Notes/Observations
Risk aversion sentiment fails to hold following another North Korea missile as ongoing tensionon Korean Peninsula would not lead to any actual military action
BOE dove Vlieghe ruffles hawkish feathers to move in-line with recent BOE statement
Small explosion reported on London Underground Train; being treated as terror event
Overnight
Asia:
North Korea fires a missile from Pyongyang towards the east, missile passes over Japan
Japan PM Abe: North Korea launch is absolutely unacceptable; international community must send clear message to North Korea over provocative actions; requested emergency UN meeting; North Korea has to be shown there is no bright future for it if it continues down this path; UN sanctions need to be firmly and fully implemented
South Korea President Moon: Dialogue with North Korea is impossible at this point. Will not sit idle on North Korea provocation. South Korea has power to ‘pulverize’ should North Korea provoke
South Korea Military said to have conducted ‘firing drill’ in which it fired missile in a test into the sea, coinciding with North Korea’s missile launch
US Sec of State Tillerson: China and Russia must indicate their intolerance for these reckless missile launches by taking direct actions of their own
Europe:
ECB’s Weidmann (Germany): ECB should not miss the precise time to normalize policy. Reiterated General Council view that monetary policy to remain exceptionally easy after QE. ECB should ease up on the gas, but not brake hard
Germany Fin Min Schaeuble: ECB must prepare exit from policy very cautiously to prevent markets from overreacting. ECB extraordinary monetary policy with low interest rates and bond purchases (QE) was necessary to overcome economic crisis
Americas:
Bank of Canada Wilkins: Not ideal to give markets full plan on rates, every rate decision is ‘live’. Only moving rates when everyone expects it would not lead to good policy outcomes.
UN Security Council to meet at 3 pm EDT on Friday, Sept 15thregarding the most recent North Korea missile test
Economic data
(NO) Norway Aug Trade Balance (NOK): 12.4B v 14.3B prior
(CN) China Aug New Yuan Loans (CNY): 1.09T v 950.0Be
(CN) China Aug Aggregate Financing (CNY): 1.48T v 1.280Te
(CN) China Aug M2 Money Supply Y/Y: 8.9% v 9.1%e; M1 Money Supply Y/Y: 14.0% v 14.8%e; M0 Money Supply Y/Y: 6.5% v 6.0%e
(IT) Italy July General Government Debt: €2.300T (record high) v €2.281T prior
(EU) Euro Zone July Trade Balance (Seasonally Adj): €18.6B v €20.3Be; Trade Balance NSA(unadj): €23.2B v 26.6B prior
(EU) Euro Zone Q2 Labour Costs Y/Y: 1.8% v 1.4% prior
Fixed Income Issuance:
(ZA) South Africa sold total ZAR800M vs. ZAR800M indicated in I/L 2029, 2038 and 2050 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.1% at 381.6, FTSE -0.7% at 7247, DAX flat at 12536, CAC-40 flat at 5225, IBEX-35 -0.2% at 10341, FTSE MIB flat at 22274, SMI -0.4% at 9040, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes:
European Indices trade mostly lower being led lower once again by the FTSE 100 which trades lower by over half a percent following on from the steep drop yesterday as hawkish commentary from BoE Dove Vlieghe which pushed Sterling up a further 80 pips.
On the corporate front AB Science and Santhera Pharma trade sharply lower following negative opinions from the CHMP, whilst H&M trades higher on a better Autumn outlook. Pub Chain JD Weatherspoons outperforms after Full year results and current trading.
Equities
Consumer discretionary [H&M [HMB] +2.4% (Prelim Q3), JD Weatherspoon [JDW.UK] +9.7% (Earnings), Sthree [STHR.UK] +1.4% (Earnings)]
Industrials: [DX Group [DX.UK] -12% (Cuts outlook due to incorrect accounting practice)]
Technology: [ DIGIA [DIGIA.FI] -7.2% (Cuts outlook)]
Healthcare: [UCB [UCB.BE] +1.3% (UCB’s newest antiepileptic drug approved by FDA ), Santhera Pharmaceuticals [SANN.CH] -54% (Negative CHMP opinion), Bavarian Nordic -50% (Independent data monitoring committee recommends discontinuation of Bavarian Nordic’s Phase 3 study of PROSTVAC in metastatic prostate cancer), AB Science -13% (CHMP has adopted negative opinion for masitinib marketing authorization in indolent systemic mastocytosis after reassessment)]
Speakers
BOE’s Vlieghe (dove): Might need to adjust BOE interest rate in the coming months (in-line with MPC majority). Time for a rate hike was approaching; slack being eroded, wage pressure gently growing. Still a risk that Brexit would have a biggest effect on economy
ECB’s Lautenschlaeger (Germany): Conditions are all in place for inflation to reach a stable trend towards our goal: below, but close to, 2% in the medium term. Accommodation still needed to help bring inflation back to stable trend towards target. Must help markets get idea on how QE exit will look like
IMF’s Lipton: Risks that Ukraine could go backwards in terms of IMF program
North Korea Foreign Ministry official: Latest missile launch is a normal part of strengthening the nuclear deterrent
China govt official reiterated urge to find peaceful and political solution for Korean Peninsula. To continue to strictly implement UN resolution and opposes North Korean violations of UN resolution
Currencies
GBP/USD continued to build upon recent gains in the aftermath of the BOE rate decision and policy statement. BoE sent a very hawkish message with the majority of members agreeing that some withdrawal of monetary stimulus is likely to be appropriate over the coming months. The market probability for a November hike is now just over 50%. GBP/USDstrengthened to above 1.35 level as BOE dove Vlieghe turned hawkish
JPY currency (Yen) off session best level despite another missile launch from North Korea on Friday. Dealers note that current thinking of markets is the ongoing tension on Korean Peninsula would not lead to any actual military action
Fixed Income
Bund futures trade at 161.74 up 10 ticks, with technical levels remaining in focus. Continued downside targets 161.42 while upside resistance stands initially at 162.07, followed by 163.27.
Gilt futures trade at 125.59 down 37 ticks continuing to underperform following yesterday’s BOE rate decision, which prompted a sharp repricing of UK rate expectations after breaking below the 126.53 support level. Continued downside eyeing 124.91. Upside targets 127.90 then 128.24.
Friday’s liquidity report showed Thursday’s excess liquidity fell to €1.766T from €1.786T and use of the marginal lending facility rose to €115M from €107M.
Corporate issuance saw $7.9B come to market via 6 issuers headlined Bank of Nova Scotia $1.4B 2-part senior unsecure note offering and BP Capital Markets $3B 4-part senior unsecured note offering. For the week ending Sep 13th IG Funds reported high-yield outflows of $95.5M v inflows of $641M in the prior week.
Looking Ahead
(BE) Belgium Debt Agency (BDA) announces size of upcoming OLO auction
06:00 (IE) Ireland Q2 GDP Q/Q: +1.3%e v -2.6% prior; Y/Y: No est v 6.1% prior
06:00 (IE) Ireland Q2 Current Account Balance: No est v €8.6B prior
06:00 (UK) DMO to sell combined £4.5B in 1-month, 3-month and 6-month Bills on Fri, Sept 15th (£1.5B, £1.0B and £2.0B respectively)
06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to cut 1-Week Auction Rate by 50bps to 8.50%
06:45 (US) Daily Libor Fixing
07:00 (IL) Israel Aug CPI M/M: +0.3%e v -0.1% prior; Y/Y: -0.1%e v -0.7% prior
07:30 (IN) India Weekly Forex Reserves
08:00 (IS) Iceland Aug Unemployment Rate: No est v 3.4% prior
08:00 (DE) German Chancellor Merkel with France PM Philippe in Berlin
08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming issuance
08:00 (IN) India announces upcoming Bill auction (held on Wed)
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Sept Empire Manufacturing: 18.0e v 25.2 prior
08:30 (US) Aug Advance Retail Sales M/M: 0.1%e v 0.6% prior; Retail Sales Ex Auto M/M: 0.5%e v 0.5% prior; Retail Sales Ex Auto and Gas: 0.3%e v 0.5% prior; Retail Sales Control Group: 0.2%e v 0.6% prior
09:00 (CA) Canada Aug Existing Home Sales M/M: No est v -2.1% prior
09:00 (BE) Belgium July Trade Balance: No est v €0.1M prior
09/15/2017 09/16 (RU) Russia Aug Industrial Production Y/Y: No est v 1.1% prior
09:15 (US) Aug Industrial Production M/M: 0.1%e v 0.2% prior; Capacity Utilization: 76.8%e v 76.7% prior; Manufacturing Production Y/Y: +0.4%e v -0.1% prior
10:00 (US) Sept Preliminary University of Michigan Confidence: 95.0e v 96.8 prior
10:00 (US) July Business Inventories: 0.2%e v 0.5% prior
11:00 (CO) Colombia July Industrial Production Y/Y: +4.1%e v -1.9% prior
11:00 (CO) Colombia July Retail Sales Y/Y: 2.8%e v 1.0% prior
11:00 (EU) Potential sovereign ratings
(AT) Austria Sovereign Debt to be rated by S&P
(CY) Cyprus Sovereign Debt to be rated by S&P
(DK) Denmark Sovereign Debt to be rated by S&P
(FI) Finland Sovereign Debt to be rated by S&P
(IE) Ireland Sovereign Debt to be rated by Moody’s
(LX) Luxembourg Sovereign Debt to be rated by S&P
(NG) Nigeria Sovereign Debt to be rated by S&P
(PT) Portugal Sovereign Debt to be rated by S&P
(RU) Russia Sovereign Debt to be rated by S&P
13:00 (US) Weekly Baker Hughes Rig Count data
14:00 (CO) Colombia Central Bank Aug Minutes
(CO) Colombia Aug Consumer Confidence: -6.0e v -9.5 prior
(PE) Peru July Economic Activity (Monthly GDP) Y/Y: 2.7%e v 3.6% prior
(PE) Peru Aug Unemployment Rate: 6.9%e v 7.1% prior
