MNI US OPEN - RBA Sees Australia Beyond Peak Inflation

NEWS

ECB (MNI): EZ Consumer 3-Yr Inflation Expectations Inch Higher
Euro area consumer inflation expectations for the next 12 months were unchanged at 3.4% in July, the latest ECB survey showed, while expectations for three years ahead edged modestly higher. The outlook for price changes three years ahead edged up to 2.4%, from 2.3% in June, but they still remain well below the perceived past inflation rate, particularly at the three-year horizon. Uncertainty about inflation expectations over the next 12 months was unchanged for the second consecutive month, the Consumer Expectations Survey showed.

ECB (BBG): Lane Says ECB Sees Core Inflation Slowing in Coming Months
ECB Chief Economist Philip Lane offered a cautiously optimistic take on inflation, saying slowing in goods and services gauges are welcome and that underlying pressures will keep weakening. In an interview with Irish website the Currency, he described 2023 as the year of “peak second round” as the effects of prior increases feed through the economy.

EU (MNI): High Debt, Rates, Pose Stability Risk- Klaas Knot
Persistent inflation, strong interest rate rises, tightening financial conditions and slowing growth rates may make it harder for borrowers to service a historically high stock of global debt, Financial Stability Board chair Klaas Knot has warned in a letter to G20 leaders ahead of this week’s New Delhi Summit.

RBA (MNI): Rates Held; Services, China Caution Noted
The Reserve Bank of Australia board said Tuesday Australia had passed its inflation peak despite services prices rising briskly and nodded to the growing risk of China’s slowing economy, following its decision to hold the official cash rate at 4.10% for the third consecutive month. While the board's decision fell in line with market expectations, overnight index swaps responded, cutting peak rate expectations to 4.10%. Ex-RBA officials recently told MNI that the cash rate could plateau at 4.10% for some time.

CHINA (MNI): China Exports To Rebound, Strengthen GDP-Advisor
China’s export growth will likely rebound later in the year and help consolidate GDP over the government's 5% target to 5.6% for 2023, while any additional policy measures should focus on reducing real-estate risk, a senior policy advisor told MNI. “Based on the current policy intensity, the growth rate should reach 5.7% in H2, bringing the whole year growth to 5.6%,” said Yu Miaojie, president at Liaoning University and a deputy to the National People's Congress. Yu also acts as a trade policy consultant to the Ministry of Commerce and participates in State Council economy advisory meetings.

CHINA (BBG): China Seeks $40 Billion to Drive Chipmaking, Reuters Says
China is seeking to raise a $40 billion fund to bankroll investments in domestic chipmaking and research, Reuters reported, citing unidentified people familiar with the matter. The state-backed China Integrated Circuit Industry Investment Fund is establishing its third and largest investment pool of about 300 billion yuan ($41.1 billion), Reuters reported. The country’s finance ministry may contribute 60 billion yuan to the fund, which won approval to operate in recent months, Reuters cited the people as saying. The process may take time and it’s unclear who the potential investors were or when it might launch, it added.

TURKEY (BBG): World Bank in Talks to Double Turkey Exposure to $35 Billion
The World Bank is in advanced talks to potentially double its exposure to Turkey to $35 billion to help stabilize the Middle East’s largest non-oil economy, according to people with direct knowledge of the matter. The discussions include a World Bank pledge of as much as $18 billion for projects over the next three years, in addition to more than $17 billion in programs already in place, the people said, asking not to be named because the talks aren’t public.

DATA

MNI: EUROZONE JUL PPI -0.5% M/M, -7.6% Y/Y

MNI: EUROZONE FINAL AUG SERVICES PMI 47.9 (FLASH 48.3); JUL 50.9
MNI: GERMANY FINAL AUG SERVICES PMI 47.3 (FLASH 47.3); JUL 52.3
MNI: FRANCE AUG FINAL SERVICES PMI 46.0 (FLASH 46.6); JUN 47.1
MNI: ITALY AUG SERVICES PMI 49.8 (FCST 50.4) JUL 51.5

MNI: UK BRC AUG BY VALUE SHOP SALES LFL +4.3% YY, TOTAL +4.1% YY

NORWAY: Housing price increases slow in August

• Eiendom Norge house price data slowed in August, printing at a monthly 0.4% NSA and -0.6% SA (vs 1.1% NSA and 0.2% SA in July). Prices fell 1.6% Y/Y NSA.
• This was the weakest August in the history of housing price statistics, and the weak trend is expected to continue in Autumn, according to the release.
• The slower pace of increase was expected per last month's release notes and the Norges Bank noted the same in their August decision, with focus turning to next Thursday's Monetary Policy Report with updated economic and rate path projections.

FOREX: AUD Undermined by RBA, Weak Chinese Markets

• The dollar is dominant in early Tuesday trade, with the greenback favoured as US participants return from their Labor Day bank holiday. Markets retain a generally risk-off backdrop, with US equities futures under pressure thanks to the resumption of the climb higher in US yields. The 10y yield has resumed trade and risen back above the 4.20% - weighing on global appetite.
• The resulting USD strength is pressing major pairs lower, with GBP/USD plumbing a new pullback low at 1.2528 to expose 1.2487 and the 200-dma at 1.2422.
• AUD takes up the bottom position in G10, with AUD weaker against all others following the RBA rate decision overnight. The bank kept policy unchanged, with markets reading into the bank's view that the peak in inflation has now passed. Persistent weakness in Chinese markets also undermined the currency, putting AUD/USD within range of key support and the bear trigger of 0.6365.
• The data schedule is topped by US July factory orders, accompanied by the final durable goods orders release. Central bank speakers include ECB's Visco and Schnabel.

EGBs: Bunds Twist Steepen

Bund futures sit a little above early session lows, after stabilisation in the space fades.

• The contract is -20, while the major German cash benchmarks are 0.5bp richer to 3.5bp cheaper as the curve twist steepens.
• Bund futures have looked through initial firm support (131.70) on a couple of occasions, with bears looking to force a more meaningful break to expose the August 23 low (131.20).
• Most other core/semi-core EGB curves see steepening moves (mix of bear and twist).
• Spreads (including peripherals) vs. 10-Year Bunds are little changed to a touch wider on the day.
• Schatz ASW registered a fresh multi-month low this morning, with Commerzbank suggesting that “Bund scarcity premiums reflected in swap spreads look set to align more with the cheap levels in repo markets.”
• The latest ECB consumer inflation expectations survey saw a marginal uptick in the 3-Year inflation expectations component, while the 1-Year metric was unchanged. This wasn’t a needle mover for market, but provided another reason not to buy.

GILTS: Futures Back Towards Early Lows, Syndication Prices Tight, Sized At Lower End Of Exp.

Gilt futures trade back towards early lows alongside Bunds, with little in the way of headline flow to note.

• The contract is -15 or so (initial technical support remains untested), while cash benchmarks twist flatten, running 1.5bp cheaper to 1bp richer.
• The lower tier consumer health checks (BRC & Barclaycard metrics) released overnight did little for the space, while the mark higher in the final services PMI release (49.5 from 48.7 flash) will have provided some light downside pressure.
• The syndication of the 4.00% Oct-63 gilt has seen the spread set at the tight end of guidance and issuance sized at GBP5bn (the bottom end of our own expectations, orderbook closed in excess of GBP59bn, including JLM interest of GBP5bn).
• SONIA futures print +1.0 to -1.5 through the blues, twist steepening, while BoE-dated OIS is little changed to ~2bp softer on the day.
• The local data docket is essentially non-existent for the remainder of the day.

EQUITIES: Chinese Markets Slide, Led by Hang Seng

• Japan's NIKKEI closed higher by 97.58 pts or +0.3% at 33036.76 and the TOPIX ended 4.12 pts higher or +0.17% at 2377.85.
• Elsewhere, in China the SHANGHAI closed lower by 22.691 pts or -0.71% at 3154.369 and the HANG SENG ended 387.25 pts lower or -2.06% at 18456.91.
• Across Europe, Germany's DAX trades lower by 49.27 pts or -0.31% at 15775.95, FTSE 100 lower by 4.05 pts or -0.05% at 7448.68, CAC 40 down 44.79 pts or -0.62% at 7235.03 and Euro Stoxx 50 down 18.51 pts or -0.43% at 4261.42.
• Dow Jones mini down 24 pts or -0.07% at 34858, S&P 500 mini down 7.5 pts or -0.17% at 4514, NASDAQ mini down 46.75 pts or -0.3% at 15468.

COMMODITIES: Gold and Crude Weighed by Firm Dollar

• WTI Crude down $0.14 or -0.16% at $85.4
• Natural Gas down $0.14 or -4.99% at $2.627
• Gold spot down $11.03 or -0.57% at $1931.29
• Copper down $3.9 or -1.01% at $381.25
• Silver down $0.5 or -2.07% at $23.4849
• Platinum down $12.65 or -1.32% at $944.4