Quiet EU session as market await key data during the week (US readings include CPI inflation (Tues), industrial production (Wed), retail sales (Thurs)).
– Markets await key rate decisions in the following week including Fed (Sept 22nd) amid prospects that asset-purchase tapering will begin this year.
– House Democrats eye corporate tax rate hike.
– China govt said to be seeking to break up Alipay from company. Govt requesting the further breakup of Huabei and Jiebei into two independent apps.
– Japan Aug PPI (CGPI) M/M: 0.0% v 0.3%e; Y/Y: 5.5% v 5.7%e.
– North Korea test fired new long range cruise missile on Sept 11th and 12th and reportedly hits target 1,000 miles away.
– Japan candidate Kono leader in latest Asahi poll with 33% for LDP leadership race; In Nikkei/TV Tokyo poll Kono had 27% support, Ishiba 17%, Kishida 14%, Takaichi 7%.
– UK Health Min Javid: Do not expect more lockdowns and so vaccine passports will not be used in UK.
– PM Johnson is expected to address parliament on Tuesday, Sept 14th about plans for managing Covid thru autumn/winter period.
– SNB Vice Chairman Zurbruegg: Reiterates stance that negative interest rates to prevent CHF currency (Franc) appreciation.
– EU’s Dombrovskis (trade chief) stated that would look at concerns that the debt reduction rule was not realistic given the big rise in many member states’ debt to GDP ratios during the pandemic downturn (Reminder: On Sept 9th reports circulated that group of hawkish EU Finance ministers were set to take tough stance in talks over post-pandemic changes to budget rules).
– Greek PM Mitsotakis: Raises 2021 GDP growth forecast from 3.6% to 5.9%.
– UK PM Johnson expected to hold bilateral talks with President Biden during a 4 day trip to the US starting Sep 21st.
– UK Govt expected to further delay new post Brexit customs checks on EU goods for fear it could interfere with disruptions to shops and supermarkets for the Christmas season.
– Confederation of British Industry (CBI) said to have warned the UK Govt that if the corporate tax rate goes to 25% from the current 19%, there would be “consequences”.
– Fed’s Harker (non-voter): Hope the tapering process will start sometime this year, weaker than expected employment data largely to supply issues.
– House Democrats said to be considering various tax increases; to increase (long term) capital gains tax rate to 28.8% (25% + 3.8% surcharge), 26.5% corporate tax rate [from 21.0%]; the draft plan is seeking to raise $2.9T in new taxes and revenues.
– Senator Manchin (D-WV) stated that lawmakers unlikely to complete spending package by congressional leaders’ Sept 27th deadline. Reiterated view that could support a smaller $1.5T bill but there was no rush to push it through congress.
– House Democrats proposed increasing electric vehicle tax credits to as much $12,500 per vehicle for union-made zero emission models assembled in the US.
– Louisiana Gov declares state of emergency ahead of Tropical Storm Nicholas; Oil prices at one-week high as US supply concerns dominate.
– IAEA chief Grossi to visit Iran following agreement to resume cooperation with the nuclear watchdog agency; Grossi’s visit expected to end IAEA board efforts to censure Iran.
Indices [Stoxx600 +0.41% at 468.26, FTSE +0.48% at 7,062.85, DAX +0.69% at 15,717.10, CAC-40 +0.36% at 6,687.48, IBEX-35 +0.47% at 736, FTSE MIB +0.54% at 25,825.00, SMI +0.43% at 12,112.00, S&P 500 Futures +0.46%].
Market Focal Points/Key Themes
European indices open modestly higher and continued their rise throughout session with Dax slightly outperforming others; sectors with better performance include technology and industrials. On corporate front, Valneva received notice of termination of COVID-19 vaccine supply agreement by UK govt and trades sharply down, nearly 30%; UK retailer Associated British Foods trades lower as much as 4% following its trading update. On M&A front, Zooplus over the weekend received increased offer while Ocean Yield in Oslo rose more than 25% on acquisition’s offer. No major equities events scheduled for the upcoming US session.
– Consumer discretionary: Zooplus [ZO1.DE] +8% (increased offer), EasyJet [EZJ.UK] -14% (rights issue; Ryanair press interview).
– Consumer staples: AB Foods [ABF.UK] -4% (trading update).
– Healthcare: Valneva [VLA.FR] -30% (UK alleged Valneva is in breach of its obligations).
– Industrials: Ocean Yield [OCY.NO] +26% (offer).
– ECB’s Schnabel (Germany) stated that sentiment in EU was picking up; Would only begin normalizing rates when ECB was confident of reliably reaching the inflation target. Diligently monitoring the possibility of higher inflation. Reiterated stance that inflation likely to notably decrease in 2022. Adjusted for base effects and pandemic impact then inflation remained too low rather than too high. Stressed that ECB to act quickly and resolutely if inflation target reached sooner.
– BOE’s Hauser commented that central bank balance sheet would be structurally larger in the future even after the current QE programs are unwound.
– German Economy Ministry: Q3 GDP growth to be significantly better compared to Q2.
– Poland Central Bank member Zyzynski stated that he saw no change in interest rates in 2021 but possible a hike next year. Believed rise inflation is transitory and the central bank should wait it out.
– China Foreign Ministry spokesperson: Reiterates that US-China trade relationship should be based upon mutual respect.
– USD was a touch firmer in a quiet session aided by growing Fed tapering expectations. Markets await key data during the week (US readings include CPI inflation (Tues), industrial production (Wed), retail sales (Thurs)) and also eyeing the numerous key rate decisions in the following week including Fed (Sept 22nd) amid prospects that asset-purchase tapering will begin this year.
– (SE) Sweden Sept SEB Housing-Price Indicator: 41 v 39 prior.
– (DE) Germany Aug Wholesale Price Index M/M: 0.5% v 1.1% prior; Y/Y: 12.3% v 11.3% prior.
– (TR) Turkey July Current Account Balance: -$0.7B v -$0.5Be.
– (TR) Turkey July Industrial Production M/M: -4.2% v +2.2% prior; Y/Y: 8.7% v 15.2%e.
– (IT) Italy Q2 Unemployment Rate: 9.8% v 10.0%e.
– (CH) Swiss weekly Total Sight Deposits (CHF): 714.8B v 714.9B prior; Domestic Sight Deposits: 635.9B v 636.5B prior.
– (CZ) Czech July Current Account Balance (CZK): -19.5B v -14.7Be.
– (HK) Hong Kong Q2 Industrial Production Y/Y: 5.6% v 2.6% prior.
– (HK) Hong Kong Q2 PPI Y/Y: 2.7% v 1.9% prior.