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Nordea Markets analysts suggest that not much is expected to happen on the economic policy front in China this month but they still expect growth to gradually slow down.

• “Although China's soft policy stance will continue, we do not see a need for its leaders to push a panic button, as the negative impacts of the trade war seem to have been largely offset by its stimulus policies. Although the trade negotiations are expected to continue in October, we maintain our view that a profound agreement between the US and China will be almost impossible to achieve in the coming months.
• Most economic indicators confirm that growth is slowing down in China, probably more than the official GDP numbers indicate.
• Just like in other parts of the world, manufacturing is the sector where the weaker momentum is most visible. On the other hand, the general tone in the household sector remains mainly positive, and there are no signs of a sudden stop in the important real estate sector either.
• We reiterate our growth rate estimates of 6.2% for 2019 and 5.9% for 2020.
• As Beijing is dealing with an escalated trade war and a looming economic slowdown, the CNY has made its biggest monthly drop since China unified its dual exchange rates. This may help offset some of the effects of the US tariffs, but it also raises the risks of capital flight and financial panic.”

Jane Foley, the senior FX strategist at Rabobank, notes that given the optimism that washed over market sentiment last week it stands to reason that the AUD is the best performing G10 currency on a 5-day view.

• “Given Australia’s geographical position and its strong trade links with China, it is often traded as a loose proxy to the latter’s economic outlook. The recent recovery in the AUD belies the fact that in the year to date the AUD has dropped around 2.71% vs. the USD. That said, this move can be largely attributed to the fact that the USD is one of the best performing G10 currencies in the year to date. The drop in the value of the AUD this year is likely to be insufficient to put much of a dent in the debate about the need for further policy stimulus in Australia in the months ahead.
• The proactive nature of the RBA’s rate cuts in June and July did have some impact on undermining the value of the Aussie. That said, the AUD is still positioned towards the top of the table in terms of G10 currency performance in the year to date.
• Frydenberg has indicated that the government was negotiating a new agreement with the RBA to “strengthen” the conditions around the central bank's inflation target. Currently, the Bank is mandated to target CPI inflation between 2% and 3%. The implication is that the RBA is likely to be under pressure to ease monetary conditions further. Given that the rates may soon be approaching a floor, the debate about whether QE could be used in Australia is likely to remain alive despite Lowe’s conclusion that “we risk just pushing up assets prices”. We expect AUD/USD to edge towards the 0.65 area on a 12-month view.”

Analysts at TD Securities have changed their call and now expect 50bps of easing in 2020, with rate cuts in January and April.

• “While the Canadian economy has thus far been resilient to global headwinds, recent actions taken by the US and China will result in a larger drag on growth once new tariffs go into effect. This should prompt the BoC to provide more stimulus to offset the impact of global headwinds, although recent messaging suggests there is a very high bar to do so by October.
• Underscoring the BoC's (relatively) constructive outlook is a healthy starting point; Q2 GDP was stronger than expected at 3.7%, and even with an undesirable composition (domestic demand contracted by 0.7%) the output gap is nearly closed. Core CPI remains target at 2.0% on average and labour market strength has shown no signs of abating, which supports the narrative that soft Q2 consumption was a one-off.”

National Institute of Economic and Social Research (NIESR) reported on Wednesday its estimates revealed the UK’s economy is on course to grow by 0.3 percent in Q3, following a 0.2 percent contraction in the second quarter. This is higher than the 0.2 percent advance that NIESR had penciled in last month.

Dr. Garry Young, Director of Macroeconomic Modelling and Forecasting, noted: “It looks like there has been a welcome resumption of economic growth in the third quarter, roughly offsetting the fall in the second quarter. But it is not clear how long growth will continue. Only the services sector is expanding, primarily to meet higher demand from consumers driven by increased household incomes fuelled by rising real wages.  But there is a limit to how much further real wages can grow without a pick-up in investment and productivity, and this seems unlikely in the near term.”

Deutsche Bank's analysts list down the day-by-day calendar for the week ahead, containing all the key economic releases and events for markets.

• “Tuesday

1. Data: China August CPI, PPI; France July industrial production, manufacturing production; Italy July industrial production; UK July unemployment, Canada August housing starts, July building permits; US July JOLTS job openings.

• Wednesday

1. Data: South Korea August unemployment; US weekly MBA mortgage applications, August PPI, final July wholesale inventories; Canada Q2 capacity utilization rate.

• Thursday

1. Data: UK August RICS house price balance; Japan August PPI, July core machine orders, tertiary industry index; Germany final August CPI, France final August CPI, Italy Q2 unemployment; Euro area July industrial production; US August CPI, weekly initial jobless claims.
2. Central Banks: ECB policy decision and President Draghi press conference; Central Bank of Turkey policy decision.
3. Politics: US Democratic primary debate

• Friday

1. Data: Japan July capacity utilization, final July industrial production; Euro area July trade balance; US August retail sales, preliminary September University of Michigan sentiment, July business inventories.
2. Politics: Eurogroup meeting.”

U.S. stock-index futures rose on Monday, supported by expectations of monetary stimulus from central banks as well as trade optimism.

Global Stocks:

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Analysts at the Royal Bank of Scotland (RBS) note that the U.S. non-farm payrolls surprised on the downside in August, rising a tepid 130k, while the June and July were also marked down.

• “Taking into account temporary hiring for the 2020 census survey, the headline figure for August is overstated. The unemployment rate was unchanged at 3.7% in August. Encouragingly, the participation rate ticked higher to 63.2 last month, signalшng more workers entered the labour force - a good sign for US growth near-term. Average earnings posted a decent 3.4% increase y/y in August.
• Alongside modest inflation, real incomes increased healthily last month. The consumer appears alive and well, at least for now, lessening the chances of a 0.5% Fed funds cut later this month.”

HP (HPQ) downgraded to Mkt Perform from Outperform at Bernstein; target $20

• There is a slowdown in the world economy, but U.S. is the bright spot 
• Trade talks will take place in DC late September on a lower level and in early October at a higher level
• President Trump is "perfectly happy" to continue tariffs if China does not agree to a good deal

Analysts at TD Securities note the NAB Business Survey for August is going to be the key economic release for Tuesday’s Australian session.

• “The softening in the employment subcomponent from -5pts to 0 drove business conditions lower by 2 pts with retail and manufacturing under pressure. Tax cuts may help to boost confidence but we think global growth/trade concerns are more likely to have dominated.
• The main components of the July survey that registered drops were trading conditions -1pt, employment -5pts, forward orders -3pts, and capacity utilization from 82.1% to 80.9%.”

Analysts at TD Securities note that China’s August trade data was generally weak, with exports falling -1.0% y/y (TD 5.7%, mkt 2.2%) and imports falling -5.6% y/y (TD -5.3%, mkt -5.6%), resulting in a smaller than expected trade surplus of $34.84bn from an upwardly revised surplus of $44.58bn in July.

• “China’s FX reserves rose by $3.48bn to $3.107trn in August. However, reserves growth would have been even bigger had it not been for adverse valuation effect (due to a stronger USD), which according to our estimates would have deflated reserves by $7.27bn in August. FX reserves would have grown by $10.75bn had it not been for adverse valuations.”

• We will continue to promote high-quality development of trade

• UK parliament will be prorogued at the close of business today
• Lawmakers should vote for an election today to let the people decide on Brexit
• Says lawmakers should face consequences of their actions and take part in election
• PM wants to work with EU leaders to achieve a deal to leave on October 31
• PM has set out that we are working on a variety of ideas for Brexit talk
• Moment of decision will come at the EU summit on October 17-18

Analysts at TD Securities note that the UK GDP posted a 0.3% m/m gain in July, with fairly broad-based strength, easily beating consensus for a 0.1% increase.

• “Despite the downturns in the PMIs so far in Q3, the hard data suggests that the UK economy should avoid a mid-year recession with a positive Q3 outcome.”

Carsten Brzeski, the chief economist at ING, notes that Germany's exports increased by 0.7% month-on-month (seasonally and calendar adjusted) in July from -0.1% MoM in June. Imports dropped by 1.5% MoM from 0.7% MoM in June. 

• "As a result, the trade balance widened to €20.2 billion in July. Not adjusted for seasonal and calendar effects, the trade balance widened to €21.4bn from €16.6bn in June. Since the start of the year, exports have still dropped by 0.1% MoM on average every single month. 
• When talking trade in Germany, everyone immediately thinks of the trade conflict between the US and China. Interestingly, however, it is not the direct but rather the indirect impact from the ongoing trade conflict, which currently weighs on German exports. In fact, German exports to China and the US have performed better than exports to other eurozone countries in the first half of the year compared with the first half of 2018. While exports to the rest of the eurozone were only up by 0.5%, exports to both the US and China were each up by more than 4%. Looking at the EU, German exports to Scandinavian and Baltic countries suffered significantly, while exports to Eastern European countries remain an important driver for growth. The economic stagnation in Italy left a big mark on German trade, with exports to Italy down by 1.5%. The US is still the single most important export market for Germany, followed by France. While this currently is good news, it is also a double-edged sword as it shows how vulnerable the German economy is to possible US tariffs. Nevertheless, what is hurting German exports the most right now is not the direct impact from the US-Chinese trade conflict but the uncertainty, which has spread across the globe and has also paralyzed many European economies.
• Looking ahead, however, the US-China trade battle remains important for the outlook for German exporters. This is not just because of the ongoing conflict but also because of a possible conflict between the US and the EU, with President Trump already joking about tariffs on cars, and future trends in the Chinese market for automotives. The currency is another channel through which the trade conflict can harm the German economy. In August, the nominal effective exchange rate of the euro was still close to its 2018-average, providing little support for exports. However, over the last few weeks, the effective exchange rate has lost some ground.
• Following and analyzing the German economy requires a high capacity for suffering these days. This morning’s trade data brings a very weak ray of sunshine. Nothing more but luckily also nothing less."

• Need to define the reform agenda as soon as possible

The Bank of France retained its growth forecast for the third quarter amid an improvement in confidence in the manufacturing sector.

The bank continues to see a 0.3 percent expansion in the three months to September, same as its initial estimate. The French economy expanded 0.3 percent sequentially in the second quarter.

Survey data from the bank showed that the manufacturing business confidence rose to 99 from 96 in July. However, manufacturers expect production to grow at a slower pace in September. The confidence indexes in services and construction were stable in September.

• Structural forces unrelated to monetary policy are likely to keep rates low

• BOE unlikely to be able to cut rates as it did in the previous downturn

• BOE analysis rules out taking rates into negative territory

• Does not believe that a recession is overdue

• Not much room for the UK gilt yields to fall much further, so more QE unlikely to provide much more stimulus.

• BOE firepower is less than before previous recessions.

• If you change BOE 2% inflation target, could create higher perceived risk that it will be changed again in future.

• Helicopter money could put central bank independence at risk.

Sales of sedans, sport utility vehicles, minivans and multipurpose vehicles in August fell 9.9% from a year earlier to 1.59 million units, the China Passenger Car Association said.

Automakers reeling from the industry’s longest downturn in three decades continue to face headwinds as the economy slows and trade tensions with the U.S. persist. To help stimulate demand, China has rolled out a series of supportive measures to encourage consumption -- the latest one coming last month, when the government issued guidelines to loosen car-purchase restrictions. But the slide continues, battering carmakers’ earnings. 

Separately, Indian car sales tumbled 41% -- the most on record -- in August amid a prolonged slump in that country. In the U.S., which was experiencing its own downturn, automakers posted a much-needed rebound last month -- though deliveries were helped by the inclusion of Labor Day weekend in August.

• We will bring forward other ideas to address the complexity of the Irish border

• There is a way through that will satisfy Ireland

• A deal can be done by 18 October, let's do it together

• I want to get a deal

• We have "an abundance" of proposals to break Brexit impasse

• But will not share said proposals in public

• Progress has to be made on political declaration as well as the withdrawal agreement

• We have the ideal amount of time to get this done

• Can make "huge progress" if we really focus

The economic situation in Euroland remains tense, Sentix survey showed on Monday. 

The Sentix economic indices improved slightly in September to -11.1 points from -13.7 points in August. This is due to a clear recovery of the expected values to -12.8. The assessment of the situation, on the other hand, is still falling to -9.5 points. The Euro zone thus remains close to a recession.

In Germany, on the other hand, it must now be assumed that the economy will no longer grow. The expected values, which can recover more clearly, do give us some hope. But as long as these bear a negative sign, a trend reversal is not yet in sight.

There are also few positive reports from the other regions of the world. With the exception of Latin America, which is sliding deeper into recession, all overall indices are rising slightly. To date, however, this has only hid stagnation at a weak level and no real trend reversal.

According to the report from Office for National Statistics (ONS), GDP grew by 0.3% in July 2019, with all components apart from agriculture showing growth. Economists had expected a 0.1% increase

ONS also said that GDP remained level in the three months to July 2019, following a contraction of 0.2% in Quarter 2 (Apr to June) 2019

The services sector was the only positive contributor to GDP growth in the three months to July 2019, growing by 0.2%. Stronger growth in July 2019 in each of the main components of GDP, along with the weak production growth in April moving into the base period, meant that rolling three-month GDP growth was no longer negative, at 0.0%. Output in both the production and construction sectors contracted, by 0.5% and 0.8% respectively. Within production, manufacturing fell by 1.1%.

Commenting on today’s GDP figures, Head of GDP Rob Kent-Smith said: "GDP growth was flat in the latest three months, with falls in construction and manufacturing. While the largest part of the economy, services sector, returned to growth in the month of July, the underlying picture shows services growth weakening through 2019. The trade deficit narrowed due to falling imports, particularly unspecified goods (including non-monetary gold), chemicals and road vehicles in the three months to July."

The U.S. deputy energy secretary told CNBC that America wants to achieve energy dominance regardless of what happens to oil prices.

“Our energy policy is not designed to affect price, that’s not we do for a living. And yet it does because of our production numbers,” Dan Brouillette told CNBC at the World Energy Congress in Abu Dhabi.

“The president has an ‘all of the above’ strategy. He talks often about energy dominance and the world often asks: what does that mean? It just simply means that we are going to produce as much energy as we can, as cleanly as we can and as affordably as we can.”

“And whatever happens to the world price of oil, whatever happens to the world price of whatever, electricity, it doesn’t really matter, then so be it,” Brouillette said.

In the last decade, the U.S. has more than doubled oil production to 12.3 million barrels a day, making it the world’s largest producer.

It now appears set to flood the oil market with even more crude, putting downward pressure on prices at a time when it is already struggling to cope with too much supply.

Britain is not ready for its next recession and must consider changes to the way it manages its economy to see off the downturn when it comes, the Resolution Foundation, a think-tank, said.

UK GDP shrank in the second quarter of this year and the economy is struggling to pick up momentum as Brexit approaches.

The Resolution Foundation said the Bank of England could muster only a quarter of the firepower needed in a typical recession because its key interest rate is so low and its bond-buying program is likely to prove less effective now.

Therefore, the government should be more explicit about how it could pump money into the economy in a downturn and revisit its tax and benefit rules to cushion households against income shocks which have been weakened since the last slump.

The think-tank also called for a pipeline of shovel-ready infrastructure projects which could be sped up in a crisis and it said direct payments could be made to households if necessary.

“Now is the time to plan for the next recession – because the one thing we know for certain is that it will happen. The UK today faces the highest recession risk since the financial crisis, and lower-income households are now more exposed to a downturn than they were back then,” James Smith, Research Director at the Resolution Foundation, said.

FX Strategists at UOB Group see EUR/USD extending the consolidation for the time being.

24-hour view: “EUR traded sideways between 1.1018 and 1.1056 last Friday, narrower than our expected range of 1.0095/1.1060. Momentum indicators are mostly ‘neutral’ which suggest EUR could continue to trade sideways for now. Expected range for today, 1.1000/1.1050”.

Next 1-3 weeks: “EUR tested the minor 1.1080 resistance (high of 1.1084) before dropping back quickly to end the day unchanged at 1.1033. The price action bolstered our view from yesterday (05 Sep, spot at 1.1035) wherein the current movement is viewed as the “early stages of a consolidation phase”. In other words, we continue to expect EUR to trade sideways between 1.0950 and 1.1110”.

Analysts at Danske Bank highlight the key event risks that will hog the limelight in the day ahead.

“Today all eyes remain on Brexit and whether a snap election will be called as UK lawmakers are casting a second vote today. We will also watch out for the monthly UK GDP estimate for July, giving us a first hint where the economy is moving at the start of Q3. Based on PMIs, we cannot rule out the UK has fallen into a 'technical recession' (i.e. two quarters of GDP contraction)", Danske Bank said.

"In the euro area Sentix investor confidence for September is due for release. In August sentiment plunged to the lowest level in five years amid fears about an escalating trade war and we would be surprised to see an increase today amid the growing uncertainty on the global geopolitical stage.” Danske Bank added.

Moody's Investors Service says in a new report that recent measures by the Chinese government (A1 stable) for a number of troubled banks indicate that financial system stability remains the overriding priority, although support will become increasingly differentiated.

"We have in recent months seen rapid government response to episodes of bank stress, as regulators aim to alleviate market fear of contagion risk amid ongoing shadow banking and interbank activity," says Nicholas Zhu, a Moody's Vice President and Senior Credit Officer.

Moody's report forms part of an ongoing series of research that provides in-depth analysis on China's contingent liabilities, and the risks posed to financial stability.

"We expect the regulators will continue to reduce shadow banking and interbank activity as part of the policy goal of maintaining financial system stability. As a result, we expect authorities will become increasingly selective in providing support, especially where banks do not pose significant systemic risk," adds Zhu.

Moody's differentiated approach to assessing government support for banks in China takes into account that the probability of government support will likely become more tiered, and assumes lower levels of government support for small regional banks.

Veteran investor Mark Mobius is bullish on gold as central banks around the world cut interest rates.

“Physical gold is the way to go, in my view, because of the incredible increase in money supply,” said Mobius, the founding partner of Mobius Capital Partners.

“All the central banks are trying to get interest rates down, they are pumping money into the system. Then, you have all of the cryptocurrencies coming in, so nobody really knows how much currency is out there,” he told CNBC.

Amid expectations of slowing global growth, central banks around the world have been lowering interest rates, as they seek to boost money supply in the economy, stoke demand and provide an impetus to growth.

Mobius recommends that investors hold 10% of their portfolios in physical gold, with the rest invested in dividend yielding equities. That’s especially if the dollar gets weaker. 

In his view, “the U.S. government, the Trump White House, does not want a strong dollar.” “They are certainly going to try to weaken the dollar against other currencies and of course, it’s a race to the bottom. Because, as soon as they do that, other currencies will also weaken. People are going to finally realize that you got to have gold, because all the currencies will be losing value,” he added.

According to the provisional data from Federal Statistical Office (Destatis), Germany exported goods to the value of 115.2 billion euros and imported goods to the value of 93.7 billion euros in July 2019. Destatis also reports that German exports increased by 3.8% and imports decreased by 0.9% in July 2019 year on year. After calendar and seasonal adjustment, exports were up 0.7% and imports down 1.5% compared with June 2019.

The foreign trade balance showed a surplus of 21.4 billion euros in July 2019. In July 2018, the surplus amounted to 16.4 billion euros. In calendar and seasonally adjusted terms, the foreign trade balance recorded a surplus of 20.2 billion euros in July 2019.

In July 2019, Germany exported goods to the value of 64.2 billion euros to the Member States of the European Union (EU), while it imported goods to the value of 52.8 billion euros from those countries. Compared with July 2018, exports to the EU countries decreased by 0.5%, and imports from those countries by 1.6%. Goods to the value of 41.3 billion euros (-0.2%) were exported to the Euro area countries in July 2019, while the value of the goods imported from those countries was 34.9 billion euros (-3.4%). In July 2019, goods to the value of 22.9 billion euros (-1.1%) were exported to EU countries not belonging to the Euro area, while the value of the goods imported from those countries was 18.0 billion euros (+2.0%).

EUR/USD

Resistance levels (open interest**, contracts)

$1.1198 (1674)

$1.1171 (2061)

$1.1137 (938)

Price at time of writing this review: $1.1027

Support levels (open interest**, contracts):

$1.0974 (3867)

$1.0933 (2956)

$1.0889 (1844)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date October, 4 is 71968 contracts (according to data from September, 6) with the maximum number of contracts with strike price $1,1100 (4513);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2484 (518)

$1.2433 (245)

$1.2397 (182)

Price at time of writing this review: $1.2275

Support levels (open interest**, contracts):

$1.2177 (872)

$1.2107 (1049)

$1.2068 (695)

Comments:

- Overall open interest on the CALL options with the expiration date October, 4 is 14212 contracts, with the maximum number of contracts with strike price $1,2500 (1893);

- Overall open interest on the PUT options with the expiration date October, 4 is 12224 contracts, with the maximum number of contracts with strike price $1,1900 (1537);

- The ratio of PUT/CALL was 0.86 versus 0.86 from the previous trading day according to data from September, 6

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.