- US stocks rallied and the dollar strengthened, while treasuries saw notable weakness in reaction to the stronger-than-expected US retail sales and the surprise fall in initial jobless claims which helped ease recent economic concerns and pushed back against expectations for a 50bp rate cut from the Fed in September.
- USD was underpinned and the DXY rose back above the 103.00 level following a slew of data releases including Retail Sales which topped expectations and the consensus range, while a surprise drop in Initial Jobless Claims helped soothe some of the recent labour market concerns.
- Looking ahead, highlights include New Zealand PMI, Singapore Non-Oil Exports, Comments from RBA Governor Bullock and RBNZ Governor Orr, Supply from Australia & Japan.
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LOOKING AHEAD
- Highlights include New Zealand PMI, Singapore Non-Oil Exports, Comments from RBA Governor Bullock and RBNZ Governor Orr, Supply from Australia & Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks rallied and the dollar strengthened, while treasuries saw notable weakness in reaction to the stronger-than-expected US retail sales and the surprise fall in initial jobless claims which helped ease recent economic concerns and pushed back against expectations for a 50bp rate cut from the Fed in September.
- SPX +1.61% at 5,543, NDX +2.46% at 19,490, DJIA +1.39% at 40,563, RUT +2.45% at 2,135
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Musalem (2025 voter) said monetary policy is moderately restrictive and absent further shocks, inflation seems to have returned to a path consistent with 2% over time. Musalem also said recent data bolstered his confidence on inflation and the time may be nearing for a change in the policy rate.
- Atlanta Fed GDPnow (Q3): 2.4% (prev. 2.9%) following the retail trade, industrial production, and import/export prices data.
DATA RECAP
- US Retail Sales MM (Jul) 1.0% vs. Exp. 0.3% (Rev. -0.2%)
- US Retail Control (Jul) 0.3% vs. Exp. 0.1% (Prev. 0.9%)
- US Industrial Production MM (Jul) -0.6% vs. Exp. -0.3% (Prev. 0.6%, Rev. 0.3%)
- US Manufacturing Output MM (Jul) -0.3% vs. Exp. -0.2% (Prev. 0.4%)
- US Capacity Utilization SA (Jul) 77.8% vs. Exp. 78.5% (Prev. 78.8%, Rev. 78.4%)
- US NY Fed Manufacturing (Aug) -4.7 vs. Exp. -6.0 (Prev. -6.6)
- US Philly Fed Business Index (Aug) -7.0 vs. Exp. 6.0 (Prev. 13.9)
- US Philly Fed Prices Paid (Aug) 24.0 (Prev. 19.8)
- US Philly Fed New Orders (Aug) 14.6 (Prev. 20.7)
- US Philly Fed Employment (Aug) -5.7 (Prev. 15.2)
- US Business Inventories MM (Jun) 0.3% vs. Exp. 0.3% (Prev. 0.5%)
- US NAHB Housing Market Index (Aug) 39.0 vs. Exp. 43.0 (Prev. 42.0, Rev. 41.0)
- US Export Prices MM (Jul) 0.7% (Prev. -0.5%, Rev. -0.3%)
- US Import Prices MM (Jul) 0.1% vs. Exp. -0.1% (Prev. 0.0%)
- US Initial Jobless Claims w/e 227.0k vs. Exp. 235.0k (Prev. 233.0k, Rev. 234k)
- US Continued Jobless Claims w/e 1.864M vs. Exp. 1.875M (Prev. 1.875M, Rev. 1.871M)
FX
- USD was underpinned and the DXY rose back above the 103.00 level following a slew of data releases including Retail Sales which topped expectations and the consensus range, while a surprise drop in Initial Jobless Claims helped soothe some of the recent labour market concerns.
- EUR gave way to the firmer dollar in the aftermath of the US data which pressured EUR/USD to back beneath the 1.1000 handle
- GBP swung between gains and losses with early support from the mixed data releases including in-line Q2 GDP data.
- JPY underperformed and USD/JPY spiked to above the 149.00 level as US yields climbed on the encouraging data releases.
- Norges Bank maintained its key policy rate at 4.50% as expected, and reiterated that the policy rate will likely be kept at the current level for some time ahead. Norges Bank Governor Bache noted a "very high" threshold for Norges Bank to intervene in FX to support the NOK, while she added that a floating NOK is an advantage and there is no new prognosis on when the first rate cut will come.
FIXED INCOME
- T-notes declined amid bear steepening after strong retail sales and falling jobless claims helped quell recent economic concerns with traders paring 50bp rate cut bets.
COMMODITIES
- Oil prices gained despite the firmer dollar with prices supported amid the backdrop of ongoing geopolitical risks.
- DoE said the US bought 1.5mln barrels of oil for SPR for January delivery.
GEOPOLITICAL
MIDDLE EAST
- Gaza hostage and ceasefire talks in Qatar are expected to continue on Friday and the negotiating team will stay in Doha tonight, according to Axios's Ravid. It was separately reported that there is a high probability the Doha negotiations will continue until Saturday, according to Al Arabiya citing an Israeli official
- Egypt's Al Qahera News TV cited 'informed sources' on Gaza talks who noted that disagreements between parties remain big.
- White House’s Kirby said the start of negotiations in Doha is an encouraging step to bridge the gaps in the agreement and they expect difficult negotiations on Gaza, while he added that Israel and Hamas must make concessions and work on the final details, according to Al Arabiya reports. Kirby separately commented that the information suggests Iran has not moved off its threat to attack Israel with the US ready for any Iranian response and is working to prevent it at the diplomatic level.
- Estimates indicate that Hezbollah is to respond which may occur within days and Israel will be on maximum readiness for a response from Hezbollah this weekend, according to Sky News Arabia citing Israeli sources. It was separately reported that estimates in Tel Aviv are that Hezbollah is determined to attack Israel and will not wait for Iran, according to Alsharq News citing Israeli Channel 13.
- Hezbollah’s deputy leader said US envoy Hochstein's visit did not bring anything, while there is a decision to respond to the assassination of senior ISIS operative Fouad Shokur, and it will be carried out, according to Israeli Radio correspondent
- Houthis stated that the response is coming and the decision is decisive, while it added that US efforts to contain the response are a failure and the military mobilisation will not cancel the decision to deter the Israeli enemy.
- Iran reported that an IRGC adviser died after being wounded in a US airstrike in Syria, according to an Israeli Radio correspondent.
- US Treasury announced fresh sanctions on Houthi and Hezbollah trade networks.
- UK Foreign Minister Lammy is set to travel to Israel "in an attempt to prevent an all-out war in the Middle East", according to Sky News citing a diplomatic source.
- Iraq said the date of ending the US-led coalition's mission has been postponed due to the latest developments, according to the Foreign Ministry.
OTHER
- Ukraine captured the Russian town of Sudzha, according to AFP citing Ukrainian President Zelensky.
- Ukraine's top commander said the situation in the east and the south remains tense but under control, while Ukraine forces have advanced 35km in the Kursk region since the start of the operation.
- White House's Kirby said there will be additional security packages coming for Ukraine in the coming days, according to MSNBC.
- US President Biden's administration is reportedly “open” to sending long-range cruise missiles to Ukraine in "a move that would give Kyiv’s F-16s greater combat punch as it seeks to gain further momentum in its fight against Russia", according to Politico. Furthermore, an official said no final decision has been made on sending the missile, but the administration is working through the complicated details now.
ASIA-PAC
NOTABLE HEADLINES
- PBoC Governor Pan said the overall Chinese financial system is relatively stable and they will be planning new incremental policies. Pan later commented that China will gradually shift away from a focus on quantitative assets and will place greater emphasis on the use of price-based tools such as interest rates. China will also improve the mechanism for forestalling and defusing systemic risks, while they will stabilise expectations and help consolidate the nation's economic recovery trend. Furthermore, he said they will focus efforts on striking a balance between growth stabilisation and risk prevention, as well as adhere to supportive monetary policy.
- China's Commerce Ministry is to impose export controls on antimony (semi-metal) and other metals from September 15th and stated that export controls are not targeting any specific country or region.
- Chinese regulators reportedly require some rural commercial banks to reign in the scale of investments in public funds, according to Reuters sources.
- Nasdaq increased scrutiny on small to midsize Chinese companies looking to list on the bourse, causing uncertainty and delays, according to Nikkei sources.
- US lawmakers are reportedly seeking a probe into China's TP-Link Technology for potential national security risks, according to Reuters citing a document.
- Philippine Policy Interest Rate 6.25% vs. Exp. 6.5% (Prev. 6.5%), while it flagged another 25bps cut sometime during the year in October or December.
EU/UK
DATA RECAP
- UK GDP Prelim QQ (Q2) 0.6% vs. Exp. 0.6% (Prev. 0.7%)
- UK GDP Prelim YY (Q2) 0.9% vs. Exp. 0.9% (Prev. 0.3%)
- UK GDP Estimate MM (Jun) 0.0% vs. Exp. 0.0% (Prev. 0.4%)
- UK GDP Estimate YY (Jun) 0.7% vs. Exp. 0.8% (Prev. 1.4%)
- UK Industrial Output MM (Jun) 0.8% vs. Exp. 0.1% (Prev. 0.2%, Rev. 0.3%)
- UK Industrial Output YY (Jun) -1.4% vs. Exp. -2.1% (Prev. 0.4%)
- UK Manufacturing Output MM (Jun) 1.1% vs. Exp. 0.1% (Prev. 0.4%, Rev. 0.3%)
- UK Manufacturing Output YY (Jun) -1.5% vs. Exp. -2.4% (Prev. 0.6%, Rev. 0.4%)
