EU Formally Agrees To A 3-Month Extension To Brexit, Awaiting The UK Motion To Call For Elections

Oct 28 19, 11:12 GMT

Notes/Observations

UK Parliament prepares to vote on the government’s call for a Dec. 12th general election
EU formally agrees to a 3-month Brexit extension (with flexible out-clauses)
Optimism that China and US to have a written 1st phase trade agreement by mid-Nov
Key rate decisions in week likely see the Fed widely again cut rates on Wednesday while the BOJ to keep its policy steady to save its ammunition for another day
Corporate earnings season picks up pace during the week
US jobs report on Friday

Asia:

China Commerce Ministry confirmed US and China were close to finalizing some sections of the technical consultation. Comments from MOFCOM seen as further sign of progress on the Phase 1 deal that could be signed in mid-November

Europe/Mideast:

Germany 2019 budget surplus seen amounting to billions of euros
S&P affirmed United Kingdom sovereign rating at AA; outlook remains Negative
S&P raised Greece sovereign rating one notch to BB- from B+; outlook Positive
Canadian ratings agency DBRS affirmed France sovereign rating at AAA with stable trend (also affirmed both Sweden and Norway at AAA with stable trend)
Fitch affirmed Netherlands sovereign rating at AAA; outlook Stable

Brexit:

EU ambassadors said to be looking to approve Brexit delay to January 31, 2020 with the ability to leave earlier. The latest plan envisages that Britain could also be out on Dec.1 or Jan.1 should the parliament ratify the agreement in November or December, respectively,
Northern Irish DUP party (part of minority coalition) plans to oppose PM Johnson’s call for a pre-Christmas election. PM Johnson said to have been handed a lifeline by the Liberal Democrats and SNP, who proposed holding a general election on Dec 9th if the EU extends Article 50 until Jan 31 and Mr Johnson promises to ?adhere to the extension.
Opinium Poll: Conservative Party hold a 16-point lead over the opposition Labour Party ahead of a parliamentary vote on Monday on whether to hold a snap general election

Americas:

Argentina Opposition candidate Alberto Fernandez wins presidential election (beats pro-market incumbent Macri) as the nation moved toward left-wing populism at a time of economic crisis

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.15% at 7,305.37, FTSE -0.26% at 7,305.37, DAX +0.03% at 12,898.66, CAC-40 -0.19% at 5,711.10, IBEX-35 -0.20% at 9,411.00, FTSE MIB -0.29% at 22,543.50, SMI +0.01% at 10,198.00, S&P 500 Futures +0.14%]
Market Focal Points/Key Themes: European Indices trade mostly lower in lackluster trade ahead of another busy week for corporate earnings. On the Brexit front Cable nudges higher as the EU has agreed to a Brexit delay until end of January. UK listed HSBC weighs on the FTSE down almost 4% as the company reported a profit miss, Dutch traded Philips also declines as Net profit fell 29% on the year with NCC and Bankia also declining on earnings. Eurofins trades higher as the company reported a rise in Revenues, while Covestro inches higher with in line results. In other news Cairn Energy declines sharply on a drilling update with the objectives were found to be dry; Curetis gains on the launch of an AI powered molecular antibiotic susceptibility test, while LVMH gains as the company confirmed preliminary talks with Tiffany on potential transaction. Looking ahead notable earners include Walgreens, AT&T, Spotify and Loews among others.

Equities

Consumer discretionary: LVMH [MC.FR] +0.5%, Pandora [PNDORA.DK] +3%, Kering [KEP.FR] +0.5% (speculation on $14.5B LVMH offer for Tiffany)
Materials: Ferrexpo [FXPO.UK] +0.5% (new acting CEO)
Energy: Cairn Energy [CNE.UK] -13% (updates)
Financials: HSBC [HSBA.UK] -4% (earnings)
Industrials: Covestro [1COV.DE] +0.5% (earnings), Aston Martin [AML.UK] -8% (analyst action)
Real Estate: TLG Immobilien [TLG.DE] +2.5% (possible merger)

Speakers

EU’s Tusk: EU to agree to Brexit delay until end-Jan
French official stated that the French govt would agree to a Brexit extension of 3 months (until Jan 31st)

Currencies/Fixed Income

GBP/USD was little changed at 1.2830 area as market participants awaited the fog to lift on the Brexit front. UK Parliament was prepared to vote on the government’s call for a Dec. 12th general election later today and as the EU meets to consider a Brexit extension. France Govt said to be poised to back a three-month Brexit extension (dropping its call for a shorter deadline).
Risk appetite helped to soften the JPY currency as optimism persisted that China and US would have a written 1st phase trade agreement by mid-Nov. The key resistance in USD/JPY remained at 109 with large USD buy-stops building above the level. BOJ meets on Thursday but was expected to keep its policy steady for the time being and watching risks to its price target momentum

Economic Data

(FI) Finland Oct Consumer Confidence: -6.6 v -4.2 prior; Business Confidence: -8 v -5 prior
(DE) Germany Sept Import Price Index M/M: 0.6%% v 0.1%e; Y/Y: -2.5% v -3.0%e
(DK) Denmark Sept Retail Sales M/M: 0.1% v 0.3% prior; Y/Y: 0.2% v 0.9% prior
(SE) Sweden Sept Trade Balance (SEK): +2.0B v -5.5B prior
(CH) Swiss Weekly Total Sight Deposits (CHF): 592.4B v 592.4B prior; Domestic Sight Deposits: 487.9B v 482.6B prior
(EU) Euro Zone Sept M3 Money Supply Y/Y: 5.5% v 5.7%e
(IS) Iceland Oct CPI M/M: 0.4% v 0.1% prior; Y/Y: 2.8% v 3.0% prior

Fixed Income Issuance

Looking Ahead

(UK) Govt to table motion asking Parliament to authorize election on Dec 12th
06:00 (EU) Daily Euribor Fixing
06:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
07:00 (UK) Oct CBI Retailing Reported Sales: -20e v -16 prior; Distribution Reported Sales: No est v 3 prior
07:00 (BR) Brazil Oct FGV Construction Costs M/M: 0.1%e v 0.6% prior
07:00 (RO) Romania to sell Bonds
07:25 (BR) Brazil Central Bank Weekly Economists Survey
07:45 (US) Daily Libor Fixing – 08:00 (MX) Mexico Sept Trade Balance: No est v $0.8B prior
08:00 (IL) Israel to sell bonds – 08:30 (US) Sept Chicago Fed National Activity Index: 0.05e v 0.10 prior
08:30 (US) Sept Advance Goods Trade Balance: -$73.5Be v -$72.8B prior
08:30 (US) Sept Preliminary Wholesale Inventories M/M: 0.3%e v 0.2% prior; Retail Inventories M/M: +0.1%e v -0.1% prior (revised from 0.0%)
09:00 (UK) Daily Baltic Dry Bulk Index
10:00 (FR) France Debt Agency (AFT) to sell combined €3.9-5.1B in 3-month, 6-month and 12-month Bills
10:30 (US) Oct Dallas Fed Manufacturing Activity Index: 1.0e v 1.5 prior
11:00 (EU) ECB President Draghi (outgoing) – farewell event
11:30 (US) Treasury to sell 3-Month and 6-Month Bills
13:00 (UK) BOE member Tenreyo in London