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MORNING BID EUROPE-China still busy exporting disinflation

A take a look at the day ahead in European and global markets from Wayne Cole

It's been a down day for Asia as it overtakes the post-payrolls fallout on Wall Street, with the Nikkei losing another 1.7% on top of last week's almost 6% slide.

A minimum of S&P 500 futures have recouped early losses to trade up 0.3% and European equity futures are modestly firmer ahead of an all-but-certain rate cut from the ECB on Thursday. Treasury yields have actually come off their lows, while the dollar has restored some ground on the safe-haven yen.

Not helping the mood were misses out on for Chinese inflation information where manufacturer prices dropped 1.8% against forecasts for a 1.4%. fall. CPI rose a yearly 0.6% in August and practically all of that. was food, with goods prices up just 0.2%.

All this is positive for ongoing worldwide disinflation, but. hardly smacks of a long-awaited healing in need at home and. Chinese blue chips fell 1.3%.

The U.S. CPI report for August comes out on Wednesday and. forecasts are for the headline figure to slow to 2.6%, the. lowest because March 2021 and a world far from the peak of 9.1%. The range of forecasts likewise runs from 2.4% to 2.6%, suggesting. the danger is to the downside.

A soft outcome would motivate require the Federal Reserve. to cut by 50 basis points next week, which futures presently. rate at a 31% possibility. A relocation of 25 basis points is 100% priced,. with 112 basis points implied by Christmas.

Fed speakers on Friday did not sound overly keen on an. outsized cut, with Guv Christopher Waller recommending he. would only advocate front-loading reducing if subsequent data. showed weakness in the labour market. There is little in the way. of major tasks information between now and Sept. 18.

The August U.S. unemployment rate of 4.2% and tasks growth of. 142,000, released on Friday, were hardly recessionary, although. the downward modification of 86,000 to the previous 2 months has. markets presuming August will get revised down as well. The. three-month average also slowed to 116,000, which is well short. of the 200,000-odd required to fulfill development in the labour force and. stop the jobless rate from rising.

An included wrinkle for the Fed is that their Nov. 7 conference. comes simply two days after the U.S. presidential election and it. might not be completely clear by then which side has actually won. Deciding. on whether to go by 50 bp in such a politically charged. environment could be a difficult call.

That simply highlights the stakes for the debate between. Harris and Trump on Tuesday evening.

Key advancements that could influence markets on Monday:

- Euro Zone Sentix Index for Sept

- Fireside chat by ECB Board Member Elizabeth McCaul in New. York

(source: Reuters)