Notes/Observations
- Euro rallies on strong PMI data out of Germany, France and the Eurozone
- European Indices trade mixed on continuing Geopolitical tensions in regards to North Korea
- ECB Chief Draghi notes that they are not there on inflation yet
Overnight
Asia:
- Geopolitical tensions rose again in the far east with North Korea responding to President Trumps executive order for additional US sanctions by considering the ‘highest level of countermeasures’
- It was later reported that North Korea could conduct a Hydrogen-bomb test which has weighed on markets.
- S&P downgrades Hong Kong sovereign rating to AA+ from AAA (follows recent downgrade of China); Outlook revised to Stable from Negative; cites potential for spillover risks
- China’s metals, including iron ore, have traded lower by over 2%, following reports that the Shanghai Metals Exchange raised trading fees
Europe:
- German, French and Eurozone prelim PMI readings handily beat estimates, French and German Composite PMI readings highest in over 6 years.
- UK PM May to give Speech in Florence, it is speculated that she will propose payments of €20B over a two year transitional period, in which she will emphasis it is a shared responsibility to make Brexit work ‘Smoothly’.
Oil:
- OPEC panel to discuss export monitoring and and oil pact extension
Economic data
(DE) GERMANY SEPT PRELIMINARY MANUFACTURING PMI: 60.6 V 59.0E (34TH MONTH OF EXPANSION)
- Services PMI: 55.6 v 53.7e (50th month of expansion)
- Composite PMI: 57.8 v 55.7e
*(FR) FRANCE SEPT PRELIMINARY MANUFACTURING PMI: 56.0 V 55.5E (11TH MONTH OF EXPANSION)
- Services PMI: 57.1 v 54.8e (15th month of expansion)
- Composite PMI: 57.2 v 55.0e (15th month of expansion)
(EU) EURO ZONE SEPT PRELIMINARY MANUFACTURING PMI: 58.2 V 57.2E (50TH MONTH OF EXPANSION)
- Services PMI: 55.6 v 54.8e
- Composite PMI: 56.7 v 55.6e
- (FR) FRANCE Q2 FINAL GDP Q/Q: 0.5% V 0.5%E; Y/Y 1.8% V 1.7%E
- (NL) NETHERLANDS Q2 FINAL GDP Q/Q: 1.5% V 1.5%E; Y/Y: 3.3% V 3.3%E
Fixed Income Issuance:
- Non seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 +0.1% at 3,544, FTSE -0.1% at 7,256, DAX +0.1% at 12,613, CAC-40 +0.2% at 5,280, IBEX-35 -0.1% at 10,284, FTSE MIB +0.2% at 22,531, SMI +0.1% at 9,137, S&P 500 Futures -0.2%]
Market Focal Points/Key Themes: European stocks open lower but pair losses as session progressed; geopolitical concerns weighed on indices, supported safe haven flows; materials stocks impacted by drop in metal prices; L’Oreal heiress Bettencourt died, leading to moves in L’Oreal, Nestle and Sanofi; Israel closed for Jewish New year; attention turning to UK PM May’s Brexit speech later in the day, and German elections over the weekend; upcoming earnings in the US session include Carmax
Equities
- Consumer discretionary: Adecco ADEN.CH -1.3% (strategy update)
- Energy: Lamprell LAM.UK -9.8% (outlook)
- Financials: Unicredit UCG.IT +0.9% (meeting to remove voting cap)
- Healthcare: Roche ROG.CH -0.2% (drug approvals)
- Industrials: Fincantieri FCT.IT +3.1% (press speculation STX deal near)
- Materials: Rio Tinto RIO.UK -0.8% (share buyback)
- Technology: Smiths Gorup SMIN.UK -5.2% (earnings)
Speakers
- (EU) ECB Chief Draghi: We aren’t there on inflation yet; We see some local bubbles not systemtic
- (NO) Norway Central Bank (Norges) Gov Olsen: Flexible inflation target is more and more important
- (CH) SNB Gov Board member Moser: An end to Libor will challenge the private sector but will not hinder the SNB’s ability to conduct monetary policy
- (VE) Venezuela Oil Min: Opec, Non-Opec evaluating all parameters when asked about export monitoring
- (EU) ECB Supervisory Board member Angeloni: Far from neutralising the transmission of risks between banks and public sector finances at the national level
Currencies
EUR/USD trades higher after stronger PMI readings out of Europe briefly topping 1.20. A clear break would see a move to 1.2027.
GBP/USD trades at the lower end of today’s range after trading just below 1.36 earlier ahead of UK PM May’s Brexit speech. Resistance seen just above $1.36.
Fixed Income
- Friday’s liquidity report showed Thursday’s excess liquidity rose to €1.734T from €1.729T, and use of the marginal lending facility fell to €116M from €137M.
- Corporate issuance saw $3.7B come to market via 3 deals led by 3M Co 3 part $2B offering, which brings weekly issuance to $16.7B.
- For the week ending Sep 20th Lipper US fund flows reported IG Funds net inflows of $2.86B bringing YTD inflows to $91.3B, High Yield funds reported net inflows of $865.8M bringing YTD outflows to $8.41B.
Looking Ahead
- 06:00 (UK) Sept CBI Industrial Trends Total Orders: 13e v 13 prior; Selling Prices: No est v 19 prior
- 06:00 (IE) Ireland Aug PPI M/M: No est v -1.1% prior; Y/Y: No est v -1.9% prior
- 07:00 (BR) Brazil Sept FGV Consumer Confidence: No est v 101.6 prior
- 07:30 (IN) India Weekly Forex Reserves
- 08:05 (UK) Baltic Dry Bulk Index
- 08:00 (PL) Poland Aug M3 Money Supply M/M: 0.3%e v 0.3% prior; Y/Y: 5.2%e v 5.0% prior
- 08:00 (CL) Chile Aug PPI M/M: No est v 1.7% prior
- 08:30 (CA) Canada Aug CPI M/M: 0.2%e v 0.0% prior; Y/Y: 1.5%e v 1.2% prior
- 08:30 (CA) Canada Aug CPI Core- Common YoY: No est v 1.4% prior; CPI Core- Trim YoY: No est v 1.3% prior; CPI Core- Median YoY: No est v 1.7% prior; Consumer Price Index: e v 130.4 prior
- 08:30 (CA) Canada Retail Sales M/M: 0.2%e v 0.1% prior; Retail Sales Ex Auto M/M: 0.4%e v 0.7% prior
- 09:00 (BE) Belgium Sept Business Confidence: -2.0e v -2.1 prior
- 09:00 (MX) Mexico Q2 Aggregate Supply and Demand Y/Y: 2.6%e v 4.0% prior
- 09:45 (US) Sept Preliminary Markit Manufacturing PMI: 53.0e v 56.0 prior; Composite PMI: No est v 55.3 prior
- 13:00 (US) Weekly Baker Hughes Rig Count data
- 15:00 (CO) Colombia July Economic Activity Index (Monthly GDP) Y/Y: No est v 1.4% prior
