EU Inflation Not Giving Any Sign Of Abating

Notes/Observations

• European CPI readings making difficult to believe that inflationary pressures are transitory (Spain Final Aug reading revised higher; Sweden comes in above target).
• UK labor data showing a buoyant market with the number of workers on company payrolls climbing above its pre-pandemic level.
• Focus turns to US Aug CPI reading ahead of next week FOMC rate decision.

Asia

• RBA Gov Lowe stated that Q3 GDP was likely down ‘at least’ 2%, could be significantly lower; Delay in taper review to Feb due to delayed recovery. Expected economy to be growing again in Q4 and recovery to continue into 2022.

Coronavirus

• China’s Fujian province went into lockdown on Mon, Sept 13th after recording 135 new Covid-19 cases in the latest outbreak.
• Australia’s Canberra regional lockdown will be extended by 4 weeks.
• UK PM Johnson to confirm in his press conference on Tuesday that people over 50 years old to be offered a Pfizer or Moderna Cocid-19 vaccine shot; children over 12 may also receive a first dose to protect against a “prolonged and unpredictable“ winter.
• UK Ministers were expected to announce booster shots for the over 50s after getting advice from the JCVI as part of their Covid winter plan.

Europe

• UK Brexit Min Frost stated that EU should take UK’s warning over Northern Ireland protocol seriously; There must be a real negotiation with EU over Northern Ireland.
• France Central Bank updated economic forecasts which raised 2021 GDP growth from 5.8% to 6.3% while cutting 2022 GDP growth from 4.1% to 3.7%. Forecasted 2021 CPI at 1.8% and 2022 CPI at 1.4%.
• Norway center-left opposition forecast to win parliamentary election. Norway PM Solberg later conceded defeat in the General Election. Labour Leader Gahr stated that would seek to form a centre left govt.

Americas

• Senate Republicans threatened to indefinitely hold up the nominations of 5 top Treasury Department officials until the Biden administration blacklists Russia-owned Nord Stream 2.

Energy

• NHC: Nicholas upgraded to hurricane, expected to bring heavy rain/flooding along Texas/Louisiana Gulf Coast this week.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.07% at 467.36, FTSE -0.19% at 7,054.85, DAX +0.13% at 15,721.15, CAC-40 -0.49% at 6,643.96, IBEX-35 +0.14% at #, FTSE MIB +0.56% at 26,072.00, SMI +0.08% at 12,085.06 , S&P 500 Futures +0.15%].

Market Focal Points/Key Themes:

Equities

• European indices opened lower across the board but turned around to trade mixed in last hour; Dax and FTSE MIB slightly outperforming others indexes; sectors leading to the upside include industrials and technology; while sectors that are weighing on the indexes includes energy amid Hurricane Nicholas impacts some Royal Dutch Shell’s sites; on corporate front retailers Pandora and JD Sports Fashion both trade sharply higher following their upgraded outlooks; Ocado in London trades lower 3% following its trading update and disappointing Kantar data; upcoming US morning earners include FuelCell Energy, AstroNova.
• Consumer discretionary: Pandora [PNDORA.DK] +5% (targets; buyback), JD Sports Fashion [JD.UK] +6% (earnings; raises outlook), Vivendi [VIV.FR] +1% (Universal Music Group prospectus), Ocado [OCDO.UK] -3% (trading update; Kantar sales), Smart Metering Systems {SMS.UK] -12% (placement; earnings), DeLonghi [DLG.IT] -7% (placement).
• Technology: Argo Blockchain [ARB.UK] +7% (US IPO).

Speakers

• ECB’s Villeroy (France) reiterated Council view that pick-up in inflation seen as transitory; ECB to remain vigilant.
• ECB’s Weidmann (Germany): central bank digital currencies (CBDC) should have limited features initially with additional functionalities added later. Success depended on trust rather than speed.
• EU Commission approved €3.0B fund for France to use to recapitalize companies impacted by pandemic.
• Russia President Putin to self-isolate due to covid found among entourage.
• Ukraine PM Shmyhal stated that govt had fulfilled all IMF benchmarks and expected to to receive $750M.
• Bank of Korea (BOK) Aug Minutes: Member noted CPI above target could last longer than forecasted. Member Joo stated that a rate hike was not a fundamental solution to address household debt issue. A member noted that was doubtful a rate change could cool the rise in home prices.
• IEA Monthly Oil Report: global oil demand to grow until year-end. Impact of Hurricane Ida and other oil supply outages would take a sizable chunk out of global oil production in 2021. Oil supply uptrend to resume in Oct. Cuts 2021 global oil demand growth from 5.3M bpd to 5.2M bpd while maintaining 2022 global oil demand growth at 3.2M bpd.

Currencies/Fixed Income

• European CPI readings made it difficult to believe that inflationary pressures were transitory (Spain Final Aug reading revised higher; Sweden comes in above target).
• USD saw some initial strength evaporate in quiet trading. Focus turns to US Aug CPI reading ahead of next week FOMC rate decision and clues on tapering.
• EUR/USD holding above the 1.1820 area. ECB to publish its weekly QE bond buying figures for clues on the revised slower pace of PEPP buying for the upcoming quarter.
• GBP was higher as UK labor data showed a buoyant market with the number of workers on company payrolls climbing above its pre-pandemic level. GBP/USD at 1.3875 by mid-session.
• SEK currency (Kroner) was firmer after CPI data. Analysts noted that the Riksbank could exit its extraordinary measures earlier than expected (**Note: Current forward guidance is that the Repo Rate to remain at current level in coming years, at least until Q3 2024).

Economic data

• (SE) Sweden Aug PES Unemployment Rate: 3.9%v 3.9% prior.
• (FI) Finland Aug CPI M/M: 0.2% v 0.3% prior; Y/Y: 2.2% v 1.9% prior.
• (FI) Finland July Final Retail Sales Volume Y/Y: 3.4% v 1.4% prelim.
• (FR) Bank of France Aug Industry (Business) Sentiment: 104 v 105e.
• (UK) Aug Jobless Claims Change: -58.6K v -48.9K prior; Claimant Count Rate: 5.4% v 5.6% prior.
• (UK) July Average Weekly Earnings 3M/Y: 8.3% v 8.2%e; Weekly Earnings (ex-bonus) 3M/Y: 6.8% v 6.8%e.
• (UK) July ILO Unemployment Rate: 4.6% v 4.6%e; Employment Change 3M/3M: +183K v +199Ke.
• (IN) India Aug Wholesale Prices (WPI) Y/Y: 11.4% v 10.8%e.
• (CH) Swiss Aug Producer & Import Prices M/M: 0.7% v 0.5% prior; Y/Y: 4.4% v 3.3% prior.
• (ES) Spain Aug Final CPI M/M: 0.5% v 0.4%e; Y/Y: 3.3% v 3.3%e.
• (ES) Spain Aug Final CPI EU Harmonized M/M: 0.4% v 0.4%e; Y/Y: 3.3% v 3.3%e.
• (ES) Spain Aug CPI Core M/M: +0.1% v -0.9% prior; Y/Y: 0.7% v 0.6% prior.
• (SE) Sweden Aug CPI M/M: 0.5% v 0.2%e; Y/Y: 2.1% v 1.6%e; CPI Level: 343.99 v 342.86e.
• (SE) Sweden Aug CPIF M/M: 0.5% v 0.2%e; Y/Y: 2.4% v 1.9%e.
• (SE) Sweden Aug CPIF (ex-energy) M/M: 0.3% v 0.0%e; Y/Y: 1.4% v 1.1%e.
• (NO) Norway Aug Region Output Survey (past 3 months): 1.79 v 0.44 prior; Output Survey (next 6 months): 1.65 v 1.88 prior.
• (IS) Iceland Aug International Reserves (ISK): 931B v 859B prior.

Fixed income Issuance

• (EU) European Union opened its book to sell EUR-denominated NextGeneration (INGEU) 7-year bond via syndicate; spread set at -14bps to mid-swaps ; order book above €85B.
• (HU) Hungary Debt Agency (AKK) opened its book to sell USD-denominated 10-year and 30-year bonds via syndicate.
• (CL) Chile opened its book to sell EUR-denominated 7-year social bond; guidance seen +100bps to mid-swaps.
• (NL) Netherlands Debt Agency (DSTA) sold €1.98B vs. €1.0-2.0B indicated range in 0.00% Jan 2052 DSL Bonds; Avg Yield: % v -0.027% prior.
• (ES) Spain Debt Agency (Tesoro) sold total €2.83B vs. €1.0-2.0B indicated range in 3-month and 9-month bills.
• (ID) Indonesia sold total IDR21.0T vs. IDR21.0T target in bills and bonds.
• (UK) DMO sold £3.0B in 0.375% Oct 2026 Gilts; Avg Yield: 0.429% v 0.324% prior; bid-to-cover: 2.67x v 2.11x prior; Tail: 0.2bps v 0.9bps prior.
• (IT) Italy Debt Agency (Tesoro) sold total €5.75B vs. €4.25-5.75B indicated range in 3-year, 7-year and 30-year BTP Bonds.
• Sold €2.0B vs. €1.5-2.0B indicated range in 0.00% Aug 2024 BTP; Avg Yield: -0.27% v -0.19% prior Bid-to-cover: 1.65x v 1.34x prior.
• Sold €2.0B vs. €1.5-2.0B indicated range in 0.50% July 2028 BTP; Avg Yield: 0.32% v 0.38% prior; bid-to-cover: 1.58x v 1.50x.
• Sold €1.75B vs. €1.25-1.75B indicated range in 1.70% Sept 2051 BTP bonds; Avg Yield: 1.69% v 2.06% prior; Bid-to-cover: 1.47x v 1.30x prior.

Looking Ahead

• 05:15 (CH) Switzerland to sell 3-month Bills.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (ZA) South Africa July Total Mining Production data (no est).
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.
• 05:30 (DE) Germany to sell €5.0B in 0.00% Sept 2023 Schatz.
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
• 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2030, 2032 and 2044 bonds.
• 06:00 (IL) Israel Q2 Preliminary GDP Annualized (2nd reading): No est v 15.4% advance.
• 06:00 (IL) Israel Q2 Current Account Balance: No est v $5.9B prior.
• 06:00 (US) Aug NFIB Small Business Optimism: 99.0e v 99.7 prior.
• 06:00 (FI) Finland to sell combined €1.5B in 9-month and 12-month Bills.
• 06:30 (EU) ESM to sell €1.1B in 12-month Bills.
• 06:45 (US) Daily Libor Fixing.
• 08:00 (BR) Brazil July IBGE Services Sector Volume Y/Y: 18.0%e v 21.1% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Aug CPI M/M: 0.4%e v 0.5% prior; Y/Y: 5.3%e v 5.4% prior.
• 08:30 (US) Aug CPI (ex-food/energy) M/M: 0.3%e v 0.3% prior; Y/Y: 4.2%e v 4.3% prior.
• 08:30 (US) Aug CPI Index NSA: 272.835e v 273.003 prior; CPI Core Index SA: 279.740e v 279.054 prior.
• 08:30 (US) Aug Real Avg Weekly Earnings Y/Y: No est v -0.7% prior; Real Avg Hourly Earning Y/Y: No est v -1.2% prior.
• 08:30 (CA) Canada July Manufacturing Sales M/M: -1.0%e v +2.1% prior.
• 08:55 (US) Weekly Redbook LFL Sales data.
• 09:00 (EU) Weekly ECB Forex Reserves.
• 09:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).
• 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 (MX) Mexico Weekly International Reserve data.
• 10:30 (CA) Canada to sell 3-month, 6-month and 12-month Bills.
• 11:30 (IL) Israel Aug CPI M/M: 0.3%e v 0.4% prior; Y/Y: 2.2%e v 1.9% prior.
• 15:00 (AR) Argentina Aug National CPI M/M: 2.9%e v 3.0% prior; Y/Y: 52.1%e v 51.8% prior.
• 16:30 (US) Weekly API Oil Inventories.
• 18:45 (NZ) New Zealand Q2 Current Account Balance (NZD): -1.7Be v -2.9B prior; Current Account GDP Ratio: -3.3%e v -2.2% prior.
• 19:00 (KR) South Korea Aug Unemployment Rate: 3.5%e v 3.3% prior.
• 19:50 (JP) Japan July Core Machine Orders M/M: +2.5%e v -1.5% prior; Y/Y: 14.8%e v 18.6% prior.
• 20:30 (AU) Australia Sept Consumer Confidence Index: No est v 104.1 prior.
• 21:10 (JP) BOJ Outright Bond Purchase Operation for 1~3 Years, 3~5 Years and 5~10 Years maturities.
• 21:30 (CN) China Aug New Home Prices M/M: No est v 0.3% prior.
• 21:30 (CN) China Aug Retail Sales Y/Y: 7.0%e v 8.5% prior; Retail Sales YTD Y/Y: 18.9%e v 20.7% prior.
• 21:30 (CN) China Aug Industrial Production Y/Y: 5.8%e v 6.4% prior; Industrial Production YTD Y/Y: 13.5%e v 14.4% prior.
• 21:30 (CN) China Aug YTD Fixed Urban Assets Y/Y: 9.0%e v 10.3% prior.
• 21:30 (KR) Bank of Korea (BOK) to sell KRW1.0T in 3-year Bonds.
• 22:00 (CN) China Aug YTD Property Investment Y/Y: 11.3%e v 12.7% prior.
• 22:00 (CN) China Aug Surveyed Jobless Rate: 5.1%e v 5.1% prior.
• 23:00 (CN) China to sell 1-year and 10-year Upsize Bonds.
• 23:00 (TH) Thailand Govt to sell combined THB20B in 2035 and 2049 Bonds.