Supply Bottlenecks Remained A Major Hindrance In EU PMI Readings

Notes/Observations

• Major European Manufacturing PMI (Beats: France, Italy; Misses: Germany, Spain).
• Wave of tightening from central banks expected in various upcoming meetings.
• RBA abandoned its yield target and left door open for earlier rate hike. Tweaked forward guidance that Board would not increase the cash rate until actual inflation was sustainably within the 2.0-3.0% range (removed calendar base).

Asia

• RBA left Cash Rate Target unchanged at 0.10% (as expected) and removed its 3-year Yield Target of 0.10%; tweaks language on forward guidance.
• RBA Gov Lowe post rate decision press conference noted that forward guidance was based on state of economy, not the calendar. Was plausible that 1st hike in OCR would not be before maturity of current Apr 2024 bond but that could lift rate in 2023+
• South Korea Oct CPI reading registered its 7th month above target and highest since Jan 2012(Y/Y: 3.2% v 3.3%e).
• BOJ Sept Minutes (two meetings ago) stated that economy to improve as pandemic impact subsided; To closely monitor impact of coronavirus, discussed COVID relief program.
• Monetary Authority of Singapore (MAS) Gov Menon said prepared to act against inflation risks; recently announced policy tightening was deliberately small on risk related to growth.

Europe

• France postponed sanctions until after a planned meeting on Thursday (Nov 4th) between Brexit Min Frost and EU Affairs Min Beaune.

Americas

• House Speaker Pelosi said to be planning to go ahead with plans to vote this week on President Biden’s two Bills even though party moderates were echoing Sen Manchin’s complaints that they do not know full cost and economic impact.
• Sen Manchin (D-WV) stated that would not support reconciliation bill without understanding its impact on the economy. Would not support a multi-trillion dollar bill without greater clarity. Prepared to support a Build Back Better plan that combated inflation, was fiscally responsible, and would create jobs.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.13% at 478.24, FTSE -0.55% at 7,248.67, DAX +0.36% at 15,865.65, CAC-40 +0.17% at 6,905.21, IBEX-35 -0.56% at 9,131.50, FTSE MIB -0.20% at 27,152.00, SMI +0.27% at 12,249.50, S&P 500 Futures -0.06%].
• Market Focal Points/Key Themes: European indices open mostly lower but recovered to trade mixed later in the session; better performing sectors include industrials and health care; while laggards include consumer discretionary and materials; banking subsector dragged by disappointing results from Stantard Chartered; Capita sell sits insurance buisness; earnings expected in the upcoming US session include DuPont, Pfizer, Under Armor and Western Union.

Equities

• Consumer discretionary: HelloFresh [HFG.DE] +15% (sales; raises outlook).
• Energy: BP [BP.UK] -3% (earnings).
• Financials: Standard Chartered [STAN.UK] -7% (earnings).
• Industrials: Fresenius SE [FRE.DE] +5% (earnings), Maersk [MAERSKB.DK] -2% (earnings; buyback).
• Technology: AMS [AMS.CH] -6% (earnings).

Speakers

• ECB’s Enria (SSM chief) stated that expected a continued decrease in Gross NPLs at least until end-2022.
• Japan Fin Min Suzuki stated that had no discussions on FX when meeting with BOJ; Specific Monetary Policy was up to BOJ and it should maintain independence. Doing best to keep market stability and reach inflation.
• Bank of Korea (BOK) Oct Minutes: Most Board members agreed that another rate hike was needed. One member noted that a rate hike would be appropriate at next policy meeting (Nov). Another member stressed that strong growth and inflation did not warrant another hike as the economy needed to fully recover.
• Russia govt spokesperson Peskov stated that Govt remained faithful to OPEC+ deal. Putin orders to send more gas to Europe from Nov 8th remained in force.

Currencies/Fixed Income

• USD remained on solid footing with focus on Wed’s FOMC decision with the Fed widely expected to announce a tapering of stimulus. Greenback supported by the recent rise in the 2-year UST yield has almost doubled to over 0.50% in the past month for its highest level since March 2020.
• AUD currency was lower after dealers believed that RBA sounded a more dovish tone than expected in its policy statement and press conference. RBA’s message was successful in at least marginally scaling down hawkish bets.
• The recent rise in Euro Zone government bond yields took a pause in today’s session as some dealer believe the recent move was exaggerated. Supply bottlenecks remained a major hindrance as viewed in the PMI readings for October.

Economic data

• (CH) Swiss Oct CPI M/M: 0.3% v 0.2%e; Y/Y: 1.2% v 1.1%e; CPI Core Y/Y: 0.6% v 0.5%e.
• (CH) Swiss Oct CPI EU Harmonized M/M: 0.4% v 0.2%e; Y/Y: 1.3% v 1.1%e.
• (CH) Swiss Sept Real Retail Sales Y/Y: 2.5% v 0.8% prior.
• (HU) Hungary Oct PMI Manufacturing: 53.1 v 52.5e (7th straight expansion).
• (PL) Poland Oct PMI Manufacturing: 53.8 v 53.0e (16th straight expansion).
• (HU) Hungary Aug Final Trade Balance: -€0.8B v -€0.5B prelim.
• (HU) Hungary Sept PPI M/M: 2.4% v 0.4% prior; Y/Y: 14.0% v 14.4% prior.
• (ES) Spain Oct Manufacturing PMI: 57.4 v 58.1e (9th month of expansion but lowest reading since Mar 2021).
• (HK) Hong Kong Sept Retail Sales Value Y/Y: 7.3% v 11.9%e; Retail Sales Volume Y/Y: 4.7% v 10.8%e.
• (IT) Italy Oct Manufacturing PMI: 61.1 v 59.6e (16th month of expansion and highest reading since June).
• (FR) France Oct Final Manufacturing PMI: 53.6 v 53.5 prelim (confirmed the 11th straight expansion but lowest since Jan).
• (DE) Germany Oct Final Manufacturing PMI: 57.8 v 58.2 prelim (confirmed the 16th straight expansion but lowest since Jan).
• (EU) Euro Zone Oct Final Manufacturing PMI: 58.3 v 58.5 prelim (confirmed the 16th straight expansion).
• (ZA) South Africa Oct Manufacturing PMI: 53.6 v 55.8e.

Fixed income Issuance

• (IN) India sold total INR200B vs. INR200B indicated in 3-month, 6-month and 12-month bills.
• (ID) Indonesia sold total IDR4.0T vs. IDR4.0T target in Islamic bills and bonds (sukuk).

Looking Ahead

• (US) Monthly Auto sales data during the session.
• 06:00 (EU) Daily Euribor Fixing.
• 06:00 (AT) Austria Debt Agency (AFFA) to sell €690M in 0.25% Oct 2036 RAGB bonds.
• 06:00 (UK) DMO to sell £3.0B in 0.25% Jan 2025 Gilts.
• 06:25 (EU) Daily ECB Liquidity Stats.
• 06:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.
• 06:30 (DE) Germany to sell combined €800M in 2030 and 2033 I/L Bonds (Bundei).
• 06:30 (BE) Belgium Debt Agency (BDA) to sell €1.4-1.8B in 6-month and 9-month bills.
• 06:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
• 06:30 (ZA) South Africa to sell combined ZAR3.9B in 2032, 2035 and 2040 bonds.
• 07:20 (NL) ECB’s Elderson (Netherlands, SSM).
• 07:30 (CL) Chile Sept Economic Activity Index (Monthly GDP) Y/Y: 12.2%e v 19.1% prior.
• 07:30 (CL) Chile Central Bank Traders Bi-monthly Survey.
• 07:30(UK) DMO to sell £1.25B in 1.625% 2071 Gilts.
• 07:30 (EU) ESM to sell €1.5B in 3.-month Bills.
• 07:45 (US) Daily Libor Fixing.
• 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).
• 08:30 (CA) Canada Sept Building Permits M/M: +3.0%e v -2.1% prior.
• 08:55 (US) Weekly Redbook LFL Sales data.
• 09:00 (SG) Singapore Oct Purchasing Managers Index (PMI): 50.7e v 50.8 prior; Electronics Sector Index: No est v 51.2 prior.
• 09:00 (UK) Daily Baltic Dry Bulk Index.
• 10:00 (FR) France Debt Agency (AFT) to sell €5.1-6.3B in 3-month, 6-month and 12-month bills.
• 10:00 (EU) ECB weekly QE bond buying update.
• 10:00 (EU) Weekly ECB Forex Reserves.
• 10:45 (UK) BOE to buy £1.47B in APF Gilt purchase operation (20+ years).
• 11:00 (CO) Colombia Oct PMI Manufacturing: No est v 55.5 prior.
• 11:00 (CO) Colombia Sept Exports: $3.7Be v $3.3B prior.
• 11:30 (MX) Mexico Oct PMI Manufacturing: No est v 48.6 prior.
• 12:00 (DK) Denmark Oct Foreign Reserves (DKK): No est v 501.7B prior.
• 16:00 (NZ) RBNZ Financial Stability Report.
• 16:30 (US) Weekly API Oil Inventories.
• 17:00 (KR) South Korea Oct Foreign Reserves: No est v $464.0B prior.
• 17:45 (NZ) New Zealand Q3 Unemployment Rate: 3.9%e v 4.0% prior.
• 17:45 (NZ) New Zealand Q3 Employment Change Q/Q: 0.4%e v 1.1% prior (revised from 1.0%); Y/Y: 2.7%e v 1.7% prior.
• 18:00 (AU) Australia Oct Final PMI Services: No est v 52.0 prelim; PMI Composite: No est v 52.2 prelim.
• 18:00 (CO) Colombia Central Bank Oct Minutes.
• 20:30 (JP) Japan Oct Final PMI Services: No est v 50.7 prelim; PMI Composite: No est v 50.7 prelim.
• 20:30 (HK) Hong Kong Oct PMI (whole services): No est v 51.7 prior.
• 20:30 (SG) Singapore Oct PMI (whole services): No est v 53.8 prior.
• 20:30 (PH) Philippines Oct Manufacturing PMI: No est v 50.9 prior.
• 20:30 (AU) Australia Sept Building Approvals M/M: -2.0%e v +6.8% prior; Private Sector Houses M/M: No est v 3.5% prior.
• 21:01 (IE) Ireland Oct PMI Services: No est v 63.7 prior; PMI Composite: No est v 61.5 prior.
• 21:45 (CN) China Oct Caixin PMI Services: 53.1e v 53.4 prior; PMI Composite: No est v 51.4 prior.
• 23:00 (CN) China to sell 3-year and 7-year Upsize Bonds.