As We Approach The Open... - 8/31/21
As We Approach The Open... - 8/31/21
Please excuse typos (there was a lot to get through this morning so I'm sure there are some).
As we approach the open of US equity trade in NY, risk assets trade mixed with US equity markets trading down mildly but RUT, SPX, and NDX all trade down between flat and around one tenth.
And remember our summer caveat: One thing to keep in mind is after July 4th until around Labor Day, there is significantly less liquidity in the markets due to vacations, etc., so we can get more whippy action and "overshoots" in all markets. More true this week than most as vacation schedules are at the peak.
Major equity indices in the Asia-Pacific region ended Tuesday on a higher note. Japan's Nikkei: +1.1% Hong Kong's Hang Seng: +1.3% China's Shanghai Composite: +0.5% India's Sensex: +1.2% South Korea's Kospi: +1.8% Australia's ASX All Ordinaries: +0.5%.
In news, Japan's Finance Minister Aso said that a high-quality budget will be compiled for the next fiscal year with an aim of reforming expenditures. In terms of Chinese regulations, latest was private equity funds who "must return to their defined role and support innovation and startups." It was also reported that major Chinese banks received guidance to increase their lending in August.
Also next plenary session will start in November. You can rest assured that most of Xi's moves made now are with an eye to setting up for that.
In economic data, China's non-manufacturing PMI fell into contraction for the first time in 16 months in the August reading while manufacturing PMI stayed in expansionary territory by a slight margin. Japanese IP contracted m/m but was better than expected as were housing starts. S Korean IP also beat expectations (and improved to positive m/m).
China's August Manufacturing PMI 50.1 (expected 50.2; last 50.4) and non-Manufacturing PMI 47.5 (last 53.3). BBG.
Japan's July Industrial Production -1.5% m/m (expected -2.5%; last 6.5%). July Jobs/Applications ratio 1.15 (expected 1.12; last 1.13), July Unemployment Rate 2.8% (expected 2.9%; last 2.9%), July Housing Starts 9.9% yr/yr (expected 4.8%; last 7.3%), and July Construction Orders -3.4% yr/yr (last 32.3%). August Household Confidence 36.7 (last 37.5)
South Korea's July Retail Sales -0.6% m/m (last 1.4%). July Industrial Production 0.4% m/m (expected -0.1%; last 2.3%); 7.9% yr/yr (expected 7.0%; last 11.5%)
Indian GDP (Y/Y) Q2: 20.1% (est 21.0%; prev 1.6%)
Australia's July Building Approvals -8.6% m/m (expected -5.0%; last -5.5%) and Private House Approvals -5.8% m/m (last -11.8%). Q2 Current Account surplus AUD20.50 bln (expected AUD21.00 bln; last AUD18.90 bln)
Hong Kong's July Retail Sales 2.9% yr/yr (last 5.8%)
As Google and Apple will have to open their app stores in S Korea.
Europe
Major European indices trade in the red. STOXX Europe 600: -0.3% Germany's DAX: -0.1% U.K.'s FTSE 100: -0.6% France's CAC 40: - 0.2% Italy's FTSE MIB: UNCH Spain's IBEX 35: -0.5%.
In news, ECB policymaker Rehn said that great caution will be exercised when it comes to withdrawing stimulus measures.
In economic data, the latest inflation readings from the region lifted the eurozone's yr/yr CPI to 3.0%, matching the rate seen in late 2011. However, European Central Bank policymakers continue expecting that the rate will decelerate back below the 2.0% target. German CPI was the highest since 2008.
From LiveSquawk:
Preliminary readings for headline and core consumer price growth in the euro-area far outpaced expectations this month, according to data from the EU statistics office Eurostat, adding yet more data points to items under consideration ahead of next week's European Central Bank rate decision.
The annual inflation rate hit a decade high 3% – a full point above the recently raised ECB target for the medium term – and beat both the market forecast of 2.7% and the 2.2% reading last month.
The annual core rate more than doubled to 1.6%, which was a touch above the market estimate of 1.5%. July core inflation was only 0.7%.
EU-harmonised consumer price growth in Italy, the third-largest economy in Europe, more than doubled to a surprising 2.6% versus the estimate of 2.1% and the 1.0% mark in July, according to data released concurrently with the Eurozone number.
The initial estimate for annual energy price growth in the single-currency area hit 15.7% this month after a 14.3% reading in July, Eurostat said.
The euro slipped against the greenback ahead of the news only to return to pre-release levels following the announcement.
Capital Economics said the increase in the headline was more than its estimate, which was already above the market forecast. “Energy and food inflation both edged up, but more importantly the core inflation rate (which excludes energy, food, alcohol and tobacco) more than doubled from 0.7% in July to 1.6%. A big jump in core inflation was always likely, reflecting base effects related to last year’s VAT cut in Germany.”
Germany, Europe’s largest economy, announced on Monday that preliminary EU-harmonised inflation had climbed to an annual rate of 3.4%, the highest in 13 years. The level was in-line with the market estimate and more than the 3.1% reading last month.
Preliminary EU-harmonised inflation data from France – the region’s second-largest economy –ballooned to 2.4% to beat expectations of 2.1%, the country reported Tuesday.
On Monday, inflation data from Spain, the single-currency area’s fourth-largest economy, showed EU-harmonised prices jumping a preliminary annual rate of 3.3% this month, which beat the forecast of 3.0%.
ECB policymakers are now confronted with another spike in consumer prices, but many of the central bankers and a wide range of economists say consumer price growth is expected to slow by the beginning of next year. This makes a wait-and-see approach one of the preferred options at bank headquarters in Frankfurt.
Claus Vistesen at Pantheon Macroeconomics warned in a tweet that price growth will get worse before it gets better: “I am all for [the] idea that post-pandemic inflation risks are tilted to the upside. But anyone extrapolating H2 data in the Eurozone will be making a big error, which will become clear once the January print comes in. For now, though; it’ll get hotter still.”
Here was a wrap up of all the European data releases. Outside of prices, UK lending contracted m/m but business barometer came in very strong, German employment improved but missed expectations slightly, French and Italian 2QGDP came in around expectations, with PPI's remaining hot in both countries.
Eurozone's August CPI 0.4% m/m (last -0.1%); 3.0% yr/yr (expected 2.7%; last 2.2%). August Core CPI 0.3% m/m (last -0.4%); 1.6% yr/yr (last 0.7%)
Germany's August Unemployment Change -53,000 (expected -40,000; last -90,000). August Unemployment Rate 5.5% (expected 5.6%; last 5.6%)
France's Q2 GDP 1.1% qtr/qtr (expected 0.9%; last 0.0%). July Consumer Spending -2.2% m/m (expected -0.5%; last 0.3%) and July PPI 1.3% m/m (last 1.1%). August CPI 0.6% m/m (last 0.1%); 1.9% yr/yr (last 1.2%)
Italy's August CPI 0.5% m/m (expected 0.4%; last 0.5%); 2.1% yr/yr (expected 2.0%; last 1.9%). Q2 GDP 2.7% qtr/qtr, as expected (last 2.7%); 17.3% yr/yr, as expected (last 17.3%)
UK Net Consumer Credit Jul: 0.0B (est 0.4B; prev 0.3B), UK Consumer Credit (Y/Y) Jul: -2.7% (prev -2.2%), UK Net Lending Sec. On Dwellings Jul: -1.4B (est 3.1B; prev 17.9B); UK Lloyds Business Barometer Aug: 36 (prev 30)
Commodities/Currencies/Bonds
Bonds - Yields remain little changed with the 10-year up less than a basis point at 1.290%. 2-year yield is flat at 0.20%.
Dollar (DXY) - Trades just under flat levels at $92.546. Technicals remain slightly positive.
VIX - Up a bit to 16.60.Crude (/CL) - Pulled back to support (100-DMA) this morning but remains in short term uptrend. Down 1% to $68.53 WTI. OPEC+ JMC meeting this morning. No real news yet but it does appear they have noted that their current schedule of production increases will still result in inventory draws in 2021 but that might flip to a surplus in 2022.
As Japanese oil demand remains weak.
Natural Gas (/NG) - Continues to consolidate breaking below yesterday's lows now down almost 2% at $4.221. Technicals remain positive, question is how far this consolidation pulls back as there's some space between here and 20-DMA.
US Data
In terms of those price indices here were the headlines:
Random stuff:
Probably because of all the cash that remains in money markets.
As EU hits 70% vaccination target.
And SEC continues to look at payment for order flow.
And while Louisiana deals with water, Lake Tahoe deals with fire.
To see more content, including summaries of most major U.S. economic reports and my morning and nightly updates go to https://seekingalpha.com/user/15085872/instablogs for more recent or https://sethiassociates.blogspot.com for the full history.
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