Ukraine Fighting Surges as Russian-Backed Forces Gain (Bloomberg)
Disappearing euro zone inflation set to heighten ECB concerns (Reuters)
Nowotny Hints at ECB Forecast Cut as Euro-Area Economy Lags (Bloomberg)
Japan's Inflation Unchanged, Highlighting BOJ's Challenge (Bloomberg)
Obama Cools Talk of Strikes Against Islamic State in Iraq or Syria (WSJ)
Eurozone inflation for August was a slight miss to the downside, probably the worst outcome for risk assets because it might not be enough of a downturn to spur new action at the ECB meeting next week. Inflation fell to 0.3% from 0.4% last month, as expected. This morning, Governing Council member Nowotny alluded to the idea that the central bank could lower its staff economic outlook next week, which would implicitly be the precursor for further action. He is also one of the more hawkish members of the Council, and has turned decidely more negative on the economy and more supportive of Mr Draghi. Unemployment was also higher in the Eurozone,
The reaction in risk assets is what we expected following an inline-to-slight-miss. German Bunds are mildly lower, equities are mostly flat, and the EURUSD is up a fewpips. The Italian FTSEMIB, the de facto sentiment gauge of further QE, is the leading performer on a risk-adjusted basis. RBS announced this morning that it expects the ECB to make a 10bps rate cut at the meeting next week, but Draghi may nominate investors for the ice bucket challenge by pouring cold water over their QE hopes (via Alberto Gallo).
The reports of Russia's involvement in Ukraine continue to be hazy. Russian Foreign Minister Lavrov said this morning that the photos of Russian troops inside Ukraine were from a computer game. So, there's that. NATO said yesterday that it believes as much as 1,000 active-duty Russian troops are operating within Ukraine using advanced weaponry. However, Russia and Ukraine's border services will meet tomorrow to discuss how to tighten the border between the two countries.
In response to much of what has been going on, current Ukrainian Prime Minister Poroshenko called for the government in Kiev to immediately begin a debat on possible NATO membership for the country. This would likely anger Russia and Putin the most, because hthe main goal behind its actions in the country have been to prohibit just this act. Some of Ukraine's soldiers have been encircled in the southeastern part of the country after a new offensive was launched by Russia, which has caused Ukraine's calls for help from NATO to grow louder. Putin today asked the separatists to open a humanitarian corridor to allow Ukrainian soldiers that they have encircled to retreat, an odd move.
To wrap things up, barring Russia invading a mall in New Jersey, today should be a snoozer.
- Japan jobless rate (Jul) up to 3.8% vs 3.7% expected, prior 3.7%
- Japan national CPI YoY (Jul) down to 3.4% vs 3.4% exp, prior 3.6%
- Japan Tokyo CPI (Aug) unchanged at 2.8% vs 2.7% exp, prior 2.8%
- Japan retail sales MoM down -0.5% vs 0.3% exp, prior 0.4%
- Japan industrial production MoM (Ju prelim) up 0.2% vs 1.0% exp, prior -3.4%
- Eurozone CPI YoY (advance Aug) down to 0.3% vs 0.3% exp, prior 0.4%
- Eurozone unemployment rate (Jul) unchanged at 11.5% vs 11.5% exp, prior 11.5%
US Economics (Time Zone: EST)
08:30 Personal Income (July) - 0.2% expected 0.3%, prior 0.4%
08:30 Personal Spending - -0.1%, exp 0.2%, prior 0.4%
08:30 PCE Deflator MoM - +0.1%, exp 0.1%, prior 0.2%
08:30 PCE Deflator YoY - +1.6%, exp 1.6%, prior 1.6%
08:30 PCE Core MoM - +0.1%, exp 0.1%, prior 0.1%
08:30 PCE Core YoY - +1.5%, exp 1.5%, prior 1.5%
09:00 ISM Milwaukee (Aug) - 59.63, exp 60.00, prior 63.87
09:45 Chicago PMI (Aug) - 62.4 exp 56.5, prior 52.6
09:55 University of Michigan Confidence (August final) - 82.5, exp 80.0, prior 79.2
No major earnings scheduled
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