- Modest downside for European bourses while US futures pick up into a week headlined by NVDA & PCE
- Weekend newsflow dominated by geopols; as it stands, we are awaiting any fresh details from Hezbollah and/or Israel on their next steps
- Action which has underpinned crude, haven-FX and XAU. USTs largely unreactive while EGBs came under pressure on a better-than-feared Ifo
- The event between Hezbollah and Israel was framed as one of the biggest clashes in more than 10 months, elsewhere Gaza talks in Cairo ended without agreement
- Looking ahead, highlights include US Durable Goods, UK Bank Holiday (market holiday) and Earnings from PDD.
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EUROPEAN TRADE
EQUITIES
- European bourses have kicked the week off with marginal losses, Euro Stoxx 50 -0.1%.
- Sectors are mixed with no overarching theme; Tech is the incremental laggard as we count down to Nvidia numbers later in the week.
- DAX 40 -0.2% is the incremental laggard; German Ifo release was better-than-feared but was a poor set of data and keeps stagnation/recessionary talk alive.
- Stateside, futures are a touch higher with specifics light as participants digest Jackson Hole and prepare for NVDA and PCE this week before Payrolls next week, ES +0.2% & NQ +0.2%.
- Click for the sessions European pre-market equity newsflow
- Click for the additional news
- Click for a detailed summary
FX
- DXY flat after what was a bruising week for the Dollar last week, picked up off the overnight 100.52 base but is yet to make any real traction into the green.
- EUR and GBP both a touch softer; no real follow through from Ifo while the UK is away for a Bank Holiday with specifics light thus far. Single currency back below 1.12 after failing to hold onto the handle overnight.
- Havens outperform given the weekend's geopolitical escalation while CitiFX month-end model points to USD selling with the strongest signal vs the JPY; USD/JPY sub-144.00.
- Antipodeans softer given the risk tone and after strong performance last week.
- PBoC set USD/CNY mid-point at 7.1139 vs exp. 7.1132 (prev. 7.1358)
- Brazil's Central Bank Chief Neto said recent volatility may show the market is pricing less room for fiscal and monetary intervention in the future, according to Reuters.
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- Click for NY OpEx Details
FIXED INCOME
- Bunds in the red after only a fleeting haven bid on overnight geopols. Complex came under some modest pressure after a better-than-feared German Ifo release, but one that still points to significant pressure in the bloc's largest economy.
- At session lows of 134.24 but yet to test Thursday's base at 134.11 with Friday's at 134.07 before the figure.
- OATs await details from the meeting between President Macron and other political leaders, following on from his meeting with NFP PM candidate Castets on Friday.
- USTs are essentially flat with specifics light as the benchmarks has already reacted to Jackson Hole with attention now on upcoming inflation and jobs numbers. Holding at the low end of 113-22 to 113-30 parameters, support some way off at Friday's 113-08+ base.
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COMMODITIES
- Crude benchmarks at session highs of 75.83/bbl and USD 80.02/bbl for WTI and Brent respectively, upside driven by the weekend's geopolitical escalation.
- As it stands, we are awaiting any fresh details from Hezbollah and/or Israel on their next steps.
- Spot gold also supported and lifting further above the USD 2500/oz mark but yet to test the USD 2531/oz ATH from last week.
- Base metals firmer, supported by the initially constructive overnight tone and now awaiting fresh macro drivers in somewhat light trade; reminder, UK Bank Holiday means no LME trade.
- Russia's (441k BPD) Omsk oil refinery has reported a fire, which has been brought under control; plant is working as usual
- Click for a detailed summary
NOTABLE DATA RECAP
- German Ifo Business Climate New (Aug) 86.6 vs. Exp. 86.0 (Prev. 87.0); Current Conditions 86.5 vs. Exp. 86.5 (Prev. 87.1); Expectations 86.8 vs. Exp. 86.5 (Prev. 86.9, Rev. 87.0)
NOTABLE EUROPEAN HEADLINES
- ECB's Chief Economist Lane said the return to the 2% inflation target is not yet secure. "The monetary stance will have to remain in restrictive territory for as long as needed to shepherd the disinflation process towards a timely return to the target", Lane said. Lane also warned that keeping rates high for too low could deliver below-target inflation.
- Riksbank Minutes: Overall, the minutes highlight that while a 50bps move was considered/discussed the preference among the board was for 25bps with various factors as to why a larger magnitude would not be appropriate. However, the language makes clear that nothing is ruled out ahead and the preference from the governor is for a cut to occur at each meeting in H2 (in-line with the most dovish end of the new verbal guidance from August). Full details on the headline feed
NOTABLE US HEADLINES
- Canada Industrial Relations Board (CIRB) imposed binding arbitration on Teamsters Union, CN, and CPKC railways, according to Teamsters cited by Reuters. Canada Industrial Relations Board halts work stoppages at CN and CP railways.
- Canada Labour Minister Mackinnon said the CIRB has issued a decision to impose final and binding arbitration in negotiations between CN Rail, CPKC, and Teamsters Canada Rail Conference, and he expects that railway companies and employees will resume at the earliest opportunity, according to a post on X.
- Canadian National Railway said it had received an order from CIRB imposing binding arbitration between the company and Teamsters Canada Rail Conference. This means that the strike notice recently issued to CN by the Teamsters is now voided. CN Rail added that CIRB has also ordered that no further labour stoppage, including lockout or strike, can occur during the arbitration process, and will comply with the order, which also extends the current collective agreement until a new agreement is signed between the parties.
GEOPOLITICS
MIDDLE EAST
- Lebanon's Hezbollah launched hundreds of rockets and drones at Israel early on Sunday. Meanwhile, Israel's military said it struck Lebanon with around 100 jets to thwart a larger attack. The event was framed as one of the biggest clashes in more than 10 months. Three deaths were confirmed in Lebanon and one death in Israel, both sides indicated appetite to avoid further escalation, but warned that there could be more strikes to come, according to Reuters.
- Hezbollah said it completed the 'first phase' of its response to Israel's killing of a top commander last month and hit 11 Israeli military sites on Sunday, firing more than 320 Katyusha rockets, according to Reuters. Hezbollah said it began the attack on Israel with a large number of drones in response to the top commander's killing in a Beirut suburb last month, and it will take “some time” to complete its response to the top commander's killing.
- Israeli PM Netanyahu said the military intercepted all the drones that Hezbollah launched at a strategic target in central Israel, and the attacks are 'not the end of the story.' Netanyahu added that the country has taken the first step towards returning its residents in the north safely to their homes, according to Reuters.
- Hezbollah leader Nasrallah said the group will assess the impact of Sunday’s operation; if results are not seen to be enough, "we will respond another time". The Group said its military operation was completed as planned, with precision, and decided not to respond to the killing of a top commander by targeting civilian areas. Response was delayed for several reasons, including mass Israeli and US military mobilization. Hezbollah said it wanted to target military sites close to Tel Aviv, and targeted a military intelligence base 110 km into Israeli territory, 1.5 km away from Tel Aviv. The group said for the first time, it sent drones to Israel from the Bekaa region, while the group said it had no intention to use precision missiles today, but may use them in the near future.
- Israel's Foreign Minister said Israel does not seek a full-scale war but will act according to developments on the ground, according to Reuters.
- Gaza talks in Cairo ended without agreement, according to Reuters citing Egyptian sources. "Axios quotes US official: Gaza talks will continue in the coming days through working groups to address issues and remaining details", reported by Sky News Arabia.
- White House National Security Adviser Sullivan says they are still working in Cairo towards a ceasefire deal, according to Reuters.
- Hamas' armed wing said it fired a rocket at Tel Aviv, according to Reuters.
- Jordan warned the escalation in Lebanon and its 'dangerous repercussions' could lead to regional war, according to Reuters.
- On Sunday, Hamas said that it rejects the new Israeli conditions put forward in the Gaza ceasefire talk, according to Reuters.
- Iranian Foreign Minister said Iran is "not afraid of escalation, but we do not seek it, unlike Israel", according to Al Jazeera, adding that their retaliation "will be decisive and well calculated".
- Yemen's Defence Minister said Yemen is ready to inflict painful blows on Israel, according to IRNA.
RUSSIA-UKRAINE
- Ukrainian President Zelenskiy said negotiations are ongoing with Saudi Arabia, Qatar, Turkey, and Switzerland about a second summit on peace, according to Reuters. He added Ukraine’s operation in Russia’s Kursk region is difficult but he views its progress positively.
- Russia and Ukraine exchange 115 prisoners each, according to RIA. Russia said Ukraine has returned servicemen captured in the Kursk region.
- Ukraine's military says Ukraine air defence systems in Kyiv region engaged in repelling Russian air attack, according to Reuters.
- Ukraine said Belarus massing troops at the border under a pretext of drills, and warned of “unfriendly moves”, according to Walla's Elster.
- Russian Kremlin says there have been no ceasefire discussions with Ukraine; topic of negotiations has "pretty much lost its relevance".
SOUTH CHINA SEA
- Philippines' South China Sea Task Force said Chinese Coast Guard vessels 'made close perilous manoeuvres that resulted in ramming' and deployed water cannons against Manila's fisheries vessel, leading to engine failure, and added that fisheries vessel was 'targeted by People's Liberation Army Navy ship and multiple China Coast Guard ships' to block the mission.
- China says it 'took control measures' towards the Philippine vessel near the Sabina Shoal, and added that Philippine's vessel 'illegally' entered waters near Sabina Shoal in the South China Sea. China said the Philippine vessel has been continuously approaching Chinese Coast Guard ships in a dangerous manner, according to Reuters.
- Philippines South China Sea Task Force said a Chinese fighter jet 'engaged in irresponsible and dangerous manoeuvres, deploying flares multiple times at a dangerously close distance', according to Reuters.
US-CHINA
- Chinese Commerce Ministry said it strongly opposes the US adding Chinese entities to the export control list over Russia-related issues, and the action disrupts international trade order and hinders normal economic exchanges. Commerce Ministry said it will take necessary measures to resolutely safeguard the legitimate rights of Chinese companies.
OTHER
- Chinese President Xi is to visit Russia in October, according to RIA citing the Chinese envoy.
- North Korea said it will continue to strengthen strategic power to control security challenges posed by the reorientation of US nuclear strategy, according to KCNA.
- China's military said it conducted armed patrols and air-ground joint police patrols near China-Myanmar borders, according to a statement.
- Taiwan Defence Ministry says in the past 24 hours, 12 Chinese military aircraft were detected operating around Taiwan (vs 12 in the prior 24 hours), according to Reuters.
CRYPTO
- Under modest pressure but overall relatively contained in limited newsflow during European hours at least. Bitcoin holds just above the USD 63.5k mark, having faded from USD 64.4k best overnight.
APAC TRADE
- APAC stocks kicked off the week mixed following the gains on Wall Street after Fed Chair Powell's dovish pivot, whilst the weekend was packed with geopolitics in which the heavy fires between Israel and Hezbollah resulted in no civilian casualties, but both sides expressed no appetite for further escalation.
- ASX 200 traded firm with the index underpinned by Real Estate, Tech, and Energy, although further upside was limited by the losses in Healthcare - the underperforming sector.
- Nikkei 225 was pressured by the recent JPY strength following the Fed Chair's dovish comments after the BoJ Governor's hawkish remarks on Friday, in which Powell's speech ultimately resulted in a weaker Dollar and lower US bond yields. Auto stocks fell with Yamaha Motors sliding after reports Yamaha Corp was to sell a 1.7% stake in Yamaha Motors.
- Hang Seng and Shanghai Comp. were mixed with Hong Kong bolstered by its Real Estate sector, whilst the mainland was subdued in a tight range after the PBoC conducted its delayed MLF with a maintained rate at 2.30%.
- US equity futures were mostly subdued at the resumption of trade with contracts taking a breather after Friday's Powell-induced gains. Ultimately, price action was flat and horizontal overnight. (ES -0.1%)
NOTABLE ASIA-PAC HEADLINES
- PBoC Governor Pan said financial risks in key areas are being resolved in an orderly manner and added the government will encourage financial institutions to increase support for weak links or in key areas, according to Bloomberg.
- PBoC injected CNY 300bln via 1-year MLF at a maintained rate of 2.30% (delayed MLF).
- PBoC injected CNY 471bln via 7-day Reverse Repo at a maintained rate of 1.70%.
- Japanese former Defence Minister Shigeru Ishiba says he will run in the ruling LDP leadership race on September 27th, according to Reuters.
- IMF Chief Economist said there is scope for the BoJ to further normalize monetary policy, raising interest rates gradually for some time, according to Reuters.
