Supply Shortages Weight On German IFO Survey

Notes/Observations

• Evergrande questions persist.
• Supply shortages weight on German IFO Survey.
• Focus on Germany ahead of the elections this Sunday.

Asia

• Japan Sept Preliminary PMI Manufacturing registered its 8th month of expansion ( 51.2 v 52.7 prior).
• Japan Aug National CPI YoY: -0.4% v -0.3%e; CPI Ex-fresh food (Core) YoY: 0.0% v 0.0%e.
• China PBoC injected CNY120B in 14-day reverse repos (net add of CNY110B) (Note: ahead of upcoming 1-week holiday).
• China property developer Evergrande situation: No word yet on payment from the firm on the $83.5M bond interest due on Thurs (Sept 23rd). Company entered a 30 day grace period.
• China Econ Daily: China should control imported inflation risks; currently imported inflation was only impacting raw material costs.
• China State Planner NDRC stated that working on solving issues of rising raw material prices and power limits. Told state owned firms to strictly fulfill gas supply contracts to fertilizer companies.
• China Foreign Ministry spokesperson Zhao Lijian: There was only one China in this world, and Taiwan could not be separated from China (Note: China criticized Taiwan’s bid to join CPTPP trade pact).

Europe

• UK Government stated that they could assign soldiers to drive petrol tankers after BP was forced to ration fuel deliveries due to the lack of lorry drivers.
• Italy Government approved package to address higher energy prices.

Americas

• US House Budget Committee to meet Sat afternoon (Sept 25th) to discuss reconciliation Bill.
• White House tells agencies to prepare for a possible shutdown of the US government.
• US Household Net worth rose to record $141.7tn in Q2 2021.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.58% at 464.80, FTSE -0.18% at 7,065.95, DAX -0.52% at 15,562.15, CAC-40 -0.73% at 6,653.08, IBEX-35 +0.01% at 8,877.50, FTSE MIB -0.08% at 26,061.00, SMI -0.72% at 11,852.19, S&P 500 Futures -0.29%].
• Market Focal Points/Key Themes: European indices open generally lower and remained in the red as the session wore on; better performing sectors include financials and health care; sectors among those trending negative include consumer discretionary and materials; sportswear names under pressure after Nike cuts outlook yesterday; GoldenTree places block of Bawag shares; no major earnings expected in the upcoming US session.

Equities

• Consumer discretionary: Adidas [ADS.DE] -3.5%, Puma [PUM.DE] -3%, JD Sports Fashion -2% [JD.UK] (Nike earnings), Mitie Group [MTO.UK] +2% (trading update).
• Healthcare: Astrazeneca [AZN.UK] +1.5% (trial results), Lysogene [LYS.FR] -1.5% (earnings).

Materials: Avon Protection [AVON.UK] +6% (contract).

Speakers

• ECB chief Lagarde stated that many causes of higher prices were temporary; To see movement on inflation front. Still had lots of slack in employment. Saw return to stability in upcoming year. Not tapering stimulus but recalibrating program.
• ECB’s Visco (Italy) stated that EU inflation rate was expected to be back under 2% in 2022. Reiterated Council view that factors behind rise of inflation are temporary.
• German IFO Economists noted that supply shortages had worsened in Sept and saw no signs that they would ease.
• Hungary Fin Min Varga stated that 2021 GDP growth could be above 7.0%.
• Poland Central Bank’s Lon: No sure how to vote at Nov policy meeting. Important not to support the solutions that could lead to a radical strengthening of the PLN currency (zloty).
• Poland Central Bank’s Hardt stated country returning to pre-pandemic growth but concerned about prospect for CPI as 2nd round effects appear to be surfacing. Low interest rate did risk de-anchoring of inflationary expectations.
• Ukraine PM Shmyhal stated that the country had sufficient amount of stored gas for winter.
• China State Planner NDRC: To strictly prohibit financial support for new cryptocurrency mining projects.
• China PBoC urgied curbs to crypto noting that such related activities were illegal.

Currencies/Fixed income

• USD was steady after recent gains inspired by the Fed’s clear taper signal and inching forward of rate lift-off plans.
• GBP/USD stayed above the 1.37 level after the BOE noted on Thursday that two of its policymakers had voted for an early end to pandemic-era government bond-buying and markets brought forward their expectations for an interest rate rise to March. Focus turned to an upcoming speech by BOE Gov Bailey next week for further clues about a possible interest-rate hike.
• USD/JPY at 1-month high above the 110.35 area as dealers note that BOJ’s accommodative policy contrasted with the tightening bias of major central banks.
• European yields continued to edge higher in the session. Peripheral spreads were steady. Dealers noted that a new German government with a softer stance on austerity and no strong opposition against a permanent EU debt capacity would argue for tighter Euro Zone periphery spreads.

Economic data

• (FI) Finland Aug PPI M/M: 1.4% v 3.4% prior; Y/Y: 15.5% v 14.8% prior.
• (CZ) Czech Sept Consumer Confidence Index: -6.5 v -1.5 prior; Business Confidence: 7.4 v 9.3 prior; Composite Confidence Index: (Consumer & Business Confidence): 4.6 v 7.2 prior.
• (TR) Turkey Sept Capacity Utilization: 78.1% v 77.1% prior.
• (TR) Turkey Sept Real Sector Confidence NSA (unadj): 113.3 v 112.2 prior; Real Sector Confidence (seasonally adj): 113.4 v 113.9prior.
• (SE) Sweden Aug PPI M/M: 2.0% v 2.7% prior; Y/Y: 15.8% v 13.5% prior.
• (CN) Weekly Shanghai copper inventories (SHFE): 44.6K v 54.3K tons prior.
• (DE) Germany Sept IFO Business Climate Survey: 98.8 v 99.0e; Current Assessment Survey: 100.4 v 101.8e; Expectations Survey: 97.3 v 96.5e.
• (IT) Italy Sept Consumer Confidence Index: 119.6 v 115.8e; Manufacturing Confidence: 113.0 v 112.7e; Economic Sentiment: 133.8 v 114.2 prior.
• (RU) Russia Narrow Money Supply w/e Sept 17th (RUB):14.54 T v 14.49T prior.
• (TR) Turkey Aug Foreign Tourist Arrivals Y/Y: 119.4% v 367.0% prior.
• (TW) Taiwan Aug Export Orders Y/Y: 17.6% v 21.3%e.

Fixed income issuance

• (IT) Italy Debt Agency sold €2.5B vs. €2.0-2.5B indicated range in 0.0% Jan 2024 BTP Bonds; Avg Yield: -0.32% v -0.29% prior; bid-to-cover: 1.58x v 1.51x prior.
• (IT) Italy Debt Agency (Tesoro) sold €B vs. €0.75-1.0B in 0.4% May 2030 inflation-linked bonds (BTPei); Real Yield: -0.85% v -0.45% prior; bid-to-cover: 1.41x v 1.40x prior.

Looking ahead

• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (IN) India to sell combined INR310B in 2026, 2034, 2035 and 2050 bonds.
• 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2029, 2038 and 2046 Bonds.
• 06:00 (UK) Sept CBI Retailing Reported Sales: 34e v 60 prior; Total Distribution Reported Sales: No est v 45 prior.
• 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).
• 07:00 (MX) Mexico July Retail Sales M/M: +0.2%e v -0.6% prior; Y/Y: 11.7%e v 17.7% prior.
• 07:30 (IN) India Weekly Forex Reserve w/e Sept 17th: No est v $641.1B prior.
• 07:50 (NL) ECB’s Elderson, Netherlands, SSM member).
• 08:00 (CL) Chile Aug PPI M/M: No est v 1.9% prior.
• 08:00 (BR) Brazil mid-Sept IBGE Inflation IPCA-15 M/M: 1.0%e v 0.9% prior; Y/Y: 9.9%e v 9.3% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond issuance.
• 08:30 (BR) Brazil Aug Current Account Balance: +$1.3Be v -$1.6B prior; Foreign Direct Investment (FDI): $6.0Be v $6.1B prior.
• 08:45 (US) Fed’s Mester.
• 09:00 (BE) Belgium Sept Business Confidence: 6.8e v 7.6 prior.
• 10:00 (US) Aug New Home Sales: 712Ke v 708K prior.
• 10:00 (US) Fed chief Powell with members Clarida and Bowman.
• 10:00 (US) Fed’s George.
• 10:00 (UK) BOE’s Tenreyro.
• 11:00 (EU) Potential sovereign ratings after European close (Fitch on Belgium, Iceland, Cyprus sovereign ratings; Moody’s on Sweden and Hungary sovereign ratings; S&P on Germany sovereign rating).
• 12:00 (US) Fed’s Bostic.
• 13:00 (US) Weekly Baker Hughes Rig Count.