Preliminary CPI readings continue to show EU's struggle with inflation

EU Mid-Market Update: Preliminary CPI readings continue to show EU's struggle with inflation; China govt official manufacturing PMI for Aug stayed in contraction.

Notes/Observations

- Risk appetite was on to begin with, but appeared to reverse following comments from China Foreign Ministry as they vocalize their opposition to Arizona Gov visit to Taiwan, elevating geo-political tensions.

- Chinese govt official manufacturing PMI for Aug stayed in contraction territory for second straight month.

- EU flash CPI data for August came above 9.0% for the first time and higher month on month showing highest annual inflation pace since EUR currency launch back in the late 1990's.

- Nord Stream 1 pipeline maintenance halt began today and planned to end Sept 2nd. Russia Foreign Min stated German Govt was doing its best to destroy all ties with Russia.

- Abundance of economic data throughout the morning, which for the most part matched estimates with no surprises. Theme of elevated preliminary CPI’s present across Europe. Notably, Poland Aug Prelim CPI read high at 16.1% YoY compared to 15.4%e which lifted the PLN (Zloty) 0.2%.

- Asia closed lower with Shanghai Composite underperforming at -0.8%. EU indices are also lower, with bond yields mostly higher. US futures are in the green but dropping. Gold -0.7%, DXY +0.2%; Commodity: Brent -2.3%, WTI -2.5%, UK Nat Gas +5.4%; Crypto: BTC -0.9%, ETH -0.8%.

Asia

- (AU) Australia Q2 Construction Work Done Q/Q: -3.8% V +0.8%E.

-(CN) China Aug Manufacturing PMI (Govt Official ): 49.4 V 49.2E (2nd straight contraction); Non-manufacturing PMI: 52.6 v 52.2e; Composite PMI: 51.7 v 52.5 prior.

-(JP) Bank of Japan (BOJ) Board Member Nakagawa: BOJ policy response has exerted intended effects; must carefully watch impact of inflation on household spending.

-(JP) Japan PM Kishida: No change in stance to reduce dependence on nuclear; safety remains prerequisite for using nuclear power

-(TH) Thailand Fin Min Arkhom: Sees 2022 GDP 3.0-3.5%.

-(KR) Bank of Korea (BOK): Chance that high inflation will last longer then previously though; won weakness due to yuan's depreciation, continued trade deficit.

-(KR) South Korea Vice Fin Min: To keep debt-GDP ratio at around 52% by 2026.

-(TH) Thailand Central Bank: Domestic economic activity on recovery in Aug.

-(TH) Thailand Central Bank Member Chayawadee: THB (Baht) is weakening due to Fed comments.

-(JP) Japan said to step up surveillance of banks' risk control following foreign rate hikes.

-(ID) Indonesia Environmental Agency: Expects rainy season to start in Sept-Nov.

Taiwan

- (TW) Taiwan Defense Ministry: China military continues high intensity patrols near Taiwan; Will exercise right to self defense and counter attack if Chinese drones do not leave Taiwan's territory after warnings and pose security threat.

- (CN) China Foreign Ministry Spokesperson Zhao: China opposes Arizona Gov visit to Taiwan.

Europe

- (DK) Denmark Finance Ministry: Cuts 2022 GDP growth forecast from 3.4% to 2.8%; Cuts 2023 GDP growth forecast from 1.9% to 0.8%.

- (PL) Poland Central Bank (NBP) member Wnorowski: Polish hike and no change in rates are equally likely on Sept 7th meeting.

- (UK) Former BOE Member Bean: UK likely to see persistent inflation; Consequence will be larger rates for longer.

Energy

- (BE) Belgium reportedly to extend 6% VAT rate on power & gas by 3 months.

- (DE) Germany said to consider 2nd floating LNG site in Wilhelmshaven.

- (DE) German Energy Regulator chief: Germany is better prepared for Nord Stream 1 outage now, with gas storage almost 85% filled.

- Gazprom confirmed gas flows via Nord Stream 1 are fully halted.

- (FI) Finland PM Marin: Budget to focus on cutting energy costs; Must ensure every home has heat in winter.

 -(UK) Office for National Statistics (ONS): Energy bill rebates will not affect inflation statistics directly.

- (RU) Russia Foreign Ministry Spokesperson: German Govt is doing its best to destroy all energy ties with Russia.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.25% at 418.74, FTSE -0.53% at 7,323.61, DAX -0.27% at 12,926.54, CAC-40 -0.46% at 6,181.81, IBEX-35 -0.49% at 7,941.07, FTSE MIB -0.09% at 21,807.00, SMI -0.17% at 10,866.70, S&P 500 Futures +0.20%].

Market Focal Points/Key Themes: European indices open generally higher but quickly turned around to trade with a negative bias; better performing sectors include materials and technology; underperforming sectors include utilities and health care; Maersk acquires LF Logistics; reportedly Italian government selects Delta and Air France in exclusive talks to take majority ITA stake; earnings expected during the upcoming US session include Brown-Forman, Designer Brands and Greif.

Equities

- Consumer discretionary: Strabag [STB1.DE] -0.5% (earnings).

- Financials: UniCredit [UCG.IT] +3.5% (buyback), Danske Bank [DANSKE.DK] +1% (sets the debt of ~90K debt collection customers to zero).

- Industrials: Airbus [AIR.FR] -2% (CFO to step down), Stadler Rail [SRAIL.CH] +1% (earnings), Maersk [MAERSKB.DK] -0.5% (acquisition).

- Technology: ASML [ASML.NL] +1.5% (analyst action), SAP [SAP.DE] +0.5% (new CFO).

Speakers

- (SE) Sweden Central Bank (Riksbank) Breman: Inflation is too high; Policy rate path from June indicates that the rate will be raised to over 2% in early 2023.

Currencies/fixed income

- USD climbs slightly, reversing loses as risk sentiment reversed slowly following comments from China and Russia. Pairs in general are muted throughout the session as no real surpises in economic data or commentary..

- EUR/USD continues to touch parity, after volatility throughout the morning session.

- GBP/USD flat at 1.164, new PM to be announced next week on Sept 5th.

Economic data

- (NL) Netherlands July Retail Sales Y/Y: 3.2% v 1.0% prior.

- (JP) Japan Aug Consumer Confidence Index: 32.5 v 29.5e.

- (FI) Finland July House Price Index M/M: +0.2% v -0.1% prior; Y/Y: 1.2% v 1.2% prior.

- (FI) Finland Q2 GDP Q/Q: 0.9% v 0.5% prior; Y/Y: 3.0% v 3.9% prior.

- (JP) Japan July Annualized Housing Starts: 825K v 857Ke; Y/Y: -5.4% v -3.5%e.

- (DE) Germany July Import Price Index M/M: 1.4% v 1.7%e; Y/Y: 28.9% v 28.8%e.

- (DK) Denmark July Unemployment Rate: 2.3% v 2.2% prior; Gross Unemployment Rate: 2.7% v 2.5% prior.

- (DK) Denmark Q2 Preliminary GDP Q/Q: +0.9% v -0.5% prior; Y/Y: 3.6% v 6.2% prior.

- (FI) Finland July Final Trade Balance: -€0.7B v -€0.6B prelim.

- (FR) France Aug Preliminary CPI M/M: 0.4% v 0.6%e; Y/Y: 5.8% v 6.1%e; CPI EU Harmonized M/M: 0.4% v 0.6%e; Y/Y: 6.5% v 6.7%e.

- (FR) France Q2 Final GDP Q/Q: 0.5% v 0.5%e; Y/Y: 4.2% v 4.2%e.

- (FR) France July Consumer Spending M/M: -0.8% v -0.2%e; Y/Y: -4.3% v -3.9%e.

- (FR) France July PPI M/M: 1.6% v 1.3% prior; Y/Y: 27.2% v 27.2% prior.

- (HU) Hungary July PPI M/M: 5.7% v 3.1% prior; Y/Y: 37.9% v 35.0% prior.

- (TR) Turkey Q2 GDP Q/Q: 2.1% v 1.5%e; Y/Y: 7.6% v 7.4%e.

- (TH) Thailand July Current Account:-$4.1B v -$1.8Be.

- (AT) Austria Aug Preliminary CPI M/M: -0.2% v +0.9% prior; Y/Y: 9.1% v 9.3% prior.

- (DE) Germany Aug Net Unemployment Change: +28.0K v +28.5Ke; Unemployment Claims Rate : 5.5% v 5.4%e.

- (PL) Poland Aug Preliminary CPI M/M: 0.8% v 0.2%e; Y/Y: 16.1% v 15.4%e.

- (CZ) Czech July M2 Money Supply Y/Y: 5.4% v 5.3% prior.

- (PL) Poland Q2 Final GDP Q/Q: -2.1% v -2.3% prelim; Y/Y: 5.5% v 5.3% prelim.

- (CH) Swiss Aug Expectations Survey: -56.3 v -57.2 prior.

- (ES) Spain Jun Current Account: €0.1B v €2.9B prior.

- (NO) Norway Central Bank (Norges) Sept Daily FX Purchases (NOK): 3.5B v 1.5B prior.

- (PT) Portugal Aug Preliminary CPI M/M: -0.3% v 0.0% prior; Y/Y: 9.0% v 9.1% prior;- CPI EU Harmonized M/M: -0.2% v 0.0% prior; Y/Y: 9.4% v 9.4% prior.

- (HK) Hong Kong July Retail Sales Value Y/Y: 4.1% v 1.4%e; Retail Sales Volume Y/Y: +1.0% v -1.1%e.

- (IT) Italy Aug Preliminary CPI M/M: 0.8% V v 0.6%e; Y/Y: 8.4% V 8.1%E (formal release) CPI EU Harmonized M/M: 0.8% v 0.0%e; Y/Y: 9.0% v 8.2%e v 9.0%.

- (EU) Euro Zone Aug CPI Estimate Y/Y: 9.1% v 9.0%e; CPI Core Y/Y: 4.3% v 4.1%e CPI M/M: 0.5% v 0.4%e.

- (BE) Belgium Q2 Final GDP Q/Q: 0.2% v 0.2% prelim; Y/Y: 3.3% v 3.3% prelim.

- (IS) Iceland Q2 GDP Q/Q: 3.9% v 1.1% prior; Y/Y: 6.1% v 8.6% prior.

- (IS) Iceland July Final Trade Balance (ISK): -31.8B v -31.0B prelim.

- (EU) Daily 3-month Euribor Fixing: 0.654% v 0.620% prior.

Fixed income issuance

- (DE) Germany opens book to sell 5-year green Bobl via syndicate; guidance seen +-1bps to Oct 2027 Bund.

Looking ahead

- 05:30 (GR) Greece Debt Agency (PDMA) to sell 13-week Bills.

- 05:30 (EU) ECB allotment in 3-month LTRO tender.

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

- 06:00 (IL) Israel July Chain Store Sales Y/Y: No est v 0.1% prior.

- 06:00 (IT) Italy July PPI M/M: No est v 1.1% prior; Y/Y: No est v 41.9% prior.

- 06:00 (PT) Portugal Q2 Final GDP Q/Q: -0.2%e v -0.2% prelim; Y/Y: 6.9%e v 6.9% prelim.

- 06:00 (IE) Ireland Aug Unemployment Rate: no est v 4.2%e.

- 06:00 (IE) Ireland Aug Preliminary CPI M/M: No est v 0.4% prior; Y/Y: No est v 9.1% prior.

- 06:00 (IE) Ireland Aug Preliminary CPI EU Harmonized M/M: No est v 0.4% prior; Y/Y: No est v 9.6% prior.

- 06:30 (IN) India July Fiscal Deficit (INR): No est v 148.0B prior.

- 07:00 (US) MBA Mortgage Applications w/e Aug 26th: No est v -1.2% prior.

- 07:00 (MX) Mexico Jun Gold Production: No est v 6.5K prior; Silver Production: No est v 355.1K prior; Copper Production: No est v 39.4K prior.

- 07:30 (IN) India July Eight Infrastructure (key) Industries: No est v 12.7% prior.

- 08:00 (US) Fed’s Mester on economic outlook.

- 08:00 (IN) India Q2 GDP Y/Y: 15.3%e v 4.1% prior; GVA Y/Y: 14.0%e v 3.9% prior.

- 08:00 (ZA) South Africa July Trade Balance (ZAR): 20.2Be v 24.2B prior.

- 08:00 (BR) Brazil July National Unemployment Rate: 9.0%e v 9.3% prior.

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

- 08:15 (US) Aug ADP Employment Change: +300Ke (1st release in 3 months after new methodology).

- 08:30 (CA) Canada Jun GDP M/M: 0.1%e v 0.0% prior; Y/Y: 4.9%e v 5.6% prior; Quarterly GDP Annualized: 4.4%e v 3.1% prior.

- 08:30 (BR) Brazil July Nominal Budget Balance (BRL): -39.9Be v -66.0B prior; Primary Budget Balance: +21.4Be v -33.0B prior; Net Debt to GDP Ratio: 58.8%e v 58.8% prior.

- 09:00 (CL) Chile July Manufacturing Production Y/Y: -1.9%e v -2.5% prior; Industrial Production Y/Y: -1.20%e v -1.5% prior; Copper Production: No est v 462.2K prior.

- 09:00 (CL) Chile July Retail Sales Y/Y: -9.5%e v -6.5% prior; Commercial Activity Y/Y: No est v -5.3% prior.

- 09:45 (US) Aug Chicago Purchase Manager’ Index (PMI): 52.2e v 52.1 prior.

- 10:00 (MX) Mexico July Net Outstanding Loans (MXN): No est v 5.12T prior.

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

- 11:00 (CO) Colombia July National Unemployment Rate: No est v 11.3% prior; Urban Unemployment Rate: 11.4%e v 11.7% prior.

- 12:00 (RU) Russia July Unemployment Rate: 4.1%e v 3.9% prior; Jun Real Wages Y/Y: No est v -6.1% prior.

- 12:00 (RU) Russia July Real Retail Sales Y/Y: -9.0%e v -9.6% prior.

- 13:00 (NZ) New Zealand Aug Corelogic House Prices Y/Y: No est v 9.5% prior.

- 13:30 (MX) Mexico Central Bank Inflation Report.

- 15:00 (AU) Australia Aug Corelogic House Price Index M/M: No est v -1.4% prior.

- 18:30 (US) Fed's Bostic speaks on role of fintech in financial inclusion.

- 19:00 (KR) South Korea Q2 Preliminary GDP (2nd reading) Q/Q: 0.7%e v 0.7% advance Y/Y: 2.9%e v 2.9% advance.

- 19:00 (AU) Australia Aug Final PMI Manufacturing: No est v 54.5 prelim.

- 19:50 (JP) Japan Q2 Capital Spending (capex) Y/Y: 3.0%e v 3.0% prior; Capital Spending Ex-Software: 5.1%e v 5.0% prior; Company profits: 0.0%e v 13.7% prior; Company Sales: 11.6%e v 7.9% prior.

- 20:00 (KR) South Korea Aug Trade Balance: -$8.2Be v -$4.8B prior (revised from -$4.7B); Exports Y/Y: 5.6%e v 9.2% prior (revised from 9.45); Imports Y/Y: 23.7%e v 21.8% prior.

- 20:01 (IE) Ireland Aug PMI Manufacturing: No est v 51.8 prior.

- 20:30 (TH) Thailand Aug PMI Manufacturing: No est v 52.4 prior.

- 20:30 (TW) Taiwan Aug PMI Manufacturing: No est v 44.6 prior.

- 20:30 (MY) Malaysia Aug PMI Manufacturing: No est v 50.6 prior.

- 20:30 (ID) Indonesia Aug PMI Manufacturing: No est v 51.3 prior.

- 20:30 (KR) South Korea Aug PMI Manufacturing: No est v 49.8 prior.

- 20:30 (PH) Philippines Aug PMI Manufacturing: No est v 50.8 prior.

- 20:30 (JP) Japan Aug Final PMI Manufacturing: No est v 51.0 prelim.

- 21:30 (AU) Australia Q2 Private Capital Expenditure QoQ: +1.0%e v -0.3% prior.

- 21:30 (AU) Australia July Home Loans Value M/M: -3.5%e v -4.4% prior; Investment Lending M/M: -4.0%e v -6.3% prior; Owner Occupied Loan Value M/M: -2.8%e v -3.3% prior.

- 21:45 (CN) China Aug Caixin PMI Manufacturing: 50.0e v 50.4 prior.

- 23:35 (JP) Japan to sell 10-Year JGB Bonds.