EU CONSUMER CYCLICALS: CONSUMER CYCLICALS: Tapestry; Judge rules in favour of FTC (#3)
Oct-25 07:54
- €31s -4.2pts/+70bps at €102.4
- €27s -2.2pts/+80bps at €102.3
- €25s unch at €102.0
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UK DATA: Brightmine data point to lower earnings growth than previously expected
Sep-25 07:52
- Brightmine pay data was published yesterday (seemingly ahead of the scheduled release time of this morning) and showed a meaningful decline in pay settlements across the past two months.
- Last month's release saw the median pay rise at 4.5%Y/Y in the three months to July but that data has since been revised down to 4.0% - and the data for the 3-months to August has stayed at 4.0%.
- In fact there appear to be a number of revisions to the prior data. Looking at private sector data (reading from the graph) it appears as though between Jan-Jun readings were around 4.9%Y/Y before falling to 4.8% in July and 4.7%Y/Y in August. Previously private sector pay in both January and February were above 5% and there was no downtick in July.
- Conversely public sector pay rises have been revised higher for both April and May - and now show a more gradual decline.
- We are yet to hear back from Brightmine regarding the reason for the revisions, although we do note that the survey size is much larger than previously - now 900k employees with 67 pay awards are covered while in the previous three months 744k employees with 48 pay settlements were covered. Bear in mind that the survey sizes does vary depending on when pay settlements are agreed.
- Without knowing the reasons for some of these large revisions, it is hard to know how impactful they will be for the MPC - but on the whole this is a positive development and should give more confidence that pay awards are moving in the "right" direction for policy normalisation.
RIKSBANK: SEK Little Changed Post Riksbank , Rates Likely To Trough At 2.25%
Sep-25 07:49
The Riksbank made a dovish tilt to its August guidance, including opening the door to 50bps cuts in its policy statement. However, markets already came into the meeting pricing around 100bps of cuts through the remainder of 2024, so the announcement hasn’t been enough to induce any material weakness in SEK.
- The decision was unanimous amongst the Executive Board, but more details on to what extent a 50bp cut was considered at this meeting will need to wait for the minutes next week.
- The September MPR rate path indicates that the policy rate is likely to reach 2.25% at the end of this cutting cycle (between Q4 2025 and Q1 2026).
- This would be slightly below the Riksbank’s most recent (albeit from 2017) neutral rate estimate of 2.50-4.00%.
- We noted in our preview that we think the Riksbank is concerned enough by the weak growth outlook to justify cutting rates a little below neutral, but don’t think there is enough evidence to bring nominal rates below 2% over the course of next year – in contrast to market pricing.
- From a first glance, there doesn’t seem to be any updated estimates of neutral in the September MPR.
CROSS ASSET: Equities are recovering off the lows
Sep-25 07:46
- Some small selling interest going through in US Treasuries, and in turn in the SFR strip, still fairly limited early volumes across Govies, and tight ranges.
- EU and US Equities are bouncing off the lows, albeit just a few points for now, but focus is still on the US Emini (ESZ4) and the new printed record high last Week at 5797.50.
