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Breakfast Bites - Mon Sep 25, 2023

Rise and shine everyone and Happy Monday.

We have a host of Fedspeak lined up this week with Kashkari on Monday, Bowman on Tuesday, Golsbee, Cook and Powell on Thursday, Barkin & Williams on Friday. I can’t imagine what more they would have to say after the last week’s projections. Maybe they decide to talk down the hawkish message they sent.

To add to that, we also have ECB President Lagarde speaking at 9am ET.

Major earnings this week include - Costco, Nike, Cintas, Micron, Accenture, Paychex, TD Synnex, Concentrix, Jabil, Jeffries and CarMax. Nothing major for today though.

US Equity Futures are marginally lower this morning. The US Dollar Index maintains its strength $105.6. The long end of the curve is higher with the Yield Curve at -0.61. Bitcoin and Oil are lower; Gold remains flat.

Global equity funds saw outflows of $16.9B in week-ended 20-Sep, the most since December 2022. Fixed income and in particular Developed Market Investment grade saw positive flows. Money Markets saw an outflow of over $4B.

Asia and Australia

  • Asian equities ended mixed Monday. More steep losses in Hong Kong property stocks on Evergrande developments, mainland bourses also down but relative outperformers. Seoul was lower, Taipei gained. Australia recovered from a rocky start to end slightly higher. India paring early losses, Southeast Asia mixed. Japan closed higher as Nikkei outperformed Topix.

  • China’s Evergrande Group will again delay restructuring meetings to discuss $22.7B in offshore debt scheduled for September 25-26. A securities filing was released disclosing Evergrande is unable to issue new debt due to a regulatory probe on its Hengda Real Estate subsidiary.With this, the concerns in the property market are back in focus.

  • Comments from PBOC MPC member Liu Shijin at a financial forum in Shanghai on Sunday that China has limited room for further monetary policy easing due to widening China-US interest rate differentials, and it should pursue structural reforms rather than counting on macroeconomic policies to revive growth.

  • Adding on from global flows in the chart above, Japan continued to see foreign inflows to their market. The higher-for-longer message in the rest of the developed world now stands in stark contrast to the situation in Japan. With inflation, higher pricing and local consumption finally picking up, we’re seeing business investments gradually increasing. Not to mention, a weaker Japanese Yen creates an FX tailwind.

  • Apple to scale up India production fivefold to $40B

Europe, Middle East, Africa

  • European equity markets lower. Still seeing outflows and selling pressure continue in line with US markets.

  • Markets are pricing in peak ECB rates, particularly after the pause coming from the Bank of England. Traders are increasing their short positions in the Euro. Recent CFTC data shows, leverage funds have increased net short positions to highest levels since October last year.

  • The German Ifo business climate survey remained weak in September at 85.7 versus consensus and prior 85.8 revised up from 85.7. The discussion around this is that there seems to be bottoming in the data. While the numbers still remain weak, pessimism surrounding the outlook for the next 6-months has declined.

  • KPMG said in latest UK economic outlook that economy would rapidly slow in second half of the year, leaving real GDP for 2023 at 0.4% and sees growth of just 0.3% in 2024. This is now the key debate driving the rate decision in the UK. The BoE’s pause is indicative of fear of an economic decline. However, inflation as we’ve seen, still remains significantly higher than the US, EU or any other Developed Market economy. Some of this includes higher costs due to Brexit which is also likely driving wage growth.

  • The London Times reported UK PM Sunak is preparing to scrap the second leg of the UK's landmark high-speed rail project that links Birmingham to Manchester amid concerns costs of the project are "out of control".

The Americas

  • Government shutdown still remains the main point of discussion among macro analysts for the US. A consensus still needs to be reached by Sep 30 on key spending bills. MS estimates a 0.05% decline in GDP per week and would affect employment and data releases.

  • Talks between automakers and UAW continued over the weekend without a resolution. Ford has seen incremental progress on the negotiations and this may force GM and Stellantis to come up with similar terms. Ford, however, already has better standing with the unions because of better pay and more union workers.

  • In other news, Writers Guild of America came to agreement on Sunday with studios to end strike that began on 2-May, with approval potentially coming as soon as Tuesday.

  • Amazon to invest as much as $4B in Anthropic as it seeks to gain dominance in GenAI

Seasonality in the Nasdaq seems to be holding true to form for September. October however, is a mixed month in historical terms.


(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)


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