Notes/Observations

- UK retail sales data continues its summer slump.

- Euro Zone Final CPI reading confirmed the highest annual pace since 2011.

- Political shifts have increased the odds of Germany loosening its tight national fiscal rules after the September elections.

- Large liquidity add by PBoC to help risk appetite as it sought to soothe market nerves frayed by concern over quarter-end funding needs and China Evergrande Group’s debt crisis.

Asia

- New Zealand Aug Manufacturing PMI registered its 1st contraction in 8 months (40.1 v 62.2 prior).

- China PBOC Open Market Operation (OMO) injected CNY50B in 7-day reverse repos and CNY50B in 14-day Reverse Repos. PBoC stated that large cash injection aimed at keeping liquidity stable towards quarter-end (largest since Feb. Analysts saw PBoC injection as sign the authorities were seeking to soothe market nerves frayed by concern over quarter-end funding needs and China Evergrande Group’s debt crisis.

- China submits application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

- Japan LDP Candidates begin leadership race. Noda (frontrunner) stated that would offer blanket cash payouts to all Japan workers and pledged to have half of his Cabinet comprised of women. Candidate Takaichi (seeking to become 1st female PM in Japan) stated that now was the time to take bold steps and make use of ultra-low interest rates. Would seek to reach the 2% inflation target and freeze primary balance target to deploy flexible fiscal stimulus.

Europe

- ECB noted that a FT story of potential rate increase was not accurate; Conclusion on rates was not consistent with forward guidance.

- FT report circulated citing an unpublished ECB inflation estimate which raised the chance of a rate rise in just over 2-years (towards end-2023); Expected to hit 2% inflation target by 2025.

- UK Chancellor Rishi Sunak said to be planning to use next month’s Budget to set out new rules to reign in government borrowing with the specter of higher inflation and rising interest rates a concern. Would require underlying debt to start falling by 2024-25 (Note: currently stands at about 100 per cent of gross domestic product).

Americas

- Treasure Sec Yellen said to have called Senate minority leader McConnell (R-KY) on debt limit on Wednesday, Sept 15th. McConnell repeated to Secretary Yellen what he has said publicly since July: This was a unified Democrat government, engaging in a partisan reckless tax and spending spree. Democrats have to raise the debt ceiling on their own, and they had the tools to do.

- President Biden failed to convince Sen Manchin (D-VW) to agree to spend $3.5T on the reconciliation package during their meeting at the Oval office.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 +0.57% at 468.62, FTSE +0.40% at 7,055.55, DAX +0.49% at 15,728.05, CAC-40 +0.89% at 6,681.82, IBEX-35 +1.21% at 8,838.50, FTSE MIB +0.54% at 26,104.00, SMI +0.45% at 12,082.91, S&P 500 Futures +0.02%].

Market Focal Points/Key Themes: European inices open higher across the board and stayed positive as the session progressed; sectors among those leading to the upside include consumer discretionary and financials; while underperformers include materials and industrials; Grifols makes bid for Biotest; reportedly Cerberus considering taking stake in Commerzbank; Safestay evaluating sale of company; BNP Paribas sells stake in Euronext; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Dometic Group [DOM.SE] +5% (acquisitions).

- Financials: Commerzbank [CBK.DE] +5% (govt stake sale speculation), Euronext [ENX.FR] -2% (placement).

- Healthcare: Biotest [BIO.DE] +10% (offer).

- Industrials: Yara International [YAR.NO] -3% (partially stops production on higher natural gas prices).

Speakers

- ECB’s de Cos (Spain) noted that recent bond yield price action reflected uncertainty. Market expectations did not foresee an interest rate hike in the Euro Zone in 2023 (again refutes recent FT story).

- Austria Central Bank (ONB) maintained its 2021 GDP growth forecast at 4.0%. Could have a small downward revision if bottlenecks in economy persisted.

- Russia Central Bank (CBR) Gov Nabiullina reiterated stance to consider possible further interest rate hikes at upcoming meetings.

- South Africa's top court ruled that former president Zuma had failed in his bid to have his 15-month jail sentence for failing to attend a corruption inquiry overturned.

- Japan Chief Cabinet Sec Kato confirmed Oct 4th as date for reopening Parliament to decide the new PM.

- Japan Leadership Candidate Kono said to be supported by PM Suga.

- IEA Exec Birol stated that would be surprised to see oil at $100/barrel in 2021. Noted that high gas prices to persist for weeks.

- US House Speaker Pelosi reiterated that destruction of the Good Friday Accords would make a US-UK trade deal unlikely.

Currencies/Fixed income

- FX price action was subdued in the session with focus continuing to be on bond yields. USD holding near 3-week highs aided by safe-haven demand due to concerns over slowing growth, rising inflation and concerns over possible international financial shock from China’s domestic debt situation.

- GBP/USD was slightly softer after UK retail sales data continued its summer slump. Pair holding above the 1.38 area.

- EUR/USD staying below the 1.18 handle despite higher inflation concerns in Europe. Dealers noted that Political shifts have increased the odds of Germany loosening its tight national fiscal rules after the September elections.

- Bond yields seemed to have stopped falling at this time. Dealers cite a stronger rise in inflation expectations. An ECB spokesperson did refute an earlier FT report that cited an unpublished ECB inflation estimate which raised the chance of a rate rise in just over 2-years.

Economic data

- (UK) Aug Retail Sales (ex-auto/fuel) M/M: -1.2% v +0.8%e; Y/Y: -0.9% v +2.5%e.

- (UK) Aug Retail Sales (including auto/fuel) M/M: -0.9% v +0.5%e; Y/Y: 0.0% v 2.7%e.

- (FR) France Q2 Final Wages Q/Q: 0.3% v 0.3%e.

- (TR) Turkey Sept TCMB Survey of Expectations: Next 12-month Outlook: 12.9% v 12.5% prior.

- (AT) Austria Aug Final CPI M/M: 0.1% v 0.1% prelim; Y/Y: 3.2% v 3.1% prelim.

- (CN) Weekly Shanghai copper inventories (SHFE): 54.3K tons v 61.8K tons prior.

- (RU) Russia Narrow Money Supply w/e Sept 10th (RUB): 14.49T v14.35 T prior.

- (EU) Euro Zone July Current Account Balance: €21.6B v €21.8B prior.

- (PL) Poland Aug Employment M/M: -0.2% v 0.0%e; Y/Y: 0.9% v 1.1%e.

- (PL) Poland Aug Average Gross Wages M/M: -0.1% v -0.6%e; Y/Y: 9.5% v 8.8%e.

- (UK) BoE/GfK Sept Inflation (quarterly release) Inflation: Next 12 Months: 2.7% v 2.4% prior.

- (PT) Portugal July Current Account Balance: -€0.2B v €0B prior.

- (IT) Italy July Current Account Balance: €8.0B v €3.5B prior.

- (GR) Greece July Current Account Balance: +€0.5B v -€1.3B prior.

- (EU) Euro Zone Aug Final CPI Y/Y: 3.0% v 3.0%e; CPI Core Y/Y: 1.6% v 1.6%e.

- (EU) Euro Zone July Construction Output M/M: +0.1% v -0.6% prior; Y/Y: 3.3% v 4.1% prior.

- (CY) Cyprus Aug CPI Harmonized M/M: 1.4% v 0.2% prior; Y/Y: 3.3% v 2.7% prior.

Fixed income issuance

(IN) India sold total INR260B vs. INR260B indicated in 2023, 2031 and 2061 bonds.

Looking ahead

- (NG) Nigeria Central Bank Interest Rate Decision: Expected to leave Interest Rates unchanged at 11.50%.

- (CO) Colombia Aug Industrial Confidence: No est v 16.3 prior; Retail Confidence: No est v 35.8 prior.

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

- 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2029, 2038 and 2046 Bonds.

- 06:00 (UK) DMO to sell £3.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £2.0B respectively).

- 06:45 (US) Daily Libor Fixing.

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

- 07:30 (IN) India Weekly Forex Reserve w/e Sept 10th: No est v $642.5B prior.

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

- 10:00 (US) Sept Preliminary University of Michigan Confidence: 72.0e v 70.3 prior.

- 11:00 (CO) Colombia July Trade Balance: -$1.3Be v -$1.6B prior; Total Imports: $4.8Be v $4.9B prior.

- 11:00 (EU) Potential sovereign ratings after European close.

- 12:00 (CO) Colombia July Economic Activity Index (Monthly GDP) Y/Y: 13.0%e v 14.5% prior.

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

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