European flash PMIs suggest Oct rate cut could be on ECB's table

 EU mid-market update: European flash PMIs suggest Oct rate cut could be on ECB's table; Intel rises on potential Apollo investment.

Notes/Observations

- All European flash PMIs miss consensus for Germany, France, Euro Zone and UK, as economists see a technical recession already baked in. Inverted yield curves began dis-inverting, as short-term ends fall. German 2/10yr yield disinverted for first time since Nov 2022.

- Market pricing increased odds for an ECB cut in Oct, while CME futures price another 50bps cut for Fed on Nov 7th, although with marginal majority at 52%.

- UK Sterling collapses below 1.33 ahead of speech by Chancellor Reeves at first Labour Conf, likely to indicate tone and impact of Autumn Budget Statement on Oct 30th.

- Shares of Intel rise again premarket following press reports that Apollo in preliminary talks to invest as much as $5B in Intel.

- Asia closed mixed with NZX50 outperforming -0.6%. EU indices are -0.4% to +0.2%. US futures are +0.1 %. Gold -0.2%, DXY +0.4%; Commodity: Brent -0.1%, WTI -0.1%; Crypto: BTC +0.8%, ETH +2.2%.

Asia

- China Central Bank (PBoC) cut the 14-day Repo Rate by 10bps to 1.85% for its 1st cut in the 14-day rate since Sept 2023 (**Note: move follows the 10bps cut in the 7-day ops last month).

- Australia Sept Preliminary Manufacturing PMI registered its 8th month of contraction (46.7 v 48.5 prior).

- China PBOC Gov Pan Gongsheng reiterated to continue with accommodative monetary policy and look to enhance intensity of adjustments. To create good monetary, financial environments for growth.

- Nikkei closed for holiday.

Global conflict/tensions

- Israel Military: Conducting extensive strikes on Hezbollah targets in Lebanon.

Europe

- UK Chancellor of the Exchequer (Fin Min) Reeves said to pledge 'no austerity' despite tough decisions at upcoming Autumn Budget Statement.

- French Pres Macron unveiled new govt cabinet which confirmed to appoint Antoine Armand as new Fin Min.

- France PM Barnier ruled out broad tax hikes, opting instead for tax increases for high earners; Wanted to avoid raising taxes on the middle class and workers; There needed to be a collective effort to cut spending and to turn around country’s “grave” debt situation. France must preserve credibility on bond markets.

- German Chancellor Scholz's ruling SPD party secured narrow win in Brandenburg vote with 31% of votes; Far-right AfG party came second at 30%.

- Fitch affirmed United Kingdom sovereign rating at AA-; outlook stable.

- Morningstar DBRS affirms France at sovereign rating 'AA' (high); Outlook stable.

Americas

- Congressional leaders said to announce ‘deal’ to avoid government shutdown; the Congressional leaders announced 3-month spending agreement to keep US govt open through Dec 20th; Congress to vote on the bill on Wed, Sept 25th.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.20% at 515.28, FTSE +0.10% at 8,238.51, DAX +0.38% at 18,802.45, CAC-40 -0.38% at 7,471.89, IBEX-35 +0.06% at 11,760.55, FTSE MIB -0.13% at 33,718.00, SMI +0.19% at 11,954.60, S&P 500 Futures +0.06%].

Market focal points/key themes: European indices open generally mixed but then most moved up to trade in the green after the first hours of trading; among better performing sectors are energy and telecom; sectors inclined to the downside include consumer discretionary and financials; energy sector supported with Brent gains amidst tensions in the Middle East; HSBC divests its private banking unit in Germany to PN Paribas; REA raises bid for Rightmove; German government pauses sale of Commerzbank shares amidst interest from Unicredit; earnings expected in the upcoming US session include AAR.

Equities

- Consumer discretionary: LVMH [MC.FR] -1.5% (analyst downgrade), Kingfisher [KGF.UK] +1.5% (UBS raised to neutral), Ahold Delhaize [AD.NL] +1.5% (HSBC raised to hold).

- Financials: BNP Paribas [BNP.FR] -2.0% (acquires HSBC's Private Banking unit in Germany) - Healthcare: Sanofi [SAN.FR] +0.5% (FDA approves Sarclisa with Bortezomib, Lenalidomide and Dexamethasone), Active Biotech [ACTI.SE] -28.5% (rights issue), AstraZeneca [AZN.UK] -1.0% (no statistical significance in the final overall survival (OS) analysis for Datopotamab deruxtecan), Innate Pharma [IPH.FR] +5.0% (FDA clearance of IND for IPH4502, a Nectin-4 ADC to be developed in solid tumors).

- Industrials: Volkswagen [VOW3.DE] +0.5% (targeting hundred of staff cuts in China at group level over three year - post close Fri) - Technology: Alphawave IP [AWE.UK] -32.5% (H1 results; outlook cut) - Telecom: Rightmove [RMV.UK] +2.5% (REA Group rejected prior offers and confirmed to evaluate new improved bid from REA Group the total value of the new offer is 770p/shr from 705p/shr; total deal value £6.1B).

Speakers

- ECB's Kazaks (Latvia) reiterated that direction of interest rates is down; Services inflation and growth remain a concern.

- Spain Govt said to raise its 2024 GDP growth forecast from 2.4% to 2.7%.

- India said to increase the retail sale of onions to help control prices.

Currencies/fixed income

- USD was firmer during the session as major EU PMI readings disappointed. Market participates now bet that the ECB would need to accelerate the pace of interest-rate cuts as concerns grow the region’s economic recovery.

- EUR/USD moved back below the 1.11 level as German 2-year/10-year yield dis-inverts (aka normalized) for first time since Nov 2022. Weak PMI data put an Oct ECB rate cut on the table.

- GBP/USD was at 1.3255 with focus on UK Chancellor of the Exchequer (Fin Min) Reeves speech at Labour conference later today. Reports circulated that she would pledge 'no austerity' or wealth tax despite tough decisions at upcoming Autumn Budget Statement.

- USD/JPY higher at 143.60 after BOJ Gov Ueda recently dampened any hope for an Oct rate hike.

Economic data

- (NL) Netherlands Q2 Final GDP Q/Q: 1.0% v 1.0% prelim; Y/Y: 0.8% v 0.8% prelim.

- (NL) Netherlands Aug House Price Index M/M: 1.1% v 1.4% prior; Y/Y: 11.2% v 10.6% prior.

- (HU) Hungary July Average Gross Wages Y/Y: 13.9% v 13.6%e.

- (CH) Swiss Aug M3 Money Supply Y/Y: 1.1% v 0.4% prior.

- (MY) Malaysia mid-Sept Foreign Reserves: $117.6B v $116.8B prior.

- (FR) France Sept Preliminary Manufacturing PMI: 44.0 v 44.2e (20th month of contraction); Services PMI: 48.3 v 53.1e; Composite PMI: 47.4 v 51.5e.

- (DE) Germany Sept Preliminary Manufacturing PMI: # v 42.3e (27th month of contraction and lowest since Nov 2023); Services PMI: 50.6 v 51.0e; Composite PMI: 47.2 v 48.2e.

- (EU) Euro Zone Sept Preliminary Manufacturing PMI: 44.8 v 45.7e (27th month of contraction); Services PMI: 50.5 v 52.3e; Composite PMI: 48.9 v 50.5e.

- (CH) Swiss weekly Total Sight Deposits (CHF): 465.3B v 466.8B prior; Domestic Sight Deposits: 457.2B v 458.2B prior.

- (PL) Poland Aug Construction Output Y/Y: % v -6.2%e.

- (PL) Poland Aug Real Retail Sales M/M: % v 1.7%e; Y/Y: % v 3.2%e; Retail Sales (current prices) Y/Y: % v 3.7%e.

- (TW) Taiwan Aug Unemployment Rate: 3.4% v 3.3%e.

- (UK) Sept Preliminary Manufacturing PMI: 51.5 v 52.2e; Services PMI: 52.8 v 53.5e; Composite PMI: 52.9 v 53.5e.

- (IS) Iceland Aug Wage Index M/M: 0.1% v 0.2% prior; Y/Y: 6.3% v 6.5% prior.

Fixed income issuance

- None seen.

Looking ahead

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

- 05:30 (DE) Germany to sell combined €4.0B in 6-month and 12-month BuBills.

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

- 06:00 (UK) Sept CBI Industrial Trends Total Oreders: -23e v -22 prior; Selling Prices: No est v 15 prior.

- 06:00 (IL) Israel July Manufacturing Production M/M: No est v -0.9% prior.

- 06:00 (IL) Israel to sell combined ILS2.7B in 2027, 2029, 2034, 2035 and 2042 bonds.

- 06:00 (BE) Belgium Debt Agency (BDA) to sell combined €2.8B in 2029, 2033 and 2039 OLO Bonds).

- 06:00 (EU) European Union to sell 2029 and 2044 NGEU bonds.

- 06:00 (NO) Norway announcement on upcoming bond issuance (held on Wed).

- 07:00 (UK) Chancellor of the Exchequer (Fin Min) Reeves speech at Labour conference.

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

- 07:30 (CL) Chile Central Bank (BCCh) Sept Minutes.

- 08:00 (PL) Poland Aug M3 Money Supply M/M: 0.6%e v 0.6% prior; Y/Y: 8.0%e v 8.3% prior.

- 08:00 (MX) Mexico July IGAE Economic Activity Index (Monthly GDP) M/M: 0.1%e v 0.0% prior; Y/Y: +2.0%e v -0.6% prior.

- 08:00 (MX) Mexico July Retail Sales M/M: +0.3%e v -0.5% prior; Y/Y: -0.7%e v -3.9% prior.

- 08:00 (MX) Mexico July Gold Production: No est v 5.3K prior; Silver Production: No est v 346.4K prior; Copper Production: No est v 36.1K prior.

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

- 08:00 (US) Fed’s Bostic.

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

- 08:30 (US) Aug Chicago Fed National Activity Index: -0.20e v -0.34 prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.4-8.0B in 3-month, 6-month and 12-month bills (4 tranches).

- 09:00 (IT) ECB’s Cipollone (Italy) on digital euro.

- 09:45 (US) Sept Preliminary Manufacturing PMI: 48.6e v 47.9 prior; Services PMI: 55.3e v 55.7 prior; Composite PMI: 54.7e v 54.6 prior.

- 10:15 (US) Fed’s Goolsbee.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 13:00 (US) Fed’s Kashkari.
(IT) Italy Debt Agency (Tesoro) announcement on upcoming issuance (to sell I/L on Wed).

- 16:00 (US) Weekly Crop Progress Report.

- 17:00 (KR) South Korea Aug PPI Y/Y: No est v 2.6% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 84.1 prior.

- 20:30 (JP) Japan Sept Preliminary Manufacturing PMI: No est v 49.8 prior; Services PMI: No est v 53.7 prior; Composite PMI: No est v 52.9 prior.

- 22:35 (CN) China MOF to sell 30-year Special Bonds: Avg Yield: % v 2.3062% prior (Sept 5th 2024).

- 23:00 (TH) Thailand Central Bank to sell THB55B in 3-month bills.