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Breakfast Bites - Thur Sep 14, 2023

Rise and shine everyone.

Today is a big day! We get the ECB interest rate decision shortly, then PPI, retail sales, jobless claims, and the ECB press conference.

US Equity Futures are bid up 0.33% on the S&P 500 and NASDAQ 100. Crude Oil is rallying again, up 1.34% to $89.71. Bitcoin is down modestly, shedding 0.24%. The US dollar index is relatively flat, with longer-term rates rising. The yield curve is at -0.72%.

Asia and Australia

  • Asian equities saw mostly positive performance: Japan's Nikkei increased by 1.41%, Hong Kong's Hang Seng rose by 0.21%, and China's Shanghai Composite was up by 0.11%. The gains in Japan and Australia were particularly strong. The Australian dollar and yen are rallying while the U.S. dollar is down.

  • In currency markets, the People’s Bank of China (PBOC) issued window guidance to major banks to refrain from immediately squaring their FX positions to alleviate pressure on the yuan. This guidance seems to coincide with China's Golden Week holidays, which often bring seasonal dollar demand.

  • Fresh Chinese economic data for August may show the worst of the year's economic downturn has passed. Indicators like industrial output, retail sales, and fixed asset investment are forecasted to grow. This follows positive credit, inflation, and car sales data released earlier in the week.

  • Japan saw machinery orders fall roughly in line with expectations, marking a slow start to Q3. Japanese investors also emerged as significant net buyers of foreign bonds, the largest since a record high in March 2020.

  • Australian employment grew substantially by 64.9K in August, beating the consensus estimate of a 25K increase. However, the gains were mainly in part-time jobs, and the unemployment rate remained unchanged at 3.7%.

  • Chevron's Australian LNG facilities may face disruptions due to escalating industrial actions from striking workers.

  • China's Country Garden is facing a deadline to win creditor approval for extending repayment of its final onshore note.

  • Trade tensions are increasing between the European Union and China over subsidies to Chinese Electric Vehicles (EVs). China has warned of retaliatory action.

Europe, Middle East, Africa

  • European equity markets are mostly on the rise, with significant indexes like STOXX 600, FTSE 100, DAX, and CAC showing gains. Miners and Oil/Gas sectors are outperforming, while the Autos sector lags behind.

  • The European Central Bank (ECB) faces a pivotal rate decision. There's market anticipation of a 25-basis point rate hike as inflation is expected to stay above 3% next year. However, there is speculation that the ECB is nearing the end of its tightening cycle due to slowing economic activity.

  • UK's housing market is at its weakest in 14 years according to the Royal Institute of Chartered Surveyors (RICS). There's a steep fall in house prices and sales, with hedge funds like Viking Global Investor shorting Lloyds Bank due to concerns about the lender's mortgage business.

  • EU luxury sector faces challenges due to a slowdown in China. Analysts at Barclays have downgraded the sector to Neutral, citing risks of disappointing sales growth and margin pressures.

The Americas

  • S&P futures are up 0.7%, signaling a potentially positive day for U.S. equities after a mixed performance on Wednesday where sectors like big tech and autos stood out. Treasury bonds remain steady, while the dollar index is mostly unchanged. Key economic indicators like retail sales, PPI, and initial claims are on today's calendar, and the Federal Reserve is expected to maintain steady rates in the coming week.

  • On the corporate front, tensions are rising between the United Auto Workers (UAW) and automakers, with potential strikes looming. Notable IPOs and acquisitions are making headlines, including ARM's IPO at $51 a share, valuing the company at around $54.5 billion, and Apollo being among the bidders for IGT's global gaming divisions, which could fetch between $4-5 billion.

  • Small businesses are feeling the heat from inflation and labor shortages. The NFIB Small Business Optimism Index dropped to 91.3, its 20th consecutive month below the 49-year average of 98. Inflation is increasingly reported as a significant concern, and 40% of small businesses report struggling to fill job openings.

  • Investor sentiment is showing mixed signals. Bank of America's latest Fund Manager Survey indicates a 17-month high in equity allocations but also caution, with elevated cash levels. Goldman Sachs and Morgan Stanley offer contrasting views on market prospects, highlighting the volatility and uncertainty currently characterizing the U.S. financial landscape.


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


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