- US stocks were indecisive and the major indices finished flat on the eve of the FOMC although the small-cap Russell 2000 outperformed and the dollar strengthened as participants digested a slew of data releases including better-than-expected US Retail Sales and Industrial Production, while all attention now turns to the pivotal Fed meeting.
- USD strengthened and the DXY tested the 101.00 level to the upside following better-than-expected US Industrial Production and Retail Sales data, while Manufacturing Output also topped estimates and Atlanta Fed GDPnow for Q3 was revised upwards to 3.0% (prev. 2.5%). Attention now turns to Wednesday for the much-awaited Fed rate decision, accompanying statement, SEPs and Powell's press conference.
- Looking ahead, highlights include New Zealand Quarterly Consumer Sentiment & Current Account, Australian MI Leading Index, Japanese Machinery Orders & Trade Data, Comments from BoC's Rogers & RBA's Jones, Supply from Australia, Holiday Closures in Hong Kong & South Korea.
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LOOKING AHEAD
- Highlights include New Zealand Quarterly Consumer Sentiment & Current Account, Australian MI Leading Index, Japanese Machinery Orders & Trade Data, Comments from BoC's Rogers & RBA's Jones, Supply from Australia, Holiday Closures in Hong Kong & South Korea.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were indecisive and the major indices finished flat on the eve of the FOMC although the small-cap Russell 2000 outperformed and the dollar strengthened as participants digested a slew of data releases including better-than-expected US Retail Sales and Industrial Production, while all attention now turns to the pivotal Fed meeting.
- SPX +0.03% at 5,635, NDX +0.05% at 19,432, DJIA -0.04% at 41,606, RUT +0.74% at 2,205.
- Click here for a detailed summary.
NOTABLE HEADLINES
- US House Speaker Johnson said there will be a vote on the six-month short-term federal funding bill on Wednesday.
- Atlanta Fed GDPnow (Q3) 3.0% (prev. 2.5%)
- Goldman Sachs raised its US Q3 GDP tracking estimate by 0.3ppts to +2.8%.
DATA RECAP
- US Industrial Production MM (Aug) 0.8% vs. Exp. 0.2% (Prev. -0.6%, Rev. -0.9%)
- US Manufacturing Output MM (Aug) 0.9% vs. Exp. 0.3% (Prev. -0.3%, Rev. -0.7%)
- US Retail Sales MM (Aug) 0.1% vs. Exp. -0.2% (Prev. 1.0%, Rev. 1.1%)
- US Capacity Utilization SA (Aug) 78.0% vs. Exp. 77.9% (Prev. 77.8%, Rev. 77.4%)
- US Business Inventories MM (Jul) 0.4% vs. Exp. 0.3% (Prev. 0.3%)
- US NAHB Housing Market Index (Sep) 41.0 vs. Exp. 40.0 (Prev. 39.0)
- US Retail Inventories Ex-Auto Rev. (Jul) 0.5% (Prev. 0.5%)
FX
- USD strengthened and the DXY tested the 101.00 level to the upside following better-than-expected US Industrial Production and Retail Sales data, while Manufacturing Output also topped estimates and Atlanta Fed GDPnow for Q3 was revised upwards to 3.0% (prev. 2.5%). Attention now turns to Wednesday for the much-awaited Fed rate decision, accompanying statement, SEPs and Powell's press conference.
- EUR posted modest losses against the dollar despite the much weaker-than-expected German ZEW Economic Sentiment which fell to its lowest figure since October 2023, while there were comments from ECB's Simkus who noted the likelihood of an October rate cut is very small.
- GBP retreated with GBP/USD back beneath the 1.3200 handle owing to the dollar strength, with the attention shifting to incoming UK CPI data.
- JPY underperformed in which USD/JPY extended above the 141.00 level and eventually reclaimed the 142.00 handle as the dollar strengthened post-US data.
FIXED INCOME
- T-notes bear flattened in response to strong US economic data ahead of the FOMC decision with markets torn between 25bps and 50bps.
COMMODITIES
- Oil prices were driven higher by escalating geopolitical updates which outweighed broader dollar strength.
- US Private Energy Inventories (bbls): Crude +2.0mln (exp. -0.5mln), Distillate +2.3mln (exp. +0.6mln), Gasoline +2.3mln (exp. +0.2mln), Cushing -1.4mln.
- US is to seek 6mln barrels of oil for emergency reserve, taking advantage of relatively low prices, according to Reuters citing sources.
- BSEE reported that 6% of oil production and 10% of natural gas production is shut in the US Gulf of Mexico in the aftermath of Francine.
- Venezuela's largest oil refinery has reportedly been paralyzed since September 12th due to a power failure, according to Reuters citing sources.
GEOPOLITICAL
MIDDLE EAST
- Lebanese sources said initial reports indicate that Israel managed to penetrate and blow up telecommunications devices used by Hezbollah operatives.
- At least 2,750 were injured and 9 died in the pagers detonation across Lebanon, while the Lebanese Information Minister said the government condemned the pagers detonation as '"Israeli aggression". Furthermore, Hezbollah promised to retaliate after blaming Israel for detonating pagers on Tuesday and Hezbollah Chief Nasrallah was reportedly not harmed in the pager blasts, according to a Senior Hezbollah source cited by Reuters
- Israel didn't inform the Biden administration ahead of its intelligence operation that included exploding thousands of Hezbollah members' pager devices, according to Axios citing sources. Israeli officials said they are aware that a major escalation on the northern border is possible after the attack and said Israel Defense Forces are on high alert for a possible response by Hezbollah, while the operation was approved earlier this week during security meetings with Israeli PM Netanyahu and senior members of his cabinet and the heads of the security services.
- Israel’s Mossad reportedly put a quantity of high-explosive PETN on the battery of devices and it was detonated by raising the temperature of the battery, according to Sky News Arabia citing special sources.
- Israeli press cited sources that warned Hezbollah will pay a heavy price if it chooses escalation, according to Al Jazeera.
- Senior Israeli military officials are preparing for a third Hezbollah War which is expected to begin almost immediately, according to Israel's Channel 14. Furthermore, the security and military weight will shift from the Gaza Strip to the northern front, according to Al Jazeera citing Israel's Channel 14.
- Hamas said blasts are an escalation that will only lead Israel to "failure and defeat".
- US Secretary of Defense Austin is expected to visit Israel on Sunday and Monday to discuss the growing tensions in Lebanon, according to Axios citing two Israeli and US officials.
- Jordanian armed forces thwarted an attempt by a drone to cross Jordanian territory, according to the state news agency.
OTHER
- Some of Ukraine’s allies are reportedly starting to talk about how the fight against Russia’s invasion might end, raising concerns in several other Western capitals that these efforts could lead to Kyiv being forced into a premature ceasefire, according to Bloomberg sources.
- US military aid packages for Ukraine have been smaller in recent months, as the stockpiles of weapons and equipment the Pentagon is willing to send Kyiv from its own inventory have dwindled, according to CNN.
- Russian Foreign Minister Lavrov is to meet the North Korean Foreign Minister, according to RIA. It was also reported that Russia's Secretary of the Security Council Shoigu is visiting Iran, according to RT.
ASIA-PAC
NOTABLE HEADLINES
- China's Commerce Minister said the EU's EV probe seriously affected the confidence of Chinese auto firms to invest in Italy. Furthermore, China asked Germany to push the EU to reach a solution over EV tariff, during a meeting of China’s Commerce Minister with Germany's Economic Affairs Minister Habeck.
- Indian PM Modi is to visit the US between September 21st - 23rd, according to India's Foreign Ministry.
- Indian trade official said they will hold the next round of trade negotiations with the EU in September.
EU/UK
NOTABLE HEADLINES
- EU Commission President von der Leyen proposed France's Sejourne as Commissioner for Industrial Strategy and Ribera for Competition Commissioner, while she proposed Sefcovic as the Trade Commissioner and Dombrovskis as the Economy Commissioner.
- ECB's Simkus said the economy is developing in line with forecasts and the likelihood of an October rate cut is very small as they will not have many new data points in October.
- ECB's Villeroy said the French goal to cut the deficit to 3% of GDP by 2027 is not realistic and most of the effort should come from reducing spending, but targeted tax hikes are needed too.
- A proposed resolution to initiate impeachment proceedings against French President Macron was deemed to be admissible by the National Assembly.
DATA RECAP
- EU ZEW Survey Expectations (Sep) 9.3 (Prev. 17.9)
- German ZEW Economic Sentiment (Sep) 3.6 vs. Exp. 17.0 (Prev. 19.2)
