• European bourses trade on the backfoot after succumbing to the selling pressure seen Stateside and during APAC trade, while macro newsflow has been light.
• DXY faded from best levels after extending gains on the back of broad risk aversion, EUR sees several large option expiries, AUD underperforms after the Aussie jobs report.
• WTI and Brent front-month futures tilted higher this morning following APAC consolidation, with little in the way of fresh newsflow to drive price action.
• Norges Bank hiked its Key Policy Rate by 25bps as expected to 4.00%, and sees another hike in September.
• Looking ahead, highlights include highlights include US IJC, Philadelphia Fed Business Index, Norges Policy Announcement, Earnings from Walmart & Applied Materials.

17th August 2023

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EUROPEAN TRADE

EQUITIES

• European bourses trade on the backfoot after succumbing to the selling pressure seen Stateside and during APAC trade, while macro newsflow has been light.
• Sectors are mostly lower with Industrial Goods & Services names bottom of the pile amid losses in BAE Systems (BA/ LN) after the Co. confirmed the acquisition of the Ball Aerospace business from Ball Corporation (BALL) for USD 5.55bln in cash. Elsewhere, other laggards include Travel & Leisure and Construction & Materials, whilst to the upside.
• Stateside, equity futures are flat/modestly firmer following risk-off trade seen at yesterday's close with the FOMC Minutes unable to cap the negativity.
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• Click here and here for a recap of the main European equity updates.

FX

• DXY faded from best levels after extending gains on the back of broad risk aversion and further weakness in EM currencies rather than independent factors.
• AUD and NOK are at opposite ends of the G10 spectrum, the Aussie suffered a double whammy as the labour market report revealed an unexpected fall in employment and firmer than forecast unemployment rate. Conversely, the Norwegian Krona saw enough in the Norges Bank’s accompanying statement to test bids/support around 11.5000 vs the Euro.
• PBoC set USD/CNY mid-point at 7.2076 vs exp. 7.3047 (prev. 7.1986)
• China's major state-owned banks' branches were seen selling dollars to buy yuan in the offshore FX market during London and New York trading hours this week and were also seen selling dollars to buy yuan in the onshore FX market, according to sources cited by Reuters.
• RBI was likely selling dollars via state-run banks, according to traders cited by Reuters.
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FIXED INCOME

• Debt futures have been choppy in the aftermath of a risk-off APAC session and with some follow-through from the FOMC minutes that featured a hawkish line, but in the context of recent sessions price action has been somewhat restrained.
• Bunds, Gilts and the T-note all remain in negative territory between 130.89-40, 92.00-91.61 and 109.20+/109-05+ respective bounds, though inside current w-t-d ranges awaiting the next major market-mover or catalyst.
• France sold EUR 8.44bln vs. Exp. EUR 7.5-8.5bln 2.50% 2026, 2.75% 2029, 1.50% 2031 OAT.
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COMMODITIES

• WTI and Brent front-month futures tilted higher this morning following APAC consolidation, with little in the way of fresh newsflow to drive price action.
• Spot gold is flat intraday under the USD 1,900/oz mark after relinquishing the level amid the recent Dollar strength, with the yellow metal pulling further away from its 200 DMA (1,905.86/oz).
• Base metals are holding modest gains with some impetus seen from the aforementioned revivals of Chinese sentiment towards the end of their trading day.
• Woodside Energy (WDS AT) workers will reportedly vote tonight on industrial action at LNG platforms, according to CNBC TV citing sources.
• US reportedly plans to escalate its dispute with Mexico over genetically modified corn, according to Bloomberg sources.
• NHC said Hilary forecast to rapidly intensify and become a Hurricane very soon, according to Reuters.
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NOTABLE US HEADLINES

• Tesla's (TSLA) revamped Model 3 mass China output may begin next month, Bloomberg reported.

NOTABLE EUROPEAN HEADLINES

• ECB's Kazaks said it is good news that inflation is coming down, needs to see the new ECB forecasts before deciding on hikes; any additional hikes would be small, according to Bloomberg.
• Spain's Socialist Party reaches agreement in principle with Catalan Separatist party Junts to elect lower House Speaker, via ABC Newspaper.
• Norges Bank hiked its Key Policy Rate by 25bps as expected to 4.00%, and sees another hike in September. The future policy rate path will depend on economic developments. If the economy evolves as currently anticipated, the policy rate will be raised further in September. Activity in the Norwegian economy remains high, and the labour market is tight. Consumer price inflation has edged down but remains high and markedly above the target. Underlying inflation has remained elevated. If the NOK proves to be weaker than previously projected or pressures in the economy persist, a higher policy rate than signalled in June may be needed to bring down inflation. If there is a more pronounced slowdown in the Norwegian economy or inflation declines more rapidly, the policy rate may be lower than envisaged in June.

GEOPOLITICS

• US plan new tariffs on food-can metal from China, Germany and Canada, according to WSJ; Levies announced in response to dumping allegations could raise canned food prices, industry group saysChinese products would be subject to the highest tariffs of the three countries, a levy of 122.52% o their import value.
• Russian Ambassador to the US said issues of prisoner swaps are being solved by relevant bodies of Russia and the US, while he added that this channel has proved to be effective, according to Reuter.
• South Korean lawmaker said there is a possibility for another spy satellite launch in North Korea between the end of August and early September, while there are signs that North Korea is preparing an ICBM launch, citing the spy agency.
• North Korea and Russia agreed to military cooperation during a recent meeting between North Korean leader Kim and Russia's Defence Minister, according to Yonhap.

CRYPTO

• Bitcoin is subdued after falling under the USD 29,000 mark towards USD 28,500.

APAC TRADE

• APAC stocks were pressured following the declines on Wall St amid the broad risk-off mood, which was triggered by global macro headwinds, in particular, the recent slew of weak data from China.
• ASX 200 was led lower by the large industries, while participants also digested earnings and a softer leading index.
• Nikkei 225 dipped beneath the 32,000 level as all major bourses suffered from the falling tide across stocks.
• Hang Seng and Shanghai Comp remained pressured amid China growth concerns as recent poor data releases have prompted several banks to cut their growth forecasts for the world’s second-largest economy including JPMorgan which now anticipates 4.8% GDP growth for China this year, while the latest House Price data also showed a contraction Y/Y to add to the ongoing developer woes.

NOTABLE ASIA-PAC HEADLINES

• China reportedly told state banks to escalate Yuan intervention this week, according to Bloomberg sources.
• PBoC said it will keep the Yuan rate basically stable, will keep liquidity reasonably ample, prudent policy will be precise and forceful, and will resolutely prevent over-adjustment risks of CNY exchange rate.
• China shadow banking Co. Zhongzhi plans a debt restructuring and hired KPMG, while it is seeking strategic investors, according to sources cited by Reuters.

DATA RECAP

• Japanese Trade Balance Total Yen (Jul) -78.7B vs. Exp. 24.6B (Prev. 43.0B)
• Japanese Exports YY (Jul) -0.3% vs. Exp. -0.8% (Prev. 1.5%)
• Japanese Imports YY (Jul) -13.5% vs. Exp. -14.7% (Prev. -12.9%)
• Japanese Machinery Orders MM (Jun) 2.7% vs. Exp. 3.6% (Prev. -7.6%)
• Japanese Machinery Orders YY (Jun) -5.8% vs. Exp. -5.5% (Prev. -8.7%)
• Singapore Non-Oil Exports MM (Jul) -3.4% vs. Exp. 1.0% (Prev. 5.4%)
• Singapore Non-Oil Exports YY (Jul) -20.2% vs. Exp. -14.4% (Prev. -15.5%)
• Australian Employment (Jul) -14.6k vs. Exp. 15.0k (Prev. 32.6k)
• Australian Unemployment Rate (Jul) 3.7% vs. Exp. 3.6% (Prev. 3.5%)
• Australian Participation Rate (Jul) 66.7% vs. Exp. 66.8% (Prev. 66.8%)