Risk on flows given additional tailwinds overnight after strong China data

EU mid-market update: Risk on flows given additional tailwinds overnight after strong China data; UAW strike is limited to particular plants for now.

Notes/observations

- Upbeat risk appetite seen globally after ECB hinted at likelihood of being at peak rate, alongside a successful ARM IPO in the tech space and continued stimulus out of China with a RRR cut.

- Typical post ECB-rate flow of speakers reiterating latest policy stance and various peripheral European banks updating economic outlook or matching rate hike to maintain Euro peg.

- UAW confirmed strike to go ahead against Ford, GM and Stellantis, but only at 3 from the originally suggested 9 plants. Affecting ~9% of UAW workers.

- JPY (yen) weakened to levels seen not since Gov Ueda’s comments about ending negative rates. Moved after reports this morning that BOJ said there was a discrepancy between Ueda comments and market interpretation.

- Asia closed mostly higher with ASX200 outperforming at +1.3%. EU indices are +0.7-1.4%. US futures are -0.2% to +0.2%. Gold +0.4%, DXY -0.2%; Commodity: Brent +0.2%, WTI +0.3%, TTF -2.3%; Crypto: BTC +1.2%, ETH +0.5%.

Asia

- China 1-Year Medium Term Lending Facility (MLF) left the rate unchanged at 2.50%.

- China PBOC Open Market Operation (OMO) cut the 14-day reverse repo by 20bps to 1.95%.

- China Aug New Home Prices M/M: -0.3% v -0.2% prior.

- China Aug Industrial Production Y/Y: 4.5% v 3.9%e.

- China Aug Retail Sales Y/Y: 4.6% v 3.0%e.

- China Aug YTD Fixed Urban Assets Y/Y: 3.2% v 3.3%e.

- China Aug YTD Property Investment Y/Y: -8.8% v -8.9%e.

- China Aug Surveyed Jobless Rate: 5.2% v 5.3%e.

- Japan Fin Min Suzuki confirmed to consider extra budget based on economic measures.

- BOJ said to see continued upside risks to price outlook; Saw discrepancy between what Gov Ueda said in a recent interview and how traders interpreted the remark. Believed BOJ Gov Ueda's recent remarks said not to be new policy signal.

Europe

- France Fin Min Le Maire cut its 2024 GDP growth from 1.6% to 1.4% citing Germany's recession, China's difficulties and high interest rates. Saw 2024 CPI at 2.6% compared to 4.9% this year.

- ECB hawks said to believe that interest rates could rise again in Dec 2023 if wages keep increasing rapidly and inflation proves stickier than hoped.

Americas

- UAW confirmed members would go on strike at three factories as contract talks fall through [**Note: For the first time in its history, the UAW launched a strike against all Big 3 automakers at once].

- House Speaker McCarthy said to be adamant that Republicans needed to avoid a shutdown (closed meeting of House Republicans).

- Tier-1 Analyst expected US to avoid a government shutdown on Oct 1st, but it was close to 50% chance.

- Canada PM Trudeau stated that would call heads of large grocery chains to Ottawa to discuss rising food costs, to demand a plan to stabilize prices. Govt could impose new taxes on major grocery chains if they can’t come up with a plan to limit rising food prices (**Note: deadline to come up with a plan is Oct 9th).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.94% at 465.20, FTSE +0.93% at 7,744.21, DAX +1.02% at 15,966.55, CAC-40 +1.32% at 7,405.14, IBEX-35 +0.58% at 9,604.81, FTSE MIB +0.54% at 29,035.00, SMI +1.13% at 11,223.80, S&P 500 Futures +0.06%].

Market focal points/Key themes: European indices open higher across the board and stayed upbeat through the early part of the session; all sectors start the day in the green; sectors leading the way higher include consumer staples and materials; lagging sectors include telecom and real estate; reportedly TotalEnergies looking to take stakes in some of Adani Green’s assets; focus on release of EMA’s CHMP decisions later in the day; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: LVMH [MC.FR] +3.0%, Kering [KER.FR] +2.5% (China retail sales data), Hennes & Mauritz H&M [HMB.SE] -4.5% (Q3 results), Games Workshop [GAW.UK] +9.0% (trading update).

- Consumer staples: Savencia [SAVE.FR] -1.5% (H1 results - post close).

- Financials: Intesa Sanpaolo [ISP.IT] +1.5% (analyst action - raised to Buy at Jefferies).

- Industrials: Stellantis [STLA.NL] +0.5% (UAW confirmed to go on strike at three factories as contract talks fall through; Less than 9% of UAW workers (12.7K out of 146K) involved in the strike for now; Immediately put co. in contingency mode), Lenzing [LNZ.AT] -8.0% (cuts outlook).

- Technology: ASML [ASML.NL] -3.0% (chip giant TSMC said to be increasingly nervous about customer demand; Arm IPO), ASM International [ASM.NL] -5.5% (analyst action).

- Materials: Petra Diamonds [PDL.UK] -4.0% (FY23 results).

Speakers

- ECB's de Guindos (Spain) stated that both headline and Core CPI will continue to ease. Any future rate cuts to depend on many factors.

- ECB’s Villeroy (France): Fiscal spending must not fuel inflation; Fiscal and monetary policy must be better coordinated in the Euro.

- Eurogroup Chief Donohoe (Ireland) stated that it was in everyone's interest to bring inflation down.

- Germany Fin Min Lindner noted that ECB decision to hike rates was understandable as inflation was too high.

- China Foreign Ministry has decided to apply sanctions on Co. and Lockheed Martin.

Currencies/fixed income

- USD was holding onto gains in the aftermath of ECB rate decision and continued signs of a resilient US economy.

- EUR/USD drifted higher to at 1.0665 in the session. Euro trying to recover from its perceived ECB dovish hike. ECB speak was flowing to back up Lagarde’s statement of Council moving into its duration of restrictive policy. Press reports overnight stressed that ECB hawks were still open to higher rates if inflation proved to be stubborn.

- USD/JPY moved higher after reports circulated that BOJ saw discrepancy between what Gov Ueda stated in a recent interview on rates and how traders interpreted the remarks. Article noted that BOJ Gov Ueda's remarks were not any new policy signal.

Economic data

- (FI) Finland July GDP Indicator Y/Y: +1.5% v -0.3% prior.

- (FI) Finland July Final Retail Sales Volume Y/Y: -1.1% v -1.9% prelim.

- (NO) Norway Aug Trade Balance (NOK): 61.4B v 61.6B prior.

- (DK) Denmark Aug PPI M/M: +0.2% v -0.6% prior; Y/Y: -7.5% v -4.3% prior.

- (FR) France Aug Final CPI M/M: 1.0% v 1.0% prelim; Y/Y: 4.9% v 4.8% prelim; CPI (ex-tobacco) Index: # v 117.99e.

- (FR) France Aug Final CPI EU Harmonized M/M: 1.1% v 1.1% prelim; Y/Y: 5.7% v 5.7% prelim.

- (ES) Spain Q2 Labour Costs Y/Y: 5.8% v 6.2% prior.

- (TR) Turkey Central Bank (TCMB) Sept Inflation Expectation Survey: Next 12 Months: 44.9% v 42.0% prior.

- (TH) Thailand Sept Foreign Reserves w/e Sept 8th: $215.0B v $217.1B prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 65.2K v 55.0K tons prior.

- (IT) Italy Aug Final CPI M/M: 0.3% v 0.4% prelim; Y/Y: 5.4% v 5.5% prelim.

- (IT) Italy Aug Final CPI EU-Harmonized M/M: 0.2% v 0.2% prelim; Y/Y: 5.5% v 5.5% prelim; CPI Index (ex-tobacco): 119.1e v 118.7 prior.

- (RU) Russia Narrow Money Supply w/e Sept 8th (RUB): 18.67T v 18.59T prior.

- (PL) Poland Aug Final CPI M/M: 0.0% v 0.0% prelim; Y/Y: 10.1% v 10.1% prelim.

- (TR) Turkey Aug Central Govt Budget Balance (TRY): 51.3B v 48.6B prior.

- (UK) Aug BoE/Ipsos Quarterly Inflation Attitude Survey: Next 12 Mths3.6% v 3.5% prior.

- (IT) Italy July General Government Debt: €2.859T v €2.848T prior.

- (EU) Euro Zone July Trade Balance: €2.9B v €8.6B prior; Trade Balance NSA (unadj): €6.4B v €23.0B prior.

- (EU) Euro Zone Q2 Labour Costs Y/Y: 4.5% v 5.2% prior.

- (IT) Italy July Total Trade Balance: €6.4B v €3.5B prior; EU Trade Balance: +€1.3B v -€1.8B prior.

- (IS) Iceland Aug International Reserves (ISK): 744B v 750B prior.

Fixed income issuance

- (IN) India sold total INR310B vs. INR310B indicated in 2030, 2037 and 2063 bonds.

Looking ahead

- (NG) Nigeria Aug CPI Y/Y: 25.0%e v 24.1% prior.

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2029, 2043 and 2058 Bonds.

- 05:45 (EU) ECB chief Lagarde at Eurogroup.

- 06:00 (IE) Ireland July Trade Balance: No est v €6.7B prior.

- 06:00 (UK) DMO to sell £4.5B in 1-month, 3-month and 6-month bills (£0B, £B and £B respectively).

- 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave 1-week Auction Rate unchanged at 12.00%.

- 07:00 (IL) Israel Aug CPI M/M: 0.4%e v 0.3% prior; Y/Y: 4.0%e v 3.3% prior.

- 07:30 (IN) India Weekly Forex Reserve w/e Sept 8th: No est v $598.9B prior.

- 07:30 (IN) India announces upcoming bill issuance (held on Wed).

- 08:00 (BR) Brazil July Retail Sales M/M: 0.5%e v 0.0% prior; Y/Y: 2.0%e v 1.3% prior.

- 08:00 (BR) Brazil July Broad Retail Sales M/M: 0.2%e v 1.2% prior; Y/Y: 7.1%e v 8.3% prior.

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

- 08:00(RU) Russia Central Bank (CBR) Gov Nabiullina post rate decision press conference.

- 08:30 (US) Sept Empire Manufacturing: -10.0e v -19.0 prior.

- 08:30 (US) Aug Import Price Index M/M: 0.3%e v 0.4% prior; Y/Y: -2.9%e v -4.4% prior; Import Price Index (ex-petroleum) M/M: 0.0%e v 0.0% prior.

- 08:30 (US) Aug Export Price Index M/M: 0.4%e v 0.7% prior; Y/Y: -6.8%e v -7.9% prior.

- 08:30 (CA) Canada July Int'l Securities Transactions (CAD): No est v 12.6B prior.

- 08:30 (CA) Canada July Manufacturing Sales M/M: +0.7%e v -1.7% prior.

- 09:00 (CA) Canada Aug Existing Home Sales M/M: -0.2%e v -0.7% prior.

- 09:15 (US) Aug Industrial Production M/M: 0.1%e v 1.0% prior; Capacity Utilization 79.3%e v 79.3% prior; Manufacturing Production 0.1%e v 0.5% prior.

- 10:00 (US) Sept Preliminary University of Michigan Confidence: 69.0e v 69.5 prior.

- 11:00 (PE) Peru July Unemployment Rate: 6.3%e v 6.3% prior.

- 11:00 (PE) Peru July Economic Activity Index (Monthly GDP) Y/Y: 0.0%e v -0.6% prior.

- 11:00 (CO) Colombia July Manufacturing Production Y/Y: -4.8%e v -4.8% prior; Industrial Production Y/Y: -1.5%e v -2.1% prior.

- 11:00 (CO) Colombia July Retail Sales Y/Y: -7.8%e v -11.9% prior.

- 11:00 (EU) Potential sovereign ratings after European close (Fitch on Germany Sovereign Rating to be reviewed by Fitch; S&P on Spain, Belgium. Croatia and Saudi Arabia Sovereign Rating; Moody's on Greece and Luxembourg Sovereign Ratings).

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