EU mid-market update: Market circles ahead of key rate decision marathon, starting with Fed tomorrow; UAW strike contagion concerns.

Notes/observations

- United Auto Workers (UAW) strike influence spreads as Canadian union UNIFOR enters dispute talks with Ford. Initially threatening to strike tonight if no agreement was reached, but then extended talks for 24 hours. UAW Pres said strikes would expand if no agreement was reached by noon on Fri.

- With ongoing US automaker disputes, automobile sector in Europe shows strength and Toyota and Honda shares hit record highs in Asia.

- Euro Zone Final Aug CPI YoY revised slightly lower to 5.2% but core remains unchanged at 5.3% YoY.

- No surprises seen on macro front with RBA minutes in line and ECB Villeroy comment reiterating council stance to hold rates at current levels.

- Generally light moves seen in European major bourses ahead of key catalysts in latter part of week, with rate decisions from FOMC, BoE and BoJ. Mild positive equity move seen at open amid a falling USD.

- Asia closed mixed with Nikkei 225 underperforming at -0.8%. EU indices are -0.2% to +0.4. US futures are +0.1%. Gold 0.0%, DXY -0.1%; Commodity: Brent +0.4%, WTI +0.6%, TTF +0.1%; Crypto: BTC +1.5%, ETH +0.8%.

Asia

- Reserve Bank of Australia (RBA) Sept Minutes: Reiterates that further policy tightening may be required, but decided the case for a pause at 4.1% was stronger.

- China Foreign Min Wang Yi said China and Russia pursue an independent foreign policy; Cooperation between the two sides is not aimed at third party and will not be influenced by a third party.

- Japan METI Minister Nishimura said it is key for firms to be able to respond to higher yields.

- Reserve Bank of New Zealand (RBNZ): Plans debt-to-income framework consultation in early 2024.

- Japan PM Kishida to announce domestic asset management industry reforms on Thursday in NYC.

- Japan Foreign Ministry: US, Japan, South Korea shared concerns that Russia-North Korea cooperation may have negative impact on peace and stability of Indo-Pacific.

- Indonesia Parliament approves 2024 budget at IDR3,325T (as expected).

- Bank of Japan (BOJ) and Malaysia Central Bank (BNM) renew bilateral currency swap arrangement of up to $3B; Effective Sept 18.

- India Govt Cabinet passes women reservation bill to reserve a third of parliament lower house seats for woman.

- China Transport Ministry: Fully resuming international cruise ship transportation to and from Chinese ports.

Ukraine conflict

- US Sec of State Blinken met with China VP Han about Russia/Ukraine war, North Korea and Taiwan Strait.

- EU foreign ministers expected to meet in Ukraine in October.

Europe

- OECD Updates Economic Outlook: Notes Germany is the only major economy expected to be in recession this year.

- South Africa Foreign Minister said there is no solution to Palestinian-Israeli conflict without an independent Palestinian state.

- Ireland Central Bank (BoI) updated economic outlook by raising 2023 EU Harmonized CPI and cutting 2024-2025 EU Harmonized CPI forecasts.

- EU Commission Vice President reiterated the EU does not seek to decouple from China.

- Germany carmakers in line of fire of possible EU-China trade war - FT.

- BoE Dep Gov Woods (PRA Dir) said seeing some pickup in loan impairment, not worried.

- Ukraine Dep Premier Stefanishyna said he hopes for stabilization of grain issue with Poland.

Americas

- US House Speaker McCarthy (R-CA) said he will bring GOP stopgap govt spending measure to house floor on Thursday to avert a shutdown.

- US President Biden said billionaires should be paying at least 36% in taxes.

- Brazil Fin Min Haddad said Pres Lula is insisting on a lot with EU for us to seal Mercosur Agreement this year.

- For Ford, UNIFOR (Canada union, covers ~5.6K Ford workers) and company to extend talks for 24-hours; Union got 'substantive offer' before deadline.

Energy

- Ukraine Energy Min said Ukraine has enough gas in storage to pass winter.

- Japan Chief Cabinet Sec Matsuno said gathering information about fresh US sanctions related to Russia's Arctic LNG 2 gas project and its impact to Japan.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.24% at 457.80, FTSE +0.25% at 7,671.71, DAX -0.05% at 15,718.55, CAC-40 +0.23% at 7,292.91, IBEX-35 +0.50% at 9,529.61, FTSE MIB +0.50% at 28,730.00, SMI +0.15% at 11,106.90, S&P 500 Futures ++0.12%].

Market focal points/key themes

Equities

European indices opened slightly higher across the board and advanced a bit as the session progressed; among sectors leading the way higher are Automobiles & Parts and Real Estate; lagging sectors include Retail and Tech; On the corporate front, shares of tourism operator TUI trade higher in Frankfurt over 5% following winter bookings outlook, while shares of UK focused retailer and manufacturer of PVCu replacement windows and doors, Safestyle UK trade down over 40% following weak September outlook; earnings expected in the upcoming US session include AutoNation and Apogee Enterprises.

- Consumer discretionary: Richemont [CFR.CH] -0.5% (Swiss trade data), Colas Rail [RE.FR] +52% (Bouygues offer), TUI [TUI1.DE] +5.5% (trading update; bookings outlook), Kingfisher [KGF.UK] -4.0% (earnings; cuts outlook; buyback), Safestyle UK [SFE.UK] -42.5% (trading update; fresh Sept business outlook).

- Consumer staples: Ocado [OCDO.UK] +2.5% (earnings).

- Financials: UBS [UBSGN.CH] +0.5% (uncertainties in securing regulatory approvals in some countries related to Credit Suisse takeover).

- Industrials: Stellantis [STLA.NL] +1.5% (UAW President says Union will announce new plants to strike on Friday if no serious progress reached; Stellantis could close 18 facilities under UAW deal; cites the co's offer to the UAW), Volkswagen [VOW3.DE] +3.0% (analyst action), Kion Group [KGX.DE] -2.5% (placement).

Speakers

- ECB's Villeroy (France) said ECB will maintain rates at 4% as needed. Later saying ECB rates can fall once inflation is back around 2% target.

- Japan PM Kishida said to hold bilateral Summit with Iran in New York; Expects to talk with Ukraine's Pres Zelenskiy at UN Assembly.

- Philippines Finance Chief Diokno: Halting fuel taxes to seriously impact government finances.

- Czech Central Bank Dep Gov Frait said Czech cuts likely to be slower than market expects, but a cut in Nov or Dec can't be ruled out.

Currencies/fixed income

USD weakness at EU open put pressure on USD/JPY down to 147.70. GBP/USD relatively sideways with BoE decision on Thurs. EUR/USD litle changed after Euro Zone Aug CPI relatively in line. Muted moves as main focus is towards rate decisions including Fed on Wed, and BoE/BoJ on Thurs.

Economic data

- (MY) Malaysia Aug Trade Balance (MYR): 17.3B v 17.8Be.

- (CH) Swiss Aug Trade Balance (CHF): 4.1B v 3.1B prior.

- (AT) Austria Aug Final CPI M/M: 0.3% v 0.4% prelim; Y/Y: 7.4% v 7.5% prelim.

- (EU) Euro Zone July Current Account: €20.9B v €35.8B prior.

- (IT) Italy July Current Account: €5.2B v €6.0B prior.

- (HK) Hong Kong Aug Unemployment Rate: 2.8% v 2.8%e.

- (GR) Greece July Current Account: +€0.8B v -€0.6Be.

-(PT) Portugal July Current Account: €0.8B v €1.1B prior.

- (EU) Euro Zone Aug Final CPI Y/Y: 5.2% v 5.3%e; CPI Core Y/Y: 5.3% v 5.3%e; CPI M/M: 0.5% v 0.6%e.

- (CY) Cyprus Aug CPI Harmonized M/M: 1.1% v 1.4% prior; Y/Y: 3.1% v 2.4% prior.

Fixed income issuance

- South Korea sells KRW500B vs. KRW500B indicated in 20-year Bonds; Avg Yield 3.830% v 3.795% prior; bid to cover: 3.12x v 3.01x prior.

- Japan sells ¥3.5T in 12-Month Bills; Avg Yield: -0.0378% v -0.0679% prior; bid-to-cover: 3.27x v 2.87x prior.

-Thailand Central Bank sells THB60B vs. THB 60B indicated in 3-month bills; Avg Yield: 2.37507% v 2.2304% prior; bid-to-cover: 1.14x v 1.33x prior.

-China PBOC sells CNY15.0B v CNY15.0B indicated in 6-month bills at 3.38% coupon in Hong Kong.

-Taiwan sells NT$25.0B vs. NT$25B indicated in 20-year Bonds; Avg Yield: 1.388% v 1.419% prior, bid-to-cover: 1.89x v 1.87x prior.

- Philippines sells PHP30B vs. PHP 30B indicated in 10-year bonds; Avg Yield: 6.420% v 6.625% prior; bid-to-cover: 2.26x v 2.23x prior.

- Germany to sell €4.0B in 10-year bund on Wed, Sept 27th.

- Indonesia sells total IDR15.8T vs. IDR14.0T target in bills and bonds.

- UK DMO sells £2.75B in 3.75% Oct 2053 Green Gilts ; Avg Yield: 4.704% v 4.484% prior; Bid-to-cover: 2.38x v 2.33x prior; Tail: 1.6bps v 2.2bps prior.

Looking ahead

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

- 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2032, 2037 and 2044 bonds.

- 06:00 (IL) Israel Q2 Preliminary GDP (2nd of 3 readings): No est v 3.0% advance.

- 06:00 (IL) Israel Aug Unemployment Rate: No est v 3.4% prior.

- 06:00 (PT) Portugal Aug PPI M/M: No est v -0.3% prior; Y/Y: No est v -6.7% prior.

- 06:00 (FI) Finland to sell €1.0B in 2030 and 2033 RFGB bonds.

- 06:00 (EU) ESM to sell €1.1B in 6-month Bills.

- 06:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance.

- 08:00 (BR) Brazil July Economic Activity Index (Monthly GDP) M/M: 0.5%e v 0.6% prior; Y/Y: 0.9%e v 2.1% prior.

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

- 08:30 (NL) ECB’s Elderson.

- 08:30 (US) Aug Housing Starts: 1.437Me v 1.452M prior; Building Permits: 1.440Me v 1.443M prior (revised from 1.442M); Housing Starts M/M: -0.8%e v 3.9% prior; Building Permits M/M: 0.3%e v 0.1% prior.

- 08:30 (CA) Canada Aug CPI M/M: 0.2%e v 0.6% prior; Y/Y: 3.8%e v 3.3% prior; CPI Core-Trim Y/Y: 3.7%e v 3.6% prior; CPI Core-Median Y/Y: 3.7%e v 3.7% prior; Consumer Price Index: 158.3e v 158.1 prior.

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

- 11:00 (CO) Colombia July Trade Balance: -$0.6Be v -$0.8B prior; Total Imports: $4.9Be v $5.0B prior.

- 13:00 (US) Treasury to sell 20-Year Bond Reopening.

- 13:45 (CA) Bank of Canada (BOC) Dep Gov Kozicki.

- 15:00 (AR) Argentina Q2 GDP Q/Q: -2.8%e v +0.7% prior; Y/Y: -4.8%e v +1.3% prior.

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

- 17:00 (KR) South Korea Aug PPI Y/Y: No est v -0.2% prior.

- 18:45 (NZ) New Zealand Q2 Current Account (NZD): -4.4Be v -5.2B prior; Current Account to GDP Ratio YTD: -8.0%e v -8.5% prior.

- 19:50 (JP) Japan Aug Trade Balance: -¥678.5Be v -¥66.3B prior (revised from -¥78.7B); Adj Trade Balance: -¥441.1Be v -¥557.2B prior; Exports Y/Y: -2.3%e v -0.3% prior; Imports Y/Y: -20.0%e v -13.6% prior (revised from -13.5%).

- 20:30 (AU) Australia Aug Westpac Leading Index M/M: No est v -0.0% prior.

- 21:15 (CN) China PBOC Monthly Loan Prime Rate (LPR) Setting: Expected to leave both 1-year and 5-year rates unchanged at 3.45% and 4.20% respectively.

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