ECB decision cliffhanger looms whether to hike or pause

Notes/observations

- Lull in news flow ahead of ECB rate decision at 08:15 ET (12:15 GMT). Consensus is split between the first pause or its 10th straight rate hike. Conversation around the balance between recent longer-term staff inflation projects and the lackluster economic growth.

- ARM IPO expected today, with pricing at $51 per ADS, for ~$54.5B valuation; The IPO is seen as the largest of 2023 and considered a litmus test for the IPO market and risk appetite.

- Italian banks underperformed during morning trade after hopes of a reversal in bank windfall tax were evaporated when Italian PM Meloni said govt will not scrap windfall tax, but it can be amended.

- Asia closed mostly higher with Nikkei225 outperforming at +1.5%. EU indices are -0.2% to +0.5%. US futures are +0.1-0.3%. Gold -0.1%, DXY -0.1%; Commodity: Brent +0.6%, WTI +0.6%, TTF -1.5%; Crypto: BTC +1.3%, ETH +1.8%.

Asia

- Australia Aug Employment Change: +64.9K v +25.0Ke; Unemployment Rate: 3.7% v 3.7%e.

- Japan July Core Machine Orders M/M: -1.1% v -0.8%e; Y/Y: -13.0% v -10.3%e.

- Japan Econ Min Shindo stated that would mobilize all possible policy measures to support economy. To do the utmost to achieve structural wage hikes and consider bold measures to ease the pain of price hikes.

Europe

- UK Aug RICS House Price Balance: -68% v -55%e (lowest since 2009 as higher interest rates weigh on sector).

- Italy PM Meloni ruled out scrapping the tax. Stated that corrections could be done, but did not want to backtrack (**Reminder: Recent ECB Opinion on Italian Bank Windfall Tax Proposal noted that it might create problems of legal uncertainty and not be commensurate with longer-term profitability of a credit institutions).

Americas

- US Aug Monthly Budget Statement: +$89.3B v -$230.0Be.

- UAW President Fain: Detroit Three automakers had offered 146K US autoworkers pay raises of as much as 20% over four and a half years; offer seen as inadequate.

- Senator John Thune (R-SD): Stopgap spending bill will be necessary to avoid govt shutdown.

Energy

- White House economic advisor Bernstein stated that Energy Dept was in touch with producers and refiners to resolve an issues and ensure a stable supply.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.06% at 454.22, FTSE +0.38% at 7,554.24, DAX -0.23% at 15,617.25, CAC-40 -0.29% at 7,201.54, IBEX-35 -0.18% at 9,406.92, FTSE MIB -0.23% at 28,415.00, SMI +0.11% at 10,988.60, S&P 500 Futures +0.22%].

Market focal points/Key themes: European indices opened mixed and failed to gain direction in the early hours of trading; sectors trending higher include materials and energy; sector pushing into the red include industrials and financials; focus on upcoming ECB rate decision; Applus receives takeover offer from ISQ; Fiskars acquires Georg Jensen; reportedly Stellantis looking at options for Comau unit; corporate events expected in the upcoming US session include earnings from Adobe and Bristol Myers Squibb R&D day.

Equities

- Consumer discretionary: Deliveroo [ROO.UK] +6.5% (Sachem Head has acquired stake; Sees it has potential takeover target), THG Holdings [THG.UK] -17.0% (earnings; cuts Rev outlook), Ipsos [IPS.FR] -1.0% (cuts FY23 guidance), Remy Cointreau [RCO.FR] -3.0% (analyst action - double cut to Underweight from Overweight), Autoneum [AUTN.CH] -3.5% (places 1.17M shares at CHF90.75/shr to raise. ~CHF100M).

- Consumer staples: Pernod Ricard [RI.FR] -2.5% (analyst action - double cut to Underweight from Overweight at Barclays).

- Energy: Nordex [NDX1.DE] +3.0% (awarded 141MW in Spain).

- Materials: Rio Tinto [RIO.UK] +2.5% (analyst upgrade), Nordic Waterproofing Holding [NWG.SE] +16.5% (Kingspan passed threshold for a mandatory offer).

- Industrials: Kier Group [KIE.UK] +5.0% (earnings; to resume dividend).

- Telecom: Telefonica Deutschland [O2D.DE] +3.0% (analyst action - raised to Buy at CitiGroup).

Speakers

- Spain Econ Min Calvino stated that saw no need for any more inflation measures.

- Govt Quad Statement with UK, Germany, France and US: Iran needed to provide credible information on current location of nuclear material and contaminated equipment in relation to Turquzabad and Varamin.

- Thailand Central Bank Gov Sethaput stated that monetary policy to be outlook dependent; Wanted rates to be at a neutral level. Monetary policy to take inflation to target. Inflation to rise due to El Nino effects.

- China Commerce Ministry (MOFCOM) noted that it would pay close attention to EU measures on EVs.

Currencies/fixed income

- FX markets were quiet as traders prepared for the ECB rate decision.

- EUR/USD steady at 1.0750 area with focus on ECB rate decision. Close call whether the last hike comes today or in late Oct; Decision divided over persistently high inflation and rising recession fears. Reports circulated that the upcoming Staff Projection on inflation could have the Council pull the trigger and hike today.

- GBP/USD back below the 1.25 level with USD/JPY at 147.25 by mid-session.

Economic data

- (FI) Finland Aug CPI M/M: -0.7% v +0.5% prior; Y/Y: 5.6% v 6.5% prior.

- (SE) Sweden Aug CPI M/M: 0.1% v 0.2%e; Y/Y: 7.5% v 7.7%e; CPI Level: 405.97 v 406.77e.

- (SE) Sweden Aug CPIF M/M: -0.1% v +0.1%e; Y/Y: 4.7% v 4.9%e.

- (SE) Sweden Aug CPIF (ex-energy) M/M: -0.3% v -0.1%e; Y/Y: 7.2% v 7.4%e.

- (CH) Swiss Aug Producer & Import Prices M/M: -0.2% v -0.1% prior; Y/Y: -0.8% v -0.6% prior.

- (IN) India Aug Wholesale Prices (WPI) Y/Y: -0.5-0.6%e.

- (NO) Norway Q3 Region Output Survey (past 3-months): 0.3% v 0.2% prior; Output Survey (next 6-months): 0.1% v 0.3% prior.

- (GR) Greece Q2 Unemployment Rate: 11.2% v 11.8% prior.

Fixed income issuance

- (IE) Ireland Debt Agency (NTMA) sold total €1.0B vs. €1.0B indicated in 2027 and 2045 IGB Bonds.

Looking ahead

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

- 05:30 (ZA) South Africa July Total Mining Production M/M: 0.6%e v 1.3% prior; Y/Y: -0.2%e v +1.1% prior; Gold Production Y/Y: No est v 28.5% prior; Platinum Production Y/Y: No est v 11.1% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month bills.

- 06:00 (IL) Israel Q2 Current Account Balance: No est v $5.9B prior.

- 06:00 (RO) Romania to sell RON300M in 6-month bills.

- 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to cut Key Rate by 200bps to 20.00%.

- 08:00 (BR) Brazil July IBGE Services Volume M/M: 0.5%e v 0.2% prior; Y/Y: 3.5%e v 4.1% prior.

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

- 08:15 (EU) European Central Bank (ECB) Interest Rate Decision: Expected to leave Key Rates unchanged.

- 08:30 (US) Aug Advance Retail Sales M/M: 0.1%e v 0.7% prior; Retail Sales (ex-auto) M/M: 0.4%e v 1.0% prior; Retail Sales (ex-auto/gas): -0.1%e v +1.0% prior; Retail Sales (control group): -0.1%e v +1.0% prior.

- 08:30 (US) Initial Jobless Claims: 225Ke v 216K prior; Continuing Claims: 1.70Me v 1.679M prior.

- 08:30 (US) Aug PPI Final Demand M/M: 0.4%e v 0.3% prior; Y/Y: 1.3%e v 0.8% prior.

- 08:30 (US) Aug PPI (ex-food/energy) M/M: 0.2%e v 0.3% prior; Y/Y: 2.2%e v 2.4% prior.

- 08:30 (US) Aug PPI (ex-food/energy/trade) M/M: 0.2%e v 0.2% prior; Y/Y: 2.7%e v 2.7% prior.

- 08:30 (CA) Canada July Wholesale Sales (ex-petroleum) M/M: +1.4%e v -2.8% prior.

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

- 08:45 (EU) ECB chief Lagarde post rate decision press conference.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Sept 8th: No est v $583.5B prior.

- 10:00 (DK) Possible Denmark Central Bank (Nationalbanken) announcement.

- 10:00 (US) July Business Inventories: 0.1%e v 0.0% prior.

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

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

- 18:30 (NZ) New Zealand Aug Manufacturing PMI: No est v 46.3 prior.

- 19:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to cut Reference Rate by 25bps to 7.50%.

- 21:20 (CN) China 1-Year Medium Term Lending Facility (MLF) Monthly Setting: Expected to leave rate unchanged at 2.50%.

- 21:30 (CN) China Aug New Home Prices M/M: No est v -0.2% prior.

- 22:00 (CN) China Aug Industrial Production Y/Y: 3.9%e v 3.7% prior; YTD Y/Y: 3.8%e v 3.8% prior.

- 22:00 (CN) China Aug Retail Sales Y/Y: 3.0%e v 2.5% prior; YTD Y/Y: 6.8%e v 7.3% prior.

- 22:00 (CN) China Aug YTD Fixed Urban Assets Y/Y: 3.3%e v 3.4% prior.

- 22:00 (CN) China Aug YTD Property Investment Y/Y: -8.9%e v -8.5% prior; Residential Property Sales Y/Y: No est v 0.7% prior.

- 22:00 (CN) China Aug Surveyed Jobless Rate: 5.3%e v 5.3% prior.

- 22:00 (ID) Indonesia Aug Trade Balance: $1.5Be v $1.3B prior; Exports Y/Y: -23.5%e v -18.0% prior; Imports Y/Y: -9.7%e v -8.3% prior.

- 23:30 (JP) Japan to sell 3-Month Bills.