Morning 9-1

Chinese Yuan touched the highest level since 5-2019, it has been a one way train the last few weeks +~3% over last month

 Where is the Inflation? “Eurozone flash inflation data for August surprised on many fronts but the underlying message confirms that Covid-19 is deflationary. The headline inflation rate is negative at -0.2% while the core is at an all-time low of 0.4%The headline inflation print can be explained away but it is going to be difficult for the ECB to ignore the core rate that is now at a low. “(IFR News)  What does this mean for Markets  first thoughts are more stimulus  even though it isn’t working now more of it is the answer I guess   Further from IFR News “There is now a high probability that a PEPP increase will be bought forward to October with our expectation being that it will be upsized by a further €500bn with purchases extended until end-2021. We will look at ECB speakers and more importantly the ECB meeting next week for clues as to whether an increase in PEPP is more likely in October than December. “

 You would think Euro would trade heavy on this news, but Tailwinds behind Dollar weakness are strong, for Now. Euro running into resistance at 1.20  Big handle change the reason  for any Resistance no major technical significance, December Gold back above 2k,Copper continues to trend higher helped by Inventories held at LME at lowest levels since 2005 (BBG) The Cash -futures spread in backwardation and of Course Weak dollar .

  The best August for US stocks in 34 years wasn’t just another spate of Big Tech outperformance. Of the 10 best performing S&P companies, four of them were airline, cruise ship, or casino operators – Bloomberg…. Global stocks post their best August on record (data back to 1988).(Mizuho)  Let’s see what September Brings, So far Stocks are green Nasdaq +.1%,Spoos Little changed Stoxx +.5% Dax +.6% Zoom said Quarterly revenue jumped  355%,Both Goldman and BTIG upgraded stock(BBG)   Stock +41% pre market ISM data at  9:00  and Fed Governor Brainard speech at 12:00 are the highlights scheduled.  Treasury Yields continue to trend higher hmmm next week another round of long end auctions will need to be monitored closely

 News:

  Another round of Chinese PMI Data beat expectation, all else equal makes sense then that Yuan Is rallying at the Expense of Dollar.  China’s Caixin manufacturing PMI for August comes in at 53.1, the fourth consecutive month of growth, vs expected 52.5, and previous 52.8. The manufacturing PMI for August is the highest reading since Feb 2011. Chinese factories reported the first increase in new export orders this year in August as overseas countries eased COVID-19 restrictions to kick start their economies. “A mirror factory in the Chinese city of Yiwu, which supplies to retail giants such as Walmart and Home Depot, has been inundated with new business beyond the factory’s current operating capacity, with the management sending the entire sales team down to factory floors, a 23-year-old salesman at the company told Reuters.” China’s official data released on Monday showed that the services sector expanded in Aug at the fastest pace since Jan 2018 (Mizuho)

  • SPA Aug Mfg. PMI: 49.9 vs 52.8 cons
  • -ITA Aug Mfg. PMI: 53.1 vs 52.0 cons
  • -FRA Aug Mfg. PMI: 49.8 vs 49.0 cons
  • Source: German govt expects the economic impact from virus to be smaller than expected this year; April’s f/c was a fall of 6.3% in GDP, Eco Min Alteier presents updated f/c’s at 10.00am bst 
  • RBA: left cash rate unch at 0.25% as expected: maintained 3y govt bond yield target at 0.25%, target will stay in place until progress made on employment/infla; increased size of term funding facility which will be available for longer, until Jun 2021; inflation expected to avg 1-1.5% over the next couple of years(broker talk)

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