Awaiting US Jobs Report To Review Fed Tapering Bets

Notes/Observations

• Focus on US payrolls and whether data supports Fed hawks on potential tapering.
• Major European Aug PMI Services data miss consensus in session (Note: coming off record high levels from recent months). Slowdown partly reflected a normalization in activity, but there widespread reports of shortages of staff and supply chain disruptions.
• Japan PM Suga to step down after heading the country for just one year.

Asia

• China Aug Caixin PMI Services registered its 1st contraction in 16 months (46.7 v 52.0e).
• Australia Aug Final PMI Services confirmed its 2nd month of contraction and lowest since June 2020 (42.9 v 43.3 prelim.
• Japan Aug Final PMI Services confirmed its 19th month of contraction and lowest since May 2020 (42.9 v 43.5 prelim).
• Japan PM Suga confirmed he would not run for LDP Leadership.

Europe

• UK PM Johnson expected to announce manifesto-breaking tax increase to fund largest overhaul in social care. To reveal plan to raise national insurance that will see approximately 25M people pay extra tax. Plan called for a 1% rise in National Insurance in return PM would promise to cap the amount an individual will ever pay in social care costs.
• Health Sec Javid said to have pushed in the summer for a 2% increase in National Insurance during a cabinet split over funding for the NHS/social care. Chancellor Sunak is arguing against a more than 1% increase
• German ZDF Poll on Sept elections: SPD moves ahead Merkel’s bloc. SPD: 25% (+3) while Merkel CDU/CSU bloc: 22% (unch).

Americas

• Sen Manchin (D-WV) stated that Senate should hit ‘pause’ on the $3.5T spending plan as concerned by inflation and debt accumulation.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.08% at 474.20, FTSE +0.16% at 7,175.55, DAX +0.07% at 15,852.05, CAC-40 -0.27% at 6,744.58, IBEX-35 -0.17% at 8,966.00, FTSE MIB +0.05% at 26,245.50, SMI -0.20% at 12,407.06, S&P 500 Futures +0.16%].
• Market Focal Points/Key Themes: European indices open modestly lower and later traded mixed wit a downward bias; general muted trading ahead of data releases, long weekend in US; better performing sectors inclue industrials and real estate; sectors inclined to the downside include consumer discretionary and technology; Watchstone rejects offer from Polygon; DSM acquires First Choice Ingredients; reportedly Italian regulators to probe Nexi-SIA merger; reportedly Zooplus in talks for takeover by EQT; Cinven disists in talks to acquire Sanne Group; HAL takes stake in Technip Energies; focus on US NFP release later today; no major earnings expected in the upcoming Americas session.

Equities

• Consumer discretionary: Delivery Hero [DHER.DE] -1.5% (convertibles offering).
• Financials: Ashmore [ASHM.UK] -4% (earnings), Berkeley Group [BKG.UK] -1% (AGM statement).
• Healthcare: Astrazeneca [AZN.UK] +1% (settlement with EU).
• Industrials: Webuild [WBD.IT] +2% (contract), Eurocell [ECEL.UK] +4% (earnings).

Speakers

• EU’s Dombrovskis (trade chief): optimistic of resolving steel tariff dispute after EU/US summit by year end.
• China PBoC Financial Stability Report reiterated stance to make prudent monetary policy flexible, targeted and appropriate. To improve financial risk prevention, warning, disposal and responsibility system.

Currencies/Fixed income

• USD continued to be on the defensive following the dovish signals from the Fed Chair Powell at last week’s Jackson Hole symposium. Greenback at 1-month lows by mid-session against the major European and commodity-related pairs. Focus on upcoming US payrolls in today’s session to determine whether data supported Fed hawks recent rhetoric on potential tapering.
• EUR/USD at 1.1880. Dealers noted could the potential that the ECB could scale back its pandemic bond purchases at next week’s meeting providing additional support to the Euro.

Economic data

• (RU) Russia Aug PMI Services: 49.3 v 53.5e (1st contraction in 8 months); PMI Composite: 48.2 v 51.7 prior.
• (SE) Sweden Aug PMI Services: 64.7 v 69.1 prior (15th month of expansion); PMI Composite: 63.4 v 67.8 prior.
• (FR) France July YTD Budget Balance: -€166.6B v -€131.3B prior.
• (TR) Turkey Aug CPI M/M: 1.1% v 0.7%e; Y/Y: 19.3% v 18.8%e; CPI Core Index Y/Y: 16.8% v 17.0%e.
• (TR) Turkey Aug PPI M/M: 2.8% v 2.5% prior; Y/Y: 45.5% v 44.9% prior.
• (CZ) Czech Q2 Average Real Monthly Wage Y/Y: 8.2% v 5.7%e.
• (HU) Hungary July Retail Sales Y/Y: 3.0% v 3.5%e.
• (ES) Spain Aug PMI Services: 60.1 v 61.5e (5th month of expansion); PMI Composite: 60.6 v 60.6e.
• (ZA) South Africa Aug PMI (whole economy): 49.9 v 49.0e (2nd straight contraction).
• (SE) Sweden Q2 Current Account (SEK): 80.2B v 74.5B prior.
• (TH) Thailand end-Aug Foreign Reserves: $250.8B v $248.0B prior.
• (CN) Weekly Shanghai copper inventories (SHFE): 69,3K v 82.4K tons prior.
• (IT) Italy Aug PMI Services: 58.0 v 58.5e (4th month of expansion); PMI Composite: 59.1 v 58.9e.
• (FR) France Aug Final PMI Services: 56.3 v 56.4e (confirmed 5th straight expansion); PMI Composite: 55.9 v 55.9e.
• (DE) Germany Aug Final PMI Services: 60.8 v 61.5e (confirmed 4th month of expansion); PMI Composite: 60.0 v 60.6e.
• (EU) Euro Zone Aug Final PMI Services: 59.0 v 59.7e (confirmed 5th month of expansion); PMI Composite: 59.0 v 59.5e.
• (RU) Russia Narrow Money Supply w/e Aug 27th (RUB): 14.24T v 14.34T prior.
• (NO) Norway Aug Unemployment Rate: 2.7% v 2.9%e.
• (UK) Aug Final PMI Services: 55.0 v 55.5e (confirmed 6th month of expansion); PMI Composite: 54.8 v 55.3e.
• (UK) Aug Official Reserves Change: -0.6$B v +$1.0B prior.
• (EU) Euro Zone July Retail Sales M/M: -2.3% v 0.0%e; Y/Y: 3.1% v 4.5%e.
• (NO) Norway Aug House Prices M/M: +1.9% v -1.1% prior; Y/Y: 9.4% v 8.5% prior.

Fixed income issuance

• None seen.

Looking ahead

• Portugal Debt Agency (IGCP) to announce upcoming issuance.
• (EG) Egypt Aug Gross Official Reserves: No est v $40.5B prior.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (IN) India to sell combined INR260B I 2023, 2031 and 2061 bonds.
• 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2033, 2038 and 2046 Bonds.
• 06:00 (IE) Ireland Aug Live Register Monthly Change: No est v -2.2K prior; Live Register Level: No est v 169.5K prior.
• 06:00 (UK) DMO to sell £3.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £1.5B respectively).
• 06:45 (US) Daily Libor Fixing.
• 07:00 (IN) India announces upcoming bill issuance (held on Wed).
• 07:30 (IN) India Weekly Forex Reserve w/e Aug 27th: No est v $616.9B prior.
• 07:30 (IS) Iceland to sell Apr 2024 RIKB Bonds.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Aug Change in Nonfarm Payrolls: +725Ke v +943K prior; Change in Private Payrolls: +610Ke v +703K prior; Change in Manufacturing Payrolls : +23Ke v +27K prior.
• 08:30 (US) Aug Unemployment Rate: 5.2%e v 5.4% prior; Underemployment Rate: No est v 9.2% prior; Labor Force Participation Rate: 61.8%ev 61.7% prior.
• 08:30 (US) Aug Average Hourly Earnings M/M: 0.3%e v 0.4% prior; Y/Y: 4.0%e v 4.0% prior; Average Weekly Hours: 34.8e v 34.8 prior.
• 08:30 (CA) Canada Q2 Labor Productivity Q/Q: +1.6%e v -1.7% prior.
• 09:00 (BR) Brazil PMI Services: No est v 54.4 prior; PMI Composite: No est v 55.2 prior.
• 09:45 (US) Aug Final Markit PMI Services: 55.2e v 55.2 prelim; PMI Composite: No est v 55.4 prelim.
• 10:00 (US) Aug ISM Services Index: 61.8e v 64.1 prior.
• 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Spain, Estonia, Hungary sovereign ratings; S&P on Finland and Cyprus sovereign ratings; Fitch on Estonia, Lithuania sovereign ratings; Canadian rating agency DBRS on Spain and Estonia sovereign ratings).
• 13:00 (US) Weekly Baker Hughes Rig Count.
• 13:00 (US) Fed’s Bostic.