The Chinese focused equity markets are higher overnight led by SHPROP +3.5%, HSI +1.2% and Nikkei +1.6%. New etf's, cutting the trading levy in half to 0.05%, ultimately more amendments around the edges of the economy but still not the big bang fiscal push the market and the global economy is searching for. (FT, WSJ, ZeroHedge)
Despite the positive performance of Asian equity markets, there was limited reaction in the USD (CNH 7.2930, AUD 0.6430, EUR 1.0818).
Recapping Jackson Hole speeches (Newsquawk, FT, BoE, Odd Lots)
Is the US still Exceptional?
It may be another slow start to a summer trading week as the UK enjoys a long weekend of intermittent showers, but after some depressing summer lulls, the energy is starting to return to the market and boy, do we have a raft of US data this week to guide the streets fixed income pricing. We will quickly find out whether the US is indeed expectational, whether the August fixed income move is more than just an erratic summer squeeze in thin liquidity and if the Fed will have to hike one more time in Q4.
Aug 29: US Corp t+2 Flow
Aug 29: Jolts Job Openings exp 9450k (prior 9582k)
Aug 30: ADP exp 198k (prior 324k)
Aug 30: Core PCE Index exp 3.8% (prior 3.8%)
Aug 31: Month End Asset Manager Portfolio Rebalancing
Aug 31: Initial Jobless Claims 235k (prior 230k)
Aug 31: PCE Core Deflator MoM 0.2% (prior 0.2%) and YoY 4.2% (prior 4.1%)
Sept 01: NFP exp 168k (prior 187k, BBG Whisper 171k)
Sept 01: UER exp 3.5% (prior 3.5%)
Sept 01: AHE MoM exp 0.3% (prior 0.4%), YoY exp 4.3% (prior 4.4%)
Sept 01: ISM Manufacturing exp 47 (prior 46.4)
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What's in the price? We enter this data heavy week with the USD at 2month highs, the US as the principal growth engine of the world, JPow maintaining the higher for longer mantra and the probability of a soft landing steadily increasing.
Sept/Nov: there's 15-16bps priced across the two meetings, so the market is implying a 65% chance of one hike... 20% in Sept and 45% in Nov.
Dec 2024: 4 cuts in the curve across 2024 to bring the implied rate down to 4.3%.
10year real rates: (BBG ticker USGGT10Y Index) is at 1.9% and hovering just below the ytd high of 2.02% and levels last seen in 2009.
2s10s: Has steepened in August off the March / July double bottom of -110bps. Having been as high as -65bps its now back flatter to -85bps.
The bar to further US outperformance is naturally high (GDPNow 5.9%) but betting against the US labour market has been a fool's errand year to date. So, what happens if the data is inline? How aggressive have the USD longs built up? Will the back-to-school trade be US Exceptionalism?
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Following Jackson Hole, there's limited top tier data or speakers today
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