Oil on track for 10% weekly gain as US payrolls looms

EU mid-market update: Oil on track for 10% weekly gain as US payrolls looms; US dockworker strike lifted for now; EU vote on China EV tariffs inconclusive.

Notes/observations

- US Non-Farm Payrolls in focus. Analyst range is exceptionally wide at +70-310K. Jolts job openings and ADP employment beat expectations earlier in week. CME futures see 35% chance of 50bps cut and 65% chance of 25bps at next meeting on Nov 7th.

- EU shipping stocks decline as US dockworkers call off strike. Dockworkers reached ‘tentative agreement’ for 61.5% pay increase over 6 years. Strike suspended until at least Jan 15th. Trades unwind after stocks initially lifted when strike was called 3 days ago.

- EU "inconclusively" votes to approve increase of China EV tariffs. France, Italy, Greece and Portugal reportedly vote for, while Germany votes against. Sweden abstains. Final EU Commission’s decision on tariffs expected early next month.

- Oil looks to close week ~10% higher. Overnight commentary from Pres Biden spiked crude several percent higher. In typical Biden fashion, his exact words were unclear, but market interrupted them as ‘considering Israel’s proposal on attacking Iran oilfields’.

- Asia closed mixed with Hang Seng outperforming +2.8%. EU indices are -0.3% to +0.7%. US futures are -0.1% to +0.1%. Gold +0.1%, DXY -0.1%; Commodity: Brent +1.0%, WTI +1.0%; Crypto: BTC +1.8%, ETH +1.9%.

Asia

- Australia Aug Household Spending M/M: 0.0% v 0.5%e; Y/Y: 1.7% v 2.9%e.

- Australia Aug Home Loans Value M/M: 1.0% v 1.0%e.

Global conflict/tensions

- North Korea leader Kim Jong Un stated that if South Korea and the US attempted to use force, the North would respond with nuclear weapons.

Europe

- Italy Fin Min Giorgetti stated that govt was planning windfall levy on companies to narrow budget deficit; 2024 GDP growth target of 1.0% was realistic.

- BOE's Pill (chief economist) said further rate cuts expected but need for caution over inflation persistence, noting BOE should Not cut too far or too fast.

Americas

- US Dockworkers union suspended its US East/Gulf Coast port strike until mid-Jan 2025 to allow time to negotiate new contract. Union had accepted an offer that would increase wages 61.5% over the new six-year contract. Seeks to have language to protect union members from automation.

- Fed's Goolsbee (non-voter for 2024) noted that options between 25bps v 50bps not as important as getting rates down over next 12 months by a lot to get to neutral.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.23% at 517.48, FTSE -0.33% at 8,255.11, DAX +0.19% at 19,029.35, CAC-40 +0.36% at 7,504.38, IBEX-35 +0.22% at 11,643.50, FTSE MIB +0.60% at 33,370.00, SMI -0.24% at 11,965.97, S&P 500 Futures +0.04%].

Market focal points/key themes: European indices open mixed with a bias to the upside, rising to trade green across the board in the first hours of trading; among sectors leading the way higher are real estate and energy; lagging sectors include consumer discretionary and communication services; oil & gas supported by spike in Brent prices; EU automakers on watch for EU vote on Chinese EV tariffs ahead of final EU Commission decision next month; Sanofi to sell global rights to Enjaymo to Recordati; focus on US NFP later in the day; no major earnings expected in the upcoming Americas session.

Equities

- Consumer discretionary: JD Wetherspoon [JDW.UK] +1.0% (prelim earnings).

- Financials: Scor [SCR.FR] +2.5% (Berenberg raised to buy).

- Healthcare: Recordati [REC.IT] +5.5% (acquires global rights to Sanofi's Enjaymo) - Industrials: Volvo Car [VOLCAB.SE] +5.0% ( Sweden govt hopes for special Volvo Car EV dispute deal; Sweden will abstain in a vote on the introduction of EU tariffs on Chinese EVs today), Volkswagen [VOW3.DE] +1.5% (Germany to vote against EU tariffs on Chinese EVs), Maersk [MAERSKB.DK] -7.5%, Hapag-Lloyd [HLAG.DE] -13.5% (US East Coast dockworkers agree on wage increase and end strike until Jan 2025 for further talks).

- Utilities: SSE [SSE.UK] -1.5% (Jefferies cuts to hold).

Speakers

- ECB’s Centeno (Portugal, dove) stated that inflation was controlled.

- BOE's Pill (chief economist) noted that further rate cuts were expected but neeed caution over inflation’s persistence; Should Not cut too far or too fast; Saw merit on maintaining restrictive policy.

- EU diplomats and officials stated that they did not expect enough countries today to vote no to block EU Commission’s proposal on Chinese EV tariffs, meaning the duties should go through.

- EU voted to greenlight EU Commission’s proposal to increase EV tariffs on China.

- Czech Central Bank Gov Michl stated that would continue easing 'very cautiously' as inflation risks were present.

- Hungary PM Orban stated that needed to restart growth before focusing on wage rises.

- Philippines Central Bank (BSP) stated to continue to take a calibrated approach to ensure price stability. Saw downside risks to CPI in both 2024 and 2025 and upside risks to 2026 CPI outlook.

- Iran Supreme Leader Khamenei stats that Muslim nations had a common enemy; woulld not delay nor rush to respond to Israel and would strike again if necessary.

Currencies/fixed income

- FX price action was cautious ahead of the US nonfarm payrolls report that could offer hints on the Federal Reserve's next move after cutting interest rates by 50 basis points last month. Greenback consolidating gains after Fed Gov Powell recently dampened bets for further aggressive rate cuts,

- GBP/USD trying to recover following Thursday’s plunge. Pair at 1.3145 by mid-session. Dealers noted that BOE Gov Bailey opened the door to ramping up interest-rate cuts. Comments from BOE Chief economist Pill dialed back on some of the dovishness.

Economic data

- (FI) Finland July House Price Index M/M: +1.3% v -0.3% prior; Y/Y: -1.5% v -2.9% prior.

- (CH) Swiss Sept Unemployment Rate: 2.5% v 2.4%e; Unemployment Rate (seasonally adj): 2.6% v 2.6%e.

- (HU) Hungary Aug Industrial Production M/M: -0.5% v 0.2%e; Y/Y: -4.1% v -2.8%e.

- (FR) France Aug Industrial Production M/M: 1.4% v 0.3%e; Y/Y: +0.5% v -2.0%e.

- (FR) France Aug Manufacturing Production M/M: +1.6% v -0.2% prior; Y/Y: +0.3% v -1.8% prior.

- (ES) Spain Aug Industrial Production M/M: -0.1% v 0.2%e; Y/Y: -0.1% v -0.1%e; Industrial Output NSA (unadj) Y/Y: -3.5% v +4.6% prior.

- (DE) Germany Sept Construction PMI: 41.7 v 38.9 prior.

- (TH) Thailand May Foreign Reserves w/e Sept 27th: $243.2B v $240.9B prior.

- (IT) Italy Q2 YTD Budget Deficit to GDP Ratio: 5.8% v 8.4% prior.

- (UN) FAO Sept World Food Price Index: 124.4 v 120.7 prior.

- (UK) Sept New Car Registrations Y/Y: +1.0% v -1.3% prior.

- (RU) Russia Narrow Money Supply w/e Sept 27th (RUB): 18.30T v 18.39T prior.

- (TW) Taiwan Foreign Reserves Sep: $577.9B v $579.06B prior.

- (UK) Sept UK Construction PMI: 57.2 v 53.1e (2 ½ year high).

Fixed income issuance

- (IN) India sold total INR390B vs. INR390B indicated in 2027, 2034 and 2073 bonds.

Looking ahead

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2031, 2038 and 2046 Bonds.

- 06:00 (IE) Ireland Sept Live Register Monthly Change: No est v -5.7K prior; Live Register Level: No est v 166.1K prior.

- 06:00 (IT) Italy Aug Retail Sales M/M: No est v 0.5% prior; Y/Y: 1.3%e v 1.0% prior.

- 06:00 (ES) ECB’s De Guindos (Spain).

- 06:00 (UK) DMO to sell £B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £2.5B respectively).

- 07:30 (TR) Turkey Sept Real Effective Exchange Rate (REER): No est v 62.34 prior.

- 07:30 (IN) India Forex Reserve w/e Sept 27th: No est v $692.3B prior.

- 07:30 (IS) Iceland to sell 2027 and 2035 Bonds.

- 07:30 (IN) India announces upcoming bill issuance (held on Wed).

- 08:00 (PL) Poland National Bank (NBP) Aug Minutes (2 decisions ago).

- 08:00 (MX) Mexico Aug Unemployment Rate: 2.9%e v 2.9% prior; Unemployment Rate (seasonally adj): No est v 2.7% prior.

- 08:00 (MX) Mexico Sept Vehicle Production: No est v 352.6K prior; Vehicle Exports: No est v 292.7K prior.

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

- (RO) Romania Central Bank (NBR) Interest Rate Decision.

- 08:30 (US) Sept Change in Nonfarm Payrolls: +150Ke v +142K prior; Private Payrolls: +125Ke v +118K prior; Manufacturing Payrolls: -8Ke v -24K prior.

- 08:30 (US) Sept Unemployment Rate: 4.2%e v 4.2% prior; Underemployment Rate: No est v 7.9% prior; Labor Force Participation Rate: 62.7%e v 62.7% prior.

- 08:30 (US) Sept Average Hourly Earnings M/M: 0.3%e v 0.4% prior; Y/Y: 3.8%e v 3.8% prior; Average Weekly Hours All Employees: 34.3e v 34.3 prior.

- 09:00 (US) Fed's Williams.

- 09:10 (NL) ECB’s Elderson (Netherlands).

- 10:00 (CA) Canada Sept Ivey Purchasing Managers Index (seasonally adj): No est v 48.2 prior.

- 10:00 (US) Fed's Goolsbee (media rounds).

- 10:30 (US) Fed's Goolsbee (media rounds).

- 11:00 (EU) Potential sovereign ratings after European close (Moody’s on EU).

- 13:00 (US Weekly Baker Hughes Rig Count.

- 14:00 (BR) Brazil Sept Trade Balance: $4.6Be v $4.8B prior; Exports: $28.4Be v $29.1B prior; Imports: $23.9Be v $24.3B prior.

- 16:00 (US) Fed's Goolsbee (media rounds).

- (AR) Argentina Central Bank Survey.

- (PH) Philippines Aug Bank Lending Y/Y: No est v 9.6% prior; Net Bank Lending Y/Y: No est v 10.4% prior.

- (PH) Philippines Aug M3 Money Supply Y/Y: No est v 7.2% prior.

- (RU) Russia Sept Wellbeing Fund: No est v $133.4B prior.