- Yields kept climbing pulled up by a hawkish shift at the Fed.
- EU confidence rises as data defied concerns over supply-side constraints and a new surge in Covid-19 cases (Note: Both German and French reading beat consensus).
- Senate fails to advance debt ceiling, government funding measure.
- China Aug industrial profit growth slows for sixth month.
- Oil extends rally into 6th day on tight supply, Brent hitting 3-year high.
- China PBOC Open Market Operation (OMO) again injected CNY100B in 14-day reverse repos (Note: 8th straight session of PBoC net liquidity injection).
- BOJ July Meeting Minutes (two decisions ago) reiterates its overall assessment that domestic economy had picked up as a trend, although it remained in a severe situation due to the impact of COVID.
- Japan Fin Min Aso stated that he did not believe pent up demand would emerge too easily and would take time for demand to return after state of emergency ends.
- Australia Aug Preliminary Retail Sales M/M: -1.7% v -2.5%e.
- China Aug Industrial Profits slow for the 6th consecutive month (Y/Y: 10.1% v 16.4% prior).
- North Korea fires unidentified projectile into East Sea.
- ECB’s de Cos (Spain) stated that reduction of ECB monetary support must be done with caution.
- UK govt said to place the army on standby to help ease fuel supply issues with up to 150 military drivers preparing to deliver fuel to station forecourts.
- Fed Chair Powell Senate testimony stated that Fed would act against ‘sustained’ high inflation; Bottleneck effects were larger and more persistent than expected.
- Fed’s Bostic (FOMC voter, hawk) stated that was not convinced were facing a lengthy bout with troublesome inflation; Without clear data demonstrating inflation had arrived and was likely to last, we would allow labor markets to run their course.
- Fed’s Williams (FOMC voter): Tapering bond buying might soon be warranted; Conditions to support a rate hike still well off.
- Fed’s Brainard noted that economy could reform to pre-pandemic equilibrium of low unemployment and mild inflation. Expected inflation to return to pre-virus dynamics, did not take any signal on liftoff from taper timing.
- Fed’s Kashkari (dove, non-voter) stated that our highest priority was to put people back to work.
- Dallas Fed’s Kaplan to retire on Oct 8th (Reminder: Fed’s Rosengren (non-voter) said to retire on Sept 30th).
- Senate Republicans blocked a measure to fund the government and suspend the debt ceiling Monday evening.
- Democrats said to be hinting that they could be willing to drop the debt ceiling from their government funding package this week in order to avoid a government shutdown – Politico.
- WTI Crude continues to rise, Brent trades above $80/bbl.
- Indices [Stoxx600 -1.03% at 457.64, FTSE -0.28% at 7,043.31, DAX -0.70% at 15,464.75, CAC-40 -1.14% at 6,575.28, IBEX-35 -0.97% at 8,915.50, FTSE MIB -0.63% at 25,967.00, SMI -1.16% at 11,556.00, S&P 500 Futures -0.65%].
- Market Focal Points/Key Themes: European indices open mixed with a downward bias, then fell into the red later in the session; better performing sectors include energy and financials; consumer discretionary and technology sectors among those leading to the downside; oil and gas subsector supported by rise in crude prices; Castellum divests property portfolio; Blue Prism to be acquired by Vista; reportedly SocGen looking to acquire ING’s retail bank unit; Maerks sells it’s reefer construction unit; Wolters Kluwer sells its US legal ed business; focus on upcoming testimony from Fed’s Powell before Congress; earnings expected later in the US session include IHS Markit, Micron Technologies and Synnex.
- Consumer discretionary: Ferguson [FERG.UK] +1% (earnings; buyback), Smiths Group [SMIN.UK] +3% (earnings; confirms divestment), Go-Ahead [GOG.UK] -18%.
- (CFO resigns; Updates on Southern Contract), Card Factory [CARD.UK] -1% (earnings), EasyJet [EZJ,UK] -3% (results of rights issue).
- Technology: ASM International [ASM.NL] -4% (investor day), Blue Prism Group [PRSM.UK] -2.5% (to be acquired).
- ECB’s Villeroy (France) reiterated view that inflation rate will fall below 2% by 2023.
- ECB’s Kazimir (Slovakia): Financing conditions remain favorable.
- Sweden Central Bank (Riksbank) Bremam stated had clearly indicated that would tolerate inflation over target for a while. Having Repo Rate outlook that was on the accommodative side was OK as it was only a forecast.
- Turkey Central Bank Gov Kavcioglu stated that planned to increase FX reserves and saw no reason for further depreciation in currency.
- Romania Central Bank official Popa: Favor faster rate hikes.
- Japan PM Suga to lift the Coronavirus State of Emergency on Sept 30th (as expected).
- China State Grid stated that power supply for Beijing was ample and that cuts made during the week were due to regular checks.
- China PBOC Gov Yi Gang: No need to purchase assets at this time. Saw China’s economy potential growth between 5.0-6.0%.
- Plethora of recent Fed speak reinforces message of tapering and US bond yields continued to climb. The 10-year Treasury yield approached the 1.55% level during the session.
- USD/JPY at 3-month highs and edging to the key resistance area of 112. JPY currency furthered weakened after a weak JGB auction that added to negative sentiment. Focus also on the LDP ruling party election on Wednesday.
- EUR/USD holding below the 1.17 level as US yields kept climbing pulled up by a hawkish shift at the Fed.
- GBP/USD moved back below the 1.37 level as markets reassessed the BOE. Dealers noted the current supply chain crisis could discourage the Bank of England from raising interest rates.
- (NL) Netherlands Sept Producer Confidence Index: 11.1 v 9.6 prior.
- (FI) Finland Aug Preliminary Retail Sales Volume Y/Y: 1.2% v 3.4% prior.
- (DE) Germany Oct GfK Consumer Confidence: +0.3 v -1.5e (1st positive reading in 19 months).
- (NO) Norway Aug Retail Sales (includes auto/fuel) M/M: -3.8% v +0.6%e.
- (FR) France Sept Consumer Confidence: 102 v 100e.
- (ES) Spain July Total Mortgage Lending Y/Y: 5.7% v 29.9% prior; House Mortgage Approvals Y/Y: 36.8% v 41.2% prior.
- (HU) Hungary Aug Unemployment Rate: 4.0% v 3.7%e.
- (SE) Sweden Aug Retail Sales M/M: +0.7% v -0.2%e; Y/Y: 6.6% v 5.3%e.
- (SE) Sweden Aug Trade Balance (SEK): -10.3B v 6.6B prior.
- (AT) Austria Sept Manufacturing PMI: 62.8 v 61.8 prior (15th straight expansion).
- (HK) Hong Kong Aug Trade Balance (HKD): -26.3B v -29.2Be; Exports Y/Y: 25.9% v 26.0%e; Imports Y/Y: 28.1% v 28.9%e.
- (IS) Iceland Sept CPI M/M: 0.5% v 0.5% prior; Y/Y: 4.4% v 4.3% prior.
Fixed income Issuance
- (NL) Netherlands Debt Agency (DSTA) sold €4.92B vs. €3.0-5.0B indicated range in new 0.0% Jan 2029 DSL Bonds; Avg Yield: -0.251% v -0.479% prior.
- (ID) Indonesia sold total IDR12.0T vs. IDR12.0T target in bills and bonds.
- (IT) Italy Debt Agency (Tesoro) sold €5.5B vs. €5.5B indicated in 6-month bills; Avg Yield: -0.545% v -0.519% prior; Bid-to-cover: 1.29x v 1.28x prior.
- (UK) DMO sold £2.0B in 1.25% July 2051 Gilts; Avg Yield: 1.332% v 0.972% prior; bid-to-cover: 2.05x v 2.41x prior; Tail: 1.1bps v 0.5bps prior.
- (CH) Switzerland sold CHF637.0M in 6-month Bills; Avg Yield: -0.776% v -0.750% prior.
- (PL) Poland Central Bank to hold non-monetary policy meeting.
- 05:25 (EU) Daily ECB Liquidity Stats.
- 05:30 (ZA) South Africa Q2 Non-farm Payrolls Q/Q: +0.1%e v -0.1% prior; Y/Y: -1.0%e v -5.4% prior.
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills; Avg Yield: % v 1.11% prior; bid-to-cover: x v 1.70x prior.
- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
- 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2035, 2040 and 2048 bonds.
- 06:00 (IE) Ireland Aug Retail Sales Volume M/M: No est v -1.7% prior; Y/Y: No est v 5.2% prior.
- 06:45 (US) Daily Libor Fixing.
- 07:00 (MX) Mexico Aug Unemployment Rate NSA (unadj): 4.4%e v 4.4% prior.
- 07:00 (BR) Brazil Central Bank (BCB) Sept Minutes.
- 07:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Skingsley.
- 08:00 (UK) Daily Baltic Dry Bulk Index.
- 08:00 (EU) ECB chief Lagarde opens ECB forum.
- 08:30 (US) Aug Advance Goods Trade Balance: -$87.3Be v -$86.4B prior.
- 08:30 (US) Aug Preliminary Wholesale Inventories M/M: 0.8%e v 0.6% prior; Retail Inventories M/M: 0.5%e v 0.4% prior.
- 08:30 (ES) ECB’s De Guindos (Spain).
- 08:50 (UK) BOE’s Mann.
- 08:55 (US) Weekly Redbook LFL Sales data.
- 09:00 (US) July FHFA House Price Index M/M: 1.5%e v 1.6% prior.
- 09:00 (US) July S&P Case-Shiller House Price Index (20-City) M/M: 1.70%e v 1.77% prior; Y/Y: 20.00%e v 19.08% prior.
- 09:00 (US) July S&P Case-Shiller House Price Index (Overall) Y/Y: No est v 18.61% prior.
- 09:00 (EU) Weekly ECB Forex Reserves.
- 09:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).
- 09:00 (US) Fed’s Evans.
- 09:45 (IT) ECB’s Panetti (Italy).
- 09:45 (EU) ECB weekly QE bond buying update.
- 09:45 (UK) BOE to buy £1.47B in APF Gilt purchase operation (20+ years).
- 10:00 (US) Sept Consumer Confidence Index: 115.0e v 113.8 prior.
- 10:00 (US) Sept Richmond Fed Manufacturing Index: 10e v 9 prior.
- 10:00 (MX) Mexico Weekly International Reserve data.
- 10:00 (US) Fed chief Powell in Senate.
- 10:00 (SE) Sweden Central Bank (Riksbank) Gov Ingves.
- 11:00 (DE) ECB’s Schnabel (Germany).
- 13:00 (US) Treasury to sell 7-year notes.
- 15:00 (AR) Argentina July Economic Activity Index (Monthly GDP) M/M: No est v 2.5% prior; Y/Y: 8.5%e v 10.8% prior.
- 15:00 (US) Fed’s Bostic.
- 16:30 (US) Weekly API Oil Inventories.
- 19:01 (UK) Sept BRC Shop Price Index Y/Y: No est v -0.8% prior.
- 21:10 (JP) BOJ Outright Bond Purchase Operation for 3~5 Years and 5~10 Years maturities.
- 22:00 (VN) Vietnam Q3 GDP Y/Y: 1.9%e v 6.6% prior.
- 22:00 (VN) Vietnam Sept CPI Y/Y: 3.1%e v 2.8% prior.
- 22:00 (VN) Vietnam Sept Trade Balance: -$1.8Be v -$1.3B prior; Exports Y/Y: +0.5%e v -5.4% prior; Imports Y/Y: 15.0%e v 21.2% prior.
- 22:00 (VN) Vietnam Sept YTD Retail Sales Y/Y: No est v -4.7% prior.
- 22:00 (VN) Vietnam Sept Industrial Production Y/Y: No est v 5.6% prior (revised from -7.4%).
- (JP) Japan Ruling Party (LDP) agreed on leadership.