US CPI in focus, UK GDP flat-lines in July ahead of BoE, Trump fumbles debate as Harris holds up

Notes/observations

- Yen strengthened amid hawkish comments from typically dovish BOJ member Nakagawa, currency move weighed on Nikkei225 (BOJ decision next week).

- In parallel, USD weaker as aftermath of first presidential debate between Trump and Harris has media touting Harris as winner of the night.

- Sterling rose into the UK GDP data but sold off on wider trade deficit, lower production and flat GDP for July. Analysts don’t see weak data affecting BOE decision next week.

- Spanish IBEX-35 outperforming Europe due to major retailer and distributor of clothing, Inditex (owns Zara), reported H1 results above estimates. Noted early Q3 trading was strong.

- Notable corporate news: German govt began selling Commerzbank 53.1M stake at €13.20/shr, with UniCredit taking the chance for additional 4.5% stake.

- Asia closed lower with Nikkei225 underperforming -1.6%. EU indices are -0.4% to +0.8%. US futures are -0.5%. Gold +0.3%, DXY -0.2%; Commodity: Brent +1.8%, WTI +2.0%; Crypto: BTC -0.9%, ETH -1.2%.

Asia

- BOJ Nakagawa reiterated to adjust degree of easing if outlook was realized.

- RBA Asst Gov (Econ) Hunter noted that its current assessment is that labour market dynamics had not fundamentally changed, although have been surprised by some of the recent data. Expect employment to continue to increase, but at a slower pace than population growth.

Europe

- Bank of France (BdF) reiterated forecast for 0.3%-0.4% Q3 GDP growth. Expected the Olympics to add additional 0.25ppts.

Americas

- Trump and Harris face off during combative debate and sparred on a wide-ranging topic from domestic economic agenda to foreign policy. Press headlines ‘give’ Harris the nod with Trump performance ‘panned’ by critics.

- Taylor Swift endorsed Kamala Harris in Instagram post.

Energy

- Weekly API Crude Oil Inventories: -2.8M v -7.4M prior

- Approx 25% of crude production & natural gas production in the Gulf of Mexico offline as Francine moved towards Louisiana.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.1% at 509, FTSE -0.1% at 8196, DAX +0.1% at 18285, CAC-40 +0.1% at 7415, IBEX-35 +0.8% at 11298, FTSE MIB -0.2% at 3247, SMI -0.4% at 11922, S&P 500 Futures -0.4%].

Market Focal Points/Key Themes: European indices open generally higher and kept the upbeat attitude through the early trading hours; among sectors trending to the upside are consumer discretionary and financials; lagging sectors include health care and telecom; banking subsector supported following Unicredit building its stake in Commerzbank; ADNOC to make formal offer for Covestro; Rightmove rejects offer from REA Group; Score denies interest from Covea; focus on release of US CPI figures later in the day; earnings expected in the upcoming Americas session include Manchester United.

Equities

- Consumer discretionary: Inditex [ITX.ES] +3.5-4.0% (H1 results, beats estimates, early Q3 sales >10%, affirms guidance); Husqvarna [HUSQB.SE] -5.0% (sees challenging conditions for Q3); Auto1 [AG1.DE] -0.5% (Q2 results beats estimates).

- Consumer staples: WH Smith [SMWH.UK] +10.0% (trading update).

- Energy:

- Financials: Commerzbank [CBK.DE] +15.5% (German govt commences selling 53M shares at €13.20/shr); Unicredit [UCG.IT] +1.5% (takes stake in Commerzbank).

- Healthcare: Orion Oyj [ORNBV.FI] -3.5% (guidance cut); Sanofi [SAN.FR] -0.5% (Dupixient meets primary and all key second endpoints).

- Industrials: Kion [KGX.DE] +3.5-4.0% (analyst upgrade); Rotork [ROR.UK] +1.5% (analyst upgrade); Legrand [LR.FR] +1.0% (analyst upgrade); Rentokil Initial [RTO.UK] -20.0% (trading update, guidance missed estimates, weakness noted for US).

- Technology: Frontier Development [FDEV.UK] +1.0% (FY results); Ubisoft [UBI.FR] -1.0% (analyst downgrade).

- Telecom:

-Chemicals: Covestro [1COV.DE] +1.5% (ADNOC to make formal offer of €14.4B - FT).

Speakers

- South Korea Director of National Policy Tae-yoon noted that rate cut conditions were being created during to stabilizing inflation.

Currencies/fixed income

- Market focus was on US CPI reading due out later today. The data seen as the ‘tiebreaker’ on the magnitude of the likely Fed rate cut next week. Markets see 100% chance of a rate cut at the Sept policy meeting with 67% expecting a 25bps (33% for a 50bps cut).

- EUR/USD drifting higher ahead of Thurs ECB rate decision. Market pricing in two more rate cuts this year and 40% probability of a third one in Dec.

- GBP/USD holding below the 1.31 level. Softer GDP and production data for July unlikely to have the BOE be forced into a rate cut next week. Dealers believe the BOE would remain nervous over the inflation outlook.

- USD/JPY tested 140.70 after BOJ Nakagawa reiterated view that would continue to raise interest rates if the economy and inflation moved in line with the bank's forecasts.

Economic data

- (NL) Netherlands Jun Trade Balance: €10.7B v €13.37 prior; Exports Y/Y: +2.2% v -0.4% prior; Imports Y/Y: -0.7% v -0.3% prior.

- (UK) July Monthly GDP M/M: 0.0% v 0.2%e; 3M/3M: 0.5% v 0.6%e.

- (UK) July Industrial Production M/M: -0.8% v +0.3%e; Y/Y: -1.2% v -0.1%e.

- (UK) July Manufacturing Production M/M: -1.0% v +0.2%e; Y/Y: -1.3% v -0.1%e.

- (UK) July Construction Output M/M: -0.4% v +0.4%e; Y/Y: % v -0.7%e.

- (UK) July Index of Services M/M: 0.1% v 0.2%e; 3M/3M : 0.6% v 0.6%e.

- (UK) July Visible Trade Balance: -£20.0B v -£18.0Be; Overall Trade Balance: -£7.5B v -£5.1Be.

- (RO) Romania Aug CPI M/M: % v 0.1%e; Y/Y: 5.1% v 5.0%e.

- (TR) Turkey July Retail Sales Y/Y: % v 8.6% prior.

Fixed income issuance

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

- (DK) Denmark sold total DKK1.50B in 3-month and 6-month bills.

- (UK) DMO sold £3.75B in 4.25% July 2034 Gilts; Avg Yield: 3.757% v 4.082% prior; bid-to-cover: 2.84x v 2.93x prior; Tail: 1.3bps v 0.5bps prior.

- (SE) Sweden sold total SEK4.0B vs. SEK4.0B indicated in 2025 and 2045 bonds.

- (NO) Norway sold total NOK vs. NOK3.0B indicated in 2026 and 2034 Bonds.

- (IT) Italy Debt Agency (Tesoro) sold €7.5B vs. €7.5B indicated in 12-month bills; Avg Yield: 2.892% v 3.112% prior; Bid-to-cover: 1.52x v 1.52x prior.

Looking ahead

- (IL) Israel Central Bank (BOI) Aug Minutes.

- (CO) Colombia Aug Consumer Confidence: -8.0e v -9.0 prior.

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

- 05:25 (CH) Switzerland to sell 2032 and 2038 Bonds.

- 05:30 (DE) Germany to sell €4.5B in 2.60% Aug 2034 Bunds.

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

- 06:00 (PT) Portugal Aug Final CPI M/M: No est v -0.3% prelim; Y/Y: 1.9%e v 1.9% prelim.

- 06:00 (PT) Portugal Aug Final CPI EU Harmonized M/M: No est v -0.1% prelim; Y/Y: 1.8%e v 1.8% prelim.

- 06:00 (CZ) Czech Republic to sell €500M in 6-month Bills.

- 06:00 (RU) Russia to sell OFZ Bonds.

- 07:00 (US) MBA Mortgage Applications w/e Sept 6th: No est v 1.6% prior.

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

- 08:00 (HU) Hungary Central Bank (MNB) Aug Minutes.

- 08:00 (BR) Brazil July IBGE Services Volume M/M: 0.0%e v 1.7% prior; Y/Y: 2.5%e v 1.3% prior.

- 08:00 (MX) Mexico July Industrial Production M/M: -0.3%e v +0.6% prior; Y/Y: +0.8%e v -0.7% prior; Manufacturing Production Y/Y: +1.3%e v -0.9% prior.

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

- 08:30 (US) Aug CPI M/M: 0.2%e v 0.2% prior; Y/Y: 2.5%e v 2.9% prior.

- 08:30 (US) Aug CPI (Ex Food and Energy) M/M: 0.2%e v 0.2% prior; Y/Y: 3.2%e v 3.2% prior.

- 08:30 (US) Aug CPI Index NSA: 314.826e v 314.54 prior; CPI Core Index : 319.512e v 318.872 prior.

- 08:30 (US) Aug Real Avg Hourly Earning Y/Y: No est v 0.7% prior; Real Avg Weekly Earnings Y/Y: No est v 0.4% prior.

- 09:00 (RU) Russia July Trade Balance: No est v $11.5B prior; Exports: No est v $35.3B prior; Imports: No est v $23.8B prior.

- 10:30 (US) Weekly DOE Oil Inventories.

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

- 12:00 (RU) Russia Aug CPI M/M: 0.1%e v 1.1% prior; Y/Y: 9.0%e v 9.1% prior.

- 12:00 (RU) Russia Aug CPI Core M/M: No est v 0.4% prior; Y/Y: No est v 8.6% prior.

- 12:00 (CA) Canada to sell 5 Year Bonds.

- 13:00 (US) Treasury to sell 10-Year Notes Reopening.

- 15:00 (AR) Argentina Aug National CPI M/M: 4.0%e v 4.0% prior; Y/Y: 235.8%e v 263.4% prior.

- 18:45 (NZ) New Zealand Aug Food Prices M/M: No est v 0.4% prior.

- 18:45 (NZ) New Zealand Aug Total Card Spending M/M: No est v 0.7% prior; Retail Card Spending M/M: No est v -0.1% prior.

- 19:01 (UK) Aug RICS House Price Balance: -14%e v -19% prior.

- 19:50 (JP) Japan Q3 BSI Large All Industry Q/Q: No est v 0.4 prior; Large Manufacturing Q/Q: No est v -1 prior.

- 19:50 (JP) Japan Aug PPI (domestic CGPI) M/M: 0.0%e v 0.3% prior; Y/Y: 2.8%e v 3.0% prior.

- 21:00 (AU) Australia Sept Consumer Inflation Expectation Survey: No est v 4.5% prior.

- 21:00 (JP) BOJ Board Tamura in Okayama.

- 22:00 (JP) Japan Aug Tokyo Avg Office Vacancies: No est v 5.0% prior.

- 23:00 (TH) Thailand Aug Consumer Confidence: No est v 57.7 prior; Economic Confidence: No est v 51.3 prior.

- 23:35 (JP) Japan to sell 20-Year JGB Bonds.