POWER: Italy Approves Nuclear Energy Delegation Bill

UniCredit write “investor demand for EU bonds has proven healthy so far this year but does not seem to have been sufficient to convince markets to ask for their inclusion in sovereign bond indices. Investors remain concerned that issuance activity by the EU will drop after the NGEU program is phased out after next year”.

• In their view, “common funding will be more frequent than it was before the pandemic, as the EU will want to capitalise on the success of the NGEU program and to address issues that require common action, such as defence, competitiveness and environmental goals. The recent launch of a new defence program, Security Action for Europe (SAFE), the funding of which could require up to EUR150bn, is a good example in this respect. More frequent issuance activity would enhance EU bond liquidity and would encourage demand from investors looking for higher yields than those offered by Bunds or seeking less idiosyncratic risk than that associated with OATs”.

• MNI: UK AUG SERV PMI 54.2 (53.6 FLASH, 51.8 JUL)

The Eurozone final August services PMI was revised down a touch to 50.5 (vs 50.7 flash, 51.0 prior). This was mostly driven by Germany, which saw its services reading revised down to 49.3 (vs 50.1 flash). The composite reading was essentially unchanged from the flash at 51.0 (vs 51.1 flash, 50.9 prior) - a one-year high.

• We estimate the France/Germany services PMI at 49.5 (vs 49.9 flash, 49.7 prior). Meanwhile, the ex-France/Germany measure also softened to 52.2 (vs 52.0 flash, 53.2 prior).
• The details of the Eurozone-wide report didn’t add much new relative to the flash, and the data has unsurprisingly had little impact on market pricing.
• From the report:
  • Composite:" While the pace of expansion ticked up to a one-year high, it remained sluggish overall. The service sector held back overall growth, with output rising only marginally. Nevertheless, for the first time since May 2024, private sector firms reported greater volumes of incoming new work and employment growth was its quickest in 14 months"
  • Services: “ Business expectations were optimistic as companies anticipated higher activity over the coming 12 months. The overall level of positive sentiment was down fractionally on the month and remained below its long-term average”.
  • Services: “Inflationary pressures picked up across the euro area service sector. Input cost inflation rose to a three-month high, while charges increased at the fastest pace since March”