Inflation Continues To Run Hot In Europe

Notes/Observations

• US Congress averted govt shutdown for now with 9-week extension.
• House delayed vote on $1.0T infrastructure bill until Friday as Democrat rifts persist.
• Energy price increases are adding to concerns about inflation.
• Major European PMI Manufacturing hitting lowest level of expansion since the start of the year (Beats: UK, Italy; Misses: Germany, France, Spain).
• Euro Zone Sept Flash CPI at decade highs.
• Polish inflation at 20-year high with MPC facing pressure to hike.

Asia

• Australia Sept Final PMI Manufacturing: 56.8 v 57.3 prior (confirms 16th month of expansion).
• Japan Sept Final PMI Manufacturing: 51.5 v 51.2 prelim (confirm the 8th straight month of expansion).
• Japan Aug Jobless Rate: 2.8% v 2.9%e.
• Japan Q3 Tankan Large Manufacturing Index: 18 v 13e; Outlook Survey: 14 v 14e (aka Japan business mood improved).
• Chinese markets closed for a week from today (reopens Fri, Oct 8th).

Europe

• France PM Castex stated that Govt to enact a ‘tariff shield’ to ease the cost of rising billsand put a halt to gas price increases; Gas prices were expected to decline again from April.

Americas

• Senate passed bill to fund the govt through Dec 3rd (as expected); House voted to approve stopgap funding bill, which averted a Friday govt shutdown. President Biden signed bill.
• House Leadership Aide stated that the House would NOT vote on $1.0T infrastructure bill on Sept 30th and would return Friday (Oct 1st) to attempt to vote on bill.
• Fed Chair Powell House testimony noted that the Fed found itself in difficult situation in regards to tension between inflation and employment; Inflation was well above target but still far away from full employment.
• Mexico Central Bank (Banxico) again raised the raise the Overnight Rate by 25bps to 4.50% (as expected).

Energy

• OPEC+ said to be considering options for releasing more oil to the market at next week’s meeting beyond the plan for adding 400K bpd in Nov.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -1.2% at 449.4, FTSE -0.7% at 7,035, DAX -0.7% at 15,147, CAC-40 -0.6% at 6,482, IBEX-35 -0.6% at 8,743, FTSE MIB -0.8% at 25,502, SMI -1.2% at 11,508, S&P 500 Futures -0.5%].
• Market Focal Points/Key Themes: European indices open lower across the board but moderated loses as the session progressed; less negative sectors include utilities and telecom; sectors leading to the downside include materials and industrials; Bilia reaches agreement with Volvo Cars in Sweden; Orange acquires take in Orange Bank; Daimler shareholders to vote on truck spin-off; earnings expected in the upcoming US session include S&P Global.

Equities

• Consumer discretionary: AO World AO.UK -18.1% (trading update), Bilia BILIA.SE +0.4% (agreement with Volvo Cars), Euromoney ERM.UK +3.0% (trading update).
• Energy: EDF EDF.FR +4.3% (electricity tariffs remain in place).
• Financials: Icade ICAD.FR +0.4% (suspends IPO of health unit), Sampo SAMAS.FI +0.7% (buyback).
• Healthcare: METabolic EXplorer METEX.FR 5.0% (results).
• Industrials: Gulf Marine Services GMS +4.3% (trading update).
• Technology: Darktrace DARK.UK -5.3% (stake sale), Iomart IOM.UK -14.1% (cuts outlook).
• Utilities: Engie ENGI.FR +1.6% (France to block further price hikes).

Speakers

• Poland Central Bank’s Hardt stated that might need steeper hike unless MPC acted now; needed urgently to hike by 15bps.

Currencies/Fixed income

• USD continued to hold onto its recent weekly gains as the prospects for Fed tapering gathered momentum. Dealers continued looking for formally announce the start of tapering in November by the Fed.
• EUR/USD remained under the 1.16 level in the session as Major European PMI Manufacturing continued to move off recent record highs and drift to their lowest level of expansion since the start of the year. Rate divergence also weighing upon the Euro as market participants are reluctant to price in monetary policy normalization any time soon.

Economic data

• (DE) Germany Aug Retail Sales M/M: 1.1% v 1.5%e ; Y/Y: 0.4% v 1.8%e.
• (RU Russia Sept PMI Manufacturing: 49.8 v 47.1e (4th straight contraction).
• (SE) Sweden Sept PMI Manufacturing: 64.6 v 60.1 prior (16th month of expansion).
• (FR) France Aug YTD Budget Balance: -€178.0B v -€166.6B prior.
• (AT) Austria Sept Preliminary CPI M/M: 0.4% v 0.1% prior; Y/Y: 3.2% v 3.1% prior.
• (NL) Netherlands Sept PMI Manufacturing: 62.0 v 65.8 prior (14th straight expansion).
• (PL) Poland Sept PMI Manufacturing: 53.4 v 54.8e (14th straight expansion).
• (TR) Turkey Sept PMI Manufacturing: 52.5 v 54.1 prior (4th straight expansion).
• (HU) Hungary Sept Manufacturing PMI: 52.1 v 54.5e (6th straight expansion).
• (HU) Hungary July Final Trade Balance: -€0.2B v -€0.2B prior.
• (ES) Spain Sept Manufacturing PMI: 58.1 v 58.2e(8th month of expansion).
• (CH) Swiss Sept PMI Manufacturing: 68.1 v 65.5e (14th straight expansion).
• (CZ) Czech Republic Sept PMI Manufacturing: 58.0 v 58.3e (13th straight expansion).
• (TH) Thailand Sept Business Sentiment Index: 42.6 v 40.0 prior.
• (IT) Italy Sept Manufacturing PMI: 59.7 v 59.5e (15th month of expansion).
• (FR) France Sept Final PMI Manufacturing: 55.0 v 55.2 prelim (confirmed 10th month of expansion but lowest reading since Jan 2021).
• (DE) Germany Sept Final PMI Manufacturing: 58.4 v 58.5 prelim (confirmed 15th month of expansion).
• (EU) Euro Zone Sept Final PMI Manufacturing: 58.6 v 58.7 prelim (confirmed 15th month of expansion but lowest since Feb).
• (GR) Greece Sept Manufacturing PMI: 58.4 v 59.3 prior (7th month of expansion).
• (NO) Norway Sept PMI Manufacturing: 59.2 v 61.7 prior (13th month of expansion).
• (NO) Norway Sept Unemployment Rate: 2.4% v 2.5%e.
• (RU) Russia Narrow Money Supply w/e Sept 24th (RUB):14.41 T v 14.54T prior.
• (PL) Poland Sept Preliminary CPI M/M: 0.6% v 0.3%e; Y/Y: 5.8% v 5.5%e (5th month above target and highest since 2001).
• (UK) Sept Final PMI Manufacturing: 57.1 v 56.3 prelim(confirmed 15th straight expansion and lowest since Feb).
• (EU) Euro Zone Sept Advance CPI Estimate Y/Y: 3.4% v 3.3%e (highest annual pace since 2011); CPI Core Y/Y: 1.9% v 1.9%e.
• (DK) Denmark Sept PMI Survey: 65.2 v 67.3 prior (7th straight expansion).
• (ZA) South Africa Sept Manufacturing PMI: 56.8 v 53.3e (2nd month of expansion).

Fixed income issuance

• None seen.

Looking ahead

• (RO) Romania Sept International Reserves: No est v $46.7B prior.
• (ZA) South Africa Sept Naamsa Vehicle Sales Y/Y: No est v 24.6% prior.
• (IT) Italy Sept Budget Balance: No est v €9.1B prior.
• (US) Sept Total Vehicle Sales data in session.
• (AR) Argentina Sept Government Tax Revenue (ARS): No est v 1.005T prior.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (IN) India to sell combined INR240B in 2028, 2031 and 2061bonds.
• 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2033, 2038 and 2050 Bonds.
• 06:00 (UK) DMO to sell £2.0B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively).
• 06:45 (US) Daily Libor Fixing.
• 07:00 (IN) India announces upcoming bill issuance (held on Wed); to sell combined INR170B in 3-month, 6-month and 12-month Bills on Oct 6th.
• 07:30 (CL) Chile Aug Economic Activity Index (Monthly GDP) M/M: No est v 1.4% prior; Y/Y: 16.9%e v 18.1% prior.
• 07:30 (IN) India Weekly Forex Reserve w/e Sept 24th: No est v $639.6B prior.
• 08:00 (CZ) Czech Sept Budget Balance (CZK): No est v -298.1B prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond issuance.
• 08:30 (US) Aug Personal Income: 0.2%e v 1.1% prior; Personal Spending: 0.7%e v 0.3% prior; Real Personal Spending: +0.4%e v -0.1% prior.
• 08:30 (US) Aug PCE Deflator M/M: 0.3%e v 0.4% prior; Y/Y: 4.2%e v 4.2% prior.
• 08:30 (US) Aug PCE Core Deflator M/M: 0.2%e v 0.3% prior; Y/Y: 3.5%e v 3.6% prior.
• 08:30 (CA) Canada July GDP M/M: -0.2%e v +0.7% prior; Y/Y: 5.0%e v 8.0% prior.
• 08:30 (CA) Canada Aug MLI Leading Indicator M/M: No est v 1.0% prior.
• 09:00 (BR) Brazil Sept PMI Manufacturing: No est v 53.6 prior.
• 09:30 (CA) Canada Sept Manufacturing PMI: No est v 57.2 prior.
• 09:45 (US) Sept Final Markit PMI Manufacturing: 60.5e v 60.5 prelim.
• 10:00 (US) Sept Final University of Michigan Confidence: 71.0e v 71.0 prelim.
• 10:00 (US) Aug Construction Spending M/M: 0.3%e v 0.3% prior.
• 10:00 (US) Sept ISM Manufacturing: 59.5e v 59.9 prior; Prices Paid: 78.5e v 79.4 prior.
• 10:00 (MX) Mexico Aug Total Remittances: $4.4Be v $4.5B prior.
• 10:00 (MX) Mexico Central Bank Economist Survey.
• 10:30 (MX) Mexico Sept PMI Manufacturing: No est v 47.1 prior.
• 11:00 (CO) Colombia Sept PMI Manufacturing: No est v 53.2 prior.
• 11:00 (CO) Colombia Aug Exports: $3.6Be v $3.3B prior.
• 11:00 (PE) Peru Sept CPI M/M: 0.2%e v 1.0% prior; Y/Y: 4.8%e v 5.0% prior.
• 11:00 (EU) Potential sovereign ratings after European close.
• 11:00 (US) Fed’s Harker.
• 11:30 (DE) ECB’s Schnabel (Germany).
• 12:00 (RU) Russia Q2 GDP (3rd reading) Y/Y: 10.5%e v 10.5% prelim.
• 12:00 (RU) Russia Aug Unemployment Rate: 4.5%e v 4.5% prior.
• 12:00 (RU) Russia Aug Real Retail Sales Y/Y: 4.9%e v 4.7% prior.
• 12:00 (RU) Russia July Real Wages Y/Y: 2.6%e v 4.9% prior.
• 12:00 (IT) Italy Sept New Car Registrations Y/Y: No est v -27.3% prior.
• 13:00 (MX) Mexico Sept IMEF Manufacturing Index: No est v 51.3 prior; Non-Manufacturing Index: No est v 50.1 prior.
• 13:00 (US) Weekly Baker Hughes Rig Count.
• 13:00 (US) Fed’s Mester.
• 14:00 (BR) Brazil Sept Trade Balance: $4.5Be v $7.7B prior; Total Exports: $25.3B v $27.2B prior; Total Imports: $20.6Be v $19.6B prior.