Notes/Observations
- J&J paused further dosing of all clinical trials of its Covid vaccine after a study volunteer became ill
- China trade data points to continued demand recovery both at home and abroad
Asia:
- China Sept Trade Balance: $37.0B v $60.0Be; Exports Y/Y: 9.9% v 10.0%e; Imports Y/Y: 13.2% v 0.4%. Improving components highlight strengthening domestic demand
- China Customs Ministry Spokesman: Paying attention to the impact of the exchange rate fluctuation (Note: response to question when asked about the yuan exchange rate
Europe:
- Several ECB policymakers said to be reluctant to follow Fed with average inflation target, fearing such policy would tie their hands; ECB appeared to be leaning towards 2% symmetric target
- Institute for Fiscal Studies (IFS) think tank report noted that Fin Min Sunak would need to raise taxes by more than £40B a year by 2025 to stop public debt spiraling upwards
- BOE’s Gov Bailey stated that MPC believed risks were all on the downside. Did not know how quickly negative rates could be implemented, depends on responses from banks to BoE consultation
- UK PM Johnson announces new virus-related measures (as expected). Did not believe a full lockdown was necessary noting it would damage economy and deprive children of education
- Americas: – White House said to seek Congressional approval for three separate arms packages to Taiwan (Chinese embassy statement reiterated stance that it consistently and firmly opposed US arms sales to Taiwan
Energy:
- IEA: 2020 global oil demand to decline 8% y/y; Pandemic has set back global energy demand by 2.5 years from 2019 level; to return to level in 2023
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.12% at 372.56, FTSE -0.33% at 5,981.65, DAX -0.23% at 13,107.65, CAC-40 -0.24% at 4,967.37, IBEX-35 -0.20% at 6,937.00, FTSE MIB -0.14% at 19,691.50, SMI +0.15% at 10,379.90, S&P 500 Futures -0.10%]
- Market Focal Points/Key Themes: European indices open mixed and slipped generally into the red later in the session; underperforming sectors include consumer discretionary and financials; better performers lead by utilities and telecom; Italy, Germany and UK issue new coronavirus measures; SSE sells stake in West Yorkshire facilities; Maersk raises guidance after better than anticipated shipping volumes; Airbus reaches agreement to cut jobs; earnings expected in the upcoming US session include Delta Airlines, JNJ, JP Morgan and Citygroup. Note after close Apple to launch new iPhone 12.
Equities
- Consumer discretionary: French Connection Group [FCCN.UK] -19% (earnings)
- Industrials: AP Moller Maersk [MAERSKB.DK] +1% (raises outlook), Demant [DEMANT.DK] +3.5% (trading update), Scapa Group [SCPA.UK] +8% (trading update), Gerresheimer [GXI.DE] -5% (earnings)
Speakers
- Germany Dep Foreign Min Roth stated that situation was at a critical stage in Brexit negotiations with UK; working hard on an agreement that was acceptable for both sides. Expected substantial progress from UK on issues including governance, level-playing-field and fisheries
- German Bundesbank Financial Stability Review: Banking and supervisors should prepare for higher risks; insolvencies could rise by more than 35% in Q1
- German ZEW economists commented that Euphoria seen in Aug and Sept period seemed to have evaporated
- Italy Econ Min Gualtieri saw Q4 GDP +0.4%
- EU imposed duties on aluminum extrusions to counter dumping from China; tariffs range from 30.4% to 48%- Japan PM Suga said to instruct administration to compile a stimulus package in November
- Indonesia Central Bank (BI) Gov Warjiyo pre rate decision press conference saw low volatile food inflation due to large supply. Forecasted a current account surplus in Q3 citing exports and capital inflows. Reiterated stance to guard IDR currency (Rupiah) with fundamentals; currency to be supported by foreign inflows. Saw IDR currency appreciation continuing aided by current account surplus and low CPI. Saw ample liquidity in banking system and supports lower rates
- Indonesia Central bank (BI) Policy Statement reiterated stance that monetary policy remained accommodative. Kept policy steady to maintain currency stability but would strengthen monetary operations. To focus on quantitative channel such as providing liquidity to stimulate GDP growth. To take further measures to support economy by taking into account global dynamics and pandemic situation. Saw IDR currency (Rupiah) as undervalued; recent appreciation in-line with fundamentals
- Taiwan Central Bank reiterated stance of not seeing signs of deflation and that inflation would rise in 2021
- China Foreign Ministry spokesperson Zhao Lijoan reiterated govt stance that opposed US arm sales to Taiwan. China would make legitimate and necessary response if sales moved forward
Currencies/Fixed Income
- USD was a tad firmer in quiet trading on Tuesday.
- GBP/USD was off by 0.2% but held above $1.30 despite new UK lockdown measures. Cable also defying the looming UK October 15th deadline for a trade deal with the EU.
- AUD/USD was lower in session after press reports circulated that China had halted coal imports from the country as their relations deteriorate.
- Italian 10-year yields continued it march for record lows as markets bet on further ECB stimulus
Economic Data
- (FI) Finland Aug Current Account Balance: +€0.3B v -€0.1B prior
- (UK) Sept Jobless Claims Change: +28.0K v +39.5K prior; Claimant Count Rate: 7.6% v 7.5% prior
- (UK) Aug Average Weekly Earnings 3M/Y: 0.0% v -0.6%e; Weekly Earnings (ex-bonus) 3M/Y: 0.8% v 0.6%e
- (UK) Aug ILO Unemployment Rate: 4.5% v 4.3%e; Employment Change 3M/3M: -153K v -30Ke
- (DE) Germany Sept Final CPI M/M: -0.2% v -0.2%e; Y/Y:-0.2% v -0.2%e
- (DE) Germany Sept Final CPI EU Harmonized M/M: -0.4% v -0.4%e; Y/Y: -0.4% v -0.4%e
- (TR) Turkey Aug Industrial Production M/M: 3.4% v 0.0%e; Y/Y: 10.4% v 7.1%e
- (ID) Indonesia Central Bank (BI) left the 7-Day Reverse Repo unchanged at 4.00% (as expected)
- (SE) Sweden Sept CPI M/M: 0.1% v 0.3%e; Y/Y: 0.4% v 0.6%e; CPI Level: 337.27 v 338.00e
- (SE) Sweden Sept CPIF M/M: 0.1% v 0.3%e; Y/Y: 0.3% v 0.6%e
- (SE) Sweden Sept CPIF (ex-energy) M/M: 0.0% v 0.3%e; Y/Y: 0.9% v 1.2%e
- (DE) Germany Oct ZEW Current Situation Survey: -59.5 v -60.0e; Expectations Survey: 56.1 v 72.0e
- (EU) Euro Zone Oct ZEW Expectations Survey: 52.3 v 73.9 prior
- (IS) Iceland Sept International Reserves (ISK): 943B v 973B prior
Fixed Income Issuance
- (ID) Indonesia sold total IDR11.9T vs. IDR10T target in Islamic bills and bonds 9Sukuk auction)
- (SI) Slovenia opened its book to sell EUR-denominated 30-year bond via syndicate; guidance seen +65bps to mid-swaps
- (NL) Netherlands Debt Agency (DSTA) sold €2.0B vs. €1.5-2.5B indicated range in 0% Jan 2027 DSL Bonds; Avg Yield: -0.624% v -0.478% prior
- (ES) Spain Debt Agency (Tesoro) sold total €935M vs. €0.5-1.5B indicated range in 3-month and 9-month
- (IT) Italy Debt Agency (Tesoro) sold total €7.5B vs. €6.5-7.5B indicated range in 3-year, 7-year and 30-year BTP Bonds
- Sold €3.75B vs. €3.25-3.75B indicated range in new 0.00% Jan 2024 BTP bonds; Avg Yield: -0.14% (record low) v +0.07% prior; Bid-to-cover: 1.40x v 1.54x prior (Sept 10th 2020 under 0.30% Aug 2023 BTP) )
- Solds €2.25B vs. €1.75-2.25B indicated range in 0.95% Sept 2027 BTP; Avg Yield: 0.34% v 0.75% prior; Bid-to-cover: 1.76x v 1.47x prior (Sept 10th 2020)
- Sold €1.5B vs. €1.00-1.5B in 2.45% Sept 2050 BTP bond; Avg Yield: 1.48% v 1.91% prior; bid-to-cover: 1.42x v 1.39x prior
- (UK) DMO sold £3.0B in 0.125% Jan 2026 Gilts; Avg Yield: 0.013% v 0.026% prior; bid-to-cover: 2.45x v 2.60x prior; Tail: 0.2bps v 0.1bps prior
(ZA) South Africa sold total ZAR6.6B vs. ZAR6.6B indicated in 2026, 2030 and 2044 bonds
Looking Ahead
- OPEC Monthly Report
- (PT) Bank of Portugal releases Data on Banks
- 05:30 (ZA) South Africa Aug Total Mining Production M/M: 3.45e v 20.2% prior; Y/Y: -7.7%e v -9.1% prior; Gold Production Y/Y: No est v -10.2% prior; Platinum Production Y/Y: No est v 4.6% prior
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 12-month bills
- 06:00 (US) Sept NFIB Small Business Optimism Index: 101.0e v 100.2 prior
- 06:00 (PT) Portugal Sept Final CPI M/M: No est v 1.0% prelim; Y/Y: No est v -0.1% prelim
- 06:00 (PT) Portugal Sept Final CPI EU Harmonized M/M: No est v 0.8% prelim; Y/Y: No est v -0.7% prelim
- 06:00 (FI) Finland to sell €2.0B in 6-month and 9-month bills
- 06:30 (UK) DMO to sell £1.25B in 1.75% July 2057 Gilts
- 06:30 (EU) ESM to sell 12-month bills;
- 06:45 (US) Daily Libor Fixing
- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 07:30 (CL) Chile Central Bank Economists Survey
- 08:00 (IS) Iceland Sept Unemployment Rate: No est v 9.4% prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:30 (US) Sept CPI M/M: 0.2%e v 0.4% prior; Y/Y: 1.4%e v 1.3% prior
- 08:30 (US) Sept CPI (ex-food/energy) M/M: 0.2%e v 0.4% prior; Y/Y: 1.7%e v 1.7% prior
- 08:30 (US) Sept CPI Index NSA: 260.285e v 259.918 prior; CPI Core Index SA: 269.341e v 268.747prior
- 08:30 (US) Sept Real Avg Weekly Earnings Y/Y: no est v 3.8% prior (revised from 3.9%) ; Real Avg Hourly Earning Y/Y: No est v 3.2% prior (revised from 3.3%)
- 08:30 IMF updates its World Economic Outlook (WEO)
- 09:00 (EU) Weekly ECB Forex Reserves
- 10:00 (MX) Mexico Weekly International Reserve data
- 11:30 (US) Treasury to sell 14-Week and 26-Week Bills
- 19:30 (AU) Australia Oct Consumer Confidence Index: No est v 93.8 prior
- 20:00 (KR) Bank of Korea (BOK) Interest Rate Decision: Expected to leave 7-Day Repo Rate unchanged at 0.50%
- 20:00 (SG) Monetary Authority of Singapore (MAS) semi-annual Monetary Policy statement
- 20:00 (SG) Singapore Q3 GDP Q/Q: +33.5%e v -42.9% prior; Y/Y: -6.8%e v -13.2% prior
- 21:10 (JP) BOJ Outright Bond Purchase Operation in 1~3 Years, 3~5 Years and 5~10 Years maturities
- 22:35 (CN) China to sell 3-year and 7-year Upsized Bonds
