BoJ decision sees a surprise hawkish dissent

Notes/observations

- BOJ dissent initially prompted speculation of a near-tern rate hike (**Reminder: Vote was 7-2 to keep policy steady). dissents typically are less common when policy was being kept unchanged; yen currency exhibits volatility.

- UK budget deficit reading for Aug overshoots forecast (Aug numbers were the highest in 5 years for that month).

- Focus on upcoming call Trump and Chinese President Xi later today covering a framework for TikTok’s US operations.

- US Senate poised to vote on the stopgap bill.

Asia

- Bank of Japan (BOJ) left its Target Rate unchanged at 0.50% (as expected) for its 5th straight pause under the current phase of its tightening cycle. Decision was not unanimous (7-2) with dissenters seeking a hike. Announced a plan to off-load EFT holdings.

-Japan Aug National CPI Y/Y: 2.7% v 2.8%e; CPI (ex-fresh food) Y/Y: 2.7 % v 2.7%e (**Note: price trend slowing modestly from those in July).

- New Zealand Aug Trade Balance (NZD): -1.2B v -0.6B prior.

Taiwan

- Trump Admin reportedly declined to approve $400M in military aid for Taiwan (**Note: Move seen as attempt to try and negotiate a trade deal with China).

Europe

- UK Sept GfK Consumer Confidence: -19 v -18e.

Americas

- US July Total Net TIC Flows: $2.1B v $92.1B prior; Net Long-Term TIC Flows: $49.2B v $151.0B prior (**Note: Foreign holdings of US Treasuries surge to all-time high in July)

- Trump Admin asked Supreme Court to allow the President to fire Fed Gov Lisa Cook while the legal battle over her firing (**Note:Cook urged Supreme Court to reject Pres Trump's request to allow him to immediately remove her from Fed).

- Canada PM Carney stated that would create a new bilateral security dialogue with Mexico and strengthen USMCA free trade agreement. To wait for USMCA review and then we can plan a trilateral meeting.

Trade

- China said not to have purchased any US soybeans at the start of export season. Move viewed as a leverage tactic (**Note: China buying from Brazil and said to have covered the need for the rest of 2025.

- South Africa’s Trade Minister Parks Tau met USTR Greer in Washington and described the talks as cordial and constructive.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.2% at 556.11, FTSE +0.1% at 9,235, DAX +0.1% at 23,703, CAC-40 +0.7% at 7,908, IBEX-35 +0.8% at 15,292, FTSE MIB +0.8% at 42,655, SMI +0.6% at 12,116, S&P 500 Futures +0.2%].

Market Focal Points/Key Themes: European indices opened generally higher and remained upbeat through the early part of the session; geopolitics to the fore as Trump set to talk with Xi today; sectors leading the way higher include industrials and materials; among lagging sectors are communication services and technology; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Stroeer [SAX.DE] +0.9% (adjusts outlook), Scout24 [G24/DE] -3.8% (acquisition).

- Financials: Nexity [NXI.FR} +10.3% (analyst action).

- Healthcare: Idorsia [IDIA.CH] +4.4% (Jeraygo approved in Switzerland).

- Industrials: Stellantis [STLA.NL] +3.9% (analyst action), Kuehne & Nagel [KNIN.CH] -7.1% (analyst action), Dassault Aviation [AM.FR] -2.5% (reportedly Germany looking to replace France in FCAS program).

Speakers

- Spain Econ Min Cuerpo stated that theEU has a huge trade deficit with China and needed to engage country. - Spain Econ Min Cuerpo: EU has a huge deficit with China; need to engage country.

- BOJ Gov Ueda post rate decision press conference reiterated forward guidance to raise rates if economic outlook was realized. Easy monetary conditions would support economy. Declined to comment when asked about US Treas Sec Bessent's prior assertion that the BOJ was 'behind the curve'. Saw no need to revise July Quarterly Projections outlook report as little sign of tariffs having an impact on Japan's economy. Reiterated view that US-Japan trade deal reduced economic uncertainty.

- South Korea Foreign Min Cho: Trade talks with US were delayed, but still ongoing (*Note: South Korea to hold investment event in NY on Sept 25th).

Currencies/fixed income

- USD maintained a steady/firm tone with EU pairs in a quiet session.

- EUR/USD drifted to test 1.1760 during the EU morning as the pair consolidated recent 4-year highs. Euro still locked within a 1.15-1.20 likely trading rage for the time being. Focus continued to see if the ceiling could be breech and draw an ECB response on FX and its impact on inflation.

- GBP/USD moved below the 1.35 level despite some analysts continuing to push back their calls for the next BOE rate cut following Thurs’s decision. UK Aug borrowing data registered its highest reading in 5 years for that specific month with YTD borrowing at £83.8B, which was £16.2B more than the same five-month period of 2024.

- USD/JPY tested below 147.25 in late Asia after a surprise dissent on the BOJ rate decision. Dealers noted that the next decision in late Oct would be a live on to hike rates. Pair saw a move back towards 148 by the mid- EU session.

- 10-year German Bund yield at 2.74% and 10-year Gilt yield at 4.71% 10-year Treasury yield: 4.13%.

Economic data

- (UK) Aug Public Finances (PSNCR): £10.2B v £2.6B prior; Net Borrowing (PSNB): £18.0B v £12.8Be; PSNB (ex-banking groups): £18.0B v £2.8B prior; Central Govt NCR: £11.1B v £6.3B prior.

- (UK) Aug Retail Sales (ex-auto/fuel) M/M: 0.8% v 0.7%e; Y/Y: 1.2% v 1.0%e.

- (UK) Aug Retail Sales M/M: 0.5% v 0.4%e; Y/Y: 0.7% v 0.6%e.

- (DE) Germany Aug PPI M/M: -0.5% v -0.1%e; Y/Y: -2.2% v -1.7%e.

- (FR) France Sept Business Confidence: 96 v 95e; Manufacturing Confidence: 96 v 96e.

- (FR) France Q2 Final Wages Q/Q: 0.5% v 0.5% prelim.

- (FR) France Aug Retail Sales Y/Y: -0.9% v -1.9% prior.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 105.9K v 94.1K tons prior.

- (TH) Thailand May Foreign Reserves w/e Sept 12th: $272.0B v $269.8B prior.

- (RU) Russia Narrow Money Supply w/e Sept 12th (RUB): 18.88T v 18.80T prior.

- (HK) Hong Kong Q2 Current Account Balance: $92.6B v $126.9B prior; Overall Balance of Payments (BOP): +$105.5B v -$85.4B prior.

Fixed income issuance

- (IN) India sold total INR360B vs. INR360B indicated in 2028 and 2035 bonds.

Looking ahead

- (US) President Trump to hold call with China President Xi.

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2031, 2038 and 2046 Bonds.

- 06:00 (UK) DMO to sell £6.5B in 1-month, 3-month and 6-month bills (£1.0B, £2.5B and £3.0B respectively).

- 08:00 (IN) India announces upcoming bill issuance (held on Wed).

- 08:00 (MX) Mexico Q2 Aggregate Supply and Demand: No est v -0.2% prior.

- 07:30 (IN) India Forex Reserve w/e Sept 12th: No est v $698.3B prior.

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

- 08:30 (CA) Canada July Retail Sales M/M: -0.8%e v +1.5% prior; Retail Sales (ex-auto) M/M: -0.6%e v +1.9% prior.

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

- 13:00 (EU) Potential sovereign ratings after European close (S&P on Ireland; Moody’s on Greece; Fitch on Italy).