Risk Aversion Theme Musters Fresh Momentum As Trump Tests Positive For Coronavirus

Notes/Observations

• Euro Zone headline CPI remained in negative territory for the 2nd straight month
• Trump tests positive for coronavirus (Covid-45??); concerns whether Biden could be infected after debating the President earlier in the week
• US Congress fails to reach an agreement on fresh fiscal stimulus
• Focus turns to US jobs report

Asia

• Japan Aug Jobless Rate: 3.0% v 3.0%e
• Australia Aug Retail Sales M/M: -4.0% v-4.2%e
• Japan TSE reopens after Thurs technical glitch; China, HK, Korea remained closed for holiday

Europe

• Day 1 of EU Council discussed external relations (Turkey/Belarus/China)
• Italy Economic Development Min Patuanelli pledged to use EU aid funds properly to help economy

Americas

• President Trump and First Lady Melania tested positive for coronavirus
• House Democrats passed $2.2T in stimulus bill (seen as symbolic as Senate will not take up this bill). Vote was 214 to 207. All Republicans voted no. Talks continued between Speaker Pelosi and Tsy Sec Mnuchin yielding little results. Pelosi said to signaled no coronavirus deal likely with White House

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.21% at 361.04, FTSE -0.58% at 5,845.35, DAX -0.73% at 12,637.20, CAC-40 -0.52% at 4,799.09, IBEX-35 +0.05% at 6,734.00, FTSE MIB -0.29% at 19,006.50, SMI -0.33% at 10,204.22, S&P 500 Futures -1.18%]
• Market Focal Points/Key Themes: European indices open amply lower across the board, but moderated losses as the session progressed; risk sentiment impacted following announcement that President Trump tested positive for covid; utilities and telecom sectors among better performers; materials and industrials sectors lead to the downside; reportedly ASTM interested in Autostrade, Atlantia awarded 10-day extension to concession; Vinci made offer for ACS’s industrial unit; focus on upcoming NFP release; no major events expected during the US session

Equities

• Consumer discretionary: Korian [KORI.FR] -9% (acquisition; capital increase), TUI [TUI1.DE] -2% (CEO comments)
• Industrials: ACS [ACS.ES] +16% (receives proposal from Vinci)
• Materials: Centamin [CEY.UK] -18% (defer mining at plant)

Speakers

• ECB’s Panetta (Italy) stated that ECB should be able to issue digital euro if necessary. Intensifying work on digital currency and hold consultation and experiment on issue
• UK Govt spokesperson: PM Johnson to hold talks with EU’s Von der Leyen on Sat, Oct 3rd to help attempt to unlock impasse in Brexit negotiations (**Insight: 1st time since Jun that UK PM to participate in Brexit negotiations
• Ireland Fin Min Donohoe: would work until last moment in hope to achieve a Brexit trade agreement
• UK-EU to hold more trade talks before the next schedule EU Leader Summit (scheduled for Oct 15-16th)
• Czech Central Bank (CNB) Sept Minutes noted that current policy was sufficiently accommodative but risks to current forecasts were substantial . Two members saw rising risk of more easing. FX rate was reacting very strongly to sentiment; weakening would not bring desired additional easing of conditions
• Hungary Central Bank Dep Gov Virag prepared to act if FX did impact inflation

Currencies/Fixed Income

• Risk aversion set in just ahead of the European morning after President Trump tweeted that he and First Lady Melania tested positive for the coronavirus. The risk-off sentiment weighed on stocks, sent core bond yields lower and provided flows into JPY and USD currencies.
• EUR/USD tested below the 1.17 level as the session began but did manage to recover a bit from those levels. EUR currency facing some headwinds as headline CPI data for Sept registered its 2nd straight month of negative readings while Core CPI YoY hit a fresh record low
• GBP recovered from its initial losses on reports that UK PM Johnson would meet EU Commission President von der Leyen to help break the deadlock in post-Brexit negotiation. GBP also aided by reports that UK-EU to hold more trade talks before the next schedule EU Leader Summit (scheduled for Oct 15-16th)
• Safe haven flows prompted the JPY to appreciate. USD/JPY dipped below the 105 handle to register 1-month lows.

Economic Data

• (FR) France Aug YTD Budget Balance: -€165.7B v -€151.0B prior
• (CZ) Czech Q2 Final GDP (3rd reading) Q/Q: -8.7% v -8.7%e; Y/Y: -10.9% v -11.0%e
• (ES) Spain Sept Net Unemployment Change: -26.3K v +60.0Ke
• (HU) Hungary July Final Trade Balance: €0.2B v €0.3B prelim
• (RU) Russia Narrow Money Supply w/e Sept 25th (RUB): 13.27T v 13.34T prior
• (NO) Norway Sept Unemployment Rate: 3.7% v 3.8%e
• (IT) Italy Q2 Budget Deficit to GDP Ratio: 10.0% v 9.8% prior
• (BR) Brazil Sept FIPE CPI (Sao Paulo): 1.1% v 1.0%e
• (EU) Euro Zone Sept Advance CPI Estimate Y/Y: -0.3% v -0.2%e; CPI Core Y/Y: 0.2% v 0.4%e

Fixed Income Issuance

• None seen

Looking Ahead

• 05:30 (ZA) South Africa to sell combined ZAR2.0B in I/L Bonds
• 06:00 (IE) Ireland Aug Live Register Monthly Change:No est v -12,4K prior; Live Register Level: No est v 213.7K prior
• 06:00 (UK) DMO to sell £1.75B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £0.75B respectively)
• 06:45 (US) Daily Libor Fixing
• 07:00 (MX) Mexico Aug Leading Indicators M/M: No est v 0.11 prior
• 07:00 (MX) Mexico Sept Vehicle Domestic Sales: No est v 77.1K prior
• 07:30 (IN) India Weekly Forex Reserve w/e Sept 25th: No est v $545.0B prior
• 08:00 (BR) Brazil Aug Industrial Production M/M: 3.7%e v 8.0% prior; Y/Y: -2.3%e v -3.0% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Sept Change in Nonfarm Payrolls: +868Ke v +1.37M prior; Change in Private Payrolls: +875Ke v +1.03M prior; Change in Manufacturing Payrolls: +35Ke v +29K prior
• 08:30 (US) Sept Unemployment Rate: 8.2%e v 8.4% prior; Underemployment Rate: No est v 14.2% prior; Labor Force Participation: 62.0%e v 61.7% prior
• 08:30 (US) Sept Average Hourly Earnings M/M: 0.2%e v 0.4% prior; Y/Y: 4.8%e v 4.7% prior; Average Weekly Hours: 34.6e v 34.6 prior
• 09:00 (SG) Singapore Sept Purchasing Managers Index: 50.2e v 50.1 prior; Electronics Sector Index: No est v 50.6 prior
• 09:00 (US) Fed’s Harker
• 09:45 (US) Aug ISM New York: No est v 42.9 prior
• 10:00 (US) Sept Final University of Michigan Confidence: 79.0e v 78.9 prelim
• 10:00 (US) Aug Factory Orders: 0.9%e v 6.4% prior; Factory Orders (ex-transportation): No est v 2.1% prior
• 10:00 (US) Aug Final Durable Goods Orders: 0.4%e v 0.4% prelim; Durables (ex-transportation): 0.4%e v 0.4% prelim; Capital Goods Orders (non-defense/ex-aircraft): 1.7%e3 v 1.8% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v 1.5% prelim
• 11:00 (DK) Denmark Sept Foreign Reserves (DKK): No est v 455.7B prior
• 11:00 (EU) Potential sovereign ratings after European close (Moody;s on Iceland and Slovenia Sovereign Debt; S&P on France and Germany Sovereign Debt; Fitch on Belgium Cyprus Sovereign Debt; DBRS on Sweden Sovereign Debt
• 12:00 (RU) Russia Q2 Final GDP (3rd reading) Y/Y: -8.0%e v -8.0% prelim
• 13:00 (US) Weekly Baker Hughes Rig Count