US stocks gained after firm data, dovish ECB rate hike and PBoC RRR cut - Newsquawk Asia-Pac Market Open

• US stocks rallied with risk sentiment spurred by several factors including strong US data release as Retail Sales topped forecasts and Initial Jobless Claims printed lower than expected, while participants also digested a dovish ECB rate increase in which the language suggested the end of the hiking cycle and the PBoC recently announced a RRR cut.
• USD gained following the hot US data including better-than-expected Retail Sales, firmer PPI and below-forecast jobless claims which helped lift the DXY above 105.00, while it also benefitted from EUR weakness.
• Looking ahead, highlights include New Zealand Business NZ PMI, Chinese Industrial Production & Retail Sales, PBoC MLF Operation.

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LOOKING AHEAD

• Highlights include New Zealand Business NZ PMI, Chinese Industrial Production & Retail Sales, PBoC MLF Operation.

US TRADE

• US stocks rallied with risk sentiment spurred by several factors including strong US data release as Retail Sales topped forecasts and Initial Jobless Claims printed lower than expected, while participants also digested a dovish ECB rate increase in which the language suggested the end of the hiking cycle and the PBoC recently announced a RRR cut.
• SPX +0.84% at 4,505, NDX +0.82% at 15,474, DJIA +0.96% at 34,907, RUT +1.4% at 1,867.
• Click here for a detailed summary.

NOTABLE HEADLINES

• White House officials are preparing emergency aid to protect smaller firms that supply US auto manufacturers if workers strike, according to the Washington Post.
• General Motors (GM) said it made another offer to the UAW for a new labour deal on Thursday morning and it remains in talks with the goal of avoiding strikes.

DATA RECAP

• US Retail Sales MM (Aug) 0.6% vs. Exp. 0.2% (Prev. 0.7%)
• US PPI ex. Food/Energy MM (Aug) 0.2% vs. Exp. 0.2% (Prev. 0.3%)
• US PPI ex. Food/Energy YY (Aug) 2.2% vs. Exp. 2.2% (Prev. 2.4%)
• US PPI Final Demand MM (Aug) 0.7% vs. Exp. 0.4% (Prev. 0.3%)
• US PPI Final Demand YY (Aug) 1.6% vs. Exp. 1.2% (Prev. 0.8%)
• US Initial Jobless Claims (W 09 Sep) 220.0k vs. Exp. 225.0k (Prev. 216.0k, Rev. 217k)
• US Continued Jobless Claims (W 02 Sep)1.69M vs. Exp. 1.70M (Prev. 1.68M)

FIXED INCOME

• US Treasuries ultimately declined after whipsawing on the dovish ECB guidance and hot US data.

FX

• USD gained following the hot US data including better-than-expected Retail Sales, firmer PPI and below-forecast jobless claims which helped lift the DXY above 105.00, while it also benefitted from EUR weakness.
• EUR weakened to a 6-month low in the aftermath of the ECB meeting where the central bank hiked rates by 25bps to a record high although its language was viewed as dovish and suggested it could be the end of the rate hike cycle.
• GBP was pressured owing to the dollar strength which dragged GBP/USD to a floor around the 1.2400 level.
• JPY predominantly held its ground against the firmer dollar which saw USD/JPY briefly test 147.00 to the downside where it then rebounded off support.

COMMODITIES

• Crude resumed their ascent to fresh YTD peaks on Thursday, with hot US economic data and China RRR cut emboldening the upward momentum despite a rip higher in the dollar.
• US President Biden said he is going to get gas prices down again.
• US Presidential Energy Security Adviser Hochstein said they are seeing record oil production in the US and will continue to refill the SPR, while he added that Libyan floods are impacting oil production there.
• Russia's plan for a gas hub in Turkey is reportedly facing delays over who should control it, according to Reuters sources.
• Iranian Revolutionary Guards Navy seized two Panama-flagged ships smuggling USD 1.5mln of fuel, according to Tasnim.

GEOPOLITICAL

• Ukrainian President Zelensky is to attend the United Nations General Assembly next week and meet with US President Biden, according to a Ukrainian official via NBC.
• Ukraine’s military said it damaged two Russian patrol ships in the Black Sea in a morning attack.
• Russian Defence Ministry said Russia destroyed an uncrewed Ukrainian boat in the Black Sea.
• EU's Borrell said he received a letter from France, Britain and Germany announcing the intention not to lift Iran sanctions on October 18th.
• Iran is ready to implement a Qatar-mediated prisoner trade and funds deal with Washington.
• A Houthi delegation is to visit Saudi Arabia for ceasefire talks with Saudi officials, according to Reuters sources.

ASIA-PAC

NOTABLE HEADLINES

• PBoC cut the RRR by 25bps effective September 15th with the weighted average deposit reserve ratio of financial institutions to be approximately 7.4%. This excludes financial institutions that have implemented a 5% deposit reserve ratio, while it will maintain the basic stability of the exchange rate, firmly support the sustainability of the real economy and promote the economy to achieve effective qualitative improvement and reasonable quantitative growth.
• PBoC's RRR cut is to release over CNY 500bln of liquidity, according to Chinese state media.
• US senior House Republicans urge the US Commerce Department to toughen export controls against Huawei and SMIC citing the new advanced smartphone from Huawei.
• RBA watcher McCrann stated following the Australian jobs data that there will likely be no more rate hikes but don’t hold your breath for cuts, according to the Herald Sun.

EU/UK

NOTABLE HEADLINES

• ECB hiked rates by 25bps to lift the Deposit Rate to 4.0% and the Refinancing Rate to 4.5%, while it stated rates have reached levels, that maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target.
• ECB Staff Economic Projections showed headline inflation forecasts were upgraded for 2023 and 2024 but growth downgraded for 2023-2025 with headline inflation to average 5.6% in 2023 (prev. 5.4%), 3.2% in 2024 (prev. 3.0%) and 2.1% in 2025 (prev. 2.2%), while Core inflation seen at 5.1% in 2023 (prev. 5.1%), 2.9% in 2024 (prev. 3.0%) and 2.2% in 2025 (prev. 2.3%). ECB expects the economy to grow 0.7% in 2023 (prev. 0.9%), 1.0% in 2024 (prev. 1.5%) and 1.5% in 2025 (prev. 1.6%).
• ECB President Lagarde said the economy is likely to remain subdued in the coming months and noted during the Q&A that "a few" members did not draw the same conclusions and would have preferred to have paused although a "solid majority" agreed with today's decision. Lagarde said the 'door is not open or closed' on future moves and she is not saying they are currently at peak rates, while she added that 'as long as necessary' and 'substantial contribution' cannot be pinned down. Furthermore, she replied the ECB did not discuss what 'long enough' means and will continue to be data dependent when asked what 'sufficiently long' refers to and said this was not even a word that they pronounced when asked about rate cuts.
• French Finance Minister Economic Forecasts maintained 2023 growth estimate at 1% and cut 2024 growth forecast to 1.4% (prev. 1.6%), while inflation is seen at 4.9% for 2023 and 2.6% for 2024.