Monday bounce back as traders eye US CPI on Wed and ECB on Thurs

EU mid-market update: Monday bounce back as traders eye US CPI on Wed and ECB on Thurs; Crude higher on storm tracking towards to Texas.

Notes/observations

- European bourses and US futures attempt to bounce after risk assets sold off on Friday. Move was attributed to Fed’s Waller comments about favoring 25bps cut over 50bps on Sept 18th, and not the jobs data, which in totality was mixed. (Miss in payrolls, beat in hourly earnings, unemployment rate in line). Focus pivots to CPI on Weds.

- ECB decision looms: ECB on Thurs are expected to cut Deposit Rates by 25bps with council members suggesting decision after in Oct will be a pause. Additionally, ECB are expected to cut Main Refinancing Rates by 60bps, as it narrows the spread between Deposit and Lending rates. This has been telegraphed ahead of time for months.

- Budget concerns plague Europe and UK: France wants to delay submission of budget deficit plan to EU, while FT reports UK councils face £4.3B black hole in financing for next year. Reminder that UK autumn statement approaches at end-Oct, which Labor has suggested will include tax increases to fix debt issues.

- EU Travel and Leisure sector outperforms in Europe after betting company Entain noted UK online division returned to growth earlier than expected with accelerated recovery across gaming and sports in volume and margins.

- Brent and WTI Crude rise >1.0% after NHC issues Tropical Storm Watch for Southern Texas.

- Asia closed lower with Hang Seng underperforming -1.4%. EU indices are +0.5-0.8%. US futures are +0.5-0.8%. Gold -0.1%, DXY +0.4%; Crypto: BTC +1.7%, ETH +1.3%.

Asia

- Japan Q2 Final GDP Q/Q: 0.7% v 0.8% prelim; Annualized Q/Q: 2.9% v 3.1% prelim.

- Japan July Current Account Balance: ¥3.193T v ¥2; Trade Balance (BoP Basis): -¥482.7B v -¥ 424.2BTe.

- Japan Aug Bank Lending Y/Y: 3.0% v 3.2% prior; Bank Lending (ex-trust) Y/Y: 3.4% v 3.5% prior.

- China Aug CPI Y/Y: 0.6% v 0.7%e; PPI Y/Y: -1.8% v -1.5%e; deflation risk concerns grow.

- China Aug Foreign Reserves: $3.29T v $3.294Te [highest level since Dec 2015]; halts gold reserve increases for the 4th straight month.

Europe

- France govt said to seek to delay the submission of budget deficit plan to the EU Commission; the plan is due on Sept 20th.

Americas

- Fed outlook on rate path remains uncertain after September cut. Upcoming SEP likely to show more rate cuts for 2024 than back in its June outlook, but might not match the market’s enthusiasm.

Energy

- NHC issues Tropical Storm Watch for extreme Southern Texas. Storm Watches likely be required for portions of the Louisiana and Upper Texas coast.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.6% at 510, FTSE +0.5% at 8222, DAX +0.7% at 18410, CAC-40 +0.6% at 7394, IBEX-35 +0.7% at 11244, FTSE MIB +0.7% at 3286, SMI +0.7% at 11993, S&P 500 Futures +0.6%].

Market focal points/key themes: European indices open higher across the board, maintaining a generally upbeat tone through the early part of the session; risk appetite appearing to recover after last week’s losses; among sectors leading the way higher are technology and energy; lagging sectors include consumer discretionary and telecom; luxury subsector under pressure following analyst downgrade of Kering; OCI to sell global methanol business to Methanex; reportedly Safran negotiating acquisition of 50% of Roxel; earnings expected in the upcoming US session include Oracle.

Equities

- Consumer discretionary: Entain [ENT.UK] +7.0% (positive trading update); Kering [KER.FR] -2.5% (analyst downgrades).

- Healthcare: BioInvest [BINV.SE] +11.0% (promising initial phase 1/2a data on Oncolytic Virus); Oryzon Genomics [ORY.SE] +3.0% (first patient dosed in phase 1b study of iadademstat in first-line acute myeloid leukemia).

- Industrials: Kion [KGX.DE] -2.0% (analyst downgrade).

- Technology: LEM [LEHN.CH] +7.0% (analyst upgrade); Eagle Eye Solutions [EYE.UK] +2.0% (awarded contract); Computacenter [CCC.UK] -5.5% (H1 results, misses estimates).

Speakers

- Italy's Draghi (former ECB chief) stated in his EU competitiveness report that the region must spend additional €750B annually to compete globally.

- Iran Foreign Ministry spokesperson Kanaani stated that nuclear talks with EU's Borrell have been good. Opportunity to restore nuclear agreement exists for all sides.

- Thailand Dep Fin Min stated that short-term economic stimulus was necessary; Govt planned to give ~THB145B to vulnerable groups late this month.

Currencies/fixed income

- The recent jobs report failed to clarify the magnitude of the Fed’s Sept rate cut. Dealers now focus on Wed’s CPI reading for a decisive stance on magnitude of cut. Fed futures now price approx. 25% chance of 50bps rate cut upcoming FOMC (**Note: compared to 55% from Friday).

- USD price action was subdued but a tad former during a quiet EU session.

- EUR/USD at 1.1050 by mid-session. Focus on Thursday’s ECB decision where the central bank will likely continue its easing cycle.

- USD/JPY at 143.30 by mid-session.

Economic data

- (SE) Sweden SEB Swedish Housing-Price Indicator: 47 v 43 prior.

- (NL) Netherlands July Consumer Spending Y/Y: +1.1% v -1.1% prior.

- (DK) Denmark July Current Account Balance (DKK): 35.3B v 35.6B prior.

- (CZ) Czech Aug Unemployment Rate: 3.8% v 3.8% prior.

- (TW) Taiwan Aug Trade Balance: $11.5B v $5.4Be; Exports Y/Y: 16.8% v 8.4%e; Imports Y/Y: 11.8% v 21.6%e.

- (CZ) Czech Aug International Reserves: $152.8B v $149.5B prior.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 455.9B v 456.7B prior; Domestic Sight Deposits: 447.3B v 448.6B prior.

- (CN) China Aug Preliminary Retail Passenger Vehicle Sales M/M: +10.8% v -2.6% prior; Y/Y: -1.0% v -2.8% prior - PCA.

- (EU) Euro Zone Sept Sentix Investor Confidence: -15.4 v -12.2e (lowest reading of year).

- (HU) Hungary Aug YTD Budget Balance (HUF): -2.858T v -2.443T prior.

- (SG) Singapore Aug Foreign Reserves: $384.6B v $378.6B prior.

Fixed income issuance

- None scheduled.

Looking ahead

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

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

- 06:00 (PT) Portugal July Trade Balance: No est v -€1.9B prior.

- 06:00 (IE) Ireland July Industrial Production M/M: No est v -7.8% prior; Y/Y: No est v -17.2% prior.

- 06:00 (IL) Israel to sell combined ILS2.2B in 2027, 2029, 2034 and 2035 bonds.

- 06:00 (RO) Romania to sell RON500M in 6.30% Apr 2028 bonds.

- 06:00 (NO) Norway announcement on upcoming Bond auction (to be held on Wed).

- 06:30 (TR) Turkey to sell bonds (2 tranches) Zero Coupon and TLREF Indexed Bonds).

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

- 07:30 (CL) Chile Aug Trade Balance: $1.6Be v $1.3B prior; Exports: No est v $8.3B prior; Imports: No est v $7.0B prior; Total Copper Exports: No est v $4.2B prior.

- 07:30 (CL) Chile Aug International Reserves: No est v $45.5B prior.

- 08:00 (MX) Mexico Aug CPI M/M: 0.1%e v 1.1% prior; Y/Y: 5.1%e v 5.6% prior.

- 08:00 (MX) Mexico Aug CPI Core M/M: 0.2%e v 0.3% prior; Y/Y: 4.0%e v 4.1% prior.

- 08:00 (MX) Mexico Aug Consumer Confidence: 46.8e v 46.9 prior.

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

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

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

- 09:00 (FR) France Debt Agency (AFT) to sell €5.4-7.0B in 3-month, 6-month and 12-month bills.

- 09:45 (UK) BOE Gilt sale operation.

- 10:00 (US) July Final Wholesale Inventories M/M: 0.3%e v 0.3% prelim; Wholesale Trade Sales M/M: No est v -0.6% prior.

- 11:00 (US) Aug NY Fed 1-year Inflation Expectations: No est v 3.0% prior.

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

- 15:00 (US) July Consumer Credit: $12.0Be v $8.9B prior.

- 15:00 (AR) Argentina July Industrial Production Y/Y: No est v -20.1% prior; Construction Activity Y/Y: No est v -35.2% prior.

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

- 18:45 (NZ) New Zealand Q2 Manufacturing Activity Q/Q: No est v 0.7% prior; Manufacturing Volume Q/Q: No est v -0.4% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 83.1 prior.

- 19:50 (JP) Japan Aug M3 Money Supply Y/Y: No est v 0.9% prior; M2 Money Supply Y/Y: No est v 1.4% prior.

- 20:30 (AU) Australia Sept Westpac Consumer Confidence Index: No est v 85.0 prior.

- 21:00 (PH) Philippines July Trade Balance: -$4.1Be v -$4.3B prior; Exports Y/Y: -3.2%e v -17.3% prior; Imports Y/Y: +2.0%e v -7.5% prior.

- 21:30 (AU) Australia Aug NAB Business Confidence: No est v 1 prior; Business Conditions: No est v 6 prior.

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

- 23:35 (JP) Japan to sell 5-Year JGB Bonds.