European inflation data pointing to a Sept ECB rate cut

EU mid-market update: European inflation data pointing to a Sept ECB rate cut; Report on Intel weighs on European chip names.

Notes/observations

- Healthier European inflation prints turns ECB policy focus onto growth: Preliminary French CPI back below 2% ECB target for first time since Aug 2021, like Germany yesterday. Portugal CPI also drops within target. Euro Zone headline and Core CPI in line with estimates, core inflation proving sticky at 2.8%; Similar to situation in UK and US, GDP and employment now top focus to instruct ECB on size and frequency of further rate cuts.

- European chip names, including ASML, trade lower after press report that Intel mulls splitting the design and manufacturing businesses, which some analysts see could result into temporarily equipment purchasing halt by Intel, which was set to get ASML's High NA EUV equipment.

- Focus ahead on US July PCE and Core PCE Deflator at 08:30 ET.

- Reminder: US holiday on Mon, Sept 2nd with markets closed. Volumes likely to taper off as Friday afternoon session progresses.

- Asia closed higher with Hang Seng outperforming +1.1%. EU indices are +0.2-0.7%. US futures are +0.1-0.6%. Gold +0.2%, DXY +0.1%; Commodity: Brent +0.1%, WTI +0.1%; Crypto: BTC -0.2%, ETH -0.9%.

Asia

- Japan Aug Tokyo CPI Y/Y: 2.6% v 2.3%e; CPI (ex-fresh food) Y/Y: 2.4% v 2.2%e.

- Japan July Retail Sales M/M: 0.2% v 0.4%e; Y/Y: 2.6% v 2.8%e.

- Japan July Jobless Rate: 2.7% v 2.5%e.

- Japan July Preliminary Industrial Production M/M: 2.8% v 3.5%e; Y/Y: 2.7% v 2.7%e.

- Australia July Retail Sales M/M: 0.0% v 0.5% prior.

- New Zealand Aug ANZ Consumer Confidence: 92.2 v 87.9 prior.

- New Zealand July Building Permits M/M: +26.2% v -17.0% prior.

- South Korea July Industrial Production M/M: -3.6% v +0.5% prior; Y/Y: 5.5% v 3.8% prior.

- China govt said to consider refinancing $5.4T of mortgages with aim to lower borrowing costs for millions of families and boost consumption.

Global conflict/tensions

- Israel and Hamas said to have agreed to three separate and zoned 3-day pauses in Gaza Strip fighting for Polio vaccinations.

Europe

- Aug Lloyds Business Barometer: 50 v 46e.

Americas

- Fed's Bostic (hawk, voter for 2024) stated that inflation was still far from target.

- Presidential candidate Harris (D-CA) gave her first interview and changed some of her positions on fracking, immigration and energy; would take new steps to lower housing, drug and food costs; defended Biden admin’s handling of the economy.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.36% at 526.48, FTSE +0.34% at 8,407.79, DAX +0.18% at 18,936.65, CAC-40 +0.51% at 7,679.90, IBEX-35 +0.66% at 11,433.54, FTSE MIB +0.65% at 34,414.00, SMI +0.25% at 12,455.50, S&P 500 Futures +0.41%].

Market focal points/key themes: European indices open mixed with a downward bias and maintained the direction through the early part of the session; among better performing sectors are real estate and financials; underperforming sectors include technology and communication services; European chip names under some pressure after press reports that Intel mulls splitting the design and manufacturing businesses; focus on US PCE price index to be released later in the day; no major earnings expected in the upcoming Americas session.

Equities

- Consumer discretionary: Remy Cointreau [RCO.FR] -3.0% (taken note of announcement by China's Ministry of Commerce Not to impose provisional tariffs on brandy imported from the EU for now), Beiersdorf [BEI.DE] -0.5% (read across from Ulta Q2 results and earnings call).

- Energy: Frontline [FRO.NO] -3.0% (Q2 results).

- Industrials: Daimler Truck [DTG.DE] +1.5% (analyst upgrade).

- Technology: ASML [ASML.NL] -1.5%, BE Semiconductor [BESI.NL] -2.5% (analyst note on ASML; Intel reportedly considering splitting the design and manufacturing businesses).

Speakers

- ECB’s Schnabel (Germany) stated that incoming data had broadly confirmed the baseline; conditions in place for inflation to be at target by end-2025. Soft economic landing looks more probable than a recession.

- ECB’s Rehn (Finland) stated that the growth outlook was weaker than expected and reinforced the case for a Sept rate cut.

- ECB’s Kazaks (Latvia) commented that was open for Sept rate cut discussion.

- Poland Central Bank's Tyrowicz believed Base Rate should be higher around 7.5-7.75% (**Note: current level is 5.75%).

- Hungary Fin Min Varga saw 2025 GDP growth between 3.2-3.5% range.

- German VDMA Engineering Association July Orders -5% y/y. Both Domestic and Foreign Orders -5% y/y.

- India PM Modi stated that sustainable economic growth was the priority of the govt. To support growth with green finance.

Currencies/fixed income

- Plethora of growth, employment and inflation data in the session.

- USD remained subdued and barely holding onto its consolidation gains. Focus on upcoming PCE data in the session (seen as the Fed’s preferred gauge of inflation).

- EUR/USD staying below the 1.11 level as various EU inflation data moved back within ECB 2% target (France, Portugal). Markets making the case for an additional 75bps of rate cuts by year. Dealers see the range between 1.10-15 now as the Fed is viewed as being more aggressive on the rate cut front (approx. 100bps seen by year-end).

- USD/JPY stayed around the 145 level as Japan released a set of mixed economic data (higher unemployment coupled with hotter inflation data).

Economic data

- (NL) Netherlands Aug Preliminary CPI Y/Y: 3.6% v 3.4%e.

- (NL) Netherlands Aug CPI EU Harmonized M/M: 0.4% v 0.2%e; Y/Y: 3.3% v 3.1%e.

- (FI) Finland Q2 GDP Q/Q: 0.3% v 0.3% prior; Y/Y: -1.2% v -1.3% prior.

- (FI) Finland July Retail Sales Volume Y/Y: -2.1% v -1.2% prior.

- (FR) France Q2 Final Private Sector Payrolls Q/Q: -0.1% v 0.0% prelim; Total Payrolls: 0.0% v 0.3% prior.

- (DE) Germany May Retail Sales M/M: % v 0.1%e ; Y/Y:% v -0.7%e.

- (DE) Germany July Import Price Index M/M: -0.4% v +0.1%e; Y/Y: 0.9% v 1.5%e.

- (UK) Aug Nationwide House Price Index M/M: -0.2% v +0.2%e; Y/Y: 2.4% v 2.9%e.

- (SE) Sweden Jun Non-Manual Workers’ Wages Y/Y: 4.5%v 4.2% prior.

- (DK) Denmark July Unemployment Rate: 2.6% v 2.5% prior; Gross Unemployment Rate: 2.9% v 2.9% prior.

- (DK) Denmark July Retail Sales M/M: 0.0% v 0.4% prior; Y/Y: 3.9% v 0.5% prior.

- (ZA) South Africa July M3 Money Supply Y/Y: 5.9% v 4.2% prior; Private Sector Credit Y/Y: 3.5% v 4.3%e.

- (HU) Hungary July PPI M/M: 0.7% v 1.5% prior; Y/Y: 2.5% v 2.7% prior.

- (FR) France Q2 Final GDP Q/Q: 0.2% v 0.3% prelim; Y/Y: 1.0% v 1.1% prelim.

- (FR) France Aug Preliminary CPI M/M: 0.6% v 0.5%e; Y/Y: 1.9% v 1.8%e (annual pace back within ECB target for 1st time since Aug 2021).

- (FR) France Aug Preliminary CPI EU Harmonized M/M: 0.6% v 0.5%e; Y/Y: 2.2% v 2.1%e.

- (FR) France July PPI M/M: +0.2% v -0.2% prior; Y/Y: -5.4% v -5.9% prior.

- (FR) France July Consumer Spending M/M: 0.3% v 0.3%e; Y/Y: -0.6% v -0.9%e.

- (ES) Spain Jun Total Mortgage Lending Y/Y: -8.3% v -13.2% prior; Mortgage Approvals Y/Y: -5.5% v -18.2% prior.

- (ES) Spain July Adjusted Retail Sales Y/Y: 1.0% v 0.3%e; Retail Sales (unadj) Y/Y: +2.8% v -1.4% prior.

- (CH) Swiss Aug KOF Leading Indicator: 101.6 v 100.6e.

- (AT) Austria Aug Preliminary CPI M/M: -0.2% v 0.0% prior; Y/Y: 2.4% v 2.9% prior.

- (AT) Austria July PPI M/M: 0.0% v 0.2% prior; Y/Y:-1.8% v -2.5% prior.

- (CZ) Czech Q2 Preliminary GDP (2nd of 3 readings) Q/Q: 0.3% v 0.3% advance; Y/Y: 0.6% v 0.4% advance.

- (TH) Thailand July Current Account Balance: $0.3B v $0.6Be; Overall Balance of Payments (BoP): $2.1B v $0.6B prior; Trade Account Balance: $0.9B v $2.4B prior; Exports Y/Y: +15.3% v. +0.3% prior; Imports Y/Y:+15.8 % v -0.1% prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 241.8K v 251.1K tons prior.

- (TH) Thailand May Foreign Reserves w/e Aug 23rd: $237.0B v $234.5B prior.

- (DE) Germany Aug Net Unemployment Change: +2.0K v +16.0Ke; Unemployment Claims Rate: 6.0% v 6.0%e.

- (ES) Spain Jun Current Account Balance: €B v €5.6B prior.

- (IT) Italy July Unemployment Rate: 6.5% v 7.0%e.

- (NO) Norway Aug Unemployment Rate: 2.0% v 2.1% prior; Unemployment Rate (seasonally adj):2.0% v 2.1%e.

- (NO) Norway Central Bank (Norges) Sept Daily FX Purchases: 400M v 400M prior.

- (PL) Poland Aug Preliminary CPI M/M:0.1 % v 0.1%e; Y/Y: 4.3% v 4.3%e.

- (CZ) Czech July M2 Money Supply Y/Y: 5.3% v 6.4% prior.

- (RU) Russia Narrow Money Supply w/e Aug 23rd (RUB): 18.33T v 18.37T prior.

- (UK) July Net Consumer Credit: £1.2B v £1.3Be; Net Lending: £2.8B v £2.4Be.

- (UK) July Mortgage Approvals: 62.0K v 60.5Ke.

- (UK) July M4 Money Supply M/M: 0.3% v 0.5% prior; Y/Y: 2.1% v 1.0% prior; M4 (ex-IOFCs) 3-month Annualized: 2.6% v 2.5% prior.

- (PT) Portugal Aug Preliminary CPI M/M: -0.3% v -0.6% prior; Y/Y: 1.9% v 2.5% prior.

- (PT) Portugal Aug Preliminary CPI EU Harmonized M/M: -0.1% v -0.8% prior; Y/Y: 1.8% v 2.7% prior.

- (HK) Hong Kong July Retail Sales Volume Y/Y: -11.8% v -10.9%e; Retail Sales Value Y/Y: -13.3% v -8.6%e.

- (HK) Hong Kong July M3 Money Supply Y/Y: 2.0% v 1.5% prior; M2 Money Supply Y/Y: 2.0% v 1.5% prior; M1 Money Supply Y/Y: -3.0% v -5.9% prior.

- (EU) Euro Zone Aug CPI Estimate Y/Y: 2.2% v 2.2%e; Core CPI Y/Y: 2.8% v 2.8%e.

- (EU) Euro Zone July Unemployment Rate: 6.4% v 6.5%e.

- (IT) Italy Aug Preliminary CPI M/M: 0.2% v 0.3%e; Y/Y: 1.1% v 1.2%e.

- (IT) Italy Aug Preliminary CPI EU Harmonized M/M: -0.1% v -0.1%e; Y/Y: 1.3% v 1.3%e.

- (BE) Belgium July Unemployment Rate: 5.4% v 5.5% prior.

- (BE) Belgium Q2 Final GDP Q/Q: 0.2% v 0.2% prelim; Y/Y: 1.1% v 1.1% prelim.

- (IS) Iceland Q2 GDP Q/Q: +1.7% v -1.0% prior; Y/Y: -0.3% v -3.5% prior.

- (GR) Greece Jun Retail Sales Value Y/Y: 5.8% v 10.5% prior; Retail Sales Volume Y/Y: 7.4% v 14.3% prior.

Fixed income issuance

- (IN) India sold total INR300B vs. INR300B indicated in 2034 and 2054 bonds.

- (DK) Denmark sold total DKK800M in 3-month and 6-month bills.

Looking ahead

- (MX) Mexico July Public Balance (MXP): No est v -744.2B prior.

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2033, 2043 and 2058 Bonds.

- 06:00 (IE) Ireland July Retail Sales Volume M/M: No est v -1.4% prior; Y/Y: No est v -1.8% prior.

- 06:00 (PT) Portugal Q2 Final GDP Q/Q: 0.1%e v 0.1% prelim; Y/Y: 1.5%e v 1.5% prelim.

- 06:00 (IT) Italy Aug Consumer Confidence: 99.0e v 98.9 prior; Manufacturing Confidence: 87.0e v 87.6 prior; Economic Sentiment: No est v 94.2 prior.

- 06:00 (UK) DMO to sell £6.0B in 1-month, 3-month and 6-month bills (£1.0B, £2.0B and £3.0B respectively).

- 06:30 (IN) India July YTD Fiscal Deficit (INR): No est v 1.357T prior.

- 07:30 (IN) India July Eight Infrastructure (Key) Industries: No est v 4.0% prior.

- 07:30 (BR) Brazil July Nominal Budget (Overall) Balance (BRL): -80.0Be v -135.7B prior; Primary Budget Balance: -5.0Be v -40.9B prior; Net Debt to GDP: 62.3%e v 62.2% prior.

- 07:30 (IN) India Forex Reserve w/e Aug 23rd: No est v $674.7B prior.

- 07:30 (IN) India announces upcoming bill issuance (held on Wed).

- 08:00 (IN) India Q2 GDP Y/Y: 6.8%e v 7.8% prior; GVA Y/Y: 6.4%e v 6.3% prior.

- 08:00 (ZA) South Africa July Trade Balance (ZAR): 21.5Be v 24.2B prior.

- 08:00 (ZA) South Africa July Monthly Budget Balance (ZAR): -155.7Be v +38.6B prior.

- 08:00 (BR) Brazil July National Unemployment Rate: 6.8%e v 6.9% prior.

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

- 08:30 (US) July Personal Income: 0.2%e v 0.2% prior; Personal Spending: 0.5%e v 0.3% prior; Real Personal Spending (PCE): 0.3%e v 0.2% prior.

- 08:30 (US) July PCE Deflator Index M/M: 0.2%e v 0.1% prior; Y/Y: 2.6%e v 2.5% prior.

- 08:30 (US) July Core PCE Deflator M/M: 0.2%e v 0.2% prior; Y/Y2.7%e v 2.6% prior.

- 08:30 (CA) Canada Jun GDP M/M: 0.1%e v 0.2% prior; Y/Y: 1.4%e v 1.1% prior; Q2 Quarterly GDP Annualized: 1.9%e v 1.7% prior.

- 09:00 (CL) Chile July Retail Sales Y/Y: 2.7%e v 7.9% prior; Commercial Activity Y/Y: No est v 3.9% prior.

- 09:00 (CL) Chile July Industrial Production Y/Y: 1.0%e v 1.0% prior; Manufacturing Production Y/Y: +0.5%e v -4.8% prior; Total Copper Production: No est v 452.8K tons prior.

- 09:45 (US) Aug Chicago Purchase Manager’s Index (PMI): 45.1e v 45.3 prior.

- 10:00 (US) Aug Final University of Michigan Confidence: 68.0e v 67.8 prelim.

- 11:00 (MX) Mexico July Net Outstanding Loans (MXN): No est v 6.379T prior.

- 11:00 (CO) Colombia July National Unemployment Rate: No est v 10.3% prior; Urban Unemployment Rate: 10.3%e v 10.2% prior.

- (MX) Mexico July Public Balance (MXP): No est v -744.2B prior.

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

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

- 21:30 (CN) China Aug Manufacturing PMI (Govt Official): 49.5e v 49.4 prior; Non-manufacturing PMI: 50.0e v 50.2 prior; Composite PMI: No est v 50.2 prior.

Sat

- 20:00 (KR) South Korea Aug Trade Balance: $3.9Be v $3.6B prior; Exports Y/Y: 13.1%e v 13.9% prior; Imports Y/Y: 6.3%e v 10.5% prior.