Notes/Observations
European Indices rise; Bunds drop below 161 on risk on flows
Markets awaiting President Trump outline to parts of his tax overhaul plan at 15:20 ET in Indiana
France consumer confidence unexpectedly falls, while Italian business confidence hits fresh post-crisis high and Sweden’s Economic Confidence highest since early 2011
Overnight
Asia:
China PBOC sets yuan reference rate at 6.6192 v 6.6076 prior (2nd consecutive weaker setting, weakest since Aug 29th)
New Zealand Q3 Employment Confidence index rises to 9 year high
Thailand leaves benchmark Interest rates unchanged at 1.5%
Nikkei trades lower after almost half the stock in the index trade ex-div
Europe:
French Consumer confidence unexpectedly falls while Italian consumer confidence handily beats estimates
Reportedly German Economic Institutes forecasts for 2017 raised to 1.9% from 1.5% prior; 2018 growth 2.0% v 1.8% prior
Siemens and Alstom confirm merger of rail unit
Bund futures drop below 161 on risk on flows with yields breaking 0.47%, following falls in Treasuries and JGBs overnight
(IQ) President of Iraqi Kurdistan Barzani: ‘yes’ vote won in Kurdistan independence referendum; will hold serious discussions with Iraqi govt and our neighbors
Americas
Trump tax framework said to cap corporate tax rate at 20% (from 35%), have a 35% individual tax rate that has option to go higher
(US) Fed Chair Yellen: it would be imprudent to leave rates on hold until inflation reaches 2%; there are considerable odds inflation won’t stabilize at 2% for next few years – comments in Cleveland
without further modest increases in the federal funds rate over time, there is a risk that the labor market could eventually become overheated, potentially creating an inflationary problem down the road
Oil
Russian Energy minister looks to extend OPEC oil output cut beyond March if it makes sense
Economic data
(FR) FRANCE SEPT CONSUMER CONFIDENCE: 101 V 103E
(EU) EURO ZONE AUG M3 MONEY SUPPLY Y/Y: 5.0% V 4.6%E
(IT) ITALY SEPT CONSUMER CONFIDENCE: 115.5 V 110.6E; MANUFACTURING CONFIDENCE: 110.4 V 108.2E
(SE) SWEDEN SEPT CONSUMER CONFIDENCE: 101.8 V 102.0E; MANUFACTURING CONFIDENCE: 124.6 V 115.0E
(IT) Italy July Industrial Orders M/M: 0.2% v 4.3% prior; Y/Y: 10.1% v 13.7% prior
Fixed Income Issuance:
(IT) Italy Debt Agency (Tesoro) sells €6B vs. €6B indicated in 6-month Bills; Avg Yield: -0.382% v -0.356% prior; Bid-to-cover: 2.07x v 1.72x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 +0.7% at 3,555, FTSE +0.1% at 7,293, DAX +0.5% at 12,673, CAC-40 +0.2% at 5,278, IBEX-35 +1.2% at 10,307, FTSE MIB +0.7% at 22.593, SMI +0.1% at 9.118, S&P 500 Futures +0.1%]
Market Focal Points/Key Themes: European stocks opened higher and continued momentum; clarification on rate projections from Fed Chair Yellen lead to across-the-board support to equities; energy stocks supported by oil rally; Alstom and Siemens to merge rail units; attention turning to expected unveiling of President Trump’s tax plan; upcoming earnings in the US session include ReneSola and Jabil
Equities
Consumer discretionary: AST Groupe ASP.FR +3.2% (results), Axfood AXFO.SE -5.3% (analyst action), Hella HLE.DE -1.4% (results), OVS OVS.IT -3.1% (stake placement), Trigano TRI.FR +0.5% (results)
Consumer staples: ICA Gruppen ICA.SE -4.0% (analyst action)
Energy: Fortum FUM1V.FI +0.9% (Not looking at full takeover of Uniper), Uniper UN01.DE -0.5% (Fortum CEO comments)
Financials: Hannover Re HNR1.DE +0.8%(analyst action), Plus500 PLUS.UK +4.5% (trading update)
Industrials: Bouygues EN.FR (on Alstom) +2.3%, Carillion CLLN.UK (press speculation of takeover) +17.2%, Gaz Transport et Technigaz GTT.FR +1.1% (technical difficulties with plant), NeoPost NEO.FR +6.5% (results)
Healthcare: Galapagos GLPG.BE +1.1% (study results), Guerbet GBT.FR +7.3% (results), Kiadis KDS.NL +6.3% (marketing update), TxCell TXCL.FR +10.3% (study presentation)
Technology: GFT Technologies GFT.DE -3.1% (analyst action)
Telecom: Mediaset MS.IT +0.8% (results)
Speakers
(EU) ECB’s Nouy (SSM chief): good chance banking sector will shrink
(IT) Italy Fin Min Padoan: It is a critical time for Europe at the moment; Sees much better outlook for Italian Economy- TV interview
(RU) Russia Energy Minister Novak: Will look at extending OPEC oil output beyond March if it makes sense
Currencies
GBP/USD fell for a fourth day as the latest round of Brexit talks between the EU and the U.K. continued this week and the dollar strengthened ahead of President Trump’s tax plan speech
Emerging market currencies fell across the board to the dollar as the Greenback benefited from Fed Yellen’s speech
Fixed Income
Bund futures trade at 160.90 down 88 ticks under pressure following declines in both Treasuries and JGBs. Continued downside targets 160.55 while upside resistance stands initially at 162.07, followed by 163.27.
Gilt futures trade at 123.77 down 33 ticks as the 5-year Gilt touched the highest level since the Jun 2016 Brexit vote. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.
Wednesday’s liquidity report showed Tuesday’s excess liquidity rose to €1.725T from €1.723T and use of the marginal lending facility dropped to €49M from €114M.
Corporate issuance saw $6.7B come to market via 6 issuers headlined by Goldman Sachs $2.5B senior unsecured global notes and Clorox $0.4B senior unsecured note offering
Looking Ahead
05:00 (IS) Iceland Sept CPI M/M: No est v 0.2% prior; Y/Y: No est v 1.7% prior
05:00 (IT) Italy July Industrial Orders M/M: No est v 4.3% prior; Y/Y: No est v 13.7% prior
06:00 (UK) Sept CBI Retailing Reported Sales: No est v 10 prior
07:00 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave Repurchase Rate unchanged at 0.25%
07:00 (US) MBA Mortgage Applications w/e Sept 22nd: No est v % prior
07:30 (CL) Chile Central Bank’s Traders Survey
08:00 (BR) Brazil Aug PPI Manufacturing M/M: No est v -1.0% prior; Y/Y: No est v 0.8% prior
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Aug Preliminary Durable Goods Orders: +1.5%e v -6.8% prior; Durables Ex Transportation: 0.3%e v 0.6% prior
09:00 (MX) Mexico Aug Trade Balance: No est v -$1.5B prior
09:30 (BR) Brazil Aug Total Outstanding Loans (BRL): No est v 3.062T prior; M/M: No est v -0.6% prior
10:00 (US) Aug Pending Home Sales M/M: No est v -0.8% prior; Y/Y: No est v -0.5% prior
10:30 (US) Weekly DOE Crude Oil Inventories
15:00 (AR) Argentina Q2 Current Account: No est v -$6.9B prior
15:00 (AR) Argentina July Economic Activity Index (Monthly GDP) M/M: No est v 0.3% prior; Y/Y: No est v 4.0% prior
16:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave Cash Rate (OCR) unchanged at 1.75%
