• European bourses are mostly lower but have trimmed the losses seen at the cash open. The main macro story for the region thus far has been the flash PMI prints for September.
• French PMI missed, German PMI modestly beat, EZ PMI was mixed, UK PMI only saw manufacturing beat; the main theme of the PMIs was growth concerns.
• DXY is on a firmer footing following the uneventful BoJ decision overnight coupled with weakness from the EUR post-PMI; JPY underperforms 
• BoJ kept monetary policy settings unchanged and made no change to forward guidance with the central bank to patiently continue monetary easing.
• Australian unions agreed to endorse recommendations made by the industrial umpire to end the dispute with Chevron; strike actions have been called off. 
• Looking ahead highlights include US PMIs (Flash), Canadian Retail Sales, ECB’s de Guindos, Fed’s Daly, Cook & Kashkari. 

22nd September 2023

• Click here for the Newsquawk Week Ahead summary.

EUROPEAN TRADE

EQUITIES

• European bourses are mostly lower, but have trimmed the losses seen at the cash open. The main macro story for the region thus far has been the flash PMI prints for September.
• Sectors in Europe are mostly lower with the exception of Basic Resources which is in marginally positive territory thanks to underlying metals prices. On the downside, the Construction & Materials sector lags.
• US futures are trading slightly firmer following the biggest US stock drop since March, in yesterday's session.
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FX

• DXY is on a firmer footing following the uneventful BoJ decision overnight coupled with weakness from the EUR post-PMI.
• EUR and GBP both declined following overall downbeat PMI data in which the overarching theme was growth concerns.
• USD/JPY hit a high of 148.42 after the BoJ announcement overnight which offered no hawkish surprises whilst Governor Ueda repeated that the central bank will not hesitate to take additional easing measures if necessary.
• Antipodeans outperform in tandem with optimism surrounding China which has also propped up commodities.
• PBoC set USD/CNY mid-point at 7.1729 vs exp. 7.3009 (prev. 7.1730)
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FIXED INCOME

• Debt futures faded from post-French PMI peaks and never really threatened best levels again.
• Bunds returned to flat on the day within a 130.19-129.50 range and OATs recently dipped below par between 124.87-124.21 parameters, while Gilts are holding above 96.00 having reached 96.37 from their 95.65 early Liffe low.
• T-note is closer to 108-19+ overnight high than 108-09 base awaiting the fate of preliminary US PMIs and Fed rhetoric from Daly, Cook and Kashkari with an element of pre-weekend short covering probably in mind.
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COMMODITIES

• WTI and Brent November futures are choppy in the European morning, with the complex swayed by mixed flash PMI data from France and Germany, with price action within yesterday’s range but underpinned by Russia’s gasoline and diesel export ban which came into effect yesterday.
• Dutch TTF is on a firmer footing despite Chevron’s Australia LNG workers suspending industrial action after reaching a deal. The upside for the complex could emanate from the Russian gasoline/diesel export ban, whilst recent reports also suggested firmer Chinese LNG demand.
• Metals are resilient to the firmer Dollar with spot gold rising from a 1,919.12/oz low, above its 200 DMA (1,925.29/oz) to a high just shy of its 50 DMA (1,929.58/oz).
• Base metals meanwhile have rebounded and trimmed a bulk of yesterday’s losses, with some citing optimism of a Chinese economic rebound amid recent stimulus measures, with desks also pointing to restocking ahead of China’s 8-day long holiday commencing next Friday.
• Australian unions agreed to endorse recommendations made by the industrial umpire to end the dispute with Chevron (CVX) and agreed to call off strikes at Chevron facilities. Chevron (CVX) Australia spokesperson says unions have advised the Co. and the Fair Work Commission that industrial action has been suspended.
• Russian Kremlin said the fuel export ban will last for as long as necessary to ensure stability of the fuel market, according to Reuters.
• Russia's Kremlin said there has been no progress on the Black Sea grain deal issue, with no talks between the Russian and Turkish presidents scheduled, according to Reuters.
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NOTABLE EUROPEAN HEADLINES

• ECB's Lane said he sees a staggered reset of prices and wages across the economy which is an ongoing process and noted the dynamics of wages and profits in the coming quarters are still open questions. Lane commented that the transmission of monetary policy to the broader financing conditions in the real economy is firmly taking hold and the effect of some past tightening is still in the pipeline, while the ECB will be sufficiently restrictive for as long as necessary.

DATA RECAP

• EU HCOB Composite Flash PMI (Sep) 47.1 vs. Exp. 46.5 (Prev. 46.7)
• EU HCOB Services Flash PMI (Sep) 48.4 vs. Exp. 47.7 (Prev. 47.9)
• EU HCOB Manufacturing Flash PMI (Sep) 43.4 vs. Exp. 44.0 (Prev. 43.5)
• German HCOB Services Flash PMI (Sep) 49.8 vs. Exp. 47.2 (Prev. 47.3)
• German HCOB Manufacturing Flash PMI (Sep) 39.8 vs. Exp. 39.5 (Prev. 39.1)
• German HCOB Composite Flash PMI (Sep) 46.2 vs. Exp. 44.8 (Prev. 44.6)
• French HCOB Services Flash PMI (Sep) 43.9 vs. Exp. 46.0 (Prev. 46.0)
• French HCOB Composite Flash PMI (Sep) 43.5 vs. Exp. 46.0 (Prev. 46.0)
• French HCOB Manufacturing Flash PMI (Sep) 43.6 vs. Exp. 46.0 (Prev. 46.0)
• Spanish GDP YY * (Q2 2023) 2.2% vs. Exp. 1.8% (Prev. 1.8%)
• Spanish GDP Final QQ * (Q2 2023) 0.5% vs. Exp. 0.4% (Prev. 0.4%)
• UK Flash Composite PMI (Sep) 46.8 vs. Exp. 48.7 (Prev. 48.6)
• UK Flash Manufacturing PMI (Sep) 44.2 vs. Exp. 43.0 (Prev. 43.0)
• UK Flash Services PMI (Sep) 47.2 vs. Exp. 49.2 (Prev. 49.5)
• UK Retail Sales YY* (Aug 2023) -1.4% vs. Exp. -1.2% (Prev. -3.2%)
• UK Retail Sales MM* (Aug 2023) 0.4% vs. Exp. 0.5% (Prev. -1.2%)
• UK Retail Sales Ex-Fuel YY* (Aug 2023) -1.4% vs. Exp. -1.3% (Prev. -3.4%)
• UK Retail Sales Ex-Fuel MM* (Aug 2023) 0.6% vs. Exp. 0.6% (Prev. -1.4%)
• UK GfK Consumer Confidence (Sep) -21.0 vs. Exp. -27.0 (Prev. -25.0)

NOTABLE US HEADLINES

• UK CMA regulator said the sale of Activision's (ATVI) cloud gaming rights to Ubisoft (UBI FP) has made significant progress in resolving previous concerns, and is now seeking input on potential solutions before making the final decision on the Microsoft (MSFT) deal. CMA said that while some limited concerns remain with the new deal, Microsoft has proposed remedies that the CMA believes can effectively address these issues. As part of the revised agreement, Microsoft will not acquire Activision's cloud gaming rights. There are reasonable grounds for believing the undertakings taken by MSFT and ATVI, or a modified version, might be accepted by the CMA under the Enterprise Act 2002, according to a statement.
• Apple (AAPL) iPhone 15 launch sales surged 253% Y/Y in China on JD's Dada one-hour delivery app at 10:00 Beijing time, according to CNBC.
• Amazon (AMZN) said starting 2024, Prime Video shows and movies will include limited adverts; not making changes to current price of Prime, but will offer new ad-free option for additional USD 2.99 per month in the US, according to Reuters.
• US Commerce Department has finalised guardrails to prevent China from benefitting from USD 52bln semiconductor manufacturing research programme, according to Reuters.
• Alibaba's (BABA) Cainiao is looking to file for a USD 1bln+ HK IPO "soon", according to Bloomberg.
• BofA Flow Show: USD 2.5bn into bonds (26th consecutive week), USD 0.3bln from gold, USD 4.3bln from cash, USD 16.9bln from stocks (largest since Dec’22)Click here for details.
• Click here for the US Early Morning Note.

GEOPOLITICS

• Belarus Defence Ministry announces that Belarus and Russia are to commence joint military drills, according to Reuters.
• US President Biden said in a meeting with Ukrainian President Zelensky that Russia alone stands in the way of peace and Russia is seeking more weapons from Iran and North Korea, while he added that Russia hopes to use winter as a weapon against the Ukrainian people.
• Biden announced USD 325mln of security aid for Ukraine and that the first US Abrams tanks would be delivered to Ukraine next week.
• Ukrainian President Zelensky said that they reached an agreement to strengthen Ukraine's defence capabilities and that the US will help Ukraine boost air defence during the winter, while they agreed on steps to expand exports of grain from Ukraine, according to Reuters.
• Chinese Vice President Han Zheng said China supports all efforts that are conducive to the peaceful resolution of the Ukraine crisis and stands ready to continue playing a constructive role for an early attainment of peace, according to Reuters.

CRYPTO

• Bitcoin traded relatively steady just above the USD 26.5k mark.

APAC TRADE

• APAC stocks traded mixed amid a higher yield environment and after this week’s central bank frenzy culminated with a lack of surprises from the BoJ.
• ASX 200 was dragged lower with real estate and tech among the worst performers after the Australian 10yr yield touched its highest level since 2014, while the flash PMI data was mixed and showed a deeper contraction in manufacturing.
• Nikkei 225 was pressured following the mostly firmer-than-expected Japanese CPI data but then pared some of the losses following the lack of hawkish surprises from the BoJ.
• Hang Seng and Shanghai Comp shrugged off early jitters amid supportive measures including Beijing’s draft rules to promote a high level of opening up and encourage foreign investments, while China's market regulator also issued measures to promote the private economy.

BOJ

• BoJ kept its monetary policy settings unchanged, as expected, with rates held at -0.1% and QQE with YCC maintained to target 10yr JGBs at 0% with a +/-50bps band via unanimous vote, while it made no change to forward guidance with the central bank to patiently continue monetary easing. BoJ stated that Japan's economy is recovering moderately and inflation expectations show renewed signs of accelerating, as well as noted that they must watch financial and forex market moves and the impact on Japan's economic activity and prices.
• BoJ Governor Ueda (post-meeting press conference) said the economy is recovering moderately, and will not hesitate to take additional easing if necessary. Ueda reiterated that the BoJ needs to patiently continue its easy policy. Click here for the comments.

NOTABLE ASIA-PAC HEADLINES

• China mulls easing foreign stake limits to lure global funds, via Bloomberg.
• PBoC releases list for systemic important banks; will promote stable operations and healthy development of systemically important banks, according to Reuters.
• Chinese Vice President Han Zheng said China remains committed to opening itself up to the wider world and to an independent foreign policy, while it stays committed to safeguarding sovereignty and territorial integrity, according to Reuters.
• China's market regulator issued measures to promote the private economy and China will continue to break down market access barriers for the private economy, according to state media.
• Japanese PM Kishida said he will reform the asset management sector and will introduce a new programme to assist new entrants to the asset management sector. Furthermore, Kishida said it is important for FX to move stably, reflecting economic fundamentals.

DATA RECAP

• Japanese National CPI YY (Aug) 3.2% vs. Exp. 3.0% (Prev. 3.3%)
• Japanese National CPI Ex. Fresh Food YY (Aug) 3.1% vs. Exp. 3.0% (Prev. 3.1%)
• Japanese National CPI Ex. Fresh Food & Energy YY (Aug) 4.3% vs. Exp. 4.3% (Prev. 4.2%)
• Japanese Manufacturing PMI Flash SA (Sep) 48.6 (Prev. 49.6)
• Japanese Services PMI Flash SA (Sep) 53.3 (Prev. 54.3)
• Australian Manufacturing PMI Flash (Sep) 48.2 (Prev. 49.6)
• Australian Services PMI Flash (Sep) 50.5 (Prev. 47.8)
• New Zealand Trade Balance (NZD)(Aug) -2291.0M (Prev. -1107.0M)
• New Zealand Exports (NZD)(Aug) 4.99B (Prev. 5.45B)
• New Zealand Imports (NZD)(Aug) 7.28B (Prev. 6.56B)