ECB Officials Discount Threat Of Deflation

Notes/Observations

• UK Q2 record contraction revised slightly better
• German Retail Sales rise in Aug but mixed compared to consensus
• German Unemployment improves for the 3rd straight month (though gained back approx. 30K of the almost 700K jobs lost from pandemic)
• More EU Sept CPI data comes in negative (France, Italy and Portugal readings)
• Fierce and chaotic first Presidential debate between Trump and Biden
• Focus remains on any progress being made around a US fiscal stimulus package

Asia:

• Japan Aug Preliminary Industrial Production M/M: 1.7% v 1.4%e; Y/Y: -13.3% v -13.4%e
• Japan Aug Retail Sales M/M: 4.6% v +2.0%e; Y/Y: -1.9% v -3.1%e
• China Sept Manufacturing PMI registered its 7th straight expansion ( 51.5 v 51.3e)
• China Sept Caixin PMI Manufacturing: 53.0 v 53.1e

Americas:

• 1st of the Presidential debates deemed as a chaotic encounter; candidates battled over the president’s leadership on the coronavirus pandemic, the economy and taxes
• House Speaker Pelosi stated that her conversation with Tsy Sec Mnuchin on stimulus was positive; hopeful about getting deal with White House this week on coronavirus aid package
• Senate has votes to advance stopgap funding bill, as expected; Senate expected to have full vote on Stopgap bill on Wed, Sept 30th
• World Trade Organization (WTO) approves EU Tariffs on $4.0B of US goods due to subsidies for Boeing

Energy:

• Weekly API Crude Oil Inventories: -0.8M v +0.7M prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.19% at 360.80, FTSE +0.02% at 5,898.95, DAX -0.51% at 12,759.85, CAC-40 -0.32% at 4,816.82, IBEX-35 +0.02% at 6,715.00, FTSE MIB -0.04% at 19,054.50, SMI -0.15% at 10,214.00, S&P 500 Futures -0.78%]
• Market Focal Points/Key Themes: European indices open broadly lower across the board, but quickly retraced a bit to trade modestly in the red; weaker sentiment attributed to increase in covid cases; better performing sectors include telecom and utilities; financials and industrials sectors lead to the downside; reportedly Spain considering new lockdown measures in major cities; Veolia raises offer for Engie’s stake in Suez; William Hill confirms to be acquired by Caesars; reportedly Telefonica mulling further stake sale in its towers business; BPER announces capital increase to finance acquisition of Intesa branches; DSM sells coating resins business to Covestro; Shell announced job cuts, while Equinor workers declared strike; earnings expected in the upcoming US session include S&P Global and NetApp

Equities

• Consumer discretionary: 888 Holdings [888.UK] +22% (earnings), Compass Group [CPG.UK] -5% (Q4 update), Gama Aviation [GMAA.UK] -11% (earnings)
• Energy: Royal Dutch Shell [RDSA.NL] +1.5% (Q3 update; job cuts; cost optimization)
• Financials: Hammerson [HMSO.UK] +4% (new CEO)
• Industrials: Alstom [ALO.FR] -3% (stake)
• Materials: Covestro [1COV.DE] -6% (acquisition)

Speakers

• ECB Chief Lagarde speech at Watchers Conference noted that low inflation posed fundamental challenges. Needed to agree on what tools were available to address low inflation. Measures taken since March would increase inflation by 0.8% between the 2020-22 period and aid GDP growth by 1.3%. Too soon to draw any conclusions from Strategic Review
• ECB’s Weidmann (Germany): Widening of ECB mandate would harm independence. Enduring easy monetary policy could contribute to building imbalances
• ECB’s Rehn (Finland): Have managed to avoid the threat of deflation but risk of inflation continues to be too slow. Reiterated stance that monetary policy would continue to be accommodative for a long time
• ECB’s Muller (Estonia) stated that he did not believe that pace of recovery would be as fast as before. Cited that business confidence in the region had declined lately
• BOE’s Haldane (chief economist): Most recent Minutes did not signal negative rates as imminent; technical work likely to take months
• German Chancellor Merkel stated in German Parliament that Govt sought a return to budget normality asap. Needed to stand tough on pandemic in Autumn; facing difficult months ahead as inflection rates rose. Could avoid a 2nd national lockdown if careful. Expected difficult negotiations on EU Recovery Fund; must be made available from start of 2021
• EU’s Dombrovskis (incoming trade chief) said to urge a robust level playing field terms with UK – confirmation written replies
• SNB: Q2 Foreign exchange intervention at CHF51.5B and for h21 at CHF90.0B (**Reminder: On Sept 24th SNB announced that it would begin publishing FX intervention data quarterly)
• Thailand Central Bank official Don: GDP could return to positive territory in Q2 of 2021

Currencies/Fixed Income

• Quarter end saw the USD edge out small gains in the session against the major European pairs. Focus turning towards the US Presidential election after a fierce first debate between Republican President Trump and Democratic rival Biden.
• A plethora of economy data in the session failed to inspire any fresh position taking.
• EUR/USD was lower by 0.3% despite some improvement in various EU data. German unemployment improved for the 3rd straight month but only making a small dent in the massive pandemic job losses from the mar-Jun period. Continued concerns on harsher restrictions in Europe a headwind for the Euro for the time being. Focus turning to the EU Council meeting on Thurs-Fri and debate over the Recovery Fund. Also, markets eyeing S&P upcoming decision on Italy’s sovereign rating on Friday.
• CNY currency end Q3 as one of the world’s best-performing currency as its rose by 3.8% over the past three months. USD/CNY approached the 6.75 level.

Economic Data

• (NL) Netherlands Aug Retail Sales Y/Y: 6.2 v 12.0% prior
• (UK) Q2 Final GDP Q/Q: -19.8% v -20.4%e; Y/Y: -21.5% v -21.7%e
• (UK) Q2 Final Private Consumption Q/Q: -23.6% v -23.1%e; Government Spending Q/Q: -14.6% v -14.0%e; Gross Fixed Capital Formation Q/Q: -21.6% v -25.5%e; Exports Q/Q: -11.0% v -11.3%e; Imports Q/Q: -22.7% v -23.4%e
• (UK) Q2 Final Total Business Investment Q/Q: -26.5% v -31.4% prelim; Y/Y: -26.1% v -31.3% prelim
• (UK) Q2 Current Account Balance: -£2.8B v -£0.8Be
• (UK) Sept Nationwide House Prices M/M: 0.9% v 0.5%e; Y/Y: 5.0% v 4.5%e
• (DE) Germany Aug Retail Sales M/M: 3.1% v 0.4%e; Y/Y: 3.7% v 4.2%e
• (DE) Germany Aug Import Price Index M/M: 0.1% v 0.0%e; Y/Y: -4.0% v -4.1%e
• (DE) Denmark Q2 Final GDP Q/Q: -6.9% v -6.9% prelim; Y/Y: -7.7% v -8.2% prelim
• (DE) Denmark Aug Gross Unemployment Rate: 4.9% v 5.2% prior; Unemployment Rate (Seasonally Adj): 4.4% v 4.8% prior
• (NO) Norway Aug Credit Indicator Growth Y/Y: 4.7 v 4.5% prior
• (FI) Finland July Final Trade Balance: -€0.5B v v -€0.4B prelim
• (ZA) South Africa Aug M3 Money Supply Y/Y:10.9%v 10.6%e; Private Sector Credit Y/Y: 3.9% v 4.9%e
• (JP) Japan Aug Final Machine Tool Orders Y/Y: -23.2% v -23.3% prelim
• (FR) France Sept Preliminary CPI M/M: -0.5% v -0.4%e; Y/Y: 0.1% v 0.2%e
• (FR) France Sept Preliminary CPI EU Harmonized M/M: -0.6% v -0.4%e; Y/Y: 0.0% v 0.2%e
• (FR) France Aug PPI M/M: 0.1% v 0.4% prior; Y/Y: -2.5% v -2.5% prior
• (FR) France Aug Consumer Spending M/M: +2.3% v -0.2%e; Y/Y: 2.4% v 0.4%e
• (CH) Swiss Sept KOF Leading Indicator: 113.8 v 106.0e (decade high)
• (TR) Turkey Aug Trade Balance: -$6.3B v -$6.3Be
• (HU) Hungary Aug PPI M/M: 0.7% v 0.7% prior; Y/Y: 3.6% v 3.4% prior
• (HU) Hungary July Average Gross Wages Y/Y: 10.8% v 14.1%e
• (AT) Austria Aug PPI M/M: 0.0% v 0.1% prior; Y/Y: -1.9% v -2.1% prior
• (TH) Thailand Aug Current Account Balance: 3.0$B v $2.0Be
• (SE) Sweden July Non-Manual Workers Wages Y/Y: 1.9% v 1.7% prior
• (TH) Thailand Aug Trade Balance: $5.4B v $4.1B prior; Exports Y/Y: -8.2% v -11.9% prior; Imports Y/Y: -19.1% v -25.4% prior; Overall Balance of Payments (BOP): $2.1B v $2.7B prior
• (CN) Weekly Shanghai copper inventories (SHFE): 155.1K v 170.5K tons prior
• (DE) Germany Sept Net Unemployment Change: -8.0K v -7.0Ke; Unemployment Claims Rate: 6.3% v 6.4%e
• (CH) Swiss Sept Credit Suisse Expectations Survey: 26.2 v 45.6 prior
• (NO) Norway Central Bank (Norges) Oct Daily FX Purchases (NOK): -1.6B v -2.0B prior
• (CZ) Czech Aug M2 Money Supply Y/Y: 9.8% v 10.0% prior
• (ZA) South Africa Aug CPI M/M: 0.2% v 0.2%e; Y/Y: 3.1% v 3.2%e
• (ZA) South Africa Aug CPI Core M/M: 0.2% v 0.2%e; Y/Y: 3.3% v 3.2%e
• (DE) Germany Sept CPI Brandenburg M/M: +0.1% v -0.5% prior; Y/Y: -0.2% v -0.4% prior
• (ES) Spain July Current Account: €1.5B v €2.0B prior
• (PT) Portugal Sept Preliminary CPI M/M: +1.0% v -0.3% prior; Y/Y: -0.1% v 0.0% prior
• (PT) Portugal Sept Preliminary CPI EU Harmonized +0.8% v -0.3% prior; Y/Y: -0.7% v -0.2% prior
• (HK) Hong Kong Aug Retail Sales Value Y/Y: -13.1% v -17.5%e; Retail Sales Volume Y/Y: -13.4% v -15.9%e
• (IT) Italy Sept Preliminary CPI M/M: 1.0% v -0.4%e; Y/Y: -0.5% v -0.5%e
• (IT) Italy Sept Preliminary CPI EU Harmonized M/M: 1.0% v 0.9%e; Y/Y: -0.9% v -0.4%e
• (GR) Greece July Retail Sales Value Y/Y: -3.1% v -3.8% prior; Retail Sales Volume Y/Y: -3.0% v -6.9% prior
• (IS) Iceland Aug Final Trade Balance (ISK): -11.3B v -11.2B prelim

Fixed Income Issuance

• (SE) Sweden sold SEK vs. SEK15.0B indicated in 3-month Bills; Avg Yield: -0.1858% v -0.1726% prior; Bid-to-cover: 4.63x v 2.76x prior

Looking Ahead

• 05:30 (SL) Sri Lanka Sept CPI Y/Y: No est v 4.1% prior
• 05:30 (DE) Germany to sell €4.0B in 0% Oct 2025 BOBL
• 05:30 (EU) ECB allotment in 3-month LTRO tender
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month bills
• 05:30 (GR) Greece Debt Agency (PDMA) to sell €375.0M in 26-week bills
• 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays)
• 06:00 (PT) Portugal Aug Industrial Production M/M: No est v 11.9% prior; Y/Y: No est v -9.6% prior
• 06:00 (CZ) Czech Republic to sell combined CZK5.0B in 2029 and 2040 bonds
• 06:45 (US) Daily Libor Fixing
• 07:00 (RU) Russia to sell OFZ Bonds
• 07:00 (UK) Weekly PM Question time in House
• 07:00 (US) MBA Mortgage Applications w/e Sept 25th: No est v 6.8% prior
• 07:00 (MX) Mexico July Gold Production: No est v 5.6K kilograms; Silver Production: No est v 324.9K kilograms; Copper Production: No est v 40.7K tons
• 07:30 (IN) India Aug Eight Infrastructure (Key) Industries: No est v -9.6% prior
• 08:00 (ZA) South Africa Aug Trade Balance (ZAR): 29.7Be v 37.4B prior
• 08:00 (ZA) South Africa Aug Monthly Budget Balance (ZAR): -85.4Be v -134.5B prior
• 08:00 (BR) Brazil July National Unemployment Rate: 13.8%e v 13.3% prior
• 08:00 (CL) Chile Aug Unemployment Rate: 13.5%e v 13.1% prior
• 08:00 (CL) Chile Aug Retail Sales Y/Y: -10.0%e v -17.4% prior; Commercial Activity Y/Y: No est v -11.2% prior
• 08:00 (CL) Chile Aug Industrial Production Y/Y: No est v -3.3% prior; Manufacturing Production Y/Y: -5.3%e v -7.2% prior; Total Copper Production: No est v 467.9K prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:15 (US) Sept ADP Employment Change: +648Ke v +428K prior
• 08:30 (US) Q2 Final GDP Annualized Q/Q: -31.7%e v -31.7% prelim; Personal Consumption: -34.1%e v -34.1% prelim
• 08:30 (US) Q2 Final GDP Price Index: -2.0%e v -2.0% prelim; Core PCE Q/Q: -1.0%e v -1.0% prelim
• 08:30 (CA) Canada July GDP M/M: 2.9%e v 6.5% prior; Y/Y: -5.3%e v -7.8% prior
• 08:30 (BR) Brazil Aug Primary Budget Balance (BRL): -99.0Be v -81.1B prior; Nominal Budget Balance (BRL): -131.2Be v -86.9B prior; Net Debt to GDP Ratio: 61.4%e v 60.2% prior
• 09:45 (US) Sept Chicago Purchase Managers Index (PMI): 52.0e v 51.2 prior
• 10:00 (US) Aug Pending Home Sales M/M: 3.2%e v 5.9% prior; Y/Y: No est v 15.4% prior
• 10:00 (MX) Mexico Aug Net Outstanding Loans (MXN): No est v 4.848T prior
• 10:00 (IE) ECB’s Lane (Ireland, chief economist) at ECB Watchers Conference
• 10:30 (US) Weekly DOE Oil Inventories
• 11:00 (CO) Colombia Aug National Unemployment Rate: No est v 20.2% prior; Urban Unemployment Rate: 24.4%e v 24.7% prior
• 11:00 (US) Fed’s Kashkari on economy
• 11:15 (SE) Sweden Central Bank (Riksbank) Jansson on panel
• 12:00 (US) USDA Quarterly Crop Report
• 12:00 (CA) Canada to sell 2-Year Bonds
• 13:30 (BR) Brazil Aug Total Formal Job Creation: +143.9Ke v +131.0K prior
• 13:40 (US) Fed’s Bowman on community banks
• 15:00 (AR) Argentina July Wages M/M: No est v 0.6% prior
• 18:30 (AU) Australia Sept Performance of Managers Index: No est v 49.3 prior
• 19:00 (AU) Australia Sept Final PMI Manufacturing: No est v 55.5 prelim
• 19:50 (JP) Japan Q3 Tankan Large Manufacturers Index: -24e v -34 prior; Large Manufacturers Outlook: -16e v -27 prior; Large All Industry Capex: +0.5%e v 3.2% prior
• 19:50 (JP) Japan Q3 Tankan Large Non-Manufacturers Index: -9e v -17 prior; Large Non-Manufacturers Outlook-7e v -14 prior
• 19:50 (JP) Japan Q3 Tankan Small Manufacturers Index: -37e v -45 prior; Small Manufacturers Outlook: -34e v -47 prior
• 19:50 (JP) Japan Q3 Tankan Small Non-Manufacturers Index: -21e v -26 prior; Small Non-Manufacturers Outlook: -21e v -33 prior
• 20:00 (AU) Australia Sept CoreLogic House Prices M/M: No est v -0.5% prior
• 20:00 (KR) South Korea Sept Trade Balance: $8.9Be v $4.1B prior; Exports Y/Y: +3.5%e v -10.1% prior (revised from -9.9%); Imports Y/Y: -5.1%e v -15.8% prior (revised from -16.3%)
• 20:01 (IE) Ireland Sept PMI Manufacturing: No est v 52.3 prior
• 20:30 (JP) Japan Sept Final PMI Manufacturing No est v 47.3 prelim
• 20:30 (ID) Indonesia Sept PMI Manufacturing: No est v 50.8 prior
• 20:30 (TH) Thailand Sept PMI Manufacturing: No est v 49.7 prior
• 20:30 (PH) Philippines Sept PMI Manufacturing: No est v 47.3 prior
• 20:30 (MY) Malaysia Sept PMI Manufacturing: No est v 49.3 prior
• 20:30 (VN) Vietnam Sept PMI Manufacturing: No est v 45.7 prior
• 21:30 (AU) Australia Aug Job vacancies: No est v -43.2% prior
• 23:35 (JP) Japan to sell 10-Year JGB Bonds