Virus Concerns Continues To Weigh Upon Risk Appetite, German IFO Survey Rises For A 5th Straight Month

Notes/Observations

• Both SNB and Norges kept policy and forward guidance unchanged (as expected)
• German IFO Survey Survey registered its 5th straight month of improvement
• Focus on UK’s Sunak for his statement on how to plan for protecting jobs through the winter
• Resurgence of coronavirus cases across the US, the EU and UK helped to boost safe-haven demand

Asia:

• BOJ July Minutes (2 meetings ago) Most members noted that virus measures exerting intended effects; Members agreed to add easing without hesitation, with eye on impact of coronavirus on economy
• China Beige Book indicates that there are 2 sides to the economy and the Govt is only highlighting the side that is doing well, large corporations. Larger corporate companies are recovering faster than smaller companies; China is experiences two different economic recoveries

Coronavirus:

• France Health Min stated that would take new steps to address pandemic but looked to avoid a general lockdown

Europe:

• British Chambers of Commerce (BCC) stated that domestic companies were not preparing for the next stage of Brexit, fewer were assessing risks, the Govt needed to do more to help them
• Chancellor of the Exchequer Sunak (Fin Min) to make a statement on the economy and to present plan for protecting jobs through the winter
• Italy PM Conte said to have no plans for Cabinet reshuffle in the wake of regional elections. Balance of power of government is not shifting toward center-left following vote; not concerned about poor showing of 5-Star party

Americas:

• President Trump stated that he believed the election would end up in the Supreme Court; that’s why it’s important to have nine justices seated
• Fed’s Rosengren (hawk, non-voter): highly accommodative monetary and fiscal policy was appropriate until a vaccine was widely available; full recovery not likely until coronavirus vaccine exists
• Fed’s Evans (dove, non-voter): it’s probably a bit ambitious to think there would be $1T in fiscal help
• Fed’s Quarles (hawk, voter): Economic hole from the pandemic remains deep, would take a long time to recovery from this shock
• Fed’s Daly (non-voter): Pandemic in a week erased the labor market’s achievements of a decade

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.93% at 356.16, FTSE -0.80% at 5,852.15, DAX -0.57% at 12,578.95, CAC-40 -0.71% at 4,768.05, IBEX-35 -0.29% at 6,635.00, FTSE MIB -0.42% at 18,850.50, SMI -1.21% at 10,204.56, S&P 500 Futures -0.30%]
• Market Focal Points/Key Themes: European indices open lower across the board but moderated the losses a little as the session wore on; sectors among better performers include utilities and telecom; consumer discretionary and technology sectors among underperformers; France announces new measures to deal with covid; Italy rules out nation-wide lockdown; Veolia CEO says raising proposed offer for Suez a possibility; SPA holding launches bid for Ahlstrom- Munksjo; Disney postpones major releases; reportedly Unicaja and Liberbank studying merger; focus on upcoming announcement in UK Parliament of plans for furlough replacement, and release of unemployment data in the US; earnings expected in the upcoming US session include Accenture, Carmax and Blackberry

Equities

• Consumer discretionary: National Express [NEX.UK] +4% (trading update), Go-Ahead [GOG.UK] +1% (earnings), Smiths Group [SMIN.UK] -6% (earnings; dividend cut), Cineworld [CINE.UK] -15% (earnings)
• Healthcare: Indivior [INDV.UK] +4% (strategic alignment plan)
• Technology: Ebiquity [EBQ.UK] -25% (earnings

Speakers

• ECB Economic Bulletin noted that labor market indicators pointed to continued job losses in Q3. Looking forward it saw little signs of any buoyancy in demand for consumer goods
• SNB Policy Statement maintained its expansionary monetary policy as it remained necessary to ensure appropriate monetary conditions in Switzerland. Reiterated language on FX; CHF currency remained highly valued and willing to intervene more strongly in the FX market. Saw a strong rebound in Q3 GDP
• SNB Quarterly Staff Projections raised the 2020 GDP outlook from -6.0% to -5.0% and raised its 2020 CPI from -0.7% to -0.6% and 2021 CPI from -0.2% to +0.1%
• SNB President Jordan post rate decision press conference noted that the situation was less negative compared to prior meeting in June but environment remained challenging
• Sweden Central Bank (Riksbank) Skingsley stated that thedomestic economy appears to be recovering but could face risks of setbacks. Had been successful in calming marketsbut reiterated that it had room for further rate cuts if needed but space was limited
• Norway Central bank (Norges) Policy Statement noted that the decision to keep policy steady was unanimous. Reiterated forward guidance that Deposit Rate would most likely to stay at current level for some time (next couple of years). Economic downturn and uncertainty suggested keeping rate on hold until signs that conditions were normalizing
• German IFO Economists noted that the domestic industry was continuing its recovery; exports had improved significantly. Rising coronavirus infection rate was hurting sentiment in service sector – especially in tourism . Brexit and upcoming US election had not had any impact on business
• Romania Central Bank official Popa: Govt playing with fire with its wide budget deficit as the country’s sovereign credit rating hanging by a thread
• Japan Cabinet Office (Govt) Sept Monthly Economic Report maintained its overall economic assessment that the domestic economy remained in a severe situation despite signs of improvement. Cut its view on private consumption while raising its views on exports, production and jobs
• China Commerce Ministry (MOFCOM) reiterated stance of no timetable for unreliable entry list

Currencies/Fixed Income

• Safe haven flows continued to remain the theme. Dealers noted that a rapid rebound of confirmed coronavirus cases in the EU posed a growing threat to the economic recovery. Number of inflation rising elsewhere around the globe.
• EUR/USD slightly lower despite the German IFO survey registering its 5th straight month of improvement. Dealers focused on the virus. Sentiment was not help after the France Health Min announced new steps to address pandemic but stressed it looked to avoid a general lockdown. Pair at 1.1650 at mid-session
• GBP/USD reversed earlier losses to trade at 1.2735 by mid-day. Focus on upcoming statement from Chancellor Sunak on how to protect jobs once the furlough programs ends in Oct.

Economic Data

• (FI) Finland Aug Preliminary Retail Sales Volume Y/Y: 4.2% v 4.5% prior
• (FI) Finland Aug PPI M/M: +0.8% v -0.1% prior; Y/Y: -4.1% v -5.0% prior
• (FR) France Sept Business Confidence: 92 v 94e; Manufacturing Confidence: 96 v 96e; Production Outlook Indicator: -2 v +2e; Own-Company Production Outlook: 12 v 15e
• (CZ) Czech Sept Consumer Confidence Index: -9.0 v -12 prior; Business Confidence: +1.7 v -2.8 prior; Composite Confidence (Consumer & Business Confidence): -0.5 v -4.7 prior
• (TR) Turkey Sept Real Sector Confidence (Seasonally Adj): 105.7 v 105.2 prior; Real Sector Confidence NSA (unadj): 105.3 v 106.2 prior
• (TR) Turkey Sept Capacity Utilization: 74.6% v 73.3% prior
• (CH) Swiss National Bank (SNB) left its Key Rates unchanged; Leave Sight Deposit Interest Rate unchanged at -0.75% and Policy Rate unchanged at -0.75%; reiterated its FX language of Franc being highly valued
• (NO) Norway Central Bank (Norges) left the Deposit Rates unchanged at 0.00% (as expected); maintained its forward guidance and rate path
• Norway Central Bank (Norges) Gov Olsen post rate decision press conference noted that there was limited risk of inflation going too low
• (DE) Germany Sept IFO Business Climate Survey:93.4# v 93.8e; Current Assessment: 89.2 v 89.5e; Expectations Survey: 97.7 v 98.0e
• (TW) Taiwan Aug M2 Money Supply Y/Y: 7.7% v 5.9% prior; M1 Money Supply Y/Y: 11.0% v 10.3% prior
• (HK) Hong Kong Aug Trade Balance (HKD): -14.6B v -20.5Be; Exports Y/Y: -2.3% v -3.0%e; Imports Y/Y: -5.7% v -3.9%e

Fixed Income Issuance

• (UK) DMO sold £3.0B in 0.125% Jan 2026 Gilts; Avg Yield: -0.009% v +0.026% prior; bid-to-cover: 2.60x v 2.45x prior; Tail: 0.1bps v 0.3bps prior
• (IT) Italy Debt Agency (Tesoro) sold €3.75B vs. €3.25-3.75B indicated range in Sept 2022 CTZ; Avg Yield: -0.118% v -0.014% prior; bid-to-cover: 1.59x v 1.56x prior
• (IT) Italy Debt Agency (Tesoro) sold €750M vs. €500-750M in 0.4% May 2030 I/L Bonds (BTPei); Real Yield: 0.37% v 0.46% prior; bid-to-cover: 1.70x v 1.48x prior

Looking Ahead

• (IL) Israel Aug Leading ‘S’ Indicator M/M: No est v 0.2% prior
• (AR) Argentina Sept Consumer Confidence Index: No est v 41.3 prior
• (EG) Egypt Central Bank Interest Rate Decision: No analyst estimates; Current Lending Rate at 10.25% and Deposit Rate at 9.25%
• 05:30 (EU) ECB allotment in LTRO-3 Operation
• 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds
• 06:00 (UK) Sept CBI Retailing Reported Sales: -10e v -6 prior; Total Distribution: -15e v -9 prior
• 06:00 (CA) Canada Sept CFIB Business Barometer: No est v 59.2 prior
• 06:00 (RO) Romania to sell RON200M in 4.15% 2028 Bonds
• 06:30 (UK) DMO to sell £1.2B in 0.125% I/L 2028 Gilts; Avg Yield: % v -2.882% prior; bid-to-cover: x v 2.44x prior; Tail: bps v 0.4bps prior (Sept 3rd 2020)
• 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave One-Week Repo Rate unchanged at 8.25%
• 07:00 (BR) Brazil Central Bank Quarterly Inflation Report
• 07:30 (UK) Chancellor of the Exchequer Sunak (Fin Min) statement regarding plans to replace the furlough scheme
• 08:00 (PL) Poland Central Bank Sept Minutes
• 08:00 (CL) Chile Aug PPI M/M: No est v 4.3% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Initial Jobless Claims: 840Ke v 860K prior; Continuing Claims: 12.30Me v 12.628M prior
• 08:30 (US) Weekly USDA Net Export Sales
• 08:50 (US) Fed’s Kaplan
• 09:00 (IE) ECB’s Lane (Ireland, chief economist)
• 09:00 (RU) Russia Gold and Forex Reserve w/e Sept 18th: No est v $591.8B prior
• 09:00 (BR) Belgium Sept Business Confidence: -11.0e v -12.0 prior
• 10:00 (US) Aug New Home Sales: 890Ke v 901k prior
• 10:00 (US) Fed Chair Powell testifies in Senate
• 10:00 (UK) BOE Gov Bailey at event
• 10:30 (US) Weekly EIA Natural Gas Inventories
• 11:00 (US) Sept Kansas City Fed Manufacturing Activity Index: 14e v 14 prior
• 12:00 (US) Fed’s BUllard
• 13:00 (US) Fed’s Evans
• 13:00 (US) Fed’s Barkin
• 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to cut Overnight Rate by 25bps to 4.25% (**Note: 50-50% of move)
• 14:00 (US) Fed’s Williams
• 14:00 (US) Fed’s Bostic
• 15:00 (AR) Argentina Aug Trade Balance: $1.2Be v $1.5B prior
• 17:00 (KR) South Korea Sept Consumer Confidence: No est v 88.2 prior (revised from 84.2)
• 19:01 (UK) Sept GFK Consumer Confidence: -27e v -27 prior
• 19:50 (JP) Japan Aug PPI Services Y/Y: 1.2%e v 1.2% prior
• 12:00 (CA) Canada to sell 10-year Bonds
• 23:00 (CN) China to sell 3-month and 6-month Bills
• 23:30 (JP) Japan to sell 3-month bills