Sell off continues as triad of weak US economic data

EU mid-market update: Sell off continues as triad of weak US economic data, seasonal Sept weakness and Nvidia DOJ subpoena drags down equities.

Notes/observations

- EU bourses opened lower after red momentum in US and Asia saw Nasdaq drop >3% in worst session for over a month. Analysts note move was gradual and sustained, starting as US cash equity trade opened, not helped from miss in ISM data. S&P500 VIX remains grounded at ~20, a far cry off the spike seen in early Aug, which took VIX near 60.

- Semiconductor chip stocks get battered after Nvidia notched largest single day decline of any stock in history, approx losing $280B in market cap. ASML, Infineon, BE Semiconductor and others move lower in EU.

- Services PMI readings were mixed: Upwards final revision for UK, downwards final revisions for Germany and Euro-Zone. France unchanged at 55.0 with distortion due to Olympics; Miss for Spain and Italy.

- ECB speakers repeat council mantra as Simkus and Kazaks call for Sept cut, while Nagel and Cipollone reiterates no pre-commitment to a particular rate path. Stournaras notes policy will still be restrictive after more cuts. First color on Oct decision, after Simkus said Oct rate cut is quite unlikely.

- Early reports that China is considering cutting mortgage rates in two steps to protect banks.

- Notable corporate news: Blackstone to acquire AirTrunk for A$24.0B; German Govt to sell 3-5% stake in Commerzbank.

- Asia closed lower with Nikkei225 underperforming -4.4%. EU indices are -0.8% to -1.2%. US futures are -0.2% to -0.5%. Gold -0.7%, DXY -0.1%; Commodity: Brent -0.1%, WTI -0.2%; Crypto: BTC -3.5%, ETH -4.1%.

Asia

- Australia Q2 GDP Q/Q: 0.2% v 0.2%e; Y/Y: 1.0% v 0.9%e.

- Australia July Household Spending M/M: 0.8% v 0.6%e; Y/Y: 2.9% v 3.3%e.

- Australia Aug Final Services PMI: 52.5 v 52.2 prelim (confirms 7th month of expansion.

- Japan Aug Final Services PMI: 53.7 v 54.0 prelim (confirms 2nd month of expansion).

- China Aug Caixin PMI Services: 51.6 v 52.1e (20th month of expansion).

Europe

- Ireland Aug PMI Services: 53.8 v 53.6 prior (41st month of expansion).

- ECB’s Nagel (Germany) stated that the great wave of inflation was over; Won't commit in advance on whether to vote for September rate cut.

Americas

- Chile Central Bank (BccH) cut Overnight Rate Target by 25bps to 5.50% (as expected) for its 9th straight cut in the current easing cycle. Decision to cut by 25bps was unanimous. Rate cut toward neutral level now seen sooner compared to June's forecast.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -1.1% at 514, FTSE -0.8% at 8229, DAX -0.9% at 18589, CAC-40 -0.9% at 7507, IBEX-35 -0.9% at 11182, FTSE MIB -0.8% at 3293, SMI -1.1% at 12194, S&P 500 Futures -0.4%].

Market focal points/key themes: European indices open lower across the board and remained under pressure through the early part of the session; pessimism in the markets attributed to a continuation of the moves seen in Wall Street yesterday; sectors avoiding major losses include consumer discretionary and telecom; sectors leading the way lower include technology and materials; tech sector under pressure following drop in Nvidia shares; oil & gas subsector under pressure after Brent fell the lowest it has been since January; Segro to acquire Tritax Eurobox in all-stock deal; Aegean to take a stake in Volotea; focus on US trade balance and JOLTS job openings later in the day; earnings expected in the upcoming Americas session include HP, Dick’s Sporting Goods, Hormel Foods and Dollar Tree.

Equities

- Consumer discretionary: Clas Ohlson [CLAS.B.SS] +1.5% (Q1 results); Dalata Hotel Group [DHG.IE] -4.5% (H1 results).

- Energy: Saipem [SPM.IT] +1.5% (awarded two offshore contracts in Saudi Arabia worth approximately $1B); Centrica [CNA.UK] -3.0% (analyst downgrade).

- Financials: Equals Group [EQLS.UK] -4.0% (updates on strategic review and extension of PUSU deadline).

- Healthcare: Ascelia Pharma [ACE.SE] +8.0% (successful rights issue); Shield Therapeutics [STX.UK] -8.5% (H1 results).

- Technology: ASML Holding [ASML.NL] -5.0% (analyst downgrade).

- Telecom: Airtel Africa [AAF.UK] -7.0% (analyst downgrade).

- Real Estate: Barratt Developments [BDEV.UK] -2.0% (FY results).

Speakers

- ECB’s Cipollone (Italy) reiterated ECB was not committing to any path but stressed the real risk that stance could become too restrictive. Reiterated stance to take decisions on a meeting-by-meeting basis. Data so far confirmed direction of travel and would allow policy to be less restrictive.

- ECB's Kazaks (Latvia) reiterated that could cut rates in Sept but must remain cautious.

- ECB's Stournaras (Greece noted that even with more rate cuts, policy would remain restrictive.

- Sweden Central Bank (Riksbank) Jansson stated that must be prepared to deal with FX movements. Gradual policy adjustment could help the SEK currency (Krona).

- German IFW Institute updated its economic outlook which cut 2024 GDP growth from 0.2% to 0.1% and cut 2025 GDP growth from 1.1% to 0.5%. It saw both 2024 and 2025 CPI around 2.0%.

- Ukraine said to expect IMF to weaken the UAH currency (Hryvnia) in loan review.

- Turkey Central Bank (CBRT) Dep Gov Hatice Karahan stated that continuing weakening in underling trend of monthly inflation was critical for disinflation path.

Currencies/fixed income

- USD price action was little changed despite renewed concerns about a slowing economy as the Fed was widely expected to embark on its first interest-rate cut later this month.

- EUR/USD steady at 1.1055 by mid-session. Various ECB speak continued to point to a Sept rate cut but several members noted rates would remain in restrictive territory, nonetheless.

- USD/JPY was aided by risk aversion flows and a diverging rate path between Fed and BOJ. Pair just above 145 by mid-session.

Economic data

- (RU) Russia Aug Services PMI: 52.3 v 51.1 prior (2nd month of expansion); Composite PMI: 52.1 v 51.9 prior.

- (SE) Sweden Q2 Current Account Balance (SEK): 153.9B v 106.3B prior.

- (NO) Norway Q2 Current Account Balance (NOK) 231.8B v 283.3B prior.

- (SE) Sweden Aug PMI Services: 52.9 v 53.5e (3rd month of expansion); PMI Composite: 52.8 v 52.5 prior.

- (ES) Spain Aug Services PMI: (12th month of expansion); Composite PMI: 55.3 v 54.3e.

- (ZA) South Africa Aug PMI (whole economy): 50.5 v 49.3 prior (1st expansion in 3 months).

- (IT) Italy Aug Services PMI: 51.4 v 52.5e (8th month of expansion); Composite PMI: 50.8 v 51.4e.

- (FR) France Aug Final Services PMI: 55.0e v 55.0 prelim (confirmed 2nd month of expansion); Composite PMI: 53.1e v 52.7 prelim.

- (DE) Germany Aug Final Services PMI: 51.2e v 51.4 prelim (confirmed 6th month of expansion); Composite PMI: 48.4e v 48.5 prelim.

- (EU) Euro Zone Aug Final Services PMI: 52.9e v 53.3 prelim (confirms 7th month of expansion); Composite PMI: 51.0e v 51.2 prelim.

- (UK) Aug Final Services PMI: 53.7 v 53.3 prelim (confirms 10th month of expansion); Composite PMI: 53.8 v 53.4 prelim.

- (UK) Aug Official Reserves Changes: $3.6B v $1.1B prior.

- (EU) Euro Zone July PPI M/M: 0.8% v 0.3%e; Y/Y: -2.1% v -2.5%e.

Fixed income issuance

- (IN) India sold total INR200B vs. INR200B indicated in 3-month, 6-month and 12-months.

- (DK) Denmark sold total DKK2.78B in 2026 and 2033 DGB bonds.

- (SE) Sweden sold SK7.5B vs. SEK7.5B indicated in 12-month bills; Avg Yield: 2.5062% v 3.313% prior; Bid-to-cover: 2.44x v 3.21x prior.

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3.625% Apr 2034 Bonds; Avg Yield: 3.320% v 3.380% prior; bid-to-cover: 2.35x v 2.89x.

- (GR) Greece Debt Agency (PDMA) sold €600M vs. €500M indicated in 12-month Bills; Avg Yield: 2.82% v 3.34% prior; Bid to cover: 1.83x v 2.29x prior.

Looking ahead

- (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 5.75%.

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

- 05:30 (DE) Germany to sell combined €1.5B in 2038 and 2041 Bunds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (IE) Ireland Aug Unemployment Rate: No est v 4.7% prior.

- 06:00 (ZA) South Africa Q3 BER Business Confidence: No est v 35 prior.

- 06:00 (EU) EU Commission to sell combined €3.5B in 3-month and 6-month Bills.

- 06:00 (CZ) Czech Republic to sell up to CZK7.0B total in 2033, 2035 and 2043 bonds.

- 07:00 (RU) Russia to sell OFZ Bonds.

- 07:00 (US) Aug MBA Mortgage Applications w/e Aug 30th: No est v 0.5% prior.

- 07:00 (UK) Weekly PM Question time in House.

- 07:00 (FR) ECB’s Villeroy (France).

- 07:30 (TR) Turkey Aug Real Effective Exchange Rate (REER): No est v 62.90 prior.

- 08:00 (BR) Brazil July Industrial Production M/M: -1.0%e v +4.1% prior; Y/Y: 6.7%e v 3.2% prior.

- 08:00 (MX) Mexico July Leading Indicators M/M: No est v -0.03 prior.

- 08:00 (MX) Mexico Aug Vehicle Domestic Sales: No est v 124.8K prior.

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

- 08:01 (NZ) New Zealand Aug CoreLogic House Prices M/M: No est v -0.5% prior.

- 08:30 (US) July Trade Balance: -$79.0Be v -$73.1B prior.

- 08:30 (CA) Canada July Int'l Merchandise Trade (CAD): 0.7Be v 0.6B prior.

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

- 09:00 (BR) Brazil Aug Services PMI: No est v 56.4 prior; Composite PMI: No est v 56.0 prior.

- 09:00 (CL) Chile Central Bank Quarterly Monetary Policy Report.

- 09:45 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to cut Interest Rates by 25bps to 4.25%.

- 10:00 (US) July JOLTS Job Openings: 7.900Me v 8.184M prior.

- 10:00 (US) July Factory Orders: +4.7%e v -3.3% prior; Factory Orders (ex-transportation): No est v 0.1% prior.

- 10:00 (US) July Final Durable Goods Orders: 9.9%e v 9.9% prelim; Durables (ex-transportation): No est v -0.2% prelim; Capital Goods Orders (non-defense/ex-aircraft): No est v -0.1% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v -0.4% prelim.

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

- 14:00 (US) Federal Reserve Beige Book.

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

- 19:00 (KR) South Korea Q2 Preliminary GDP (2nd of 3 readings) Q/Q: -0.2%e v -0.2% advance; Y/Y: 2.3%e v 2.3% advance.

- 19:30 (JP) Japan July Labor Cash Earnings Y/Y: 2.9%e v 4.5% prior; Real Cash Earnings Y/Y: -0.6%e v +1.1% prior; Cash Earnings (Same Sample Base) Y/Y: 3.2%e v 5.1% prior (revised from 5.4%); Scheduled Full-Time Pay (Same Sample Base) Y/Y: 2.8%e v 2.7% prior.

- 21:00 (PH) Philippines Aug CPI M/M: 0.3%e v 0.7% prior; Y/Y: 3.6%e v 4.4% prior.

- 21:30 (AU) Australia July Trade Balance (A$): 5.0Be v 5.6B prior; Exports M/M: No est v 1.7% prior; Imports Y/Y: No est v 0.5% prior.

- 21:30 (JP) BOJ’s Takata.

- 22:00 (AU) RBA Gov Bullock at Anika Foundation.

- 23:30 (TH) Thailand Aug CPI M/M: 0.1%e v 0.2% prior; Y/Y: 0.4%e v 0.8% prior; CPI Core Y/Y: 0.6%e v 0.5 prior.

- 23:35 (JP) Japan to sell 30-Year JGB Bonds.