Mix UK data continues to cloud next BOE rate decision

EU mid-market update: Mix UK data continues to cloud next BOE rate decision; Germany ZEW at a 3-year low but sees some optimism.

Notes/observations

- UK unemployment data was in line with expectations while wages rose more than expected. However, market view focused on the unemployment which rose comparable to month ago, giving extra weight for a BoE pause at next decision on Thurs, Sept 19th, pushing GBP currency and Gilt yields lower and holding FTSE100 up in the green while European equity counterparts fell. Reminder that Sept data is the reference for UK state pension triple lock rule. With today’s data being the first time in 2-years for real wage gains, the pensions are now set to rise by 8.5% in Apr 2024, locked to wage growth.

- German ZEW Survey was mixed with the current situation hitting a 3-year low; but some optimism bubbling on the 6-month outlook.

- Russia Pres Putin made a comprehensive annual speech at Eastern Economic Forum but did not carry any surprises.

- Apple Event expected later, following recent iPhone govt official bans in China. During EU morning, reports circulated that Apple will sell made-in-India iPhone 15 from launch day.

- Asia closed mixed with Nikkei225 outperforming at +1.0%. EU indices are -0.4% to +0.4%. US futures are -0.2% to -0.4%. Gold -0.2%, DXY +0.2%; Commodity: Brent +0.6%, WTI +0.7%, TTF +1.0%; Crypto: BTC -0.2%, ETH -1.9%.

Asia

- Australia Aug Business Confidence: 2 v 1 prior.

- Australia Sept Consumer Confidence: 79.7 v 81.0 prior.

- Japan LDP Senior Official Seko believed that BOJ Gov Ueda's comments in weekend media interview meant that BOJ would continue with easing. Finance Min Suzuki and Chief Cabinet Sec Matsuno stated they expected the BOJ to “closely communicate” with Japan gov’t and “conduct policy appropriately”.

- Japan PM Kishida updated the senior positions in cabinet reshuffle. Chief Cabinet Secretary Matsuno and Fin Min Suzuki to keep current positions. Deputy Chief Cabinet Sec Kihara to resign.

- New Zealand Treasury & Debt Management Office pre-election economic and fiscal update forecasted FY24 budget deficit of NZ$11.4B with a return to surplus delayed a year until 2026/27. Raised 2023/24 GDP forecast from 1.0% to 1.3% noting the country would avoid double dip recession.

Europe

- BOE's Mann (hawk) noted that MPC would need to do what was necessary to achieve 2% target sooner rather than later. Over tightening was easier to rectify than not moving; underestimating would lead to overshoot and holding rates at current level risked enabling further inflation persistence. She added that if she was wrong on inflation and the economy dropped significantly then would not hesitate to cut rates.

Energy

- IEA: Peak fossil fuel demand will happen this decade.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.07% at 456.50, FTSE +0.42% at 7,528.40, DAX -0.43% at 15,733.15, CAC-40 -0.29% at 7,257.17, IBEX-35 +0.44% at 9,476.80, FTSE MIB +0.04% at 28,537.00, SMI +0.11% at 11,018.90, S&P 500 Futures -0.20%].

Market focal points/Key themes: European indices open mixed with a bias to the upside, but shifted later in the session to take on a bias to the downside; better performing sectors include consumer discretionary and telecom; sectors trending lower include energy and materials; Smurfit Kappa to merge with WestRock; Shell sells remaining interest in Cambo to Ithaca Energy; reportedly German goverment looking to take stake in ThyssenKrupp’s marine division; earnings expected in the upcoming US session include Nasdaq.

Equities

- Consumer discretionary: Davide Campari-Milano [CPR.IT] -5.0% (new CEO).

- Consumer staples: Associated British Foods [ABF.UK] +1.5% (trading update - outlook ahead of expectations).

- Healthcare: OSE Immunotherapeutics [OSE.FR] +62.0% (positive trial data).

- Industrials: Smurfit Kappa [SKG.UK] -10.5% (to merge with WestRock), Chemring Group [CHG.UK] -5.5% (trading update).

- Technology: SAP [SAP.DE] -2.0% (sentiment from Oracle results and Q2 guidance), Keywords Studios [KWS.UK] -3.5% (H1 results).

- Materials: Vallourec [VK.FR] -2.0% (affirms FY23 guidance).

Speakers

- Russia Pres Putin commented that Russia was open for trade and he did not see difficulties with RUB currency (Ruble) volatility; No need to make sharp decisions on FX.

- Czech Central Bank (CNB) Prochazka stated that could begin the discussion of a potential rate cut at the Sept meeting. Did not expect a rate cut in Sept as inflation was still 'very strong'.

- Bank of Korea (BOK): Aug Minutes noted that the possibility of further rate hikes should be left open due to uncertainties to FX rates and inflation.

Currencies/fixed income

- USD steady with focus on upcoming US CPI data later this week. Dealers to use the data to help determine how much further the Fed would need to go in raising rates (if at all).

- EUR/USD holding just above the 107 level in quiet trade. Focus remains on the Thursday ECB rate decision with analysts still favoring a pause in the current tightening cycle.

- GBP/USD was lower as focus was on Hourly Earnings data to gauge 2nd round effects of inflation. Although the headline data was hot the ‘ex-bonus’ reading remained steady. Higher unemployment data building the case for a pause at next week’s BOE decision.

Economic data

- (SE) Sweden Aug PES Unemployment Rate: 3.2 v 3.1% prior.

- (NL) Netherlands Aug CPI M/M: 0.4% v 1.0% prior; Y/Y (final): 3.0% v 3.0% prelim.

- (NL) Netherlands Aug Final CPI EU Harmonized M/M: 0.5% v 0.5% prelim; Y/Y: 3.4% v 3.4% prelim.

- (FI) Finland July Current Account Balance: -€0.2B v -€0.2B prior.

- (UK) Aug Jobless Claims Change: +0.9K v +7.3K prior; Claimant Count Rate: 4.0% v 4.0% prior.

- (UK) July Average Weekly Earnings 3M/Y: 8.5% v 8.2%e; Weekly Earnings (ex-bonus) 3M/Y:7.8 % v 7.8%e.

- (UK) July ILO Unemployment Rate: 4.3% v 4.3%e; Employment Change 3M/3M: -207K v -195Ke.

- (DE) Germany Aug Wholesale Price Index M/M: +0.2% v -0.2% prior; Y/Y: -2.7% v -2.8% prior.

- (NO) Norway July Overall GDP M/M: 0.3% v 0.1% prior; GDP Mainland M/M: 0.2% v 0.0%e.

- 03:00 (ES) Spain Aug Final CPI M/M: 0.5% v 0.5% prelim; Y/Y: 2.6% v 2.6% prelim.

- (ES) Spain Aug Final CPI EU Harmonized M/M: 0.5% v 0.5% prelim; Y/Y: 2.4% v 2.4% prelim.

- (ES) Spain Aug CPI Core M/M: % v 0.0% prior; Y/Y (final): 6.1% v 6.1% prelim.

- (TR) Turkey July Retail Sales Y/Y: 31.0% v 29.3% prior.

- (DE) Germany Sept ZEW Current Situation Survey: -79.4 v -75.5e; Expectations Survey: -11.4 v -15.0e.

- (EU) Euro Zone Sept ZEW Expectations Survey: -8.9 v -5.5 prior.

Fixed income issuance

- (ID) Indonesia sold total IDR9.0T vs. IDR6.0T target in Islamic bill and bonds (Sukuk).

- (EU) European Union opened its book to sell new EUR-denominated Dec 2030 bond via syndicate; guidance seen +4bps to mid-swaps.

- (NL) Netherlands Debt Agency (DSTA) sold €2.495B vs. €2.0-2.5B indicated range in 0% Jan 2026 DSL Bonds; Avg Yield: 3.040% v 2.578% prior.

- (ES) Spain Debt Agency (Tesoro) sold total €2.31B vs. €1.5-2.5B indicated range in 3-month and 9-month bills.

- (UK) DMO sold £900M in 0.125% Mar 2051 Inflation-linked Gilts (UKTi); Real Yield: 1.330% v 1.105% prior; bid-to-cover: 2.54x v 2.82x prior.

- (IT) Italy Debt Agency (Tesoro) sold €7.0B vs. €7.0B indicated in 12-month Bills; Avg Yield: 3.873% v 3.723% prior; Bid-to-cover: 1.48x v 1.55x prior.

Looking ahead

- (DE) Germany July Current Account: No est v €29.6B prior.

- (CO) Colombia Aug Consumer Confidence: No est v -17.4 prior.

- 05:15 (CH) Switzerland to sell 3-month Bills.

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

- 05:30 (DE) Germany to sell €5.5B in 3.10% Sept 2025 Schatz.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell bills.

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

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

- 05:30 (PL) Poland to sell Bonds.

- 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2031, 2048 and 2053 bonds.

- 06:00 (US) Aug NFIB Small Business Optimism Index: 91.5e v 91.9 prior.

- 06:00 (PT) Portugal Aug Final CPI M/M: No est v 0.3% prelim; Y/Y: No est v 3.7% prelim.

- 06:00 (PT) Portugal Aug Final CPI EU Harmonized M/M: No est v 0.8% prelim; Y/Y: No est v 5.3% prelim.

- 06:00 (FI) Finland to sell combined €2.0B in 9-month and 12-month bills.

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

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

- 08:00 (BR) Brazil Aug IBGE Inflation IPCA M/M: 0.3%e v 0.1% prior; Y/Y: 4.7%e v 4.0% prior.

- 08:00 (IN) India Aug CPI Y/Y: 7.1%e v 7.4% prior.

- 08:00 (IN) India July Industrial Production Y/Y: No est v 3.7% prior.

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

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

- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills.

- 12:00 (US) WASDE Crop Report.

- 13:00 (US) Treasury to sell 10-Year Notes Reopening.

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

- 17:00 (KR) South Korea Aug Import Price Index M/M: No est v 0.4% prior; Y/Y: No est v -13.5% prior.

- 17:00 (KR) South Korea Aug Export Price Index M/M: No est v 0.1% prior; Y/Y: No est v -12.8% prior.

- 17:05 (NZ) RBNZ’s Silk.

- 18:45 (NZ) New Zealand Aug Food Prices M/M: No est v -0.5% prior.

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

- 19:50 (JP) Japan Aug PPI M/M: 0.2%e v 0.1% prior; Y/Y: 3.3%e v 3.6% prior.

- 19:50 (JP) Japan Q3 BSI Large All Industry Q/Q: No est v 2.7 prior; Large Manufacturing Q/Q: No est v -0.4 prior.

- 21:10 (JP) BOJ Outright Bond Purchase Operation for 1~3-years; 5~10 Years; 25Years~ maturities.

- 21:30 (KR) Bank of Korea (BOK) to sell KRW800B in 1-Year Monetary Stabilization Bonds (MSB).

- 23:00 (KR) South Korea Aug Total Bank Lending to Households (KRW): No est v 1,068T prior.

- 23:00 (KR) South Korea July M2 Money Supply M/M: No est v 0.5% prior; “L” Money Supply M/M: No est v 0.7% prior.

- 23:00 (TH) Thailand to sell combined THB32B in 2027 and 2052 bonds.