Notes/Observations
German Business Survey reading of 116.7 hits its highest level since German reunification
UK Q3 Advance GDP data registers a slight beat (QoQ: 0.4% v 0.3%e); support case for BOE rate hike
Overnight
Asia:
Australia Q3 Consumer Prices (CPI) misses expectations (Q/Q: 0.6% v 0.8%e; Y/Y: 1.8% v 2.0%e; remained below the lower end of the RBA’s 2-3% inflation target
China Xi Jinping renamed as Head of Communist Party and Chairman of Central Military Commission (as expected); The overall Politburo Standing Committee has 7 members
Europe:
Bank ECB’s Weidmann (Germany) might agree to an extension of time and reduction of ECB bond purchases at monetary policy meeting on Thursday. Not demanding a fixed end date for the QE program in order to get his vote. One potential scenario would be for ECB to cut the bond purchases in half to 30B/month and extending the earliest end date by 9 months
Americas:
John Taylor reportedly won informal straw poll among GOP senators for Fed Chair appointment at lunch with President Trump
Energy:
Weekly API Oil Inventories: Crude: +0.5M v -7.1M prior
Economic Data
(CH) Swiss Sept UBS Consumption Indicator: 1.56 v 1.50 prior
(ES) Spain Sept PPI M/M: +0.5% v -0.1% prior; Y/Y: 3.4% v 3.3% prior
(DE) Germany Oct IFO Business Climate: 116.7 v 115.1e (record high); Current Assessment: 124.8 v 123.5e; Expectations Survey: 109.1 v 107.3e
(CH) Swiss Oct Credit Suisse Expectations Survey: 32.0 v 28.0 prior
(UK) Q3 Advance GDP Q/Q: 0.4% v 0.3%e; Y/Y: 1.5% v 1.5%e
(UK) Sept BBA Loans for House Purchases: 41.6K v 41.8Ke
Fixed Income Issuance:
(IN) India sold total INR110B vs. INR110B indicated in 3-month, 6-month and 12-month Bills
(SE) Sweden sold SEK10B vs. SEK10B indicated in 3-month Bills; Avg Yield: -0.7460% v -0.6964% prior; Bid-to-cover: 2.43x v 2.47x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -flat at 389.4, FTSE -0.4% at 7498, DAX flat at 13010, CAC-40 +0.2% at 5405, IBEX-35 +0.4% at 10241, FTSE MIB flat at 22629, SMI -0.1% at 9183, S&P 500 Futures -0.2%]
Market Focal Points/Key Themes:
European Indices trade mixed this morning, with focus on the ECB rate decision tomorrow. Strong German IFO reading did little to move the markets, while a slighly stronger UK GDP figure has helped lift Cable and consequently put pressure on the FTSE100.
On the corporate front earnings continued to be the predominent theme, with notable risers including Kering, CapGemini and Air Liquide, while Valeo, Kesko, PSA Group and Lufthansa are some of the notable fallers. Refresco trades higher in the Netherlands after receiving an improved offer; Bawag IPO marked Austria’s largest IPO valued at over €4B and will make around 4% of the ATX Index.
Looking ahead Visa, Coca Cola and Boeing are some the notable names expected to report.
Equities
Consumer discretionary [Kesko [KESKOB.FI] -1.8% (Earnings), Lufthansa [LHA.DE] -0.7% (Earnings), Kering [KER.FR] +7.4% (Earnings), Heineken [HEIA.NL] -2.5% (Earnings), BATS [BAT.UK] +2.6% (Outlook ahead of capital markets day)]
Consumer Staples [Refresco [RFRG.NL] +2.4% (Improved takeover offer)]
Materials: [Antofagasta [ANTO.UK] -3.7% (Production, initial FY18 outlook) ,
Industrials: [PSA Group [UG.FR] -1.2% (Earnings), Air Liquide [AI.FR] +2.8% (Earnings), Dassault Systems [DSY.FR] -0.9% (Earnings), Valeo [FR.FR] -3.1% (Earnings), Alfa Laval [ALFA.SE] -2.% (Earnings)]
Financials: [Lloyds [LLOY.UK] -1.9% (Earnings)]
Technology: [CapGemini [CAP.FR] +1.6% (Earnings)]
Speakers
Spain PM Rajoy: Catalonia elections is the only way out
German IFO Economists noted that the domestic economy was full steam ahead. Economy unaffected by political development as coalition talks following national election not causing any uncertainty
Brexit Min Davis testified in Parliament that was aiming for an agreement on everything by March 2019. Aiming for tariff-free comprehensive trade agreement; most complex Brexit issues fell outside the FTA remit. The transition status would be close to status quo. Expected transition outline to be agreed upon in Q1Sought free movement with registration during transition period and expected passporting to be included in transition. Sought to keep 3rd party deals during transition
Italy Senate to hold final vote on new electoral bill on Thursday, Oct 26th
Czech Central Bank Vice Gov Hampl: prefers gradual rate hikes by 25bps
Indonesia Fin Min Indrawati saw 2018 GDP growing improving aided by better purchasing power and would maintain prudent fiscal policy in 2018
Japan Cabinet Office (Govt) Monthly Economic Report for Oct: Maintains overall economic assessment with domestic economy experiencing a moderate recovery
Currencies
EUR/USD was little changed in the session with focus on ECB policy meeting on Thursday. Pair showed little reaction despite German Oct IFO Business Climate survey hitting a fresh German reunification high. ECB widely expected to outline plans to scale back bond purchases under its quantitative easing program with tapering expectations shifted towards a "lower for longer" approach. Reports circulated that even German Bundesbank Gov Weidmann could possibly agree to an extension of time and reduction of ECB bond purchases and not demand any fixed end date
The GBP currency (Cable) was slightly higher after UK Q3 Advance GDP data registered a slight beat (QoQ: 0.4% v 0.3%e) and keeping expectations that BOE could hike rates in the near future. Dealers noted chances of a BOE hike next month remain above 80%
USD/JPY was back at 3-month highs above the 114 handle.The USD was firmer after John Taylor reportedly won informal straw poll among GOP senators for Fed Chair appointment at lunch with President Trump on Tuesday.
Softer CPI data out of Australia weighed upon the AUD/USD pair as inflation remained below the lower end of the RBA’s 2-3% inflation target. AUD/USD off 0.7% at 0.7710 area
Fixed Income
Bund futures trade at 160.97 down 23 ticks, with the focus on Thursday’s ECB rate decision and the announcement to changes on the QE program. Support lies at 161.00, followed by 160.38. Resistance stands initially at 162.75, followed by 163.51.
Gilt futures trade at 123.67 down 45 ticks following beat in UK GDP data. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.
Wednesday’s liquidity report showed Tuesday’s excess liquidity fell to €1.791T from €1.794T and use of the marginal lending facility stayed at €417M
Corporate issuance saw $11.5B come to market via 4 issuers, headlined by Goldman Sach’s $7B debt offering
Looking Ahead
(CO) Colombia Sept Retail Confidence: No est v 17.5 prior; Industrial Confidence: No est v -1.9
(TR) Iraq PM Abadi in Turkey
05:30 (EU) ECB allotment in 3-month LTRO (€3Be)
05:30 (DE) Germany to sell €3.0B in 0.50% Aug 2027 Bunds
05:30 (PL) Poland to sell Bonds
06:00 (BR) Brazil Oct FGV Consumer Confidence: No est v 82.3 prior
06:30 (CL) Chile Central Bank’s Traders Survey
06:45 (US) Daily Libor Fixing
07:00 (RU) Russia to sell combined RUB30B in OFZ bonds
07:00 (US) MBA Mortgage Applications w/e Oct 20th: No est v 3.6% prior
07:00 (UK) PM May weekly question time in House of Commons
07:30 (TR) Turkey Oct Capacity Utilization: 79.0%e v 79.0% prior
07:30 (TR) Turkey Oct Real Sector Confidence (Seasonally Adj): No est v 110.8 prior; Real Sector Confidence (unadj): 109.0e v 111.6 prior
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Sept Preliminary Durable Goods Orders: 1.0%e v 2.0% prior; Durables Ex Transportation: 0.5%e v 0.5% prior
09:00 (US) Aug FHFA House Price Index M/M: 0.4%e v 0.2% prior
09:00 (MX) Mexico Aug Retail Sales M/M: 0.2%e v 0.3% prior; Y/Y: 0.5%e v 0.4% prior
10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to leave Interest Rates unchanged at 1.00%
10:00 (CA) Bank of Canada (BOC) October Monetary Policy Report
10:00 (US) Sept New Home Sales: 554Ke v 560K prior
10:30 (US) Weekly DOE Crude Oil Inventories
11:00 (IT) Italy Debt Agency (Tesoro) announces specifics bonds in upcoming BTP auction on Monday, Oct 30th
11:15 (CA) Bank of Canada (BOC) Gov Poloz and Wilkins hold post rate decision press conference
11:30 (US) Treasury to sell 2-Year Floating Rate Notes
13:00 (US) Treasury to sell 5-Year Notes
16:00 (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to cuts Selic Target Rate by 75bps to 7.50%
