ECB continues to cut speculation on any rate hikes during its horizon period

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Remarks / Observations

  • UK retail sales data continues its summer slump.
  • The final reading of the euro area CPI confirmed the highest annual pace since 2011.
  • The political changes have increased the chances that Germany will ease its strict national fiscal rules after the September elections.
  • Plenty of liquidity was added by the PBoC to help risk appetite as it sought to appease market nerves, weakened by concerns over quarter-end financing needs and the debt crisis of the China Evergrande group.

Asia

  • New Zealand’s August manufacturing PMI recorded its first contraction in 8 months (40.1 vs. 62.2 previously).
  • China PBOC Open Market Operation (OMO) injected CNY 50 billion into 7-day reverse repurchase agreements and CNY 50 billion into 14-day reverse repurchase agreements. The PBoC said a large cash injection was aimed at maintaining liquidity stability towards the end of the quarter (the largest since February.
  • China submits an application to join the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP).
  • Japan’s LDP candidates start the leadership race. Noda (the leader) said he would offer global cash payments to all Japanese workers and pledged that half of his cabinet be made up of women. Candidate Takaichi (seeking to become Japan’s first female PM) said now is the time to take bold action and use ultra-low interest rates. Seek to meet the 2% inflation target and freeze the primary balance target to deploy flexible fiscal stimulus.

Europe

  • The ECB noted that an FT story regarding a potential rate hike was not accurate; The conclusion on rates was inconsistent with forward guidance.
  • An FT report circulated citing an unpublished ECB inflation estimate that raised the possibility of a rate hike in just over 2 years (towards the end of 2023); It is expected to reach the 2% inflation target by 2025.
  • British Chancellor Rishi Sunak said he plans to use next month’s budget to set new rules to control government borrowing as the specter of higher inflation and rising interest rates looms large. worrying. The underlying debt would need to start declining by 2024-25 (Note: it is currently around 100% of gross domestic product).

Americas

  • Treasure Sec Yellen said he called Senate Minority Leader McConnell (R-KY) on the debt limit on Wednesday, September 15. McConnell repeated to Secretary Yellen what he had said publicly since July: This was a unified Democratic government, engaged in partisan folly and reckless on taxes and spending. Democrats need to raise the debt ceiling themselves, and they had the tools to do it.
  • President Biden failed to convince Sen Manchin (D-VW) to agree to spend $ 3.5 billion on the reconciliation package during their meeting at the Oval Office.

Speakers / Fixed income / FX / Commodities / Erratum

Actions

  • Indices [Stoxx600 +0.57% at 468.62, FTSE +0.40% at 7,055.55, DAX +0.49% at 15,728.05, CAC-40 +0.89% at 6,681.82, IBEX-35 +1.21% at 8,838.50, FTSE MIB +0.54% at 26,104.00, SMI +0.45% at 12,082.91, S&P 500 Futures +0.02%].
  • Market Focal Points / Key Themes: European inices are opening up in all areas and have remained positive as the session progressed; sectors that are leading the upside include consumer discretionary and financials; while underperformers include materials and industrial products; Grifols makes an offer for Biotest; Cerberus plans to take a stake in Commerzbank; Safestay assesses the sale of the business; BNP Paribas sells its stake in Euronext; no major profit is expected during the next US session.

Actions

  • Consumer discretionary: Dometic Group [DOM.SE] + 5% (acquisitions).
  • Finance: Commerzbank [CBK.DE] + 5% (speculation of the sale of a stake by the government), Euronext [ENX.FR] -2% (placement).
  • Health: Biotest [BIO.DE] + 10% (offer).
  • Industrial: Yara International [YAR.NO] -3% (partial shutdown of production in the event of an increase in natural gas prices).

Loudspeakers

  • The ECB’s De Cos (Spain) noted that recent price action in bond yields reflected uncertainty. Market expectations did not predict an interest rate hike in the euro zone in 2023 (once again refutes the recent history of the FT).
  • The Central Bank of Austria (ONB) kept its GDP growth forecast for 2021 at 4.0%. May have a small downward revision if economy bottlenecks persist.
  • The Governor of the Central Bank of Russia (CBR) Nabiullina reiterated his position to consider possible further interest rate hikes at the next meetings.
  • South Africa’s highest court ruled that former President Zuma failed in his attempt to overturn his 15-month prison sentence for failing to attend a corruption probe.
  • Japan’s chief of staff Sec Kato has confirmed October 4 as the date for reopening parliament to decide on the new prime minister.
  • The candidate for the leadership of Japan, Kono, was reportedly backed by Prime Minister Suga.
  • IEA executive Birol said he would be surprised to see oil at $ 100 a barrel in 2021. Noted that high gas prices would persist for weeks.
  • U.S. House of Representatives Speaker Pelosi reiterated that destroying the Good Friday agreements would make a U.S.-British trade deal unlikely.

Currency / Fixed Income

  • Currency price action was subdued during the session, with the focus still on bond yields. The US dollar holds close to three-week highs, helped by demand for safe-haven securities amid concerns over slowing growth, rising inflation and concerns about a possible international financial shock related to the situation of China’s domestic debt.
  • GBP / USD was slightly weaker after UK retail sales data continued its summer slump. Pair standing above the 1.38 area.
  • EUR / USD remains below 1.18 despite inflation fears in Europe. Dealers noted that the political changes have increased the chances that Germany will ease its strict national fiscal rules after the September elections.
  • Bond yields seemed to have stopped falling by then. Dealers cite a stronger rise in inflation expectations. An ECB spokesperson refuted a previous FT report that cited an unpublished ECB inflation estimate that increased the odds of a rate hike in just over 2 years.

Economic data

  • (United Kingdom) August retail sales (excluding auto / fuel) M / M: -1.2% v + 0.8% e; Y / Y: -0.9% against + 2.5% e.
  • (UK) August Retail sales (including auto / fuel) M / M: -0.9% v + 0.5% e; Y / Y: 0.0% vs. 2.7% e.
  • (FR) France T2 Final wages T / T: 0.3% v 0.3% e.
  • (TR) Turkey Sept TCMB Expectations Survey: Outlook for the next 12 months: 12.9% vs. 12.5% ​​previously.
  • (AT) Austria August Final CPI M / M: 0.1% against 0.1% preliminary; Y / Y: 3.2% against 3.1% prelim.
  • (CN) Shanghai weekly copper stocks (SHFE): 54.3,000 tonnes compared to 61.8,000 tonnes previously.
  • (UK) Russia Narrow money supply with September 10 (RUB): 14.49T v14.35T before.
  • (EU) Euro zone current account balance in July: 21.6 billion euros compared to 21.8 billion euros previously.
  • (PL) Poland August Employment M / M: -0.2% vs. 0.0% e; Y / Y: 0.9% vs. 1.1% e.
  • (PL) Poland August Average gross wages M / M: -0.1% against -0.6% e; Y / Y: 9.5% vs. 8.8% e.
  • (United Kingdom) BoE / GfK inflation in September (quarterly publication) Inflation: next 12 months: 2.7% against 2.4% previously.
  • (PT) Portugal July current account balance: -0.2 billion euros compared to 0 billion euros previously.
  • (IT) Italy July Current account balance: € 8.0B versus € 3.5B previously.
  • (GR) Greece July current account balance: + € 0.5B vs. – € 1.3B previously.
  • (EU) Euro zone Final CPI August Y / Y: 3.0% vs. 3.0% e; CPI Core Y / Y: 1.6% vs. 1.6% e.
  • (EU) Euro zone July construction production M / M: + 0.1% vs. -0.6% previously; Y / Y: 3.3% against 4.1% previously.
  • (CY) Cyprus August Harmonized CPI M / M: 1.4% vs. 0.2% previously; Y / Y: 3.3% against 2.7% previously.

Issue of fixed income securities

  • (IN) India sold a total of INR260B against INR260B shown in the 2023, 2031 and 2061 bonds.

Look ahead

  • (NG) Central Bank of Nigeria decision on interest rates: should leave interest rates unchanged at 11.50%.
  • (CO) Colombia August Industrial Confidence: No is v 16.3 before; Retail Trust: No earlier version than version 35.8.
  • 5:25 am (EU) ECB daily liquidity statistics.
  • 05:30 (ZA) South Africa will sell ZAR1.2B combined in I / L 2029, 2038 and 2046.
  • 06:00 (UK) DMO to sell £ 3.5bn in 1-month, 3-month and 6-month bills (£ 0.5bn, £ 1.0bn and £ 2.0bn respectively ).
  • 6:45 am (US) Daily Libor correction.
  • 07h00 (IN) India announces next issue of invoices (Wednesday).
  • 07:30 (IN) Weekly Forex reserve in India with September 10: no estimate against 642.5 billion dollars previously.
  • 08:00 (UK) Daily Baltic Dry Bulk Index.
  • 10:00 am (US) Sept Preliminary University of Michigan Confidence: 72.0 ev 70.3 forward.
  • 11:00 am (CO) Colombia July Trade balance: -1.3 $ vs. -1.6 $ previously; Total imports: $ 4.8 billion compared to $ 4.9 billion previously.
  • 11:00 am (EU) Potential sovereign ratings after European close.
  • 12:00 (CO) Colombia July Economic activity index (monthly GDP) Y / Y: 13.0% ev 14.5% before.
  • 1:00 p.m. (US) Baker Hughes Platform Weekly Countdown.

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