Notes/Observations
Overnight
Asia:
China Oct Manufacturing PMI (official govt) 51.6 v 52.0e; Non-Manufacturing PMI: 54.3 v 55.4 prior; Policy makers may be incrementally more relaxed about supporting growth after the Party Congress
Bank of Japan (BOJ) left its policy steady (as expected). Left Interest Rate on Excess Reserves (IOER) unchanged at -0.10% and maintained its policy framework of "QQE with Yield Control" around 0.00% and asset purchases at annual pace of ¥80T. Vote was 8 to 1 with Kataoka (new member) again dissenting
BOJ Outlook for Economic Activity and Prices raised FY17/18 GDP growth outlook from 1.8% to 1.9% and maintained FY18/19 GDP growth outlook at 1.4% and FY19/20 GDP growth outlook at 0.7%. Cut FY17/18 core CPI outlook from 1.1% to 0.8%; Cut FY18/19 core CPI outlook from 1.5% to 1.4% but maintained FY19/20 core CPI (excluding effect of consumption tax hike) at 1.8%
Japan Sept Jobless rate in-line at 2.8% and again matched its lowest rate since Jun 1994
Europe:
Chancellor of Exchequer Hammond (Fin Min) is under pressure to abandon fiscal targets, but pledges to respect fiscal rules
Fitch on Spain: Sovereign rating reflects persistent Catalonia tension. Escalation that significantly worsened the outlook for Spanish growth and public finances could prompt negative action on the sovereign rating (**Reminder: On July 21st Fitch affirmed Spain sovereign rating at BBB+; revises outlook to Positive from Stable)
UK Oct GFK Consumer Confidence: -10 v -10e
Americas:
White House Press Sec Sanders: White House wants to pass House tax bill by Thanksgiving (the same time frame given by Speaker Ryan). President Trump has no intention of firing Special Counsel Mueller; indictments announced today have nothing to do with the President or his –campaign
White House: President Trump to make announcement on Fed Chair decision on Thursday (Nov 2). Most recnt speculation that Trump was likely to name Jerome Powell as Fed Chair
Treasury Sec Mnuchin: Treasury was not seeing a lot of demand for ultra long bonds; to continue to monitor market for interest
Economic Data
(FR) France Q3 Advance GDP Q/Q: 0.5% v 0.5%e; Y/Y: 2.2% v 2.1%e
(TR) Turkey Sept Trade Balance: -$8.1B v -$8.1Be
(FR) France Oct Preliminary CPI M/M: 0.1% v 0.1%e; Y/Y: 1.1% v 1.0%e
(FR) France Oct Preliminary CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: 1.2% v 1.2%e
(FR) France Sept Consumer Spending M/M: 0.9% v 0.6%e; Y/Y: 2.8% v 1.9%e
(FR) France Sept PPI M/M: 0.5% v 0.4% prior; Y/Y: 2.1% v 1.9% prior
(TW) Taiwan Q3 Preliminary GDP Y/Y: 3.1% v 2.2%e
(AT) Austria Q3 Preliminary GDP Q/Q: 0.6% v 0.7% prior; Y/Y: 2.6% v 2.8% prior
(IT) Italy Sept Preliminary Unemployment Rate: 11.1% v 11.1%e (matched lowest level since 2012)
(ZA) South Africa Q3 Unemployment Rate: 27.7% v 27.7% prior (matched highest level since 2003)
Fixed Income Issuance:
(ID) Indonesia sold total IDR22.5T vs. IDR15T target in 3-month and 9-month Bills; 5-year, 10-year 15-year Bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.2% at 394.7, FTSE 0.4% at 7515, DAX +0.1% at 13229, CAC-40 +0.2% at 5502, IBEX-35 +0.4% at 10484 , FTSE MIB flat at 22758, SMI +0.4% at 9214, S&P 500 Futures +0.2%]
Market Focal Points/Key Themes:
European Indices trade higher across the board, continuing the upward momentum with good earnings from Oil Giant BP, Airbus and Ryanair underpinning the rise. Advertising giant WPP trades higher despite cutting their full year outlook, while Gerberit and BNP Paribas trade lower after missing estimates.
Looking notable earners include Pfizer, Under Armour, Lumber Liquidators and Kellogg.
Equities
Consumer discretionary [ Just Eat [JE.UK] +3.9% (Q3 update, raises outlook), RyanAir [RYA.UK] +4.9% (Earnings)]
Industrials: [Airbus [AIR.FR] +2.3% (Earnings), Geberit [GEBN.CH] -4.6% (Earnings), Weir Group [WEIR.UK] -6.2% (Trading update, cuts outlook), SCA [SCAB.SE] +4% (Earnings), – Oerlikon [OERL.CH] +2.8% (Earnings)]
Financials: [BNP Paribas [BNP.FR] -3.3% (Earnings)]
Energy: [BP [BP.UK] +3.5% (Earnings), Siemens Gamesa [SGRE.ES] +5.8% (Contract)]
Speakers
Russia Central Bank 1st Dep Gov Yudaeva reiterated that govt opposed to capital controls. Had the tools to maintain stability under current sanctions
Russia Central Bank Oct 12-month Inflation Expectation Survey: Households see CPI at 9.9% v 9.6% prior survey
BOJ Gov Kuroda post rate decision press conference reiterated that domestic economy was expanding moderately while downside risks to prices were larger. To continue with easing to hit 2% inflation target asap. BOJ was far from price target and no need to change Yield Control (YCC). He added that BOJ saw no need to adjust all easing package at once at some point in the future. Upward pressure on wages was growing steadily. Important for govt to maintain faith on fiscal reform; have not given up on primary budget surplus discipline
Bank of Korea (BOK) Gov Lee Ju-yeol: To check if the solid growth trend continues and also check price movements before any change in policy
Currencies
FX markets were subdued at month end with German markets closed for public holiday.
The GBP/USD little changed with focus on the upcoming BOE rate decision on Thursday. For the month of October the GBP was weaker as dealers noted that the 1st interest-rate increase in a decade would not enough to offset their concerns over Brexit negotiations
USD/CHF was just below parity but the recent weakening of the CHF franc currency helped the SNB report a record 9-month net profit of CHF 33.7B.
Fixed Income
Bund futures trade at 162.75 up 3 ticks poised to end October at month’s high. Support lies at 161.00, followed by 160.38. Resistance stands initially at 163.51, followed by 164.25.
Gilt futures trade at 124.51 up 18 ticks, with the focus remaining on the BOE meeting on Thursday. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.
Tuesday’s liquidity report showed Monday’s excess liquidity rose to €1.833T from €1.828T and use of the marginal lending facility rose to €431M from €328M
Corporate issuance shows primary sees busiest October on record.
Looking Ahead
(ES) Spain Sept YTD Budget Balance: No est v -€21.5B prior
(AT) Austria Debt Agency (AFFA) announcement on upcoming RAGB bond auction on Wed, Nov 7th
06:00 (EU) Euro Zone Oct Advance CPI Estimate Y/Y: 1.5%e v 1.5% prior; CPI Core Y/Y: 1.1%e v 1.1% prior
06:00 (EU) Euro Zone Q3 Advance GDP Q/Q: 0.5%e v 0.6% prior; Y/Y: 2.3%e v 2.3% prior
06:00 (EU) Euro Zone Sept Unemployment Rate: 9.0%e v 9.1% prior
06:00 (IT) Italy Oct Preliminary CPI (NIC incl. tobacco) M/M: +0.1%e v -0.3% prior; Y/Y: 1.3%e v 1.1% prior
06:00 (IT) Italy Oct Preliminary CPI EU Harmonized M/M: 0.2%e v 1.8% prior; Y/Y: 1.3%e v 1.3% prior
06:00 (GR) Greece Aug Retail Sales Value Y/Y: No est v 2.3% prior; Retail Sales Volume Y/Y: No est v 1.6% prior
06:00 (EU) Daily Euribor Fixing
06:00 (ZA) South Africa to sell combined ZAR2.65B in 2032, 2040 and 2048 bonds
06:15 (CH) Switzerland to sell 3-month Bills
06:30 (UK) Weekly John Lewis LFL sales data
06:30 (EU) ECB allotment in 7-day Main Financing Tender (MRO) tender
06:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
06:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 6-month bills
07:00 (IT) Italy Sept PPI M/M: No est v 0.5% prior; Y/Y: No est v 1.6% prior
07:00 (BR) Brazil Sept National Unemployment Rate: 12.4%e v 12.6% prior
07:00 (IL) Israel Sept Unemployment Rate: No est v 4.1% prior
07:45 (US) Weekly Goldman Economist Chain Store Sales
07:45 (US) Daily Libor Fixing
08:00 (CL) Chile Sept Unemployment Rate: 6.5%e v 6.6% prior
08:00 (ZA) South Africa Sept Trade Balance (ZAR): 10.0Be v 5.9B prior
08:00 (IN) India Sept Eight Infrastructure (Key) Industries: No est v 4.9% prior
08:30 (US) Q3 Employment Cost Index (ECI): 0.7%e v 0.5% prior
08:30 (CA) Canada Aug GDP M/M: 0.1%e v 0.0% prior; Y/Y: 3.5%e v 3.8% prior
08:30 (CA) Canada Sept Industrial Product Price M/M: 0.5%e v 0.3% prior; Raw Materials Price Index M/M: 0.4%e v 1.0% prior
08:55 (US) Weekly Redbook Retail Sales
09:00 (US) Aug S&P/Case-Shiller 20-City M/M: 0.40%e v 0.35% prior; Y/Y: 5.90%e v 5.81% prior; House Price Index (HPI): No est v 201.99 prior
09:00 (US) Aug S&P/Case-Shiller (overall) HPI Y/Y: No est v 5.94% prior, House Price Index (HPI): No est v 194.1 prior
09:00 (BR) Brazil Oct PMI Manufacturing: No est v 50.9 prior
09:00 (PL) Poland Oct Preliminary CPI M/M: 0.4%e v 0.4% prior; Y/Y: 2.1%e v 2.2% prior
09:00 (US) The FOMC begins its 2-day policy meeting (Decision on Wed)
09:05 (UK) Baltic Dry Bulk Index
09:45 (US) Oct Chicago Purchasing Manager: 60.0e v 65.2 prior
10:00 (US) Oct Consumer Confidence: 121.0e v 119.8 prior
10:00 (EU) Weekly ECB Forex Reserves:
10:00 (MX) Mexico Q3 Preliminary GDP Q/Q: 0.0%e v 0.6% prior; Y/Y: 1.6%e v 1.8% prior
10:00 (RU) Russia announces weekly OFZ bond auction
10:00 (BR) Brazil to sell I/L 2022, 2026, 2035 and 2055 Bonds
11:00 (CO) Colombia Sept National Unemployment Rate: No est v 9.1% prior; Urban Unemployment Rate: No est v 9.9% prior
11:00 (MX) Mexico Sept Net Outstanding Loans (MXN): No est 3.869T prior
11:30 (US) Treasury to sell4-Week Bills
15:00 (AR) Argentina Sept Industrial Production Y/Y: 4.8%e v 5.1% prior; Construction Activity Y/Y: No est v 13.0% prior
15:30 (CA) Bank of Canada (BOC) Gov Poloz in Parliament
16:30 Weekly API Petroleum Inventories
