Bulk Of EU Services PMIs Beat Expectations, Risk Appetite Trying To Find Fresh Legs

Notes/Observations

• Risk appetite returns as reports circulated that President Trump could be discharged from a hospital as early as Monday; continued talks of US stimulus plan
• Bulk of Major European Sept PMI Services revised higher (Beats: Germany, Euro Zone, Italy, UK; Misses: Spain; In-line: Italy)

Asia:

• Australia Sept Final PMI Services: 50.8 v 50.0 prelim (moved back into expansion)
• Japan Sept Final PMI Services: 46.9 v 45.6 prelim (confirmed 7th straight contraction
• South Korea Sept PMI Manufacturing: 49.8 v 48.5 prior (9th straight contraction)

Coronavirus:

• Italy PM Conte said to be planning the govt tighten rules as virus cases rise with southern Italian regions for the first time looking vulnerable to the disease (Insight: Italy cabinet set to meet on Tuesday, Oct 7th)
• France govt put Paris on maximum COVID-19 alert level
• Britain’s coronavirus cases rise sharply to record level; UK Govt said to plan ‘three-tier’ lockdown for England, affirms the restrictions would include the closure of pubs

Europe:

• UK PM Johnson’s office noted that PM Johnson had instructed chief negotiator Frost to work intensively to try and bridge the gaps in EU talks. Weekend meeting between PM Johnson and EU Commission President approved a further month of Brexit negotiations after agreeing that enough progress has been made to justify a last push to reach a deal on trade and security. Johnson and von der leyen endorsed the assessment of both chief negotiators that progress had been made in recent weeks, but that significant gaps remained, notably but not only in the areas of fisheries, the level playing field, and governance.”
• S&P affirmed Germany sovereign rating at AAA; outlook Stable
• S&P affirmed France sovereign rating at AA; outlook Stable

Americas:

• President Trump could be discharged from a hospital as early as Monday
• Trump called on congressional leaders to continue negotiating a deal on a new fiscal stimulus program before the November election
• House speaker Nancy Pelosi said talks were making progress, but suggested the outcome would hinge on whether the Trump administration offers more funds for testing and tracing.

Energy:

• Norway Oil Industry Association (NOG): Oil workers begin expansion of strike on Monday, the move to cut Norway’s petroleum output capacity by up to 8%

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.67% at 365.12, FTSE +0.49% at 5,931.15, DAX +0.66% at 12,772.30, CAC-40 +0.84% at 4,865.17, IBEX-35 +1.37% 6,847.00, FTSE MIB +0.74% at 19,205.50, SMI +0.42% at 10,295.00, S&P 500 Futures +0.56%]
• Market Focal Points/Key Themes: European indices open higher across the board and remained in the green as the session progressed; improvement in risk sentiment attributed to reports President Trump might be discharged from hospital today; better performing sectors include financials and energy; underperforming sectors include materials and technology; Cineworld confirms to close all theatres in UK and US; France to close Paris bars in effort to curb rise in covid cases, Italy considering further measures; reportedly Deutsche Boerse to increase number of DAX components; over weekend Nexi announced to merge with SIA; no major earnings expected during upcoming US session

Equities

• Consumer discretionary: Dufry [DUFN.CH] +14% (Alibaba JV), Cineworld [CINE.UK] -30% (to stop cinema operations in US and UK), Intertek [ITRK.UK] -1.5% (new CFO)
• Healthcare: Bone Therapeutics [BOTHE.BE] +30% (licensing agreement)
• Industrials: K+S [SDF.DE] +18% (potential divestment), Airbus [AIR.FR] +2% (COO comments), Weir Group [WEIR.UK] +15% (sells unit)

Speakers

• German Foreign Min Maas: stated that many questions remained open in Brexit negotiations
• Italy Econ Min Gualtieri: EU Recovery Fund to be operative from Jan 2021. Cabinet to approve budget outlook later on Monday which will put debt on a structural declining path
• German VDMA Engineering association: Aug Machinery Orders -14.0% y/y
• BOJ Gov Kuroda reiterated view that domestic economy was in a severe condition but was starting to pick up but uncertainties remain extremely high. Reiterated that past measures were having an impact but would not hesitate to add to easing
• Japan PM Suga reiterated stance to prevent the spread of the coronavirus and restore economic priorities
• Thailand govt appointed Arkhom Chenglai as Finance Minister

Currencies/Fixed Income

• Both the USD and JPY were trading softer on Monday as risk appetite returned in the session. Sentiment was aided on reports that President Trump could be discharged from a hospital as early as Monday. Also aiding risk were continued speculation that US could find common grond to agree on fresh stimulus measures
• EUR/USD was higher by 0.2% to test 1.1740 area as the bulk of Major European Sept PMI Services readings were revised higher. Germany avoided a contraction as its Final Sept number was lifted from 49.1 to 50.6. Risk sentiment managed to hold off concerns of new restrictive measures in Europe as the number of new coronavirus case continued to rise. Pair locked in a 1.15-1.20 range for the time being
• USD/JPY was higher by 0.3% to test above 105.60 level. Softer yen currency attributed to unwinding of safe-haven flows as President Trump’s condition was said to be improving

Economic Data

• (UK) Sept Official Reserves Changes: -$0.1B v +$0.5B prior
• (RU) Russia Sept PMI Services: 53.7 v 56.0e (3rd month of expansion); PMI Composite: 53.7 v 57.3 prior
• (SE) Sweden Sep PMI Services: 54.7v 57.3 prior (4th month of expansion); PMI Composite: 54.9 v 56.3 prior
• (HU) Hungary Aug Retail Sales Y/Y: -0.7% v +1.6%e
• (TR) Turkey Sept CPI M/M: 1.0% v 1.3%e; Y/Y: 11.8% v 12.1%e; CPI Core Index Y/Y: 11.3% v 11.8%e
• (TR) Turkey Sept PPI M/M: 2.7% v 2.4% prior; Y/Y: 14.3% v 11.5% prior
• (ES) Spain Sept Services PMI: 42.4 v 47.7e (2nd straight contraction and lowest since May); Composite PMI: 44.3 v 46.4e
• (ZA) South Africa Sept PMI (whole economy): 49.4 v 46.0e (17th month of contraction)
• (IT) Italy Sept Services PMI: 48.8 v 46.6e (2nd month of contraction); Composite PMI: 50.4 v 49.2e
• (FR) France Sept Final Services PMI: 47.5 v 47.5e (confirms 1st contraction in 4 months and lowest since May 2020); Composite PMI: 48.5 v 48.5e
• (DE) Germany Sept Final Services PMI: 50.6 v 49.1e (3rd month of expansion); Composite PMI: 54.7 v 53.7e
• (EU) Euro Zone Sept Final Services PMI: 48.0 v 47.6e (confirmed 1st contraction in 3 months); Composite PMI: 50.4 v 50.1e
• (CH) Swiss weekly Total Sight Deposits (CHF): 705.1B v 704.5B prior; Domestic Sight Deposits: 635.4B v 634,2B prior
• (UK) Sept New Car Registrations Y/Y: -4.4% v -5.8% prior
• (EU) Euro Zone Oct Sentix Investor Confidence: -8.3 v -9.3e
• (UK) Sept Final Services PMI: 56.1 v 55.1e (confirms 3rd month of expansion); Composite PMI: 56.5 v 55.7e
• (EU) Euro Zone Aug Retail Sales M/M: 4.4% v 2.5%e; Y/Y: 3.7% v 2.2%e
• (NO) Norway Sept House Prices M/M: 0.4% v 1.1%prior, Y/Y 5.8% v 4.3% prior
• (CY) Cyprus Sept CPI M/M: 0.9% v 0.6% prior; Y/Y: -0.9% v -1.2% prior

Fixed Income Issuance

• None seen

Looking Ahead

• 05:30 (DE) Germany to sell €3.0B in 6-month BuBills
• 05:30 (NL) Netherland Debt Agency (DSTA) to sell €3.5B in 3-month and 9-month bills
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
• 06:45 (US) Daily Libor Fixing
• 07:00 (MX) Mexico Sept Consume Confidence: No est v 34.6 prior
• 07:00 (TR) Turkey to sell 2027 Floating Rate Bonds
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (ES) Spain Debt Agency (Tesoro) announcement of size on upcoming issuance
• 09:00 (BR) Brazil Sept PMI Services: No est v 49.5 prior; PMI Composite: No est v 53.9 prior
• 09:00 (EU) European Finance Ministers (Eurogroup)
• 09:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 09:00 (FR) France Debt Agency (AFT) to sell €B in 3-month, 6-month and 12-month bills
• 09:45 (EU) ECB weekly QE bond buying update
• 09:45 (US) Sept Final Markit Services PMI: 56.1e v 56.9 prelim; Composite PMI: No est v 54.4 prelim
• 10:45 (US) Fed’s Evans at NABE Meeting in Chicago
• 11;30 (US) Treasury to sell 13-week and 26-week bills
• 15:15 (US) Fed’s Bostic
• 16:00 (US) Weekly Crop Condition
• 17:00 (NZ) NZIER Think Tank Business Opinion Survey
• 17:30 (AU) Australia Sept Performance of Construction Index: No est v 37.9 prior
• 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 95.0 prior
• 19:00 (SK) South Korea Sept CPI M/M: 0.4%e v 0.6% prior; Y/Y: 0.5%e v 0.7% prior; CPI Core Y/Y: 0.8%e v 0.8% prior
• 20:00 (CO) Colombia Sept CPI M/M: 0.1%e v 0.0% prior; Y/Y: 1.8%e v 1.9 % prior
• 20:00 (CO) Colombia Sept CPI Core M/M: No est v 0.1% prior; Y/Y: No est v 1.4% prior
• 20:30 (AU) Australia Sept ANZ Job Advertisements M/M: No est v % prior
• 20:30 (AU) Australia Aug Trade Balance (A$): $5.1Be v4.6B prior; Exports M/M: N=2%e v -4% prior; Imports M/M: -5%e v +7% prior
• 21:00 (PH) Philippines Sept CPI Y/Y: 2.3%e v 2.4% prior
• 23:30 (AU) Australia Central Bank (RBA) Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 0.25% and maintain Yield Target at 0.25% (70% chance of hold)
• 23:30 (HK) Hong Kong to sell 3-month and 6-month bills
• 23:35 (JP) Japan to sell 30-Year JGB Bonds