One small step for Fed, and one giant message for global markets

EU mid-market update: One small step for Fed, and one giant message for global markets; Fed to begin easing

Notes/observations

- Laser-sharp focus on Fed decision at 14:00 ET, expected to begin easing for first time since March 2020 (pandemic). Still seeing divergent opinions on size of the cut, with CME futures pricing in ~65% chance of 50bps cut and ~35% chance of 25bps, while ~95% of economists and macro analysts see 25bps rate cut. Chair Powell to give press conf at 14:30 ET, with Q&A following statement to comment on dot-plot projections update and future rate path. No Fed official has voted against a policy decision in two years and no Fed governor has dissented on a rate decision since 2005. Event likely to trigger heavy volatility across global markets and expected to continue as BOJ and BOE with own rate decisions over next 48 hours.

- UK Aug Core and Services CPI increased from July, likely cementing BOE hold tomorrow. Although headline and components matched consensus, sticky components of core and services, which have been highlighted by MPC as a concern, rose from July, leaving no case from today’s data to back up additional cuts. Overnight, Shadow MPC recommended BOE leave rates unchanged. Cable (GBP/USD) moved higher and FTSE100 underperforms.

- Indonesia Central Bank (BI) unexpectedly cut Bi-Rate by 25bps, following 4 consecutive holds. Consensus was for a 5th pause. Central Bank noted decision was in line with outlook for inflation and growth and they continue to monitor data for further cuts.

- More EU Court antitrust conclusions with a win for Google and a loss for Qualcomm. Alphabet won a challenge against a €1.49B antitrust fine over ads, while Qualcomm lost their case, with instructions to pay €239M.

- Asia closed mixed with Hang Seng outperforming +1.4%. EU indices are -0.1% to -0.6%. US futures are +0.1%. Gold 0.0%, DXY -0.1%; Commodity: Brent -1.4%, WTI -1.5%; Crypto: BTC +1.8%, ETH +0.2%.

Asia

- New Zealand Q2 Current Account Balance (NZD): -4.8B v -3.8B prior.

- Japan Aug Trade Balance: -¥0.7T v -¥1.456Te; Exports Y/Y: 5.6% v 10.4%e; Imports Y/Y: 2.3% v 15.0%e.

- Japan July Core Machine Orders M/M: -0.1% v +0.5%e; Y/Y: 8.7% v 2.5%e.

- Australia Aug Westpac Leading Index M/M: -0.05% v -0.03% prior.

Europe

- Bank of France forecasts inflation at 1.5% in 2025 and 1.7% in 2026 (**Note: Below ECB target).

- Times Shadow MPC recommended BOE leave rates unchanged and increase bond sales; Only one member of the nine-strong committee, said rates should be reduced by 25bps.

Americas

- BOC Dep Gov Carolyn Rogers stated that still had work to do on inflation.

- Canada PM Trudeau’s Liberal Party lost a Parliament seat it had held for decades in a special election in Montreal.

- Presidential candidate Trump said to float easing cap on State and Local tax deductions.

Energy

- Weekly API Crude Oil Inventories: +2.0M v -2.8M prior.

- Biden Administration said to seek 6M barrels of oil for SPR, taking advantage of low prices.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.33% at 515.48, FTSE -0.43% at 8,274.01, DAX +0.50% at 18,726.08, CAC-40 -0.42% at 8,274.61, IBEX-35 +1.04% at 11,703.40, FTSE MIB +0.63% at 33,780.28, SMI +0.30% at 12,041.05, S&P 500 Futures +0.01%].

Market focal points/key themes: European indices open generally lower and trended mostly sideways through the early part of the session; lackadaisical trading seen ahead of key monetary policy events coming up; among better performing sectors are financials and energy; sectors inclined to the downside include technology and real estate; Legal & General to sell Cala Group; reportedly Italian state preparing sale of a stake in Poste Italiane; focus on FOMC meeting later in the day; earnings expected in the upcoming US session include General Mills.

Equities

- Consumer discretionary: Ubisoft [UBI.FR] +3.5% (BMO Capital Markets raised to outperform), PZ Cussons [PZC.UK] -14.0% (earnings) - Consumer staples: Reckitt Benckiser [RKT.UK] +1.5% (said to begin talks on sale of home care products business for £6B).

- Financials: EQT [EQT.SE] -1.5% (UBS cuts to sell).

- Healthcare: NicOx [COX.FR] +14.5% (Chinese partner, Ocumension Therapeutics, has received approval of the New Drug Application (NDA) to commercialize ZERVIATE), Novo Nordisk [NOVOB.DK] -2.0% (trader expectation that Ozempic will see price cut in US), Carmat [ALCAR.FR] -12.5% (launches €10.3M capital increase) - Industrials: BMW [BMW.DE] +0.5% (CitiGroup raised to neutral), Meyer Burger Technology [MBTN.CH] -0.5% (strategic realignment).

Speakers

- ECB's Villeroy (France) reiterated ECB likely to continue rate cuts.

- Germany Finance Agency updated its Debt Issuance plan which trimmed its planned Oct and Nov BuBills sales by €2B in total; canceled sale of Green bonds on Nov 5th; Still planned total 2024 Green bond sales between €17-19B.

- Indonesia Central Bank Gov Warjiyo pre-rate decision press conference noted that the domestic growth had shown resilience but needed to further stimulate growth. Committed to maintain the effectiveness of monetary policy to keep inflation within target range. Q3 indicators showed economic activity remained good. To strengthen policy mix from the demand side and added that structural reforms were needed from the supply side.

- Indonesia Central Bank Policy Statement noted it would monitor room to cut rates further in line with inflation outlook, FX stability and growth outlook.

- China FX Regulator SAFE stated that cross border flows were becoming more stable.

Currencies/fixed income

- USD was holding onto recent ranges ahead of the FOMC rate decision. Dealers noted that the question of the magnitude of the easing would be answered as policymakers decide whether it would either for a 25 or a 50 basis points cut.

- GBP/USD drifted higher after UK: August inflation data took any potential BoE September rate cut off the table. Aug CPI stayed above BOE 2% target for a 2nd straight month as core inflation accelerated. .

- EUR/USD holding above the 1.11 level. Euro Zone final Aug CPI data was unrevised. ECB had cautioned that upcoming inflation readings into yearend would come in higher.

- USD/JPY at 141.75 by mid-session.

Economic data

- (UK) Aug CPI M/M: 0.3% v 0.3%e; Y/Y:2.2 % v 2.2%e (2nd month above target); CPI Core Y/Y: 3.6% v 3.6%e; CPI Services Y/Y: 5.6% v 5.6%e; CPIH Y/Y: 3.1% v 3.1%e.

- (UK) Aug RPI M/M: 0.6% v 0.5%e; Y/Y: 3.5% v 3.4%e; RPI (ex-mortgage payments) Y/Y:2.8 % v 2.7%e; Retail Price Index: 389.9 v 389.6e.

- (UK) Aug PPI Input M/M: -0.5% v -0.3%e; Y/Y: -1.2% v -0.8%e.

- (UK) Aug PPI Output M/M: -0.3% v 0.0%e; Y/Y: 0.2% v 0.5%e.

- (SE) Sweden Aug Unemployment Rate: 7.9% v 7.7% prior; Unemployment Rate (seasonally adj): 8.3% v 8.5%e; Trend Unemployment Rate: 8.4% v 8.4% prior.

- (AT) Austria Aug Final CPI M/M: -0.2% v -0.2% prelim; Y/Y: 2.3% v 2.4% prelim.

- (ID) Indonesia Central Bank (BI) cut the Bi-Rate by 25bps to 6.00% (not expected).

- (ZA) South Africa Aug CPI M/M: 0.1% v 0.2%e; Y/Y: 4.4% v 4.5%e.

- (ZA) South Africa Aug CPI Core M/M:0.0 % v 0.2%e; Y/Y: 4.1% v 4.2%e.

- (PL) Poland Sept Consumer Confidence: -13.9 v -14.5e.

- (UK) July ONS House Price Index Y/Y: 2.2% v 2.7% prior.

- (EU) Euro Zone Aug Final CPI Y/Y: 2.2% v 2.2% advance; Core CPI Y/Y: 2.8% v 2.8% advance.

- (EU) Euro Zone July Construction Output M/M: 0.0% v 0.6% prior; Y/Y: -2.2% v -1.3% prior.

- (CY) Cyprus Aug CPI Harmonized M/M: 0.9% v 0.7% prior; Y/Y: 2.2% v 2.4% prior.

Fixed income issuance

- (DK) Denmark sold total DKK2.52B in 2026 and 2033 DGB Bonds.

- (SE) Sweden sold SEK5.0B vs. SEK5.0B indicated in 9-month bills; Avg Yield: 2.5105% v 4.131% prior, bid-to-cover: 2.67x v 2.39x prior.

- (UK) DMO sold £2.75B in 0.875% July 2033 Green Gilts; Avg Yield: 3.731% v 4.072% prior; bid-to-cover: 3.55x v 3.52x prior; Tail: 0.9bps v 0.7bps prior.

Looking ahead

- (AR) Argentina UTDT Aug Leading Indicator: No est v 1.5% prior.

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

- 05:30 (DE) Germany to sell combined €1.0B in 2053 and 2054 Bunds.

- 05:30 (PT) Portugal Debt Agency (IGCP) to sell combined €0.75-1.0B in 6-month and 12-month Bills.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (PT) Portugal Aug PPI M/M: No est v 0.8% prior; Y/Y: No est v 1.9% prior.

- 06:00 (IE) Ireland July Property Prices M/M: No est v 0.7% prior; Y/Y: No est v 8.6% prior.

- 06:00 (EU) EU Commission to sell combined €3.5B in 3-month and 6-month Bills.

- 06:00 (CZ) Czech Republic to sell 2032, 2034 and 2036 Bonds.

- 07:00 (RU) Russia to sell OFZ Bonds.

- 07:00 (US) MBA Mortgage Applications w/e Sept 13th: No est v 1.4% prior.

- 07:00 (ZA) South Africa July Retail Sales M/M: 0.1%e v 1.6% prior; Y/Y: 2.8%e v 4.1% prior.

- 07:00 (DE) ECB’s Nagel (Germany).

- 08:00 (MX) Mexico Q2 Aggregate Supply and Demand: 2.7%e v 2.6% prior.

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

- 08:30 (US) Aug Housing Starts: 1.318Me v 1.238M prior; Building Permits: 1.410Me v 1.396M prior; Housing Starts M/M: +6.5%e v -6.8% prior; Building Permits M/M: +1.0%e v -3.3% prior.

- 08:30 (CA) Canada July Int’l Securities Transactions (CAD): No est v 5.17B prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (CO) Colombia July Economic Activity Index (Monthly GDP) Y/Y: +1.9%e v -1.1% prior.

- 12:00 (RU) Russia Aug PPI M/M: No est v 1.1% prior; Y/Y: No est v 13.7% prior.

- 12:00 (RU) Russia Q3 Consumer Confidence: No est v -6 prior.

- 13:30 (CA) Bank of Canada (BoC) Summary of Deliberations.

- 14:00 (US) FOMC Interest Rate Decision: Expected to cut Target Range by 25bps to 5.00-5.25%.

- 14:30 (US) Fed Chair Powell post rate decision press conference.

- 15:00 (AR) Argentina Q2 GDP Q/Q: -1.7%e v -2.6% prior; Y/Y: -1.3%e v -5.1% prior.

- 16:00 (US) July Total Net TIC Flows: No est v $107.5B prior; Net Long-term TIC Flows: No est v $96.1B prior.

- 17:30 (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to raise Selic Target Rate by 25bps to 10.75%.

- 18:45 (NZ) New Zealand Q2 GDP Q/Q: -0.4%e v +0.2% prior; Y/Y: -0.6%e v +0.3% prior.

- 21:00 (CN) China Aug Swift Global Payments (CNY): No est v 4.7% prior.

- 21:30 (AU) Australia Aug Employment Change: +26.0Ke v +58.2K prior; Unemployment Rate: 4.2%e v 4.2% prior; Full Time Employment Change: No est v +60.5K prior; Part Time Employment Change: No est v -2.3K prior; Participation Rate: 67.1%e v 67.1% prior.

- 22:00 (NZ) New Zealand to sell combined NZ$500M in 2031, 2034 and 2037 bonds.

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