EU PMI services data bring renewed jitters about global growth

Notes/observations

- Rotation from yesterday's optimism puts risk off flows into USD and off equities; jitters about global growth.

- Overnight out of Australia, RBA left Cash Rate Target unchanged as expected but reiterated further tightening may be needed. Elsewhere, Chevron’s Australia Union approved a full strike at domestic LNG facilities with Chevron execs later playing down the impact.

- European morning session focused on Aug Service PMIs which continued to disappoint, only the UK was positive with an upward revision in comparsion to Spain, France and Italy missing consensus. Comments from ECB’s Lane circulated from several days agos highlighting hope from Euro Zone Aug Flash CPI.

- Analysts have noted a significant pick up in corporate debt issuance as Sept gets underway.

- US markets return from Labor Day holiday.

- Asia closed lower with Hang Seng underperforming at -2.3%. EU indices are -0.1% to -0.4%. US futures are -0.1% to -0.4%. Gold -0.3%, DXY +0.4%; Commodity: Brent -0.6%, WTI -0.2%, TTF -2.0%; Crypto: BTC -1.1%, ETH -0.8%.

Asia

- RBA left the Cash Target Rate unchanged at 4.10% (as expected) for its 3rd straight pause in the current tightening cycle. Statement reiterated that some further tightening might be required. Uncertainty around lags in effect of monetary policy. Noted that inflation had passed its peak but remained too high and would remain so for some time. Board remained resolute in its determination to return inflation to target and reiterated its view that inflation to be back within 2.0-3.0% target band in late 2025 (**Note: Last decision for Gov Lowe in his role).

- China Aug Caixin PMI Services: 51.8 v 53.7e (8th straight expansion but lowest since Dec 2022).

- Japan Aug Final PMI Services confirmed its 11th month of expansion (54.3 v 54.3 prelim).

- Australia Aug Final PMI Services confirmed its 2nd straight contraction (47.8 v 46.7 prelim).

- Japan July Household Spending Y/Y: -5.0% v -2.5%e.

- Australia Q2 Current Account (A$): 7.7B v 8.0Be.

- South Korea Q2 Preliminary GDP (2nd of 3 readings) Q/Q: 0.6% v 0.6% advance; Y/Y: 0.9% v 0.9% advance.

- South Korea Aug CPI registered its fastest monthly pace since Jan 2017 (M/M: 1.0% v 0.6%e; Y/Y: 3.4% v 2.9%e).

Europe

- ECB chief Lagarde noted that it must do more to explain why its forecasts were sometimes wrong; Maked no reference to upcoming September policy decision but would achieve a timely return of inflation to 2% target.

- ECB's Nagel (Germany) reiterated that inflation is still much too high and the ECB mandate was price stability.

- ECB’s Lane (Ireland, chief economist) noted that the Aug flash CPI reading was welcome but needed to see that trend continue.

- UK Aug BRC LFL Sales Y/Y: 4.3% v 1.8% prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.3% at 456, FTSE -0.1% at 7,450, DAX -0.3% at 15,782, CAC-40 -0.6% at 7,239, IBEX-35 -0.1% at 9,410, FTSE MIB 0.0% at 2,806, SMI -0.4% at 11,014, S&P 500 Futures -0.3%].

Market focal points/Key themes: European indices opened lower across the board and stayed under pressure through the early part of the session; sectors holding on to the green include consumer discretionary and health care; sectors trending to the downside include materials and real estate; Helvetia to combine with MoneyPark; reportedly Barclays looking to sell stake in its payments unit; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Ashtead [AHT.UK] -42.2% (Q1 results).

- Energy: BKW [BKW.CH] +2.2% (H1 results), Orsted [ORSTED.DK] -5.5% (analyst action - price target cut at Bernstein).

- Financials: Partners Group [PGHN.CH] +5.9% (H1 results).

- Healthcare: Sanofi [SAN.FR] +1.0% (analyst action - raised to Buy at Berenberg).

- Industrials: Eurocell [ECEL.UK] -5.8% (H1 results; Multiple analyst price target cuts), Skanska [SKAB.SE] +2.7% (signs $834M contract).

- Materials: Enquest [ENQ.UK] -11.7% (H1 results).

- Technology: Betsson [BETSB.SE] +2.5% (gaming license in Serbia).

Speakers

- ECB Consumer Expectation Survey maintained it view on inflation over next 12 months at 3.4% while raising the view on 3-year outlook from 2.3% to 2.4%.

- Germany Fin Min Lindner noted that the 2024 budget was first step in normalization of fiscal policy. Must return to monetary stability as soon as possible.

- Israel Central Bank Gov Yaron noted that inflationary expectations were anchored.

Currencies/fixed income

- USD on firmer footing as China economic data continued to disappoint. Dealers noted that various policy easing by the Chinese government had had to convinced market participants the outlook for the Chinese economy and currency had improved. A plethora of EU PMI Services data also brought jitters about global growth.

- Rate path divergence also aiding the greenback as market seemed to abandoned rate hike bets for ECB and BOE.

- EUR/USD at 3-month lows at 1.0750 as market participants believe a high probability that the ECB would leave interest rates unchanged at the Sept 14th meeting.

- GBP/USD at 1.2545 area by mid-session.

- USD/JPY at 147.00 by mid-session with the 150 level continued to be viewed as key resistence.

Economic data

- (RU) Russia Aug Services PMI: 57.6 v 54.0 prior (7th straight expansion); Composite PMI: 55.9 v 53.3 prior.

- (SE) Sweden Aug PMI Services: 49.0 v 53.4 prior (moved back into contraction); PMI Composite: 48.1 v 51.9 prior.

- (ES) Spain Aug Services PMI: 49.3 v 51.5e (1st contraction in 10 months); Composite PMI: 48.6 v 50.5e.

- (ZA) South Africa Aug PMI (whole economy): 51.0 v 48.2 prior (1st expansion in 6 months).

- (IT) Italy Aug Services PMI: 49.8 v 50.3e (1st contraction in 8 months); Composite PMI: 48.2 v 48.3e.

- (FR) France Aug Final Services PMI: 46.0 v 46.7 prelim (confirmed 3rd straight contraction); Composite PMI: 46.0 v 46.6 prelim.

- (DE) Germany Aug Final Services PMI: 47.3 v 47.3 prelim (confirmed 1st contraction in 8 months); Composite PMI: 44.6 v 44.7 prelim.

- (EU) Euro Zone Aug Final Services PMI: 47.9 v 48.3 prelim (confirmed 1st contraction in 8 months); Composite PMI: 46.7 v 47.0 prelim.

- (EU) ECB inflation Expectation Survey.

- (UK) Aug New Car Registrations Y/Y: 24.4% v 28.3% prior.

- (TW) Taiwan Aug Foreign Reserves: $565.5B v $566.5B prior.

- (UK) Aug Final Services PMI: 49.5 v 48.7e; Composite PMI: 48.6 v 47.9 prelim.

- (UK) Aug Official Reserves Changes: -$1.5BB v +$0.9B prior.

- (EU) Euro Zone July PPI M/M: -0.5% v -0.6%e; Y/Y: -7.6% v -7.6%e.

- (NO) Norway Aug House Price Index M/M:+0.4% v -1.1% prior, Y/Y: -1.6% v -0.2% prior.

Fixed income issuance

- (HU) Hungary to sell EUR-denominated 10-year bond; guidance seen +260bps to mid-swaps.

- (EU) European Investment Bank (EIB) opens book to sell EUR-denominated 5-year notes via syndicate; guidance seen at -11bps to mid-swaps.

- (ES) Spain Debt Agency (Tesoro) sold total €4.94B vs. €4.0-5.0B indicated range in 6-month and 12-month bills.

- (AT) Austria Debt Agency (AFFA) sold total €1.38B vs. €1.38B indicated in 2033 and 2053 RAGB Bonds.

Looking ahead

- 05:15 (CH) Switzerland to sell 3-month Bills.

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

- 05:30 (ZA) South Africa Q2 GDP Q/Q: 0.3%e v 0.4% prior; Y/Y: 1.2%e v 0.2% prior.

- 05:30 (DE) Germany to sell €600M in 2033 and 2046 I/L Bonds (Bundei).

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2032, 2040 and 2053 bonds.

- 06:30 (EU) ESM to sell €1.1B in 3-month Bills.

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 07:30 (TR) Turkey Aug Real Effective Exchange Rate (REER): No est v 51.52 prior.

- 08:00 (BR) Brazil July Industrial Production M/M: -0.3%e v +0.1% prior; Y/Y: -0.4%e v +0.3% prior.

- 08:00 (MX) Mexico Aug Consumer Confidence: 46.8e v 46.2 prior.

- 08:00 (MX) Mexico Aug Vehicle Domestic Sales: No est v 110.8K prior.

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

- 08:30 (DE) ECB’s Schnabel (Germany).

- 09:00 (BR) Brazil Aug Services PMI: No est v 50.2 prior; Composite PMI: No est v 52.0 prior.

- 10:00 (US) July Factory Orders: -2.5%e v +2.3% prior; Factory Orders (ex-transportation): 0.1%e v 0.2% prior.

- 10:00 (US) July Final Durable Goods Orders: No est v -5.2% prelim; Durables (ex-transportation): No est v 0.5% prelim; Capital Goods Orders (non-defense/ex-aircraft): No est v 0.1% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v -0.2% prelim.

- 10:15 (ES) ECB’s De Guindos (Spain).

- 11:00 (CO) Colombia July Exports: $4.0Be v $4.0B prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 11:30 (US) Treasury to sell 52-Week Bills.

- (MX) Mexico CitiBanamex Survey of Economists.

- 16:00 (US) Weekly Crop Progress Report.

- 17:00 (CL) Chile Central Bank (BCCH) Interest Rate Decision: Expected to cut Overnight Rate Target by 75bps to 9.50%.

- 18:45 (NZ) New Zealand Q2 Volume of All Buildings Q/Q: 0.2%e v 0.6% prior.

- 20:30 (SG) Singapore Aug PMI (whole economy): No est v 51.3 prior.

- 21:30 (AU) Australia Q2 GDP Q/Q: 0.3%e v 0.2% prior; Y/Y: 1.8%e v 2.3% prior.

- 21:30 (JP) BOJ’s Takata.