Lower than expected UK unemployment rate raises doubt on more BoE rate cuts

EU mid-market update: Lower than expected UK unemployment rate raises doubt on more BOE rate cuts but high jobless claims and low wage growth leaves a dovish kicker; German ZEW tanks; Home Depot and US PPI to come.

Notes/observations

- Conflicting UK unemployment figures put further doubt over the methods used for calculation by ONS, after ILO unemployment rate hits lowest since Feb, while July Jobless Claims was highest since the pandemic or 2009 if excluding pandemic. Following BOE beginning easing on Aug 1st, could see both hawks and doves use today’s data as evidence for their case. Cable (GBP/USD) and Gilt yields trade higher. FTSE lags slightly.

- Remaining in UK, Kantar released 12-week grocery sales, showing first acceleration in monthly grocery inflation since Mar 2023, although now in a more normal range at only 1.8%.

- Substantial miss in German ZEW survey, for biggest drop in ~2 years and lowest since Feb as ZEW economists note domestic economy is ‘breaking down’.

- Primary focus remains on Wed CPI print out of UK and US, as well as Home Depot and Walmart earnings during next few days.

- Nikkei225 surged 3.5%, Yen weakened 0.5% as Japan markets returned from holiday on Monday and played catch up from the weekend.

- Asia closed mixed with Nifty 50 -0.8%. EU indices are -0.1% to +0.3%. US futures are +0.1-0.5%. Gold -0.5%, DXY +0.1%; Commodity: Brent -0.4%, WTI -0.3%; Crypto: BTC +1.1%, ETH +3.0%.

Asia

- Japan July PPI registered its highest annual pace since Aug 2023 (M/M: 0.3% v 0.3%e; Y/Y: 3.0% v 3.1%e).

- Singapore Q2 Final GDP Q/Q: 0.4% v 0.4% prelim; Y/Y: 2.9% v 2.9% prelim.

- Australia Aug Westpac Consumer Confidence Index: 85.0 v 82.7 prior.

- Australia Q2 Wage Price Index Q/Q: 0.8% v 0.9%e; Y/Y: 4.1% v 4.0%e.

- Australia July NAB Business Confidence: 1 v 4 prior; Business Conditions: No est v 4 prior.

- Japan Parliament to hold special session at lower house committee on Aug 23rd [Fri] to discuss BOJ rate hike.

Mid-East

- Fitch downgraded Israel sovereign rating to A from A+; Outlook Negative.

Global conflict/tensions

- Israel Military has recently stated to be at the highest level of alert.

- White House's Kirby: Timing of Iran attack on Israel could be this week; We've to be prepared for what could be significant attacks.

- White House: US Pres Biden spoke to leaders of France, Germany, Italy, and UK to discuss Middle East.

- Sec of State US Blinken scheduled to travel to Middle East on Tuesday, Aug 13th.

- Russia Pres Putin stated that Ukraine's incursion in Kursk region was an attempt to stop Moscow's offensive in Donbas and aimed at ceasefire negotiations.

- WTI Crude hitting nearly $80 overnight on increased Middle East tensions was added to by Adani Ports forecast of Red Sea disruptions to remain until at least end-2024.

Europe

- German Econ Min Habeck: ECB lowering rates will help the construction industry. erman building industry is weakening and in a slump.

Americas

- US July Monthly Budget Statement: -$247.3B v -$242.0Be.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.04% at 499.28, FTSE -0.09% at 8,202.50, DAX +0.22% at 17,750.35, CAC-40 -0.08% at 7,245.14, IBEX-35 +0.27% at 10,675.00, FTSE MIB +0.03% at 31,939.00, SMI -0.11% at 11,879.70, S&P 500 Futures +0.33%].

Market focal points/key themes: European indices open higher across the board; tech financials; consumer healthcare; healthcare sector weighed by Novo Nordisk shares in response to news from rival Eli Lilly; TIM divests its residual stake in Inwit; earnings expected in the upcoming US session include Home Depot and Nu Holdings.

Equities

- Consumer discretionary: HelloFresh [HFG.DE] +12.5% (Q2 results, affirms guidance), Pandora [PNDORA.DK] -3.0% (Q2 results, beats estimates, notes healthy Q3 trading), Adidas [ADS.DE] -0.5% (rival Asics affirms outlook), ISS [ISS.DK] -2.0% (Q2 results, raises guidance and increases buyback).

- Energy: thyssenkrupp nucera [NCH2.DE] +3.5% (earnings) - Financials: Just Group [JUST.UK] +13.5% (H1 results, expects to exceed guidance) - Healthcare: Basilea Pharmaceutical [BSLN.CH] +7.5% (H1 results, raises profit and revenue guidance) - Industrials: Volkswagen [VOW3.DE] -0.5% (will significantly delay launch of 'Trinity' EV model; Production pushed from 2026 to the end of 2032).

- Technology: Tecan Group [TECN.CH] -18.0% (H1 results, cuts guidance).

Speakers

- IEA Monthly Oil Report (OMR) noted that oil supply struggled to match summer demand, market in deficit; Noted China's oil demand growth slowdown weighed on global outlook.

- German ZEW Economists noted that likely that economic expectations were still affect by high uncertainty . Most recently, this uncertainty expressed itself in a turmoil on international stock markets.

Currencies/fixed income

- FX trading remained listless as market participants awaited key inflation data in the coming days. Markets awaiting whether inflation was proving to be stickier-than-expected. Mid-East tensions keeping safe-haven plays on the front burner.

- EUR/USD little changed at 1.0920 level and dealers noted the pricing unlikely to be derailed by the upcoming ZEW survey.

- Better UK unemployment data aided the GBP currency as GBP/USD probed the 1.28 level. However Kantar grocery market data saw grocery inflation register its 1st acceleration since Mar 2023 (at 1.8% v 1.6% prior). UK July CPI data will be released in Wed’s session.

- USD/JPY continued to inch higher and probe the 148 neighborhood. Japan Parliament to hold special session at lower house committee on Aug 23rd to discuss the recent BOJ rate hike.

Economic data

- (SE) Sweden July PES Unemployment Rate: 3.6 v 3.4% prior.

- (JP) Japan July Preliminary Machine Tool Orders Y/Y:8.4 % v 9.7% prior.

- (UK) July Jobless Claims Change +135.0K v +36.2K prior; Claimant Count Rate: 4.7% v 4.4% prior; Payrolled Employees Monthly Change: +24K v +10Ke.

- (UK) Jun Average Weekly Earnings 3M/Y/Y: 4.5% v 4.6%e; Weekly Earnings (ex-bonus) 3M/Y/Y: 5.4% v 5.4%e.

- (UK) Jun ILO Unemployment Rate: 4.2% v 4.5%e; Employment Change 3M/3M: +97K v +3Ke.

- (ES) Spain July Final CPI M/M: -0.5% v -0.5% prelim; Y/Y: 2.8% v 2.8% prelim.

- (ES) Spain July Final CPI EU Harmonized M/M: -0.7% v -0.7% prelim; Y/Y: 2.9% v 2.9% prelim.

- (ES) Spain July CPI Core M/M: -0.3% v +0.5% prior; Y/Y: 2.8% v 2.8% prelim.

- (TR) Turkey Jun Current Account Balance: $0.4B v $0.3Be.

- (CZ) Czech Jun Monthly Current Account Balance(CZK): -48.3B v -28.0Be.

- (DE) Germany Aug ZEW Current Situation Survey: -77.3 v -74.5e; Expectations Survey: 19.2 v 34.0e.

- (EU) Euro Zone Aug ZEW Expectations Survey: 17.9 v 43.7 prior.

- (ZA) South Africa Jun Total Mining Production M/M: -1.6% v +0.1% prior; Y/Y: -3.5% v -0.1%e; Gold Production Y/Y: -12.6% v -9.0% prior; Platinum Production Y/Y: -5.8% v -4.3% prior.

- China July YTD New Yuan Loans (CNY):13.53T v 13.700Te.

- China July YTD Aggregate Financing (CNY): 18.90T v 19.149Te.

- China July M2 Money Supply Y/Y: 6.3% v 6.0%e; M1 Money Supply Y/Y: -6.6% v -5.3%e; M0 Money Supply Y/Y: 12.0 v 11.7% prior.

Fixed income issuance

- (ID) Indonesia sold total IDR8.0T vs. IDR8.0T target in Islamic bills and bonds (sukuk).

- (ES) Spain Debt Agency (Tesoro) sold total €2.191B vs. €1.5-2.5B indicated range in 3-month and 9-month bills.

- (UK) DMO sold £3.0B in 3.75% Jan 2038 Gilts; Avg Yield: 4.131% v 4.134% prior; bid-to-cover: 3.28x v 3.42x prior; Tail: 0.1bps v 0.1bps prior.

Looking ahead

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

- 05:30 (ZA) South Africa Q2 Unemployment Rate: 31.8%e v 32.9% prior.

- 05:30 (CH) Switzerland to sell 3-month Bills.

- 05:30 (DE) Germany to sell €5.0B in 2.7% Sept 2026 Schatz.

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

- 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2032, 2035 and 2037 bonds.

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

- 06:00 (US) July NFIB Small Business Optimism Index: 91.5e v 91.5 prior.

- 06:00 (IL) Israel July Trade Balance: No est v -$2.4B prior.

- 06:00 (PT) Portugal Q2 Labour Costs Y/Y: No est v 6.2% prior.

- 06:00 (FI) Finland to sell combined €2.0B in 6-month and 12-month bills.

- 06:30 (TR) Turkey to sell bonds (2 tranches).

- 08:00 (PL) Poland Jun Current Account Balance: +€0.4Be v -€0.1B prior; Trade Balance: -€0.3Be v -€0.6B prior; Exports: €27.0Be v €26.4B prior; Imports: €27.2Be v €27.0B prior.

- 08:00 (BR) Brazil CONAB Crop Report.

- 08:00 (BR) Brazil Jun IBGE Services Volume M/M: 0.9%e v 0.0% prior; Y/Y: 0.8%e v 0.8% prior.

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

- 08:30 (US) July PPI Final Demand M/M: 0.2%e v 0.2% prior; Y/Y: 2.3%e v 2.6% prior.

- 08:30 (US) July PPI (ex-food/energy) M/M: 0.2%e v 0.4% prior; Y/Y: 2.7%e v 3.0% prior.

- 08:30 (US) July PPI (ex-food/energy/trade) M/M: 0.2%e v 0.0% prior; Y/Y: No est v 3.1% prior.

- 08:30 (CL) Chile Central Bank Traders Survey.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 13:15 (US) Fed’s Bostic.

- 16:30 (US) Weekly API Oil Inventories.

- 19:00 (KR) South Korea July Unemployment Rate: 2.9%e v 2.8% prior.

- 21:30 (KR) Bank of Korea to sell KRW600B in 1-year Bonds.

- 22:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave Official Cash Rate (OCR) unchanged at 5.50%.

- 22:35 (CN) China to sell 1-year, 3-year and 7-year Bonds.

- 22:35 (CN China sells 20 Year Bonds (Special); Avg Yield % v 2.4415% prior (July 18th 2024).

- 23:00 (NZ) New Zealand Central Bank (RBNZ) Gov Orr post rate decision press conference.

- 23:35 (JP) Japan to sell 5-Year JGB Bonds.