- US stocks ultimately closed mixed but with a negative bias and sectors were predominantly in the red with Energy, Health Care and Materials the underperformers while Utilities and Tech were the only sectors in the green on a day dominated by geopolitical-related headlines. There were heightened concerns regarding a potential ground invasion of Lebanon after an Israeli army chief told troops that Israel had been striking all day to prepare the ground for possible entry. Nonetheless, it was also reported that the US was leading a new effort to end hostilities and Israeli PM Netanyahu gave the green light to discuss with the US side the cessation of attacks with Lebanon to give a chance for negotiations, although Netanyahu also said that any truce negotiations will be under fire and they will continue to strike Hezbollah, while a US official noted that it is still uncertain whether Israeli PM Netanyahu and Hezbollah's Nasrallah are willing to agree to a cessation of fighting.
- USD strengthened and the DXY climbed to just shy of the 101.00 level amid haven appeal after significant Middle Eastern escalations, while the data calendar was light with no tier-1 releases, although there is a deluge of Fed speak on Thursday culminating in appearances from Powell and Williams, in addition to jobless claims and durable goods.
- Looking ahead, highlights include Singapore Industrial Production, BoJ Minutes from the July Meeting, RBA Financial Stability Review, Supply from Japan.
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LOOKING AHEAD
- Highlights include Singapore Industrial Production, BoJ Minutes from the July Meeting, RBA Financial Stability Review, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks ultimately closed mixed but with a negative bias and sectors were predominantly in the red with Energy, Health Care and Materials the underperformers while Utilities and Tech were the only sectors in the green on a day dominated by geopolitical-related headlines. There were heightened concerns regarding a potential ground invasion of Lebanon after an Israeli army chief told troops that Israel had been striking all day to prepare the ground for possible entry. Nonetheless, it was also reported that the US was leading a new effort to end hostilities and Israeli PM Netanyahu gave the green light to discuss with the US side the cessation of attacks with Lebanon to give a chance for negotiations, although Netanyahu also said that any truce negotiations will be under fire and they will continue to strike Hezbollah, while a US official noted that it is still uncertain whether Israeli PM Netanyahu and Hezbollah's Nasrallah are willing to agree to a cessation of fighting.
- SPX -0.19% at 5,722, NDX +0.14% at 19,973, DJIA -0.70% at 41,915, RUT -1.19% at 2,197.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Kugler (2024 voter) said she strongly supported the Fed's 50bps interest rate cut and will support additional rate cuts going forward if progress on inflation continues as she expects, while she added that the Fed should keep focus on reducing inflation and also shift attention to the maximum-employment mandate.
- US Senator Schumer said the Senate will pass a stopgap bill before the day is done and that they will keep the government open.
- Agriculture and food groups urged the White House to intervene to block a potential US East Coast and Gulf Coast ports labour disruption.
DATA RECAP
- US New Home Sales-Units (Aug) 0.716M vs. Exp. 0.7M (Prev. 0.739M)
- US New Home Sales Change MM (Aug) -4.7% (Prev. 10.6%)
- US Building Permits R Number (Aug) 1.47M (Prev. 1.475M)
- US Building Permits R Change MM (Aug) 4.6% (Prev. 4.9%)
FX
- USD strengthened and the DXY climbed to just shy of the 101.00 level amid haven appeal after significant Middle Eastern escalations, while the data calendar was light with no tier-1 releases, although there is a deluge of Fed speak on Thursday culminating in appearances from Powell and Williams, in addition to jobless claims and durable goods.
- EUR gave way to the firmer buck and was pressured after failing to sustain a brief foray into the 1.1200 territory.
- GBP retreated beneath the 1.3400 level owing to the broad dollar strength despite earlier comments from BoE's Greene who underlined the cautious stance being taken by the MPC relative to some of its peers within the G10 space.
- JPY weakened throughout the session which saw USD/JPY approach near to the 145.00 handle on the dollar resurgence.
- Riksbank cut its rate by 25bps 3.25% (prev. 3.50%), as expected. It stated the policy rate may also be cut at two remaining meetings this year with a 50bps cut possible at one of those meetings, while it added that rates are expected to be cut at a clearly faster pace than before.
FIXED INCOME
- T-notes were sold on chunky corporate supply into the 5yr auction ahead of GDP and plethora of Fed speak on Thursday.
COMMODITIES
- Oil prices were pressured despite bullish crude inventories and geopolitical escalation in the Middle East with desks attributing the selling to Libyan tensions easing.
- US EIA Weekly Crude Stocks w/e -4.47M vs. Exp. -1.45M (Prev. -1.63M).
- NHC said Helene becomes a hurricane and is expected to bring life-threatening storm surge, damaging winds, and flooding rains to a large portion of Florida and the southeastern US.
- BSEE said 29% of oil production and 17% of nat gas production at the Gulf of Mexico is shut in due to Hurricane Helene.
- Kazakhstan's energy ministry said the Kashagan oil field (400k BPD) to suspend operations for 38 days for maintenance.
- Representatives from Libya’s eastern and western administrations are said to have agreed to nominate Naji Issa as interim central bank governor, while it was also reported that Libya’s legislative bodies signed an agreement on procedures, criteria and timelines for appointing the central bank governor, deputy and board of directors.
GEOPOLITICAL
MIDDLE EAST
- Israeli PM Netanyahu said they are delivering blows to Hezbollah that it could never imagine and doing that with force and by being clever. Netanyahu also said that he cannot give details on what they are doing, but they are determined to bring the citizens of the north home.
- Israeli PM Netanyahu gave the green light to discuss with the US side the cessation of attacks with Lebanon to give a chance for negotiations, according to Sky News Arabia citing a correspondent. It was separately reported that Netanyahu said any truce negotiations will be under fire and that they will continue to strike Hezbollah, according to Al Arabiya.
- Israel’s cabinet members will discuss authorising PM Netanyahu and Defence Minister Galant to approve ground exercises in Lebanon, according to Al Jazeera citing sources.
- Israeli army chief told troops that Israel has been striking all day to both prepare the ground for possible entry and to continue degrading Hezbollah. It was also reported that Israeli strikes on Lebanon expanded to reach the Keserwan and Chouf areas in Mount Lebanon, according to Sky News Arabia.
- Israeli source said they are approaching a crossroads to make decisive decisions that will determine where the war is heading and noted that talks on the north aim to provide an opportunity for a settlement that prevents a major war, according to Israeli press.
- US Department of Defence believes Israel is not in a position to launch a ground invasion now and would need to move more troops into place, but it also thinks such an attack could come together in a matter of several days, according to WSJ sources.
- US President Biden said an all-out war is possible in the Middle East, but there is also a possibility of a settlement and said there needs to be a two-state solution, according to an ABC interview.
- US Chief of Staff discussed with his Israeli counterpart the need to reduce tensions through a diplomatic solution, while the US continues to work with international partners to avoid a wider conflict in the region, according to Al Jazeera.
- US is reportedly leading a new effort to end hostilities in both Gaza and Lebanon, according to Reuters citing sources. Furthermore, the deal sought by the US could include hostage releases from Gaza, while Hezbollah is open to any settlement on Gaza and Lebanon.
- US-led talks for a potential de-escalation of the Israel-Hezbollah flare-up with an eye to a possible ceasefire saw “significant progress” and reached “a serious and advanced stage”, according to Lebanese news site LBCI reports citing sources.
- Kann News noted regarding the ceasefire proposal that the first stage is to show a ceasefire between Israel and Hezbollah to allow intensive contacts, while the working assumption of mediators is that Hezbollah is interested in an agreement and Israeli PM Netanyahu also gave the green light.
- It is still uncertain whether Israeli PM Netanyahu and Hezbollah's Nasrallah are willing to agree to a cessation of fighting, according to the New York Times quoting a US official.
- Dozens of US troops have been deployed to Cyprus amid sharply escalating tensions between Israel and Hezbollah, and are preparing for a range of contingencies, according to CNN citing sources.
- Cyprus’s President said the US and France are working on a diplomatic initiative to avoid further escalation in Lebanon, while meetings will be crucial for developments in the region and he is hopeful for an interim agreement for cessation of hostilities to give time for diplomacy.
- Islamic resistance in Iraq said it targeted Israel's Eilat with drones, while the IDF said they are following up on threats from Iraq, gathering information and will do what is necessary, according to Asharq News.
- White House's Kirby said there is no indication Iran is interested in an all-out war in the region, according to a Fox News interview.
- US Treasury sanctioned over a dozen entities and vessels for their involvement in transporting Iranian oil to Syria and East Asia, according to Asharq News.
OTHER
- Russian President Putin proposed to update Russia's nuclear strategy and said that a number of clarifications have been proposed with regard to the definition of conditions for the use of nuclear weapons. The proposal stated that aggression against Russia by any non-nuclear state, but with participation or support of a nuclear state, is proposed to be considered as their joint attack on the Russian federation, while Russia reserves the right to use nuclear weapons in case of aggression against Russia and Belarus.
- Russia has established a weapons programme in China to develop and produce long-range attack drones for use in the war against Ukraine, according to Reuters citing two sources from a European intelligence.
- Hackers linked to the Chinese government have broken into a handful of US internet service providers in recent months in pursuit of sensitive information, according to WSJ citing sources.
ASIA-PAC
NOTABLE HEADLINES
- China's State Council issued guidelines for promoting high-quality employment in which it will make high-quality and sufficient employment a prioritised goal in social and economic development, while it will leverage the leading role of state-owned enterprises for employment, according to state media.
- China’s Commerce Ministry said it resolutely opposes the US proposing restrictions on the use of Chinese hardware and software vehicles on US roads.
EU/UK
NOTABLE HEADLINES
- BoE's Greene said it is appropriate to take a gradual approach to removing restrictiveness and outlined scenarios for the economy and risks. Greene said a lot of the latest decline in UK services inflation is in the more volatile components and cannot get the ticker tape out yet, while she remains concerned about wage pass-through to inflation.
- French Finance Minister Armand said domestic growth is holding up and is close to potential, while it should be at 1.1% in 2024. Furthermore, he said they must first make an effort to reduce spending, before taxes can be discussed and will ensure that taxes do not increase for the working class, but there can be targeted increases for firms and the wealthy.
