Awaiting US payroll data

Notes/observations

-European industrial production data beats estimates for Germany, France, Spain and Hungary, but misses for Italy. UN FAO World Food Price Index prints fastest monthly decline since 2008 at 140.9.

-China/US turmoil continues as China announces sanctions on US House Speaker Pelosi following her visit to Taiwan. US Sec State Blinken reiterated that China's actions are provocative, which comes after China missile launches on the sea east of Taiwan yesterday.

-UK Halifax House Prices read the first negative MoM since 2021 as traders digests the severe economic outlook provided by the BOE yesterday, which warned of a 5 consecutive quarter recession. BOE comments were a topic of contention with Sunak and Truss on last nights TV leadership debate. Truss hinted at reviewing the BOE regime which prompted Bailey to confirm his intention this morning to stay until his term ends in 2028. Another heatwave approaches the UK next week as drought plagues the south of the country.

-Asia closed mixed with Shanghai Composite outperforming at +1.2%. EU indices are -0.1-0.4% lower with bond yields mixed. US futures are flat. Safe haven: Gold.

-0.2%, DXY +0.3%; Commodity: Brent +0.4%, WTI +0.2%, Copper +0.7%; Speculative: BTC +1.5%, ETH +2.7%, HKD -27.3%.

-Looking ahead, highly anticipated US Non-Farm Payrolls at 08:30ET with consensus of +250K. Pre-market earnings from the likes of: AXL, FLR, GLP, GT, QRTEA, TRMB, TU, WDC.

- Focus on US payroll data to gauge how the economy was faring.

Asia

- RBA Statement on Monetary Policy (SOMP) noted that its cash rate assumed to increase to around 3.00% by the end of 2022 (**Note: OCR currently at 1.85%). It cut its outlook for economic growth while revising its inflation forecasts higher. Raised end-2022 Core inflation from 2.75% to 4.75% and end-2023 core inflation from 2.75% to 3.25%. Cuts end-2022 GDP growth from 4.25% to 3.25% and cut the end-2023 GDP growth from 2.0% to 1.75%.

- India Central Bank (RBI) raised its Repurchase Rate by 50bps to 5.40% (more-than-expected).

- China Premier Li Keqiang noted that keeping unemployment rate below 5.5% and inflation under 3.5% could allow to tolerate a slightly lower growth rate.

- Japan Jun Household Spending Y/Y: 3.5% v 1.5%e.

Taiwan

- US House Speaker Pelosi noted that from the beginning that representation was not on changing status quo in Indo Pacific or Taiwan. Had positive meetings in Taiwan on security and governance.

Europe

- Italy Cabinet passed €17B aid package. Noted it would not increase the country’s deficit because of higher than forecast revenues.

- Italy PM Draghi stated that govt was prepared to approve new anti-inflation measures if necessary. Fully committed to collecting revenue from windfall tax on energy companies.

Americas

- Fed's Mester (FOMC voter, hawk) noted that the path of inflation to govern the size of rate hikes ahead; Fed was committed to bringing inflation down to goal; Recession risks had gone up though.

- Fed's Kashkari (dove, non-voter) stated that was concerned that inflation was spreading and needed to act with urgency. Reiterated view that was very unlikely that Fed would cut rates in 2023.

- US Senator Sinema (D-AZ) signed off on the Democrat’s modified climate/tax/health care legislation after getting some changes made; the legislation will move forward on Sat. She agreed to remove the carried interest tax provision.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.19% at 438.24, FTSE -0.15% at 7,436.60, DAX -0.03% at 13,659.25, CAC-40 -0.30% at 6,493.85, IBEX-35 -0.20% at 8,144.67, FTSE MIB -0.22% at 22,597.00, SMI -0.07% at 11,194.26, S&P 500 Futures -0.04%].

Market Focal Points/Key Themes: European indices opened broadly flat across the board but later turned around to trade generally negative; sectors among those leading to the upside are consumer discretionary and utilities; while laggard sectors include energy and industrials; oil subsector digest yesterday drop in WTI prices to levels last seen before Russia invasion into Ukraine; Deutsche Post DHL reported increase in both revenues and profits and trades higher over 6% in Frankfurt; German financial giant Allianz trade lower over 2% following its results, while London Stock Exchange Group shares rise amid earnings and buyback program commencement; earnings expected during the upcoming US session include Western Digital, DraftKings, Goodyear Tire & Rubber and Canopy Growth.

Equities

- Consumer discretionary: Deutsche Post DHL [DPW.DE] +6% (earnings), Storytel [STORYB.SE] +14% (earnings).

- Consumer staples: Carl Zeiss Meditec [AFX.DE] -0.5% (earnings).

- Energy: Orron Energy [ORRON.SE] -10% (earnings).

- Financials: London Stock Exchange [LSEG.UK] +2% (earnings; buyback), Allianz [ALV.DE] -2.5% (earnings).

- Telecom: WPP {WPP.UK] -8% (earnings; raises outlook).

Speakers

- BOE Gov Bailey stated that he intend to serve out term until 2028 whoever become PM. Open to discussions with govt on how BOE regime should operate but did not accept criticism that BOE acted too late on inflation. Risk that inflation could become embedded in the UK. Earlier rate hikes could have damaged the economy.

- BOE's Pill (chief economist) noted that gas price increase was feeding UK inflation. Aim was to slow down momentum in economy and cut inflation.

- India Central Bank (RBI) Gov Das post rate decision press conference reiterated that the domestic economy was resilient. Inflation remained unacceptably high but was expected to moderate. Exact roadmap on monetary policy could not be spelled out but future guidance was 'withdrawal of accommodation.

- US Sec State Blinken noted that China's provocative actions were a significant escalation. In no one's interest to escalate further with China. To support Taiwan and cross-strait stabilization.

- China Ministry of Foreign Affairs announced sanctions on US House Speaker Pelosi over her recent Taiwan visit.

Currencies/Fixed income

- FX price action was subdued ahead of the US jobs report.

- EUR/USD at 1.0230 area. Dealers noted that upside likely to see stiff resistance as concerns about an energy crisis remain.

- GBP/USD rebounded from its post-BOE rate decision lows. Cable did test below 1.21 on Thursday as BOE staff projections hinted the threat of a hard landing. Pair at 1.2150 by mid-session.

Economic data

- (DE) Germany Jun Industrial Production M/M: +0.4% v -0.4%e; Y/Y: -0.5% v -1.3%e.

- (UK) July Halifax House Price Index M/M: -0.1% v +1.8% prior; Y/Y: 11.8% v 13.0% prior (first negative M/M print since June 2021).

- (FI) Finland Jun Preliminary Trade Balance: -€0.6B v -€1.2B prior - (SE) Sweden July Budget Balance (SEK): +15.4B v -30.5B prior.

- (ZA) South Africa July Gross Reserves: $59.5B v $58.9B prior; Net Reserves: $53.7B v $53.8B prior.

- (FR) France Jun Trade Balance: -€13.1B v -€12.4Be; Current Account: -€1.6B v -€3.7B prior.

- (FR) France Jun Industrial Production M/M: +1.4% v -0.3%e; Y/Y: +1.4% v -0.3%e.

- (FR) France Jun Manufacturing Production M/M: 1.2% v 1.5%e; Y/Y: 3.3% v 2.3% prior.

- (FR) France Q2 Preliminary Private Sector Payrolls Q/Q: 0.5% v 0.2%e.

- (ES) Spain Jun Industrial Production M/M: +1.1% v -0.1%e; Y/Y: 7.0% v 4.6%e; Industrial Output NSA (unadj) Y/Y: 6.4% v 6.9% prior.

- (ES) Spain Jun House transactions Y/Y: 18.8% v 27.7% prior.

- (CH) Swiss July Foreign Currency Reserves (CHF): 849.4B v 849.0B prior.

- (AT) Austria July Wholesale Price Index M/M: -1.5% v +2.5% prior; Y/Y: 22.8% v 26.5% prior.

- (HU) Hungary Jun Industrial Production M/M: % v 1.4% prior; Y/Y: % v 3.4%e.

- (CZ) Czech Jun Retail Sales (ex-auto) Y/Y: -6.0% v -7.5%e.

- (MY) Malaysia end-July Foreign Reserves: $109.2B v $109.0B prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 34.8K v 37.0K tons prior.

- (TH) Thailand end-July: Foreign Reserves: $220.0B v $218.0B prior.

- (IT) Italy Jun Industrial Production M/M: -2.1% v -0.1%e; Y/Y: -1.2% v +2.7%e; Industrial Production NSA (unadj) Y/Y: -1.2% v +6.6% prior.

- (RU) Russia Narrow Money Supply w/e July 29th (RUB): 14.25T v 14.36T prior.

- UN FAO July World Food Price Index: 140.9 v 154.3 prior (fastest monthly drop since 2008 and lowest print since Jan 2022).

- (TW) Taiwan July CPI Y/Y: 3.4% v 3.6%e; CPI Core Y/Y: 2.7% v 2.8%e; WPI Y/Y: 13.1% v 15.2%e.

- (TW) Taiwan July Foreign Reserves: $547.8B v $549.0B prior.

- (CN) China Q2 Preliminary Current Account: $80.2B v $88.9B prior.

Fixed income issuance

- None seen.

Looking ahead

- (IT) Bank of Italy Report on Balance-Sheet Aggregates: Target2 Liabilities: No est v €627.7B prior.

- (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to raise Interest Rates by 100bps to 5.75%.

- (MX) Mexico CitiBanamex Survey of Economists.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (IN) India to sell combined INR330B in 2024, 2029, 2032 and 2061 bonds.

- 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2033, 2038 and 2046 Bonds.

- 06:00 (UK) DMO to sell £3.5B in 1-month, 3-month and 6-month bills (£1.0B, £1.5B and £1.0B respectively).

- 06:00 (BE) Belgium Debt Agency (BDA) to sell OLO Bonds.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (IN) India announces upcoming bill issuance (held on Wed).

- 07:00 (CO) Colombia July CPI M/M: 0.6%e v 0.5% prior; Y/Y: 10.0%e v 9.7% prior.

- 07:00 (CO) Colombia July Core CPI M/M: No est v 0.5% prior; Y/Y: No est v 6.8% prior.

- 07:00 (MX) Mexico May Gross Fixed Investment: 6.0%e v 7.0% prior.

- 07:00 (MX) Mexico July Vehicle Production: No est v 285.3K prior; Vehicle Exports: No est v 237.7K prior.

- 07:00 (BR) Brazil July FGV Inflation IGP-DI M/M: -0.2%e v +0.6% prior; Y/Y: 9.3%e v 11.1% prior.

- 07:15 (UK) BOE’s Pill (chief economist) - 07:30 (IN) India Weekly Forex Reserve w/e July 29th: No est v $571.6B prior.

- 07:45 (US) July CBIZ Small Business Employment Index: No est v +0.29% prior.

- 08:00 (PL) Poland July Official Reserves: No est v $154.2B prior.

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

- 08:30 (US) July Change in Nonfarm Payrolls: +250Ke v +372K prior; Change in Private Payrolls: +230Ke v +381K prior; Change in Manufacturing Payrolls: +20Ke v +29K prior.

- 08:30 (US) July Unemployment Rate: 3.6%e v 3.6% prior; Underemployment Rate: No est v 6.7% prior; Labor Force Participation Rate: 62.2%e v 62.2% prior.

- 08:30 (US) July Average Hourly Earnings M/M: 0.3%e v 0.3% prior; Y/Y: 4.9%e v 5.1% prior; Average Weekly Hours: 34.5e v 34.5 prior.

- 08:30 (CA) Canada July Net Change in Employment: +15.0Ke v -43.2K prior; Unemployment Rate: 5.0%e v 4.9% prior; Full Time Employment Change: No est v -4.0K prior; Part Time Employment Change: No est v -39.1K prior; Participation Rate: 64.9%e v 64.9% prior; Hourly Wage Rate: 5.9%e v 5.6% prior.

- 09:00 (RU) Russia July Official Reserve Assets: No est v $584.1B prior.

- 09:00 (CL) Chile Jun Nominal Wage Y/Y: No est v 9.6% prior.

- 09:00 (BR) Brazil July Vehicle Production: No est v 203.6K prior; Vehicle Sales: No est v 178.1K prior; Vehicle Exports: No est v 47.3K prior.

- 10:00 (CA) Canada July Ivey Purchasing Managers Index (seasonally adj): No est v 62.2 prior.

- 10:30 (TR) Turkey July Cash Budget Balance (TRY): No est v -26.6B prior.

- 12:00 (EU) Potential sovereign ratings after European close.

- 13:00 (US) Weekly Baker Hughes Rig Count.

- 15:00 (US) Jun Consumer Credit: $27.0Be v $22.3B prior.