Hope Remains Alive For US Stimulus And Brexit Deals

Notes/Observations

• USD currency on soft footing as hopes for US stimulus agreement remained a possibility
• GBP currency firmer on hopes that a Brexit agreement was still possible
• UK Sept CPI moved off recent 4-year lows but well below BOE target

Asia:

• BOJ Official Sakurai stated that he expected inflation to remain weak for now. BOJ easing was having intended effects
• Adviser to China President Xi (Hu Angang) said China to maintain 5% GDP growth through 2035, said it wass still too early to set a growth target for the next 5-years

Europe:

• UK House of Lords condemns Govt Internal Market Bill. Vote: 395-169. Expressing “regret” for the legislation (as speculated) noting the bill “would undermine the rule of law and damage the reputation of the United Kingdom.”
• UK Chancellor of the Exchequer Sunak (Fin Min) said to have told PM Johnson to ditch his comprehensive review due to corona virus-ravaged public finances
• Spain Parliament said to have approved escape clause to suspend fiscal rules for 2020 and 2021 due to pandemic (Reminder: On Oct 6th EU Commission stated that ot would allow budget rules to remain suspended in 2021)

Americas:

• White House Chief of Staff Meadows stated that Tsy Sec: Mnuchin and House Speaker Pelosi made good progress in stimulus talks and were productive enough to talk again on Wed (Oct 21st) afternoon
• House Speaker Pelosi noted that talks with Tsy Sec Mnuchin on Tuesday provided more clarity on stimulus
• Senate Majority Leader McConnell said to warn White House against making big stimulus deal before election. Did vow to give any stimulus deal supported by Trump and Pelosi a Senate Vote.

Energy:

• Weekly API Crude Oil Inventories: +0.6M v -5.4M prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -1.24% at 361.00, FTSE -1.51% at 5,799.65, DAX -1.31% at 12,570.65, CAC-40 -1.40% at 4,860.15, IBEX-35 -1.30% at 6,837.00, FTSE MIB -1.20% at 19,247.50, SMI -1.41% at 10,003.35, S&P 500 Futures -0.26%]
• Market Focal Points/Key Themes: European indices open mixed with modest bias to the upside but later turned around to trade in the red across the board; better risk sentiment attributed to potential stimulus agreement in the US, but impacted after record covid cases in Germany; better performing sectors include financials and technology; health care and consumer discretionary sectors among underperformers; Iberdrola to buy PNM; reportedly private equity interested in Bilfinger; earnings expected in the upcoming US session include Nasdaq, Abbott Laboratories, Verizon and Tesla

Equities

• Consumer discretionary: Nestle [NESN.CH] -1% (sales), Iberdrola [IBE.ES] -1.5% (earnings)
• Industrials: Antofagasta [ANTO.UK] -1% (production), Centamin [CEY.UK] -21% (production)
• Materials: Akzo Nobel [AKZA.NL] -1% (earnings)
• Telecom: Ericsson [ERICB.SE] +7% (earnings)

Speakers

• ECB’s Lane (Ireland, chief economist) reiterated Council stance that price stability was at the center of the ECB’s work
• EU Council President Michel reiterated that EU remained united on Brexit; needed action from UK and not just words
• EU Brexit Negotiator Barnier reiterated EU stance on Brexit that it would not change but would continue to look for a deal. Stressed that any agreement must reflect a balance compromised
• EU’s Sefcovic stated that remained far apart on key issues of level-playing-field and fisheries but had constructive approach at last meeting with UK. Stressed that there was no time to lose in talks but still hoped that a deal could be reached. Withdrawal Agreement must be respected whether there was a Brexit deal or not
• Italy Econ Min Gualtieri stated that GDP would beat expectations if pandemic slowed. Recent EU issuance of SURE bonds showed that common EU debt issues should be permanent
• EU’s Dombrovskis (trade chief ) stated that recent surge in coronavirus in region would have an effect on EU Commission autumn forecasts. EU prepared to react with new measures if necessary. Hoped to distribute Recovery Fund by the end of spring 2021
• UK Treasury confirmed that spending review to conclude in late Nov and comprise of one year (rather than 3 year outlook)
• UK Chancellor of the Exchequer Sunak :that that govt to repair finances over time as economy recovered
• Japan ruling parties said to agree on new stimulus measures
• China Vice Premier Liu He stated that China will highly likely have positive GDP growth in 2020
• China PBoC Gov Yi Gang: expect 2020 GDP growth to be positive. Macro leverage ratio to be more stable in 2021

Currencies/Fixed Income

• The USD remained on soft footing in the session as optimism over a possible US fiscal stimulus package continued to percolate and thus dim the appeal of the greenback as a safe-haven currency. USD was at 1-month lows against other major currencies.
• GBP/USD was higher by 0.8% by mid-session as various EU officials continued to express hope that a Brexit agreement was still possible. Pair trading at 1.3040 just ahead of mid-day
• USD/JPY dipped below the 105 level aided by the weak USD factor. Yen also aided that next week’s BOJ decision would have a high bar for any additional easing at this time.
• Treasury yields advanced to their highest since June as traders bet on the likelihood of a US stimulus deal and Democratic Party election sweep. The 10-year yield testing above 0.82% during the electronic session.

Economic Data

• (UK) Sept CPI M/M: 0.4% v 0.5%e; Y/Y: 0.5% v 0.6%e; CPI Core Y/Y: 1.3% v 1.3%e; CPIH Y/Y: 0.7% v 0.8%e
• (UK) Sept RPI M/M: 0.3% v 0.3%e; Y/Y: 1.1% v 1.1%e; RPI-X (ex-mortgage Interest Payments) Y/Y: 1.4% v 1.4%e; Retail Price Index: 294.3 v 294.4e
• (UK) Sept PPI Input M/M: +1.1% v -0.3%e; Y/Y: -3.7% v -5.4%e
• (UK) Sept PPI Output M/M: -0.1% v 0.0%e; Y/Y: -0.9% v -0.9%e
• (UK) Sept PPI Output Core M/M: 0.2% v 0.0%e; Y/Y: 0.3% v 0.1%e
• (UK) Sept Public Finances (PSNCR): £31.5B v £27.4B prior; PSNB (ex-banking groups): £36.1B v £33.6Be; Public Sector Net Borrowing: £35.4B v £32.4Be; Central Government NCR: £25.2B v £22.0B prior
• (CH) Swiss Sept M3 Money Supply Y/Y: 4.1% v 4.0% prior
• (PL) Poland Sept Retail Sales M/M: -1.8% v -2.4%e; Y/Y: 2.7% v 2.4%e; Real Retail Sales Y/Y: 2.5% v 1.9%e
• (PL) Poland Sept Construction Output Y/Y: -9.8% v -10.8%e
• (PL) Poland Oct Consumer Confidence: -20 v -15 prior
• (UK) Aug ONS House Price Index Y/Y: 2.5% v 3.0%e
• (BE) Belgium Oct Consumer Confidence Index: -17 v -16 prior

Fixed Income Issuance

• (IN) India sold total INR160B vs. INR160B indicated in 3-month, 6-month and 12-month bills
• (GR) Greece Debt Agency (PDMA) opened its book to sell 1.875% Feb 2035 bond via syndicate; guidance seen +135bps to mid-swaps
• (DK) Denmark sold total DKK4.67B in 2022 and 2052 bonds
• (SE) Sweden sold total SEK5.0B vs. SEK5.0B indicated in 2022 and 2031 Bonds

Looking Ahead

• (CO) Colombia Sept Retail Confidence: No est v 13.8 prior; Industrial Confidence: No est v 1.5 prior
• (HU) Hungary Central bank Gov Matolcsy at conference on Green Finance
• 05:30 (SL) Sri Lanka Sept National CPI (NCPI) Y/Y: No est v 6.2% prior
• 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays)
• 06:00 (IL) Israel Sept Trade Balance: No est v -$1.9B 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 2025, 2028 and 2030 Bonds
• 07:00 (US) MBA Mortgage Applications w/e Oct 16th: No est v -0.7% prior
• 07:00 (MX) Mexico Sept Unemployment Rate NSA (unadj): 5.3%e v 5.2% prior
• 07:00 (UK) Weekly PM Question time in House
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:10 (UK) BOE’s Ramsden
• 08:30 (CA) Canada Aug Retail Sales M/M: 1.1%e v 0.6% prior; Retail Sales (ex-auto) M/M: +0.9%e v -0.4% prior
• 08:30 (CA) Canada Sept CPI M/M: -0.1%e v -0.1% prior; Y/Y: 0.5%e v 0.1% prior; Consumer Price Index: 136.8e v 137.0 prior; CPI Core- Median Y/Y: 1.9%e v 1.9% prior; CPI Core- Common Y/Y: 1.6%e v 1.5% prior; CPI Core- Trim Y/Y: 1.7%e v 1.7% prior
• 10:00 (US) Fed’s Mester
• 10:30 (US) Weekly DOE Oil Inventories
• 13:00 (US) Treasury to sell 20-Year Bonds Reopening
• 13:30 (US) NY Fed Head of Markets Group Singh
• 14:00 (US) Federal Reserve Beige Book
• 18:30 (AU) RBA’s Debelle speech and Participates in Panel
• 20:30 (AU) Australia Q3 Business Confidence Index: No est v -15 prior
• 21:00 (CN) China Sept Swift Global Payments (CNY): No est v 1.9% prior
• 21:05 (NZ) New Zealand to sell combined NZD650M in 2024, 2031, 2035 and 2041 bonds
• 22:00 (SL) Sri Lanka Central Bank (CBSL) Interest Rate Decision: (50-50 prob on rate cut)
• 23:30 (TH) Thailand Sept Customs Trade Balance: $3.4Be v $4.4B prior; Exports Y/Y: -5.0%e v -7.9% prior; Imports Y/Y: -17.0%e v -19.7% prior