Notes/Observations
ECB seen implementing a slower but longer” QE extension designed to reinforce the low-for-long rates guidance
Sweden Riksbank keeps policy steady (as expected) and awaits the ECB move before deciding its own QE outlook
Spain Q3 Unemployment Rate hits its lowest level since Q4 2008 (16.4% v 16.6%e)
Overnight
Asia:
South Korea Q3 Preliminary GDP Q/Q: 1.4% v 0.8%e; Y/Y: 3.6% v 3.0%e (fastest quarterly pace since Q2 2010)
China Communist Party Seniorr Official Yang Weimin: China will no longer set a target to double GDP from 2021, emphases on quality of growth
North Korea official warns that hydrogen bomb threat should be taken literally
Europe:
EU govts reportedly have agreed to begin preparations for scenario where Brexit talks fail
EU officials said to put any Brexit transition period limited to 20 months citing the end of the EU budget timeline and potentially lining up better with certain annual quotas
Ireland Fin Min Donohoe: insufficient progress on tracker mortgages could lead to targeted action. Tax law for bank may be amended
British Retail Consortium (BRC) retailers are cutting production at the fastest rate since 2008. Q3 employment -3% y/y; total hours worked -4.2% y/y (**Note: both figures are the steepest falls since BRC started collecting records in 2008)
Catalan Parliament to meet late Thursday. Reports circulating that Catalan President Puigedemont seemed inclined to prepare independence declaration in regional parliamentary session
Americas:
President Trump has reportedly removed Gary Cohn from shortlist for Fed Chairman. Cohn reportedly likely to leave administration after tax reform passes
Brazil Central Bank (BCB) cuts Selic Target Rate by 75bps to 7.50% (as expected) for its 9th straight rate cut
Brazil Chamber of Deputies votes against proceeding with Temer corruption charges (as expected); against votes totaled 251 vs 233
Economic Data
(DE) Germany Nov GfK Consumer Confidence: 10.7 v 10.8e
(NO) Norway Aug AKU Unemployment Rate: 4.1% v 4.2%e
(HU) Hungary Sept Unemployment Rate: 4.1% v 4.1%e
(ES) Spain Q3 Unemployment Rate: 16.4% v 16.6%e (lowest level since Q4 2008)
(SE) Sweden Central Bank (Riksbank) left its Repo Rate unchanged at -0.50% (as expected); maintained Repo Rate path and current QE bond buying program
(EU) Euro Zone Sept M3 Money Supply Y/Y: 5.1% v 5.0%e
(IT) Italy Oct Consumer Confidence: 116.1 v 114.9e; Manufacturing Confidence: 111.0 v 110.0e
(NO) Norway Central Bank (NORGES) left its Deposit Rates unchanged at 0.50% (as expected)
Fixed Income Issuance:
(SE) Sweden sold SEK 750M vs. SEK750M indicated in I/L Jun 2025 bond; Avg yield: -1.4397% v -1.4079% prior; Bid-to-cover: 1.67x v 2.80x prior
(IT) Italy Debt Agency (Tesoro) sold €1.25B vs. €0.75-1.25B indicated in I/L 2028 Bonds (BTPei); Avg Yield: 0.97%; Bid-to-cover: 1.85x
(IT) Italy Debt Agency (Tesoro) sold €3.0B vs. €2.5-3.0B indicated range in new zero coupon Oct 2019 CTZ Bonds; Avg yield: -0.167% v -0.22% prior; Bid-to-cover: 2.02x v 2.0x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 flat at 387.20, FTSE +0.3% at 7465, DAX +0.1% at 12973, CAC-40 +0.2% at 5385, IBEX-35 -0.2% at 10137, FTSE MIB +0.1% at 22476, SMI +0.4% at 9117, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes:
European Indices trade mostly higher ahead of the ECB rate meeting later today. Mixed earnings have capped the move with German heavyweight Bayer down over 3%, while Deutsche Bank also weighs. UK Banking giant Barclays trades sharply lower after weak investment banking results, whilst Nokia trades over 10% lower after weak 2018 guidance. STMicro outperforms on strong results and guidance, with other notable risers including Wirecard, Orange and ABB.
Looking ahead Ford, Southwest, Twitter and American Airlines are some of the notable earners expected this morning.
Equities
Consumer discretionary [AB Inbev [ABI.BE] -2.3% (Earnings)]
Industrials: [ABB [ABBN.CH] +3.1% (Earnings), Ferrovial [FER.ES] +1.5% (Heathrow earnings)]
Financials: [Deutsche Bank [DBK.DE] -1.9% (Earnings), Barclays [BARC.UK] -7.0% (Earnings)]
Technology: [STMicro [STM.FR] +6.4% (Earnings), Fingerprint Cards [FINGB.SE] -15% (Earnings), Wirecard [WDI.DE] +3.7% (Earnings)]
Telecom: [Orange [ORA.FR] +1.4% (Earnings), Telefonica [TEF.ES] -1.5% (Earnings)]
Healthcare: [Bayern [BAYN.DE] -3.3% (Earnings)]
Energy: [Statoil [STL.NO] -3.9% (Earnings)]
Speakers
Sweden Central Bank (Riksbank) policy statement reiterated that its monetary policy needed to remain expansionary for inflation to continue to be close to 2% target. International recovery was continuing, but global inflationary pressures were subdued. Purchases of government bonds (QE program) to continue during the second half of 2017; Awaited further info that could affect a decision in December to possibly extend purchases. Extended the mandate for FX intervention (members Ohlsson and Floden had reservations)
Sweden Central Bank (Riksbank) Gov Ingves post Rate Decision press conference reiterated that policy needed to be expansionary. Inflation was near the 2% target again but too early to make policy less expansionary. Reiterated that SEK currency (Krona) should not appreciate too quickly
Spain Econ Min de Guindos: Economic indicators are good but political crisis could have an impact. Central govt could not accept or allow Catalan secession scenario; such a move would lead to a debacle for the region
Spain govt spokesperson: Received written response from Catalan leader Puigdemont on Article 155 presenting his case against the implementation of Article 155 (just before deadline expired)
Poland Labor Min Rafalska: End-2017 Unemployment Rate seen between 6.8-7.0% area (**Note: Sept Unemployment was 6.8%)
RBA’s Debelle: Subdued wage pressure at full employment could happen. Saw sizable spare capacity in labor market
Japan PM Abe: Hopeful of 3% wage hikes in negotiations next spring
Russia Energy Min Novak reiterated his view that is too early to decide on any extension of current production cut agreement
Saudi Arabia Crown Prince Mohammed Bin Salman: Committed to work will all oil producers to balance oil market supply and demand. Backed extending OPEC production cuts into 2018. Reiterated govt view that Saudi Aramco IPO was on track for 2018; noted that the valuation could be over $2T
Currencies
EUR/USD was little changed ahead of the ECB rate decision where the central bank was expected to lay out plans to scale back monetary easing
GBP/USD was softer by 0.3% to probe the lower end of 1.32 after ONS Stats Agency noted that full-time worker weekly earnings (inflation adjusted) was -0.4% in the eyar period ending in April for its 1st drop since 2014.
EUR/SEK cross was initially lower after the Rikebank decision to keep it policy steady. The central bank awaited the ECB outcome before deciding on its oqn QE bond buying extension. EUR/SEK tested 9.68 following the decision but later reversed the move. Dealers noted that real fireworks in volatility could emerge if ECB hinted at the expected timing of any interest rates hike (doubtful that would come at today’s meeting)
Fixed Income
Bund futures trade at 161.26 up 18 ticks, after 10-year yield on US Treasuries tentatively broke below the 2.42%. The focus remains on the ECB rate decision where the consensus is for the ECB to halve bond purchases to €30 billion a month and that asset purchase period will be extended to September 2018. Support lies at 161.00, followed by 160.38. Resistance stands initially at 162.75, followed by 163.51.
Gilt futures trade at 123.59 little changed after initially opening higher. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.
Thursday’s liquidity report showed Wednesday’s excess liquidity rose to €1.825T from €1.791T and use of the marginal lending facility fell to €133M from €417M
Corporate issuance saw $2.4B come to market via 4 issuers, headlined by AT&T $1.1B senior note offering
Looking Ahead
(GR) ESM to discuss €800M tranche disbursement to Greece
(ES) Catalonia Parliament meets
(AR) Argentina Oct Consumer Confidence: No est v 51.0 prior
(BR) Brazil Sept Central Govt Budget Balance (BRL): -22.8Be v -9.6B prior
05:30 (ZA) South Africa Sept PPI M/M: 0.4%e v 0.4% prior; Y/Y: 4.9%e v 4.2% prior
05:30 (HU) Hungary Central Bank (AKK) to sell combined HUF50B in 2020, 2022 and 2027 Bonds
06:00 (UK) Oct CBI Retailing Reported Sales: 14e v 42 prior
06:00 (BR) Brazil Oct FGV Construction Costs M/M: 0.1%e v 0.1% prior
06:00 (IL) Israel Sept Trade Balance: No est v -$1.2B prior
06:45 (US) Daily Libor Fixing
07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave all key rates unchanged
07:00 (UR) Ukraine Central Bank Interest Decision: Expected to leave Key Rate unchanged at 12.50%
07:00 (BR) Brazil Sept PPI Manufacturing M/M: No est v 0.1% prior; Y/Y: No est v 1.3% prior
07:45 (EU) ECB Interest Rate Decision: ECB expected to keep key rates unchanged; Leave Main Refinance Rate unchanged at 0.00%; Leave Marginal Lending rate unchanged at 0.25%; Leave Deposit Rate unchanged at -0.40%
08:00 (PL) Poland Central Bank (NBP) Oct Minutes
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Sept Advance Goods Trade Balance: -$64.0Be v -$63.3 prior (revised from -$62.9B)
08:30 (US) Sept Preliminary Wholesale Inventories M/M: 0.4%e v 0.9% prior, Retail Inventories M/M: No est v 0.7% prior
08:30 (US) Initial Jobless Claims: 235Ke v 222K prior; Continuing Claims: 1.89Me v 1.888M prior
08:30 (US) Weekly USDA Net Export Sales
08:30 (BR) Brazil Sept Current Account: -$0.3Be v -$0.3B prior; Foreign Direct Investment (FDI): $6.0Be v $5.1B prior
08:30 (EU) ECB chief Draghi post rate decision press conference
09:00 (RU) Russia Gold and Forex Reserve w/e Oct 20th: No est v $427.0B prior
09:00 (MX) Mexico Sept Trade Balance: -$1.3Be v -$2.7B prior
10:00 (US) Sept Pending Home Sales M/M: +0.4%e v -2.6% prior; Y/Y: -4.2%e v -3.1% prior
10:00 (BR) Brazil to sell Fixed Rate 2023 and 2027 Bonds
10:00 (BR) Brazil to sell 2018, 2019 and 2021 LTN Bills
10:30 (US) Weekly EIA Natural Gas Inventories
11:00 (US) Oct Kansas City Fed Manufacturing Activity: 17e v 17 prior
12:00 (CE) Canada to sell 10-Year Bonds
13:00 (US) Treasury to sell 7-Year Notes
