Notes/Observations
Euro Area Service PMI data mixed in session (Beats: Euro Zone, UK, Spain; Misses:France, Italy, Russia; in-line: Germany )
Overnight
Asia:
BOJ Dep Gov Nakaso said not to rule out BoJ deficit in exit strategy. Revenue fluctuations in the short-term from exit strategy would not hurt policy execution as BoJ had been saving some of its revenues for future losses.
Japan Sept PMI Services: 51.0 v 51.6 prior (11-month low)
The World Bank raised China’s 2017 and 2018 GDP growth forecasts, putting them in line with those of the IMF
Europe:
UK Trade Min Fox: have reached agreement with EU on the methodology of WTO quotas
PM May reiterated seeks a deal on Northern Ireland power sharing agreement; UK will do everything it can to get to a deal. UK PM May said to plan to tell her Tory party to “shape up and go forward together” in her closing speech at today’s annual party conference
UK Foreign Min Johnson: things are going well in the EU Brexit negotiations, but it’s amid too much gloom. Expected to complete many free trade deals before the next election
UK Sept BRC Shop Price Index Y/Y: -0.1% v -0.3% prior (smallest decline since May 2013)
Catalan govt President Puigdemont confirmed planning to declare independence within day
Spain King Felipe VI: Spanish democracy is in a serious moment; referendum plans by Catalan leaders were illegal. Committed to Spanish unity; Spanish crown firmly committed to constitutional order
Americas:
President Trump aides said to deliver shortlist for Fed Chair, Treasury Sec Mnuchin is said to have given support to Jerome Powell for the position. President could bring in a wild-card candidate, but some said this is not likely (**Note: 4 candidates for the Fed chair position that President Trump interviewed including Yellen, Gary Cohn, Jerome Powell and Kevin Warsh)
House GOP tax plan reportedly likely to include fourth tax bracket on high earners; not likely to exceed 39.6%
Bank of Canada (BOC) Leduc: Need to promote economic stability by aiming for 2% CPI target (did not comment directly on BOC interest rates)
Energy:
Weekly API Oil Inventories: Crude: -4.1M v -0.8M prior
Economic data
(IE) Ireland Sept Services PMI: 58.7 v 58.4 prior; Composite PMI: No est v 58.2 prior
(RU) Russia Sept PMI Services: 55.2 v 54.6e (20th month of expansion); Composite PMI: 54.8 v 54.2 prior
(SE) Sweden Sept PMI Services: 68.3 v 55.4 prior
(ES) Spain Sept Services PMI: 56.7 v 55.5e 47th month of expansion and highest since Aug 2015); Composite PMI: # v 55.1e
(ZA) South Africa Sept PMI (Whole Economy): 48.5 v 49.8 prior (2nd straight contraction)
(IT) Italy Sept Services PMI: 53.2 v 55.0e (16th month of expansion) ; Composite PMI: 54.3 v 55.9e
(FR) France Sept Final Services PMI: 57.0 v 57.1e (confirmed 15th month of expansion); Composite PMI: 57.1 v 57.2e
(DE) Germany Sept Final Services PMI: 55.6 v 55.6e (confirmed 51st month of expansion); Composite PMI: # v 57.8e
(EU) Euro Zone Sept Final Services PMI: 55.8 v 55.6e (confirmed 51st month of expansion);; Composite PMI: 56.7 v 56.7e
(BR) Brazil Sept FIPE CPI (Sao Paulo) M/M: 0.0% v 0.0%e
(UK) Sept Services PMI: 53.6 v 53.2e (14th month of expansion); Composite PMI: 54.1 v 53.8e
(IS) Iceland Central Bank (Sedabanki) cut its 7-Day Deposit Rate by 25bps to 4.25%
(IN) India Central Bank (RBI) left its Repurchase Rate at 6.00% (as expected)
(EU) Euro Zone Aug Retail Sales M/M: -0.5% v +0.3%e; Y/Y: 1.2% v 2.6%e
Fixed Income Issuance:
(IE) Ireland Debt Agency (NTMA) opened its book to sell Oct 2022 IGB bond; guidance seen -23bps to mid-swaps
(IN) India sold total INR140B vs. INBR140B indicated in 3-month, 6-month and 12-month Bills
(DK) Denmark sold total DKK2.12B in 2020 and 2027 DGB bonds
(SE) Sweden sold total SEK2.5B vs. SEK2.5B indicated in 2026 and 2032 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 -0.4% at 3,581, FTSE flat at 7,423, DAX +0.2% at 12,909, CAC-40 -0.3% at 5,348, IBEX-35 -1.9% at 10,030, FTSE MIB -1.0% at 22,497, SMI -0.1% at 9,255, S&P 500 Futures flat]
Market Focal Points/Key Themes: European stocks opened mixed and slipped lower as trading progressed; Catalan independence worries keep markets depressed in the periphery; oil slipped adding additional pressure on energy stocks; safe havens supported; Israel closed for holiday; attention turning to new Fed Chair pick, with President Trump said to have received a shortlist of candidates; reminder that China and South Korea remain closed for holiday this week; upcoming earnings in US session include Pepsico and Monsanto
Equities
Consumer discretionary: Bang & Olufsen BO.DK +3.4% (results),Tesco TSCO.UK -1.9% (results), Eniro ENRO.SE +51.0% (recapitalization plan completion)
Consumer staples: Bakkafrost BAKKO.NO +2.5% (harvest update)
Energy: Scatec Solar SSO.NO +6.1% (JV with Statoil)
Financials: International Personal Finance IPF.UK -9.5% (comments on tax proposal in Poland)
Healthcare: Motif Bio MTFB.UK +30.6% (sudy results)
Industrials: Grupo Ezentis RDT.DE -12.8% (share issue), Pirelli PIRC.IT -0.9% (first day of trading), Royal Mail RMG.UK -2.7% (strike notice)
Technology: Worldline WLN.FR +2.9% (analyst action)
Telecom: Telefonica Deutschland O2D.DE -2.3% (analyst action)
Speakers
ECB proposed new guidance for banks’ bad-loan provisioning (NPL); as speculated. Starting Jan. 1, banks will have at most two years to set aside funds to cover 100 percent of the value of their newly classified non-performing unsecured debt and seven years to cover all secured bad debt
Euro Working Group (EWG) chief Wieser: Expect member States to order the completion of banking union
Iceland Central Bank policy statement noted that GDP growth to be weaker in 2017 due to easing in tourism
India Central Bank (RBI) policy statement noted that the vote was 5-1 to keep policy steady with memberDholakia votingd for at least 25bps cut. Saw inflation picking up from recent record lows and cuts its FY18 GVA from 7.3% to 6.7%. Forecasted H2 inflation between 4.2-4.6%
Saudi Arabia Central Bank Gov Alkholifey: FX Reserves are adequate
Russia Energy Min Novak: To keep 2017 oil exports flat y/y. Reiterated view that expected oil market to achieve balance in Apr 2018
Venezuela Oil Min Del Pino: There are talks whether to extend oil production cuts or even deepen them – comments from Russia oil forum
IEA raised its forecast for Renewable energy growth over the next 5 years. Expects global renewable electricity capacity to rise by more than 920 gigawatts, or 43 percent, by 2022, due to supportive policies for low-carbon energy and cost reductions for solar PV and wind
LIbya’s Sharara oil field said to have reopened (was closed since late Sunday)
Currencies
The USD was slightly softer in a quiet session with some dealers noting of a report that President Trump aides delivered a shortlist for Fed Chair position (Treasury Sec Mnuchin is said to have given support to Jerome Powell for the position)
EUR/USD was higher by 0.2% and holding above 1.1750 area as various European Services PMI data came in mixed but holding onto expansion territory.
GBP/USD was aided by the UK Services PMI data which beat expectations. Pair trading around 1.3270 area.
Fixed Income
Bund futures trades at 161.36 up 24 ticks being aided by continued tensions in Spain, with a take out of 161.62 high targeting 161.98 followed by 162.23. A reversal continues to target 160.86 initially then 160.66.
Gilt futures
Wedneday’s liquidity report showed Tuesday’s excess liquidity rose to €1.778T from €1.767T prior, use of the marginal lending facility rose to €497M from €344M prior.
Corporate issuance saw $3.5B come to market via 2 issuers headlined by Enel Finance $3B 3 part offering, bringing weekly issuance to $6.65B.
Looking Ahead
(US) Senate Intelligence Committee update on Russia probe
05:30 (DE) Germany to sell €3.0B in 0.50% Aug 2027 Bund
06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%
06:00 (EU) EU Parliament votes on non-binding Brexit Resolution
06:00 (RU) Russia to sell combined OFZ bonds
06:30 (US) Fed’s Fischer – media interview
07:00 (US) MBA Mortgage Applications w/e Sept 29th: No est v -0.5% prior
07:00 (FI) Finland Parliament on possible no-confidence vote
07:30 (TR) Turkey Sept Effective Exchange Rate(REER): No est v 89.71 prior
08:00 (HU) Hungary Central Bank (NBH) Sept Minutes
08:05 (UK) Baltic Dry Bulk Index
08:15 (US) Sept ADP Employment Change: +138Ke v +237K prior
09:00 (EU) Weekly ECB Forex Reserves:
09:00 (MX) Mexico July Gross Fixed Investment: -1.4%e v -0.9% prior
09:00 (BR) Brazil Sept PMI Services: No est v 49.0 prior; Composite PMI: No est v 49.6 prior
09:45 (US) Sept Final Markit Services PMI: 55.1 v 55.1 prelim; Composite PMI: No est v 54.6 prelim
10:00 (US) Sept ISM Non-Manufacturing Composite: 55.5e v 55.3 prior
10:00 (PT) Portugal PM Costa in Parliament
10:00 (PL) Poland Central Bank Gov Glapinski to hold post rate decision press conference
10:30 (US) Weekly DOE Crude Oil Inventories
12:15 (EU) ECB chief Draghi in Frankfurt
15:00 (CO) Colombia Sept Total PPI M/M: No est v 0.6% prior
15:00 (ES) Spain region of Catalon President Puigdemont statement on referendum
15:15 (US) Fed Chair Yellen at community banking event
