Trump approves Tik Tok sale

In focus today

In the US, August PCE data is due for release in the afternoon. PCE is the Fed's preferred measure of inflation, and besides prices, the release also sheds light on private consumption volume growth. Earlier CPI and retail sales data pointed towards steady developments on both components.

In Denmark, data on retail spending in August released. Our spending monitor showed a 0.5% m/m increase in real retail spending in August, following a strong 1.2% m/m rise in July. We expect the figures from Statistics Denmark to reflect the same trend, with an increase in August.

Economic and market news

What happened overnight

In the US, President Trump approved the sale of TikTok's US operations, valuing the new company at $14 billion. The deal transfers control of TikTok's algorithm to a US-based entity, with ByteDance retaining less than 20% ownership. While Oracle and Silver Lake are expected to hold significant stakes, concerns persist due to reports suggesting ByteDance may maintain influence through a separate US entity managing e-commerce and branding operations.

Trump unveiled new tariffs, including a 100% levy on branded drugs and a 25% tariff on heavy-duty trucks, citing national security concerns. Details are sparse, but pharma tariffs are waived if the company has started building a US manufacturing plant. The pharmaceutical industry and US Chamber of Commerce criticised the measures, while markets saw declines in pharma and furniture stocks across Asia. The tariffs are set to take effect on 1 October.

What happened yesterday

In the US, jobless claims fell to 218,000 last week (cons: 235,000), Q2 GDP growth was revised higher to 3.8% from 3.3%, driven by a stronger-than-expected rebound in private consumption (+0.61% q/q, pre-revision +0.39%, Q1 +0.15%). Durable goods orders also exceeded expectations. These hawkish data points pushed UST yields higher and put downward pressure on EUR/USD. Meanwhile, the trade deficit narrowed in August (-85.5 billion, from -102.8 billion) as higher tariffs curbed imports, though declining wholesale inventories (-0.2% m/m, cons: +0.2%) suggest imports may rebound if demand holds steady. Fed's Goolsbee was on the wire, noting concerns about persistently rising inflation and expressing unease about prematurely front-loading rate cuts despite slowing jobs data.

In Switzerland, the SNB held its policy rate unchanged at 0% as anticipated. It maintained its stance on foreign exchange intervention, though sight deposit data shows no signs of recent activity. The inflation forecast saw a slight upward revision, but inflationary pressures remain broadly unchanged. This aligns with expectations that the SNB will keep rates steady at 0% moving forward.

In the euro area, credit growth continued to rise in August on an annual basis, while momentum is heading lower. Loans to non-financial corporations (NFCs) increased to 3.0% y/y from 2.8% y/y, and loans to households rose to 2.5% y/y from 2.4% y/y. However, the momentum in credit growth is declining, with the credit impulse (measuring the change in the annual growth rate) dropping to its lowest level in over a year. The credit impulse, which is better correlated with GDP growth, supports our view that economic growth will slow significantly in the second half of the year. We forecast 0.1% q/q growth in both Q3 and Q4 for the euro area.

In Sweden, producer prices fell by 0.7% y/y in August, marking the sixth consecutive month of deflation. This was driven by a sharp drop in capital goods prices, while energy-related products rebounded. Monthly PPI rose by 0.5%, and non-durable goods prices, an indicator of food inflation, continued to decline to 2.5% y/y.

Equities: Sour risk across the board yet again. The better than anticipated initial jobless claims, continuing claims and a revision higher of the US GDP figures which at the face of it should have led to higher equities as well. However, equities lower went as they took the cues from the higher US yields. Only the energy sector posted gains, buoyed by higher oil prices. Both S&P500 and Nasdaq ended 0.5% lower, while in Europe the Stoxx600 was 0.6% lower. Looking beneath the surface, the outlook for better US growth also meant growth stocks outperformance value as well as cyclicals outperformed defensives. Yesterday's price action seems to be a precursor for what the NFP number can do next week, if it comes on the high side; kill the goldilocks narrative.

FI and FX: The greenback had another strong session yesterday after the low jobless claims print which means that the recent uptrend is broken and supports Fed Powell's and Danske Bank's view that the labour market is not in that bad a shape. Rates responded by bear flatten the yield curve as the 2-year yield rose 6bp. The move higher in yields was bolstered by another lukewarm Treasury auction, now in the 7-year segment. EUR/USD set a weekly low at 1.1650, down from 1.1740 pre-jobless claims. USD/Scandies well supported, and we continue to see further upside in USD/SEK which now trades at 9.46.