European PMIs hold up as US Labor day marks new month and end of summer break

EU mid-market update: European PMIs hold up as US Labor day marks new month and end of summer break; Payrolls in heavy focus for Fri.

Notes/Observations

- European Aug Manufacturing PMIs not as bad as feared: Euro Zone, Germany, France and Italy beat consensus but still in contraction, while expanding nations of UK and Spain come in line and miss, respectively. Positive bias against expectations, helped lift European bond yields as rate cut expectations for ECB pared slightly. Accordingly, ECB sources piece noted council is ‘at odds’ over rate path beyond Sept, amid what impact the current economic downturn has on inflation in the mid to long term.

- China, Japan and semiconductor chip tensions: Following mixed China Manufacturing PMI readings, with beat for Caixin and miss for official govt reading, and Japan’s Q2 Capital Spending less than expected, China warned Japan of retaliation over potential new chip curbs.

- Crude oil is little changed: After reports OPEC+ is likely to proceed with planned gradual oil output increase in Oct.

- Light volume as US honors Labor Day: Most US markets close for holiday. Futures still trade.

- Asia closed mixed with Hang Seng underperforming -1.7%. EU indices are -0.1% to -0.5%. US futures are -0.1% to -0.2%. Gold +0.1%, DXY 0.0%; Commodity: Brent +0.2%, WTI +0.3%; Crypto: BTC -0.4%, ETH -0.4%.

Asia

- China Aug Manufacturing PMI (Govt Official): 49.1 v 49.5e (4th month of contraction).

- China Aug Caixin PMI Manufacturing: 50.4 v 50.0e (moved back into expansion).

- Australia Aug Final PMI Manufacturing: 48.5 v 48.7 prelim (confirmed 7th month of contraction).

- Japan Aug Final Manufacturing PMI: 49.8 v 49.5 prelim (confirmed 2nd contraction contraction).

- Japan Q2 Capital Spending (Capex) Y/Y: 7.4% v 9.9%e; Capital Spending (ex-software) Y/Y: 9.1% v 8.3%e.

- Australia July Building Approvals M/M: 10.4 % v 2.8%e.

- Australia Q2 Inventories Q/Q: +0.1% v -0.1%e.

- South Korea Aug Trade Balance: $3.8B v $3.9Be; Exports Y/Y: 11.4% v 13.1%e ; Imports Y/Y: 6.0% v 6.3%e.

Global conflict/tensions

- Russia Defense Ministry stated that Ukraine launched mass drone attacks on Russia.

- Russia Dep For Min Ryabkov stated Russia would make changes to its nuclear doctrine due to the West’s actions in Ukraine. air defenses intercepted or shot down more than 150 drones in 15 regions.

- US said to be against Ukraine using American weapons to strike deep into Russia.

Europe

- ECB said to be at 'odds' over impact of economic downturn but the rift unlikely to impact Sept decision due to widespread consensus to cut rates. Core of the debate said to be over how weakness in economic growth and a potential recession will impact inflation.

- Germany's Alternative for Germany (AfD) on track to become first far right party to win regional election since WWII. AfD was set to win 33.2% of the vote in the state of Thuringia (vs conservatives' 23.6%).

Americas

- Fitch affirms United States sovereign rating at AA+; Outlook stable; Rating was constrained by deficits, interest burden, and debt.

- Goldman Sachs analyst raised US Q3 GDP forecast from 2.5% to 2.7% (*8Reminder: On Aug 30th Atlanta Fed GDPNow raised its Q3 GDP forecast from 2.0%to 2.5%).

- Financial markets in the US and Canada closed in observance of the Labor Day holiday.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.4% at 523, FTSE -0.1% at 8367, DAX -0.2% at 18868, CAC-40 -0.4% at 7603, IBEX-35 -0.1% at 11386, FTSE MIB -0.2% at 3362, SMI -0.5% at 12380, S&P 500 Futures -0.2%].

Market focal points/key themes: European indices open mixed with a bias to the downside and experienced generally light trading; focus on economic outlook with the release of PMIs; among sectors inclined to the upside are health care and real estate; underperforming sectors include consumer discretionary and industrials; Fnac-Darty CEO said would not improve offer for Unieuro; reportedly Italian government considering selling 20% stake in Enav; US closed for holiday.

Equities

- Consumer discretionary: Vertu [VTU.UK] -3% (trading update), Basic Fit [BFIT.NL] -2.0% (new CFO).

- Healthcare: IDEX Biometrics [IDEX.NO] +5% (contract), Sanofi [SAN.FR] +2.0% (Phase 3 HERCULES study, meets endpoint).

- Technology: Kainos [KNOS.UK] -15% (trading update).

- Real Estate: Rightmove [RMV.UK] +21% (REA confirms cash and share offer for Rightmove).

Speakers

- South African Pres Ramaphosa stated that would like to narrow trade deficit and structure of trade with China.

Currencies/fixed income

- FX market were range bound in quiet trading as US markets were closed for holiday thus keeping EU participants on the sidelines.

- EUR/USD at 1.1075 area as various EU PMI Manufacturing data were revised higher in final readings.

- USD/JPY steady at 145.45 by mid-session.

Economic data

- (NL) Netherlands July Retail Sales Y/Y: +3.6% v -0.8% prior.

- (NL) Netherlands Aug Manufacturing PMI: 47.7 v 48.5e (2nd month of contraction).

- (RU) Russia Aug Manufacturing PMI: 52.1 v 53.6 prior (28th month of expansion).

- (CH) Switzerland July Real Retail Sales Y/Y: +2.7 v -2.6% prior.

- (SE) Sweden Aug PMI Manufacturing: 52.7 v 50.0e (moves back into expansion).

- (HU) Hungary Jun Final Trade Balance: €1.1B v €1.1B prelim.

- (HU) Hungary Aug Manufacturing PMI: 47.6 v 49.3e (3rd month of contraction).

- (TR) Turkey Aug Manufacturing PMI: 47.8 v 47.2 prior (5th month of contraction).

- (PL) Poland Aug Manufacturing PMI: 47.8 v 47.4e (28th month of contraction).

- (TR) Turkey Q2 GDP Q/Q: +0.1% v -0.5%e; Y/Y: 2.5% v 3.2%e.

- (ES) Spain Aug Manufacturing PMI: 50.5v 51.6e (7th month of expansion).

- (CH) Swiss Aug PMI Manufacturing: 49.0 v 43.8e (20th straight contraction); PMI Services: 52.9 v 44.7 prior.

- (CZ) Czech Aug Manufacturing PMI: 46.7 v 44.0e (27th straight contraction).

- (TH) Thailand Aug Business Sentiment Index: 47.1 v 46.9 prior.

- (IT) Italy Aug Manufacturing PMI: 49.4 v 48.5e (5th month of contraction).

- (FR) France Aug Final Manufacturing PMI: 43.9 v 42.1 prelim (confirmed 19th month of contraction).

- (DE) Germany Aug Final Manufacturing PMI 42.4 v 42.1 prelim (confirmed 26th month of contraction).

- (EU) Euro Zone Aug Final Manufacturing PMI: 45.8 v 45.6 prelim (confirmed 26th month of contraction).

- (GR) Greece Aug Manufacturing PMI: 52.9 v 53.2 prior (19th month of expansion).

- (NO) Norway Aug PMI Manufacturing: 51.2 v 59.8 prior (2nd month of expansion).

- (CH) Swiss Weekly Total Sight Deposits (CHF): No est v 463.6B prior; Domestic Sight Deposits: No est v 455.7B prior.

- (IT) Italy Q2 Final GDP Q/Q: 0.2% v 0.2% prelim; Y/Y: 0.9% v 0.9% prelim.

- (UK) Aug Final Manufacturing PMI: 52.5 v 52.5 prelim (confirms 4th month of expansion).

- (IT) Italy July PPI M/M: 2.0% v 0.1% prior; Y/Y: -1.6% v -3.5% prior.

- (ZA) South Africa Aug Manufacturing PMI: 43.6 v 52.4 prior.

- (CY) Cyprus Q2 Final GDP Q/Q: 0.7% v 0.7% prelim; Y/Y: 3.6% v 3.6% prelim.

Fixed income issuance

- (EU) ESM opened its book to sell 10-year bonds; guidance seen +26bps to mid-swaps.

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills; Avg Yield: 4.34% v 4.37% prior; bid-to-cover: 2.88x v 3.28x prior.

Looking ahead

- (RO) Romania Aug International Reserves: No est v $71.0B prior.

- (ZA) South Africa Aug Naamsa Vehicle Sales Y/Y: No est v 1.5% prior.

- (AR) Argentina Aug Government Tax Revenue (ARS): No est v 11.9T prior.

- (IT) Italy Aug Budget Balance: No est v €2.4B prior.

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

- 05:30 (DE) Germany to sell €2.0B in 6-month BuBills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell Bills.

- 06:00 (PT) Portugal July Industrial Production M/M: No est v -3.7% prior; Y/Y: No est v 3.0% prior.

- 06:00 (IL) Israel to sell bonds.

- 06:00 (RO) Romania to sell combined RON1.0B in 2027 and 2032 bonds.

- 06:00 (NO) Norway announcement on details for upcoming Bond issuance.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 08:00 (CZ) Czech Aug Budget Balance (CZK): No est v -192.3B prior.

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

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 08:30 (CL) Chile July Economic Activity Index (Monthly GDP) M/M: 0.9%e v 0.3% prior; Y/Y: 2.7%e v 0.1% prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.4-7.0B in 3-month, 6-month and 12-month bills.

- 09:00 (BR) Brazil Aug Manufacturing PMI: No est v 54.0 prior.

- 09:00 (SG) Singapore Aug Purchasing Managers Index (PMI): No est v 50.7 prior; Electronics Sector Index: No est v 51.0 prior.

- 11:00 (CO) Colombia Aug PMI Manufacturing: No est v 50.0 prior.

- 11:00 (MX) Mexico Aug Manufacturing PMI: No est v 49.6 prior.

- 11:00 (MX) Mexico July Total Remittances: $6.0Be v $6.2B prior.

- 11:00 (MX) Mexico Central Bank Economist Survey.

- 12:00 (IT) Italy Aug New Car Registrations Y/Y: No est v 4.7% prior.

- 14:00 (MX) Mexico Aug IMEF Manufacturing Index: No est v 47.1 prior; Non-Manufacturing Index: No est v 50.9 prior.

- 18:45 (NZ) New Zealand Q2 Terms of Trade Q/Q: 2.7%e v 5.1% prior.

- 19:00 (KR) South Korea Aug CPI M/M: 0.4%e v 0.3% prior; Y/Y: 2.1%e v 2.6% prior; CPI Core Y/Y: 2.1%e v 2.2% prior.

- 19:01 (UK) Aug British Retail Consortium (BRC) LFL Sales Y/Y: No est v +0.3% prior.

- 19:50 (JP) Japan Aug Monetary Base Y/Y: No est v 1.0% prior.

- 21:30 (AU) Australia Q2 Current Account Balance(A$): -5.0Be v -4.9B prior; Net Exports of GDP: +0.6%e v -0.9% prior.

- 23:35 (JP) Japan to sell 10-Year JGB Bonds.