Devil is in the details as investors wrangle over dot plot and Powell comments

EU mid-market update: Devil is in the details as investors wrangle over dot plot and Powell comments; Sights set on BOE decision and Trump/Starmer talks.

Notes/observations

- Equities bid as market digests Fed decision, cutting 25bps as expected. Vote was 11-1 with newly appointed Miran dissenting for 50bps. Powell ruled out larger cut, flagged labor supply issues and inflation risks. Focus shifted to the dot plot, where an outlier saw funds rate below 3.0% by end of 2025 (currently 4.00-4.25%), while majority saw two more cuts this year.

- Norges bank also cut by 25bps as expected, resuming easing cycle after recent pauses. Now we turn to BOE decision at 07:00 ET (11:00 GMT), where market is pricing 95% chance of a hold. Analysis predicts vote at 7-2, with Dhingra and Taylor likely voting for 25bps cut. Expected to sharply slow pace of QT from £100B to £60B. UK gilt yields steady.

- Trump meets UK PM Starmer today; UK touts £150B US investment. EU demands UK concessions on youth mobility for trade deal progress.

- Notable EU Corp News: Next posts strong H1 results but shares down 6%; Pets at Home issues profit warning and CEO exit; Wolters Kluwer accelerates €1B buyback; SIG pauses 2025 dividend.

- Asia closed mixed with KOSPI outperforming +1.4%. EU indices +0.3-1.4%. US futures +0.7-1.1%. Gold +0.2%, DXY -0.1%; Commodity: Brent 0.0%, WTI 0.0%; Crypto: BTC +0.6%, ETH +2.3%.

Asia

- Australia Aug Employment Change: -5.4K v +21.0Ke; Unemployment Rate: 4.2% v 4.2%e.

- New Zealand Q2 GDP Q/Q: -0.9% v -0.3%e; Y/Y: 0.6% v 0.0%e.

- Japan July Core Machine Orders M/M: -4.6% v 1.5%e; Y/Y: 4.9% v 5.2%e.

Americas

- FOMC cut its Target Range by 25bps to 4.00-4.25% (as expected) to resume rate cuts after 6 previous pauses under the current easing cycle. Vote: 11-1 vote; Miran dissenting for 50bps cut . Fed projections showed 9 of 19 officials see two additional cuts in 2025, two see one cut, six see no more reductions.

- Fed Chair Powell post rate decision press conference noted that change in balance of risks suggested need to move in direction of neutral; Downside risks to employment had risen, Inflation remained somewhat elevated; Activity in housing sector remained weak.

- Brazil Central Bank (BCB) left Selic Target Rate unchanged at 15.00% (as expected) for its 2nd straight pause current tightening cycle. Statement removed reference to the continuation of the interruption of the rate hike cycle.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.9% at 555.3, FTSE +0.3% at 9237, DAX +1.4% at 23668, CAC-40 +1.2% at 7883, IBEX-35 +0.6% at 15224, FTSE MIB +0.7% at 4134, SMI +0.5% at 12056, S&P 500 Futures +0.9%].

Market focal points/key themes: European indices open higher across the board and advanced through the early part of the session; equities supported amid active central bank schedule; among sectors leading the way higher are technology and industrials; lagging sectors include materials and real estate; Roche to acquire 89bio; German regulator approves JD.com’s takeover of Ceconomy; Kone reportedly studying takeover of TK; focus on BOE rate decision later in the day; earnings expected in the upcoming US session include Darden, FedEx and Lennar.

Equities

- Consumer discretionary: Pets at Home [PETS.UK] -9.0% (CEO steps down, cuts adj pretax guidance for FY25/26); Barry Callebaut [BARN.CH] -2.5% (analyst downgrade).

- Financials: DWS Group [DWS.DE] +3.0% (asset manager has begun sale of NorthC data center business).

- Industrials: BASF [BAS.DE] -1.0% (analyst downgrade); Wolters Kluwer [WKL.NL] +3.5% (accelerates €1.0B share buyback).

- Technology: Renishaw [RSW.UK] +4.5% (FY24/25 results).

Speakers

- ECB’s De Guindos (Spain) noted that the environment was quite uncertain; Current policy stance was appropriate. Should follow “very prudent” approach given high uncertainty.

- Norway Central Bank Policy Statement reiterated stance that athe rate would be cut further in course of coming year but did not envisage a 'large decrease' in period ahead. Higher rate likely needed versus June outlook and noted that a restrictive policy was still needed.

- German Federal Debt Office on Q4 issuance stated to sell additional €15.0B of debt in Q4 (in line).

- Russia Fin Min Siluanov stated that planned to make budget less dependent on oil revenues.

- Russia Fin Min Siluanov stated that planned to make budget less dependent on oil revenues.

- Taiwan Central Bank Policy Statement reiterates stance that would adjust monetary policy in a timely way. Keeping interest rate unchanged would help maintain stable economic, financial development. Reiterated to step in when needed to maintain FX market order.

Currencies/fixed income

- USD was initially firmer in the aftermath of the FOMC rate decisions but drifted lower as the EU session progressed. Markets continued to digest the Fed widely expected decision to cut interest rates by 25 basis points on Wednesday.

- EUR/USD probed below 1.18 early on but at 1.1820 by mid-session.

- GBP/USD at 1.3630 area with focus on BOE rate decision. The central bank is seen keeping policy steady but likely to trim back its QT bond selling program to curb volatility.

- USD/JPY at 147.30 with focus on Friday’s BOJ rate decision. BOJ likely to warn of lingering uncertainty as tariffs work their way through the economy. Focus on hints on how soon the BOJ could resume rate hikes.

- 10-year German Bund yield at 2.69% and 10-year Gilt yield at 4.62% 10-year Treasury yield: 4.05%.

Economic data

- (NL) Netherlands Aug Unemployment Rate: 3.9% v 3.8% prior.

- (CH) Swiss Aug Trade Balance (CHF): 4.0B v 4.6B prior; Real Exports M/M: +2.4% v -0.8% prior; Real Imports M/M: +0.6% v -0.4% prior; Swiss Watch Exports Y/Y: -16.5% v +7.0% prior.

- (NO) Norway Central Bank (Norges) cut Deposit rate by 25bps to 4.00% (as expected) to resume rate cuts under the current easing cycle.

- (TW) Taiwan Aug M2 Money Supply Y/Y: 4,8% v 3.4% prior; M1 Money Supply Y/Y:4.5 % v 2.9% prior.

- (EU) Euro Zone July ECB Current Account Balance: €27.7B v €35.8B prior.

- (GR) Greece July Current Account Balance: +€0.9B v -€1.2B prior.

- (PT) Portugal July Current Account Balance: €1.4B v €0.5B prior.

- (IT) Italy July Current Account Balance: €8.7B v €5.7B prior.

- (PL) Poland Aug Sold Industrial Output M/M:-7.1 % v -7.6%e; Y/Y: 0.7% v 0.2%e.

- (PL) Poland Aug Employment M/M: -0.2% v -0.2%e; Y/Y: -0.8% v -0.8%e.

- (PL) Poland Aug Average Gross Wages M/M: -1.5% v 1.0%e; Y/Y: 7.1% v 7.8%e.

- (PL) Poland Aug PPI M/M: -0.4% v -0.2%e; Y/Y: -1.2% v -0.9%e.

- (TW) Taiwan Central Bank (CBC) left the Benchmark Interest Rate unchanged at 2.00% (as expected) for its 5th straight pause under the current phase of its tightening cycle.

- (EU) Euro Zone July Construction Output M/M: +0.5% v -0.7% prior; Y/Y: 3.2% v 1.8% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.44B vs. €5.0-6.0B indicated range in 2028, 2035 and 2054 SPGB bonds.

- (FR) France Debt Agency (AFT) sold total €11.5B vs. €9.5-11.5B indicated range in 2028, 2031 and 2033 Bonds.

- (SE) Sweden sold total SEK750M vs. SEK750M indicated in 2036 and 2039 I/L Bonds.

Looking ahead

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

- Sells HUF vs. HUF indicated in 7.0% 2035 bonds.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 05:45 (DE) ECB’s Schnabel (Germany).

- 05:50 (FR) France Debt Agency (AFT) to sell €1.0-1.5B in inflation-linked 2034, 2038 and 2039 bonds (Oatei).

- 06:00 (PT) Portugal Aug PPI M/M: No est v 0.1% prior; Y/Y: No est v -3.7% prior.

- 06:00 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

- 06:00 (RO) Romania to sell 6-month bills.

- 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leave Bank Rate unchanged at 4.00%.

- 07:00 (CA) Canada Sept CFIB Business Barometer: No est v 47.8 prior.

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

- 08:30 (US) Sept Philadelphia Fed Business Outlook: +1.7e v -0.3 prior.

- 08:30 (US) Initial Jobless Claims: 240Ke v 263K prior; Continuing Claims: 1.95Me v 1.939M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Sept 12th: No est v $698.5B prior.

- 09:00 (ZA) South Africa Central Bank (SARB) Interest Rate Decision: Expected to leave Interest Rates unchanged at 7.00%.

- 10:00 (US) Aug Leading Index: -0.2%e v -0.1% prior.

- 10:00 (DE) ECB’s Nagel (Germany).

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills

- 12:00 (CO) Colombia July Economic Activity Index (Monthly GDP) Y/Y: 2.3%e v 2.9% prior

- 13:00 (US) Treasury to sell 10-Year TIPS Reopening

- 15:00 (AR) Argentina Q2 Unemployment Rate: No est v 7.9% prior

- 15:00 (AR) Argentina Aug Trade Balance: $0.8Be v $1.0B prior

- (AR) Argentina Aug Budget Balance (ARS): No est v 1.75T prior

- 16:00 (US) July Total Net TIC Flows: No est v $77.8B prior; Net Long-Term TIC Flows: No est v $150.8B prior

- 18:45 (NZ) New Zealand Aug Trade Balance (NZD): No est v -0.6B prior; Exports: No est v 6.7B prior; Imports: No est v 7.3B prior

- 19:01 (UK) Sept GfK Consumer Confidence: -18e v -17 prior

- 19:30 (JP) Japan Aug National CPI Y/Y: 2.8%e v 3.1% prior; CPI (ex-fresh food) Y/Y: 2.7%e v 3.1% prior; CPI (ex-fresh food/energy) Y/Y: 3.3%e v 3.4% prior

- (JP) Bank of Japan (BOJ) Interest Rate Decision: Expected to leave Target Rate unchanged at 0.50%