Morning Report

September 1, 2023

“A Nationwide report indicated today that British home prices are likely to decline by an unexpectedly high 4% this year due to high borrowing and living costs. Elsewhere, the much-anticipated US non-farm payrolls report this afternoon will be closely watched by investors and the Federal Reserve.”

Sam Cornford, Partner – Head of Trading

Main Headlines

A Chinese delegation held talks with a senior US military official at a recent conference, indicating a potential improvement in military relations amid strained US-China ties due to national security issues, such as in Taiwan. The conference, co-hosted by the United States and Fiji, featured senior military leaders from 27 countries. Admiral John Aquilino, the head of US Indo-Pacific Command, engaged with Chinese military representatives during the event in Fiji earlier this month, as reported by Pentagon spokesman Brigadier General Patrick Ryder.

British home prices are predicted to decline by 4% this year, a larger drop than previously anticipated. This decrease is attributed to high interest rates and living costs, which are deterring potential buyers from entering the market, despite a shortage of housing supply. During the COVID-19 pandemic, average prices surged by over 20% due to historically low interest rates and increased demand for larger living spaces. However, it is expected that prices will only drop by approximately 5% from their peak to the lowest point. Recent data from the Bank of England revealed a housing market slowdown, with mortgage approvals decreasing more than expected in July. Property website Zoopla also indicated a projected 21% decline in house purchases this year, marking the lowest level since 2012.


Sterling is stronger against the Dollar and weaker against the Euro this morning. Events likely to generate price action from the Sterling side are limited today, although the housing market slowdown adds to growing signs of a weakening British economy. BoE Chief Economist Huw Pill is due to speak again at a panel in South Africa later after comments earlier this week in which he said the policy rate profile would likely look like ‘table mountain’, mirroring expectations of other BoE officials that rates are likely to stay elevated for some time to bring inflation sustainably down.


The Euro is well bid against most major currencies overnight. It shed some of its gains yesterday amid slowing inflation data and comments from ECB hawks acknowledging the risks that excessive rate hikes cause unnecessary damage to the economy. Final manufacturing PMIs were released for much of the Eurozone this morning, of which the overall figure was revised slightly lower (43.5 from 43.7) but remained very much within the same contractionary range. Italian and Irish second quarter GDP are the next data points to look out for.


The Dollar is weaker than most major currencies in the early morning trade. With PCE inflation ticking up slightly from the previous month yesterday to 3.3%, and jobless claims slipping below forecast at 228,000, the Federal Reserve will be looking for evidence of labour market cooling in this afternoon’s much anticipated non-farm payrolls report. The report gives early details on job creation during the previous month, which is a leading indicator of consumer spending and economic activity. Further manufacturing PMI survey data and the current unemployment rate are also on the calendar today.


The S&P500 finished with a small loss on Thursday, while notching its first monthly slide since February. Aside from consolidation after this year’s rally, traders cited concern that the Fed will keep interest rates higher for longer to prevent a flare-up in price pressures. US Treasury 10-year yields extended their retreat after recently hitting levels last seen in 2007. China’s economic troubles prompted three of the country’s largest banks to cut interest rates on Friday across a range of deposits in an effort to ease some of the pressure on their margins. China’s stock market shook off its recent gloom in the Asian morning, with the blue-chip index’s (.CSI300) real estate (.CSI000) and financial (.CSIFN) sub-indexes leading the charge.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: UK Aug. Nationwide House Prices
8:30 a.m.: Switzerland Aug. CPI
8:30 a.m.: Sweden Aug. Manufacturing PMI
9:15 a.m.: Spain Aug. PMI
9:30 a.m.: Switzerland Aug. PMI
9:45 a.m.: Italy Aug. PMI
9:50 a.m.: France Aug. PMI
9:55 a.m.: Germany Aug. PMI
10:00 a.m.: Italy 2Q GDP
10:00 a.m.: Euro-area Aug. PMI
10:30 a.m.: UK Aug. PMI
12:00 p.m.: Ireland 2Q GDP
12:00 p.m.: UK to sell bills
2:30 p.m.: US Aug. Nonfarm Payrolls
3:45 p.m.: US Aug. PMI
3:45 p.m.: Fed’s Mester speaks
4:00 p.m.: US July Construction Spending; Aug. ISM Manufacturing
Fed’s Bostic, BOE’s Pill, SARB’s Kganyago and IMF’s Gopinath on panel in South Africa
Ambrosetti Forum in Cernobbio, Italy


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