Asian markets this morning are quite divergent, the Nikkei 225 falling on a strong yen as the US and China overnight both put into action retaliatory tariffs – 15% on various Chinese goods, on one hand, and 5% on US crude oil (the first time the commodity has been targeted since the trade war began), on the other. The Shenzhen composite is up a full 2.4% while the Hang Seng lost another 0.93% as companies lose patience with ongoing protests and heavy-handed government tactics against. Overnight, China produced conflicting manufacturing data, the government’s China Federation of Logistics and Purchasing putting the PMI at 49.5, while Markit’s Caixin marker is back into positive territory at 50.4 in August. Saturday’s non-manufacturing PMI expanded a 1/10th of a point to 53.8. Japan last week saw unemployment drop to 2.2% in August and construction orders increased by 27%, while actual housing starts contracted by 4.1% and retail trade continued to contract – another 2% in July YoY. Overnight, Japan’s Nikkei Manufacturing PMI came in at 49.3, its 4th straight month of contraction in a row. Building permits in Australia contacted by 9.7% in July MoM.
All EU sentiment markers except services improved in August despite a 0.2% contraction in Germany’s CPI and a 4,000 job increase in unemployment. On Friday, the nation’s retail sales for July contracted by 2.2% MoM. As expected, France is taking up the slack with a 0.4% increase in consumer spending, following a 0.2% decrease the month before, a tenth percent improvement in Q1’s GDP, and a 0.5% improvement in August’s CPI MoM. June’s sales & orders and July’s PPI in Italy in June contracted, while this morning’s Markit Manufacturing PMI from Spain shows a ½% improvement to a still contractionary 48.8 in August. In the UK, mortgage approvals increased by 1.2K but consumer credit fell to £0.897 bn in July from £1.075 bn the month before. After managing to tack on 200 pips over the week, the pound lost 100 (1%) on Wednesday when Boris Johnson received the Queen’s approval to suspend Parliament for a month in a bid to prevent anti-no-deal Brexit legislation. The Bank of England now estimates that the pound is 17% undervalued – even with a hard Brexit priced in; the Euro dropped to a 2-year low on the announcement.
US markets are closed today for Labour Day, after Trump last week tweeted that US-China trade talks will reconvene in September despite overnight tariffs enactments. Most US indicators last week continued southwards, with continuing jobless claims up 20K and the annualized GDP for Q2 down a tenth. Core personal consumption expenditures also lost 0.1% and July’s pending home sales contracted by 2.5% MoM in July. Personal spending doubled to 0.6% in July while income fell from 0.5% in June to 0.1% in July. And while the Chicago PMI in August crossed back into expansion at 50.4, the Michigan consumer sentiment index fell 2 points to 89.8.
Despite another huge drop in the Baker Hughes rig count to 742, oil lost nearly $2 on the barrel on Friday, and continues to trend sideways in a 50 cent band as OPEC output rose on increased supplies from Iraq and Nigeria. Also on Friday, Saudi Arabia’s Aramco said that its board had decided to place its NY listing on hold for legal reasons, leaving Riyadh and London on the board as contenders for the honour. Were Aramco listed in the US, its board members could be subject to terrorism-related litigation, putting the company’s assets at risk. Meanwhile, Poland and Ukraine have agreed to accept US help in weening themselves from their dependence on Russian gas supplies.
|07:45 AM GMT – Italy||Markit Manufacturing PMI (Aug). At 7:50 – France, 7:55 – Germany, 8:00 the EU, and at 8:30 – the UK|
|23:01 PM GMT – UK||BRC Like-For-Like Retail Sales (Aug)|
|23:50 PM GMT – Japan||Capital Spending (Q2) Foreign Reserves, and Monetary Base|
|01:30 AM GMT (+1) Australia||Current Account Balance (Q2) & Retail Sales (Jul). RBA Interest Rate Decision at 4:30.|
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