Notes/Observations
- Focus on central banks and prospect of tighter monetary policy (Fed on Wed, BOE on Thurs).
- Germany Sept Retail sales data misses expectations.
- Japan Nikkei surges after LDP secured a majority in Parliament with results reinforcing bets for fiscal stimulus and reforms.
Asia
- China Oct Manufacturing PMI (Govt official) registered its 2nd consecutive contraction (49.2 v 49.7e).
- China Oct Caixin PMI Manufacturing registered its 2nd consecutive expansion (50.6 v 50.0e).
- Japan Oct Final PMI Manufacturing: 53.2 v 53.0 prelim (confirmed the 9th straight month of expansion and highest since April).
- Australia Oct Final PMI Manufacturing: 58.2 v 57.3 prior (confirmed 17th month of expansion).
- Japan LDP secured outright majority in Parliament elections over the weekend but with fewer seats than it won in previous election (Won 261 seats of the 465 seats available compared to 276 prior). Results reinforced bets for fiscal stimulus and reforms.
- Japan PM Kishida stated that would compile a “large-scale” stimulus package around mid-November and aim to pass through parliament an extra budget by the end of this year.
- RBA purchased bonds on Monday but none of the April 2024 where it has the Yield Control target.
- China Foreign Min Wang stated that Taiwan was the most sensitive issue between China and the US. Reiterated criticism about the US interfering in China’s internal affairs and noted anti-China sanctions had severely disrupted normal bilateral exchanges.
- China PBOC Open Market Operation (OMO) injected only CNY10B in 7-day reverse repos for a net drain CNY190B v Net inject CNY100B prior.
Europe
- France President Macron said to have given UK PM Johnson 24 hours to grant licenses for small French boats or France would stop British boats from landing their catches. France also considering reducing energy supplies to Jersey.
- France President Macron stated that there had been no provocation and no tension over fishing rights dispute with UK. Wanted to cooperate with Britain and find a deal on fishing but the ball was in UK camp.
- EU’s Sefcovic stated that UK must not embark on a path of confrontation as tensions rise over fishing rights and goods passing through Northern Ireland.
- PM Johnson stated that would take appropriate action if needed in fisheries spat, not convinced EU solutions fixed Northern Ireland protocol. Expressed deep concerns to French President Macron over French rhetoric including the suggestion that EU should punish Britain over Brexit. Fishing license issue needs to be sorted out in post Brexit trade agreement, our position on fishing licenses hasn’t changed, we would welcome French proposals to de-escalate situation.
- Brexit Min Frost stated that was actively considering launching dispute settlement proceedings against France amid fishing rights tensions.
- G20 leaders endorse global minimum corporate tax deal and pledged more vaccines for the poor ‘; Leaders endorsed a global minimum tax, with major corporations facing a minimum 15% tax wherever they operate from 2023. Draft communique remained committed to capping global warming well below 2 degrees Celsius and pursue efforts to limit it to 1.5C.
- Fitch affirmed Germany sovereign rating at AAA; Outlook Stable.
- Canadian ratings agency DBRS affirmed Italy sovereign rating at BBB (high); Revised trend to Stable from Negative.
Americas
- US Treasury Sec Yellen reiterated US stance that wants China to meet phase 1 trade deal commitments; Looking at eventual reciprocal lowering of tariffs. Sees solid US recovery and rejected bond market’s growth concerns.
- Sec of State Blinken met with China Foreign Ming Wan and stressed opposition to any unilateral changes by China to the status quo around Taiwan and made clear that US had not changed its “one China” policy regarding Taiwan.
- US and Russian high-ranking officials said to have held a series of ‘secret’ meetings after Biden-Putin summit in June to discuss cybersecurity and arms control issues.
Speakers/Fixed income/FX/Commodities/Erratum
Equities
- Indices [Stoxx600 +0.69% at 478.78, FTSE +0.56% at 7,277.57, DAX +0.96% at 15,839.05, CAC-40 +1.11% at 6,906.23, IBEX-35 +1.06% at 9,153.50, FTSE MIB +1.38% at 27,248.00, SMI +0.69% at 12,191.51, S&P 500 Futures +0.41%].
- Market Focal Points/Key Themes: European indices open higher across the board and advanced further into the green as the session progressed; sectors leading to the upside include health care and materials; while more sluggish sectors include real estate and consumer discretionary; muted trading session as most European countries are on holiday, although markets are open; Essity acquires sports tape brands from J&J; reportedly GlaxoSmithKline looking to acquire Aurinia; reportedly Santander and Bankinter have held preliminary merger talks; earnings expected during the upcoming US session include Avis Budget, Mosaic and Nutrien.
Equities
- Consumer discretionary: Ryanair [RYA.UK] -4% (earnings; raises traffic outlook but cuts profit outlook).
- Financials: Barclays [BARC.UK] -2% (CEO steps down).
- Healthcare: AstraZeneca [AZN.UK] +1% (divests rights), Pandora [PNDORA.DK] -4% (prelim results; outlook raise).
- Industrials: Implenia [IMPN.CH] +5% (affirms outlook).
Speakers
- Japan PM Kishida said to considering Motegi for position of LDP Secretary.
- ChinaPBOC backed Paper: To continue lowering share of mortgages in whole loans. China’s funding to the property sector would be used more in regions that were backed by industries and have advantages in attracting population growth.
- Kuwait Oil Min Khaled al-Fadhel supported OPEC+ oil production increase plan of 400K bpd as it guaranteed supplies. – Markets to face challenges in 2022.
- Saudi Oil Min Abdulaziz: Kingdom stresses the importance of ensuring an affordable price for energy.
- Saudi Foreign Min bin Farhan stated that the country was committed to stabilizing the oil market.
Currencies/Fixed Income
- USD on solid footing with focus on Wed’s FOMC decision with the Fed widely expected to announce a tapering of stimulus. Focus on central banks and prospect of tighter monetary policy (RBA on Tues, Fed on Wed, BOE on Thurs).
- GBP/USD back below the 1.37 level. Markets weighing whether the BOE would raise rates at the meeting. Currently market participant almost fully priced for 15bps increase and further 100 bps worth of tightening seen over the next year given some of the hawkish rhetoric from permanent BoE officials, such as Gov Bailey and chief economist Pill.
- USD/JPY tested above 114.30 following Japan Parliamentary results. LDP did retain its majority (although less seats from before). Results reinforced bets for fiscal stimulus and reforms and eased doubts about the new prime minister’s popularity.
- AUD/USD trading around 0.75 with focus on Tuesday’s RBA decision. Markets pondering whether RBA could mark a retreat from its dovish rate policy.. Some speculation that RBA could ease or remove April 2024 YCC as the Apr 2024 bond yield recently moved above 0.70% (RBA did recently purchased bonds this week but none of the April 2024 where it has the Yield Control target. Also some speculation the forward guidance could be tweaked for chance hiking in 2023 rather than wait for 2024.
Economic data
- (RU) Russia Oct PMI Manufacturing: 51.6 v 50.5e (1st expansion in 5 months ).
- (DE) Germany Sept Retail Sales M/M: -2.5% v +0.4%e; Y/Y: -0.9% v +1.8%e.
- (TR) Turkey Oct PMI Manufacturing: 51.2 v 52.5 prior (5th straight expansion).
- (TH) Thailand Oct Business Sentiment Index: 47.0 v 42.6 prior.
- (SE) Sweden Oct PMI Manufacturing: 64.4 v 64.7 prior (17th month of expansion).
- (NL) Netherlands Oct Manufacturing PMI: 62.5 v 61.2e (15th straight expansion).
- (CH) Swiss Oct PMI Manufacturing: 65.4 v 66.5e (15th straight expansion).
- (CZ) Czech Republic Oct PMI Manufacturing: # v 56.8e.
- (HK) Hong Kong Q3 Advance GDP Q/Q: 0.1% v 0.6%e; Y/Y: 5.4% v 5.7%e (avoids technical recession).
- (NG) Nigeria Oct PMI Manufacturing: 54.1 v 52.3 prior.
- (GR) Greece Oct Manufacturing PMI: 58.9 v 58.4 prior (8th month of expansion).
- (NO) Norway Oct PMI Manufacturing: 58.5 v 59.0 prior (14th month of expansion).
- (CH) Swiss weekly Total Sight Deposits (CHF): 717.1B v 715.3B prior; Domestic Sight Deposits: 645.3B v 642.4B prior.
- (UK) Oct Final Manufacturing PMI: # v 57.7e (confirmed 17th straight expansion).
Fixed income Issuance
- None seen.
Looking Ahead
- (ZA) South Africa Oct Naamsa Vehicle Sales Y/Y: No est v 15.8% prior.
- (UR) Ukraine Central Bank Oct Minutes.
- (RO) Romania Oct International Reserves: No est v $46.2B prior.
- (IT) Italy Oct Budget Balance: No est v -€15.3B prior.
- (AR) Argentina Oct Government Tax Revenue (ARS): No est v 976.3B prior.
- (RU) Russia Central Bank Quarterly Monetary Policy Report.
- 06:00 (DK) Denmark Oct Danish PMI Survey: # v 65.2 prior.
- 06:00 (EU) Daily Euribor Fixing.
- 06:00 (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills.
- 06:25 (EU) Daily ECB Liquidity Stats.
- 06:30 ((DE) Germany to sell combined €6.0B in 3-month and 9-month BuBills.
- 06:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month bills.
- 06:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).
- 07:00 (IL) Israel to sell bonds.
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.
- 07:45 (US) Daily Libor Fixing.
- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).
- 08:30 (CA) Canada Sept MLI Leading Indicator M/M: No est v 0.3% prior.
- 09:00 (BR) Brazil Oct PMI Manufacturing: No est v 54.4 prior.
- 09:00 (CZ) Czech Oct Budget Balance (CZK): No est v -326.3B prior.
- 09:00 (UK) Daily Baltic Dry Bulk Index.
- 09:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming auctions.
- 09:45 (US) Oct Markit Final Manufacturing PMI: 59.2e v 59.2 prelim.
- 10:00 (US) Sept Construction Spending M/M: 0.4%e v 0.0% prior.
- 10:00 (US) Oct ISM Manufacturing: 60.5e v 61.1 prior; Prices Paid: 82.0e v 81.2 prior.
- 10:30 (CA) Canada Oct Manufacturing PMI: No est v 57.0 prior.
- 10:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (3-7 years).
- 11:00 (MX) Mexico Sept Total Remittances: $4.5Be v $4.7B prior.
- 11:00 (MX) Mexico Central Bank Economist Survey.
- 11:00 (PE) Peru Oct CPI M/M 0.2%e v 0.4% prior; Y/Y: 5.3%e v 5.2% prior.
- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.
- 13:00 (IT) Italy Oct New Car Registrations Y/Y: No est v -32.7% prior.
- 14:00 (BR) Brazil Oct Trade Balance: $2.4Be v $4.3B prior; Total Exports: $23.0Be v $24.3B prior; Total Imports: $20.6Be v $20.0B prior.
- 14:00 (MX) Mexico Oct IMEF Manufacturing Index: No est v 49.8 prior; Non-Manufacturing Index: No est v 50.1 prior.
- 17:45 (NZ) New Zealand Sept Building Permits M/M: No est v 3.8% prior.
- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 106.8 prior.
- 19:00 (KR) South Korea Oct CPI M/M: 0.2%e v 0.5% prior; Y/Y: 3.3%e v 2.5% prior; CPI Core Y/Y: 2.6%e v 1.9% prior.
- 19:50 (JP) Japan end-Oct Monetary Base: No est v ¥663.5T prior.
- 23:30 (AU) RBA Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 0.10% and maintain 3-year Yield Target at 0.10%.
- 23:30 (HK) Hong Kong to sell 3-month Bills.
- (ZA) South Africa hold local government elections.
