Notes/Observations
- European Indices trade sharply lower tracking weaker Asian and US indices with the Dax and CAC hitting 1 month lows; Bond yields are higher, Gold and Crude futures little changed
- UK PM Johnson is set to unveil new Brexit proposals today at his closing speech at the Tory party conference
- German Leading Economic institutes and the Swiss Kof institute lower their growth forecasts for Germany and Switzerland
- UK Construction PMI slumps; marks fifth straight month of contraction
Asia:
- Hong Kong protesters vow to step up action after police shot teenager in the chest yesterday; Police Chief notes action were in self defense and for safety of colleagues
- Hong Kong Bar Association said to be experiencing cooling relations with China, with reports of a total breakdown in communication with mainland authorities
- Japan PM Abe confirms North Korea launched 2 ballistic missiles on Wed (Oct 2nd); Strongly condemn North Korea missile launches, they breach UN resolution
Europe/Mideast:
- German Leading Economic Institutes confirms it cuts 2019 GDP growth from 0.8% to 0.5%, Cuts 2020 GDP growth from 1.8% to 1.1%
- Swiss Kof institute cuts Swiss 2019 and 2020 GDP forecasts; Trade war, other disruption may strengthen the Franc; sees SNB rate cut toward end of the year
- UK construction PMI record fifth straight month of contraction and misses estimates; Commercial activity remains weakest-performing category and new orders saw the second quickest fall for over a decade
- (IS) Iceland Central Bank (Sedlabanki) cuts 7-Day Term Deposit Rate by 25bps to 3.25%; not expected (4th straight cut)
Brexit:
- Reportedly PM Johnson at his closing speech at the Conservative Party conference plans to announce today a ‘two borders for four years’ Brexit idea-It is said that the DUP are happy with the reports of the new plan
- According to EU sources new plan will not fly, only option for new Brexit deal before Oct 31 is return to Northern Ireland-only backstop; time-limit to backstop impossible under UK Brexit proposal
- Swiss Kof sees Brexit delayed to at least Jan 2020
Americas: –
- WTO to announce decision on US right to retaliate against EU over Airbus subsidies at 14-00 GMT, according to earlier reports they are to rule the US can sanction $8B of EU goods over Airbus aid
Energy:
- Various Energy ministers making comments this morning
- Iran Energy Min Zanganesh: does not see any need for OPEC emergency meeting, there is little surplus on supply side of the oil market
- Russia Energy Min Novak: OPEC+ output cuts are not permanent, Russia will join in these cuts when necessary
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -1.20% at 383.32, FTSE -1.49% at 7,250.31, DAX -1.01% at 12,139.99, CAC-40 -1.40% at 5,519.45, IBEX-35 -0.85% at 9,088.00, FTSE MIB -0.81% at 21,749.50, SMI -1.00% at 9,852.50, S&P 500 Futures -0.45%]
Market Focal Points/Key Themes:
Equities
- European Indices trade sharply lower across the board hitting their lowest levels in almost a month, after lower Indices in Asia and lower US futures as recession fears continue worldwide following yesterday PMI data out of Europe and US. On the corporate front shares of groceries giant Tesco erase earlier losses following better-than-expected earnings and CEO succession next year and now trades up 1.5%. Grenke in Frankfurt issued 9-month update and raised its outlook, currently trading higher more than 10%. Elsewhere on M&A front, Flutter Entertainment and The Stars Group announced merger agreement in gambling space. Their rivals UK-listed William Hill and GVC rise sharply. In other news, Carl Zeiss Meditec announced its preliminary full-year earnings higher than previously guided and on year-on-year basis. Looking ahead notable earners include Lennar Corp., Paychex, Acuity Brands and RPM International.
- Consumer discretionary: Tesco [TSCO.UK] +1.5% (earnings), Flutter Entertainment [FLTR.UK] +15%, WIlliam Hill [WMH.UK] +4% (deal in space), Topps Tiles [TPT.UK] -5% (trading update), Atlantia [ATL.IT] -1% (probe), Ryanair [RYA.UK] -2%, Wizz Air [WIZZ.UK] -1% (load factors)
- Utilities: Suez [SEV.FR] -3% (investor day)
- Financials: Grenke [GLJ.DE] +10% (earnings; raises outlook)
- Consumer staples: Carl Zeiss Meditec [AFX.DE] +4% (prelim earnings)
Speakers
- (UK) UK Brexit Minister James Cleverly: No more pointless delays to Brexit
- (CH) SNB Maechler: monetary policy must remain expansive against the backdrop of global uncertainty
- (FR) ECB’s Villeroy (France): EU financial sector needs consolidation; Financial sector is “too fragmented” and “too concentrated” within national borders
- (IR) Iran Energy Min Zanganesh: does not see any need for OPEC emergency meeting
- (SA) Saudi Fin Min Mohammed al-Jadaan: Saudi- Russia alliance is a long term cooperation
- (RU) Russia Energy Min Novak: OPEC+ output cuts arent permanent, Russia will join in these cuts when necessary
- (HK) Hong Kong Monetary Authority (HKMA) new Chief Exec Eddie Yue: USD PEG is the most suitable system for Hong Kong; no intention to change it
- (IE) Irish Senator Richmond: reported UK proposals will not fly
Currencies/Fixed Income
- The dollar continues to gain on the Euro and Pound, as well as EM Fx on risk aversion flows. Cable approaches 1.21 handle after UK construction PMI fell further into contractionary territory amid continued Brexit uncertainty.
Economic Data
- (UK) SEPT CONSTRUCTION PMI: 43.3 V 45.0E (2nd sharpest fall since Apr 2009 and 5th consecutive month of contraction)
- (CH) SWISS SEPT CPI M/M: -0.1% V +0.1%E; Y/Y: 0.1% V 0.3%E
- (IS) Iceland Central Bank (Sedlabanki) cuts 7-Day Term Deposit Rate by 25bps to 3.25%; not expected (4th straight cut)
- (ES) Spain Sept Net Unemployment Change: +13.9K v +54.4K prior
- (ES) Spain July Total Mortgage Lending Y/Y: +16.2% v -11.7% prior; House Mortgage Approvals Y/Y: +13.1% v -2.5% prior
- (HU) Hungary July Final Trade Balance: €0.2B v €0.3B prior
Fixed Income Issuance
- (DK) Denmark sells total DKK2.76B in 2022 and 2029 bonds
Looking Ahead
- 06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%
- 07:00 (US) MBA Mortgage Applications w/e Sept 27th: No est v -10.1% prior
- 07:00 (MX) Mexico Aug Leading Indicators M/M: No est v -0.05 prior
- 07:00 (MX) Mexico Sept Vehicle Domestic Sales: No est v 107.7K prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:15 (US) Sept ADP Employment Change: 140Ke v +195K prior
- 09:00 (RU) Russia Q2 Final GDP (3rd reading) Y/Y: No est v 0.9% prelim
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 11:00 (DK) Denmark Sept Foreign Reserves (DKK): No est v 446.6B prior
