Declining UK inflation gives hope for only one more hike by BoE, FOMC rate decision in focus

Notes/observations

- Cooler than expected UK CPI for headline and core re-calibrates odds for tomorrows BoE decision, with up to 50% chance of a pause, up from 20% yesterday. Positive inflation print seen initially weighing on GBP currency and Gilt yields, while lifting UK homebuilders and the FTSE.

- Macro focus remains heavily on FOMC rate decision later, with wide consensus for leaving Target Range unchanged at 5.25-5.50%. Currently futures price only a 1% for 25bps hike.

- Verbal debate remains high over EU/China EV subsidies. Following recent announcement of an EU probe into the matter, EU’S Sefcovic said Europe is far from imposing new duties on Chinese EV’s.

- For an update on strike action, Chevron’s Australian strikes to continue after being unable to reach agreement, while Ford’s Canadian union UNIFOR clutches last minute tentative deal.

- Asia closed lower with Nikkei225 under-performing at -0.7%. EU indices are +0.2-1.4%. US futures are +0.2%. Gold -0.1%, DXY -0.1%; Commodity: Brent -1.3%, WTI -1.3%, TTF -2.4%; Crypto: BTC +0.2%, ETH -0.5%.

Asia

- China PBOC Monthly Loan Prime Rate (LPR) Setting was left unchanged for 1-year and 5-year.

- China exports zero germanium and gallium products in August - China Customs data.

- India Central Bank likely sold dollars to prevent Rupee from slipping to record low.

- S&P affirmed Australia AAA sovereign rating; Outlook stable.

-Thailand Commerce Minister Phumtham to consider lowering prices of 20 food items.

- China said to be accusing US of monitoring Huawei's server back to 2009.

- Japan Tokyo Stock Exchange has finally decided that the trading hours will be extended in conjunction with the launch of the next generation trading system (arrowhead 4.0) scheduled for November 5, 2024.

Ukraine conflict

- Russian drone said to hit Kremenchuk oil refinery in Ukraine. Operations halted.

Mid-East

- Azerbaijan halts its operation in Karabakh; Karabakh leader reportedly agree with Russian mediators' proposal to disband its defense forces.

Europe

- European Commission Vice President Sefcovic said Europe is very far from imposing new duties on Chinese EVs despite ongoing probe.

- Sweden Finance Ministry submits 2024 budget with ~SEK39B of reforms. Fin Min Svantesson said budget will include tax cuts and boost in defense spending.

-Denmark Finance Ministry updated economic outlook.

- Russia's Moscow Exchange introduces measures to limit price volatility.

- Poland PM Morawiecki said to extend credit holidays for mortgage holders for all of 2024 (more than speculated).

- France European Affairs Min Beaune said airline industry tax is still on agenda.

- South Africa Fin Min Godongwana said public finances are in a difficult position.

- Poland PM Morawiecki to extend credit holidays for mortgage holders for all of 2024 (more than speculated).

Americas

- US White House official: Biden administration is no longer sending top officials to Detroit for UAW strike talks; White House and the UAW mutually agreed it would be better to speak virtually via Zoom.

- US House Republicans set to hold first Biden impeachment inquiry hearing on Sept 28th.

Energy

- Chevron Exec said no agreement has been reached with Australia unions following further discussions and sees no prospects of reaching agreement.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.57% at 459.14, FTSE +0.63% at 7,708.45, DAX +0.52% at 15,745.55, CAC-40 +0.17% at 7,294.86, IBEX-35 +0.98% at 9,612.91, FTSE MIB +0.77% at 28,980.00, SMI +0.37% at 11,109.20, S&P 500 Futures +0.13%].

Market focal points/Key themes

European indices opened generally higher and maintained the upbeat tone through the early hours of trading; sectors leading the way into the green include Retail and Real Estate; among lagging sectors is Oil & Gas; UK homebuilders experience notable strength following positive surprise in UK inflation data and consequent repriced rate hiking expectations; following reports that US judge reportedly allows food delivery companies to sue NYC over law capping commissions, shares of Just Eat Takeaway trade sharply higher in London; Self Storage Group offered to be acquired and trade higher over 60%; focus on upcoming FOMC rate decision and updated dot-plot projections later in the day; earnings expected in the upcoming US session include General Mills, FedEx and CrowdStrike investor update.

Equities

- Consumer discretionary: Just Eat Takeaway.com [JET.UK] +7.0%, Delivery Hero [DHER.DE] +7.5% (US judge reportedly allows food delivery companies to sue NYC over law capping commissions; analyst action), Dunelm Group [DNLM.UK] -1.5% (earnings).

- Consumer staples: Finsbury Food Group [FIF.UK] +22.0% (to be acquired).

- Financials: Banca Monte Paschi de Siena [BMPS.IT] -0.5% (reportedly Italy may sell 15% stake in Monte Paschi), Talanx [TLX.DE] -6.5% (placement).

- Healthcare: AstraZeneca [AZN.UK] +2.0% (Alexion completes purchase and licence agreement for early-stage rare disease gene therapy portfolio from Pfizer), Ypsomed Holding [YPSN.CH] +4.5% (long-term agreement with Novo Nordisk).

- Industrials: Self Storage [SSG.NO] +64.0% (offered to be acquired).

- Telecom: Telecom Italia [TIT.IT] +2.0% (Italy’s Finance Ministry reportedly to formally request an extension on Sept 30th deadline on KKR bid for network), Pearson [PSON.UK] -5.0% (new CEO).

Speakers

- Poland Central Bank (NBP) Gov Glapinski said room for more rate cuts has narrowed significantly.

- ECB’s Panetta (Italy, dove) said fiscal policy should be countercyclical in order to smooth economic fluctuation, while fostering public investment to support potential growth.

- UK’s Chancellor of the Exchequer (Fin Min) Hunt said inflation is still too high. More important to stick to our plan to halve inflation by year end. Britain's approach to clean energy technologies is less distortive.

- ECB’s Schnabel (Germany) noted unit labour costs are largest contributor to domestic inflation, while profits contribute less - slides.

Currencies/fixed income

- Focus on upcoming FOMC for any guidance on future rate hikes or timing of rate cuts in mid-long term. UK CPI shifted expectations for tomorrows BoE meeting and lowered GBP/USD (cable) initially. Mainly however, a weaker USD seen is helping GBP and EUR pairs recover higher while capping USD/JPY around 148 level.

Economic data

- (JP) Japan Aug Tokyo Condominiums for Sale Y/Y: 26.4% v 14.2% prior.

- (EU) EU27 Aug New Car Registrations: 21% v 15.2% prior.

- (UK) Aug CPI M/M: 0.3% v 0.7%e; Y/Y: 6.7% v 7.0%e; CPI Core Y/Y: 6.2% v 6.8%e; CPIH Y/Y: 6.3% v 6.6%e; RPI M/M: 0.6% v 0.9%e; Y/Y: 9.1% v 9.3%e; RPI-X (ex-mortgage interest payments) Y/Y: 7.8% v 8.1%e; Retail Price Index: 376.6 v 377.3e.

- (UK) Aug PPI Input M/M: 0.4% v 0.3%e; Y/Y: -2.3% v -2.6%e; PPI Output M/M: 0.2% v 0.1%e; Y/Y: -0.4% v -0.7%e.

- (DE) Germany Aug PPI M/M: 0.3% v 0.1%e; Y/Y: -12.6% v -12.5%e.

- (SE) Sweden Aug Unemployment Rate: 7.7% v 6.2% prior; Unemployment Rate (seasonally adj): 8.0% v 7.0% prior; Trend Unemployment Rate: 7.6% v 7.5% prior.

- (ES) Spain July House transactions Y/Y: -10.5% v -6.4% prior.

- (TW) Taiwan Aug Export Orders Y/Y: -15.7% v -10.0%e v -12.0% prior.

- (ZA) South Africa Aug CPI M/M: 0.3% v 0.3%e; Y/Y: 4.8% v 4.8%e; CPI Core M/M: 0.3% v 0.2%e; Y/Y: 4.8% v 4.7%e.

- (PL) Poland Aug Sold Industrial Output M/M: 1.0% v 1.7%e; Y/Y: -2.0% v -1.7%e.

- (PL) Poland Sept Consumer Confidence: -20.3 v -21.0e.

- (PL) Poland Aug Employment M/M: -0.2% v -0.1%e; Y/Y: 0.0% v 0.1%e; Average Gross Wages M/M: -1.6% v -1.6%e; Y/Y: 11.9% v 11.8%e.

-(PL) Poland Aug PPI M/M: +0.1% v -0.4%e; Y/Y: -2.8% v -2.9%e.

- (UK) July ONS House Price Index Y/Y: 0.6% v 0.0%e.

- (EU) Euro Zone July Construction Output M/M: +0.8% v -1.2% prior; Y/Y: +1.0% v -0.8% prior.

Fixed income issuance

-Thailand sells THB23.0B vs. THB23.0B indicated in 3.35% Jun 2033 Bonds; Avg Yield: 3.2337% v 2.7738% prior, bid-to-cover: 1.81x v 1.14x.

- Vietnam Finance Ministry sells VNM2.25T in 5-year, 10-year and 15-year bonds.

- South Korea sells KRW1.5T vs. KRW1.5T indicated in 2-month bills.

- India sells total INR240B vs. INR240B indicated in 3-month, 6-month and 12-month bills.

- Sweden sells total SEK7.72B vs. SEK10B in 3-month and 9-month Bills.

Looking ahead

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

- 07:00 (US) MBA Mortgage Applications w/e Sept 15th: No est v -0.8% prior.

- 07:00 (ZA) South Africa July Retail Sales M/M: -0.3%e v +0.2% prior; Y/Y: -1.0%e v -0.9% prior.

- 08:00 (MX) Mexico July Gold Production: No est v K kg prior Silver Production: No est v 304.1K kg prior; Copper Production: No est v 40.9K tons prior.

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

- 10:30 (US) Weekly DOE Oil Inventories.

- 12:00 (RU) Russia Aug PPI M/M: No est v 1.4% prior; Y/Y: No est v 4.1% prior.

- 13:30 (CA) Bank of Canada (BoC) Summary of Deliberations.

- 14:00 (US) FOMC Interest Rate Decision: Expected to leave Target Range unchanged at 5.25-5.50%.

- 15:00 (AR) Argentina Q2 Unemployment Rate: No est v 6.9% prior.

- 17:30 (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to cut Selic Target by 50bps to 12.75%.

- 18:45 (NZ) New Zealand Q2 GDP Q/Q: +0.4%e v -0.1% prior; Y/Y: 1.2%e v 2.2% prior.

- 20:00 (KR) South Korea Sept 1-20th Day Exports Y/Y: No est v -16.5% prior; Imports Y/Y: No est v -27.9% prior.

- 21:00 (CN) China Aug Swift Global Payments (CNY): No est v 3.1% prior.