German state CPI readings but higher bond yields as debt concerns and price of Oil adds to worries

Notes/observations

- Germany state Sept CPI’s drop significantly compared to prior month. Accordingly, German economic weakness remains in focus with German Economic Institutes cutting 2023 GDP growth from 0.3% to -0.6% contraction.

- With the release of Italy 2024 budget, and a raise in budget deficit to GDP from 3.7% to 4.3%, concern is seen over ability for Italy to pay its debt. Italy has the second highest public debt in Europe, after Greece. The spread on Italy/German 10-year yields has been widening all week, now at ~200bps.

- JPY speakers have been blunt in regard to FX levels and intervention. Fin Min Suzuki was directly asked about possibility of a rate check but declined to comment. Former MOF official ‘Mr Yen’ said govt may step in between 150-155 on USD/JPY.

- According to BoFA weekly spending data, US card spending appears to have decelerated post Labor Day after a solid summer, especially in the discretionary categories.

- Asia closed mixed with Nikkei225 under-performing at -1.5%. EU indices are -0.3% to -0.8%. US futures are -0.1%. Gold -0.1%, DXY -0.1%; Commodity: Brent -0.2%, WTI -0.1%, TTF %; Crypto: BTC -0.2%, ETH -0.1%.

Asia

-China might extend more credit in Q4 to support growth [inline]; cites analysts.

-Japan PM Kishida confirms to draw up a package on domestic logistics innovation.

-China PBOC Open Market Operation (OMO): Sells CNY101B in 7-day reverse repos v CNY200B prior; Sells CNY508B in 14-day reverse repos v CNY417B prior; Net injects CNY440B v Net injects CNY412B prior.

-China Financial Regulator: To issue rules on insurance sales; met with the UBS CEO.

-China Ambassador to US Feng: Recent US ties improvement has not been easy; The achievement should be cherished with special care - National Day Event.

-China and Germany said to hold fiscal and financial talks on Sun, Oct 1st.

-Japan Fin Min Suzuki: Declined to comment when asked about any plans for a currency rate check; Watching FX with 'strong sense of urgency'.

-Former Japan MOF official Sakakibara ('Mr Yen'): Japan govt may step into FX markets again if Japanese yen (JPY) goes beyond 150 against US dollar with officials likely to get concerned if it reaches 155.

-Japan Chief Cabinet Sec Matsuno: North Korea's nuclear and missile development can never be tolerated.

-YCC might have pushed up corporate bond spreads, the policy might have made it more difficult for firms to sell debt; cites BOJ report.

-Japan Ministry suspends wind subsidies to Japan Wind Development; the subsidies will be suspended for 9 months; cites the indictment of the co's former President.

-Reserve Bank of New Zealand (RBNZ) builds war chest of foreign reserves to support the NZD if there is a crisis [inline].

-Philippine Pres Marcos vows to keep shipping lanes open in South China Sea.

-Singapore announces S$1.5B cost-of-living (COL) support package.

-India Central Bank (RBI) said to have again sold US dollars.

Taiwan

-Taiwan unveils its first domestically built submarine - FT (as expected).

Europe

-ECB said to be experimenting with generative AI across basic operations - FT.

-France said to consider windfall levy to control power prices - FT.

-Finland FSA Macroprudential Decision: Maintains counter-cyclical buffer (CCyB) at 0%.

-Norway announcement on Q4 issuance: To sell up to NOK32B of debt.

-UK Finance Ministry: Propose significant package of reforms to 'ring-fencing' rules for retail banks.

-Switzerland, France and Singapore reportedly test cross-border CBDC wholesale - press.

-UK PM Sunak: UK is making good progress on bring inflation down.

-German Economic Institutes Updates Forecasts: Cuts growth, raises inflation.

-EU Commission spokesperson Schinas: Very close to clinching deal on crisis regulation.

Americas

-US SEC nears settlement with around two dozen Wall St firms to resolve record-keeping lapses, including use of unauthorized apps such as WhatsApp.

-US financial institutions have urged the White House to clarify curbs related to China high tech investments.

Energy

-Russia Energy Min: Reiterates ban on fuel exports to last until market stabilizes; More measures could be taken on fuel market.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.22% at 445.92, FTSE -0.61% at 7,546.85, DAX -0.11% at 15,199.95, CAC-40 -0.10% at 7,064.63, IBEX-35 +0.18% at 9,348.68, FTSE MIB -0.16% at 27,968.00, SMI -0.29% at 10,851.20, S&P 500 Futures +0.04%].

Market focal points/Key themes: European indices open mixed with a bias to the upside, and maintained that trajectory through the early hours of trading; better performing indices include energy and materials; underperforming sectors include technology and real estate; UK CMA publishes concerns about Arcelik-Whirlpool merger; earnings expected in the upcoming US session include Accenture and CarMax and Jabil.

Equities

- Consumer discretionary: Hennes & Mauritz [HMB.SE] -3.5% (analyst downgrades), Ryanair [RYA.IE] -2.0% (cuts winter flight schedule due to Boeing delay).

- Consumer staples: British American Tobacco [BATS.UK] -3.5% (Philip Morris investor update), Diageo [DGE.UK] +0.5% (trading update).

- Industrials: Continental [CON.DE] +2.5% (M&A blog comments), Babcock International [BAB.UK] +6.5% (AGM update), Volkswagen [VOW3.DE] -1.0% (resumes production after IT glitch).

- Technology: ams-OSRAM [AMS.CH] -18.5% (outlook update; financing offering; Micron results and guidance), ASML [ASML.NL] -1.0% (weakness attributed to comments from TF International analyst Ming-Chi Kuo).

Speakers

-Japan Fin Min Suzuki: Declined to comment when asked about any plans for a currency rate check; watching FX with 'strong sense of urgency'.

-Former Japan MOF official Sakakibara ('Mr Yen'): Japan govt may step into FX markets again if Japanese yen (JPY) goes beyond 150 against US dollar with officials likely to get concerned if it reaches 155.

-Australia Treasurer Chalmers: RBA revamp criticism ‘Bizarre’ and 'Wrong' (responding to recent comments by Fmr RBA Gov MacFarlane).

-UK PM Sunak: UK is making good progress on bring inflation down.

-Reserve Bank of Australia (RBA) Member Harper: No evidence in Australia of a developing wage-price spiral and long-term inflation expectations remain well-anchored.

-Philippine Central Bank (BSP) Gov Remolona: Not yet time to reduce banks' RRR.

Economic data

-(UK) SMMT: UK Aug Car Production 45.1K units, -9.5% y/y.

- (NZ) New Zealand Aug Filled Jobs M/M: +0.2% v +0.2% prior.

-(NZ) New Zealand Sept Business Confidence: +1.5 v -3.7 prior; Activity Outlook: 10.9 v 11.2 prior.

-(CN) China Aug Swift Global Payments (CNY): 3.5% v 3.1% prior [multi-year high].

-(AU) Australia Aug Retail Sales M/M: 0.2% v 0.3%e.

-(AU) Australia Q2 Job Vacancies Q/Q: -8.9% v -2.5% prior.

-(TH) Thailand Aug ISIC Manufacturing Production Y/Y: -7.5% v -6.4%e; Capacity Utilization: 58.2% v 58.2% prior.

-(NL) Netherlands Sept Producer Confidence: -2.2 v -2.2 prior.

-(FI) Finland Aug House Price Index M/M: +0.9% v -1.2% prior; Y/Y: -6.2% v -7.9% prior.

-(DE) Germany Sept CPI North Rhine Westphalia M/M: 0.2% v 0.5% prior; Y/Y: 4.2% v 5.9% prior.

-(DK) Denmark Aug Retail Sales M/M: +3.9% v -4.4% prior; Y/Y: -1.0% v -5.5% prior.

-(NO) Norway Aug Retail Sales M/M: -0.3% v -0.4%e.

-(IN) India Q2 Current Account: -$9.2B v -$8.9Be.

-(HU) Hungary Aug PPI M/M: 0.7% v 0.9% prior; Y/Y: -2.3% v +1.3% prior.

-(FI) Finland July Final Trade Balance: -€0.6B v -€0.6B prelim.

-(ES) Spain Sept Preliminary CPI M/M: 0.2% v 0.2%e; Y/Y: 3.5% v 3.5%e; CPI EU Harmonized M/M: 0.6% v 0.6%e; Y/Y: 3.2% v 3.3%e; CPI Core Y/Y: 5.8% v 6.0%e.

-(TR) Turkey Sept Economic Confidence: 95.4 v 94.1 prior.

-(ES) Spain Aug Adjusted Retail Sales Y/Y: 7.2% v 7.3% prior.

-(CN) Weekly Shanghai copper inventories (SHFE): 39.0K v 54.2K tons prior.

-(DE) Germany Sept CPI Hesse M/M: 0.3% v 0.2% prior; Y/Y: 4.7% v 6.0% prior.

-(DE) Germany Sept CPI Bavaria M/M: 0.3% v 0.3% prior; Y/Y: 4.1% v 5.9% prior.

-(IT) Italy Sept Consumer Confidence: 105.4 v 105.5e; Manufacturing Confidence: 96.4 v 97.0e; Economic Sentiment: 104.9 v 106.7 prior.

-(DE) Germany Sept CPI Brandenburg M/M: 0.3% v 0.7% prior; Y/Y: 5.6% v 7.1% prior.

-(DE) Germany Sept CPI Baden Wuerttemberg M/M: 0.2% v 0.3% prior; Y/Y: 5.1% v 7.0% prior.

-(EU) Euro Zone Sept Economic Confidence: 93.3 v 92.4e; Industrial Confidence: -9.0 v -10.5e; Services Confidence: 4.0 v 3.5e; Consumer Confidence (final): -17.8 v -17.8 prelim.

-(DE) Germany Sept CPI Saxony M/M: 0.3% v 0.3% prior; Y/Y: 5.4% v 6.8% prior.

-(IT) Italy Aug PPI M/M: 0.7% v 0.0% prior; Y/Y: -16.1% v -13.8% prior.

-(IS) Iceland Sept CPI M/M: 0.4% v 0.3% prior; Y/Y: 8.0% v 7.7% prior.

-(CN) China Q2 Final Current Account: $64.7B v $65.3B prelim.

Fixed income issuance

-New Zealand sells total NZ$500M vs. NZ$500M indicated in 2029, 2034 and 2051 bonds.

-Thailand sells THB 12.1B vs. THB 25B indicated in 2.04% May 2025 bonds; Avg Yield: 2.6325%, bid-to-cover: 0.62x.

- Singapore sells S$5.3B in 6-month bills; Avg Yield: 4.07%.

-Denmark sells total DKK2.6B in 3-month and 6-month Bills.

-Italy Debt Agency (Tesoro) sells total €8.0B vs €7.0-8.0B indicated in 5-year and 10-year BTP bonds.

-India sells total INR390B vs. INR390B indicated in 2026, 2030, 2037 and 2063 bonds.

-Italy Debt Agency (Tesoro) sells €1.5B vs. €1.0-1.5B indicated in 2026 and 2030 CCTeu (floating rate notes).

Looking ahead

- 05:30 (UK) BOE’s Hauser.

- 05:30 (ZA) South Africa Aug PPI M/M: 0.5%e v 0.2% prior; Y/Y: 3.7%e v 2.7% prior.

- 05:30 (ZA) South Africa Q2 Non-Farm Payrolls Q/Q: No est v -0.2% prior; Y/Y: No est v -1.0% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell HUF15.0B in 12-month bills.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell HUF10.0B in 3.0% 2041 bonds.

- 06:00 (RO) Romania to sell combined RON1.0B in 2030 and 2038 bonds.

- 06:00 (PT) Portugal Sept Consumer Confidence: No est v -21.9 prior; Economic Climate Indicator: No est v 1.5 prior.

- 06:00 (IE) Ireland Sept Preliminary CPI EU Harmonized M/M: No est v 0.5% prior; Y/Y: No est v 4.9% prior.

- 07:00 (CA) Canada Sept CFIB Business Barometer: No est v 54.8 prior.

- 07:00 (BR) Brazil Central Bank Quarterly Inflation Report.

- 07:00 (BR) Brazil Sept FGV Inflation IGPM M/M: 0.4%e v -0.1% prior; Y/Y: -6.0%e v -7.2% prior.

- 08:00 (MX) Mexico Aug Unemployment Rate (unadj): 3.2%e v 3.1% prior.

- 08:00 (DE) Germany Sept Preliminary CPI M/M: 0.3%e v 0.3% prior; Y/Y: 4.6%e v 6.1% prior.

- 08:00 (DE) Germany Sept Preliminary CPI EU-Harmonized M/M: 0.3%e v 0.4% prior; Y/Y: 4.5%e v 6.4% prior.

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

- 08:30 (US) Q2 Final GDP Annualized (3rd reading) Q/Q: 2.2%e v 2.1% prelim; Personal Consumption: 1.7%e v 1.7% prelim.

- 08:30 (US) Q2 Final GDP Price Index (3rd reading): 2.0%e v 2.0% prelim; Core PCE Q/Q: 3.7%e v 3.7% prelim

- 08:30 (US) Initial Jobless Claims: +215Ke v +201K prior; Continuing Claims: 1.675Me v 1.662M prior.

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

- 09:00 (US) Fed's Goolsbee at Peterson Institute in Washington.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Sept 22nd: No est v $576.7B prior.

- 10:00 (AT) ECB’s Holzmann (Austria).

- 10:00 (US) Aug Pending Home Sales M/M: -1.0%e v 0.9% prior; Y/Y: -12.0%e v -13.8% prior.

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

- 10:45 (SE) Sweden Central Bank (Riksbank) Breman.

- 10:45 (UK) BOE's Greene.

- 11:00 (US) Sept Kansas City Fed Manufacturing Activity: -2e v 0 prior.

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

- 12:30 (EU) ECB's De Cos.

- 13:00 (US) Fed’s Cook (voter).

- 13:00 (US) Treasury to sell new 7-Year Notes.

- 13:30 (BR) Brazil Aug Central Govt Budget Balance (BRL): -26.0Be v -35.9B prior.

- 15:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Rate unchanged at 11.25%.

- 15:00 (AR) Argentina Q2 Current Account: -$6.6Be v -$5.6B prior.

- 16:00 (US) Fed Chair Powell hosts Town Hall with Educators.

- 17:00 (NZ) New Zealand ANZ Sept Consumer Confidence: No est v 85.0 prior.

- 19:00 (US) Fed’s Barkin.

- 19:01 (UK) Sept Lloyds Business Barometer: No est v 41 prior.

- 19:30 (JP) Japan Sept Tokyo CPI Y/Y: 2.7%e v 2.9% prior; CPI (Ex-Fresh Food) Y/Y: 2.6%e v 2.8% prior; CPI (ex-fresh food/energy) Y/Y: 3.9%e v 4.0% prior.

- 19:30 (JP) Japan Aug Jobless Rate: 2.6%e v 2.7% prior; Job-To-Applicant Ratio: 1.29e v 1.29x prior.

- 19:50 (JP) Japan Aug Retail Sales M/M: 0.4%e v 2.1% prior; Y/Y: 6.6%e v 6.8% prior; Dept. Store, Supermarket Sales Y/Y: No est v 5.5% prior.

- 19:50 (JP) Japan Aug Preliminary Industrial Production M/M: -0.8%e v -1.8% prior; Y/Y: -4.6%e v -2.3% prior.

- 21:30 (AU) Australia Aug Private Sector Credit M/M: 0.3%e v 0.3% prior; Y/Y: No est v 5.3% prior.

- 21:45 (CN) China Sept Caixin PMI Manufacturing: No est v 51.0 prior; PMI Services: No est v 51.8 prior; PMI Composite: No est v 51.7 prior.

- 22:00 (SG) Singapore Aug M2 Money Supply Y/Y: No est v 3.1% prior; M1 Money Supply Y/Y: No est v -7.9% prior.

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