Israel amplifies attack on Lebanon – European automakers continue to falter

EU mid-market update: Israel amplifies attack on Lebanon; European automakers continue to falter; UK GDP and German CPI subdued.

Notes/observations

- UK Q2 GDP revised slightly lower but remains in growth as mortgages hit 2-year high; Home-buying appetite buoyed by recent BoE rate cuts. Net lending and Consumer Credit in line ahead of Autumn Budget on Oct 30th. Sterling higher at ~1.34.

- German State CPI readings indicate further drop in national CPI at 08:00 ET, following France and Spain flash Sept readings last week. More data that suggests ECB will cut again in Oct. In relation to this, FT published piece over weekend that said economists predict ECB rate cut in Oct, ahead of previously thought Dec.

- US Pres Biden confirmed he will not intervene if US port workers go on strike; US press reported it was increasingly likely that dockworkers at major ports along the East and Gulf coasts would strike on Oct 1st in a first coast-wide strike since 1977.

- Over the weekend, China PBOC commanded all banks lower rates on existing mortgages, part of further stimulus following swatch of announcements last week. China breaks for 1 week holiday tomorrow but not before Shanghai Composite soared 8.0% at close.

- European car makers continue to bleed: Both Aston Martin and Stellantis cut FY guidance, with Aston citing supply chain and weak demand in China. Aston on for worst single day decline since pandemic in Mar 2020. Reminder that VW, BMW and Mercedes all cut guidance within the last month. Auto sector heavily under-performing Europe, down 4%.

- Crude climbs on Middle East escalation: Israeli airstrike killed leader of Lebanon’s Hezbollah (successor to be confirmed). US and Israel said to be planning response from Iran, which announced it does not plan to send its troops to Lebanon. WSJ reported Israel Special Forces have been preparing for an Israel ground incursion into Lebanon as soon as this week.

- California Governor Newsom vetoed SB 1047, one of several GenAI bills considered this year by the California Legislature.

- Asia closed mixed with Shanghai outperforming +8.1%. EU indices are -0.1% to -1.5%. US futures are -0.1% to -0.2%. Gold -0.3%, DXY -0.2%; Commodity: Brent +0.6%, WTI +0.4%; Crypto: BTC -2.2%, ETH -0.4%.

Asia

-China PBOC: All commercial banks must start lowering interest rates, in batches, on all existing mortgages by Oct 31st to no less than 30 bps below the PBOC's LPR rate - PBOC statement from third-quarter meeting.

-China MOFCOM: To further improve policy targetedness and effectiveness.

-China Sept Caixin PMI Manufacturing: 49.3 v 50.5e (moves back into contraction after one month expansion, lowest since Jul 2023).

-China Sept Manufacturing PMI (Govt Official): 49.8 v 49.4e (5th month of contraction, highest since Apr).

-Japan Incoming PM and LDP Leader Ishiba to dissolve the lower house and call for early general election on Oct 27th.

-Japan Aug Retail Sales M/M: 0.8% v 0.5%e; y/y: 2.8% v 2.6%e.

-Japan Aug Preliminary Industrial Production M/M: -3.3% v -0.5%e; y/y: -4.9% v -1.5%e.

-Bank of Japan (BOJ) announcement related to Q4 outright bond buying operations; Cuts planned 1-3 yr JGBs, 3-5 yr and 5-10 yr JGBs purchases.

Europe

-UK Chancellor of the Exchequer (Fin Min) Reeves not considering cutting pension tax relief for higher earners - FT.

-France Govt reportedly mulling new 8.5% temporary extra tax on companies with >€1.0B in revenue - French press.

-Germany said to abandon forecast for economic growth in 2024 and predict stagnation at best - press.

- Finland State Treasury lowers 2024 net borrowing requirements to €11.9B and gross borrowing to €42.1B.

-Italy multiyear fiscal plan shows debt-to-GDP ratio peaking ~138% in 2026.

-Austria's Far Right Freedom Party projected to win General Election with 29.1% of vote compared to Centre-Right GE with 26.2%.

- Ukraine Central Bank (NBU) Sept Minutes: Vote was not unanimous (10-1) to keep policy steady at 13.00%.

Americas

-US Pres Biden: Confirms he will not intervene if port workers go on strike [**Note: earlier, US press reported it was increasingly likely that dockworkers at major ports along the East and Gulf coasts would strike on Oct 1st in a first coast-wide strike since 1977].

-Fed futures now price 44% chance (v 61% last week's high) of 50bps rate cut at Nov 7th's meeting (two days after US election) and 56% chance for 25bps rate cut ahead of Chair Powell comments on Monday.

Global conflict/tensions

- Iran Foreign Ministry: Iran will not send forces to Lebanon to fight Israel.

-Reportedly US and Israel are working on defense against potential Iran attack - CNN [**Note: earlier, US press reported that Israel plans limited ground operation in Lebanon and aims to make it as short as possible].

-Hezbollah confirms its leader Nasrallah died in recent Israeli strike in Beirut [**note: Nasrallah led Hezbollah since the early 1990s].

-Hezbollah Dep Chief Qassem: To continue Nasrallah's plan with precision; Israel will not achieve its targets; We carry on despite attacks; The path is continuing, asks supporters to be patient.

-Reportedly Israeli special forces have been carrying out small, targeted raids into southern Lebanon, gathering intelligence and probing ahead of a possible ground incursion that could come as soon as this week - WSJ.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.77% at 524.02, FTSE -0.55% at 8,275.03, DAX -0.53% at 19,377.25, CAC-40 -1.48% at 7,676.40, IBEX-35 -0.25% at 11,937.42, FTSE MIB -1.45% at 34,224.00, SMI -0.43% at 12,184.90, S&P 500 Futures -0.07%].

Market Focal Points/Key Themes: European indices open generally lower and remained under pressure through the early part of the session; political events in Asia over the weekend seen weighing on risk appetite; among sectors managing gains are materials and energy; while sectors leading the way lower include industrials and financials; luxury subsector still seen being supported by Chinese stimulus; oil & gas subsector supported on renewed Middle East tensions; Stellantis and Aston Martic shares dropped over 10% after outlook cuts; Roche to acquire breast cancer treatment portfolio from CDK; reportedly Deutsche Bahn labor union to blog sale of DB Schenker to DSV; Rightmove rejects another offer from REA; Greek government to sell 10% stake in National Bank of Greece; focus on expected speech by Fed Chair Powell later in the day; earnings expected in the upcoming US session include Carnival.

Equities

- Consumer discretionary: Baywa [BYW6.DE] +5.0% (additional funding secured).

- Energy: Shell [SHEL.UK] +0.5% (oil strength after Israel killed Hezbollah chief).

- Healthcare: Roche [ROG.CH] +0.5% (2030 pharma strategy), Carmat [ALCAR.FR] -12.0% (completes €10.3M capital increase).

- Industrials: Stellantis [STLA.NL] -14.0% (cuts FY24 outlook), BMW [BMW.DE] -2.0% (reportedly considering joining potential Renault-Stellantis merger) - Technology: ASML [ASML.NL] -1.0% (Canon ships first next-gen chipmaking equipment; China urges local companies to stay away from Nvidia's AI chips; Ramping up pressure to use domestic champions like Huawei and Cambricon), Playtech [PTEC.UK] +0.5% (earnings) - Telecom:

-Materials: Anglo American [AAL.UK] +1.0% (China stocks rally).

Speakers

-Philippine Central Bank (BSP) Gov Remolona: Target is for zero RRR; Possible to cut to zero during his term [**Note: Remolona's 6-year term ends in July 2029].

-Thailand Central Bank (BOT) Assistant Gov Chayawadee: Baht outpaced gains in regional peers on stable politics.

-Japan Chief Cabinet Sec Hayashi: No comment on daily stock price moves.

Economic data

-(IS) Iceland Aug Final Trade Balance (ISK): -32.8B v -33.1B prelim.

-(IT) ITALY SEPT PRELIMINARY CPI M/M: -0.2% V -0.3%E; Y/Y: 0.7% V 0.7%E; CPI EU Harmonized M/M: 1.2% v 1.2%e; Y/Y: 0.8% v 0.8% prior.

-(GR) Greece July Retail Sales Value Y/Y: -2.8% v +5.9% prior; Retail Sales Volume Y/Y: -0.2% v 7.4% prior.

-(HK) Hong Kong Aug M3 Money Supply Y/Y: 1.9% v 2.0% prior; M2 Money Supply Y/Y: 1.9% v 2.0% prior; M1 Money Supply Y/Y: -3.7% v -3.0% prior.

-(UK) July M4 Money Supply M/M: -0.1% v +0.3% prior; Y/Y: 1.7% v 2.1% prior; M4 (ex-IOFCs) 3-month Annualized: 2.1% v 2.6% prior.

-(UK) Aug net consumer credit £1.3B V £1.4BE; Net lending: £2.9B V £2.8BE.

-(UK) Aug mortgage approvals: 64.9K V 63.9KE.

-(ES) Spain July Current Account: €5.8B v €5.8B prior

-(CH) Swiss weekly Total Sight Deposits (CHF): 472.2B v 465.3B prior; Domestic Sight Deposits: 463.6B v 457.2B prior.

-(PL) Poland Sept Preliminary CPI M/M: 0.1% v 0.1%e; Y/Y: 4.9% v 4.9%e (above target for the 3rd straight month).

-DE) Germany Sept CPI Saxony M/M: +0.2% v -0.2% prior; Y/Y: 2.4% v 2.6% prior.

-(DE) Germany Sept CPI Bavaria M/M: +0.1% v -0.1% prior; Y/Y: 1.9% v 2.1% prior.

-(DE) Germany Sept CPI North Rhine Westphalia M/M: 0.0% V -0.1% PRIOR; Y/Y: 1.5% V 1.7% PRIOR.

-(NO) Norway Central Bank (Norges) Oct Daily FX Purchases: 400M v 400M prior.

-(CZ) Czech Aug M2 Money Supply Y/Y: 5.8% v 5.3% prior.

-(DE) Germany Sept CPI Brandenburg M/M: 0.0% v -0.2% prior; Y/Y: 1.4% v 1.7% prior.

-(DE) Germany Sept CPI Hesse M/M: 0.0% v -0.1% prior; Y/Y: 1.2% v 1.5% prior.

-(DE) Germany Sept CPI Baden Wuerttemberg M/M: +0.1% v -0.3% prior; Y/Y: 1.4% v 1.5% prior.

-(AT) Austria Aug PPI M/M: 0.2% v 0.0% prior; Y/Y: -2.0% v -1.8% prior.

-(TH) Thailand Aug Current Account Balance: $1.4B v $1.0Be; Trade Account Balance: $2.4B v $0.9B prior; Exports YoY: +11.4% v +15.3% prior; Imports YoY: +8.5% v +15.8% prior.

-(CH) Swiss Q2 Foreign Exchange Transactions (CHF): 0.1B v 0.3B prior.

- (CH) Swiss Sept KOF Leading Indicator: 105.5 v 101.0e.

-(HU) Hungary Aug PPI M/M: 1.3% v 0.7% prior; Y/Y: 3.0% v 2.5% prior.

-(ZA) South Africa Aug M3 Money Supply Y/Y: 6.1% v 5.9% prior

-(UK) Q2 current account balance: -£28.4B V -£33.0BE.

-(DE) Germany Aug Import Price Index M/M: -0.4% v -0.4%e; Y/Y: 0.2% v 0.2%e.

-(SE) Sweden July Non-Manual Workers’ Wages Y/Y: 4.5% v 4.5% prior.

-(DK) Denmark Q2 Final GDP Q/Q: 1.1% v 0.6% prelim; Y/Y: 3.4% v 2.5% prelim.

-(DK) Denmark Aug Unemployment Rate: 2.6% v 2.6% prior; Gross Unemployment Rate: 2.9% v 2.9% prior.

-(SE) Sweden Aug Retail Sales M/M: +0.4% v +0.8% prior; Y/Y: +0.5% v -0.4% prior

-(UK) Sept nationwide house price index M/M: 0.7% V 0.2%E; Y/Y: 3.2% V 2.7%E.

-(UK) Q2 final GDP Q/Q: 0.5% V 0.6%E; Y/Y: 0.7% V 0.9%E.

-(JP) Japan Aug Annualized Housing Starts: 777K v 781Ke; Y/Y: -5.1% v -3.5%e.

-(FI) Finland Aug Retail Sales Volume Y/Y: -0.7% v -2.1% prior.

Fixed income issuance

-Philippines sells total PHPB20.0B vs. PHP20.0B indicated in 3-month, 6-month and 12-month bills.

-Japan sells ¥2.6T VS. ¥2.6T indicated in 2-year JGB bonds; AVG yield: 0.3920% V 0.3850% prior; bid-to-cover: 3.81X V 5.54X prior.

-South Africa announces details of upcoming I/L bond sale (held on Fridays); to sell combined ZAR1.0B in I/L 2031, 2038 and 2046 bonds on Oct 4th.

Looking ahead

- 05:30 (DE) Germany to sell €2.0B in 6-month BuBills.

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

- 06:00 (RO) Romania to sell RON400M in 7.9% Feb 2038 Bonds.

- 06:00 (IL) Israel to sell combined ILS2.6B in 2027, 2028, 2029, 2033 and 2052 bon.

- 06:00 (IE) Ireland Aug Retail Sales Volume M/M: No est v 0.1% prior; Y/Y: No est v 0.4% prior.

- 06:00 (IE) Ireland Sept Preliminary CPI EU Harmonized Y/Y: No est v 1.1% prior.

- 06:00 (PT) Portugal Aug Retail Sales M/M: No est v -0.6% prior; Y/Y: No est v 1.6% prior.

- 06:30 (IN) India Aug YTD Fiscal Deficit (INR): No est v 2.769T prior.

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

- 07:30 (IN) India Aug Eight Infrastructure (Key) Industries: No est v 6.1% prior.

- 07:30 (BR) Brazil Aug Nominal Budget (Overall) Balance (BRL): No est v -101.5B prior; Primary Budget Balance: No est v -21.3B prior; Net Debt to GDP: No est v 61.9% prior.

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement for upcoming issuance.

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

- 08:00 (DE) Germany Sept Preliminary CPI M/M: No est v -0.1% prior; Y/Y: No est v 1.9% prior.

- 08:00 (DE) Germany Sept Preliminary CPI EU Harmonized M/M: No est v -0.2% prior; Y/Y: No est v 2.0% prior.

- 08:00 (ZA) South Africa Aug Trade Balance (ZAR): No est v 17.6B prior.

- 08:00 (ZA) South Africa Aug Monthly Budget Balance (ZAR): No est v -79.9B prior.

- 08:00 (CL) Chile Aug Retail Sales Y/Y: No est v 2.7% prior; Commercial Activity Y/Y: No est v 4.3% prior.

- 08:00 (CL) Chile Aug Unemployment Rate: No est v 8.7% prior.

- 08:00 (CL) Chile Aug Industrial Production Y/Y: No est v 3.6% prior.

- 08:00 (CL) Chile Aug Manufacturing Production Y/Y: No est v 5.1% prior.

- 08:00 (CL) Chile Aug Total Copper Production: No est v 443.6K prior.

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

- 08:50 (US) Fed's Bowman.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.9-7.5B in 3-month, 6-month and 12-month bills (4 tranches).

- 09:00 (EU) ECB's Lagarde speaks in EU Parliament.

- 09:00 (RU) Russia Q2 Final Current Account: $18.0Be v $17.0B prelim.

- 09:45 (US) Sept Chicago Purchase Manager’s Index (PMI): No est v 46.1 prior.

- 10:01 (AU) Australia Sept CoreLogic Home Prices M/M: No est v 0.5% prior.

- 10:30 (US) Sept Dallas Fed Manufacturing Activity: No est v -9.7 prior.

- 11:00 (MX) Mexico Aug Net Outstanding Loans (MXN): No est v 6.434T prior.

- 11:00 (CO) Colombia Aug National Unemployment Rate: No est v 9.9% prior; Urban Unemployment Rate: No est v 10.2% prior.

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

- 12:00 (US) USDA Quarterly Crop Report.

- 13:00 (US) Fed Chair Powell speaks at NABE.

- 14:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to cut Overnight Lending Rate by 50bps to 10.25%.

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

- 16:10 (UK) BOE's Greene.

- 17:00 (NZ) New Zealand NZIER Business Opinion Survey.

- 17:45 (NZ) New Zealand Aug Building Permits M/M: No est v 26.2% prior.

- 19:00 (AU) Australia Sept Final Manufacturing PMI: No est v 46.7 prelim.

- 19:01 (UK) Sept BRC Shop Price Index Y/Y: No est v -0.3% prior.

- 19:30 (JP) Japan Aug Jobless Rate: No est v 2.7% prior; Job-To-Applicant Ratio: No est v 1.24 prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 84.9 prior.

- 19:50 (JP) Japan Sept BOJ Summary of Opinions (MPM).

- 19:50 (JP) Japan Q3 Tankan Large Manufacturing Index: 13e v 13 prior; Large Manufacturing Outlook: 12e v 14 prior; Large Non-Manufacturing Index: 32e v 33 prior; Large Non-Manufacturing Outlook: 30e v 27 prior; Large All Industry Capex: 11.9%e v 11.1% prior; Small Manufacturing Index: -1e v -1 prior; Small Manufacturing Outlook: -1e v 0 prior; Small Non-Manufacturing Index: 11e v 12 prior; Small Non-Manufacturing Outlook: 9e v 8 prior.

- 20:00 (KR) South Korea Sept Trade Balance: No est v $3.8B prior; Exports Y/Y: 11.4%e v 11.2% prior; Imports Y/Y: 1.7%e v 6.0% prior.

- 20:01 (IE) Ireland Sept PMI Manufacturing: No est v 50.4 prior.

- 20:30 (JP) Japan Sept Final PMI Manufacturing: No est v 49.6 prelim.

- 20:30 (TW) Taiwan Sept PMI Manufacturing: No est v 51.5 prior.

- 20:30 (PH) Philippines Sept PMI Manufacturing: No est v 51.2 prior.

- 20:30 (TH) Thailand Sept PMI Manufacturing: No est v 52.0 prior.

- 20:30 (ID) Indonesia Sept PMI Manufacturing: No est v 48.9 prior.

- 20:30 (MY) Malaysia Sept PMI Manufacturing: No est v 49.7 prior.

- 20:30 (VN) Vietnam Sept PMI Manufacturing: No est v 52.4 prior.

- 20:30 (SG) Singapore Q3 Preliminary URA Private Home Prices Q/Q: No est v 0.9% prior.

- 21:30 (AU) Australia Aug Retail Sales M/M: No est v 0.0% prior.

- 21:30 (AU) Australia Aug Building Approvals M/M: No est v 10.4% prior; Private Sector Houses M/M: No est v 0.6% prior.