Quiet Session Ahead Of US CPI Data And EU Planned Brexit Concessions

Notes/Observations

• UK Monthly GDP data saw the economy grew less than expected in August as consumers reined in spending.
• German Sept Final CPI unrevised but confirmed the highest annual pace since 1993.
• China’s credit growth slowed as weakness in the property market amid the Evergrande crisis.
• Awaiting the US Sept CPI reading and Sept FOMC Minutes later in today’s session.

Asia

• China Sept Trade Balance: $66.8B v $46.6Be; Exports Y/Y: 28.1% v 21.5%e; Imports Y/Y: 17.6% v 20.7%e.
• China PBOC seen cutting the RRR rate during Q4. Could also conduct ‘large’ MLF and reverse repo operations.
• South Korea Aug Unemployment Rate: 3.0% v 3.0%e.
• Taiwan Defense Ministry warned that it would issue tougher response to China if military jet flights got ‘too close’.

Europe

• UK Brexit Min Frost stated that the govt would not invoke Article 16 ‘gratuitously’; Prefered ‘quick and intensive’ discussions over next 2-3 weeks on a new protocol that allows goods to flow freely. If Article 16 was triggered it would be up to the EU whether or not it retaliated. Revised deal would be acceptable only if the EU removed Northern Ireland from the jurisdiction of the European Court of Justice.
• European Union prepared to eliminate most post-Brexit checks on UK goods to Northern Ireland.

Americas

• House passed Bill to increase the country’s debt limit until at least Dec 3rd (vote 219-206 and along party lines).
• Fed’s Quarles to no longer be chair of Supervision and Regulation committee when term expires on Oct 13th, committee to meet on un-chaired basis (Note: US President Biden has yet to select a replacement for Quarles).
• Fed’s Bostic (FOMC voter, hawk): Inflation was likely to remain above 2% going forward; Pandemic-induced price swings would eventually unwind by themselves without necessarily threatening longer-run price stability. Not seeing signs that current inflation was doing the kind of harm to the economy that would call the Fed’s policy stance into question.
• Fed’s Barkin (FOMC voter, hawk) reiterated that prices were being pushed higher by shortages.
• Apple [AAPL] said to be looking to cut its projected iPhone13 production targets for 2021 by as many as 10M units citing semiconductor chip shortage.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.39% at 458.98, FTSE -0.27% at 7,110.84, DAX +0.59% at 15,236.75, CAC-40 +0.10% at 6,554.74, IBEX-35 -0.41% at 8,899.50, FTSE MIB -0.09% at 25,967.00, SMI +0.65% at 11,762.43, S&P 500 Futures +0.16%].
• Market Focal Points/Key Themes: European indices open modestly lower across the board but later reversed to trade mixed as the session progressed; sectors leading to the upside include technology and industrials; while consumer discretionary and materials sectors among the laggards; luxury brands supported following LVMH’s earnings overnight; tech sector supported following SAP’s trading update; Spie withdraws from EQUANS bidding; Fastighets Balder raises take in Entra; earnings in the upcoming US session include Blackrock, Delta Airlines and JP Morgan.

Equities

• Consumer discretionary: LVMH [MC.FR] +1.5% (earnings), Just Eat Takeaway.com [JET.UK] -4% (trading update).
• Industrials: Volkswagen [VOW3.DE] +2.5% (job cuts risk; units listing), Barratt Developments [BDEV.UK] +5% (trading update), Infineon [IFX.DE] +1%, AMS [AMS.CH] -1% (Apple rumour on production cut).
• Technology: SAP [SAP.DE] +5% (raises outlook), Darktrace [DARK.UK] +1% (trading update).

Speakers

• Slovakia Prosecutor’s office confirmed ECB’s Kazimir (Slovakia) charged with corruption.
• Czech Central Banker Benda (hawk) stated that the latest inflation data suggested CNB currently needed relatively rapid rate hikes.
• Japan PM Kishida said not to be planning visit to Yasukuni war shrine (**Note: The prospect that any such visits would trigger fierce criticism from neighboring countries).
• Global Times’ Editorial article noted that hope of a peaceful solution to the Taiwan question was declining sharply; Future of the Taiwan Straits situation unlikely to remain peaceful.
• Iraq Oil Min Jabbar stated that oil prices were unlikely to rise further.
• Russia Dep Energy Min Sorokin stated that Russia could increase oil production in line with OPEC+ without problem.
• Russia govt official stated that there could be no gas supplies beyond contractual obligations.
• IEA chief Birol stated that the economic recovery was unsustainable due to fossil fuel demand. Energy transition was not to blame for current high prices.

Currencies/Fixed Income

• USD was slightly softer in quiet trading on Wed but remain near 1-year highs against major pairs. Market participants awaiting the US Sept CPI reading and Sept FOMC Minutes later in today’s session. Expectations remain that the Fed would announce a tapering of stimulus next month.
• EUR/USD steady at 1.1550 area. German CPI reading confirmed the annual pace at the highest level since the 1993 German unification. ECB speak still sees the situation as transitory.
• GBP/USD staying above the 1.36 level. UK Monthly GDP data registered growth as it weathered the surge in Delta virus cases better than feared. Dealers noted that the recovery was nevertheless slowing. Various analysts have brought forward their call for a BOE rate hike into Dec but some believe BoE would wait until 2022 before hiking. Brexit remains in focus as the EU will present its counter-proposal on Northern Ireland Protocol.
  USD/JPY remains near 3-year highs as rate differentials favored the greenback . Pair at 113.50 by mid-session.

Economic data

• (FI) Finland Aug Current Account Balance: €0.4B v €0.6B prior.
• (DE) Germany Sept Final CPI M/M: 0.0% v 0.0%e; Y/Y: 4.1% v 4.1%e (highest annual pace since 1993).
• (DE) Germany Sept Final CPI EU Harmonized M/M: 0.3% v 0.3%e; Y/Y: 4.1% v 4.1%e.
• (UK) Aug GDP M/M: 0.4% v 0.5%e; GDP 3M/3M: 2.9% v 3.0%e.
• (UK) Aug Industrial Production M/M: 0.8% v 0.2%e; Y/Y: 3.7% v 3.3%e.
• (UK) Aug Manufacturing Production M/M: 0.5% v 0.0%e; Y/Y: 4.1% v 4.1%e.
• (UK) Aug Construction Output M/M: -0.2% v +0.4%e; Y/Y: 10.1% v 5.7%e.
• (UK) Aug Index of Services M/M: 0.3% v 0.6%e; 3M/3M: 3.7% v 3.8%e.
• (UK) Aug Visible Trade Balance: -£14.9B v -£12.0Be; Overall Trade Balance: -£3.7B v -£2.8Be; Trade Balance Non EU: -£8.4B v -£8.1B prior.
• (EU) Euro Zone Aug Industrial Production M/M: -1.6% v -1.7%e; Y/Y: 5.1% v 4.7%e.
• (GR) Greece Aug Unemployment Rate: 13.9% v 14.2% prior.
• (CN) China Sept New Yuan Loans (CNY): 1.66T v 1.810Te.
• (CN) China Sept Aggregate Financing (CNY): 2.900T v 3.05Te.
• (CN) China Sept M2 Money Supply Y/Y: 8.3% v 8.2%e.

Fixed income Issuance

• (IN) India sold total INR200B vs.INR200B indicated in 3-month, 6-month and 12-month bills.
• (DK) Denmark sold total DKK4.12B in 3-month, 6-month, 9-month and 12-month Bills (**Note: only accepted bids in 6-months; rejected all others).
• (SE) Sweden sold SEK7.5B vs. SEK7.5B indicated in 3-month bills; Avg Yield: -0.3985% v -0.3491% prior; bid-to-cover: 1.84x v 6.15x prior.
• (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 1.5% Feb 2026 Bonds; Avg Yield: 1.45% v 1.11% prior; Bid-to-cover: 4.22x v 2.27x prior.
• (UK) DMO sold£500M in 0.125% Mar 2051 Inflation-linked Gilts (UKTi); Real Yield: -2.261% v -2.163% prior; bid-to-cover: 2.37x v 2.41x prior.
• (IT) Italy Debt Agency (Tesoro) sold total €6.5B vs. €5.0-6.5B indicated range in 3-year, 7-year and 30-year BTP bonds.
• Sold €3.0B vs. €2.5-3.0B indicated range in 0.0% Jan 2024 BTP; Avg Yield: -0.19% v -0.32% prior; bid-to-cover: 1.45x v 1.58x prior.
• Sold €2.0B vs. €1.5-2.0B indicated range in 0.50% July 2028 BTP; Avg Yield: 0.48% v 0.32% prior; bid-to-cover: 1.65x v 1.58x prior.
• Sold €1.5B vs. €1.0-1.5B indicated range in 1.70% Sept 2051 BTP bonds; Avg Yield: 1.82% v 1.69% prior; Bid-to-cover: 1.53x v 1.47x prior.

Looking Ahead

• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (DE) Germany to sell €1.0B in 0% Aug 2052 Bunds.
• 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).
• 06:00 (IL) Israel Sept Trade Balance: No est v -$3.4B prior.
• 06:00 (PT) Portugal Sept Final CPI M/M: No est v 0.9% prelim; Y/Y: No est v 1.5% prelim.
• 06:00 (PT) Portugal Sept Final CPI EU Harmonized M/M: No est v 0.9% prelim; Y/Y: No est v 1.3% prelim.
• 06:00 (CZ) Czech Republic to sell combined CZK13B in 2028, 2033 and 2036 bonds.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (RU) Russia OFZ Bond auction (if any).
• 07:00 (US) MBA Mortgage Applications w/e Oct 8th: No est v -6.9% prior.
• 07:00 (ZA) South Africa Aug Retail Sales M/M: +9.5%e v -11.2% prior; Y/Y: +2.0%e v -0.8% prior.
• 07:00 (EU) EU Commission to present counter-proposal on Norther Ireland Protocol.
• 07:00 OPEC Monthly Report.
• 07:30 (CL) Chile Central Bank Economist Survey.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Sept CPI M/M: 0.3%e v 0.3% prior; Y/Y: 5.3%e v 5.3% prior.
• 08:30 (US) Sept CPI (ex-food/energy) M/M: 0.2%e v 0.1% prior; Y/Y: 4.1%e v 4.0% prior.
• 08:30 (US) Sept CPI Index NSA: 274.172e v 273.567 prior; CPI Core Index SA: 280.008e v 279.338 prior.
• 08:30 (US) Sept Real Avg Hourly Earning Y/Y: No est v -0.9% prior; Weekly Earnings Y/Y: No est v -0.9% prior.
• 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (7-20 years).
• 10:30 (UK) BOE’s Cunliffe.
• 13:00 (US) Treasury to sell 30-Year Bonds Reopening.
• 14:00 (US) FOMC Sept Minutes.
• 15:15 (IT) ECB’s Franco and Visco (Italy) hold G20 Finance press conference.
• 16:30 (US) Weekly API Crude Oil Inventories: M v +1.0M prior.
• 16:30 (US) Fed’s Brainard at Listens Event.
• 17:00 (CL) Chile Central Bank (BCCh) Interest Rate Decision: Expected to raise the Overnight Rate Target by 75bps to 2.25%.
• 17:00 (KR) South Korea Sept Import Price Index M/M: No est v 0.6% prior; Y/Y: No est v 21.6% prior.
• 17:00 (KR) South Korea Sept Export Price Index M/M: No est v 0.6% prior; Y/Y: No est v 18.6% prior.
• 18:00 (AU) RBA’s Debelle at Conference.
• 19:01 (UK) Sept RICS House Price Balance: 70%e v 73% prior.
• 19:30 (AU) Australia to sell combined A$2.0B in 3-month and 6-month Bills.
• 20:00 (AU) Australia Oct Consumer Inflation Expectation: No est v 4.4% prior.
• 20:00 (SG) Singapore Q3 Advance GDP Q/Q: +1.1%e v -1.8% prior; Y/Y: 6.7%e v 14.7% prior.
• 20:00 (SG) Singapore Monetary Authority (MAS) Bi-annual Monetary Policy Statement.
• 20:00 (US) Fed’s Bowman on economy and monetary policy.
• 20:30 (AU) Australia Sept Net Employment Change: -110.0Ke v -146.3K prior; Unemployment Rate: 4.8%e v 4.5% prior; Full Time Employment Change: No est v.
• 68.0K prior; Part Time Employment Change: No est v -78.2K prior; Participation Rate: 64.7%e v 65.2% prior.
• 21:30 (CN) China Sept CPI Y/Y: 0.8%e v 0.8% prior; PPI Y/Y: 10.5%e v 9.5% prior.
• 22:00 (SL) Sri Lanka Central Bank (CBSL) Interest Rate Decision: Standing Lending Rate current ly at 6.00%; Standing Deposit Rate currently at 5.00%.
• 23:35 (JP) Japan to sell 5-Year JGB Bonds.