity Utilization: 77.3% v 76.1% prior.

- (RO) Romania Aug M3 Money Supply Y/Y: 8.5% v 8.0% prior.

- (CH) Swiss weekly Total Sight Deposits (CHF): 475.1B v 473.0B prior; Domestic Sight Deposits: 465.3B v 463.6B prior.

- (DE) Germany Sept IFO Business Climate Survey : 85.7 v 85.2e; Current Assessment Survey: 88.7 v 88.0e; Expectations Survey: 82.9 v 83.0e.

- (PL) Poland Aug Unemployment Rate: 5.0% v 5.0%e.

Fixed income issuance

- Taiwan plans to sell NT$85B in Gov't bonds in Q4.

- Philippines sells total PHP15.0B vs. PHP15.0B indicated in 3-month, 6-month and 12-month bills.

Looking ahead

- 05:30 (DE) Germany to sell combined €5.0B in 6-month and 12-month Bubills.

- 05:30 (EU) European Union to sell up to €4.0B in 2034 and 2053 bonds.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (UK) Sept CBI Retailing Reported Sales: No est v -44 prior; Total Distribution Reported Sales: -35e v -26 prior.

- 06:00 (RO) Romania to sell combined RON1.4B in 2027 and 2033 bonds.

- 07:00 (BR) Brazil Sept FGV Consumer Confidence: No est v 96.8 prior.

- 07:00 (IS) Iceland to sell 3-month and 6-month Bills.

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 07:30 (BR) Brazil Aug Current Account: -$1.8Be v -$3.6B prior; Foreign Direct Investment (FDI): $5.0Be v $4.2B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 08:30 (US) Aug Chicago Fed National Activity Index: 0.05e v 0.12 prior.

- 09:00 (BE) Belgium Sept Business Confidence: No est v -14.9 prior.

- 09:00 (EU) ECB’s Chief Lagarde.

- 09:00 (DE) ECB’s Schnabel (Germany).

- 09:00 (FR) France Debt Agency (AFT) to sell €5.4-7.0B in 3-month, 6-month and 12-month bills (4 tranches).

- 10:30 (US) Sept Dallas Fed Manufacturing Activity: -13.0e v -17.2 prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 17:00 (KR) South Korea Sept Consumer Confidence: No est v 103.1 prior.

- 18:00 (US) Fed’s Kashkari.

- 19:50 (JP) Japan Aug PPI Services Y/Y: 1.8%e v 1.7% prior.

- 23:00 TH) Thailand Central Bank to sell THB 60B in 3-month bills.

- 23:35 (JP) Japan to sell 40-Year JGB Bonds.