JAPAN: LDP Favourite Talks Up Gov't/BoJ Cooperation, Touts Supplementary Budget
Oct-01 08:04
In an interview with Nikkei, Agriculture, Forestry and Fisheries Minister Shinjiro Koizumi says that "It is important for the government and the Bank of Japan to share the same overall direction", and that "the government's economic policy and the Bank of Japan's monetary policy will work together to realise a virtuous cycle in the economy." Koizumi is viewed as the strong frontrunner for the leadership of the governing Liberal Democratic Party (LDP) ahead of the 4 October election.
- Should he win the contest and be elected as PM, Koizumi says that he will look to pass the supplementary budget for FY2025 as soon as possible, adding, "The public is waiting for us to deliver results quickly on measures to combat rising prices".
- All candidates have faced questions on which parties they would be willing to work with, given the LDP-Komeito coalition is short of a majority in both chambers of the National Diet. The libertarian federalist Japan Innovation Party (Ishin) are seen as the most likely partners for a Koizumi-led LDP.
- This led to questions on Ishin's plan for a second capital city that would function as "an economic centre comparable to the Tokyo area that can function as the capital in the event that Tokyo becomes unable to do so."
- Ishin co-leader, Osaka Governor Hirofumi Yoshimura, said it would be a "key issue" to discuss with the new LDP president. Koizumi said that he agreed on the need for a more decentralised governing structure, but he would need to see the details of the plan first.
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MNI: EUROZONE AUG MANUF PMI 50.7 (50.5 FLASH, 49.8 JUL)
Sep-01 08:00
- MNI: EUROZONE AUG MANUF PMI 50.7 (50.5 FLASH, 49.8 JUL)
GILTS: Bear Steepening, 5s30s Above 150bp
Sep-01 07:59
Gilts follow peers lower early today, with early focus on impending EUR supply, French political risk and ongoing questions surrounding Fed independence.
- Note that manufacturing PMI readings released as of now point to upside risks in the final Eurozone reading (due shortly).
- Fiscal risks continue to dominate locally.
- Futures pierce but fail to consolidate below initial support at the August 27 low (90.22), recovering to ~90.30 as of typing.
- Bears remain in technical control. More meaningful support comes in at the May 22 low (90.11).
- Yields 1.0-3.5bp higher curve bear steepens.
- 5s30s is on track for its first close above 150bp in the current cycle, trading less than 2bp off the Feb ’17 high (152.63bp).
- Final manufacturing PMI data headlines the UK calendar today (see our early morning STIR bullet for more on this week’s calendar).
- A reminder that the DMO will introduce the new 4.75% Oct-35 gilt via syndication this week.
ITALY DATA: Manufacturing PMI Outperforms, Domestically Driven
Sep-01 07:58
- The Italian manufacturing PMI also outperformed expectations in August, albeit to a lesser extent than Spain earlier, at 50.4 (49.8 consensus, 49.8 prior). Release highlights below:
- "Improvement in the health of the sector for the first time in nearly one-and-a-half years [...] noticeable rise in production volumes in August, which was the most marked in almost two-and-a-half years. The renewed uplift in overall order books was only mild, however, as the drag from export performance widened. Net employment decreased again, while business optimism faded."
- "Of the five PMI components, four imparted positive directional influences. However, most prominently, the headline reading was supported by renewed growth in output and new orders."
- "It was clear that the improvement in overall sales was domestic focused, as export business declined at a sharper rate. Panellists noted that trade and geopolitical tensions had continued to dampen international sales."
- On prices: "Latest data showed renewed reductions in input prices and output charges, both of which were only mild in
nature, however. Survey respondents noted that lower energy prices and favourable exchange rate movements had reduced some pressure on costs, which they had pass through to customers in the form of lower charges."
