US consumer confidence rises in August

The US Conference Board consumer confidence index rose in August, reaching its highest level since February, with a value of 103.3, up from a value of 101.9 in July. Measures of both 6-month ahead expectations and current conditions rose over the month, with lower inflation and the promise of cuts in interest rates on the horizon appearing to offset rising concerns about the labour market.

Following the release of the Ifo business climate survey earlier in the week, the latest reading of the German GfK consumer confidence measure also declined. The advanced consumer confidence index fell to a value of -22 in September, after seeing a slight improvement in August, highlighting the continued weakness facing the German economy. Separately, the second release of Q2 2024 German GDP confirmed that the economy shrank 0.1% q/q, with a combination of consumer spending and investment dragging the headline lower.

Canada has joined the US and the European union in imposing tariffs on Chinese-made electric vehicles. A 100% tariff will be applied on these vehicles from 1 October, while there will also be a 25% tariff imposed on imports of Chinese steel and aluminum.

Today’s Economic Data and Events

• 10:00 US MBA mortgage applications (w/e 23 Aug)

Fixed Income

• Moves in US Treasury yields were mixed yesterday. The yield on the 2yr bond fell after a strong auction, declining 4bps to 3.8992%, while the 10yr yield rose by less than a basis point to reach 3.8216%.
• Yields were higher across major European bond markets on Tuesday. The 10yr German Bund rose 4bps to 2.287%, while the 10yr Gilt rose 9bps to 3.9969%.

FX

• The dollar spot index fell 0.3% on Tuesday. Sterling strengthened against the dollar, reaching its highest level since March 2022, with traders betting that the Fed will cut rates more quickly than the Bank of England. GBPUSD ended the day 0.6% higher at 1.3261, while EURUSD gained 0.2% to 1.1184. USDJPY fell 0.4%, closing at 143.96.
• Commodity currencies gained against the dollar. AUSUSD rose 0.3% to 0.6793, NZDUSD gained 0.8% to 0.6252, and USDCAD dropped 0.32% to reach 1.3444.

Equities

• Moves in US equity markets were fairly muted on Tuesday, with investors waiting for Nvidia results on Wednesday. The Dow Jones was broadly flat, while the S&P 500 and NASDAQ both gained 0.16%.
• European market moves were mixed on the day. The Eurostoxx 50 was broadly flat, the CAC 40 fell 0.32%, and the DAX gained 0.35%. The UK’s FTSE 100 added 0.21%.
• Locally, the DFM added 0.43% and the DFM fell 0.18%.

Commodities

• Oil prices fell back on Tuesday, after having rallied sharply on Monday following political upheaval in Libya. Despite heightened geo-political tension, several major banks (including JP Morgan and Goldman) have cut their oil price forecasts in recent days, in part driven by continued lackluster Chinese growth. Brent futures fell 2.3% to USD 79.55/b, while WTI declined by 2.4% to USD 75.53/b.