Notes/Observations
- German Chancellor Merkel not to run for re-election to head the CDU party; questions emerge if she serve out her term as Chancellor
Asia:
- BOJ said to be looking at slightly adjusting bond buying program to allow the government debt market to better reflect fundamentals. The central bank said to consider making its bond purchases two days after new debt is auctioned (currently at 1 day). Any decision on the timing or the frequency of bond purchases would not represent a monetary policy change
Europe:
- S&P revised Italy sovereign rating outlook to Negative from Stable; affirmed BBB rating (in-line with speculation)
- S&P affirmed Germany sovereign rating at AAA; outlook Stable
- S&P affirmed United Kingdom sovereign rating at AA; outlook remains Negative
- Fitch affirmed United Kingdom sovereign rating at AA; outlook Negative
- Germany Hesse regional elections saw Chancellor Merkel CDU party’s support declined to from 38% to 28% for its worst result since 1966
- UK Chancellor of the Exchequer Hammond (Fin Min) said has money buffer in case of ‘Brexit shock’
- Italy Fin Min Tria: BTP/Bund spread at the current levels is damaging (Note: spread recently test 330bps area)
- France Finance Min Le Maire: No risk of contagion from budget crisis in Italy, euro zone is not prepared enough to deal with new economic crisis
Americas:
- Brazil Presidential Candidate Bolsonaro wins presidential elections; Brazilian equity ETF trades higher by over 10%
- Brazil’sPaulo Guedes (advisor to President-elect Bolsonardo): Aiming to get rid of budget deficit within one year; first priority is pension reform, second major item is interest payments, unreasonable to spend $100B/yr on interest
Energy:
- Russia Energy Min Novak: No reason for Russia to freeze or cut its oil production level. OPEC+ needed to wait and see the risks emerging in Nov before deciding on any further joint steps.
Macro
- (DE) Germany: Sunday’s election in Hesse was another test for the coalition partners in Berlin and the result will destabilise Merkel’s coalition as well as her own political standing. In the end the old regional coalition of CDU and Green Party is likely to remain in office, but CDU lost 11.3% points and SPD lost 10.9%. Green Party and AfD meanwhile gained 8.5% points and 9.0% points compared to the previous state election in 2013. So while the status quo remains CDU and SPD party leaders in Berlin are under pressure and the risk that the coalition will break up and that Germany will face new elections as Merkel’s potential successors are being lined up in the German press are higher than ever.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.9% at 355.6, FTSE +1.3% at 7030, DAX +1.1% at 11324, CAC-40 +0.3% at 4980, IBEX-35 +1.1% at 8826, FTSE MIB +2.2% at 19102, SMI +1.4% at 8790, S&P 500 Futures +0.3%]
Market Focal Points/Key Themes:
Equities
- European Indices trade higher across the board starting the week on a positive note; Euronext Indices had seen a delayed opening due to technical issues. Asia saw a mixed session, while US futures have reversed earlier losses to trade higher. FTSE MIB outperforms with Banking names rebounding. On the corporate front HSBC beat on both the top and bottom line with shares trading sharply higher helping the FTSE outperform. Bankia, GEA Group, ITM Power among other names trading higher after earnings, with Kuka and Gama Aviation among the names lower after results. On a busy morning on the M&A space, Ansaldo trades higher Hitachi launched a tender offer for the company; in the US IBM is to acquire Redhat for $190/shr in a $34B deal; Penn Virginia Corp to be acquired by Denbury in a $1.7B deal. Novartis trades higher helping the Swiss SMI outperform after positive trial data. Looking ahead notable earners include Cooper Tire, First Data Corp and Booz Allen.
- Consumer discretionary: International Workplace Group [IWG.UK] +2.5% (reportedly held talks with Terra Firms on possible sale of Spaces), Gama Aviation PLC [GMAA.UK] -20% (trading update; outlook cut)
- Energy: ITM Power [ITM.UK] +7% (trading update
- Financials: HSBC Holdings [HSBA.UK] +4.5% (earnings), Bankia [BKIA.ES] -5.5% (earnings),
- Healthcare: Novartis [NOVN.CH] +2% (study met primary endpoint), Grifols SA [GRF.ES] +14% (announces positive results of study), Vifor Pharma [VIFN.CH] +3.5% (study met primary endpoint), Essity AB [ESSITY-A.SE] -1.5% (earnings)
- Industrials: GEA Group [G1A.DE] +2% (earnings; affirms outlook), Kuka [KU2.DE] -4.5% (earnings; outlook cut), Ansaldo STS [STS.IT] +9% (deal announcement), Leonardo-Finmeccanica Spa [LDO.IT] -2.5% (The Leicester City FC crash was company’s AW169 helicopter)
- Telecom: MASmovil [MAS.ES] -3.5% (earnings; raises outlook),
Speakers
- (ZA) South Africa Sept M3 Money Supply Y/Y: 7.0% v 6.8%e; Private Sector Credit Y/Y: 6.3% v 6.4%e
- (FI) Finland Oct Consumer Confidence Index: 16.8 v 20.2 prior; Business Confidence: 9 v 11 prior
- (AT) Austria Oct Manufacturing PMI: 53.8 v 55.0 prior
- (CH) SNB Total Sight Deposits for Week Ended Oct 26th (CHF): 578.0B v 577.9B prior; Domestic Sight Deposits: 470.1B v 471.6B prior
- (IT) Italy Sept PPI M/M: 0.4% v 0.6% prior; Y/Y: 5.6% v 5.2% prior
- (UK) Sept Net Consumer Credit: £0.8B v £1.2Be; Net Lending: £3.9B v £2.9Be
- (UK) Sept Mortgage Approvals: 65.3K v 64.7Ke
- (UK) Sept M4 Money Supply M/M: -0.3% v +0.1% prior; Y/Y: 0.9% v 1.1% prior; M4 Ex IOFCs 3M Annualized: 1.1% v 0.6% prior
Currencies/ Fixed Income
- USD remained on firm ground as the new trading week begun. Dealers noted that the greenback continued to benefit from while the global sentiment remained fragile
- EUR/USD was lower by 0.3% to remain under the 1.14 level. German Chancellor Merkel govt suffered another regional loss (German state of Hesse). The Italian budget remained an issue with the government due to submit another proposal to the EU in coming weeks. Euro unable to benefit from the tightening of the 10-year Italian-German government bond yield spread to under 300bps.
- Chancellor of the Exchequer Philip Hammond is expected to announce this afternoon during the Autumn Budget a decline in the country’s borrowing needs of around £6.3B. GBP/USD
Economic data
- (ZA) South Africa Sept M3 Money Supply Y/Y: 7.0% v 6.8%e; Private Sector Credit Y/Y: 6.3% v 6.4%e
- (FI) Finland Oct Consumer Confidence Index: 16.8 v 20.2 prior; Business Confidence: 9 v 11 prior
- (AT) Austria Oct Manufacturing PMI: 53.8 v 55.0 prior
- (CH) SNB Total Sight Deposits for Week Ended Oct 26th (CHF): 578.0B v 577.9B prior; Domestic Sight Deposits: 470.1B v 471.6B prior
- (IT) Italy Sept PPI M/M: 0.4% v 0.6% prior; Y/Y: 5.6% v 5.2% prior
- (UK) Sept Net Consumer Credit: £0.8B v £1.2Be; Net Lending: £3.9B v £2.9Be
- (UK) Sept Mortgage Approvals: 65.3K v 64.7Ke
- (UK) Sept M4 Money Supply M/M: -0.3% v +0.1% prior; Y/Y: 0.9% v 1.1% prior; M4 Ex IOFCs 3M Annualized: 1.1% v 0.6% prior
Fixed Income Issuance
- None seen
Looking Ahead
- 06:00 (EU) Daily Euribor Fixing – 06:00 (LT) Lithuania to sell Bonds
- 06:00 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
- 06:00 (IT) Italy Debt Agency (Tesoro) to sell €6.0B in 6-month Bills
- 07:00 (IL) Israel Aug Manufacturing Production M/M: No est v 2.5% prior
- 07:00 (BR) Brazil Oct FGV Inflation IGPM M/M: 0.9%e v 1.5% prior; Y/Y: 10.8%e v 10.0% prior
- 07:00 (RO) Romania to sell Bonds
- 07:00 (IL) Israel to sell Bonds
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 07:45 (US) Daily Libor Fixing
- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 08:30 (US) Sept Personal Income: 0.4%e v 0.3% prior; Personal Spending: 0.4%e v 0.3% prior; Real Personal Spending: 0.3%e v 0.2% prior
- 08:30 (US) Sept PCE Deflator M/M: 0.1%e v 0.1% prior; Y/Y: 2.0%e v 2.2% prior
- 08:30 (US) Sept PCE Core M/M: 0.1%e v 0.0% prior; Y/Y: 2.0%e v 2.0% prior
- 09:05 (UK) Baltic Dry Bulk Index
- 09:30 (BR) Brazil Sept Primary Budget Balance (BRL): -22.3Be v -16.9B prior; Nominal Budget Balance: -62.5Be v -76.9B prior; Net Debt to GDP Ratio: 51.6%e v 51.2% prior
- 09:45 (US) Fed’s Evans (non-voter, dove)
- 09:55 (FR) France Debt Agency (AFT) to sell combined €3.6-4.8B in 3-month, 6-month, 9-month and 12-month BTF Bills
- 10:00 (BE) Belgium Q3 Preliminary GDP Q/Q: No est v 0.4% prior; Y/Y: No est v 1.4% prior
- 10:30 (US) Oct Dallas Fed Manufacturing Activity Index: 28.1e v 28.1 prior
- 10:30 (EU) ECB announces Covered-Bond Purchases
- 10:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
- 11:30 (UK) Chancellor Philip Hammond’s Budget Statement
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
- 16:00 (US) Weekly Crop Condition Report
