Musk reverses course on 'America Party'

EU mid-market update: US tech pullback weighs on Asia and Europe trade. Stretch valuations or cracks forming? Musk reverses course on 'America Party'; bpost to stop US shipments ahead of de minimis deadline next week.

Notes/observations

- European equities lower after prior session strength, US futures weaker. Market is watching rates and FOMC minutes ahead of Powell’s Jackson Hole speech.

- Focus has been on elevated UK July inflation (headline, core and services all above consensus), paring back BoE rate cut expectations but Gilt yields tipped marginally lower. 30-year gilt continues to get attention due to its divergence and elevated level. BoE Sept rate cut probability ~83%.

- Press reports that Trump administration is weighing non-voting equity stakes in other CHIPS Act recipients, not only Intel, by converting grant funds, with Commerce Secretary Howard Lutnick driving the process and Treasury Secretary Scott Bessent involved. Officials stress the stake would not confer operational control or be used to pressure customers, framing it as a way for taxpayers to earn a return on subsidies.

- Sweden and Iceland central banks left rates unchanged, as expected, while a surprise cut came from Indonesia Central Bank, cutting 25bps when a pause was predicted. IDR (rupiah) is lower as a result.

- Bpost will temporarily halt parcel shipments to the U.S. from Aug 23, citing missing U.S. guidance on how duties should be collected and remitted once the de minimis exemption ends for all goods on Aug 29. PostEurop says only some technical details arrived on Aug 15, leaving too little time to prepare, so Bpost is pausing until the modalities are clarified.

- Traders will be closely watching Target, TJX Companies and Lowe's results this morning for more color on inventories stance and pricing pressures.

- Also traders circulating the stat that data centers have quadrupled to near $40B SAAR since 2020 while offices have halved to the low $40Bs, putting data center build value on track to overtake office construction within two quarters.

- Asia closed mixed with Nikkei225 underperforming -1.4%. EU indices -0.3% to +0.1. US futures -0.2%. Gold +0.3%, DXY +0.1%; Commodity: Brent +1.1%, WTI +1.3%; Crypto: BTC -1.3%, ETH -1.3%.

Asia

- China PBOC Monthly Loan Prime Rate (LPR) Setting left both 1-year and 5-year LPR unchanged at 3.00% and 3.50% respectively (as expected).

- New Zealand Central Bank (RBNZ) cut Official Cash Rate (OCR) by 25bps to 3.00% (as expected) to resume easing in the current cycle. Vote to cut by 25bps was not unanimous (4-2) to cut by 25bps (dissenters sought a 50bps cut). Statement noted scope to lower OCR further if inflation pressures eased. A larger reduction in the OCR might disrupt such a dynamic and generate clear signals that support consumption.

- Japan July Trade Balance: -¥117.5B v ¥200Be; Exports Y/Y: -2.6% (4-year low) v -2.1%e; Imports Y/Y: -7.5% v -10.0%e.

- Japan Jun Core Machine Orders M/M: +3.0% v -0.6%e; Y/Y: 7.6% v 4.7%e.

Global conflict/tensions

- President Trump: Thought resolving Russia-Ukraine war would be 'easier'; if need i'll go to the Putin-Zelenskiy meeting and 'close it'. Would be “impossible” for Ukraine to join Nato and that US security guarantees for the country would be limited to air support.

Europe

- UK Chancellor Reeves said to be drawing up plans to hit the owners of high-value properties with capital gains tax when they sell their homes to help £40 billion hole in the public finances.

Americas

- Treasury Sec Bessent noted had good talks with China; China is the biggest revenue line in terms of tariff income; Status quo is working well on China. Noted that 'bet on stablecoins' to bolster demand for US Treasuries.

- President Trump renewed the pressure on Fed Chair Powell ahead of the Jackson Hole symposium, posting that Powell is hurting the housing industry.

Energy

- Weekly API Crude Oil Inventories: -2.4M v +1.5M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.01% at 557.72, FTSE -0.09% at 9,181.24, DAX -0.46% at 24,322.07, CAC-40 -0.09% at 7,972.29, IBEX-35 -0.28% at 15,272.39, FTSE MIB -0.35% at 42,872.00, SMI +0.06% at 12,223.67, S&P 500 Futures -0.20%].

Market focal points/key themes: European indices opened generally lower and remained under pressure through the early part of the session; US tech selloff seen weighing on risk appetite; among sectors managing gains are telecom and utilities; sectors leading to the downside include materials and industrials; focus on release of FOMC minutes later in the day; earnings expected in the upcoming US session include Target, Lowe’s, Estee Lauder and Baidu.

Equities

- Consumer discretionary: bpost [BPOST.BE] -1.0% (said to temporarily stop shipments to US from Aug 23rd due to de minimis tax exemption removal from Aug 29th).

- Energy: SFC Energy [F3C.DE] +0.5% (order).

- Healthcare: Novo Nordisk [NOVOB.DK] -1.0% (negative VKTX data on oral GLP-1), Alcon [ALC.CH] -10.5% (earnings).

- Industrials: Rheinmetall [RHM.DE] -1.5% (continued optimism on potential Putin-Zelenskiy meeting and Gaza ceasefire).

- Technology: ASML [ASML.NL] -1.0% (in sympathy with US tech stocks; US reportedly considers equity stakes in chipmakers in exchange for CHIPS Act funding similar to Intel's plan).

- Real Estate: SBB [SBBB.SE] +2.5% (earnings).

Speakers

- ECB Chief Lagarde noted that recent trade deals had alleviated, but certainly not eliminated, global uncertainty.

- Sweden Central Bank Policy Statement reiterated still saw some probability of a further interest rate cut this year. Outlook remained largely the same. Upturn in inflation was assessed to be due to temporary factors. Economic activity remained weak but the recovery was sluggish.

- Sweden Central Bank (Riksbank) Gov Thedee post rate decision press conference noted that underlying inflation was on its way towards target.

- Iceland Central Bank Policy Statement noted further rate cuts to depend whether inflation moved closer to the 2.50% target. Inflation outlook remained highly uncertain. Wages had risen markedly while inflation expectations remained above target. Economic activity appeared relatively robust.

- Indonesia Central Bank Policy Statement noted that the ecision to cut by 25bps was consistent with low inflation expectations through 2026. Decision also consistent with IDR currency and the need to support GDP growth. To continue to monitor the scope for additional rate cuts.

Currencies/fixed income

- USD began the session on steady ground but eased a bit ahead of mid-day. Focus remains on the upcoming Jackson Hole symposium on Friday.

- GBP/USD drifter higher following hotter UK July CPI data. Pair above 1.35 as BOE futures were now pricing about 45% chance for a rate cut by Dec (v >50% before inflation data).

- NZD was weaker following a dovish RBNZ rate cut.

- Oil little changed as investors await next steps in Ukraine peace talks.

- Gold hits near 3-week low on steady USD.

- 10-year German Bund yield at 2.74% and 10-year Gilt yield at 4.72%. 10-year Treasury yield: 4.31%.

Economic data

- (UK) July CPI M/M: 0.1% v 0.0%e; Y/Y: 3.8% v 3.7%e; CPI Core Y/Y: 3.8% v 3.7%e; CPI Services Y/Y: 5.0% v 4.8%e; CPIH Y/Y: 4.2% v 4.1%e.

- (UK) July RPI M/M:0.4 % v 0.1%e; Y/Y:4.8 % v 4.5%e; RPI-X (ex-mortgage interest payments) Y/Y: 4.7% v 4.3% prior; Retail Price Index: 406.2# v 404.9e.

- (DE) Germany July PPI M/M: -0.1% v +0.1%e; Y/Y: -1.5% v -1.3%e.

- (DK) Denmark Q2 Preliminary GDP Q/Q: +1.3% v -1.3% prior; Y/Y: 1.9% v 2.5% prior.

- (AT) Austria July Final CPI M/M: 0.3% v 0.2% prelim; Y/Y: 3.6% v 3.5% prelim.

- (ID) Indonesia Central Bank (BI) cut BI Rate by 25bps to 5.00% (not expected).

- (SE) Sweden Central Bank (Riksbank) left Repo Rate unchanged at 2.00% (as expected).

- (TW) Taiwan July Export Orders Y/Y: 15.2% v 16.7%e.

- (ZA) South Africa July CPI M/M: 0.9% v 0.7%e; Y/Y: 3.5% v 3.5%e.

- (ZA) South Africa July CPI Core M/M: 0.4% v 0.4%e; Y/Y: 3.0% v 3.0%e.

- (TW) Taiwan Q2 Current Account Balance: $36.2B v $30.2B prior.

- (UK) Jun ONS House Price Index Y/Y: 3.7% v 2.7% prior.

- (IS) Iceland Central Bank (Sedibank) left the 7-Day Term Deposit Rate at 7.50%.

Fixed income issuance

- (FI) Finland opened its book to sell EUR-denominated 7-year bond via syndicate; guidance seen +31bps to mid-swaps.

- (IN) India sold total INR210B vs. INR210B indicated in 3-month, 6-month and 12-month bills.

- (DK) Denmark sold total DKK2.3 in 2027 and 2035 DGB Bonds.

- (SE) Sweden sold total SEK17.5B vs. SEK17.5B indicated in 3-month and 6-month bills.

- (NO) Norway sold total NOK3.0B vs. NOK3.0B indicated in 2035 and 2039 bonds.

Looking ahead

- (AR) Argentina July UTDT Leading Indicator: No est v -1.6% prior.

- (MX) Mexico Citi Survey of Economists.

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

- 05:30 (DE) Germany to sell combined €2.5B in 2046 and 2054 Bunds.

- 06:00 (IE) Ireland Jun Property Prices M/M: No est v 0.6% prior; Y/Y: No est v 7.9% prior.

- 07:00 (US) MBA Mortgage Applications w/e Aug 15th: No est v 10.9% prior.

- 07:30 (IN) India July Eight Infrastructure (key) Industries: No est v 1.7% prior.

- 08:00 (MX) Mexico Jun Gold Production: No est v 6.14K prior; Silver Production: No est v 342.0K prior; Copper Production: No est v 41.3K prior.

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

- 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 4.50%.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:00 (US) Fed’s Waller.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (RU) Russia July PPI M/M: No est v -1.3% prior; Y/Y: No est v 0.1% prior.

- 12:00 (CA) Canada to sell 5 year Bonds.

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

- 14:00 (US) FOMC July Minutes.

- 15:00 (AR) Argentina Jun Economic Activity Index (Monthly GDP) M/M: -0.2%e v -0.1% prior; Y/Y:5.8%e v 5.0% prior.

- 15:00 (AR) Argentina July Trade Balance: $0.7Be v $0.9B prior.

- 15:00 (US) Fed's Bostic in Moderated Conversation on Economic Outlook.

- 16:10 (NZ) RBNZ Gov Hawkesby in Parliament.

- 17:00 (KR) South Korea July PPI Y/Y: No est v 0.5% prior.

- 18:45 (NZ) New Zealand July Trade Balance (NZD): No est v 0.1B prior; Exports: No est v 6.63B prior; Imports: No est v 6.49B prior.

- 19:00 (AU) Australia Aug Preliminary PMI Manufacturing: No est v 51.3 prior; PMI Services: No est v 54.1 prior; PMI Composite: No est v 53.8 prior.

- 20:00 (KR) South Korea Aug Exports 20 Days Y/Y: No est v -2.2% prior; Imports 20 Days Y/Y: No est v -4.3% prior.

- 20:30 (JP) Japan Aug Preliminary PMI Manufacturing: No est v 48.9 prior; PMI Services: No est v 53.6 prior; PMI Composite: No est v 51.6 prior.

- 21:00 (AU) Australia Aug Consumer Inflation Expectation: No est v 4.7% prior.

- 21:00 (CN) China July Swift Global Payments (CNY): No est v 2.9% prior.

- 22:30 (HK) Hong Kong to sell CNY1.25B in 3-year Bonds.

- 23:00 (ID) Indonesia Q2 BoP Current Account Balance: -$2.8Be v -$0.2B prior.