Notes/Observations
UK Sept CPI hits its highest annual pace since Apr 2012; keeps expectations that BOE could raise interest rates in November
Overnight
Asia:
RBA Oct Minutes: Any rate changes would be dependent on domestic economy; Appreciation in A$ expected to contribute to subdued pricing pressures
Japan Government Official: No discussion of FX at Economic Dialogue meetings between US and Japan officials. US express strong interest on bilateral trade deal with Japan and narrowing of US trade deficit. Japan told the US it should not focus just on trade deficit, Japan investment contributing to US job creation.
Moody’s: Japan’s credit strength remains robust (currently at A1 with a stable outlook)
Europe:
PM May and EU’s Juncker joint statement following dinner meeting: Had broad and constructive exchanges in meeting on Brexit
Spain Economic Ministry 2018 budget plan for EU cut its 2018 GDP growth forecast from 2.6% to 2.3% citing political turmoil in Catalonia and a delay to approving next year’s budget
Americas:
President Trump to reportedly formally interview Fed Chair Yellen later this week about potentially staying on in her position
Economic Data
(EU) Sept EU27 New Car Registrations: -2.0% v +5.6% prior
(AT) Austria Sept CPI M/M: +1.0 v -0.1% prior; Y/Y: 2.4% v 2.1% prior
(IT) Italy Aug Total Trade Balance: €2.8B v €6.6B prior; Trade Balance EU: €0.2B v €2.0B prior
(UK) Sept CPI M/M: 0.3% v 0.3%e; Y/Y: 3.0% (highest since Apr 2012) v 3.0%e; CPI Core Y/Y: 2.7% v 2.7%e; CPIH Y/Y: 2.8% v 2.8%e
(UK) Sept RPI M/M: 0.1% v 0.3%e; Y/Y: 3.9% v 4.0%e, RPI-X (ex-mortgage interest payment) Y/Y: 4.1% v 4.2%e
(UK) Sept PPI Input M/M: 0.4% v 1.2%e; Y/Y: 8.4% v 8.2%e
(UK) Sept PPI Output M/M: 0.2% v 0.2%e; Y/Y:3.3% v 3.3%e
(UK) Sept PPI Output Core M/M: 0.0% v 0.1%e; Y/Y: 2.5% v 2.6%e
(UK) Aug House Price Index Y/Y: 5.0% v 5.4%e
(EU) Euro Zone Sept Final CPI Y/Y: 1.5% v 1.5%e; CPI Core Y/Y: 1.1% v 1.1%e
(DE) Germany Oct ZEW Current Situation Survey: 87.0 v 88.5e; Expectation Survey: 17.6 v 20.0e
(EU) Euro Zone Oct ZEW Expectations Survey: 26.7 v 31.7 prior
Fixed Income Issuance:
(IN) India sold INR110B vs. INR110B indicated in 3-month, 6-month and 12-month Bills
(ES) Spain Debt Agency (Tesoro) sold total €3.79B vs. €3.0-4.0B indicated range in 3-month and 9-month Bills
(ID) Indonesia sold total IDR22.5T in 3-month and 12-month Bills; 5-year, 10-year, 20-year and 30-year Bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.1% at 391.1, FTSE -0.2% at 7515, DAX -0.1% at 12996, CAC-40 -0.2% at 5354, IBEX-35 -0.4% at 10144, FTSE MIB -0.5% at 22317, SMI -0.2% at 9256, S&P 500 Futures flat]
Market Focal Points/Key Themes:
European Equities trade slightly lower across the board coming off earlier highs as Indices retreat from recent highs. US Indices closed at another all time high although volume continues to be light amid lack of volatility.
On the corporate front, French CAC components Danone, Casino and Remy Cointreau reported results which came ahead of consensus, while in the UK Internet fashion retailer ASOS trades higher after inline results and up beat 2018 outlook. Publisher Pearson trades higher after raising outlook whilst Merlin Entertainment trades sharply lower after guiding FY17 EBITDA below forecasts.
Looking ahead notable earners include Johnson and Johnson, Morgan Stanley and Goldman Sachs.
Equities
Consumer discretionary [Asos [ASC.UK] +1.6% (Earnings), Pearson [PSON.UK] +5.2% (Raises outlook), Merlin Ent [MERL.UK] -18% (Trading update, guidance light)]
Consumer Staples [Danone [BN.FR] +0.4% (Earnings), Casino [CO.FR] +1.1% (Earnings)]
Materials: [ Rio Tinto [RIO.UK] +0.5% (Q3 production)]
Industrials: [ Airbus [AIR.FR] +2.6% (C-Series partnership)]
Healthcare: [Sartorius Stedim [DIM.FR] -10% (Earnings, cuts outlook), Sartorius [SRT.DE] -6% (Earnings, cuts outlook)]
Real Estate: [Bellway [BWY.UK] +2.0% (Earnings)]
Speakers
ECB’s Constancio (Portugal): Needed to take macro-prudential tools much more seriously to avoid financial crisis. No general asset price over-valuation in Euro Area
ECB’s Costa (Portugal): banks are now more capitalized than in 2007; financial sector not immune to risks
BOE Member Ramsden noted that saw signs that Brexit uncertainty could weigh on business sentiment. No signs of 2nd round effects of inflation on wages. Not in the MPC majority that sees a potential rate hike in coming months
Spain Budget Min Montoro: Catalonia crisis could have impact and could trigger an economic reverse so great that country would suffer a situation like the euro crisis at the end of 2011
Spain regional Catalan govt said to believe that dialogue cannot go forward following the recent jailings (**Note: On Oct 16th Spanish High Court: ordered detention of 2 Catalan separatist leaders under investigation for sedition)
Austria President Van Der Bellen: Have ask People’s Party (OVP) Kurz to form a gov’t (as expected)
South Africa Central Bank (SARB)’s MMinele: CPI expectations were uncomfortably close to top of range; could not allow complacency to creep in
Turkey PM Yildirim reiterated govt stance that interest rates are too high given the economic conditions
India PM Advisor: RBI needed to cut rates by 75-100bps
Currencies
USD was firmer against most of the majors in the session with dealers citing a report that Fed chair candidate John Taylor (viewed as the most hawkish possibilities) made a favorable impression on Trump. EUR/USD was off by approx. 0.25% at 1.1765 just ahead of the NY morning. USD/JPY steady at 112.17
GBP/USD stayed below the 1.33 handle as UK Oct CPI came in-line with expectations. The 3.0% YoY reading was thehighest annual pace since Apr 2012 and kept expectations that BOE could raise interest rates in November
Fixed Income
Bund futures trade at 162.53 up 9 ticks as European stocks slide. Continued downside targets 161.53 while upside resistance stands initially at 162.75, followed by 163.51.
Gilt futures trade at 124.11 down 18 after UK September inflation matched estimates and hit a five-year high. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.
Tuesday’s liquidity report showed Monday’s excess liquidity fell to €1.812T from €1.820T and use of the marginal lending facility climbed to €160M from €118M.
Corporate issuance saw $2B come to market via 2 issuers, headlined by BPCE SA $1.25B 10-year senior non-preferred note. October issuance is at $49.8B
Looking Ahead:
(EU) EU Chief Negotiator Barnier to brief EU ministers
05.30 (UK) Weekly John Lewis LFL sales data
05:30 (BE) ECB’s Praet (Beligium, chief economist) in Brussels
05:30 (EU) ECB allotment in 7-day Main Financing Tender (MRO) tender
05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
05:30 (DE) Germany to sell €4.0B in 0% Sept 2019 Schatz
06:00 (IL) Israel Q2 Final GDP Y/Y: No est v 2.4% prelim
06:15 (UK) BOE Gov Carney in Parliament
06:30 (EU) ESM to sell €1.5B in 6-month bills; Avg Yield: % v -0.6245% prior; Bid-to-cover: x v 4.7x prior (Sept 19th 2017)
06:45 (US) Daily Libor Fixing
07:00 (RU) Russia announces weekly OFZ bond auction
07:00 (BR) Brazil Aug IBGE Services Sector Volume Y/Y: -2.0%e v -3.2% prior
07:45 (US) Weekly Goldman Economist Chain Store Sales
08:00 (PL) Poland Sept Employment M/M: 0.1%e v 0.1% prior; Y/Y: 4.6%e v 4.6% prior
08:00 (PL) Poland Sept Average Gross wages M/M: -0.3%e v -0.2% prior; Y/Y: 6.2%e v 6.6% prior
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Sept Import Price Index M/M: 0.6%e v 0.6% prior; Y/Y: 2.6%e v 2.1% prior
08:30 (US) Sept Export Price Index M/M: 0.6%e v 0.6% prior; Y/Y: No est v 2.3% prior
08:55 (US) Weekly Redbook Sales
09:00 (EU) Weekly ECB Forex Reserves
09:15 (US) Sept Industrial Production M/M: +0.2%e v -0.9% prior; Capacity Utilization: 76.2%e v 76.1% prior; Manufacturing Production: +0.1%e v -0.3% prior
09:30 (UK) BOE’s Brazier in Lisbon
10:00 (US) Oct NAHB Housing Market Index: 64e v 64 prior
10:00 (BR) Brazil to sell 2022, 2026 2035 and 2055 I/L Bonds
11:00 (CO) Colombia Aug Industrial Production Y/Y: No est v 6.2% prior
11:00 (CO) Colombia Aug Retail Sales Y/Y: No est v 3.1% prior
11:00 (CA) Canada to sell 0.75% Mar 2021 note
11:30 (US) Treasury to Sell 4-Week Bills
13:00 (US) Fed’s Harker (Voter, hawk)
15:30 (CA) Bank of Canada (BOC) Wilkins
16:00 (US) Aug Total Net TIC Flows: No est v -$7.3B prior; Net Long-Term Tic Flows: No est v $1.3B prior
16:30 (US) Weekly API Oil Inventories
(CO) Colombia Sept Consumer Confidence: -8.1e v -15.9 prior
