Little Impetus To Add To Fresh Positions In Quiet Session

Sep 25 20, 10:20 GMT

Notes/Observations

Cautious tone in session as participants brace for more coronavirus restrictions in Europe

Asia:

FTSE Russell will add China government bonds to its benchmark World Government Bond Index (WGBI) next year around October 2021. Their final decision will be made in March 2021.
Japan said to be considering corporate tax cuts for Small and Medium Enterprises (SME) to encourage M&A activity
North Korea Leader Kim said to have sent letter to South Korea’s presidential office which apologized to South Korea for the shooting death of an officer

Europe:

BOE Haldane (Chief Economist): have been reassured during this crisis by how quickly govts and central banks have responded
UK Sept Preliminary GfK Consumer Confidence: -25 v -27 prior (1st improvement since June)

Americas:

Fed’s Evans (dove, non-voter): taking a very serious risk if fiscal assistance was not extended; Fed to use all tools to support the recovery
Fed’s Barkin (non-voter, hawk) noted that Inflation was not that far off 2% target right now . Saw little reason to be concerned that an inflation surge is looming
Fed’s Bullard (non-voter): sort of a full economic recovery was possible by end of 2020; Q4 data. Believed it was not reasonable for a second coronavirus wave to dominate forecasts
House Democrats said to be working on a $2.3T virus stimulus package that could be voted on as soon as next week
Mexico central bank cut key rate again, but slowed the pace of its easing

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.02% at 355.92, FTSE +0.15% at 5,831.45, DAX -0.43% at 12,551.75, CAC-40 -0.66% at 4,731.04, IBEX-35 +0.28% at 6,662.00, FTSE MIB -0.32% at 18,845.50, SMI +0.06% at 10,217.35, S&P 500 Futures 0.00%]
Market Focal Points/Key Themes: European indices trade broadly flat with DAX and FTSE MIB underperforming others on increased virus concerns in respective countries; Bayer reaches agreement in more Roundup cases and trade slightly lower erasing earlier gains; Wizz Air trade almost 2% lower on operational update stating it anticipates not to operate at a higher level of capacity during upcoming winter; earnings expected in the upcoming US session include Fluor Corp.

Equities

Consumer discretionary: Boohoo.com [BOO.UK] +11% (Independent Review of its UK supply chain), Mothercare [MTC.UK] +30% (earnings; trading update), Lagardere [MMB.FR] +28% (sells interest), Wizz Air [WIZZ.UK] -1.5% (operational update)

Speakers

ECB’s Villeroy (France) reiterated Council view that inflation was not at the level they liked; had room to maneuver if necessary. Did not doubt ECB’s determination and capacity to act if needed (**Note: downplayed speculation that ECB was running out of ammunition) . Did not assume ECB would simply follow the Fed strategy (**Reminder: ECB currently undergoing a strategic review)
France Fin Min Le Maire said not propose a new tax on cars based on their weight
G7 official said to agree to back an extension of a freeze in debt payments from the world’s poorest countries struggling with the coronavirus pandemic (**Note: In-line with IMF and G20 view)
China National Health Commission official Zheng Zhongwei: Annual coronavirus vaccine capacity is expected to reach 610M doses by end-2020 and reach reach 1.0B doses by program end-2021

Currencies/Fixed Income

FX markets were relatively quiet in session with little key data or issuance to tempt any fresh position taking.
EUR/USD slightly lower as dealers and participants were said to be cautious and brace for more coronavirus restrictions in Europe as the number of cases continued to rise. Pair at 1.1655 at mid-session. The 1.1500 area seen as key support for the currency.
TRY currency (Lira) continued to strengthen after Thursday’s surprise hike by Turkey’s Central Bank. Dealers noted the price action was a continued purging out of existing short lira positions

Economic Data

(UK) Aug Public Finances (PSNCR): €25.7 v £16.5B prior; Net Borrowing: £35.2B v £39.5Be; Central Government NCR: £21.7B v £25.5B prior; PSNB (ex-banking groups): £35.9B v £38.0Be
(DK) Denmark Aug Retail Sales M/M: -1.1% v -1.0% prior; Y/Y: 2.0% v 7.2% prior
(ES) Spain Aug PPI M/M: -0.2% v +1.8% prior; Y/Y: -3.5 v -4.8% prior
(AT) Austria July Industrial Production M/M: -0.2% v 1.8% prior; Y/Y: -3.5% v -4.8% prior
(SE) Sweden Aug PPI M/M: -0.2% v -0.7% -prior; Y/Y: -4.6 v -4.9% prior
(SE) Sweden Aug Household Lending Y/Y: 5.2% v 5.2% prior
(CN) Weekly Shanghai copper inventories (SHFE): 170.5K v 193.7K tons prior
(RU) Russia Narrow Money Supply w/e Sept 18th (RUB): 13.34 v 13.28T prior
(EU) Euro Zone Aug M3 Money Supply Y/Y: 9.5% v 10.1%e
(IT) Italy Sept Consumer Confidence Index: 101.0 v 100.8e; Manufacturing Confidence: 92.1 v 87.4e; Economic Sentiment: 91.1 v 81.4prior
(PH) Philippines Aug Balance of Payments (BOP): $0.7B v $0B (nil) prior
(CN) China Q2 Final Current Account: $110.2B v $119.6B prelim

Fixed Income Issuance

(IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 6-month Bills; Avg Yield: -0.392% (lowest since Apr 2018) v -0.330% prior; Bid-to-cover: 2.01x v 1.71x prior

Looking Ahead

(PT) Portugal Year-to-Date Budget Report
(CO) Colombia Central Bank Interest Rate Decision: expected to cut Overnight Lending Rate by 25bps to 1.75%
(IN) India to sell combined INR300B in 2022, 2030, 2033 and 2060 bonds
05:30 (ZA) South Africa to sell combined ZAR2.0B in I/L 2029, 2038 and 2046 Bonds
06:00 (UK) DMO to sell £2.0B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively)
06:45 (US) Daily Libor Fixing
07:00 (UK) BOE Quarterly Bulletin
07:00 (MX) Mexico July IGAE Economic Activity Index (Monthly GDP) M/M: 5.1%e v 9.0% prior; Y/Y: -10.1%e v -13.2% prior
07:00 (BR) Brazil Sept FGV Construction Costs M/M: 0.9%e v 0.8% prior
07:30 (IN) India Weekly Forex Reserve w/e Sept 18th: No est v $541.7B prior
08:00 (UK) Daily Baltic Dry Bulk Index
08:00 (IN) India announces upcoming bill issuance (held on Wed)
08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond issuance (held on Thursdays)
08:30 (US) Aug Preliminary Durable Goods Orders: 1.4%e v 11.4% prior; Durables (ex-transportation): 1.0%e v 2.6% prior; Capital Goods Orders (non-defense/ex-aircraft): 1.0%e v 1.9% prior; Capital Goods Shipments (non-defense/ex-aircraft): 0.8%e v 2.4% prior
09:00 (US) Fed’s Williams
11:00 (EU) Potential sovereign ratings after European close (Moody’s on Hungary, Sweden Sovereign
Debt; S&P on Saudi Arabia Sovereign Debt; Fitch on UK, Poland and Estonia Sovereign Debt
13:00 (US) Weekly Baker Hughes Rig Count
15:10 (US) Fed’s Williams