Germany keeps 'sick man of Europe' label amid weak EU PMIs

EU Mid-Market Update: Germany keeps 'sick man of Europe' label amid weak EU PMIs; JPY (yen) hovers just below 150 level; US 45-day stopgap bill passed over weekend.

Notes/observations

- European PMIs were marginally better than expected, for the most part, but still heavily in contraction territory as France and Germany led the weakness. Combined with better-than-expected UK house price data (although again, still down), bond yields have risen in morning trade and major bourses begin the week with modest gains.

- Oil rises amid supply constraint risks. An energy conference is being held in Abu Dhabi and Iraq official saying more needs to be resolved before restoring Iraq-Turkey oil pipeline flow.

- In FX space, JPY (yen) weakening continued, in the face of several senior Japan officials attempts at verbal intervention. USD/JPY approaches crucial 150 handle. Officials declined to comment on potential intervention.

- Asia closed mixed with NZX50 under-performing at -0.5%. EU indices are -0.7% to +0.3%. US futures are +0.3-0.6%. Gold -0.6%, DXY +0.1%; Commodity: Brent +0.4%, WTI +0.4%, TTF -2.1%; Crypto: BTC +4.3%, ETH +2.8%.

Asia

- New Zealand NZIER Shadow Board recommends RBNZ keep OCR on hold this week at 5.50%.

- Japan mulls disclosure of corporate pension performance - Japan press.

- Bank of Japan (BOJ) Sept Meeting Summary of Opinions: One member said important to prepare to exit from risk-management perspective, as we could have clarity around Jan-Mar 2024 on sustained, stable 2% inflation.

- Japan Fin Min Suzuki reiterated watching FX carefully and cautiously; Declined to comment on possible FX intervention.

- Japan Chief Cabinet Sec Matsuno: Reiterates watching FX moves with high sense of urgency.

- Japan BOJ announces addition to the JGB buying schedule for Oct 4th (Wed); adds 5-10 yr JGBs to the fixed amount operations.

- Thailand PM Srettha: Plan to hold monthly meetings with BoT Gov Sethaput, have no conflicts with him.

Ukraine conflict

- EU Foreign Ministers to meet later today in Ukraine; Would be the first ever meeting of all 27 Member States outside the EU.

Europe

- Sweden Central Bank (Riksbank) Sept Minutes: Contractionary policy needed for some time; Policy rate may need to be raised further.

- Slovakia's former PM Robert Fico’s leftist-populist Smer party wins election in Slovakia with 23.4%; Smer party seen as pro-Russian after promising to stop sending weapons to Ukraine

- UK PM Sunak reportedly refuses to commit to pre-election tax cuts - press.

- UK Chancellor Hunt said to pledge biggest transformation of public services in our lifetime - UK press.

- UK Chancellor Hunt has been caught in a secret recording during a private meeting with Tory activists suggesting that Sunak will call a general election once inflation has fallen below 3%.

- UK Chancellor Hunt: Tax cuts now would be inflationary; I believe in lowering taxes but do not know if that will be possible before the next election.

- UK Defense Sec Shapps: UK troops will be deployed in Ukraine for the first time to start training Ukrainian soldiers on site and not only at NATO bases under plans being discussed with military chiefs.

- Fitch raised Portugal sovereign rating from BBB+ to A-; outlook stable.

- Hungary Econ Min Nagy: See 2023 GDP growth at 0.0% and 2024 GDP growth at 4.0%.

- Russia Dep Foreign Min Ryabkov: Grounds for keeping moratorium on Russia-US Intermediate-Range Nuclear Forces Treaty are fading.

Americas

- US Congress and Senate pass short-term spending bill to avert a govt shutdown; Will be sent to Pres Biden to sign.

- US Pres Biden signs into law the 45-day stopgap funding measure until Nov 17th, averting US govt shutdown; CR bill has no Ukraine funding (as expected).

- US California gov Newsom vetoes a bill offering unemployment benefits to striking workers.

Energy

- OPEC Sec Gen Al Ghais: Underinvesting puts energy security at risk.

- UAE Energy Min: Currently OPEC+ has the right policy.

- Iran Energy Official: No plan to hold direct talks with the US.

- Turkey Energy Min Bayraktar: Iraq-Turkey oil pipeline is ready to operate this week after being damaged by earthquake; It will be able to supply almost half a million barrels to global oil markets - Abu Dhabi conf; Follow Up: Iraqi official: Issues still need to be resolved on Iraq-Turkey pipeline.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.29% at 451.52, FTSE +0.13% at 7,617.88, DAX +0.34% at 15,438.35, CAC-40 +0.51% at 7,171.51, IBEX-35 +0.66% at 9,490.52, FTSE MIB +0.23% at 28,309.00, SMI -0.35% at 10,925.00, S&P 500 Futures +0.65%].

Market Focal Points/Key Themes: European indices open generally in the green and drifted higher through the early hours of the session; sectors among those leading to the upside are real estate and materials; lagging sectors include health care and financials; reportedly Apple to bid for Formula 1 streaming rights; Faurecia sells its CVEA unit to Cummins; reportedly Fresenius in talks to sell its Eugin clinics to KKR; no major events expected in the upcoming US session.

Equities

- Consumer discretionary: Casino Guichard-Perrachon [CO.FR] -4.5% (completes some stores divestment).

- Energy: Eni [ENI.IT] +0.5% (gas discovery).

- Financials: Deutsche Bank [DBK.DE] -0.5% (German financial regulator BaFin plans to send a special monitor to Deutsche Bank following problems at its Postbank unit).

- Healthcare: Fresenius [FRE.DE] -3.5% (evaluates state aid impact).

- Industrials: Volvo [VOLVA.SE] +1.0% (UAW members at MACK Truck in Pennsylvania, Maryland and Florida have reached tentative agreement with Volvo), BAE Systems [BA.UK] +2.0% (large order award).

- Telecom: Vivendi [VIV.FR] +3.0% (analyst action).

- Utilities: Pennon [PNN.UK] +5.0%, United Utilities [UU.UK] +3.5% (trading updates).

Speakers

- Japan Fin Min Suzuki reiterated watching FX carefully and cautiously; Declined to comment on possible FX intervention.

- Japan Chief Cabinet Sec Matsuno: Reiterates watching FX moves with high sense of urgency.

- ECBs De Guindos (Spain): Dismisses talk of rate cuts; Sees cuts as premature; Getting back to 2% inflation target will not be easy; Current rates substantially help towards inflation goals.

- UK Chancellor of the Exchequer (Fin Min) Hunt: Tax cuts now would be inflationary; I believe in lowering taxes but do not know if that will be possible before the next election.

Currencies/fixed income

- USD sold off as EU bond and energy markets opened up for trade, but then firmed up as EU equity trade opened and manufacturing PMI’s came in. GBP/USD (cable) is little changed after 40pip swing up and down, trading at 1.218. EUR/USD is similar, little changed at 1.056 after 30pip swing up and down.

- Focus remains on USD/JPY and the weak yen. Japan officials cannot keep it from weakening with verbal intervention. Very heavily watched 150 level approaches. Latest at 149.65.

Economic data

- (CN) China Sept Caixin PMI Manufacturing: 50.6 v 51.2e.

- (CN) China Sept Caixin PMI Services: 50.2 v 51.8 prior

- (HK) Macau Sept Casino Rev (MOP): 14.9B v 17.2B m/m; Y/Y: +404.2%.

- (AU) Australia Sept CoreLogic House Prices M/M: 0.9% v 1.0% prior.

- (PE) Peru Sept CPI M/M: 0.0% v 0.4% prior; Y/Y: 5.0% v 5.3%e.

- (NZ) New Zealand Aug Building Permits M/M: -6.7% v -5.2% prior.

- (AU) Australia Sept Final PMI Manufacturing: 48.7 v 48.2 prelim (confirms 7th month of contraction).

- (JP) Japan Q3 Tankan Large Manufacturing Index: 9 v 6e; Large Manufacturing Outlook: 10 v 6e.

- (IE) Ireland Sept PMI Manufacturing: 49.6 v 50.8 prior (moves back into contraction).

- (AU) Australia Sept Melbourne Institute Inflation M/M: 0.0% v 0.2% prior; Y/Y: 5.7% v 6.1% prior.

- (JP) Japan Sept Final PMI Manufacturing: 48.5 v 48.6 prelim (confirms the 4th month of contraction).

- (TW) Taiwan Sept PMI Manufacturing: 46.4 v 44.3 prior (16th month of contraction).

- (MY) Malaysia Sept PMI Manufacturing: 46.8 v 47.8 prior (12th month of contraction).

- (TH) Thailand Sept PMI Manufacturing: 47.8 v 48.9 prior (2nd month of contraction).

- (VN) Vietnam Sept PMI Manufacturing: 49.7 v 50.5 prior (moves back into contraction).

- (ID) Indonesia Sept PMI Manufacturing: 52.3 v 53.9 prior (24th month of expansion).

- (PH) Philippines Sept PMI Manufacturing: 50.6 v 49.7 prior (moves back into expansion).

- (SG) Singapore Q3 prelim URA Private Home Prices Q/Q: +0.5% -0.2% prior (moves back into expansion).

- (ID) Indonesia Sept CPI M/M: 0.2% v 0.1%e; Y/Y: 2.3% v 2.2%e; CPI Core Y/Y: 2.0% v 2.1%e.

- (NL) Netherlands Sept Manufacturing PMI: 43.6 v 45.9 prior (13th straight contraction and lowest since May 2020).

- (RU) Russia Sept Manufacturing PMI: 54.5 v 52.7 prior (17th straight expansion).

- (UK) Sept Nationwide House Price Index M/M: 0.0% v -0.4%e; Y/Y: -5.3% v -5.6%e (matches weakest since July 2009).

- (HU) Hungary July Final Trade Balance: €0.6B v €0.7B prelim.

- (SE) Sweden Sept PMI Manufacturing: 43.3 v 45.5 prior (12th straight contraction).

- (CH) Swiss Aug Real Retail Sales Y/Y: -1.8% v -2.5% prior.

- (PL) Poland Sept Manufacturing PMI: 43.9 v 43.6e (17th straight contraction).

- (HU) Hungary Sept Manufacturing PMI: 47.4 v 47.3e (4th straight contraction).

- (TR) Turkey Sept Manufacturing PMI: 49.6 v 49.0 prior (3rd straight contraction).

- (ES) Spain Sept Manufacturing PMI: 47.7 v 46.5e (6th straight contraction).

- (CH) Swiss Sept PMI Manufacturing: 44.9 v 40.8e (9th straight contraction).

- (CZ) Czech Sept Manufacturing PMI: 41.7 v 42.5e (16th straight contraction).

- (TH) Thailand Sept Business Sentiment Index: 50.4 v 48.9 prior.

- (IT) Italy Sept Manufacturing PMI: 46.8 v 45.8e(6th month of contraction).

- (FR) France Sept Final Manufacturing PMI: 44.2 v 43.6e (confirms 8th straight contraction and lowest since May 2020).

- (DE) Germany Sept Final Manufacturing PMI: 39.6 v 39.8e (confirms 15th straight contraction and 3-month high).

- (EU) Euro Zone Sept Final Manufacturing PMI: 43.4 v 43.4e (confirms 15th straight contraction).

- (IT) Italy Aug Unemployment Rate: 7.3% v 7.7%e.

- (NO) Norway Sept PMI Manufacturing: 52.5 v 51.2 prior (3rd straight expansion).

- (GR) Greece Sept Manufacturing PMI: 50.3 v 52.9 prior (8th straight expansion).

- (CH) Swiss weekly Total Sight Deposits (CHF): 476.3B v 475.1B prior; Domestic Sight Deposits: 466.1B v 465.3B prior.

- (UK) Sept Final Manufacturing PMI: 44.3 v 44.2e (confirms 14th straight contraction).

- (GR) Greece Aug Unemployment Rate: 10.9% v 10.9% prior.

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

- (ZA) South Africa Sept Manufacturing PMI: 45.4 v 49.5e (8th month of contraction).

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

Fixed income issuance

- Taiwan sells NT$30B vs. NT$30B indicated in 10-year bonds: Avg Yield: 1.257% v 1.200% prior; bid-to-cover: 1.54x v 1.72x prior.

- Philippines sells total PHP12.92B vs. PHP15.0B indicated in 3-month, 6-month and 12-month bills.

Looking ahead

- 05:30 (DE) Germany to sell combined €5.0B in 3-month and 9-month Bubills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 07:30 (CL) Chile Aug Economic Activity Index (Monthly GDP) M/M: 0.2%e v 0.3% prior; Y/Y: -0.1%e v 1.8% prior.

- 08:00 (CZ) Czech Sept Budget Balance (CZK): No est v -194.6B prior.

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

- 09:00 (BR) Brazil Sept Manufacturing PMI: No est v 50.1 prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.2-6.8B in 3-month, 6-month and 12-month bills (4 tranches).

- 09:30 (CA) Canada Sept Manufacturing PMI: No est v 48.0 prior.

- 09:45 (US) Sept Final S&P Manufacturing PMI: 48.9e v 48.9 prelim.

- 10:00 (US) Sept ISM Manufacturing: 47.9e v 47.6 prior; Prices Paid: 49.0e v 48.4 prior.

- 10:00 (US) Aug Construction Spending M/M: 0.5%e v 0.7% prior.

- 11:00 (MX) Mexico Sept Manufacturing PMI: No est v 51.2 prior.

- 11:00 (CO) Colombia Sept PMI Manufacturing: No est v 46.8 prior.

- 11:00 (MX) Mexico Aug Total Remittances: No est v $5.7B prior.

- 11:00 (MX) Mexico Central Bank Economist Survey.

- 11:00 (UK) BOE's Mann.

- 11:00 (US) Fed's Powell.

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

- 12:00 (IT) Italy Sept New Car Registrations Y/Y: No est v +12.0% prior.

- 13:30 (US) Fed's Williams.

- 14:00 (BR) Brazil Sept Trade Balance: $9.0Be v $9.8B prior; Exports: $27.7Be v $31.2B prior; Imports: $20.0Be v $21.4B prior.

- 14:00 (MX) Mexico Sept IMEF Manufacturing Index: No est v 52.3 prior; Non-Manufacturing Index: No est v 52.1 prior.

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

- 17:00 (NZ) New Zealand Q3 NZIER Business Confidence: No est v -63% prior.

- 19:01 (UK) Sept BRC Shop Price Index Y/Y: No est v 6.9% prior.

- 19:30 (AU) Australia ANZ/Roy Morgan Weekly Consumer Confidence: No est v 77.5 prior.

- 19:50 (JP) Japan end-Sept Monetary Base: No est v ¥674.4T prior.

- 20:30 (AU) Australia Aug Building Approvals M/M: +2.8%e v -8.1% prior; Private Sector Houses M/M: No est v 0.1% prior.

- 20:30 (AU) Australia Aug Home Loans Value M/M: 0.0%e v -1.2% prior; Investor Loan Value M/M: No est v -0.1% prior; Owner-Occupier Loan Value M/M: No est v -1.9% prior.

- 23:30 (AU) Reserve Bank of Australia (RBA) Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 4.10%.

- 23:35 (JP) Japan to sell 10-year JGB Bonds.