Notes/Observations
Focus on US Q3 GDP data and gauge impact of the hurricanes in August and September
Overnight
Asia:
Japan Sept National CPI Ex Fresh Food Y/Y: 0.7% v 0.7%e; CPI Ex-Fresh Food (Core) Y/Y: 0.7% v 0.7%e
Australia’s High Court disqualified Dep PM (and Lower House MP) Barnaby Joyce from sitting in parliament on account of his dual citizenship (Australia and New Zealand) at the time of last year’s Federal election. Govt lost its majority as a resul. (**Insight: Court action erased PM Turnball’s one seat majority in the lower house. Joyce to re-contest his seat in a special election)
Europe:
ECB reportedly considering option to end QE with a short tapering period during 2018. Implicitly assumed the new extended asset purchase program to be tapered to a halt by the end of next year as long as inflation outlook improved
Catalan President Puigdemont considered calling for snap election, but has ruled it out citing that central govt did not offer assurances that it would not take control of the region if early elections were called
Italy PM Gentiloni nominates Gov Visco for a second term at Bank of Italy (BOI) (as expected)
High court rejected review of Tory Party’s earlier £1B deal with Northern Ireland’s DUP to shore up its minority govt
Americas:
House voted to pass Senate budget proposal that paves way for tax reform bill by 216-212 vote. Senate budget resolution gave congressional GOP the ability to avoid a Democratic filibuster so that it could pass the Senate with 50 votes.
Fed Chairman position contender John Taylor: Lower US growth due to economic policy
Economic Data
(DE) Germany Sept Import Price Index M/M: 0.9% v 0.5%e; Y/Y: 3.0% v 2.6%e
(FI) Finland Oct Consumer Confidence: 23.1 v 23.7 prior; Business Confidence: 12 v 10 prior
(FR) France Oct Consumer Confidence: 100 v 101e
(ES) Spain Sept Adjusted Retail Sales Y/Y: 2.1% v 1.9%e; Retail Sales (unadj) Y/Y: 2.2% v 1.6%e
(SE) Sweden Oct Consumer Confidence: 105.3 v 102.0e; Manufacturing Confidence: 121.1 v 120.0e; Economic Tendency Survey: 113.3 v 112.0e
Fixed Income Issuance:
(IN) India sold total INR150B vs. INR150B indicated in 2022, 2031, 2033 and 2055 bonds
(IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 6-month Bills; Avg Yield: -0.382% prior; Bid-to-cover: 1.99x v 2.07x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.5% at 393.3, FTSE +0.3% at 5504, DAX +0.7% at 13229, CAC-40 +0.9% at 5502, IBEX-35 -0.5% at 10293, FTSE MIB -0.1% at 22782, SMI +0.3% at 9225, S&P 500 Futures +0.2%)
Market Focal Points/Key Themes:
European Indices trade mostly higher across the board with notable outperform in the Dax and CAC which trades at all time highs, while the Spanish IBEX trades lower.
Markets have been on the front foot following strong results from Amazon, Alphabet and Microsoft overnight, while in Europe solid results from Volkswagen, Total, and Electrolux helped lift indices, while IAG trades lower following their results, and muted passenger growth figures. In Switzerland Clariant trades sharply lower after terminating their merger agreement with Huntsman; Kuka and SES also notbaly lower following results.
Looking ahead notable earners include Chevron, Aon and Colgate.
Equities
Consumer discretionary [IAG [IAG.UK] -4% (Earnings)]
Materials: [Clariant [CLN.CH] -5.5% (Terminates merger with Huntsman),
Industrials: [Safran [SAF.UK] +1.4% (Earnings), Electrolux [ELUXB.SE] +3.1% (Earnings), Volkswagen [VOW3.DE] +1.9% (Earnings)]
Financials: [UBS [UBSG.CH] +1.7% (Earnings), RBS [RBS>UK] +2.3% (Earnings)]
Energy: [Total [FP.FR] +1.2% (earnings), Linde [LIN.DE] +2.9% (Earnings)]
Speakers
ECB’s Vasiliauskas (Lithuania): smaller QE as continued boost to economy
ECB’s Praet (Belgium, chief economist): Political accepted fiscal capacity in region will be modest in size. Central budget could help monetary policy, especially during deep recessions when nominal interest rates might reach their effective lower bound
ECB’s Villeroy (France): Have taken the essential steps towards ending the bond buying program (QE). Should use all tools in the progressive normalization
ECB’s Costa (Portugal): Essential that banking union is completed
ECB Survey of Professional Forecasters (SPF) kept its inflation outlook unchanged for the forecast horizon (2017-19). Raised euro zone long term inflation expectations (2021) from 1.8% to 1.9%. The survey raised its growth outlook with 2017 GDP growth forecast from 1.9% to 2.2%; 2018 GDP growth from 1.8% to 1.9% and 2019 GDP growth from 1.6% to 1.7%
Spain PM Rajoy: Confronting an exceptional situation, with grave consequences for many people; illegal actions hurt economy
Greece govt official: Creditors to return to Athens at end of November
Turkey Econ Min Zeybekci: Current level of exchange rate is not reflecting reality
South Africa Fin Min Gigaba: To unveil stimulus package that focusing on tourism and manufacturing
Currencies
Rate divergence remained the catalyst for FX pairs.
The aftermath of the ECB rate decision and lack of signal on any potential 1st rate hike has sent the EUR/USD to a 3-month low. Draghi noted that interest rates won’t rise shortly QE bond buying ended. Pair under 1.1640 just ahead of the NY morning.
USD/CHF pair tested above parity for 1st time since May 15th
AUD/USD was softer on political uncertainty after a High Court ruling erased PM Turnball’s one seat majority in Parliament. AUD/USD off by 0.2% to trade at 0.7650 area
Fixed Income
Bund futures trade at 162.14 up 46 ticks as dovish repricing continues in European rates as markets adjusts to a lower for longer outlook from the ECB. Support lies at 161.00, followed by 160.38. Resistance stands initially at 162.75, followed by 163.51.
Gilt futures trade at 124.09 up 26 ticks, after initially opening a little lower after a block seller of 10-year Treasuries late on Thursday knocked both US and German 10y contracts lower ahead of the futures close. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.
Friday’s liquidity report showed Thursday’s excess liquidity fell to €1.810T from €1.825T and use of the marginal lending facility rose to €253M from €133M
Corporate issuance saw $7.6B come to market via 6 issuers. For the week ending Oct 25th Lipper fund flows reported IG fund net inflows of $4.7B and High yield funds reported net inflows of $122.5M.
Looking Ahead
05:30 (ZA) South Africa to sell combined ZAR800M in I/L 2025, 2029 and 2046 bonds
06:00 (IE) Ireland Sept Retail Sales M/M: No est v -4.2% prior; Y/Y: No est v 4.7% prior
06:00 (UK) DMO to sell combined £4.5B in 1-month, 3-month and 6-month Bills (£0.5B, £2.0B and £2.0B respectively)
06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to cut 1-Week Auction Rate by 25bps to 8.25%
06:45 (EU) ECB’s Angeloni (SSM board member)in Frankfurt
06:45 (US) Daily Libor Fixing
07:00 (DE) ECB’s Weidmann (Germany) in Paris
07:30 (IN) India Weekly Forex Reserves
08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming issuance
08:00 (IN) India announces upcoming Bill auction (held on Wed)
08:00 (RU) Russia Central Bank (CBR) Gov Nabiullina to hold post rate press conference
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Q3 Advance GDP Annualized Q/Q: 2.6%e v 3.1% prior; Personal Consumption: 2.1%e v 3.3% prior
08:30 (US) Q3 Advance GDP Price Index: 1.7%e v 1.0% prior; CORE PCE Q/Q: 1.3%e v 0.9% prior
08:30 (BR) Brazil Sept Total Outstanding Loans (BRL): No est v 3.047T prior; M/M: No est v -0.1% prior
10:00 (US) Oct Final University of Michigan Confidence: 100.7e v 101.1 prelim
11:00 (EU) Potential sovereign rating after European close
(FI) Finland Sovereign Debt to be rated by Moody’s
(DE) Germany Sovereign Debt to be rated by S&P
(NL) Netherlands Sovereign Debt to be rated by Fitch
(NL) Netherlands Sovereign Debt to be rated by Moody’s
(UR) Ukraine Sovereign Debt to be rated by Fitch
(UK) United Kingdom Sovereign Debt to be rated by Fitch
(UK) United Kingdom Sovereign Debt to be rated by S&P
13:00 (US) Weekly Baker Hughes Rig Count data
15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 5.25%
