Risk aversion flows percolate – Focus on US-China tech tensions

Notes/observations

- European economic data was tame with German Final CPI unrevised.

- European TTF Nat Gas moved higher after Chevron confirmed Australia LNG worker strike started today until Sept 14th.

- Overnight, Fed’s Logan said it could be appropriate to skip rate hike in Sept.

- Following Poland Central Bank’s unexpectedly heavy 75bps rate cut on Weds, member Kotecki called it a ‘serious problem’ and suggested the move was to support an election campaign.

- ECB speakers are in the blackout period ahead of ECB rate decision next week. Market view is tilted towards a pause, but a case remains for another hike. Beyond Sept there is more agreement, with recent ECB comments suggesting holding rates at current levels for longer instead of further hikes.

- Hong Kong markets were closed due to record rainfall.

- Asia closed lower with Hang Seng under-performing at -1.6%. EU indices are -0.4% to -0.7%. US futures are -0.2% to -0.3%. Gold +0.3%, DXY -0.1%; Commodity: Brent -0.1%, WTI -0.3%, TTF +6.8%; Crypto: BTC +1.6%, ETH +0.7%.

Asia

- Japan July Labor Cash Earnings Y/Y: 1.3% v 2.4%e; Real Cash Earnings Y/Y: -2.5% v -1.4%e.

- Japan Q2 Final GDP Q/Q: 1.2% v 1.4%e; GDP Annualized Q/Q: 4.8% v 5.6%e.

- Japan July Current Account: ¥2.772T v ¥2.246Te; Trade Balance (BoP basis): ¥68.2B v ¥165.4Be.

- Japan Fin Min Suzuki reiterated stance that FX market should reflect fundamentals. Excessive currency moves were not desirable.

- S&P confirmed affirmation of New Zealand AA+ sovereign rating; Outlook Stable.

Americas

- Fed's Logan (voter) noted that it could be appropriate to skip interest-rate increase in Sept but not yet convinced excess inflation had been extinguished. Stressed that skipping did not imply the end of the tightening cycle.

- Fed's Goolsbee (voter) noted that Fed very rapidly approaching time when its argument was not about how high should rates go, but rather how long rates had to stay high.

- Fed's Williams (voter) stated that needed more data before making decision on next move.

- BOC Gov Macklem noted that the 2% inflation target was in sight but not there yet. Prepared to take further action to restore price stability.

- US government began an official probe into an advanced made-in-China chip housed within Huawei Technologies Co.’s latest smartphone (**Note: Huawei now selling a smartphone capable of ultrafast data connectivity, coupled with the ban, has the potential to make a significant dent in Apple’s sales).

Energy

- Chevron (CVX) confirmed its industrial action at Australia LNG plants to begin on Fri, Sept 8th; talks with unions ended without an agreement; remained apart on key terms with unions.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.6% at 451, FTSE -0.5% at 7407, DAX -0.7% at 15,607, CAC-40 -0.7% at 7,146, IBEX-35 -0.6% at 9,253, FTSE MIB -0.9% at 2,731, SMI -0.7% at 10,918, S&P 500 Futures -0.3%].

Market Focal Points/Key Themes: European indices open generally higher, but quickly turned around to trade in the red after the first hours of trading; Malta closed for holiday; sectors among those trending higher are consumer discretionary and technology; underperforming sectors include health care and energy; oil & gas subsector weighed down by Brent coming off highs for the week; Duni receives takeover offer from Melby; PEXA extends deadline for takeover of Smoove; reportedly Stroeer looking to sell its Statista unit; earnings expected in the upcoming US session include Kroger.

Equities

- Consumer discretionary: Restaurant Group [RTN.UK] +3.7% (H1 results - post close; Board changes), Gear4Musick [G4M.UK] -1.0% (AGM statement).

- Financials: Petershill Partners [PHLL.UK] -7.6% (H1 results, FY23 guidance).

- Healthcare: BioInvent [BINV.SE] -3.9% (initiates Phase I/II trail of BI-1206).

- Industrials: Porsche [P911.DE] -0.5% (analyst action - cut to Hold at Berenberg).

- Real Estate: Adler Group [ADL.DE] +3.8% (divestment).

- Telecom: Computacenter [CCC.UK] +7.7% (H1 results).

Speakers

- Germany DIW Institute cut its 2023 GDP forecast from -0.2% to -0.4%.

- EU Council Pres Michel stated that G20 should focus on food and energy security.

- EU's Dombrovskis (Trade Chief) saw moderate EU growth and decline in inflation for 2023/24.

- Poland Central Bank's Tyrowicz stated that nothing indicated that inflation was under control.

- Poland Central Bank (NBP) Kotecki stated that the recent 75bps rate cut at last meeting might be a serious problem.

- China Foreign Ministry Daily Briefing noted that Vice Premier Guoqing to visit Vladivostok, Russia between Sept 10-12th.

- Treasury Sec Yellen stated that saw China’s growth slowing over time. Monitoring China's economic challenges but did not see it directly impacting the US.

Currencies/fixed income

- USD was steady in quiet trade to end the week as the focus remain on the various rate paths of G7 members.

- EUR/USD holding just above 1.07 after a weak of disappoint EU data. Focus on next week’s ECB decision where market sentiment is betting on a pause in the current tightening cycle.

- USD/JPY at 147.45 as Japanese officials continue to provide some verbal intervention in the pair. Japan Fin Min Suzuki reiterated rapid FX moves were undesirable and warned they would not rule out any options against excessive FX moves.

Economic data

- (NL) Netherlands July Manufacturing Production M/M: -0.6% v +0.9% prior; Y/Y: -8.3% v -7.2; Industrial Sales Y/Y: -13.4% v -10.8% prior.

- (FI) Finland July Industrial Production M/M: +1.2% v -3.0% prior; Y/Y: -1.0% v -5.7% prior.

- (DE) Germany Aug Final CPI M/M: 0.3% v 0.3% prelim; Y/Y: 6.1% v 6.1% prelim.

- (DE) Germany Aug Final CPI EU-Harmonized M/M: 0.4% v 0.4% prelim; Y/Y: 6.4% v 6.4% prelim.

- (SE) Sweden July GDP Indicator M/M: 0.5% v 0.4%e; Y/Y: -3.6% v -1.3% prior.

- (SE) Sweden July Household Consumption M/M: +0.5% v -0.1% prior; Y/Y: 0.4% v -1.7% prior.

- (SE) Sweden July Private Sector Production M/M: +0.3% v -1.6% prior; Y/Y: -2.0% v -3.4% prior.

- (SE) Sweden July Industrial Orders M/M: -6.2% v -7.1% prior; Y/Y: -8.4% v +0.3% prior.

- (SE) Sweden July Industry Production Value Y/Y: -4.0% v -2.8% prior; Service Production Value: +0.1% v -1.4% prior.

- (DK) Denmark July Current Account Balance (DKK): 22.4B v 27.2B prior; Trade Balance (ex-shipping): 8.6B v 8.4B prior.

- (HU) Hungary Aug CPI M/M: 0.7% v 0.5%e; Y/Y: 16.4% v 16.3%e.

- (HU) Hungary July Preliminary Trade Balance: €0.7B v €1.6B prior.

- (FR) France July Industrial Production M/M: 0.8% v 0.1%e; Y/Y: 2.7% v 1.4%e.

- (FR) France July Manufacturing Production M/M: 0.7% v 0.4%e; Y/Y: +2.7% v -0.2% prior.

- (ES) Spain July Industrial Production M/M: +0.2% v -0.2%e; Y/Y: -1.8% v -2.0%e; Industrial Output NSA (unadj) Y/Y:-1.8 % v -1.5% prior.

- (AT) Austria July Industrial Production M/M: +0.3% v -1.4% prior; Y/Y: -1.0% v -3.4% prior.

- (CZ) Czech Aug Unemployment Rate: 3.6% v 3.6%e.

- (TH) Thailand Sept Foreign Reserves w/e Sept 1st: $217.1B v $215.2B prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 55.0K v 46.6K tons prior.

- (RU) Russia Narrow Money Supply w/e Sept 1st (RUB): 18.59T v 18.62T prior.

- (UN) FAO Aug World Food Price Index: # v 123.9 prior.

- (TW) Taiwan Aug Trade Balance: $8.6B v $6.2Be; Exports Y/Y: -7.3% v -8.6%e; Imports Y/Y: -22.9% v -17.8%e.

- (GR) Greece Aug CPI Y/Y: 2.7% v 2.5% prior; CPI EU Harmonized Y/Y: 3.5% v 3.5% prior.

- (GR) Greece July Industrial Production Y/Y: -1.9% v -3.4% prior.

- (HU) Hungary Aug YTD Budget Balance (HUF): 3.299T v -2.940T prior.

Fixed income issuance

- (IN) India sold total INR330B vs. INR330B indicated in 2028, 2033 and 2053 bonds.

Looking ahead

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2028, 2033 and 2050 Bonds.

- 06:00 (PT) Portugal July Trade Balance: No est v -€2.1B prior.

- 06:00 (IE) Ireland Aug Live Register Monthly Change: No est v +0.2K prior; Live Register Change: No est v 183.5K prior.

- 06:00 (UK) DMO to sell £5.0B in 1-month, 3-month and 6-month bills (£1.5B, £2.0B and £1.5B respectively).

- 07:00 (CL) Chile Aug CPI M/M: 0.4%e v 0.4% prior; Y/Y: 5.6%e v 6.5% prior.

- 07:00 (CL) Chile Aug CPI (ex-volatile items) M/M: No est v 0.3% prior; Y/Y: No est v 8.5% prior.

- 07:30 (IN) India Weekly Forex Reserve w/e Sept 1st: No est v $594.9B prior.

- 07:30 (IS) Iceland to sell 2025 and 2028 Bonds.

- 08:00 (IN) India announces upcoming bill issuance (held on Wed).

- 08:00 (UR) Ukraine Aug CPI M/M: 0.3%e v -0.6% prior; Y/Y: 10.1%e v 11.3% prior.

- 08:00 (UR) Ukraine Q2 GDP Q/Q: No est v 2.4% prior; Y/Y: +20.3%e v -10.5% prior.

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

- 08:30 (CA) Canada Aug Net Change in Employment: +17.5Ke v -6.4K prior; Unemployment Rate: 5.6%e v 5.5% prior.

- 08:30 (CA) Canada Q2 Capacity Utilization Rate: 82.5%e v 81.9% prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 10:00 (US) July Final Wholesale Inventories M/M: -0.1%e v -0.1% prelim; Wholesale Trade Sales M/M: +0.3%e v -0.7% prior.

- 11:00 (EU) Potential sovereign ratings after European close (Fitch on Turkey and Romania sovereign ratings; S&P on Portugal, Norway and Ukraine sovereign ratings.

- 12:00 (US) Q2 Financial Account Household Change in Net Worth: No est v $3.026T prior.

- 12:00 (RU) Russia Q2 Preliminary GDP (2nd reading) Y/Y: No est v 4.9% advance.

- 12:00 (RU) Russia Aug CPI M/M: 0.3%e v 0.6% prior; Y/Y: 5.1%e v 4.3% prior.

- 12:00 (RU) Russia Aug CPI Core M/M: No est v 0.5% prior; Y/Y: No est v 3.2% prior.

- 13:00 (US) Weekly Baker Hughes Rig Count.

- 15:00 (US) July Consumer Credit: $16.0Be v $17.9B prior.

- 21:30 (CN) China Aug CPI Y/Y: +0.2%e v -0.3% prior; PPI Y/Y: -3.0%e v -4.4% prior.