Expectation central banks will increase pace of easing instead of step down

EU Mid-Market Update: Expectation central banks will increase pace of easing instead of step down approach as data flow deteriorates; Boeing wage deal fails to get off the ground.

Notes/observations

-Overall, a modest pullback in equities as US/EU indices and spot gold trades near record highs; China stocks continued to receive tailwinds from stimulus announcement yesterday, but questions remain about how long this rally set to last (most US-listed Chinese names down sharply premarket). US dollar dropped after miss in consumer confidence and Richmond Fed Manufacturing Index added to economic slowdown woes, ahead of ISM Services and US jobs report next week.

-Dovish rate cut from Swedish Central Bank: Riksbank cut Policy Rate by 25bps as expected, but statement noting one or two more cuts with one of them being 50bps at a ‘clearly’ faster pace, sees projections for total rate cuts for H2 increased from 75bps to 100bps.

-Iran said to be brokering talks to send advanced Russian supersonic anti-ship missiles to Yemen's Houthis; While no decision yet by Russia to send the missiles, experts warn these missiles would be a “game changer” for regional security; Worth noting, that shipping companies keep warning about fragility of global supply chain as no solution yet in sight for Red Sea situation.

-EU M&A Update: UniCredit CEO speaking at BofA conf projected a more friendly approach to German Govt and Commerzbank, noting no intention to take seat on board. Yesterday Commerzbank appointed CFO into CEO position, who said to be against the tie-up. In UK, Rightmove rejected third proposal from Murdoch’s REA group, who are reportedly willing to increase bid, but did not confirm any improvement yet in statement.

-Boeing worker union rejects 30% wage hike offer from company. Notes willing to go back into negotiations.

-Asia closed mixed with KOSPI underperforming -1.3%. EU indices are -0.5% to +0.1%. US futures are -0.1% to -0.4%. Gold -0.1%, DXY -0.1%; Commodity: Brent -0.1%, WTI -0.1%; Crypto: BTC -0.1%, ETH -1.3%.

Asia

- China PBoC 1-year Medium-Term Lending Facility (MLLF) Setting cut the rate by 30bps to 2.00%.

- Australia Aug CPI Y/Y: 2.7% v 2.7%e (3-year low); Trimmed Mean CPI Y/Y: 3.4% v 3.8% prior.

- South Korea Sept Consumer Confidence: 100.0 v 100.8 prior.

- Japan Aug PPI Services Y/Y: 2.7% v 2.6%e.

Europe

- ECB’s Knot (Netherlands) noted that ECB would likely to continue to gradually reduce interest rates at least through H1 2025.

- ECB’s Nagel (Germany) stated that he assumed Germany economy's momentum would slowly 'pick up'. Country still needed major reforms.

Americas

- Bank of Canada (BOC) Gov Macklem stated that was looking for continued easing in core inflation; Reiterated 'reasonable' to expect further rate cuts from BOC.

Energy

- Weekly API Crude Oil Inventories: -4.3M v +2.0M prior.

Tensions

-Iran said to be brokering talks to send advanced Russian anti-ship missiles to Yemen's Houthis; No decision yet by Russia to send the missiles; Experts warn these missiles would be a “game changer” for regional security.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.12% at 519.08, FTSE +0.07% at 8,288.15, DAX -0.36% at 18,918.95, CAC-40 -0.50% at 7,565.83, IBEX-35 -0.13% at 11,821.54, FTSE MIB -0.05% at 33,866.00, SMI +0.59% at 12,098.07, S&P 500 Futures -0.16%].

Market Focal Points/Key Themes: European indices open generally lower but recovered some of the losses in the early hours of trading; CAC-40 is underperforming other indices due to high portion of China-related index members; among sectors managing to generate gains are real estate and health care; sectors leading the way lower include energy and technology; oil & gas subsector under pressure over China demand concerns; Rightmove rejects REA’s improved offer; reportedly LSEG considering sale of its Euroclear stake; earnings expected in the upcoming US session include Micron Technology.

Equities

- Consumer discretionary: Air France/KLM [AF.FR] +8.0% (JPMorgan raised to overweight), Autostore [AUTO.NO] -5.0% (analyst downgrade).

- Financials: Commerzbank [CBK.DE] +1.5% (promotes CFO to CEO, said to be against tie-up with UniCredit; UniCredit makes comments at conference).

- Healthcare: Shield Therapeutics [STX.UK] +8.0% (trial data).

- Industrials: Rentokil Initial [RTO.UK] +3.5% (Peltz’s Trian (~2.3% stake) takes seat on Rentokil board), Valmet [VALMT.FI] +9.5% (awarded contract from Arauco worth >€1.0B for complete pulp mill).

- Technology: SAP [SAP.DE] -4.5% (US probes co. over potential price fixing against US govt agencies over a period of a decade), Melexis [MELE.BE] -4.0% (Kepler cuts to hold).

Speakers

- BOE’s Greene noted that a cautious and steady approach to easing was appropriate. UK consumption was weak;

- Sweden Central Bank Policy Statement noted that the policy rate was thus expected to be cut at a clearly faster pace than was previously communicated. Policy rate might be cut at the two remaining monetary policy meetings this year, Forecast indicated one or two further rate cuts during the first half of 2025. Riksbank added that a cut of 50bps was possible at one of these meetings.

- Sweden Central Bank updated its Staff Projections which cut 2024 CPIF from 2.0% to 1.7% and cut 2025 CPIF from 1.8% to 1.6%. Projections cut 2024 Avg GDP growth from 1.1% to 0.8% while raising 2025 Avg GDP growth from 1.7% to 1.9%. Riksbank rate path was lowered with 2024 Avg Repo Rate cut from 3.7% to 3.6%and 2025 Avg Repo Rate cut from 2.9% to 2.4%.

- Sweden Central Bank (Riksbank) Gov Thedeen noted that its main scenario was for 25bps cut at remaining meeting in 2024 - post rate decision press conference.

- Denmark Central Bank (Nationalbanken) updated its economic outlook which cut the 2024 GDP growth forecast from 2.4% to 2.1% while raising the 2025 GDP growth forecast from 1.4% to 2.3%.

- Spain Econ Min Cuerpo stated that govt to maintain 2025 budget deficit to GDP target at 2.5%.

- German Greens party leadership (part of Scholz's federal coalition) said to resign.

- Bank of Korea (BOK) board member Shin: Affirms weakening domestic demand is increasing case for rate cuts.

Currencies/fixed income

- USD continued to face headwinds on G-3 policy divergence. Fed futures currently pricing 60% chance of 50bps rate cut at Nov 7th's meeting (probability up from ~40% late last week). Weaker US consumer confidence data on Tuesday fueled concerns about an economic slowdown.

- European pairs were firmer against the greenback. EUR/USD edging closer to the 1.12 level while GBP/USD was inching up to the 1.34 handle.

- USD/JPY buck the trend and was higher at 143.80 by mid-session.

Economic data

- (SE) Sweden Aug PPI M/M: +0.6% v -1.4% prior; Y/Y: +1.2% v -0.1% prior.

- (NO) Norway Aug Credit Indicator Growth Y/Y: 3.8% v 3.7% prior.

- (TH) Thailand Aug Customs Trade Balance: $0.3B v $0.0Be; Exports Y/Y: 7.0% v 6.0%e; Imports Y/Y: 8.9% v 6.5%e.

- (HU) Hungary Q2 Current Account Balance: €2.0B v €1.8Be.

- (FR) France Sept Consumer Confidence: 95 v 92e.

- (ES) Spain Aug PPI M/M: 1.5% v 1.5% prior; Y/Y: -1.3% v -1.6% prior.

- (ZA) South Africa July Leading Indicator: 113.6 v 112.8 prior.

- (SE) Sweden Central Bank (Riksbank) cut Repo Rate by 25bps to 3.25% (as expected).

- (CH) Swiss Sept Expectations Survey: -8.8 v -3.4 prior.

- (TW) Taiwan Aug Industrial Production Y/Y: 13.4% v 9.4%e.

Fixed income issuance

- (DK) Denmark opened its book to sell EUR-denominated 2-year notes vis syndicate; guidance seen +17bps to mid-swaps.

- (TR) Turkey opened its book to sell USD-denominated 10-year binds; yield guidance 7.125%.

- (UK) DMO sold £3.75B in 4.0% Oct 2031 Gilts; Avg Yield: 3.814% v 4.074% prior; bid-to-cover: 2.98x v 3.29x prior; Tail: 1.6bps v 0.3bps prior.

- (SE) Sweden sold total SEK4.0B in 2029 and 2035 bonds.

- (NO) Norway sold total NOK3.0B vs. NOK3.0B indicated in 2028 and 2034 bonds.

- (IT) Italy Debt Agency (Tesoro) sold €2.75B vs. €2.25-2.75B indicated range in 3.10% Aug 2026 BTP bonds; Avg Yield: 2.51% v 2.89% prior; bid-to-cover: 1.62x v 1.54x prior.

- (IT) Italy Debt Agency (Tesoro) sold total €2.5B vs. €2.0-2.5B indicated range in 2029 and 2039 inflation-linked bonds (BTPei).

- (GR) Greece Debt Agency (PDMA) sold €600M vs. €500M indicated in 6-month bills; Avg Yield: 2.85% v 3.09% prior; Bid to cover: 2.12x v 1.64x prior.

Looking ahead

- (CO) Colombia Aug Retail Confidence: No est v 17 prior; Industrial Confidence: No est v -1.2 prior.

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

- 05:30 (DE) Germany to sell €3.0B in 2.40% Nov 2030 Bunds.

- 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2033, 2038 and 2040 bonds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (RU) Russia to sell OFZ Bonds.

- 07:00 (US) MBA Mortgage Applications w/e Sept 20th: No est v 14.2% prior.

- 07:00 (BR) Brazil Sept FGV Construction Costs M/M: 0.6%e v 0.6% prior.

- 07:30 (BR) Brazil Aug Current Account Balance: -$5.0Be v -$5.2B prior; Foreign Direct Investment (FDI): $7.5Be v $7.3B prior.

- 07:30 (CL) Chile Central Bank Traders Survey.

- 08:00 (BR) Brazil mid-Sept IBGE Inflation IPCA-15 M/M: 0.3%e v 0.2% prior; Y/Y: 4.3%e v 4.4% prior.

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

- 08:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to cut 2-week Repurchase Rate by 25bps to 4.25%.

- 10:00 (US) Aug New Home Sales: 700Ke v 739K prior- 10:30 (US) Weekly DOE Oil Inventories.

- 11:30 (US) Treasury to sell 2-Year FRN Reopening.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (RU) Russia Aug Industrial Production Y/Y: 1.8%e v 3.3% prior.

- 12:00 (CA) Canada to sell 10-year Bonds.

- 13:00 (US) Treasury to sell 5-Year Notes.

- 15:00 (AR) Argentina July Economic Activity Index (Monthly GDP) M/M: +0.6%e v -0.3% prior; Y/Y: -4.2%e v -3.9% prior.

- 19:50 (JP) Bank of Japan (BOJ) Minutes.

- 21:30 (AU) Australia Aug Job Vacancies Q/Q: No est v -2.7% prior.

- 21:30 (AU) RBA Financial Stability Report.

- 23:35 (JP) Japan to sell 40-Year JGB Bonds.