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Breakfast Bites - Tue Sep 05, 2023

Rise and shine everyone and Happy Tuesday.

I hope those of you who had a holiday had a lovely long weekend.

We’ve had a number of interesting news over the weekend to catch up but, the one driving global markets now is oil. We saw the price of both WTI and Brent Crude surge over the last couple of days and continue to remain elevated. WTI still remains above $85/bbl and Brent above $88/bbl. These are very uncomfortable levels to sustain and could very well mean higher inflation, globally. Not just that, the fear would also mean higher rates at the long end.

US equity futures, Bitcoin and Gold are all trading lower. The US Dollar Index is higher at 104.7. Rates are higher across the curve with the Yield Curve steepening to -0.69%.

Asia and Australia

  • Asian equities ended mixed Tuesday. Steep losses in Hong Kong, mainland markets also lower. Japan's Nikkei saw a sharp spike into the close to end higher. Australia in the red, Seoul down a few points, Taipei flat. India modestly higher, Southeast Asia mixed.

  • China’s stock market soared yesterday after stimulus measures were put in place for the property sector. But, the markets gave up those gains today on weaker Caixin PMI services numbers. Caixin services PMI was 51.8 in August, versus consensus 53.5 and 54.1 in prior month. We think any rally is capped to the upside because of economic data.

  • Country Garden pays interest on two dollar bond just before expiration of 30-day grace period

  • Philippines saw a resurgence of inflation because of the rising rice prices. The Government has now put a cap on prices.

  • The Reserve Bank of Australia keeps rates steady at 4.1% at their rate decision meeting today, which also happened to Governor Lowe’s last meeting. This is the third meeting without a hike. Inflation has peaked but still remains above their policy rate at 4.9%. They reiterated that some further tightening may be required

  • Several brokerages revised down their yen outlook amid attention on Goldman Sachs last week cutting their year-end forecast to 150 per dollar from 140. Similar downgrades came from JPMorgan to 152 from 142, and Barclays to 146 from 135. BofA also sees 150 at year-end vs prior 145.

  • South Korea CPI edged higher to 3.4% y/y from July's 2.3% and consensus 2.7%, first time prices accelerated in seven months and highest since April

Europe, Middle East, Africa

  • European equity market mostly softer. financial services, basic resources and energy all advance; China exposed sectors lag.

  • China-exposed sectors such as Construction & Materials, Chemicals and Luxury were main decliners after latest data showed China's services activity expanded at the slowest pace in eight months in August.

  • Retail amongst worst performing sectors in European trade, as Barclays data showed UK consumer spending growth lost pace last month, adding to signs of a weakening economy

  • August HCOB Eurozone Composite PMI showed the economy contracted at faster pace in as services activity tipped into decline. Overall HCOB Eurozone Composite PMI Output Index fell to a 33-month low of 46.7 vs July's outcome of 48.6

  • The HCOB Eurozone Services PMI Business Activity Index came fell to a 30-month low of 47.9 vs the preliminary of 48.3 and prior month reading of 50.9.

The Americas

  • Since Friday, we now have an unemployment report from the US that is seemingly benign. Based on the increase in the unemployment rate from 3.5% to 3.8%, the market seems to suggest that the Fed is done hiking. We also received data that showed 187,000 payrolls were added but, prior revisions were -110,000. That leaves us with a jobs market that is starting to weaken.

  • Chevron LNG workers plan two-week strike from 14-Sep unless significant progress is made in negotiations

  • It’s a quiet week for the US mostly with Fed Speakers here and there. The only major economic data point coming up is the Service PMI data.


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

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