Downbeat European PMIs and US labor market revisions set stage

EU mid-market update: Downbeat European PMIs and US labor market revisions set stage as market waits for Fed insights from Jackson Hole.

Notes/observations

- Traders navigate rough European flash PMIs: Germany misses across the board while substantial divergence was seen between French manufacturing and services, attributed to Paris Olympics lifting services. Same time, Euro Zone manufacturers raised their selling prices for the first time since April 2023 in response to three straight months of rising input costs; Euro weaker on recession concerns. UK the diamond in the rough with better-than-expected PMIs, helping lift cable (GBP/USD) to 13-month high.

- Duopoly of two Canadian railroads moved to full shut down of their Canadian rail networks and asked govt to intervene to prevent a stoppage following unsuccessful negotiations with Teamsters Union. Canada is the major exporter of hard wheat (durum) and potash globally. Canada also provided about 30-35% of US softwood lumber imports and ~60% of US crude oil imports in recent years. The majority of Canadian water treatment facilities keep 10-14 days' worth of chlorine on hand, which is used to treat drinking water across Canada.

- Yesterday’s BLS payrolls downward revisions (biggest in 15 years) emphasized the importance of the labor portion of the Fed’s dual mandate.

- Heavy hitting speakers on schedule: Highlighted by Fed Chair Powell in Jackson Hole on Fri. Also in focus is BOJ Gov Ueda with Q&A in Japan Parliament Lower House during Fri morning in Tokyo.

- Mid-East tensions simmer in background: Awaiting Iran response to Israel's attack.

- Greater China stocks showed mixed results, while mainland markets lagged, particularly in gaming and EV sectors. Chinese banks have emerged as surprising winners due to investor interest in dividends amidst low bond yields. Economists urge Beijing to raise its budget deficit ceiling to stimulate consumer spending and support local governments in light of weak economic data.

- Asia closed mixed with Hang Seng outperforming +1.4%. EU indices are +0.2-0.8%. US futures are +0.1%. Gold -0.4%, DXY +0.2%; Commodity: Brent +0.2%, WTI +0.1%; Crypto: BTC +2.5%, ETH +1.9%.

Asia

- Australia Aug Preliminary Manufacturing PMI registered its 7th month of contraction (48.7 v 47.5 prior).

- Japan Aug Preliminary Manufacturing PMI registered its 2nd straight contraction (49.5 v 49.1 prior).

- BOK left the 7-day Repo Rate unchanged at 3.50% (as expected) for its 13th straight pause in the current tightening cycle. Statement noted it hadreater confidence is greater that inflation would converge to the target level. To watch incoming data on both growth and inflation.

- BOK Gov Rhee post rate decision press conference noted that the decision to keep policy steady was unanimous. Inflation conditions were appropriate for a rate cut but financial stability risks warranted to keep policy steady. Added that 4 members were open to rate cut in next three months while 2 members preferred to hold rates.

- FT article noted that Global investors ‘pile’ into China bank bonds **Note: China PBoC had recently intervened in its bond markets. China govt said to warn of the risks of reckless buying, Moves appear to have halted a long, frenzied bond rally).

Europe

- Germany Finance Ministry Monthly Report noted that Federal and state governments' tax revenue decreased by 7.9% y/y.

Americas

- FOMC July Minutes noted that some officials saw risks to more deterioration in the labor market; some saw the case to cut rates at the meeting.

- Canada's two main railroads are set to shut down from Thursday after they failed to avert a strike by about 9,000 employees represented by a Teamsters union.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.47% at 516.36, FTSE +0.24% at 8,303.07, DAX +0.30% at 18,507.25, CAC-40 +0.38% at 7,553.88, IBEX-35 +0.69% at 11,191.55, FTSE MIB +0.18% at 33,374.00, SMI +0.55% at 12,319.60, S&P 500 Futures +0.05%].

Market focal points/key themes: European indices open with a modest bias to the upside which became more pronounced through early trading; among sectors leading the way higher are consumer discretionary and real estate; sectors inclined to the downside include energy and materials; oil & gas subsector impacted by continued slide in Brent; on corporate front, JD Sports Fashion trading higher in London after strong trading update; focus on start of Fed’s Jackson Hole Symposium; earnings expected in the upcoming US session includes Weibo, Advance Autoparts and Baidu.

Equities

- Consumer discretionary: JD Sports Fashion [JD.UK] +3.5% (trading update; no comments on recent bid speculation), Hays [HAS.UK] -1.5% (earnings), HelloFresh [HFG.DE] +5.0% (investor 'Active Ownership Capital' takes ~6.7% stake), CTS Eventim [EVD.DE] +7.0% (H1 results, above estimates).

- Financials: Swiss Re [SREN.CH] +3.5% (H1 results, affirms guidance) - Healthcare: Bavarian Nordic [BAVA.DK] +12.0% (Q2 results, raised guidance ahead of results) - Industrials: GN Store Nord [GN.DK] -9.5% (Q2 results, affirms guidance) - Technology: Kudelski [KUD.CH] -11.0% (earnings).

Speakers

- Norway Central Bank (Norges) Q3 Expectation Survey raised the 12-month ahead inflation from 2.8% to 3.1% and raised the 2 to 3 year ahead inflation from 4.0% to 4.1%.

- Poland Central Bank (NBP) Kotecki reiterated view of not seeing room to cut rates in 2024.

- Taiwan Cabinet said to approve NT$284B for 2025-28 submarine budget.

Currencies/fixed income

- USD consolidated its recent loses after FOMC July meeting minutes and a downward revision to US payrolls data likely cemented expectations for imminent interest-rate cuts. Market focus turning to Fed comments out of the upcoming Jackson Hole conference on Friday. Dealers noting a weaker NFP print on September 6th could push the fed to more aggressive action a few weeks later.

- EUR/USD of its 1-year highs of 1.1170. German PMI data reversed sentiment in the session French data was support by its hosting of the Olympics. 

- GBP/USD continued its push higher and probed above the 1.3301 level for 13-month highs aided by a better PMI reading.

- USD/JPY moved higher to test 145.60 as FOMC Minutes seemed to dial back any aggressive Fed rate cut in Sept.

Economic data

- (NL) Netherlands July House Price Index M/M: 1.4% v 1.3% prior; Y/Y: 10.6% v 9.7% prior.

- (SE) Sweden Jun Industrial Orders M/M: 2.6% v 10.1% prior; Y/Y: +0.8% v -8.8% prior.

- (DK) Denmark Aug Consumer Confidence: -7.4 v -5.4 prior.

- (NO) Norway Q2 Overall GDP Q/Q: 1.4% v 0.3% prior; GDP Mainland Q/Q: 0.1% v 0.2%e.

- (JP) Japan July Final Machine Tool Orders Y/Y: 8.4% v 8.4% prelim.

- (TR) Turkey Aug Consumer Confidence: 76.4 v 75.9 prior.

- (MY) Malaysia mid-Aug Foreign Reserves: $115.9B v $114.7B prior.

- (FR) France Retail July Sales Y/Y: -0.5% v -0.7% prior.

- (FR) France Aug Preliminary Manufacturing PMI: 42.1 v 44.5e (19th month of contraction); Services PMI: 55.0 v 50.3e; Composite PMI: 52.7 v 49.2e.

- (DE) Germany Aug Preliminary Manufacturing PMI: 42.1 v 43.3e (26th month of contraction); Services PMI: 51.4 v 52.3e; Composite PMI: 48.5 v 49.2e.

- (EU) Euro Zone Aug Preliminary Manufacturing PMI: 45.6 v 45.8e (26th month of contraction); Services PMI: 53.3 v 51.7e; Composite PMI: 51.2 v 50.1e.

- (TW) Taiwan July Unemployment Rate: 3.3% v 3.3%e.

- (PL) Poland Aug Consumer Confidence: -15.9 v -13.6e.

- (PL) Poland July Construction Output Y/Y: -1.4% v -2.3%e.

- (PL) Poland July Real Retail Sales M/M: 1.9% v 2.8%e; Y/Y: 4.4% v 5.4%e; Retail Sales Y/Y: 5.0% v 6.0%e.

- (UK) Aug Preliminary Manufacturing PMI: 52.5 v 52.2e (4th month of expansion); Services PMI: 53.3 v 52.8e; Composite PMI: 53.4 v 53.0e.

- (EU) ECB Q2 Euro-Area Negotiated Wage Index: 3.6% v 4.7% prior.

- (BE) Belgium Aug Consumer Confidence: -3 v -5 prior.

- (IS) Iceland July Wage Index M/M: 0.2% v 0.5% prior; Y/Y: 6.5% v 6.0% prior.

Fixed income issuance

- (SE) Sweden sold total SEK500M vs. SEK500M indicated in 2030 and 2039 I/L Bonds.

Looking ahead

- (IL) Israel July Leading ‘S’ Indicator M/M: No est v 0.1% prior.

- 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 7-day short-term repo operation (STR) operation.

- 06:00 (UK) Aug CBI Industrial Trends Total Orders: -25e v -32 prior; Selling Prices: 5e v 2 prior.

- 06:00 (IE) Ireland July PPI M/M: No est v 2.3% prior; Y/Y: No est v 2.8% prior.

- 06:00 (RO) Romania to sell RON800M in 12-month bills.

- 06:00 (CZ) Czech Republic to sell CZK5.0B in 3-month bills.

- 07:30 (EU) ECB Account of July Meeting (Minutes).

- 08:00 (PL) Poland Central Bank (NBP) July Minutes.

- 08:00 (BR) Brazil CONAB Sugar Production.

- 08:00 (MX) Mexico Q2 Final GDP Q/Q: 0.2%e v 0.2% prelim; Y/Y: 2.2%e v 2.2% prelim; Nominal GDP Y/Y: No est v 2.9% prior.

- 08:00 (MX) Mexico Jun IGAE Economic Activity Index (Monthly GDP) M/M: 0.1%e v 0.8% prior; Y/Y: -0.1%e v +1.6% prior.

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

- 08:30 (US) July Chicago Fed National Activity Index: 0.03e v 0.05 prior.

- 08:30 (US) Initial Jobless Claims: 232Ke v 227K prior; Continuing Claims: 1.87Me v 1.846M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Aug 16th: No est v $604.0B prior.

- 09:45 (US) Aug Preliminary S&P Manufacturing PMI: 49.5e v 49.6 prior; Services PMI: 54.0e v 55.0 prior; Composite PMI: 53.2e v 54.3 prior.

- 10:00 (US) July Existing Home Sales: 3.93Me v 3.89M prior.

- 10:00 (EU) Euro Zone Aug Advance Consumer Confidence: -12.6e v -13.0 prior.

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

- 11:00 (US) Aug Kansas City Fed Manufacturing Activity: -9e v -13 prior.

- 11:00 (MX) Mexico Central Bank (Banxico) Aug Minutes.

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

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

- 18:45 (NZ) New Zealand Q2 Retail Sales (Ex Inflation) Q/Q: -0.9%e v +0.5% prior.

- 19:01 (UK) Aug GfK Consumer Confidence: -12e v -13 prior.

- 19:30 (JP) Japan July National CPI Y/Y: 2.7%e v 2.8% prior; CPI Ex Fresh Food (Core) Y/Y: 2.7%e v 2.6% prior; CPI Ex Fresh Food, Energy (core-core) Y/Y: 1.9%e v 2.2% prior.

- 20:00 (US) Kansas City Fed releases Jackson Hole Symposium 2024 agenda.

- 21:00 (AU) Australia to sell A$700M in 2.75% Nov 2028 bonds.

- 22:35 (CN) China to sell 10 Year Bonds.

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