Upcoming US CPI in focus for clues on global inflationary trends

EU Mid-Market Update: Upcoming US CPI in focus for clues on global inflationary trends; EU said to be unlikely to impose a price cap on any imported gas ahead of tomorrow's Von der Leyen speech.

Notes/Observations

- European equities and US futures are modestly higher ahead of US Aug CPI, with expectations of a second straight decline in YoY readings.

- UK Tier 1 job data showed strength in the labor force as unemployment ticked to lowest level since 1974. Germany and Spain final Aug CPI readings in line with preliminary's for the most part which left EURUSD unfazed. Cable caught a bid off following the UK data. Same time new strike was announced at UK's largest container port Felixstowe from Sept 27th to Oct 5th.

- Ahead of tomorrows's EU Commission speech, UK press citing leaked draft document reports EU is unlikely to cap price of Russian gas, as speculated; Draft regulation on the “electricity emergency tool” contains neither a price cap on Russian gas nor on imported gas.

- In COVID news overnight, China announced cities Sanhe and Hebei to enter lockdowns while Japan Chief Cabinet Sec Matsuno confirmed to start domestic travel program if infection rates fall. Also on Chinese front, Typhoon Muifa is on course to reach China’s eastern coast on Sept 14th; Shanghai's major container port of Yangshan suspends container operations same day.

- German Chancellor Scholz shed positive light on European energy woes as he stated Germany will be able to import all the gas they need via LNG terminals by end-2023 and that they are on track for gas storage targets; Also confirmed to boost loan guarantees at KfW facility to €67B to tackle energy crisis.

- 3-month Euribor hits 1.0% for the first time since Feb 2012.

- Asia closed mixed with KOSPI outperforming at +2.7%. EU indices are mildly higher, with bond yields mixed. US futures are +0.4%. Gold -0.2%, DXY -0.3%; Commodity: Brent +1.2%, WTI +1.2%, UK Nat Gas +1.4%; Crypto: BTC +0.1%, ETH -2.2%.

Asia

- (KR) Bank of Korea (BOK) releases Aug Minutes: Bigger rate hike may be needed on wider supply shock.

- (CN) China Yunan Province orders aluminum producers to reduce power usage on Tues and Weds (13-14th) by ~10%.

- (JP) Japan Chief Cabinet Sec Matsuno: Confirms will start a domestic travel program if infections fall.

- (CN) China city Sanhe (near Beijing) said to lock down for 4 days.

- (CN) China city in Hebei Province [Shijiazhuang] has locked down a district due to COVID outbreak.

- (KR) South Korea Sept 1-10 Exports Y/Y: -16.6% v +23.2% prior; Imports Y/Y: -10.9% v +34.1% prior.

- (JP) Japan Q3 BSI Large All Industry Q/Q: +0.4 v -0.9 prior; Large Manufacturing Q/Q: +1.7 v -9.9 prior.

- (JP) Japan Aug PPI (CGPI) M/M: 0.2% v 0.3%e; Y/Y: 9.0% v 8.6%e.

- (CN) China Sec Daily: Analysts expect the PBOC to maintain the MLF rate this week.

- (KR) South Korea Finance Ministry: Proposes fiscal rule revision, aiming for legislation in Dec; Slowdown worries and market uncertainty are rising.

- (JP) Japan Govt said to consider launch of domestic travel scheme in Sept - Press.

Taiwan

- (TW) Taiwan National Devt Council Min: Chip companies to invest $210B over next five years in Taiwan.

Ukraine conflict

- (US) US said to likely announce another Ukraine military aid package of $600M as soon as this week - Politico.

Europe

- (DE) German Economy Ministry report: Domestic outlook for H2 dramatically worsened; Output in H2 could stagnate or contract.

- (UK) Union announces new strike at UK's largest container port Felixstowe from Sept 27th to Oct 5th - press.

- (DE) German govt said to be planning to boost loan guarantees at KfW facility to €67B to tackle energy crisis - German press.

- (UK) Kantar announced 12 week grocery market share and sales which showed a consumer rotation to budget grocery stores.

- (IT) Italy reportedly may sign preliminary ITA Airlines sale deal this week.

- (UK) Chancellor of the Exchequer (Fin Min) Kwarteng tells Treasury to target 2.5% GDP growth ahead of fiscal event later in Sep.

- (FI) Finland PM Marin: Must be ready for more sanctions on Russia; Must limit visa issuance for Russians strongly.

Americas

- (BR) Brazil Former President and Leftist Candidate Lula: Promises rebuilding the oil and gas industry if elected; Denies plans on walking back privatizations.

- (US) US Sec of State Blinken: Discussed efforts to address irregular migration with Mexico, Talked about strengthening Energy security between countries; Iran Response to EU proposal on Nuclear deal makes agreement in near term unlikely.

- (MX) Mexico Fin Min Ramirez: Mexico reaffirms its commitment to deeper commercial and economic integration with the US.

Energy

- (EU) EU said to be unlikely to cap price of Russian gas (as speculated); Draft regulation on the “electricity emergency tool” contains neither a price cap on Russian gas nor on imported gas - UK press.

- (DE) German Chancellor Scholz: By end-2023, Germany will be able to import all the gas that we need using LNG terminals; Power-price cap to be implemented with great speed; Also looking at introducing cap on gas prices.

- (ES) Spain Energy Min Ribera: EU Commission Pres to call another energy minister meeting by end of the month.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.44% at 429.64, FTSE +0.26% at 7,492.40, DAX +0.23% at 13,432.85, CAC-40 +0.46% at 6,362.43, IBEX-35 +0.25% at 8,214.58, FTSE MIB +0.50% at 22,723.00, SMI +0.53% at 11,049.50, S&P 500 Futures +0.49%].

Market Focal Points/Key Themes: European indices open generally higher and advanced solidly into the green through the early part of the session; sectors among those leading to the upside are consumer discretionary and financials; lagging sectors include energy and industrials; M&C Saatchi affirms recommendation for ADV offer; ProsiebenSAT acquires remaining interest in Joyn from WB; no major earnings expected during the upcoming US session.

Equities

- Consumer discretionary: Ocado [OCDO.UK] -12%, Marks & Spencer [MKS.UK] -3% (Ocado's trading update; cuts outlook).

- Healthcare: Essity [ESSITYA.SE] -1% (price increases).

- Technology: Future plc [FUTR.UK] +7.5% (trading update), M&C Saatchi [SAA.UK] -2.5% (recommends not to accept the offer), SESA [SES.IT] +2.5% (earnings; raises outlook), Trustpilot [TRST.UK] +1.5% (earnings).

Speakers

- (KR) Bank of Korea (BOK) Dep Gov: Volatility is likely to increase.

- (JP) Japan Fin Min Suzuki: Will secure necessary funding for Defense.

 -(IN) India Fin Min Sitharaman: Hearing a lot more companies are moving out of China.

- (TH) Thailand Fin Min: Minimum wage hikes should not affect economy as much.

Currencies/fixed income

- USD modestly weaker as risk appetite creeps in. GBPUSD most notable mover following stronger than expected UK job and employment data, cable at 1.172. EURUSD makes ground above parity and climbs to 1.015, with momentum from continuation of ECB speakers from last week and over the weekend. USDJPY retraces with weight of USD and pulls off highs down to 142.3. Volatility likely to be quiet and coil up ahead of US CPI at 08:30 ET.

Economic data

-(TH) Thailand Aug Consumer Confidence: 43.7 v 42.4 prior.

-(UK) July Average Weekly Earnings 3M/Y: 5.5% V 5.4%E; Weekly Earnings (ex-Bonus) 3M/Y: 5.2% v 5.1%e.

-(UK) July ILO Unemployment Rate: 3.6% v 3.8%e (Lowest since 1974); Employment Change 3M/3M: +40K v +125Ke; Payroll Employment Monthly Change 3M/3M: +71K v +60Ke.

-(UK) Aug Jobless Claims Change: +6.3K v -14.5K prior; Claimant Count Rate: 3.9% v 3.9% prior.

-(DE) Germany Aug Final CPI M/M: 0.3% v 0.3%e; Y/Y: 7.9% v 7.9%e (confirms highest annual pace seen this year and since start of the monthly statistic in 1963).

-(CH) Swiss Aug Producer & Import Prices M/M: -0.1% v -0.1% prior; Y/Y: 5.5% v 6.3% prior.

-(ES) Spain Aug Final CPI M/M: 0.3% v 0.1%e; Y/Y: 10.5% v 10.4%e.

-(TR) Turkey July Industrial Production M/M: -6.2% v 1.4% prior; Y/Y: 2.4% v 8.2%e.

-(TR) Turkey July Retail Sales Y/Y: 2.0% v 5.5% prior.

-(IT) Italy Q2 Unemployment Rate: 8.1% v 8.1%e.

-(CZ) Czech July Current Account (CZK): -24.2B v -37.4Be.

-(NO) Norway Aug Region Output Survey (past 3-months): 0.43 v 1.24 prior; Output Survey (next 6-months): -0.16 v +0.80 prior.

-(EU) Daily 3-month Euribor Fixing: 1.000% v 0.988% prior (highest since Feb 2012).

-(DE) Germany Sept ZEW Current Situation Survey: -60.5 v -52.1E; Expectations Survey: -61.9 V -59.5E.

-(EU) Euro Zone Sept ZEW Expectations Survey: -60.7 v -54.9 prior.

Fixed income issuance

- (PH) Philippines sells PHP35.0B vs. PHP35.0B indicated in 10-year bonds; Avg Yield: 6.750% v 5.813% prior; bid-to-cover: 2.84x v 3.68x prior.

- (EU) European Union to sell €10.0-12.0B in 5-year and 30-year Next-Generation Bonds (NGEU) via syndicate.

- (ID) Indonesia sells total IDR19.0T vs. IDR19.0T target in bills and bonds.

- (IT) Italy Debt Agency (Tesoro) sells total €7.5B vs. €6.0-7.5B indicated range in 3-year, 7-year and 30 year BTP bonds.

- (ZA) South Africa sells total ZAR3.9B vs. ZAR3.9B indicated in 2032, 2035 and 2044 bonds.

- (CH) Switzerland sells CHF620.6M in 3-month Bills; Avg Yield: 0.241% v 0.206% prio.

Looking ahead

- 05:30 (DE) Germany to sell €5.5B in 0.40% Sept 2024 Schatz.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 12-month bills.

- 05:30 (ZA) South Africa to sell combined ZAR3.9B in bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) (prior €3.68B with 17 bids recd).

- 05:30 (ZA) South Africa July Total Mining Production M/M: No est v -1.4% prior; Y/Y: -8.7%e v -8.0% prior; Gold Production Y/Y: No est v -28.6% prior; Platinum Production Y/Y: No est v -9.8% prior.

- 06:00 (FI) Finland to sell €2.0B indicated in 6-month and 9-month bills.

- 06:00 (US) Aug NFIB Small Business Optimism: 90.8e v 89.9 prior.

- 06:55 (US) Daily Libor Fixing.

- 08:00 (PL) Poland July Current Account: -€1.8Be v -€1.5B prior; Trade Balance: -€1.3Be v -€0.9B prior; Exports: €26.6Be v €28.1B prior; Imports: €28.0Be v €28.9B prior.

- 08:00 (BR) Brazil July IBGE Services Volume M/M: 0.6%e v 0.7% prior; Y/Y: 5.5%e v 6.3% prior.

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

- 08:30 (US) Aug CPI M/M: -0.1%e v 0.0% prior; Y/Y: 8.1%e v 8.5% prior; CPI (ex-food/energy) M/M: 0.3%e v 0.3% prior; Y/Y: 6.1%e v 5.9% prior; CPI Index NSA: 295.588e v 296.276 prior; CPI Core Index SA: 296.250e v 295.275 prior.

- 08:30 (US) Aug Real Avg Hourly Earning Y/Y: No est v -3.0% prior; Real Avg Weekly Earnings Y/Y: No est v -3.6% prior.

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

- 09:00 (EU) Weekly ECB Forex Reserves.

- 13:00 (US) Treasury to sell 30-Year Bonds Reopening.

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

- 18:45 (NZ) New Zealand Q2 Current Account (NZ$): No est v -6.1B prior; Current Account to GDP Ratio YTD: No est v -6.5% prior.

- 19:50 (JP) Japan July Core Machine Orders M/M: No est v 0.9% prior; Y/Y: No est v 6.5% prior.

- 22:35 (CN) China to sell 2-year and 10-year upsized Bonds.