Notes/Observations
Oct Manufacturing PMI and Confidence data improving for Europe (France, Germany and Euro Zone PMI beat expectations)
ECB chief Draghi likely to provide "strong forward guidance" on Thursday to avoid any taper tantrum
Overnight
Asia:
Japan Oct Preliminary PMI Manufacturing: 52.5 v 52.9 prior
New Zealand Labour Leader Ardern (Incoming PM) signed coalition agreement with NZ First. To review and reform Reserve Bank Act; review to include employment and price stability. Has agreement on banning purchase of existing homes from foreign buyers.
Europe:
ECB’s Nouy (SSM chief): Reiterates view that there’s not much time left for UK banks to secure EU market access after the Brexit
Americas:
President Trump reiterated that he was ‘very, very close’ to making Fed chair decision
Economic Data
(FI) Finland Sept PPI M/M: 0.5% v 0.1% prior; Y/Y: 4.0% v 3.8% prior
(FI) Finland Sept Unemployment Rate: 8.0% v 7.5% prior
(FR) France Oct Business Confidence: 109 v 109e; Manufacturing Confidence: 111 v 110e
(FR) France Oct Business Survey Overall Demand: 18 v 15 prior
(FR) France Oct Preliminary Manufacturing PMI: 56.7 v 56.0e (13th month of expansion and highest since Apr 2011), Services PMI: 57.4 v 56.9e, Composite PMI: 57.5 v 57.0e
(CZ) Czech Oct Business Confidence: 16.9 v 16.5 prior; Consumer Confidence: 6.3 v 6.8 prior
(ZA) South Africa Aug Leading Indicator: 97.2 v 97.3 prior
(DE) Germany Oct Preliminary Manufacturing PMI: 60.5 v 60.0e (35th month of expansion); Services PMI: 55.2 v 55.5e, Composite PMI: 56.9 v 57.5e
(EU) Euro Zone Oct Preliminary Manufacturing PMI: 58.6 v 57.8e (50th month of expansion), Services PMI: 54.9 v 55.6e, Composite PMI: 55.9 v 56.5e
(PL) Poland Sept Unemployment Rate: 6.8% v 6.9%e
Fixed Income Issuance:
(ID) Indonesia sold total IDR7.0T in 6-month Bills & 2-year,4-year,7-year and 15-Year Project-based Sukuk (PBS)
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 % at XXX, FTSE % at XXX, DAX % at XXX, CAC-40 % at XXX, IBEX-35 % at XXX, FTSE MIB % at XXX, SMI % at Indices [Stoxx600 -0.1% at 390.4, FTSE flat at 7521, DAX +0.2% at 13027, CAC-40 +0.2% at 5395, IBEX-35 +0.2% at 10184, FTSE MIB +0.4% at 22456, SMI -0.3% at 9222, S&P 500 Futures flat]
Market Focal Points/Key Themes: European Indices trade little changed in a lackluster session, despite higher then expected Manufacturing PMI readings out of Germany and France. On the corporate front Dax heavyweight BASF trades slightly lower after reporting results which beat estimates, while Novartis drags on the Swiss SMI despite beating on the top and bottom line. Covestro outperforms after a strong beat, with other notable earnings related risers include AMS, Luxottica, Essilor and SAAB. Elsewhere GFT trades sharply lower after cutting their outlook with Randstad also a heavy faller after missing estimates. Looking ahead notable earners include DOW components McDonalds, Caterpillar, 3M, United Technologies as well General Motors, Fiat and Lockheed Martin.
Equities
Consumer discretionary [Whitbread [WTB.UK] -4.3% (Earnings), Luxotica [LUX.IT] +3.3% (Earnings), Puma [PUM.DE] -2.3% (Earnings)]
Industrials: [Basf [BAS.DE] -0.9% (Earnings), Saab [SAABB.SE] +4.5% (Earnings)]
Financials: [ Commerzbank [CBK.DE] +2.5% (Hire advisers on potential M&A), Randstad [RAND.NL] -5.4% (Earnings)]
Technology: [Basler [BSL.DE] -3% (raises outlook), AMS [AMS.CH] +17% (Earnings)]
Healthcare: [Novartis [NOVN.CH] -1.3% (Earnings), Covestro [1COV.DE] +5.7% (Earnings), Morphosys [MOR>DE] +7.5% (Receives FDA breakthrough therapy designation for its antibody MOR208 in relapsed/refractory DLBCL)]
Speakers
ECB Lending Survey: Banks saw broad-based pickup in loan demand during Q3. Credit standards for mortgages, consumer loans eased in quarter. Banks expected net demand for housing loans to increase in Q4
EU Chief Negotiator Barnier: There is a possible way to negotiate Brexit; work will start on draft treaty on the UK’s exit from EU
EU’s Juncker: Want a Brexit agreement; not negotiating in a hostile mood
EU’s Tusk: EU27 was united in Brexit negotiations; up to London how talks ended
Spain PM Rajoy said to be planning on setting up a Catalonia ministry
Spain Justice Min: Catalonia crisis cannot be solved by just holding regional elections
Austria People Party (OVP) leader Kurz (likely PM-designate): Targeting a new govt before Christmas
Russia Fin Min Siluanov said to seek to tighten currency regulations during crises (**Note: In the past Russian govt officials stated that it was not considering capital controls)
India Finance Ministry said to be prepared to announce steps to counter the slowdown in economic growth
Bank of Japan (BoJ) said to consider again cutting its inflation outlook for FY17/18 (current fiscal year) from 1.1% to 1.0%. (**Next BOJ decision is on Oct 31st)
Japan Finance Ministry (MOF) raised its assessment of regional economies and noted the country was experiencing an economic recovery (prior view was moderate recovery)
Russia Energy Min Novak: To discuss OPEC cooperation and possible oil extension agreement with Saudi Oil Min Falih on Thursday, Nov 2nd. Reiterated view that was too early to take decision on production cut extension
Qatar Oil Min Al Sada (OPEC President):: OPEC to review current production agreement at its Nov meeting; would support any extension of cuts
Saudi Arabia Energy Min Al-Falih: All decisions on table for production cuts
OPEC reportedly will also work on an exit strategy alongside cuts extension at its Nov 30th meeting
Currencies
FX markets subdued in quiet trading ahead of the ECB rate decision on Thursday. Various European PMI and confidence data failed to inspire volatility. Dealers noted that ECB would likely be keen to make sure its potential QE tapering announcement Thursday doesn’t cause another market tantrum (**Reminder: In 2015 after the ECB announced QE Bund yields rose from just over 0% in mid-April to almost 1% in late June. EUR/USD fractionally higher just above 1.1765 ahead of the NY morning.
Other major pairs little changed with USD/JPY at 113.62 and GBP/USD at 1.3201
Fixed Income
Bund futures trade at 161.22 down 44 ticks as markets remain choppy. Support lies at 161.00, followed by 160.38. Resistance stands initially at 162.75, followed by 163.51.
Gilt futures trade at 124.32 down 13 ticks following the drop in bund futures. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.
Tuesday’s liquidity report showed Monday’s excess liquidity rose to €1.794T from €1.791T and use of the marginal lending facility climbed to €417M from €315M.
Corporate issuance saw $14.2B come to market via 8 issuers, headlined by Citigroup’s $4.0B in 5 and 11-year debt.
Looking Ahead
05.30 (UK) Weekly John Lewis LFL sales data
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 (UK) DMO to sell 0.625% 2042 I/L Gilts
06:00 (TR) Turkey to sell 2019, 2024 and 2027 bonds
06:30 (UK) Chancellor of Exchequer Hammond (Fin Min) in Parliament
06:45 (US) Daily Libor Fixing
07:45 (US) Weekly Goldman Economist Chain Store Sales
08:00 (CL) Chile Sept PPI M/M: No est v 2.2% prior
08:00 (HU) Hungary Central Bank (NBH) Interest Rate Decision: Expected to leave the Base Rate unchanged at 0.90%
08:05 (UK) Baltic Dry Bulk Index
08:55 (US) Weekly Redbook Sales
09:00 (BE) Belgium Oct Business Confidence: -3.0e v -3.5 prior
09:00 (EU) Weekly ECB Forex Reserves
09:00 (MX) Mexico Aug IGAE Economic Activity (Monthly GDP) Y/Y: 1.7%e v 1.0% prior
09:00 (RU) Russia announces weekly OFZ bond auction
09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement
09:45 (US) Oct Preliminary Markit Manufacturing PMI: 53.5e v 53.1 prior, Services PMI: 55.2e v 55.3 prior, Composite PMI: No est v 54.8 prior
10:00 (US) Oct Richmond Fed Manufacturing Index: 17e v 19 prior
10:00 (FI) ECB’s Liikanen (Finalnd)
11:30 (US) Treasury to sell 4-Week Bills
12:00 (FR) France Sept Net Change in Jobseekers: No est v 22.3K prior; Total Jobseekers; no est v 3.540M prior
13:00 (US) Treasury to sell 2-Year Notes
15:00 (AR) Argentina Aug Economic Activity Index (Monthly GDP) M/M: No est v 0.7% prior; Y/Y: 4.0%e v 4.9% prior
15:00 (AR) Argentina Sept Trade Balance: -$0.9Be v -$1.1B prior
16:30 (US) Weekly API Oil Inventories
