In focus today
In the US, we get the NFIB Small Business Survey. Also, Fed Governor Barr is expected to announce a reduction in the biggest banks’ capital hike in the latest Basel plan, from 19% to 9%, according to Bloomberg. Later, Kamala Harris and Donald Trump will have their first live debate at 9 pm ET, which could shift momentum in the still-open race. Read more on US politics in the US Election Monitor – Latest data shows Harris in a narrow lead, 6 September.
In Germany, the final August inflation data will be published, providing insight into inflation drivers, especially the ‘LIMI’ indicator of domestic inflation.
In the UK, the labour market report for July/August will be released at 8:00 CET. A range of indicators point to a gradually loosening labour market, and we expect this to be increasingly reflected in the official data.
In Norway, August inflation data is released, where we expect core inflation at 3.0 % y/y. The figure will be negatively affected by a reduction in maximum kindergarden prices from 1 August. Statistics Norway will publish a core figure adjusted for this, which we estimate to 3.2 % y/y, compared to Norges Bank’s estimate of 3.6% y/y from the June MPR. In general, we expect a broad-based decline in price pressures, with a particular focus on domestic service price inflation.
In Sweden, July activity data will be released at 8:00 CET, including industrial production, household consumption, industrial orders, and the GDP indicator. While the latter should be viewed cautiously amid the prediction capability, it provides an initial gauge for Q3 GDP. In the afternoon, the ceremonial opening of the parliament takes place, where the PM will present the government declaration and his new government.
Economic and market news
What happened overnight
In China, trade data for August showed exports unexpectedly rising 8.7% y/y (cons: 6.5%), the fastest pace since March 2023, while imports were weaker than expected at 0.5% y/y (cons: 2.0%), reflecting soft domestic demand. Despite momentum fading recently amid a weaker global manufacturing sector, exports continue to be a key driver of the Chinese economy.
What happened yesterday
In the US, the NY Fed Survey of Consumer Expectations showed little change in inflation outlooks for August, with 1y and 5yr expectations remained unchanged at 3% and 2.8%, respectively. The 3y outlook edged up to 2.5% from 2.3% in July.
In the euro area, the Sentix index was weaker than expected at -15.4 (cons: -12.5). The reading was the third straight month with deteriorating investor sentiment, primarily due to the frail German economy.
Former ECB president, Mario Draghi, presented his report on EU competitiveness, calling for a “new industrial strategy for Europe”. He recommends raising EU investments by EUR 750-800bn annually to fund reforms to stop the EU from falling behind China and the US. While Draghi has no formal legislative power in the EU, the report serves as an expert input for EU lawmakers, with some of the measures already spelled out in EC President Ursula von der Leyen’s new political guidelines. However, significant initiatives that could really boost the Unition are less likely due to the political landscape and budgetary problems.
Equities: Global equities were higher on Monday, following a significant sell-off last week. Most trends from last week were reversing, although they only reclaimed a minor part of the losses. Please note, bond yields were relatively flat and defensive stocks only marginally underperformed. In other words, there was nothing yesterday that suggested growth concerns have abated. In the US yesterday, Dow +1.2%, S&P 500 +1.2%, Nasdaq +1.2%, and Russell 2000 +0.3%. Asian markets are mixed this morning, as are US futures. Core European futures are marginally higher.
FI: Initially, global bond yields rose in Asian trading this morning, however at the end of the day, yields have declined and are back at the level from Friday with 10Y US Treasuries trading around the 3.70%-level, while 2Y US Treasuries are trading at 3.67%. In the European market, 10Y Bunds ended at 2.16%, so there is a bit of distance to the levels seen in January 2024, when 10Y Bunds were trading at the 2%-level. However, the curves have steepened since January as the market is pricing in more rate cuts compared to the pricing in January especially in the US, where the first move could be a 50bp rate cut on September 18 from the Federal Reserve. Today, the US Treasury will sell USD 58bn in a 3Y benchmark and given the solid demand for Treasuries it will be interesting to see the demand ahead of the FOMC meeting next week. The Treasury will also tap in the 10Y and 30Y segments on Wednesday and Thursday, respectively.
FX: The USD was the primary outperformer in the first session of the week which notably saw the Scandies trade poorly despite a recovery in risk sentiment.
