Focus on Powell, weekly US jobless claims and final reading of Q2 GDP

EU mid-market update: Ceasefire on the cards for Israel/Lebanon; China reiterates forceful rate cuts; Focus on Powell, weekly US jobless claims and final reading of Q2 GDP.

Notes/observations

- Decline in European bond yields as risk on rally washes over Europe. French 10-year declines less than peers, causing French 10-year to surpass Spain’s for first time since 2007 and spread with German 10-year widening to 80bps, largest since early Aug. French Govt said to consider asking Brussels for 2-year extension to reach 3% deficit to GDP target.

- Consumer Confidence data for Germany, Italy and Sweden beat consensus; Meanwhile, press reports circulated that ECB doves pushing for a rate cut in Oct after recent slate of weak data.

- Swiss National Bank cuts rate by 25bps, as expected; Sees more cuts possible in coming quarters.

- Crude oil falls >2.5% as early reports indicated Israel PM Netanyahu ordered easing of Lebanon strikes amid talks for 21-day cease-fire; Following this, PM Netanyahu refutes speculation and said instructed military to fight with full force; Elsewhere for oil, Saudi Arabia reportedly considers abandoning $100 price target for crude to win back market share and Russia’s Novak said all OPEC+ members are in full compliance of agreement with no new discussions ongoing.

- China Politburo stated it would strive complete its annual economic targets. It noted that at this time there were some new conditions and problems in economic operations.

- Micron earnings and outlook helping chip names globally; During its earnings call, it stated that strong growth in AI servers expected to continue this year and the next.

- Asia closed higher with Hang Seng outperforming +4.2%. EU indices are +0.4-1.4%. US futures are +0.5-1.5%. Gold +0.4%, DXY 0.0%; Commodity: Brent -2.1%, WTI -2.2%; Crypto: BTC -0.2%, ETH -0.3%.

Asia

- Bank of Japan (BOJ) Minutes noted members shared the view that, with the price stability target of 2.0% it would conduct monetary policy as appropriate, in response to developments in economic activity and prices as well as financial conditions, from the perspective of sustainable and stable achievement of the target.

- RBA Financial Stability Report noted that global economic outlook continued to be uncertain and vulnerabilities in the global financial system remain.

- China govt said to consider injecting $142B of capital into largest State banks. Move to increase their capacity to support the struggling economy.

- China Politburo stated it would strive complete its annual economic targets and that the fundamentals of economy and favorable conditions had not changed. At this time there are some new conditions and problems in economic operations. Reiterated to lower RRR and implement forceful interest rate cut.

Taiwan

- Japan Navy Destroyer said to have sailed the Taiwan Strait for the first time.

Global conflict/tensions

- Reports circulated of a 21-day cease-fire agreement to be implemented ‘soon’ along the Israeli-Lebanon border to allow more time to negotiate a more comprehensive ceasefire.

- US said to plan to announce more than $8 billion worth of military assistance for Ukraine on Thursday during Ukrainian President Zelenskiy's visit to Washington on Thurs, Sept 26th.

- Russia Pres Putin proposed updates to Russian nuclear strategy; Reserved the right to use nuclear weapons in case of aggression against Russia and Belarus.

Europe

- ECB doves reportedly to fight for Oct rate cut after weak data, but likely to face resistance from ECB hawks pushing for pause until Dec.

- Eurasia Group's Rahman: Hearing France will ask Brussels for a two year delay in reaching its 3% of GDP deficit target ie 2029 instead of 2027.

- Italian govt official Bombardieri: Italy currently not planning taxes on 'extra profits'. Govt was negotiating with its domestic banks on the terms of a contribution from them to provide additional cash for state finances.

- UK PM Starmer tweeted that he looked reset our relationship with the EU and make Brexit work for the British people.

Americas

- Fed's Kugler (voter) stated that if inflation progress continued it would support additional rate cuts.

- House of Representatives passed stopgap funding bill (as expected); Senate passed a measure late Wednesday.

Energy

- Saudi Arabia said to be prepared to abandon $100 crude oil price target in order to win back market share.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +1.11% at 524.90, FTSE +0.39% at 8,300.54, DAX +1.20% at 19,149.25, CAC-40 +1.59% at 7,685.63, IBEX-35 +1.39% at 11,952.46, FTSE MIB +1.51% at 34,353.00, SMI +0.49% at 12,199.48, S&P 500 Futures +0.78%].

Market focal points/key themes: European indices open higher across the board and remained upbeat through the early part of the session; among sectors leading the way higher are technology and consumer discretionary; among sectors in the red are energy and telecom; tech sectors supported by results from Micron overnight; oil & gas subsector impacted by drop in crude prices; China-related retail names again rising; reportedly Sodexo looking to acquire Aramark; earnings expected in the upcoming US session include Accenture, CarMax and Jabil.

Equities

- Consumer discretionary: LVMH [MC.FR] +6.5%, Anglo American [AAL.UK] +4.5% (China affirms broad stimulus measures), Ubisoft [UBI.FR] -18.5% (Cuts guidance amid delay of Assassin Creed game to Feb 14th 2025, Deutsche Bank cuts to hold), H&M [HMB.SE] -3.5% (Q3 results, misses estimates, Sept color; cuts guidance, SEK1.0B share buyback), Ceconomy [CEC.DE] +11.5% (Kepler raised to Buy).

- Consumer staples: Diageo [DGE.UK] +3.5% (Q1 AGM trading update).

- Financials: Commerzbank [CBK.DE] +4.5% (raises targets; CEO comments at conf).

- Healthcare: Evotec [EVT.DE] +6.5% (collaboration with Novo Nordisk), Roche [ROG.CH] +1.5% (positive phase III results for Gazyva/Gazyvaro).

- Industrials: BASF [BAS.DE] -2.0% (new corporate strategy for 2025-2028; cuts dividend) - Technology: ASML [ASML.NL] +4.0% (Micron earnings and outlook), Nordic Semiconductor [NOD.NO] -16.5% (provides 5-year targets - CMD).

Speakers

- SNB Policy Statement stressed that further rate cuts could occur in the coming quarters. Reiterated stance that could be prepared to intervene into FX market if necessary.

- SNB updated its Staff Projections which maintained 2024 GDP growth forecast at ~1.0% and maintained 2025 GDP growth forecast at 1.5%. Projections cut the 2024 CPI forecast from 1.3% to 1.2% and cut 2025 CPI from 1.1% to 0.6%.

- SNB President Jordan post rate decision press conference noted that downside risks to inflation were higher than upside risks. Strong CHF currency (Franc), lower oil & electricity price contributed to lower inflation projections. Economic growth would be 'rather modest' in coming quarters.

- ECB Economic Bulletin reiterated that it was determined to ensure that inflation returned to its 2% medium-term target in a timely manner and would keep policy rates sufficiently restrictive for as long as necessary to achieve this aim.

- Sweden NIER Think Tank maintained its 2024 GDP growth at 0.7%.

- Israel PM Netanyahu stated that he had not yet given response to US-French ceasefire proposal; Instructed military to keep fighting at full power.

- Russia Dep PM Novak stated that all OPEC+ members were in full compliance of its agreement.

Currencies/fixed income

- USD consolidated against the major European pairs during the session. Focus turns to upcoming pre-recorded speech from Fed Chair Powell. A host of other Fed officials were also due to make their scheduled appearances during the remainder of the session.

- EUR/USD moved lower after reports circulated that ECB ‘doves’ were preparing to fight for an interest rate cut at the Oct meeting after a string of weaker-than-expected economic data.

- CHF currency was firmer after SNB cut its Policy Rate by 25bps. SNB cut its inflation outlook for the horizon period while saw CPI at 0.5% in 2027 (well below target). USD/CHF at 0.8495 by mid-session.

- USD/JPY tested above 145 level before consolidating. Global risk appetite on the equity front providing some unwinding of safe-haven flows. A looming 21-day cease-fire agreement between Israel and Lebanon also helping sentiment.

Economic data

- (DE) Germany Oct GfK Consumer Confidence: -21.2 v -22.5e.

- (SE) Sweden Aug Trade Balance (SEK): -5.3B v +6.6B prior.

- (SE) Sweden Aug Household Lending Y/Y: 0.9% v 0.7% prior.

- (NO) Norway Aug Trend Unemployment Rate: 4.0% v 4.0% prior.

- (JP) Japan Aug Final Machine Tool Orders Y/Y: -3.5% v -3.5% prelim.

- (ES) Spain Aug Adjusted Retail Sales Y/Y: 2.3% v 1.4%e; Retail Sales (unadj) Y/Y: 3.2% v 2.9% prior.

- (ES) Spain July Home Sales Y/Y: +19.4% v -6.1% prior.

- (SE) Sweden Sept Consumer Confidence: 99.5 v 97.0e; Manufacturing Confidence: 94.2 v 96.6 prior; Economic Tendency Survey: 94.9 v 95.5e.

- (CH) Swiss National Bank (SNB) cut its Policy Rate by 25bps to 1.00% (as expected).

- (EU) Euro Zone Aug M3 Money Supply Y/Y: 2.9% v 2.5%e.

- (IT) Italy Sept Consumer Confidence: 98.3 v 97.0e; Manufacturing Confidence: 86.7 v 87.2e; Economic Sentiment: 95.7 v 94.7 prior.

- (AT) Austria Sept Manufacturing PMI: 42.8 v 44.4 prior (26th month of contraction).

- (HK) Hong Kong Aug Trade Balance (HK$): -33.1B v -23.2Be; Exports Y/Y: 6.4% v 11.5%e; Imports Y/Y: 7.9% v 9.4%e.

Fixed income issuance

- (IT) Italy Debt Agency (Tesoro) sold €7.0B vs. €7.0B indicated in 6-month Bills; Avg Yield: 3.12% v 3.247% prior; Bid-to-cover: 1.50x v 1.86x prior.

Looking ahead

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

- 05:30 (ZA) South Africa Aug PPI M/M: 0.3%e v 0.2% prior; Y/Y: 3.5%e v 4.2% prior.

- 05:30 (ZA) South Africa Q2 Non-Farm Payrolls Q/Q: No est v -0.6% prior; Y/Y: No est v -0.7% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 06:00 (RO) Romania to sell RON500M in 6.3% Jan 2026 bonds.

- 07:00 (CA) Canada CFIB Sept Business Barometer: No est v 56.8 prior.

- 07:00 (BR) Brazil Central Bank (BCB) Quarterly Inflation Report (QIR).

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

- 08:30 (US) Q2 Final GDP Annualized Q/Q: 3.0%e v 3.0% prelim; Personal Consumption: 2.9%e v 2.9% prelim.

- 08:30 (US) Q2 Final GDP Price Index: 2.5%e v 2.5% prelim; Core PCE Price Index Q/Q: 2.8%e v 2.8% prelim.

- 08:30 (US) BEA annual GDP revisions.

- 08:30 (US) Aug Preliminary Durable Goods Orders: -2.7%e v +9.8% prior; Durables (ex-transportation): +0.1%e v -0.2% prior; Capital Goods Orders (non-defense/ex-aircraft): +0.1%e v -0.1% prior; Capital Goods Shipments (non-defense/ex-aircraft): +0.1%e v -0.3% prior.

- 08:30 (US) Initial Jobless Claims: 224Ke v 219K prior; Continuing Claims: 1.83Me v 1.829M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Sept 20th: No est v $617B prior.

- 09:10 (US) Fed’s Collins.

- 09:20 (US) Fed Chair Powell.

- 09:25 (US) Fed’s Williams.

- 09:30 (EU) ECB Chief Lagarde.

- 10:00 (US) Aug Pending Home Sales M/M: +1.0%e v -5.5% prior; Y/Y: No est v -4.6% prior.

- 10:15 (ES) ECB’s De Guindos (Spain).

- 10:30 (US) Fed’s Barr.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (US) Sept Kansas City Fed Manufacturing Activity: No est v -3 prior.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (DE) ECB’s Schnabel (Germany).

- 12:00 (CA) Canada to sell 2 Year Bonds.

- 13:00 (US) Fed’s Kashkari.

- 13:00 (US) Treasury to sell 7-Year Notes.

- 15:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to cut Overnight Rate by 25bps to 10.50%.

- (BR) Brazil Aug Total Federal Debt (BRL): No est v 7.140T prior.

- 17:00 (KR) South Korea Oct Business Manufacturing Survey: No est v 73 prior; Non-Manufacturing Survey: No est v 71 prior.

- 18:00 (NZ) New Zealand Sept ANZ Consumer Confidence: No est v 92.2 prior.

- 19:30 (JP) Japan Sept Tokyo CPI Y/Y: 2.2%e v 2.6% prior; CPI (ex-fresh food) Y/Y: 2.0%e v 2.4% prior; CPI (ex-fresh food and energy) Y/Y: 1.6%e v 1.6% prior.

- 21:30 O(CN) China Aug Industrial Profits Y/Y: No est v 4.1% prior; Industrial Profits YTD Y/Y: No est v 3.6% prior.

- 22:00 (SL) Sri Lanka Central Bank (CBSL) Interest Rate Decision: Expected to leave Key Rates unchanged. Expected to leave Standing Lending Rate unchanged at 9.25%; Expected to leave Standing Deposit Rate unchanged at 8.25%.

- 23:30 (JP) Japan to sell 3-Month Bills.