Risk Appetite Trying To Recover With Focus Continuing To Be On Energy Costs

Notes/Observations

Major European PMI Services data remained robust but continued slow compared to the prior peaks seen earlier this year (Beats: France, Germany, Euro Zone, UK; Misses: Spain, Italy).

• French Aug production data showed sector on the uptrend and paints a picture of a sustained rebound.

Asia

• RBA left Cash Rate Target unchanged at 0.10% and maintained 3-year Yield Target at 0.10% (as expected). Reiterated forward guidance that conditions for rate increase would not be met prior to 2024 at the earliest.
• Australia Aug Trade Balance: A$15.1B v A$10.0Be; Exports M/M: +4% v -3%e; Imports M/M: -1% v +1%e.
• Australia Sept Final PMI Services: 45.5 v 44.9 prelim (confirmed 3rd month of contraction).
• Japan Sept Tokyo CPI Y/Y: +0.3% v -0.1%e; CPI Ex-Fresh Food Y/Y: 0.1% v 0.2%e.
• Japan Econ Min Yamagiwa stated that the economy remained severely affected by coronavirus and sought to unveil new economic package before end of year. Too early to comment on size and timing of economic package.
• Japan Fin Min Suzuki: Affirms goal of primary balance surplus by FY25. Important to keep fiscal discipline regardless of doing what’s needed.

Europe

• Eurogroup President Donohoe noted that energy prices entailed a wide ranging aspect of consequences, inflation should start to fall again in 2022. Received a new text regarding corporate tax reform from OECD and making progress on issue but there was need for further talks.

Americas

• White House spokesperson noted Biden to have talks with progressive House members and tell them the reconciliation bill would be smaller than they like.
• President Biden said to have told House progressives that spending package needed to be between $1.9-$2.2T‘; Biden felt that this could be the range that would be acceptable to Sens. Manchin (D-VW) and Sinema (D-AZ).
• Senate Parliamentarian ruled standalone debt ceiling bill could be voted on under reconciliation procedure, which would allow 50-vote majority to pass debt limit increase.
• Senate majority Schumer will try again on Wednesday (Oct 6th) to put through a debt-ceiling suspension bill which will likely fail unless 10 Republicans break rank.
• Mexico Central Bank (Banxico) Dep Gov Heath: Cycle of rate hikes is not over; We could see one or two more rate increases.

Energy

• OPEC+ ministers agreed to maintain existing policy of increasing production by 400K bpd in Nov, in line with the JMMC recommendation (Note: oil hit 7-year high afterwards).
• White House Press Sec Psaki: US will use all tools to keep gas prices down.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.58% at 453.36, FTSE +0.57% at 7,050.75, DAX +0.36% at 15,090.35, CAC-40 +0.67% at 6,520.86, IBEX-35 +0.53% at 8,838.50 , FTSE MIB +0.88% at 25,686.00, SMI +0.06% at 11,589.83, S&P 500 Futures +0.31%].
• Market Focal Points/Key Themes: European indices open generally higher and remained in the green as the session progressed; better-performing sectors inclue conusmer discretionary and technology; while industrials and real estate sectors among the laggards; technology sector supported by better results from Infineon; reportedly AB Inbev looking to sell its German beer business; focus on Lagarde speech later in the day; earnings expected in the upcoming US session include PepsiCo.

Equities

• Consumer discretionary: Greggs [GRG.UK] +5% (trading update), Shop Apotheke [SAE.DE] +8% (prelim results).
• Healthcare: AstraZeneca [AZN.UK] +1% (EUA filing).
• Industrials: GN Store Nord [GN.DK] -7% (cuts outlook), Melrose [MRO.UK] -2% (trading update).
• Technology: Infineon [IFX.DE] +1.5% (CMD; outlook).

Speakers

• UK PM Johnson stated that wanted to see wage and productivity growth to continue.
• EU Commission President Von Der Leyen stated that needed to aim reaching energy independence. Glad to see Norway stepping up gas production.
• EU Economic Commissioner Gentiloni (Italy) reiterated Eurogroup view that discussions on global tax agreement were progressing.
• Spain govt said to be planning 2% wage increase for civil servants.
• Japan Fin Min Suzuki stated that the new PM has instructed him to be flexible on policy; would seek a new type of capitalism and peruse fiscal health and growth at the same time. Instructed to make use of low interest rate environment and stick to bold monetary easing to put a decisive end to deflation. Size of economic package to depend on debate and necessity.

Currencies/Fixed income

• USD was mixed in the session but participants still seemed leaning towards risk-averse and safe haven flows if given the opportunity.
• EUR/USD steady at 1.16 area while GBP/USD regained a foothold above the 1.36 level.
• Euro zone bond yields drifted from recent three-month highs as oil prices soar after OPEC+ kept its planned Nov production increase steady at 400K bpd.

Economic data

• (RU) Russia Sept PMI Services: 50.5 v 50.3e Moved back into expansion); PMI Composite: 50.5 v 48.2 prior.
• (SE) Sweden Sept PMI Services: 69.6 v 64.7 prior (16th month of expansion); PMI Composite: 68.2 v 63.4 prior.
• (FR) France Aug Industrial Production M/M: 1.0% v 0.4%e; Y/Y: 3.9% v 3.3%e.
• (FR) France Aug Manufacturing Production M/M: 1.1% v 0.7% prior; Y/Y: 4.3% v 3.8% prior.
• (ES) Spain Sept Services PMI: 56.9 v 58.1e (6th month of expansion); Composite PMI: 57.0 v 58.5e.
• (ZA) South Africa Sept PMI (whole economy): 50.7 v 50.1e (1st expansion in 3 months).
• (IT) Italy Sept Services PMI: 55.5 v 56.5e (5th month of expansion); Composite PMI: 56.6 v 57.7e.
• (FR) France Sept Final PMI Services: 56.2 v 56.0e (confirmed 5th straight expansion); PMI Composite: 55.3 v 55.1e.
• (DE) Germany Sept Final PMI Services: 56.2 v 56.0e (confirmed 5th month of expansion); PMI Composite: 55.5 v 55.3e.
• (EU) Euro Zone Sept Final PMI Services: # v56.3e (confirmed 6th month of expansion); PMI Composite: # v 56.1e.
• (IT) Italy Q2 YTD Budget Deficit to GDP: 10.2% v 13.0% prior.
• (UK) Sept New Car Registrations Y/Y: -34.4% v -22.0% prior.
• (CZ) Czech Sept Unemployment Rate: 3.5% v 3.6% prior.
• (TW) Taiwan Sept Foreign Reserves: $544.9B v $543.6B prior.
• (UK) Sept Final PMI Services: 55.4 v 54.6e (confirms 7th month of expansion); PMI Composite: 54.9 v 54.1e.
• (UK) Sept Official Reserves Changes: -$0.9B v -$0.6B prior.
• (EU) Euro Zone Aug PPI M/M: 1.1% v 1.3%e; Y/Y: 13.4% v 13.5%e.

Fixed income issuance

• (ID) Indonesia sold total IDR5.0T vs. IDR5.0T target in Islamic bills and bonds (sukuk).
• (ES) Spain Debt Agency (Tesoro) sold total €4.995B vs. €4.5-5.5B indicated range in 6-month and 12-month Bills.
• (UK) DMO sold £3.0B in 0.25% Jan 2025 Gilts; Avg Yield: 0.491% v 0.250% prior; bid-to-cover: 2.51x v 2.81x prior; Tail: 0.3bps v 0.2bps prior.
• (AT) Austria Debt Agency (AFFA) sold total €1.265B vs. €1.265B indicated in 2025 and 2031 RAGB bonds.

Looking ahead

• (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to leave Interest Rates unchanged at 1.25%.
• (UR) Ukraine Sept Official Reserve Assets: No est v $31.6B prior.
• (MX) Citibanamex Survey of Economists.
• 05:15 (CH) Switzerland to sell 3-month Bills.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.
• 05:30 (DE) Germany to sell combined €400M in 2033 and 2046 inflation-linked Bonds (Bundei).
• 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month bills.
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
• 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2030, 2035 and 2044 bonds.
• 06:00 (IL) Israel July Manufacturing Production M/M: No est v 4.0% prior.
• 06:30 (EU) ESM to sell €1.5B in 3-month Bills.
• 06:30 (UK) DMO to sell £2.25B in 1.125% Jan 2039 Gilt.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (TR) Turkey to sell 3% I/L 2031 Bonds.
• 07:00 (CA) Canada Sept CFIB Business Barometer: No est v 67.1 prior.
• 07:00 (EU) Euro Zone Finance Ministers (EcoFin).
• 07:30 (TR) Turkey Sept Real Effective Exchange Rate (REER) : No est v 62.89 prior.
• 08:00 (BR) Brazil Aug Industrial Production M/M: -0.4%e v -1.3% prior; Y/Y: 0.0%e v 1.2% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Aug Trade Balance: -$70.5Be v -$70.1B prior.
• 08:30 (CA) Canada Aug Int’l Merchandise Trade (CAD): No est v 0.8B prior.
• 08:55 (US) Weekly Redbook LFL Sales data.
• 09:00 (BR) Brazil Sept PMI Services: No est v 55.1 prior; PMI Composite: No est v 54.6 prior.
• 09:00 (EU) Weekly ECB Forex Reserves.
• 09:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).
• 09:00 (EU) ECB weekly QE bond buying update.
• 09:45 (UK) BOE to buy £1.47B in APF Gilt purchase operation (20+ years).
• 09:45 (US) Sept Final Markit PMI Services: 54.4e v 54.4 prelim; PMI Composite: No est v 54.5 prelim.
• 10:00 (US) Sept ISM Services Index: 59.9e v 61.7 prior.
• 10:00 (MX) Mexico Weekly International Reserves.
• 11:00 (EU) ECB chief Lagarde.
• 16:30 (US) Weekly API Oil Inventories.
• 19:00 (KR) South Korea Sept CPI M/M: No est v 0.6% prior; Y/Y: 2.3%e v 2.6% prior; CPI Core Y/Y: No est v 1.8% prior.
• 20:00 (CO) Colombia Sept CPI M/M: 0.3%e v 0.5% prior; Y/Y: 4.4%e v 4.4% prior.
• 20:00 (CO) Colombia Sept CPI Core M/M: No est v 0.3% prior; Y/Y: No est v 3.1% prior.
• 20:30 (HK) Hong Kong Sept PMI (whole economy): No est v 53.3 prior.
• 21:00 (NZ) Reserve bank of New Zealand (RBNZ) Interest Rate Decision: Expected to raise Official Cash Rate (OCR) by 25bps to 0.50%.