US economic data the main driver for market mood as ADP employment and ISM Services to print before NFP

Notes/observations

- Europe trades mixed, following US session which was highlighted by weaker than expected Jolts job openings. US job market remains headline focus for macro sentiment ahead of priced in Sept rate cut by the Fed. ADP employment at 08:15 ET ahead of Nonfarm payrolls tomorrow, the main event for the week.

- Sterling rose just prior to Bank of England DMP Survey release, as 1-year and more notably, 3-year ahead CPI expectations were lifted. Unlike European counterparts such as Germany, UK PMIs and GDP have held up recently, causing GBP/USD to rise from 1.27 in early Aug to >1.32 as rate cut bets were unwound.

- German Factory Orders unexpectedly expanded in July, attributed to an influx of large orders, which if excluded, new orders fell -0.4% MoM. Specifically, orders of ‘manufacture of other transport equipment’ sector rose 86.5%.

- Notable UK trading updates from Associated British Foods, Vistry, Currys and Jet2; ABF’s initial guidance for FY25 and commentary disappointed analysts; Vistry H1 results beats estimates, affirmed guidance and announced buyback; Jet2 highlighted strong late booking momentum in July/Aug with Sept painting similar picture.

- Asia closed mixed with Nikkei225 underperforming -1.1%. EU indices are -0.3% to +0.7%. US futures are +0.1-0.2%. Gold +0.8%, DXY -0.2%; Commodity: Brent +1.1%, WTI +1.0%; Crypto: BTC +0.3%, ETH +0.1%.

Asia

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

- Japan July Labor Cash Earnings Y/Y: 3.6% v 2.9%e; Real Cash Earnings Y/Y: +0.4% v -0.6%e (**Insight: Data helping keep BOJ on rate hike path).

- Australia July Trade Balance (A$): 6.0B v 5.0Be; Exports M/M: 0.7% v 1.7% prior; Imports Y/Y: -0.8% v +0.5% prior.

- BOJ Board member Takata stated that was appropriate to adjust easing in July; would be right to again adjust rates if prices went along with outlook.

- RBA Gov Bullock stated that the Board did not expect rate cuts in the near-term. Interest rate policy was clearly working but warned if CPI did not come down, it might need more restriction.

Europe

- British Chamber of Commerce (BCC) Quarterly Forecasts noted that 2024 CPI would rise steadily to 2.6%by end-2024 and would not fall to the BOE's 2.0% target until early 2027. High energy prices, strong wage growth and global trade uncertainty would keep price growth above target.

Americas

- Fed’s Daly (voter) stated that needed to cut policy rate because inflation was falling and the economy was slowing. Not sure of the size of September Fed rate cut. Overly tight policy might meant additional slowing in the labor market. Needed more data, including Friday's job market report and upcoming CPI.

- Fed Beige Book noted that on balance prices increased modestly. Economic activity grew slightly in 3 Districts, 9 Districts reported flat or declining activity.

- NDP Leader Singh stated that it had withdrawn support of Trudeau’s minority government. Withdrawal meant that Trudeau would need to find support from other opposition legislators to continue governing.

Energy

- Weekly API Crude Oil Inventories: -7.4M v -3.4M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.1% at 515, FTSE +0.1% at 8275, DAX +0.2% at 18617, CAC-40 -0.2% at 7483, IBEX-35 +0.6% at 11281, FTSE MIB +0.3% at 3310, SMI -0.4% at 12117, S&P 500 Futures +0.1%].

Market focal points/key themes: European indices open lower across the board and remained under pressure through the early part of the session; markets seen hesitant to take on risk ahead of key data releases tomorrow; among sectors clinging to gains are real estate and utilities; sectors trending to the downside include materials and consumer discretionary; focus on US ADP employment figures later in the day; earnings expected in the upcoming US session include Broadcom, Samsara and NIO.

Equities

- Consumer discretionary: Asos [ASC.UK] +13.5% (trading update); Volvo Car [VOLCAR.B.SE] +3.5% (CMD update).

- Consumer staples: Bakkavor Group [BAKK.UK] +4.0% (results; announces new CFO); Associated British Foods [ABF.UK] -3.5% (trading update with prelim view of FY25 and buyback).

- Energy: Voltalia [VLTSA.FR] +2.0% (results).

- Financials: Ashmore Group [ASHM.UK] +2.0.% (results).

- Healthcare: bioMerieux [BIM.FR] +3.5% (results).

- Industrials: Kendrion [KENDR.NL] +4.5% (new targets at CMD); Valmet [VALMT.FI] -1.5% (restructuring and job cuts).

- Technology: Argo Blockchain [ARB.UK] -4.0% (provides Aug operational update).

Speakers

- Bank of England (BoE) Decision Maker Panel (DMP) Aug Survey raised the 1-year ahead CPI forecast from 2.5% to 2.6% (2.6%e) and raised the 3-year ahead CPI outlook from 2.5% to 2.7%.

- German IFO Institute updated its outlook which cut 2024 GDP growth forecast from 0.4% to 'stagnating' and cut 2025 GDP growth from 1.5% to 0.9%. IFO maintained its 2024 inflation forecast at 2.2%.

- Turkey VP Yilmaz presented its Medium Term Program and noted that the deflation trend to continue from Sept onward. Main goal ws to bring inflation down to single digits and boost growth potential. Cut its 2024 GDP growth forecast from 4.0% to 3.5% and cut 2025 GDP growth forecast from 4.5% to 4.0%.

- RBI Gov Das stated that the fundamentals of domestic economy was gaining momentum, despite growth moderation in Q1.

- Russia Pres Putin stated that it did not pursue de-dollarisation policy, but were forced to seek other opportunities. Ready to continue gas transit through Ukraine; can redirect gas flows away from Ukraine.

- Malaysia Central Bank Policy Statement noted that the current OPR level remained supportive of economy. Inflation seen within prior Staff Projections and was unlikely to exceed 3%. Inflation is highly subject to domestic policy measure. Economic prospects and structural reform initiatives to encourage flows to support MYR currency (Ringgit); also aided by shift in expectations of lower interest rates in major economies.

- China PBoC Dep Gov Lu Lei stated that would continue to implement supportive policy; to step up the use of existing tools to aid growth. The 7-day reverse repo rate wahhs the main policy tool. Still seeing effects of prior RRR cuts but still had space for more.

Currencies/fixed income

- USD was on soft footing with focus on Friday’s US jobs report.

- GBP/USD drifted higher towards 1.3170 as various inflation reports saw CPI staying above BOE target until early 2027. British Chamber of Commerce (BCC) Quarterly Forecasts note. Bank of England (BoE) Decision Maker Panel (DMP) Aug Survey raised the 1-year ahead CPI forecast from 2.5% to 2.6% (2.6%e) and raised the 3-year ahead CPI outlook from 2.5% to 2.7%.

- USD/JPY tested lower end of 143 area as BOJ member Takata stated that was appropriate to adjust easing in July and would be right to again adjust rates if prices went along with outlook. Japan’s Real Cash Earnings rose for the 2nd straight month and helped to keep BOJ on rate hike path.

Economic data

- (CH) Swiss Aug Unemployment Rate: 2.4% v 2.4%e; Unemployment Rate (seasonally adj): 2.5% v 2.5%e.

- (DE) Germany July Factory Orders M/M: +2.9% v -1.7%e; Y/Y: +3.7% v -1.9%e.

- (HU) Hungary July Retail Sales Y/Y: 2.5% v 3.1%e.

- (HU) Hungary July Preliminary Trade Balance: €0.2B v €0.2Be.

- (ES) Spain Q2 INE House Price Index Q/Q: 3.6% v 2.6% prior; Y/Y: 7.8% v 6.3% prior.

- (CZ) Czech July Retail Sales (ex-auto) Y/Y: 4.5% v 3.9%e.

- (MY) Malaysia Central Bank (BNM) left Overnight Policy Rate unchanged at 3.00%.

- (DE) Germany Aug Construction PMI: 38.9 v 40.0 prior.

- (TW) Taiwan Aug CPI Y/Y: 2.4% v 2.3%e; CPI Core Y/Y: 1.8% v 1.9%e; PPI Y/Y: 1.4% v 3.7% prior.

- (UK) Aug New Car Registrations Y/Y: -1.3% v +2.5% prior.

- (TW) Taiwan Aug Foreign Reserves: $579.1B v $571.7B prior.

- (UK) Aug UK Construction PMI: 53.6 v 54.5e (5th month of expansion).

- (EU) Euro Zone July Retail Sales M/M: 0.1% v 0.2%e; Y/Y: -0.1% v +0.2%e.

- (GR) Greece Q2 Unemployment Rate: 9.8% v 12.1% prior.

- (CY) Cyprus Aug CPI M/M: 0.3% v 0.0% prior; Y/Y: 1.5% v 2.1% prior.

- (ZA) South Africa Q2 Current Account (ZAR): B v -66Be; Current Account to GDP Ratio: % v -1.0%e.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €6.03B vs. €5.0-6.0B indicated range in to sell 2027, 2029 and 2034 SPGB bonds.

- Sold €1.30B in 2.50% May 2027 SPGB bonds; Avg Yield: 2.531% v 2.701% prior; bid-to-cover: 3.23x v 1.71x prior (Aug 1st 2024).

- Sold €1.50B in 3.50% May 2029 SPGB bonds; Avg Yield: 2.580% v 2.997% prior; Bid-to-cover: 2.74x v 1.47x prior (Jun 20th 2024).

- Sold €3.23B in 3.45% July 2034 SPGB; Avg Yield: 3.040% v 3.107% prior; Bid-to-cover: 2.07x v 1.51x prior.

- (ES) Spain Debt Agency (Tesoro) sold €535M vs. €250-750M indicated range to sell 1.00% Nov 2030 inflation-linked bonds (SPGBei); Real Yield: 0.908% v 1.025% prior; Bid-to-cover: 2.25x v 1.92x prior.

- (FR) France Debt Agency (AFT) sold total €11.996B vs. €10.0-12.0B indicated range in 2034, 2036, 2040 and 2055 Bonds.

- Sold €6.969B 1.25% in 3.00% Nov 2034 Oat; Avg Yield: 2.95% v 3.01% prior, bid-to-cover: 2.19x v 2.25x prior (Aug 1st 2024).

- Sold €1.400B in 1.25% May 2036 Oat; Avg Yield: 3.04% v 3.00% prior; Bid-to-cover: 3.97x v 2.10x prior (Nov 3rd 2022).

- Sold €1.779B in 0.50% May 2040 Oat; Avg Yield: 3.23% v 3.07% prior; bid-to-cover: 2.78x v 1.99x prior (Feb 1st 2024).

- Sold €1.848B in 3.25% May 2055 Oat; Avg Yield: 3.49% v 3.46% prior; Bid-to-cover: 2.66x v 2.86x prior.

- (UK DMO sold £4.0B in 4.125% July 2029 Gilts; Avg Yield: 3.811% v 3.854% prior; Bid-to-cover: 3.29x v 2.87x prior; Tail: 0.9bps v 0.9bps prior.

- (SE) Sweden sold total SEK500M vs. SEK500M indicated in I/L 2032, 2039 Bonds.

Looking ahead

- (EG) Egypt Aug Net Reserves: No est v $46.5B prior.

- (IL) Israel Aug Foreign Currency Balance: No est v $213.6B prior.

- (EG) Egypt Central Bank (CBE) Interest Rate Decision: Expected to leave Deposit Rate unchanged at 27.25%.

- (MX) Mexico CitiBanamex Survey of Economists.

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

- 05:40 (UK) BOE allotment in 7-day short-term repo operation (STR).

- 06:00 (IE) Ireland Q2 Final GDP Q/Q: No est v 1.2% prelim; Y/Y: No est v 1.4% prelim.

- 06:00 (IE) Ireland Q2 Current Account: No est v €22.6B prior.

- 06:00 (IL) Israel July Chain Store Sales M/M: No est v 0.9% prior.

- 06:00 (RO) Romania to sell RON400M in 7.20% Oct 2033 bonds.

- 07:00 (ZA) South Africa July Electricity Consumption Y/Y: No est v 3.3% prior; Electricity Production Y/Y: No est v 5.4% prior.

- 07:30 (US) Aug Challenger Job Cuts: No est v 25.9K prior; Y/Y: No est v 9.2% prior.

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

- 08:15 (US) Aug ADP Employment Change: +145Ke v +122K prior.

- 08:30 (US) Q2 Final Nonfarm Productivity: 2.5%e v 2.3% prelim; Unit Labor Costs: 0.8%e v 0.9% prelim.

- 08:30 (US) Aug Initial Jobless Claims: 230Ke v 231K prior; Continuing Claims: 1.87Me v 1.868M prior.

- 08:30 (CA) Canada Q2 Labor Productivity Q/Q: -0.1%e v -0.3% prior.

- 09:00 (CL) Chile July Nominal Wage Y/Y: No est v 6.8% prior.

- 09:00 (BR) Brazil Aug Vehicle Production: No est v 246.7 prior; Vehicle Sales: No est v 241.3K prior; Vehicle Exports: No est v 39.1K prior.

- 09:00 (RU) Russia Aug Gold and Forex Reserve w/e Aug 30th: No est v $614.5B prior.

- 09:00 (PL) Poland Central Bank (NBP) Gov Glapinski post rate decision press conference.

- 09:30 (CA) Canada Aug Services PMI: No est v 47.3 prior; Composite PMI: No est v 47.0 prior.

- 09:45 (US) Aug Final S&P Services PMI: 55.0e v 55.2 prelim; Composite PMI: 53.9e v 54.1 prelim.

- 10:00 (US) Aug ISM Services Index: 51.2e v 51.4 prior.

- 10:00 (AT) ECB’s Holtzmann.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (US) Weekly DOE Crude Oil Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 30 Year Bonds.

- 14:00 (BR) Brazil Aug Trade Balance: $6.2Be v $7.64B prior; Exports: $29.9Be v $31.0B prior; Imports: $23.8Be v $23.3B prior.

- 18:45 (NZ) New Zealand Q2 Volume of All Buildings Q/Q: -2.7%e v -4.0% prior.

- 19:00 (KR) South Korea July Current Account: No est v $12.3B prior; Balance of Goods (BoP): No est v $11.5B prior.

- 19:30 (JP) Japan July Household Spending Y/Y: +1.2%e v -1.4% prior.

- 21:00 (PH) Philippines July Unemployment Rate: No est v 3.1% prior.

- 21:30 (AU) Australia July Home Loans Value M/M: 1.0%e v 1.3% prior; Owner-Occupier Loan Value M/M: No est v 0.5% prior; Investor Loan Value M/M: No est v 2.7% prior.

- 22:35 (CN) China to sell 30 Year Bonds (Special).

- 23:00 (ID) Indonesia Aug Foreign Reserves: No est v $145.4B prior.

- 23:30 (JP) Japan to sell 3-Month Bills.