Notes/Observations
UK Retail sales beats estimates, Sterling spikes as Gilts fall on increased rate hike bets
Over 200 killed by Mexico Earthquake
Markets trade in narrow range ahead of FOMC rate decision
Overnight
Asia:
Japan trade surplus ahead of consensus, US exports grew at fastest pace in 33 months
RBNZ announced new regulations in order to ensure that a bank can continue to operate in a situation where a key service provider fails
RBA’s Ellis noted that Global wage growth and inflation may take awhile to pick up; Household debt an exacerbating factor is shock occurred
Europe:
UK August Retail sales shows strong growth handily beating expectations, back month revisions were also higher; Cable spikes while Gilts plunge
BoE Agents Summary notes impact of Sterling drop on goods inflation may have peaked
UK PM May reportedly intends to offer a €20B Brexit payment to fill post Brexit EU budget hole
UK Foreign Sec Johnson reigns back threat to resign if PM May goes against his Brexit demands
ThyssenKrupp signs MOU with Tata Steel on JV
Americas:
President Trump vowed to destroy North Korea if forced to defend itself or its allies in remarks made at the UN
(US) Sen Corker (R-TN): Republicans have reached a tentative agreement on tax reform and budget
(MX) 7.4 magnitude earthquake reported in southern Mexico, including reported shaking in Mexico City, at least 248 killed
Energy:
API date showed build in Crude inventories while Gasoline and Distillate showed drawdowns
Economic data
(UK) AUG RETAIL SALES (EX AUTO/FUEL) M/M: 1.0% V 0.1%E; Y/Y: 2.8% V 1.4%E
Retail Sales (includes Auto/fuel) M/M: 1.0% v 0.2%e; Y/Y: 2.4% v 1.1%e
(DE) Germany Aug PPI M/M: 0.2%e v 0.1%e; Y/Y: 2.6% v 2.5%e
Fixed Income Issuance:
(DK) Denmark sells total DKK2.77B in 2020 and 2027 Bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 flat at 382.3, FTSE -0.1% at 7270, DAX +0.1% at 12573, CAC-40 +0.1% at 5243, IBEX-35 -0.5% at 10327, FTSE MIB -0.1% at 22408, SMI +0.2% at 9110, S&P 500 Futures flat]
Market Focal Points/Key Themes: European Indices trade mixed in a quiet session ahead of todays FOMC rate decision. The FTSE reversed earlier slight gains on the back of a strong Retail Sales report in the UK, with strength in Sterling impacting the index. Retailer Inditex reported results slightly below expectations, impacting the shares while Kingfisher outperforms as results came in ahead of views, elsewhere Diageo trades lower following their trading update. Thyssenkrupp shares trade higher as an MOU is signed regarding a JV with Tata Steel, whilst Uniper and EON trade higher on reports Fortum nearing a bid for EON’s stake in Uniper. Looking ahead to the US morning, General Mills is the one notable earner.
Equities
Consumer discretionary [ Inditex [ITX.ES] -1.7% (Earnings), Kingfisher [KGF.UK] +6% (Earnings), Diageo [DGE.UK] -2.2% (Trading update)]
Materials: [Babcock [BAB.UK] +4.2% (Earnings)]
Industrials: [Thyssenkrupp [TKA.DE] +3.2% (Signs MOU for JV with Tata Steel)]
Healthcare:[Kiadis Pharma [KDS.NL] +7.8% (Receives FDA Regenerative Medicine Advanced Therapy (RMAT) Designation for ATIR101), Bone Therapeutics [BOTHE.FR] +4.0% (All patients meet primary endpoint in ALLOB® Phase I/IIA delayed-union study interim analysis)] Energy [Uniper [UN01.DE] +3.4% (EOAN.DE] +1.8% (Fortum reportedly nearing a bid for EON’s stake valued at $9B – press)]
Speakers
Sweden Fin Min Andersson: risks to domestic economy include developments in China, Brexit and political uncertainty in the US
Currencies
GBP/USD surges on strong retail sales beat, tentatively testing the 1.36 level, the move however may have been exacerbated as dealers noted orderbooks were thin ahead of the Fed meeting
Major currency pairs trade in tight ranges as markets await how the Fed will provide details about trimming its balance sheet. Euro hovers around 1.20 and dollar yen above the 111 level.
USD/ZAR (rand) maintains slight gain following cooler inflation data. Expectations are for SARB to cut rates by 25bps at tomorrow’s rate decision
Fixed Income
Bund futures trade at 161.24 up 18 ticks as markets await the Fed Meeting and ECB speakers. Continued downside targets 161.03 while upside resistance stands initially at 162.07, followed by 163.27.
Gilt futures trade little changed at 125.03 giving up its earlier gains after retail sales for August top expectations. Continued downside eyeing 124.91. Upside targets 127.90 then 128.24.
Wednesday’s liquidity report showed Tuesday’s excess liquidity fell to €1.747T from €1.752T and use of the marginal lending facility fell to €86M from €102M.
Corporate issuance saw $6.9B come to market via 7 issuers headlined by Sunoco Logistics $2.25B 2-part senior unsecured note offering and AEP Texas Inc $0.7B 2-part senior unsecured note offering
Looking Ahead
07:00 (US) MBA Mortgage Applications w/e Sept 15th: No est v 9.9% prior
08:05 (UK) Baltic Dry Bulk Index
10:00 (US) Aug Existing Home Sales: 5.46Me v 5.44M prior
10:30 (US) Weekly DOE Crude Oil Inventories
14:00 (US) FOMC Interest Rate Decision: Expected to hold Target Rate Range at 1.00-1.25% – 15:00
(MX) Mexico Citibanamex Survey of Economists
