Americas Breakfast Briefing

US OPEN/EVENTS AHEAD

All Japanese products traded domestically are closed for 'Respect for the Aged Day' today while China & South Korea are also shut. On Saturday, Chinese Aug Industrial Production softened to 4.5% y/y from 5.1% & missed the 4.7% f/c while Retail Sales softened to 2.1% y/y from 2.7% vs 2.5% expected. This data indicates there are growing risks to meeting the government's official 2024 growth target of 5% which has prompted calls for aggressive policy action. JP Morgan reiterated its call for a 50bps rate cut from the FOMC this month & yesterday, the FBI reported that former President Trump was the subject of a suspected assassination attempt but suffered no harm. In the markets, the Yen firmed to a best since 28th Jul 2023 (139.58 vs 138.07). S&P ended 0.55% higher at a 2 week high on Friday & the futures are a tad firmer in EZ flows. Dec24 10 notes have seen a very narrow 5 tick range and added 3.5 ticks at best. Second half data brings US Empire Manufacturing which is expected to improve to -4.3 from -4.7, Canadian Confidence, Manufacturing Sales & Existing Home Sales.

• The US 2/10yr spread builds on the recent two-year base completion to post new reach a 2-1/4yr highs above 7 (9 September peak)
• Firming studies (note the '100% higher' rating on this week's Sentiment Matrix) and the recent Golden Cross (50/200DMAs) should underpin continued steepening
• Above 10 (1 July 2022 high) opens 17/20 (16 June 2022 high and .764x -111/-11 advance from -56), perhaps 25 (50% retracement of the 162/-111 decline)
• Only the loss of -6 (30 August/6 September lows) would delay and suggest a period of extended bullish consolidation over the -21 higher trough

EUROPEAN ROUND UP

First half event risk was very thin on the ground and the lack of fresh impulses kept markets in comparatively narrow ranges. Core EGB futures traded in circa 1/5-1/3pt parameters with early session highs pared to flat/a handful of ticks in negative territory. Gilts slightly outperformed their German counterpart and the 10yr yield spread between the benchmarks flattened to a marginal new five week tight. The UK 2-10yr yield spread steepened a fraction to a 3.5 week wide. Risky assets were also sedate. Core equity indices traded narrowly mixed with Germany's DAX lagging peers but vice versa for France's CAC. Front month Brent futures traded in a tight range with a small gain. There were a couple of ECB speakers remarks for players to digest. Kazimir said the next rate cut must 'almost certainly' wait until December & the ECB are not a path to cutting rates at each meeting. Guindos reiterated this by adding they do not have a predetermined path for rates which will be decided on a meeting by meeting basis. Italian Aug final EU Harmonised CPI eased to 1.2% y/y from 1.3%.

• Bulls resume the 3-1/2 month recovery from 95.095 (29/30 May lows) via 95.480 (13 August reaction low) to regain 95.665 (14 August high)
• Strengthening studies and the '75% higher' rating on this week's Sentiment Matrix should underpin a return to 95.825 (5 August peak)
• Beyond would confirm 95.480 as a higher low and extend the wider recovery for 95.905 (61.8% retrace of 96.405/95.095 fall), perhaps 96.040 (31 January/1 February lower high)
• Only a failure to hold over 95.665 would dampen and suggest extended consolidation over 95.480 and 95.460 (9/16 May highs/former 3-1/2 month base trigger)

MARKET HEADLINES

• ECB's Kazimir: rate cuts are not a 'magic fix' for the economy
• Kazimir: Next rate must 'almost certainly' wait until December
• ....& they are not on a path to cutting rates at each meeting
• ECB's Guindos: We'll decide on rates 'meeting by meeting'
• ECB's Guindos: We don't have a predetermined path for rates
• UK Sep Rightmove House Prices 1.2% y/y from 0.8% prior
• Italian Aug final EU Harmonised CPI eased to 1.2% y/y from 1.3%
• EC Jul Trade Balance SA EUR 15.5bn from 17.0bn prev vs 15 f/c
• EC Q2 Labour Costs fell to 4.7% vs a revised 5.0% prior (was 5.1%)
• Italian Jul Trade Balance Total EUR 6743mn vs 5150mn prior
• Core EGB futures trade in narrow 1/5-1/3pt ranges
• Core EGB futures start in the black then fade
• Core equity indices narrowly mixed
• Germany/UK 10yr yield spread narrows to tight since 12th July
• UK 2-10yr yield spread steepens to 3.5wk wide
• CAC outperformed a fraction

DAY AHEAD

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