- US stocks were mixed with most indices and sectors in the green, while the Nasdaq closed in the red due to Tech weakness which was led by downside in Apple (AAPL) on lower-than-expected pre-order sale analysis. Furthermore, treasuries ultimately bull flattened after a stronger NY Fed Manufacturing Survey reversed the earlier steepening induced by former NY Fed President Dudley who reiterated calls for a 50bps cut and thinks that the Fed will conduct such a move at the upcoming rate decision this week, while money markets now price in a 67% probability of a 50bps rate cut on Wednesday vs the 48% probability seen on Friday.
- USD was sold on Monday with money markets once again moving more aggressively towards a 50bp rate cut from the Fed on Wednesday.
- Looking ahead, highlights include Singapore Non-oil Exports & Japanese Tertiary Industry Activity Index, Holiday Closures in South Korea, Mainland China & Taiwan.
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LOOKING AHEAD
- Highlights include Singapore Non-oil Exports & Japanese Tertiary Industry Activity Index, Holiday Closures in South Korea, Mainland China & Taiwan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were mixed with most indices and sectors in the green, while the Nasdaq closed in the red due to Tech weakness which was led by downside in Apple (AAPL) on lower-than-expected pre-order sale analysis. Furthermore, treasuries ultimately bull flattened after a stronger NY Fed Manufacturing Survey reversed the earlier steepening induced by former NY Fed President Dudley who reiterated calls for a 50bps cut and thinks that the Fed will conduct such a move at the upcoming rate decision this week, while money markets now price in a 67% probability of a 50bps rate cut on Wednesday vs the 48% probability seen on Friday.
- SPX +0.13% at 5,633, NDX -0.47% at 19,423, DJIA +0.55% at 41,622, RUT +0.31% at 2,189
- Click here for a detailed summary.
NOTABLE HEADLINES
- Former NY Fed President Dudley said in a Bloomberg opinion piece that the Fed should go big now and he thinks that they will, while he noted that an aggressive 50bps rate cut makes sense.
- White House Economic Advisor Brainard said it is now important to safeguard progress in the US labour market, while she added the economy has reached an "important turning point" in the fight against inflation and inflation is coming back down close to normal levels.
- Teamsters President said the union could make a decision on the Presidential endorsement as early as Wednesday.
- Apple (AAPL) iPhone 16 first weekend pre-order analysis showed estimated total sales of about 37mln units and Pro series demand is lower than expected, according to TF International Security analyst Ming-Chi Kuo.
DATA RECAP
- US NY Fed Manufacturing (Sep) 11.5 vs. Exp. -4.75 (Prev. -4.7)
FX
- USD was sold on Monday with money markets once again moving more aggressively towards a 50bp rate cut from the Fed on Wednesday.
- EUR benefitted against the weaker dollar and steadily advanced north of 1.1100, while there were several ECB speakers including de Guindos who noted the ECB wants to keep all options open for rate decisions and Kazmir said the ECB is in no rush and will almost surely have to wait until December for the next rate cut.
- GBP strengthened alongside the outperformance across cyclical currencies and reclaimed the 1.3200 status ahead of the BoE rate decision this week.
- JPY gave back most of its early advances against the greenback which saw USD/JPY rebound from a brief dip beneath the 140.00 handle.
FIXED INCOME
- T-notes were firmer and the curve bull flattened after NY Fed Mfg topped estimates, while bets continue to pile on for a 50bps rate cut on Wednesday.
COMMODITIES
- Oil prices were firmer to start the week amid the softer dollar and despite the downbeat Chinese activity data from over the weekend.
- BSEE reported that 12% of oil production and 16% of natural gas production in the US Gulf of Mexico is shut in the aftermath of Francine.
- Chevron (CVX) has redeployed all personnel to their Gulf of Mexico facilities and resumed production that was shut in due to Francine.
- Libyan crude exports for the week commencing September 9th increased three-fold W/W to 550k BPD, according to shipping data.
- Kazakh President said Kazakhstan is ready to increase oil export potential for Europe and expects to create a trade consortium for rare earths with Germany and German firms.
GEOPOLITICAL
MIDDLE EAST
- Hamas Chief Sinwar congratulated the Houthi's on their recent operation against Israel and said they are prepared for a long battle.
- Israeli PM Netanyahu is preparing to dismiss Defense Minister Yoav Galant in the near future, according to Sky News Arabia citing sources. It was also reported that if Israeli PM Netanyahu removes Galant, "Sa'ar is ready to enter within an hour", according to Al Jazeera.
- Iran's President Pezeshkian said Tehran will never give up on its missile programme as deterrence and will hold direct talks with the US only if they prove they are not hostile with Tehran in practice. It was separately reported that Iran’s President said he invited the Saudi Crown Prince to visit Iran and that he will visit Saudi Arabia if the opportunity arises, according to Al Arabiya.
- Iranian President said they are seeking a return to the framework of the 2015 nuclear deal and noted if they stop, Iran will stop too and if they are committed to the accord, Iran will be too. Furthermore, he said Iran is not seeking nuclear arms but will not bow down to pressure.
OTHER
- Chinese and Russian coast guards are to commence joint North Pacific exercises, according to the Nikkei.
ASIA-PAC
NOTABLE HEADLINES
- Goldman Sachs and Citigroup cut China's 2024 growth forecast to 4.7%, from 4.9% and 4.8%, respectively.
EU/UK
NOTABLE HEADLINES
- ECB Chief Economist Lane noted in a speech dubbed "Moving from 3.75 to 3.50: explaining the latest rate decision" that a gradual approach to dialling back restrictiveness will be appropriate if the incoming data is in line with the baseline projection, while he added they should retain optionality about the speed of adjustment and a faster pace of rate adjustment may be warranted if the incoming data indicate a sustained acceleration in the speed of disinflation or a material shortfall in the speed of economic recovery. However, a slower pace of rate adjustment may be warranted if the incoming data indicates slower-than-expected disinflation or a faster pace of economic recovery and noted these considerations reinforce the value of a meeting-by-meeting and data-dependent approach that maintains two-way optionality and flexibility for future decisions.
- ECB's de Guindos said ECB projections show that inflation by end-2025 will hover around the 2% target and inflation in services is still resisting which remains the ECB's main concern. Furthermore, he said the ECB expects a significant slowdown in growth of labour costs next year and wants to keep all options open when it comes to interest rate decisions, while its balance sheet is expected to decrease by around EUR 40bln per month.
- ECB's Kazimir said the ECB will almost surely have to wait until December for the next rate cut and it would take a significant shift in outlook for the ECB to cut in October with very little new info in the pipeline before the October meeting. Kazimir added there is no rush to cut rates and it is safest to wait for the outlook to become clearer, while he noted the economic recovery has been disappointingly weak.
- ECB's Kazaks said interest rates will continue to be lowered and there is no big reason to disagree with the rate bets for 2025.
