German PPI Hits 40-Year High

Notes/Observations

• German Sept PPI data hits 40-year high.
• European bond yield showing signs of stabilization ahead of the ECB policy meeting on Thursday.
• UK budget speech in focus later this morning.
• Australia bond yield spike 20bps higher after core CPI moved back into RBA target range for 1st time in 6 years.
• Companies due to report during the NY morning include ADP, Amphenol, Avery Dennison, Boeing, Brink’s , Bunge, Bristol-Myers, Boston Scientific, CME, GM, Garmin, Hess Corp, Hilton Worldwide, Harley Davidson, International Paper, Kraft Heinz, Coca-Cola, McDonald’s, Norfolk Southern, Old Dominion Freight Line, Penske Auto, Ryder System, Silicon Labs, Silgan Holdings, Spotify, TE Connectivity, Teva, Thermo Fisher.

Asia

• Australia Q3 CPI Q/Q: 0.8% v 0.8%e; Y/Y: 3.0% v 3.1%e (Trimmed mean inflation move back into RBA Target range for the first time since Q4 2015).
• China Sept Industrial Profits Y/Y: 16.3% v 10.1% prior.
• New Zealand Sept Trade Balance registered a record deficit (NZ$): -2.2B v -2.1B prior.

Europe

• UK Oct BRC Shop Price Index Y/Y: -0.4% v -0.5% prior; BRC chief exec Dickinson noted that was now clear that the increased costs from labour shortages, supply chain issues and rising commodity prices had started filtering through to the consumer.
• UK Chancellor of the Exchequer Sunak (Fin Min) budget speech to use up to £30B coming from faster economic growth to pay for investments in public services and reduce borrowing. To declare Britain could start to look beyond Covid to an economy fit for a new age of optimism.

Americas

• Congressional Democrats said to disagree on multiple major issues on President Biden’s spending Bill which was reducing odds of getting a quick vote.
• Sen Maj Leader Schumer stated that was on track to get economic agenda measure done; 3-4 issues left to solve on Pres Biden’s economic bill.
• Senator Manchin (D-WV) said to be undecided on the Billionaire’s Tax. Against IRS reporting proposal.

Energy

• Weekly API Crude Oil Inventories: +2.3M v +3.3M prior (4th straight weekly build).

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.46% at 473.56, FTSE -0.34% at 7,252.80, DAX -0.47% at 15,683.35, CAC-40 -0.38% at 6,740.75, IBEX-35 -0.73% at 8,935.50, FTSE MIB -0.60% at 26,809.00, SMI -0.42% at 12,095.50, S&P 500 Futures -0.15%].
• Market Focal Points/Key Themes: European indices open marginally lower and slipped further into the red as the session progressed; health care and utilities sectors among the better performers; while consumer discretionary and industrials sectors among those leading to the downside; Wacker Chemie takes stake in SICO; earnings expected during upcoming US session include Spotify, Coca-Cola, GlaxoSmithKline and McDonald’s.

Equities

• Consumer discretionary: Puma [PUM.DE] +2.5% (earnings), Electrolux AB [ELUXB.SE] +1% (earnings), Heineken [HEIA.NL] -1.5% (trading update).
• Energy: Equinor ASA [EQNR.NO] -3% (earnings; buyback).
• Financials: Deutsche Bank [DBK.DE] -5% (earnings), Santander [SAN.ES] -2.5% (earnings).
• Industrials: BASF [BAS.DE] -1% (earnings; raises outlook).
• Utilities: Iberdrola [IBE.ES] +1% (earnings).

Speakers

• Swiss govt noted that the SNB viewed CHF currency (franc)as ‘highly valued’ and stressed the need for easy monetary policy.
• German Economy Ministry formally updated its economic outlook. Cut 2021 GDP growth forecasts from 3.5% to 2.6% while raising 2022 GDP growth forecast from 3.6% to 4.1%.
• German Econ Min Altmaier noted that growth was being hampered by supply bottlenecks but saw the economy back at pre-pandemic growth by Q1 2022.
• Turkey President Erdogan stated that he did not compromise on issue about 10 envoys (**Note: threaten to expel Western ambassadors). To discuss F-35 aircraft purchase with Preidebnt Biden at COP26 in Glasgow..
• Thailand Central Bank said to extend corporate bond stabilization fund’s support by one year to end-2022 to maintain market liquidity amid high uncertainty of the Covid-19 outbreak..
• Thailand Fin Min Arkhom stated that expected 2021 GDP growth over 1.0%.
• China Foreign Ministry spokesman Zhao Lijian stated that recent comments by Sec of State Blinken on Taiwan violates “one China”understanding between two sides; recent US actions could bring huge risks.
• China said to agree on plan to cap key coal price at CNY440/ton to help ease energy crisis.

Currencies/Fixed Income

• Focus on upcoming rate decision (BOJ and ECB in the next 24 hours and plethora of Q3 GDP data (including US and Germany).
• USD was mixed in trading on Wed. Dealers were focus on Thursday’s release of US GDP data and its potential to disappoint markets.
• EUR/USD steady at 1.16 area with focus on Thursday’s ECB decision. Markets currently pricing an almost 10 basis-point interest-rate rise by the ECB before the end of 2022. Recent inflation data continued to be hot with Germany’s Sept PPI reading hitting a 40-year high.
• AUD currency steady despite the sharp rise in Australia bond yield after core CPI moved back into RBA target range for 1st time in 6 years.

Economic data

• (FI) Finland Oct Consumer Confidence: 2.7 v 6.0 prior; Business Confidence: 22 v 21 prior.
• (DK) Germany Nov GfK Consumer Confidence: +0.9 v -0.5e (2nd straight positive reading).
• (DE) Germany Sept Import Price Index M/M: 1.3% v 1.5%e; Y/Y: 17.7% v 17.9%e (highest annual pace since August 1981).
• (DK) Denmark Sept Retail Sales M/M: -1.1% v -0.9% prior; Y/Y: 3.1% v 3.8% prior.
• (FR) France Oct Consumer Confidence: 99 v 101e.
• (FR) France Sept PPI M/M: 1.7% v 1.0% prior; Y/Y: 11.6% v 10.0% prior.
• (ES) Spain Aug Total Mortgage Lending Y/Y: 48.3% v 5.7% prior; House Mortgage Approvals Y/Y: 66.9% v 36.8% prior.
• (TR) Turkey Sept Trade Balance: -$2.6B v -$2.6Be.
• (TR) Turkey Oct Economic Confidence: 101.4 v 102.4 prior.
• (SE) Sweden Sept Trade Balance (SEK): +6.3B v -10.5B prior.
• (SE) Sweden Sept Household Lending Y/Y: 6.5% v 6.4% prior.
• (EU) Euro Zone Sept M3 Money Supply Y/Y: 7.4% v 7.4%e.
• (AT) Austria Oct Manufacturing PMI: 60.6 v 62.8 prior (16th straight expansion).
• (CH) Swiss Oct Expectations Survey: 15.6 v 25.7 prior.
• (TW) Taiwan Sept Monitoring Indicator: 38 v 39 prior.
• (IS) Iceland Oct CPI M/M: 0.6% v 0.5% prior; Y/Y: 4.5% v 4.4% prior.

Fixed income Issuance

• (IN) India sold total INR200B vs. INR200B indicated in 3-month, 6-month and 12-month bills.
• (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 6-month Bills; Avg Yield: -0.550% v -0.545% prior; Bid-to-cover: 1.27x v 1.29x prior.
• (NO) Norway sold NOK vs. NOK2.0B indicated in 1.75% Mar 2025 Bonds; Avg Yield: 1.45% v 1.02% prior; bid-to-cover: 4.01x v 3.90x prior.
• (SE) Sweden sold SEK7.5B vs. SEK7.5B indicated in 3-month bills; Avg Yield: -0.3875% v -0.3985% prior; bid-to-cover: 1.75x v 1.84x.

Looking ahead

• (DE) German Economy Ministry to update economic outlook.
• (PT) Portugal Debt Agency (IGCP) Switch auction results to hold reverse auction.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (DE) Germany to sell €2.0B in 0% May 2036 Bunds.
• 05:30 (HU) Hungary Debt Agency (AKK).
• 05:30 (EU) ECB allotment in its Monthly 3-month LTRO operation.
• 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).
• 06:00 (FR) France Q3 Total Jobseekers: No est v 3.511M prior.
• 06:00 (RU) Russia to sell RUB10B in Mar 2032 inflation-linked OFZ Bonds.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (US) MBA Mortgage Applications w/e Oct 22nd: No est v -6.3% prior.
• 07:00 (MX) Mexico Sept Trade Balance: -$2.6Be v -$3.9B prior.
• 07:00 (UK) Weekly PM Question time in House.
• 07:30 (UK) Chancellor of the Exchequer (Fin Min) Sunak budget speech.
• 08:00 (BR) Brazil Aug National Unemployment Rate: 13.4%e v 13.7% prior.
• 08:00 (BR) Brazil Sept PPI Manufacturing M/M: No est v 1.9% prior; Y/Y: No est v 30.2% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Sept Preliminary Durable Goods Orders: -1.0%e v +1.8% prior; Durables (ex-transportation): 0.4%e v 0.3% prior; Capital Goods Orders (non-defense/ex-aircraft): 0.5%e v 0.6% prior; Capital Goods Shipments (non-defense/ex-aircraft): 0.5%e v 0.8% prior.
• 08:30 (US) Sept Advance Goods Trade Balance: -$88.4Be v -$87.6B prior.
• 08:30 (US) Sept Preliminary Wholesale Inventories M/M: 1.0%e v 1.2% prior; Retail Inventories M/M: 0.2%e v 0.1% prior.
• 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (7-20 years).
• 10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to leave Interest Rates unchanged at 0.25%.
• 10:30 (US) Weekly DOE Oil Inventories.
• 12:00 (RU) Russia Sept Industrial Production Y/Y: 4.6%e v 4.7% prior.
• 13:00 (US) Treasury to sell 2-Year FRN.
• 13:00 (US) Treasury to sell 5-Year Notes.
• 13:30 (BR) Brazil Sept Total Federal Debt (BRL): No est v 5.481T prior.
• 17:30 (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to raise Selic Target Rate by 150bps to 7.75%.
• 19:50 (JP) Japan Sept Retail Sales M/M: +1.5%e v -4.0% prior (revised from -4.1%); Y/Y: -2.4%e v -3.2% prior.
• 19:50 (JP) Japan Sept Dept. Store, Supermarket Sales Y/Y: -3.3%e v -4.7% prior.
• 20:30 (AU) Australia Q3 Import Price Index Q/Q: 3.4%e v 1.9% prior; Export Price Index Q/Q: 6.5%e v 13.2% prior.
• (JP) BOJ Interest Rate and Policy Decision (no set time); Expected to leave Interest On Excess Resereves (IOER) unchanged at -0.10% and maintain Yield Control Target (YCC) at 0.00%.
• (JP) BOJ Quarterly Outlook for Economic Activity and Prices.