European CPI returns to target while PMIs were mixed

EU mid-market update: US Dockworkers go on strike for 1st time in 50 years; European CPI returns to target while PMIs were mixed; Focus turns to US JOLTS Job Openings.

Notes/observations

- October marks beginning of Q4, following an unusually green Sept for US equities (best SP500 Sept since 2013), buoyed by the Fed starting policy easing. Trade this morning is fairly mixed, as market waits for critical US Payrolls data on Friday. Early clues for US job market later today with JOLTs job openings at 10:00 ET.

- US Dockworkers start strike: Union rejected nearly 50% pay increase stating strike will go on as long as needed. Economists see up to $5B a day impact on US economy. ILA union workers have not been on strike since 1977. EU shipping sector also impacted as Maersk trades ~4% lower.

- Euro Zone CPI moved back below ECB’s 2% target for first time since June 2021; PMIs were mixed as market continues pricing an Oct rate cut from ECB; Pricing shifted after the weak flash PMI readings last week, as ECB remains data dependent. Beats from Euro Zone, Germany, France, Spain and Poland. Misses for Italy, Sweden and Russia. Improvement seen from Netherlands and Hungary. Worsening from Norway, Turkey and Greece, while UK was unrevised.

- French PM Barnier set to give his first parliament speech later today with focus on upcoming tax hikes and any announcement regarding delay in reaching EU’s 3% of GDP deficit target.

- New Japan PM Ishiba formerly announces Cabinet, with Kato as Finance Minister, as expected; New NATO Sec Gen Mark Rutte officially begins term.

- Israel security official noted that a wider operation targeting Lebanon's capital Beirut is Not on the table; Overnight, Israel confirmed it started its ground incursions into Lebanon.

- Asia closed mixed (China, Korea and Hong Kong closed). EU indices are -0.5% to +0.4%. US futures are -0.2% to 0.0%. Gold +0.5%, DXY +0.3%; Commodity: Brent -2.2%, WTI -2.4%; Crypto: BTC -0.5%, ETH +0.1%.

Asia

- Japan Sept BOJ Summary of Opinions (MPM). Some members expressed concerns about a sharp reversal of the weak Yen and the risk of raising policy rate further at this point.

- Japan Q3 Tankan Large Manufacturing Index: 13 v 12e; Large Manufacturing Outlook: 14 v 12e.

- Japan Aug Jobless Rate: 2.5% v 2.6%e.

- Japan Sept Final PMI Manufacturing: 49.7 v 49.6 prelim (confirmed 3rd month of contraction).

- Australia Sept Final Manufacturing PMI: 46.7 v 46.7 prelim (confirmed 8th month of contraction and 4-year low).

- Australia Aug Retail Sales M/M: 0.7% v 0.4%e.

- Australia Aug Building Approvals M/M: -6.1% v -4.3%e v +10.4% prior; Private Sector Houses M/M: No est v 0.6% prior.

- South Korea Sept Trade Balance: $6.7B v $5.0Be; Exports Y/Y: 7.5% v 6.4%e; Imports Y/Y: 2.2% v 5.0%e.

- New Zealand Aug Building Permits M/M: -5.3% v 26.4% prior.

Global conflict/tensions

- Israel security official said wider operation targeting Lebanon's capital Beirut is Not on the table; No clashes with Hezbollah forces reported yet in ground operation.

- Israel military statement confirmed it has started its ground incursion into Lebanon.

Europe

- UK Sept BRC Shop Price Index Y/Y: -0.6% v -0.3%e (lowest since Aug 2021).

- Ireland Sept PMI Manufacturing: 49.4 v 50.4 prior (1st contraction in 3 months).

- France PM Barnier said to plan €15-18B in additional taxes and delay 3% budget deficit target to 2029 from 2027.

Americas

- Fed Chair Powell stated that If economy evolved as expected, it would mean 2 more cuts this year for a total of 50bps; Going to take longer to slow housing inflation.

- Fed's Goolsbee (non-voter for 2024; voter for 2025) stated that there would be a lot of rate cuts; Rates would have to come down a lot over the next 12 months.

- Fed's Bostic (hawk, voter for 2024; non-voter for 2025) stated that would be focused on whether the economy was "still producing net jobs" and, in particular, whether monthly job growth stayed around 100,000 positions or above; Would be watching jobs data closely.

- East Coast port strike begin as ILA union rejected wage hike offer near 50%.

Energy

- DOE statement noted it was purchasing 6M barrels of oil for SPR. Purchasing 1.5M barrels of oil per month for delivery from Feb 2025 through May 2025.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.21% at 524.00, FTSE +0.28% at 8,260.14, DAX +0.29% at 19,397.55, CAC-40 -0.11% at 7,627.53, IBEX-35 -0.41% at 11,828.28, FTSE MIB -0.04% at 34,112.00, SMI +0.40% at 12,218.75, S&P 500 Futures -0.09%].

Market focal points/key themes: European indices open generally higher and maintained the trend through the early part of the session; market appetite seen muted ahead of data releases; among sectors leading to the upside are technology and real estate; lagging sectors include energy and utilities; oil & gas subsector weighed by demand concerns; shipping stocks pressures by strike of US East Coast dockworkers; Covestro confirms takeover offer from ADNOC; Mulberry rejects Frasers’ offer; focus on US PMIs later in the day; earnings expected in the upcoming Americas session include Nike and Paychex.

Equities

- Consumer discretionary: LVMH [MC.FR] -1.5% (French stocks lag ahead of PM Barnier speech on tax hikes), Greggs [GRG.UK] -4.0% (trading update; conf call comments) - Consumer staples: Character Group [CCT.UK] +1.0% (trading update), AB Inbev [ABI.BE] +2.5% (CitiGroup raised to buy).

- Healthcare: AstraZeneca [AZN.UK] -0.5% (Enhertu granted Priority Review in the US for patients with HER2 low or HER2 ultralow metastatic breast cancer who have received at least one line of endocrine therapy), Haleon [HLN.UK] -1.0% (Pfizer sells ~640M shares in Haleon at £3.80/shr for £2.38B in total) - Industrials: Maersk [MAERSKB.DK] -3.0% (US East Coast dockworkers start ports strike).

- Materials: Covestro [1COV.DE] +3.5% (confirms takeover offer from ADNOC).

Speakers

- ECB's Rehn (Finland) reiterated Council stance that pace of rate cuts to be decided on a meeting-by-meeting basis; direction was clear but data to set the pace. More grounds for cutting rates at Oct meeting as inflation was slowing down.

- Sweden Central Bank (Riksbank) Sept Minutes noted it could make larger steps in rate cut path. Policy rate might be cut at the two remaining monetary policy meetings this year with a 50bps cut being possible.

- European Union to launch repo facility for joint bonds on Oct 7th.

- Finland FSA Macroprudential Decision maintained its countercyclical buffer (CCyB) unchanged at 0%.

- Thailand Dep Fin Min stated that the Central Bank (BOT) was not sufficiently managing THB currency volatility.

- Japan incoming PM Ishiba confirmed to select Kato as Finance Minister (as speculated).

- Japan new Fin Min Kato stated that PM Ishiba instructed him to push toward wage hikes. Likely be an additional budget.

- ILA Dockworker Union stated that it would strike as long as needed.

Currencies/fixed income

- USD held onto gains that were achieved after Fed Chief Powell indicated that they were in no rush to cut rates. Focus turned to EU inflation data.

- EUR/USD holding just above 1.11 level as ECB speak kept the door open for an Oct rate cut. EU Advance CPI data remained below the 2% target and kept the market expectations that ECB would enact a faster pace of interest-rate cuts.

- GBP/USD at 1.3340 by mid-session.

- USD/JPY off its Asian session highs. Japan Sept BOJ Summary of Opinions (MPM) showed that some members expressed concerns about a sharp reversal of the weak Yen and the risk of raising policy rate further at this point.

Economic data

- (NL) Netherlands Sept Preliminary CPI Y/Y: 3.5% v 3.3%e.

- (NL) Netherlands Sept Preliminary CPI EU Harmonized M/M: -0.9% v -1.2%e; Y/Y: 3.3% v 3.2%e.

- (NL) Netherlands Aug Retail Sales Y/Y: 2.8% v 3.9% prior.

- (NL) Netherlands Sept Manufacturing PMI: 48.2 v 47.7 prior (3rd straight contraction).

- (RU) Russia Sept Manufacturing PMI: 49.5 v 51.5e (1st contraction in 29 months).

- (SE) Sweden Sept PMI Manufacturing: 51.3 v 51.5e (2nd month of expansion).

- (CH) Swiss Aug Real Retail Sales Y/Y: 3.2% v 2.9% prior.

- (HU) Hungary July Final Trade Balance: €0.2B v €0.2B prelim.

- (AT) Austria Sept Preliminary CPI M/M: -0.1% v -0.2% prior; Y/Y: 1.8% v 2.3% prior.

- (CZ) Czech Q2 Final GDP Q/Q: 0.3% v 0.3% prelim; Y/Y: 0.6% v 0.6% prelim.

- (HU) Hungary Sept Manufacturing PMI: 49.7 v 47.6 prior (4th month of contraction).

- (TR) Turkey Sept Manufacturing PMI: 44.3 v 47.8 prior (6th month of contraction).

- (PL) Poland Sept Manufacturing PMI: 48.6 v 47.3e (29th month of contraction).

- (ES) Spain Sept Manufacturing PMI: 53.0 v 50.2e (8th month of expansion).

- (CH) Swiss Sept PMI Manufacturing: 49.9 v 48.0e (21st month of contraction); PMI Services: 49.8 v 52.9 prior.

- (CZ) Czech Sept Manufacturing PMI: 46.0 v 46.0e (28th month of contraction).

- (TH) Thailand Sept Business Sentiment Index: 45.7 v 47.1 prior.

- (IT) Italy Sept Manufacturing PMI: 48.3 v 49.0e (6th month of contraction).

- (FR) France Sept Final Manufacturing PMI: 44.6 v 44.0 prelim (confirmed 20th month of contraction.

- (DE) Germany Sept Final Manufacturing PMI: 40.6 v 40.3 prelim (confirmed 27th month of contraction).

- (EU) Euro Zone Sept Final Manufacturing PMI: 45.0 v 44.8 prelim (confirmed 27th month of contraction).

- (GR) Greece Sept Manufacturing PMI: 50.3 v 52.9 prior (19th month of expansion).

- (NO) Norway Sept Manufacturing PMI: 51.8 v 52.0 prior (3rd month of expansion).

- (UK) Sept Final Manufacturing PMI: 51.5 v 51.5 prelim (confirmed 5th month of expansion).

- (EU) Euro Zone Sept Advance CPI Estimate Y/Y: 1.8% v 1.8%e (below ECB target for the 1st time since Jun 2021); Core CPI Y/Y: 2.7% v 2.7%e.

- (GR) Greece Aug Unemployment Rate: 9.5% v 9.9% prior.

- (ZA) South Africa Sept Manufacturing PMI: # v 43.6 prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €4.79B vs. €4.5-5.5B indicated range in 6-month and 12-month bills.

- (UK) DMO sold £2.25B in 4.75% Oct 2043 Green Gilts; Avg Yield: 4.421% v 4.372% prior; bid-to-cover: 3.27x v 3.37x prior; Tail: 0.1bps v 0.2bps prior.

- (ID) Indonesia sold total IDR24.0T vs. IDR22.0T target in bills and bonds.

Looking ahead

- (ZA) South Africa Sept Naamsa Vehicle Sales Y/Y: -1.7%e v -4.9% prior.

- (IT) Italy Sept Budget Balance: No est v €6.5B prior.

- (AR) Argentina Sept Government Tax Revenue (ARS): No est v 11.764T prior.

- (RO) Romania Sept International Reserves: No est v $70.8B prior.

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

- 05:25 (CH) Switzerland to sell 3-month Bills.

- 05:30 (DE) Germany to sell €4.0B in 2.5% Oct 2029 BOBL.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month bills.

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

- 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2033, 2038 and 2048 bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) (prior €12.45B with 53 bids recd).

- 06:00 (IL) Israel Aug Chain Store Sales M/M: No est v 0.8% prior.

- 06:00 (PT) Portugal Aug Industrial Production M/M: No est v -1.0% prior; Y/Y: No est v -4.0% prior.

- 06:30 (EU) ESM to sell €1.1B in 3-month Bills; Avg Yield: % v 3.404% prior; Bid-to-cover: x v 2.71x prior (Sept 3rd 2024.

- 07:30 (CL) Chile Aug Economic Activity Index (Monthly GDP) M/M: 0.3%e v 1.0% prior; Y/Y: 2.5%e v 4.2% prior.

- 08:00 (CZ) Czech Sept Budget Balance (CZK): No est v -175.8B prior.

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

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

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

- 09:00 (BR) Brazil Sept Manufacturing PMI: No est v 50.4 prior.

- 09:30 (CA) Canada Sept Manufacturing PMI: No est v 49.5 prior.

- 09:45 (US) Sept Final S&P Manufacturing PMI: 47.0e v 47.0 prelim.

- 10:00 (US) Aug JOLTS Job Openings: 7.660Me v 7.673M prior.

- 10:00 (US) Sept ISM Manufacturing: 47.6e v 47.2 prior.

- 10:00 (US) Aug Construction Spending M/M: +0.2%e v -0.3% prior.

- 10:00 (UK) BOE's Pill (chief economist).

- 10:30 (US) Sept Dallas Fed Services Activity: No est v -7.7 prior.

- 11:00 (CO) Colombia Sept PMI Manufacturing: No est v 49.8 prior.

- 11:00 (PE) Peru Sept CPI M/M: 0.1%e v 0.3% prior; Y/Y: 2.1%e v 2.0% prior.

- 11:00 (US) Fed's Bostic gives opening remarks; moderates conversation with Fed member Cook.

- 11:15 (CH) SNB's Schlegel in Bellinzona.

- 11:30 (DE) ECB's Schnabel (Germany) chairs panel in Frankfurt.

- 11:30 (US) Treasury to sell 52-Week Bills.

- 12:00 (IT) Italy Sept New Car Registrations Y/Y: No est v -13.4% prior.

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

- 18:15 (US) Fed's Bostic with members Barkin and Collins participate on panel.

- 19:00 (KR) South Korea Sept CPI M/M: 0.4%e v 0.4% prior; Y/Y: 1.9%e v 2.0% prior; CPI Core Y/Y: 2.0%e v 2.1% prior.

- 19:50 (JP) Japan Sept Monetary Base Y/Y: No est v 0.6% prior.

- 20:30 (KR) South Korea Sept PMI Manufacturing: No est v 51.9 prior.

- 21:00 (US) Vice Presidential Candidates Vance, Walz hold debate.