UK inflation opens the door for more rate cuts

EU Mid-Market Update: UK inflation opens the door for more rate cuts; focus turn to US CPI release; Asian leader jumble as Japan PM steps back and Thai Court dismisses PM for ethics breach.

Notes/observations

-UK inflation comes in below estimates for July, with Core and Services components cooler than month ago, adds to dovish case from high jobless claims reported yesterday. GBP trades lower as BOE rate cut bets are amplified. FTSE lags peers as economic weakness takes focus.

-Volatile trade once again for JPY (yen) as PM Kishida follows Biden by stepping back from reelection bid for LDP..

-Press reports that US DOJ officials are considering calling for Google breakup after antitrust victory, with less severe options include forcing Google to share more data with competitors and measures to prevent it from gaining an unfair advantage in AI products.

-World’s largest steel firm, China Baowu Steel Group said China’s steel industry is facing a crisis more severe than the downturns of 2008 and 2015.

-European biggest tour operator, TUI noted promising start for Winter 24/25 bookings for all source markets with robust pricing; It said early bookings well ahead.

-Thailand stocks sold off and Thai Baht given bid after Thai Court dismissed PM and cabinet after breaching ethical rules.

-All eyes are on US CPI reading at 08:30 ET.

-Asia closed mixed with NZX50 outperforming +2.1%. EU indices are +0.2-1.0%. US futures are -0.1% to +0.1%. Gold +0.4%, DXY -0.1%; Commodity: Brent +0.9%, WTI +0.9%; Crypto: BTC +3.2%, ETH +3.3%.

Asia

- New Zealand Central Bank (RBNZ) cut the Official Cash Rate (OCR) by 25bps to 5.25% (not expected); moves into easing. Decision to cut was reached consensus. Still saw need for rates to remain restrictive for some time to curb domestic inflation pressures. Further easing dependent on inflation environment. Headline CPI was expected to return to target band in Sept quarter. Lowered rate path outlook and cut end-2024 OCR from 5.65% to 4.92% and cut end-2025 OCR from 5.14% to 3.85%.

- Japan PM Kishida said NOT to intend to run for ruling-party LDP leadership in Sept, (** Note: Shigeru Ishiba remained public's favorite for next LDP leader).

- South Korea July Unemployment Rate: 2.5% v 2.9%e.

Americas

- Fed’s Bostic (hawk, voter) noted that if the economy evolved as expected, there would be a rate cut by year end. Would be really bad if cut rates and then have to raise them again; willing to wait for the first cut, but is coming.

Energy

-Russia reportedly extends its gasoline export ban until end-2024 [prior Sept/Oct].

- Weekly API Crude Oil Inventories: -5.2M v +0.2M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.43% at 503.80, FTSE +0.51% at 8,277.48, DAX +0.48% at 17,893.15, CAC-40 +0.68% at 7,325.58, IBEX-35 +0.18% at 10,743.00, FTSE MIB +0.96% at 32,313.00, SMI +0.72% at 12,010.03, S&P 500 Futures -0.01%].

Market Focal Points/Key Themes: European indices open higher across the board but moderated gains in the early part of the session; improved risk sentiment being attributed to outlook for slower inflation; among sectors leading the way higher are consumer discretionary and industrials; lagging sectros include materials and utilities; travel & leisure subsector supported following TUI’s earnings; luxury subsector supported after analyst upgrade for L’Oreal; Rheinmetall to acquire Loc; focus on US CPI figures later in the day; earnings expected in the upcoming US session include Dole and Cardinal Health.

Equities

- Consumer discretionary: TUI [TUI1.DE] -2.0% (Q3 results, affirms guidance, notes accelerated strong summer bookings and provides colour on winter bookings); Flutter Entertainment [FLTR.UK] +8.5% (Q2 results, guidance raise), Playtech [PTEC.UK] +18% (Flutter reportedly in talks to acquire Playtech's Snaitech, one of Italy's biggest gambling companies), Straumann [STMN.CH] +14.5% (H1 results, raises guidance).

- Consumer staples: Carlsberg [CARLB.DK] -3.0% (H1 results, Q3-to-date colour; results disappoint but guidance raised - post close).

- Financials: UBS [UBSG.CH] +3.0% (Q2 results, profit estimate beat, increases 2024 savings target).

- Healthcare: Bavarian Nordic [BAVA.DK] +9.0% (FDA accepts priority review of BLA for Chikungunya Vaccine - post close).

- Industrials: ThyssenKrupp [TKA.DE] -4.5% (final Q3 results; cuts Net outlook; World’s largest steel firm, China Baowu Steel Group says China’s steel industry is facing a crisis more severe than the downturns of 2008 and 2015; Cash now more important than profit), Hapag-Lloyd [HLAG.DE] -6.5% (final H1 results, affirms guidance), Rheinmetall [RHM.DE] +1.5% (acquire US vehicle specialist Loc for an enterprise value of $950M), Balfour Beatty [BBY.UK] -4.0% (H1 results).

- Utilities: RWE [RWE.DE] -1.5% (H1 results and PPA with Meta).

Speakers

- Russia said to extend its gasoline export ban until end-2024.

- Thailand Court voted 5-4 to dismiss PM Srettha from position after being found guilty of breaching ethical rules.

- Fitch affirmed Taiwan sovereign rating at 'AA'; outlook stable.

Currencies/fixed income

- USD put in a mixed price action against the major pairs as participants note recent inflation data pointing towards September rate cuts for BOE, ECB and Fed. Fed futures now price 53% (v 45% d/d) chance of 50bps rate cut at Sept 18th's meeting ahead of US July CPI due out later today.

- EUR/USD above the 1.10 level and testing its highest level since Jan. Euro Area Q2 GDP was unrevised in its 2nd reading while Industrial Production data was below consensus. Markets currently believing the Fed could outpace the ECB on rate cuts.

- UK Headline CPI rose for the 1st time since Dec and back above BOE target but other components might have pave the way for more rate cuts. The inflation readings came in below consensus. Dealers noted that BOE policymakers might not place too much confidence in July's fall in services inflation component. The 2-year Gilt Yield fell to a 16-month low at 3.54%.

- USD/JPY moved above 147.40.

- Swedish inflation was slightly higher than expectations but a softening of the core reading appeared to keep the Riksbank on course for more easing.

Economic data

- (FI) Finland July CPI M/M: 0.2% v 0.0% prior; Y/Y: 1.0% v 1.3% prior.

- (FI) Finland Jun GDP Indicator Y/Y: +1.5% v -2.4% prior.

- (UK) July CPI M/M: -0.2% v -0.1%e; Y/Y: 2.2% v 2.3%e; CPI Core Y/Y: 3.3% v 3.4%e; CPI Services Y/Y:5.2 % v 5.5%e; CPIH Y/Y: 3.1% v 3.1%e.

-(UK) July RPI M/M: 0.1% v 0.1%e; Y/Y: 3.6% v 3.5%e; RPI-X (ex-mortgage interest payments) Y/Y: 2.7% v 1.9% prior; Retail Price Index: 387.5 v 387.8e.

- (UK) July PPI Input M/M: -0.1% v -0.2%e; Y/Y: 0.4% v 0.3%e.

- (UK) July PPI Output M/M: 0.0% v 0.0%e; Y/Y: 0.8% v 1.2%e.

- (SE) Sweden July CPI M/M: 0.1% v 0.0%e; Y/Y: 2.6% v 2.5%e; CPI Level: 416.22 v 415.9e.

- (SE) Sweden July CPIF M/M: 0.1% v 0.0%e; Y/Y: 1.7% v 1.6%e.

- (SE) Sweden July CPIF (ex-energy) M/M: 0.3% v 0.2%e; Y/Y: 2.2% v 2.0%e.

- (RO) Romania Q2 Advance GDP (1st of 3 readings) Q/Q: 0.1% v 1.7%e; Y/Y: 0.8% v 2.3%e.

- (NO) Norway Q3 Consumer Confidence: -16.3 v -18.3 prior.

- (IN) India July Wholesale Prices (WPI) Y/Y: 2.0% v 1.9%e.

- (FR) France July Final CPI M/M: 0.1% v 0.1% prelim; Y/Y: 2.3% v 2.3% prelim; CPI (ex-tobacco index): 119.37 v 119.30e.

- (FR) France July Final CPI EU Harmonized M/M: 0.2% v 0.2%% prelim; Y/Y: 2.7% v 2.6% prelim.

- (NL) Netherlands Q2 Preliminary GDP Q/Q: 1.0% v 0.2; Y/Y: +1.9% v -0.6% prior.

- (NL) Netherlands Jun Trade Balance: €13.3B v €12.1B prior; Exports Y/Y: -1.0% v -4.3% prior; Imports Y/Y: -0.1% v -1.7% prior.

- (NL) Netherlands Jun Consumer Spending Y/Y:-0.7 % v +0.1% prior.

- (PL) Poland July Final CPI M/M: 1.4% v 1.4% prelim; Y/Y: 4.2% v 4.2% prelim.

- (PL) Poland Q2 Preliminary GDP Q/Q: 1.5% v 1.3%e; Y/Y: 3.2% v 2.7%e.

- (UK) Jun ONS House Price Index Y/Y: 2.7% v 2.7% prior.

- 05:00 (EU) Euro Zone Q2 Preliminary GDP (2nd reading) Q/Q: 0.3% v 0.3% advance; Y/YU: 0.6% v 0.6% advance.

- 05:00 (EU) Euro Zone Q2 Preliminary Employment Q/Q: 0.2% v 0.3% prior; Y/Y: 0.8% v 1.0% prior.

- 05:00 (EU) Euro Zone Jun Industrial Production M/M: -0.1% v +0.6%e; Y/Y: -3.9% v -2.6%e.

- 05:00 (CY) Cyprus Q2 Preliminary GDP Q/Q: 0.7% v 1.0% prior; Y/Y: 3.6% v 3.5% 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 DKK0M (nil) in 1-month and 3-month bills.

- (FR) France Debt Agency (AFT) sold total €8.998B vs. €7.5-9.0B indicated range in 2027, 2029, 2030 and 2031 Bonds.

- Sold €1.832B in 0.0% Feb 2027 Oat Avg Yield: 2.57% v 2.85% prior; Bid-to-cover: 2.75x v 2.57x prior.

- Sold €2.662B in 2.75% Feb 2029 Oat; Avg Yield: 2.60% v 2.76% prior; Bid-to-cover: 2.28x v 2.70x prior.

- Sold €2.806B in 2.75% Feb 2030 Oat; Avg Yield: 2.65% v 2.87% prior; Bid-to-cover: 2.50x v 2.54x prior.

- Sold €1.698B in 0.0% Nov 2031 Oat; Avg Yield: 2.70% v 2.65% prior; Bid-to-cover: 2.44x v 3.72x prior.

- (SE) Sweden sold total SEK4.0B vs. SEK4.0B indicated in 2029 and 2035 Bonds.

Looking ahead

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

- 05:30 (DE) Germany to sell combined €2.0B in 2050 and 2054 Bunds.

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

- 05:50 (FR) France Debt Agency (AFT) to sell €1.25-2.0B in inflation-linked 2029, 2036 and 2053 Bonds (Oatei) (4 tranches).

- 06:00 (IE) Ireland Jun Property Prices M/M: No est v 0.1% prior; Y/Y: No est v 8.2% prior.

- 06:00 (CZ) Czech Republic to sell variable Aug 2043 bonds.

- 07:00 (RU) Russia to sell OFZ Bonds.

- 07:00 (US) MBA Mortgage Applications w/e Aug 9th: No est v 6.9% prior.

- 07:00 (ZA) South Africa Jun Retail Sales M/M: No est v -0.7% prior; Y/Y: 1.0%e v 0.8% prior.

- 08:00 (BR) Brazil Jun Retail Sales M/M: -0.2%e v +1.2% prior; Y/Y: 5.6%e v 8.1% prior.

- 08:00 (BR) Brazil Jun Broad Retail Sales M/M: 1.2%e v 0.8% prior; Y/Y: 3.9%e v 5.0% prior.

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

- 08:30 (US) July CPI M/M: +0.2%e v -0.1% prior; Y/Y: 3.0%e v 3.0% prior.

- 08:30 (US) July CPI (ex-food/energy) M/M: 0.2%e v 0.1% prior; Y/Y: 3.2%e v 3.3% prior.

- 08:30 (US) July CPI Index NSA: 314.772e v 314.175 prior; CPI Core Index : 318.958e v 318.346 prior.

- 08:30 (US) July Real Avg Hourly Earning Y/Y: No est v 0.8% prior; Real Avg Weekly Earnings Y/Y: No est v 0.6% prior.

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

- 11:00 (US) (US) Atlanta July Sticky-CPI data.

- 11:00 (CO) Colombia Jun Industrial Production Y/Y: +0.3%e v -2.4% prior; Manufacturing Production Y/Y: No est v -3.6% prior.

- 11:00 (CO) Colombia Jun Retail Sales Y/Y: +0.7%e v -1.7% prior.

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

- 14:00 (NZ) New Zealand Central Bank (RBNZ) Gov Orr (media rounds).

- 15:00 (AR) Argentina July National CPI M/M: 4.0%e v 4.6% prior; Y/Y: 263.3%e v 271.5% prior.

- 15:00 (AR) Argentina Jun Wages M/M: No est v 8.3% prior.

- 18:45 (NZ) New Zealand July Food Prices M/M: No est v 1.0% prior.

- 18:45 (NZ) New Zealand July Total Card Spending M/M: No est v -0.5% prior; Retail Card Spending M/M: No est v -0.6% prior.

- 19:00 (AU) Australia July CBA Household Spending M/M: No est v 0.6% prior; Y/Y: No est v 3.9% prior.

- 19:50 (JP) Japan Q2 Preliminary GDP Q/Q: +0.6%e v -0.7% prior (revised from -0.6%);; Annualized Q/Q: +2.3%e v -2.9% prior (revised from -1.8%); GDP Nominal Q/Q: 1.2%e v -0.2% prior (revised from 0.0%); GDP Deflator Y/Y: 2.7%e v 3.4% prior.

- 19:50 (JP) Japan Q2 Preliminary GDP Private Consumption Q/Q: +0.6%e v -0.7% prior; Business Spending Q/Q: +0.8%e v -0.4% prior; Inventory Contribution to GDP Ratio: -0.1%e v +0.3% prior; Net Exports Contribution to GDP Ratio: -0.1%e v -0.4% prior.

- 21:00 (AU) Australia Aug Consumer Inflation Expectation Survey : No est v 4.3% prior.

- 21:10 (JP) BOJ bond buying operation.

- 21:20 (CN) China Aug 1-Year Medium-Term Lending Facility (MLF) Operation: Expected to keep policy steady with rate at 2.30%; allot CNY275B.

- 21:30 (CN) China July New Home Prices M/M: No est v -0.7% prior; Used Home Prices M/M: No est v -0.9% prior.

- 21:30 (AU) Australia July Employment Change +20.0Ke v +50.2K prior; ; Unemployment Rate: 4.1%e v 4.1% prior; Full Time Employment Change No est v +43.3K prior; Part Time Employment Change No est v +6.8K prior; Participation Rate: No est v 66.9% prior.

- 22:00 (CN) China July Industrial Production Y/Y: 5.3%e v 5.3% prior; Industrial Production YTD Y/Y: 5.9%e v 6.0% prior.

- 22:00 (CN) China July Retail Sales Y/Y: 2.6%e v 2.0% prior; Retail Sales YTD Y/Y: 3.5%e v 3.7% prior.

- 22:00 (CN) China July YTD Urban Fixed Assets Y/Y: 3.9%e v 3.9% prior.

- 22:00 (CN) China July YTD Property Investment Y/Y: -9.9%e v -10.1% prior; Residential Property Sales YTD Y/Y: No est v -26.9% prior.

- 22:00 (CN) China July Surveyed Jobless Rate: 5.1%e v 5.0% prior.

- 23:00 (NZ) New Zealand Central Bank (RBNZ) Gov Orr testifies in Parliament.