Awaiting ECB Rate Decision As Region’s Inflation Remains Hot

Notes/Observations

• EU inflation data continues to hit decade highs (Spain, various German States).
• Focus on ECB rate decision later this today. Dealers not ECB likely to err on the side of caution and stick to its expansionary monetary policy.

Asia

• Japan Sept Retail Sales M/M: 2.7% v 1.5%e; Y/Y: -0.6% v -2.4%e.
• BOJ left Policy steady (as expected) with Interest On Excess Reserves (IOER) unchanged at -0.10% and maintain Yield Control Target (YCC) at 0.00%.
• BOJ Quarterly Outlook for Economic Activity and Prices cut FY21/22 GDP growth (current fiscal year) from 3.8% to 3.4% while raising FY22/23 GDP growth from 2.7% to 2.9. Cut FY21/22 core CPI (current fiscal year) from 0.6% to 0.0% while maintaining FY22/23 core CPI at 0.9%.
• China PBOC Open Market Operation (OMO) again injected CNY200B via 7-day reverse repos with net injection of CNY100B.

Europe

• Brexit Min Frost stated that was very disappointing that France had felt it necessary to make threats against the UK fishing industry and seemingly traders more broadly.
• UK said to vow to retaliate with an appropriate and calibrated response if France followed through with their threats to disrupt trade and hamper energy supplies.
• Portugal said to be likely to head for a snap election after Parliament rejected minority govt’s 2022 budget plan.

Americas

• President Biden to delay trip to Europe by a few hours to attend House Democrat Caucus meeting on morning of Oct 28th (Thursday).
• US Senator Manchin (D-WV) stated that a deal on Biden’s agenda is possible on Thurs.
• Ways and Means Chair Neal stated that the billionaire tax was out; there was no support to get it through Congress.
• Brazil Central Bank (BCB) raised Selic Target Rate by 150bps to 7.75% (as expected) for its 6th straight hike in the current tightening cycle and indicated a Hike of the same size appropriate for next meeting in Dec.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.06% at 474.32, FTSE -0.37% at 7,226.51, DAX -0.17% at 15,679.55, CAC-40 +0.33% at 6,775.74, IBEX-35 -0.23% at 8,951.50, FTSE MIB +0.16% at 26,850.00, SMI +0.07% at 12,095.35, S&P 500 Futures +0.23%].
• Market Focal Points/Key Themes: European indices open mixed, with a negative bias and failed to gain direction as the session progressed; better performing sectors include technology and consumer discretionary; while underperformers include materials and real estate; SUSE acquires NeuBector; Eastman sells it’s adhesive resin business to Synthomer; earnings expected during the upcoming US session include KBR , Linde, Xcel Energy and Caterpillar.

Equities

• Consumer discretionary: Nokia [NOKIA.FI] +4% (earnings), Anheuser-Busch InBev [ABI.BE] +7% (earnings).
• Energy: TotalEnergies [TTE.FR] -1.5% (earnings).
• Financials: Lloyds Banking Group [LLOY.UK] +1.5% (earnings).
• Industrials: Airbus [AIR.FR] +2% (earnings), Volkswagen [VOW3.DE] -3% (earnings; cuts outlook).
• Technology: STMicroelectronics [STM.FR] +4% (earnings), CapGemini [CAP.FR] % (earnings).

Speakers

• France Maritime Min Giradin stated that could examine France electricity tariffs to UK. He added that Govt was not serious to cut off electricity to UK.
• France EU Affairs Min Beaune stated that UK could face higher electricity prices. France could take another set of retaliation measures against the UK if it did not resume dialogue and grant fishing licenses. Stressed that France would use the language of force now since that seemed only thing UK could understand.
• German Association of Chambers of Trade and Industry (DIHK) updated its forecasts which cut 2021 GDP growth from 3.0% to 2.3% and set 2022 GDP growth at 3.6%. DIHK also raised the 2021 CPI forecast from 2.25 to 3.0% and set 2022 CPI at 2.5%.
• Turkey Central Bank (CBRT) Gov Kavcioglu stated that it continued to target FX accumulation. Supply issues are pressuring domestic inflation.
• BOJ Gov Kuroda post rate decision press conference reiterated overall assessment that domestic economy remained on a recovery trend. Risks were skewed to the downside for inflation. He saw very little risk that Japan would experience inflation as seen in other countries. Reiterated stance to ease policy further without hesitation if necessary. No comment on FX or short-term price movements but did not believe the current weakness in JPY currency (Yen) was a bad thing. Yield Control (YCC) could bring weak JPY currency (yen) as it widened interest rate differential compared to overseas.
• China Commerce Ministry (MOFCOM) spokesperson Shu Jueting stated to maintain active communication with US. Concerned about US removing China telecom license, moves destroyed the collaborative atmosphere. China to adopt necessary measures to safeguard legitimate interest of Chinese companies.

Currencies/Fixed Income

• EUR/USD was slightly lower despite hot inflation data out of Europe. Dealers noted they expected the ECB to push back against growing expectations for a rate hike next year. Expectations for any withdrawal of ECB stimulus today would also be disappointed. ECB only seen reducing asset purchases gradually in the coming months.

Economic data

• (DE) Germany Oct CPI North Rhine Westphalia M/M: 0.4% v 0.0% prior; Y/Y: 4.5% v 4.4% prior.
• (NL) Netherlands Oct Producer Confidence: 12.3 v 11.1 prior.
• (FI) Finland Sept House Price Index M/M: -0.9% v -0.4% prior; Y/Y: 4.1% v 4.8% prior.
• (NO) Norway Sept Retail Sales M/M: +0.5% v -1.0%e.
• (NO) Norway Aug AKU Unemployment Rate: 4.0% v 4.3% prior.
• (ES) Spain Oct Preliminary CPI M/M: 2.0% v 1.2%e; Y/Y: 5.5% v 4.5%e (highest annual pace since 1992).
• (ES) Spain Oct Preliminary CPI EU Harmonized M/M: 1.7% v 0.9%e; Y/Y: 5.5% v 4.6%e.
• (ES) Spain Q3 Unemployment Rate: 14.6% v 14.1%e.
• (SE) Sweden Oct Consumer Confidence: 103.1 v 106.6prior; Manufacturing Confidence: 128.5 v 126.1 prior; Economic Tendency Survey: 120.0 v 119.4 prior.
• (HU) Hungary Sept Unemployment Rate: 4.0% v 3.9%e.
• (SE) Sweden Q3 GDP Indicator Q/Q: 1.8% v 1.0%e; Y/Y: 4.7% v 3.0%e.
• (SE) Sweden Sept GDP Indicator M/M: 1.6% v 2.4%e; Y/Y: 3.3% v 2.4% prior.
• (SE) Sweden Sept Retail Sales M/M: -0.3% v +0.5% prior; Y/Y: 4.8% v 6.0% prior.
• (DE) Germany Oct Net Unemployment Change: -39K v -20.0Ke; Unemployment Claims Rate: 5.4% v 5.4%e.
• (DE) Germany Oct CPI Brandenburg M/M: +0.3% v -0.1% prior; Y/Y: 5.0% v 4.8% prior.
• (DE) Germany Oct CPI Hesse M/M: 0.6% v 0.1% prior; Y/Y: 4.7% v 4.0% prior.
• (DE) Germany Oct CPI Bavaria M/M: 0.5% v 0.0% prior; Y/Y: 4.6% v 4.2% prior.
• (IT) Italy Oct Consumer Confidence Index: 118.4 v 118.5e; Manufacturing Confidence: 114.9 v 112.3e; Economic Sentiment: 115.0 v 113.7 prior.
• (TR) Turkey Sept Foreign Tourist Arrivals Y/Y: 59.5% v 119.4% prior.
• (PT) Portugal Oct Consume Confidence Indicator: -10.9 v -12.9 prior Economic Climate Indicator: 2.0v 1.6 prior.
• (DE) Germany Oct CPI Baden Wuerttemberg M/M: 0.5% v 0.0% prior; Y/Y: 4.2% v 3.8% prior.
• (EU) Euro Zone Oct Economic Confidence: 118.6 v 116.6e; Industrial Confidence: 14.2 v 12.9e; Services Confidence: 18.2 v 14.6e; Consumer Confidence (final): -4.8 v -4.8 advance.
• (DE) Germany Oct CPI Saxony M/M: 0.4% v 0.0% prior; Y/Y: 4.5% v 4.1% prior.
• (IT) Italy Sept Hourly Wages M/M: 0.1% v 0.2% prior; Y/Y: 0.7% v 0.6% prior.
• (BE) Belgium Q3 Preliminary GDP Q/Q: 1.8% v 1.7% prior; Y/Y: 4.7% v 15.1% prior.

Fixed income Issuance

• (SE) Sweden sold total SEK1.25B vs. SEK1.25B indicated in 2030 and 2039 I/L Bonds.
• (IT) Italy Debt Agency (Tesoro) sold total €B vs. €4.75-5.75B indicated range in 5-year and 10-year BTP bonds.
• Sold €2.0B vs. €1.5-2.0B indicated range in 0.00% Aug 2026 BTP bonds; Avg Yield: 0.28% v 0.11% prior; Bid-to-cover: 1.53x v 1.84x prior.
• Sold €3.75B vs. €3.25-3.75B indicated range in 0.95% Jun 2032 BTP; Avg Yield: 1.05% v 0.86% prior; bid-to-cover: 1.35x v 1.73x prior.
• (IT) Italy Debt Agency (Tesoro) sold €1.25B vs. €1.0-1.25B indicated range in 0.65% Apr 2029 Floating Rate Note (CCTeu); Avg Yield: -0.01% v 0.03% prior; Bid-to-cover: 1.73x v 1.46x prior.

Looking Ahead

• (BE) Belgium Oct CPI M/M: No est v -0.3% prior; Y/Y: No est v 2.9% prior.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.
• 06:00 (IE) Ireland Sept Retail Sales Volume M/M: No est v 3.5% prior; Y/Y: No est v 6.0% prior.
• 06:00 (IT) Italy Sept PPI M/M: No est v 0.4% prior; Y/Y: No est v 13.8% prior.
• 06:00 (CA) Canada Oct CFIB Business Barometer: No est v 57.8 prior.
• 06:00 (IL) Israel Aug Manufacturing Production M/M: No est v 1.0% prior.
• 07:00 (BR) Brazil Oct FGV Inflation IGPM M/M: +0.2%e v -0.6% prior; Y/Y: 21.3%e v 24.9% prior.
• 07:30 (IS) Iceland to sell 3-month and 6-month Bills.
• 07:45 (EU) ECB Interest Rate Decision: Expected to leave 7-Day Main Refinancing Rate unchanged at 0.00%; Expected to leave Marginal Lending Facility unchanged at 0.25%; Expected to leave Deposit Facility Rate unchanged at -0.50%.
• 08:00 (DE) Germany Oct Preliminary CPI M/M: 0.4%e v 0.0% prior; Y/Y: 4.4%e v 4.1% prior.
• 08:00 (DE) Germany Oct Preliminary CPI EU Harmonized M/M: 0.4%e v 0.3% prior; Y/Y: 4.5%e v 4.1% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Q3 Advance GDP Annualized Q/Q: 2.6%e v 6.7% prior; Personal Consumption: 0.8%e v 12.0% prior.
• 08:30 (US) Q3 Advance GDP Price Index: 5.3%e v 6.1% prior; Core PCE Q/Q: 4.4%e v 6.1% prior.
• 08:30 (US) Initial Jobless Claims: 289Ke v 290K prior; Continuing Claims: 2.42Me v 2.481M prior.
• 08:30 (US) Weekly USDA Net Export Sales.
• 08:30 (EU) ECB chief Lagarde post rate decision press conference.
• 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 22nd: No est v $620.3B prior.
• 10:00 (US) Sept Pending Home Sales M/M: 0.5%e v 8.1% prior; Y/Y: -3.0%e v -6.3% prior.
• 10:30 (US) Weekly EIA Natural Gas Inventories.
• 11:00 (US) Oct Kansas City Fed Manufacturing Activity Index: 19e v 22 prior.
• 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.
• 13:00 (US) Treasury to sell 7-Year Notes.
• 13:30 (BR) Brazil Sept Central Govt Budget Balance (BRL): -6.7Be v -9.9B prior.
• 17:00 (NZ) New Zealand Oct Consumer Confidence Index: No est v 104.5 prior.
• 17:00 (KR) South Korea Nov Business Manufacturing Survey: No est v 93 prior; Non-Manufacturing Survey: No est v 81 prior.
• 19:00 (KR) South Korea Sept Industrial Production M/M: -0.3%e v -0.7% prior; Y/Y: 2.0%e v 9.6% prior.
• 19:01 (UK) Oct Lloyds Business Barometer: No est v 46 prior.
• 19:30 (JP) Japan Oct Tokyo CPI Y/Y: 0.4%e v 0.3% prior; CPI (ex-fresh food) Y/Y: 0.3%e v 0.1% prior; CPI (ex-fresh food/energy) Y/Y: 0.0%e v -0.1% prior.
• 19:30 (JP) Japan Sept Jobless Rate: 2.8%e v 2.8% prior; Job-To-Applicant Ratio: 1.14e v 1.14 prior.
• 19:50 (JP) Japan Sept Preliminary Industrial Production M/M: -2.7%e v -3.6% prior; Y/Y: 0.2% v 8.8% prior.
• 20:30 (AU) Australia Sept Retail Sales M/M: 0.4%e v -1.7% prior; Q/Q: -5.1%e v +0.8% prior.
• 20:30 (AU) Australia Sept Private Sector Credit M/M: 0.5%e v 0.6% prior; Y/Y: 5.0%e v 4.7% prior.
• 20:30 (AU) Australia Q3 PPI Q/Q: No est v 0.7% prior; Y/Y: No est v 2.2% prior.
• 22:00 (SG) Singapore Sept M2 Money Supply Y/Y: No est v 3.1% prior; M1 Money Supply Y/Y: No est v 12.9% prior.
• 23:30 (JP) Japan to sell 3-Month Bills.