- US stocks were lower and Treasury yields were firmer as participants awaited Fed Chair Powell's speech at Jackson Hole on Friday, while US data releases were mixed but continued to alleviate fears surrounding the labour market and economic growth concerns as initial jobless claims, for the week that coincides with the payrolls report, ticked marginally higher above expected but nowhere near enough to stoke fears around the labour market. Furthermore, US S&P Global Flash PMIs were varied as Manufacturing disappointed but Services and Composite topped forecasts, while there was a slew of Fed commentary from Schmid, Collins & Harker in which the latter two both gave a nod to a September rate cut but Schmid said he still needs to see more data before supporting a reduction.
- USD snapped its 4-day losing streak and the DXY gained a firmer footing at the 101.00 handle following the latest data releases from the US including PMIs and Jobless Claims which were mixed but ultimately quelled economic hard landing and labour market concerns, while market focus turns to Powell at Jackson Hole.
- Looking ahead, highlights include New Zealand Retail Sales, Japanese CPI, Singapore CPI, BoJ Governor Ueda Appearance in Parliament, Supply from Australia.
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LOOKING AHEAD
- Highlights include New Zealand Retail Sales, Japanese CPI, Singapore CPI, BoJ Governor Ueda Appearance in Parliament, Supply from Australia.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were lower and Treasury yields were firmer as participants awaited Fed Chair Powell's speech at Jackson Hole on Friday, while US data releases were mixed but continued to alleviate fears surrounding the labour market and economic growth concerns as initial jobless claims, for the week that coincides with the payrolls report, ticked marginally higher above expected but nowhere near enough to stoke fears around the labour market. Furthermore, US S&P Global Flash PMIs were varied as Manufacturing disappointed but Services and Composite topped forecasts, while there was a slew of Fed commentary from Schmid, Collins & Harker in which the latter two both gave a nod to a September rate cut but Schmid said he still needs to see more data before supporting a reduction.
- SPX -0.89% at 5,571, NDX -1.68% at 19,492 DJIA -0.43% at 40,713, RUT -0.95% at 2,150.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Collins (2025 voter) said the labour market overall is quite healthy and noted on benchmark revisions that the data is telling a consistent story. Collins stated the Fed is in a healthy position overall and it is important to preserve this, as well as noted that the data will guide the pace of cuts. Furthermore, she said the timing seems appropriate to begin easing monetary policy and policy is well-positioned, while she wants a gradual, methodical approach to interest rate cuts.
- Fed's Harker (2026 voter, retiring in 2025, Neutral) said ready to start the process of cutting rates and he wants a gradual and methodical course of rate cuts, as well as noted that the job market has now mostly normalised. Harker said the jobs market is softening from a high level and is heading back to normal, while he added that job revisions were not a surprise and balance of risks are more normal and the Fed must watch jobs more now. Furthermore, he said the course of Fed action is more important than the size of moves and would not comment on market pricing for the Fed but stated that he is not in the camp of 25 or 50bps cuts and needs more in the way of data.
- Fed's Schmid (2025 voter) said they could still see a demand pickup if the Fed isn't careful and payroll revisions do not change how he thinks about policy, while he needs to see more data before supporting a rate cut. It was later reported that Schmid said there is room to reduce the balance sheet faster than they are now, according to a CNBC interview.
DATA RECAP
- US S&P Global Manufacturing PMI Flash (Aug) 48 vs. Exp. 49.6 (Prev. 49.6)
- US S&P Global Services PMI Flash (Aug) 55.2 vs. Exp. 54 (Prev. 55)
- US S&P Global Composite Flash PMI (Aug) 54.1 vs. Exp. 53.5 (Prev. 54.3)
- US Existing Home Sales (Jul) 3.95M vs. Exp. 3.93M (Prev. 3.89M, Rev. 3.90M)
- US Initial Jobless Claims w/e 232.0k vs. Exp. 230.0k (Prev. 227.0k, Rev. 228k)
- US Continued Jobless Claims w/e 1.863M vs. Exp. 1.867M (Prev. 1.864M, Rev. 1.859M)
FX
- USD snapped its 4-day losing streak and the DXY gained a firmer footing at the 101.00 handle following the latest data releases from the US including PMIs and Jobless Claims which were mixed but ultimately quelled economic hard landing and labour market concerns, while market focus turns to Powell at Jackson Hole.
- EUR gave way to the recovery in the greenback which saw EUR/USD test the 1.1100 level to the downside where support held.
- GBP marginally weakened against the dollar and wiped out its initial gains after GBP/USD failed to sustain a brief incursion into 1.3100 territory.
- JPY was pressured with USD/JPY back above 146.00 amid the upside in US yields post-data, while participants also await the latest Japanese inflation data.
FIXED INCOME
- T-notes pared some of this week's gains as the latest data releases helped quell fears around an economic slowdown and further pared some of the outside bets for a 50bps September Fed rate.
COMMODITIES
- Oil prices recouped some of the recent sizeable losses in the absence of any major catalysts and despite a firmer dollar.
- Yemen's Houthis said they targeted the Sounion oil tanker in the Red Sea.
GEOPOLITICAL
MIDDLE EAST
- Israeli, Egyptian and US officials are holding talks in Cairo on Thursday evening to try to come to an agreement on how to secure the Egypt-Gaza border and reopen the Rafah crossing, according to Axios.
- US envoy to the UN told the Security Council that a Gaza ceasefire and hostage deal are "now in sight" and urged Security Council members to pressure Hamas into accepting the bridging proposal. However, it was separately reported that Israeli demands for troops in Gaza are blocking a truce deal, according to sources cited by Reuters.
- Israel's Channel 13 reported that the Israeli army is preparing for a response from Hezbollah next week if the talks on Gaza collapse.
OTHER
- Russian President Putin said Ukraine tried to hit a nuclear power station and the IAEA has been informed.
- Ukrainian security source said Kyiv conducted a drone attack on a Russian military airfield in Volgograd which hit a storage site for fuel and glide bombs. Furthermore, Ukraine’s Air Force said it used a US-made GBU-39 bomb to strike a Russian military target in Russia's Kursk region.
- Ukraine's border guard spokesman said no troops or equipment movement in Belarus after Minsk announced the deployment of additional reserves near the Ukrainian border.
- Taiwan’s top security officials made a secret trip to the US for talks, according to FT.
ASIA-PAC
NOTABLE HEADLINES
- BoJ is considering adding wage-related items to the Tankan survey as it aims to analyse wage trends faster and more accurately to reflect on the monetary policy decisions, according to Jiji.
EU/UK
NOTABLE HEADLINES
- ECB Minutes from the July 17th-18th meeting stated that headline inflation was expected to fluctuate around current levels for the remainder of 2024 and signals from the different measures of underlying inflation remained mixed. Furthermore, it stated that with inflation coming down only gradually, it was seen as natural that the Governing Council’s policy response should be cautious, while a cautious approach would also allow the Governing Council to respond by following a more gradual path of reducing policy rates if inflation was more persistent than currently foreseen.
- ECB's Kazaks said he is very much open to discussion on a September rate cut and they'd still be restrictive after a couple more cuts, while he added that a gradual approach to rate cuts would be best.
DATA RECAP
- UK Flash Manufacturing PMI (Aug) 52.5 vs. Exp. 52.1 (Prev. 52.1)
- UK Flash Services PMI (Aug) 53.3 vs. Exp. 52.8 (Prev. 52.5)
- UK Flash Composite PMI (Aug) 53.4 vs. Exp. 52.9 (Prev. 52.8)
- German HCOB Manufacturing Flash PMI (Aug) 42.1 vs. Exp. 43.5 (Prev.
- German HCOB Services Flash PMI (Aug) 51.4 vs. Exp. 52.3 (Prev. 52.5)
- German HCOB Composite Flash PMI (Aug) 48.5 vs. Exp. 49.2 (Prev. 49.1)
- EU HCOB Manufacturing Flash PMI (Aug) 45.6 vs. Exp. 45.8 (Prev. 45.8)
- EU HCOB Services Flash PMI (Aug) 53.3 vs. Exp. 51.9 (Prev. 51.9)
- EU HCOB Composite Flash PMI (Aug) 51.2 vs. Exp. 50.1 (Prev. 50.2)
- EU Consumer Confidence Flash (Aug) -13.4 vs. Exp. -12.6 (Prev. -13.0)
- EU EZ Negotiated Wage Rates (Q2). 3.55% (Prev. 4.74%)
