Fundamental Analysis

Market Update - European Session: Plenty Of Central Bank Speak Later In Session In Washington

Typography

Notes/Observations

Plethora of central bank speak at Institute of International Finance (IIF) conference in Washington today (includes ECB's Draghi (along with members Praet, Coeure and Lautenschlaeger, Fed's Brainard, Fed's Powell, BOE's Haldane and Bank of Canada (BOC) Wilkins, Riksbank Gov Ingves (along with member Skingsley)

Overnight

Asia:

China Foreign Ministry: Have lodged representations with US over destroyer's trespass on territorial waters

Europe:

Spain central govt said to have given Catalan leader Puigdemont 5 days (until Monday, Oct 16) to clarify independence stance. If Catalan President Puigdemont confirmed by Monday that he has declared independence, he will be given a further 3 days to withdraw the declaration

Americas:

FOMC Minutes (from Sept 19-20th): Many Fed officials saw another rate hike warranted this year. Many officials concerned low inflation might not only reflect transitory factors. Several members wanted to be more data dependent into December

Treasury Sec Mnuchin reportedly strongly advocating for Jerome Powell as Fed chair

US President Trump: Looking at ~10% repatriation tax rate (vs current 35% corporate tax rate)

Energy:

Weekly API Oil Inventories: Crude: +3.1M v -4.1M prior

Economic data

(NL) Netherlands Aug Trade Balance: €4.1B v €4.7B prior

(FR) France Sept Final CPI M/M: -0.2% v -0.1%e, Y/Y: 1.0% v 1.0%e, CPI Ex-Tobacco Index: 101.30 v 101.31e

(FR) France Sept Final CPI EU Harmonized M/M: -0.2% v -0.1%e, Y/Y: 1.1% v 1.1%e

(SE) Sweden Sept CPI M/M: 0.1% v 0.4%e, Y/Y: 2.1% v 2.4%e, CPI Level: 323.62 v 324.31e

(SE) Sweden Sept CPI CPIF M/M: 0.2% v 0.4%e, Y/Y: 2.3% v 2.5%e

(EU) Euro Zone Aug Industrial Production M/M: 1.4% v 0.6%e, Y/Y: 3.8% v 2.6%e

Fixed Income Issuance:

(SE) Sweden sold SEK750M vs. SEK750M indicated in I/L 2022 and 2026 Bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 flat at 390, FTSE +0.1% at 7540, DAX -0.2% at 12950, CAC-40 -0.3% at 5348, IBEX-35 flat at 10280, FTSE MIB -0.4% at 22466, SMI flat at 9264, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes:

European Indices trade mixed in range bound trade, ahead of key earnings reports out of the US. Banking giants JP Morgan and Citigroup set to report as we enter into earnings season.
On the corporate front Suedzucker trades lower after Q2 results and Sanofi weighs on the CAC after noting unfavorable currency will impact Q3 results. JustEat trades sharply higher after receiving provisional clearance from the CMA on its merger with hungryhouse. Elsewhere in the UK, Sky, GVC, Hays and Booker were some of the names that reported whilst in Germany Lufthansa trades higher after

Equities

Consumer discretionary [Lufthansa [LHA.DE] +2.9%, Air Berlin [AB1.DE] +40% (Lufthansa to acquire Air Berlin Assets), Kappahl [HAHL.SE] +16% (Earnings), Brown (N) Group [BWNG.UK] -3.1% (Earnings), Just Eat [JE.UK] +5.1% (CMA provisionally clears merger with Hungryhouse), GVC [GVC.UK] +2.7% (Earnings)]

Consumer Staples [Suedzucker [SZU.DE] -3.6% (Earnings)]

Materials: [Acacia Mining [ACA.UK] -3.1% (Q3 update)]

Industrials: [Renold [RNO.UK] -12% (Trading update)]

Healthcare: [ Sanofi [SAN.FR] -1% (Q3 currency impact),Fagron [FAGR.BE] - 8% (Q3 Rev)]

Speakers

Bank of England (BOE) Credit Conditions & Bank Liabilities Surveys: Lenders tightened criteria on unsecured borrowing (Motivations for this included concerns about customer indebtedness and the squeeze on real incomes), Defaults on Non-credit card unsecured lending up sharply

ECB spokesperson: Has legal basis for NPL provision guidance (**Note: refers to recent proposal on new guidance for banks' bad-loan provisioning starting in 2018)

Turkey Presidential advisor Ertem: Central bank tight monetary policy stance is important, seen as adequate and positive

Turkey Presidential spokesperson: Received an American request to resolve visa crisis, will evaluate proposal

Russia Central Bank (CBR) Gov Nabiullina: 2017 CPI forecast seen around 3.2%

Romania President Iohannis: Support bid for Cabinet reshuffle as economy is impacted by political turmoil

Norway 2018 fiscal budget set structural non-oil deficit at NOK231.1B vs. NOK219.6B y/y

IEA Monthly Oil Report: Maintains 2017 Global oil demand growth forecast at 1.6M bpd, Sets 2018 Global oil demand forecast at 1.4M bpd

Currencies

USD consolidated its post FOMC minutes loses in which some central bankers were still concerned about persistently low inflation. Many policymakers still felt that another rate increase this year "was likely to be warranted" but several noted that additional tightening was dependent on upcoming inflation data

EUR/USD holding steady at 1.1860 area while USD/JPY was at 112.25 just ahead of the NY morning.

SEK currency was softer after Sweden Sept CPI missed expectations Analyst noted that Swedish inflation has probably passed its peak as the strong SEK currency was taking a bite out of the upward momentum. EUR/SEK higher by over 0.5% approaching 9.60 area

Fixed Income

Bund futures trade at 161.42 up 24 ticks little change as the Fed Minutes showed central bankers are still concerned about persistently low inflation. Continued downside targets 161.03 while upside resistance stands initially at 162.07, followed by 163.27.

Gilt futures trade at 123.87 up 18 ticks with no major UK releases due for today. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.

Thursday's liquidity report showed Wednesday's excess liquidity rose to €1.809T from €1.790T and use of the marginal lending facility fell to €161M from €221M.

Corporate issuance saw $12.8B come to market via 6 Issuance was headlined by Wal-Mart's $6B 7-part senior unsecured offering and Sumitomo Mitsui Financial $2.5B 3-part issuance

Looking Ahead

(IT) Italy Debt Agency (Tesoro) to sell €6.0-7.5B indicated range in 2020, 20245 and 2048 BTP bonds

EU and UK official hold 5th round of Brexit monthly negotiation press conference

05:30 (ZA) South Africa Aug Total Mining Production M/M: +0.2%e v -0.4% prior, Y/Y: 0.5%e v 0.9% prior, Gold Production Y/Y: No est v 3.9% prior, Platinum Production Y/Y: No est v -5.0% prior

05:30 (SE) Sweden Central Bank (Riksbank) Dep Gov Ohlsson

05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds

06:00 (IE) Ireland Sept Property Prices M/M: No est v 3.0% prior, Y/Y: No est v 12.3% prior

06:00 (IE) Ireland Sept CPI M/M: No est v 0.4% prior, Y/Y: No est v 0.4% prior

06:00 (IE) Ireland Sept CPI EU Harmonized M/M: No est v 0.4% prior, Y/Y: No est v 0.4% prior

06:00 (PT) Portugal Sept CPI M/M: No est v 0.0% prior, Y/Y: No est v 1.4% prior

06:00 (PT) Portugal Sept CPI EU Harmonized M/M: No est v 0.2% prior, Y/Y: No est v 1.3% prior

06:30 (IS) Iceland to sell Bills

08:00 (PL) Poland Sept Final CPI M/M: No est v 0.4% prelim, Y/Y: No est v 2.2% prelim

08:00 (IN) India Sept CPI Y/Y: 3.5%e v 3.4% prior

08:00 (IN) India Aug Industrial Production Y/Y: 3.0%e v 1.2% prior

08:00 (UK) Baltic Dry Bulk Index

08:30 (US) Sept PPI Final Demand M/M: 0.4%e v 0.2% prior, Y/Y: 2.6%e v 2.4% prior

08:30 (US) Sept PPI Ex Food and Energy M/M: 0.2%e v 0.1% prior, Y/Y: 2.0%e v 2.0% prior

08:30 (US) Sept PPI Ex Food, Energy, Trade M/M: 0.2%e v 0.2% prior, Y/Y: No est v 1.9% prior

08:30 (US) Initial Jobless Claims: 250Ke v 260K prior, Continuing Claims: 1.93Me v 1.938M prior

08:30 (CA) Canada Aug New Housing Price Index M/M: No est v 0.4% prior, Y/Y: No est v 3.8% prior

08:30 (CA) Canada Sept Teranet/National Bank HPI M/M: No est v 0.6% prior, Y/Y: No est v 13.1% prior, House Price Index: No est v 222.03 prior

09:00 (MX) Mexico Aug Industrial Production M/M: +0.4%e v -1.0% prior, Y/Y: -0.7%e v -1.6% prior, Manufacturing Production Y/Y: 3.4%e v 2.2% prior

09:00 (RU) Russia Aug Trade Balance: $5.0Be v $ 4.0B prior, Exports: $27.3Be v $24.7B prior, Imports: $21.8Be v $20.8B prior

09:00 (RU) Russia Gold and Forex Reserve w/e Oct 6th: No est v $424.0B prior

09:00 (DE) German Chancellor Merkel at conference

10:00 (MX) Mexico Central Bank (Banxico) Sept Minutes

10:15 (EU) ECB's Draghi, Fed's Brainard speak on Monetary Policy Panel

10:30 (US) Weekly EIA Natural Gas Inventories

10:30 (US) Fed's Powell (voter, neutral) speaks at IIF Conference in Washington

10:30 (BE) ECB's Praet (Belgium, chief economist) in Washington

11:00 (US) Weekly DOE Crude Oil Inventories

12:00 (US) USDA World Agricultural Supply and Demand Estimate (WASDE) Crop Report

13:00 (US) Treasury to sell $12B in 30-Year Bonds Reopening

13:30 (SE) Sweden Central Bank (Riksbank) Dep Gov Skingsley in Washington

15:00 (AR) Argentina Sept National CPI M/M: No est v 1.4% prior

15:15 (CA) Bank of Canada (BOC) Wilkins in Washinton

15:30 (SE) Sweden Central Bank (Riksbank) Gov Ingves in Washington

15:45 (UK) BOE's Haldane in Washington

16:00 (FR) ECB's Coeure (France) in Washington

16:10 (DE) ECB's Lautenschlaeger on panel in Washington

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