Notes/Observations
- European Investor confidence hits a fresh decade high
- China Sept FX Reserves rise for 8th straight month
Overnight/weekend
Asia:
- China Sept Caixin Services PMI: 50.6 v 52.7 prior (21-month low)
Europe:
- Spain region of Catalonia Leader Puigdemont said a law passed by the Catalan parliament preparing the way for the referendum called for a declaration of independence in the event of a ‘yes’ vote
- Spain PM Rajoy: Could use constitution to suspend Catalonia’s autonomy if it declares independence. Ruled out mediation to solve Catalonia crisis
- Chancellor Merkel said to have urged party to try to forge 3-way Jamaica coalition. Advised everyone to concentrate on what lies ahead; first between CDU and CSU, then with FDP and Greens and to understand the mandate that voters handed us
- PM May to tell Parliament on Monday, Oct 9th that she was offering Europe a “new, deep and special partnership” with Britain
- EU significantly steps up backroom Brexit talks with Labour Party over fears PM May’s government will fall
- UK PM will warn the EU that Britain will not make any more concessions on Brexit until they compromise on trade and transition talks
- PM May said to have decided to commit “billions of pounds” on preparing Britain to leave the European Union without a deal in a bid to save her premiership; spending to be “unlocked” in new year if no progress is made with Brussels
- Turkey suspended non-immigrant visa services for US citizens (**Note: move follow US govt suspended non-immigrant visa services in Turkey. The move by the US followed the arrest of a US consulate employee in Istanbul in relation to alleged links to muslin leader Fethullah Gulen. Sovereign Updates:
- Moody’s affirmed Italy’s sovereign rating at Baa2; outlook remains Negative
- S&P affirmed France sovereign rating at AA; outlook Stable
- Canadian rating agency DBRS affirms Spain sovereign rating at A (low), stable trend
- Canadian rating agency DBRS affirms Austria sovereign rating at AAA with stable trend
Americas:
- Trump tweet: “Presidents and their administrations have been talking to North Korea for 25 years, agreements made and massive amounts of money paid…… hasn’t worked, agreements violated before the ink was dry, makings fools of U.S. negotiators. Sorry, but only one thing will work!”
- US Senate Republican Corker says President Trump could set nation on the path to World War III by threatening other countries – Fed’s Rosengren (moderate, non-voter): Fed has to respond to very tight labor markets or may damage the economy (reiterated support for continued gradual interest rate hikes)
Energy:
- OPEC’ Sec Gen Barkindo: No talk of holding extraordinary meeting of OPEC at this time. Consultations are under way for the extension of OPEC output cut deal beyond March 30th
Economic data
- (DE) Germany Aug Industrial Production M/M: 2.6% v 0.9%e; Y/Y: 4.7% v 2.9%e
- (FR) Bank of France Sept Industrial Sentiment: 104 v 105e
- (CZ) Czech Sept CPI M/M: -0.1% v -0.1%e; Y/Y: 2.7% v 2.7%e
- (CZ) Czech Sept Unemployment Rate: 3.8% v 3.9%e
- (CH) China Sept Foreign Reserves: $3.109t v $3.100Te (8th straight increase)
- (EU) Euro Zone Oct Sentix Investor Confidence: 29.7 v 28.5e (highest level since 2007)
**Fixed Income Issuance:
- (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 12-month Bills; Avg Yield: 0.42% v 0.39% prior; Bid-to-cover: 2.31x v 2.08x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
**Equities**
Indices [Stoxx600 +0.2% at 390.0, FTSE -0.1% at 7517, DAX +0.1% at 12964, CAC-40 flat at 5360, IBEX-35 +0.8% at 10270, FTSE MIB flat at 22395, SMI flat at 9255, S&P 500 Futures +0.1%]
Market Focal Points/Key Themes: European Indices trade flat to slightly higher as worries over Catalonia independence ease with the Spanish Ibex rebounding up over 0.7% and the Dax touched a new all time higher. On the corporate front Millennium and Copthorne trades sharply higher after its to be acquired by City Developments, while SAF Holland reversed initial losses after prelim Q3 results, and raised Rev guidance and Ericsson trades higher after naming a new Chairman. Shares of BPost trades sharply lower after acquiring Radial, while Airbus trades lower after bearish comments from the CEO and possible corruption probe.
Equities
- Consumer discretionary [Air France [AF.FR] -1.2% (Sep metrics)]
- Materials: [K+S [SDF.DE] -3.5% (2030 strategic plan), Petra Diamonds [PDL.UK] -3.6% ( likely breach of the 31 December 2017 EBITDA covenant measurement ratios has been flagged) ]
- Industrials: [Bpost [BPOST.BE] -1.4% (Acquisition), Airbus [AIR.FR] -1.7% (CEO warns of turbulent times ahead), XP Power [XPP.UK] +6% (Earnings)]
- Financials: [Millennium & Copthorne [MLC.UK] +21% (to be acquired)]
- Telecom: [ Ericsson [ERICB.SE] +1.4% (Names new Chairman)]
Speakers
- ECB: Higher interest rates would lead to higher Net Interest Income in the next three year for a majority of banks, but lower economic value of equity
- ECB’s Mersch (Luxembourg): Inflation forecasts harder to make in a globalized world. Recent information needed to be factored into ECB discussion; some disappointment in recent inflation data
- Spain Dep PM Saenz reiterates that applying Article 155 was among options on Catalonia
- Turkey Central Bank Dep Gov Uysal: Do not see any FX liquidity issues at this time
- Japan PM Abe: To give up government reins if he fails to get a majority – election debate
Currencies
- Quiet start to the trading week for the major FX pairs.
- GBP/USD was firmer by 0.4% as reports circulated that PM May might reshuffle her Cabinet to reinforce her grip on power. May might demote Foreign Secretary Johnson.
- The Turkish Lira slumped in trading after US and Turkey govts announces over the weekend they each would stop issuing non-immigrant visas to each others’ citizens.
Fixed Income
- Bund futures trade at 161.36 up 24 ticks as markets show signs of selling exhaustion. Further downside targets 160.66 then 160.24, while a reversal targets 161.66 initially then 161.82.
- Monday’s liquidity report showed Friday’s excess liquidity rose to €1.798T from €1.796T prior. Use of the marginal lending facility fell to €195M from €567M prior.
Looking Ahead
- (UK) Commons Reconvenes After Conference Recess – (UK) PM May meets business leaders on Brexit
- (UR) Ukraine Sept CPI M/M: No est v -0.1% prior; Y/Y: No est v 16.2% prior
- (MX) Mexico Sept Vehicle Production: No est v 351.9K prior; Vehicle Exports: No est v 260.6K prior
- 05:30 (DE) Germany to sell EUR2.0 BuBills
- 06:45 (US) Daily Libor Fixing
- 07:00 (BR) Brazil Sept FGV Inflation IGP-DI M/M: 0.5%e v 0.2% prior; Y/Y: -1.1%e v -1.6% prior
- 07:00 (CZ) Czech Central Bank comments on inflation data
- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 08:00 (UK) Baltic Dry Bulk Index
- 09:00 (MX) Mexico Sept CPI M/M: 0.4%e v 0.5% prior; Y/Y: 6.5%e v 6.7% prior; CPI Core M/M: 0.4%e v 0.3% prior
- 09:30 (EU) ECB announces Covered-Bond Purchases
- 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
