USD/JPY gets skittish as it aims for 150 level

EU mid-market update: USD/JPY gets skittish as it aims for 150 level; Moody's warns of credit implications on potential US govt shutdown.

Notes/observations

- Risk off flows across Asian session saw rising US dollar and falling equities, particularly those linked to real estate sector in China as Evergrande woes remain. European open saw mixed performance and a reversal in USD, with most of the major bourses lower except for FTSE100 hoovering just in the green.

- FX focus is on JPY, as its weakening approaches critical mass at the widely watched 150 level in USD/JPY. Intervention anticipation mounts as pair peaked briefly over 149 before Japan Fin Min Suzuki reiterated that they were watching it closely, which triggered nervous hands and a quick 30 pip move lower.

- Bond markets are adjusting to idea of a higher for longer rate environment following rate decisions and commentary last week.

- Data focus on string of US housing indicators at 0900 and 1000 ET. Including FHFA house price index, Corelogic house price index and new home sales.

- Asia closed lower with Hang Seng under-performing at -1.4%. EU indices are -0.6% to +0.1%. US futures are -0.4% to -0.5%. Gold -0.2%, DXY 0.0%; Commodity: Brent -1.0%, WTI -1.1%, TTF -7.1%; Crypto: BTC +0.5%, ETH +0.7%.

Asia

- China Q4 GDP growth rose to 5.2% - China Securities Journal [cites survey of 8 economists].

- New Zealand Treasury GDP growth to remain subdued for some time; path to lower inflation unlikely to be smooth.

- Japan Chief Cabinet Sec Matsuno reiterated PM instructed ministers on economic measure.

- Philippines says 4 China coastguard were nearby prior to the Philippines cutting of barrier at the South China Sea shoal.

- South Korea's Pres Yoon said if North Korea uses nuclear weapons, there will be an "overwhelming response" by South Korea, US to bring.

- Japan METI Minister Nishimura wants economic steps to aim for growth rather than demand; Supply-demand gap is almost gone.

- Japan Finance Min Suzuki said Japan is at a critical stage whether to spur consumption, wage growth; Reiterated excessive FX moves are not desirable, watching FX moves with high sense of urgency.

- China Foreign Minister Wang Yi reiterated international community is aware of need to avoid a new 'cold war'.

- Japan PM Kishida said to consider using [budget] reserves to encourage wage growth, asks for stimulus measures not to exceed last year's amount - Japanese press.

- Japan Economy Min Shindo reiterated importance for currencies to move in stable manner.

- Indonesia Central Bank Official said rupiah depreciation still 'relatively' under control.

- Japan Cabinet Office (Govt) Sept Monthly Report maintained overall economic assessment; Retains its view of a modest recovery with a raise for corporate earnings and cutting housing construction.

- Japan said to consider low-income-earner benefits as a part of upcoming economic measures - press.

Mid-East

- (AE) United Arab Emirates (UAE) UK Ambassador said trade between UAE and UK is at an all time high.

Ukraine conflict

- Ukraine reportedly suspends border checkpoint with Romania following Russian attack - press.

Europe

- EU's Jourova: Request that tech companies fight Russian propaganda; Watching what X (Twitter) is doing.

- Hungary PM Orban said there is nothing that should make us hurry about Sweden's NATO accession ratification.

- Spain reportedly to sanction 'big four' following the end of labor probe - press.

- EU Foreign Policy Chief Borrell to visit China in Oct; China and the EU said to be in close contact to plan a meeting between Chinese and EU leaders for this year.

- ECB’s Lane (Ireland, chief economist) highlighted data-dependent monetary policy with release of slide presentation.

- ECB's Simkus (Lithuania, hawk): Would not rush to answer on timing of rate cuts.

- Netherlands Govt grants Amsterdam Schiphol Airport a nature permit - press.

- Germany Finance Ministry Q4 Planned Debt Issuance: Cuts issuance by €31B.

- ECB's Muller (Estonia, hawk) reiterated sees no further rate hikes as things stand.

Americas

- Fed's Kashkari (voter) said still more work to be done on services inflation; We can definitely get back to 2% inflation; may need higher rates [for] longer, if economy is too strong.

- US government shutdown would negatively impact the country’s credit, credit rating agency Moody’s - NY Post.

- US Commerce Dept stated US imposing trade restrictions on additional Chinese and Russian companies over a plan to supply Russia with drone components.

- US House Speaker McCarthy (R-CA) said House will vote on appropriations bill on Tuesday.

- S&P raised forecast for US FY23 GDP to 2.3% from 1.7% and expects one more rate hike this cycle.

- JPMorgan CEO Dimon warned world may not be prepared for US Fed at 7.00% OCR - press.

- US Video game voice actors [SAG-AFTRA members] vote to authorize strike if labor talks with companies fail - financial press its regime to and end - financial press.

- Reportedly US Senate negotiators are nearing agreement on a bipartisan short-term spending measure to avert a US govt shutdown; Bill would extend funding for 4-6 weeks after Oct 1st.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.35% at 448.86, FTSE +0.11% at 7,632.48, DAX -0.46% at 15,334.35, CAC-40 -0.66% at 7,076.84, IBEX-35 +0.05% at 9,390.38, FTSE MIB -0.59% at 28,216.00, SMI -0.23% at 10,988.90, S&P 500 Futures -0.46%].

Market Focal Points/Key Themes: European indices open lower across the board, but moderated the losses through early trading; better performing sectors include financials and health care; sectors leading to the downside include technology and real estate; Duni rejects takeover offer from Mellby Gard; Sweco acquires Medins Havs och Vattenkonsulter AB; reportedly Vivendi looking to divest its tickets division; earnings expected in the upcoming US session include TD Synnex and United National Foods.

Equities

- Consumer discretionary: Asos [ASC.UK] -0.5% (trading update).

- Financials: Barclays [BARC.UK] +2.5% (analyst action).

- Healthcare: Eckert & Ziegler [EUZ.DE] +9.0% (supply agreement), Novartis [NOVN.CH] +1.0% (drug approval), Mithra Pharmaceuticals [MITRA.BE] -12.5% (earnings; cuts outlook).

- Industrials: Smiths Group [SMIN.UK] -0.5% (earnings).

- Technology: ASM International [ASM.NL] -2.5% (investor day; outlook), Card Factory [CARD.UK] -5.0% (earnings; outlook).

- Materials: Glencore [GLEN.UK] -1.0% (reportedly traded thousands of tonnes of Russian copper routed through Turkey to Italy in July this year).

Speakers

- ECB’s Schnabel (Germany) said activity in Euro area is clearly moderating.

- ECB's Simkus (Lithuania, hawk): Would not rush to answer on timing of rate cuts.

- Japan Chief Cabinet Sec Matsuno reiterated PM instructed ministers on economic measure.

- Japan Fin Min Suzuki retierated watching FX moves with high sense of urgency.

- ECB's Muller (Estonia, hawk) reiterated sees no further rate hikes as things stand.

Currencies/fixed income

- King US dollar is moving major pairs, with USD selloff since European open. EUR/USD rises to 1.06, GBP/USD pares overnight losses back up to 1.219. Attention remains on JPY and any potential intervention by BOJ or MOF, with brief peak over 149, since pulled back to below 149 but eyes return for another test.

Economic data

- (FI) Finland Aug Unemployment Rate: 6.7% v 6.9% prior.

- (SG) Singapore Aug Industrial Production M/M: -10.5% v -1.5%e; Y/Y: -12.1% v -3.1%e.

- (SE) Sweden Aug PPI M/M: -0.7% v -0.6% prior; Y/Y: -5.9% v -2.1% prior.

- (ZA) South Africa July Leading Indicator: 110.4 v 108.3 prior.

- (HK) Hong Kong Aug Trade Balance (HKD): -25.6B v -24.3Be; Exports Y/Y: -3.7% v -6.1%e; Imports Y/Y: -0.3% v -4.5%e.

Fixed income issuance

- Australia sells A$150M v A$150M indicated in 0.25% Nov 2032 indexed bonds: Avg Yield: 1.8939%; bid-to-cover: 2.66x.

- Thailand Central Bank sells THB60B in 3-month bills:Avg Yield: 2.38065% v 2.37507% prior; bid-to-cover: 2.11x v 1.14x prior.

- China Finance Ministry: Aug Net Local Gov't debt issuance CNY601B v CNY196.3B prior.

- Philippines sells PHP0B (nil) vs. PHP30B indicated in 3-year bonds (rejected all bids).

- Hong Kong sells total HK$82.334B in 1-month, 3-month, 6-month and 12-month bills.

- Indonesia sells total IDR8.0T in Islamic bill and bonds (Sukuk).

- Germany Finance Ministry Q4 Planned Debt Issuance: Cuts issuance by €31B.

- Netherlands Debt Agency (DSTA) sells €2.145B vs. €1.5-2.5B indicated range in 2.5% July 2033 DSL bonds; Avg Yield: 3.104% v 2.710% prior.

- UK DMO sells £3.0B vs £3.0B indicated in 0.875% July 2033 Green Gilts; Avg Yield: 4.315% v 4.239% prior; Bid-to-cover: 2.56x v 3.02x prior; Tail: 1.3bps v 0.2bps prior.

Looking ahead

- 05:30 (DE) Germany to sell €4.0B in 2.4% Oct 2028 BOBL.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2044, 2048 and 2053 bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 06:00 (IL) Israel to sell combined ILS1.8B in 2026, 2028, 2029, 2030, 2032 and 2052 bonds.

- 07:00 (BR) Brazil Sept FGV Construction Costs M/M: 0.2%e v 0.2% prior.

- 07:30 (CL) Chile Central Bank Traders Survey.

- 07:30 (BR) Brazil Central Bank (BCB) Sept Minutes.

- 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 13.0%.

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:00 (BR) Brazil mid-Sept IBGE Inflation IPCA-15 M/M: 0.4%e v 0.3% prior; Y/Y: 5.0%e v 4.2% prior.

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

- 08:30 (US) Sept Philadelphia Fed Non-Manufacturing Regional Index: No est v -13.1 prior.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 (US) July FHFA House Price Index M/M: 0.4%e v 0.3% prior.

- 09:00 (US) July S&P/CoreLogic House Price Index (20-City) M/M: 0.7%e v 0.9% prior; Y/Y: -0.1%e v -1.2% prior; House Price Index (Overall) Y/Y: No est v 0.0% prior.

- 10:00 (US) Aug New Home Sales: 698Ke v 714K prior.

- 10:00 (US) Sept Consumer Confidence: 105.5e v 106.1 prior.

- 10:00 (US) Sept Richmond Fed Manufacturing Index: -7e v -7 prior.

- 10:30 (US) Sept Dallas Fed Services Activity: No est v -2.7 prior.

- 11:30 (US) Treasury to sell 2-Year Notes.

- 12:00 (SE) Sweden Central Bank (Riksbank) Jansson.

- 12:30 (EU) ECB's Holzmann (Austria).

- 13:30 (US) Fed’s Bowman (voter).

- 15:00 (AR) Argentina July Supermarket Sales Y/Y: No est v -0.9% prior; Shop Center Sales Y/Y: No est v 11.8% prior.

- 15:00 (AR) Argentina July Economic Activity Index (Monthly GDP) M/M: 0.9%e v -0.2% prior; Y/Y: -3.8%e v -4.4% prior.

- 16:30 (US) Weekly API Oil Inventories.

- 17:00 (KR) South Korea Oct Business Manufacturing Survey: No est v 69 prior; Non-Manufacturing Survey: No est v 76 prior.

- 21:10 (JP) BOJ Outright Bond Purchase 3~5 Years, 5~10 Years, 10~25 Years and 25Years~ maturities.

- 21:30 (AU) Australia Aug CPI Y/Y: 5.2%e v 4.9% prior.

- 21:30 (CN) China Aug Industrial Profits Y/Y: No est v -6.7% prior; Aug YTD Y/Y: No est v -15.5% prior.