Notes/Observations
European Indices trade slightly higher, reversing earlier losses in lackluster session despite tensions growing in the far east
Merkel looks to build coalition after German election
Nestle affirms 2020 growth targets at investor day
Overnight
Asia:
Geopolitical tensions continue to grow as North Korean Foreign Min said Pres Trump’s comments over the weekend amount to declaration of war, noting North Korea has the right to shoot down US bombers even if they’re not in North Korean airspace.
South Korea FSC announced financial reforms for retail customers, including changes to interest rates on overdue loan payments.
The yuan declined to the lowest level against its currency basket in nearly 4-weeks as the PBOC weakens the daily fix
Europe:
Merkel looks to build coalition being open to talks with all of Germany’s mainstream parliamentary parties
Americas
(US) Fed’s Kashkari (dove, voter): Do not see signs of economy overheating; do not see inflation taking off no need to tap breaks; Fed should not be under any pressure to raise rates
(US) Fed’s Dudley (dove, FOMC voter): Reiterates expect further gradual tightening of US monetary policy; economy has grown steadily.
Economic data
(FR) FRANCE SEPT BUSINESS CONFIDENCE: 109 V 110E; MANUFACTURING CONFIDENCE: 110 V 111E
(DE) GERMANY AUG IMPORT PRICE INDEX M/M: 0.0% V 0.1%E; Y/Y: 2.1% V 2.1%E
(UK) AUG BBA LOANS FOR HOUSE PURCHASES: 41.8K V 41.7KE
(SE) Sweden Aug PPI M/M: -0.8% v +0.6% prior; Y/Y: 3.8% v 5.7% prior
Fixed Income Issuance:
(IT) Italy Debt Agency (Tesoror) sells total €1.5B v €1.0-1.5B indicated range in I/L 2022 and 2032 Bonds (BTPei)
(IT)ITALY DEBT AGENCY (TESORO) SELLS €1.5B VS. €1.0-1.5B INDICATED RANGE IN ZERO COUPON MAY 2019 CTZ BONDS; AVG YIELD: -0.22% V -0.139% PRIOR; BID-TO-COVER: 2.0X V 1.68X PRIOR
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 +0.1% at 3,543, FTSE +0.2% at 7,290, DAX +0.2% at 12,624, CAC-40 +0.1% at 5,273, IBEX-35 flat at 10,213, FTSE MIB +0.4% at 22,474, SMI +0.1% at 9,150, S&P 500 Futures -1.0%]
Market Focal Points/Key Themes: European stocks opened slightly lower, but drifted higher as the session progressed; geopolitical risks continue to weigh on sentiment, though haven flows were reduced; energy stocks supported by a bump in oil prices over Kurdistan referendum; attention moving to Fed Chair Yellen’s speech after market close; upcoming earnings releases in the US session include Carnival and Darden
Equities
Consumer discretionary: Card Factory CARD.UK -0.7% (results), Deutsche Wohnen DWN.DE +3.1% (bond issue), Nestle NESN.CH +1.0% (investor day comments), Salvatore Ferragamo SFER.IT +2.2%(analyst action)
Financials: AA AA.UK -9.5% (results)
Industrials: Aurubis NDA.DE -4.6% (Analyst action), Duro Felguera MDF.ES -6.6% (under investigation), Fincantieri FCT.IT +0.9% (STX deal), Kone KNEBV.FI +0.1% (launches strategy), Norske Skogindustrier NSG.NO +31.7% (recapitalization plan), ThyssenKrupp TKA.DE +0.6(capital raise)
Healthcare: Pharming PHARM.NL +7.1% (partnership)
Technology: Infineon IFX.DE -0.1% (analyst action)
Telecom: Kinepolis KIN.BE +3.8% (analyst action)
Utilities: United Utilities UU.UK -0.7% (trading update)
Speakers
(IT) Italy Fin Min Padoan: It is a critical time for Europe at the moment; Sees much better outlook for Italian Economy- TV interview
Currencies
EUR/USD continues its downtrend on continued concerns over following the German Elections, Support lies at 1.1810 area.
Fixed Income
Bund futures trade at 161.79 down 16 ticks following the as expectations grow for a stronger safe-haven role following the German elections. Continued downside targets 161.03 while upside resistance stands initially at 162.07, followed by 163.27.
Gilt futures trade at 124.03 down 19 ticks as markets price a 78 percent chance of a Bank of England rate rise in November. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.
Tuesday’s liquidity report showed Monday’s excess liquidity fell to €1.723T from €1.743T and use of the marginal lending facility dropped to €114M from €122M.
Corporate issuance saw $6.1B come to market via 6 issuers headlined by DNB Bank $1.75B 2-part offering and Nissan $2.0B 4-part senior unsecured note offering
Looking Ahead
05.30 (UK) Weekly John Lewis LFL sales data
05:30 (ZA) South Africa Q2 Non-Farm Payrolls Q/Q: No est v-0.5% prior; Y/Y: No est v -0.6% prior
07:00 (BR) Brazil Sept FGV Construction Costs M/M: 0.3%e v 0.4% prior
07:45 (US) Weekly Goldman Economist Chain Store Sales
08:05 (UK) Baltic Dry Bulk Index
08:55 (US) Weekly Redbook Sales
09:00 (US) July S&P / Case-Shiller 20-City M/M: 0.20%e v 0.11% prior; Y/Y: 5.70%e v 5.65% prior; House Price Index (HPI): No est v 200.54 prior
09:00 (US) July S&P / Case-Shiller Case-Shiller (overall) HPI Y/Y: No est v 5.77% prior, House Price Index (HPI): No est v 192.6 prior
09:00 (EU) Weekly ECB Forex Reserves: € v € prior
09:00 (MX) Mexico Aug Unemployment Rate (seasonally adj): 3.2%e v 3.2% prior
09:30 (BR) Brazil Aug Current Account: No est v -$3.4B prior; Foreign Direct Investment (FDI): No est v $4.1B prior
10:00 (US) Consumer Confidence: 120.0e v 122.9 prior
10:00 (US) Aug New Home Sales: 588Ke v 571K prior
10:00 (US) Sept Richmond Fed Manufacturing Index: 13e v 14 prior
