Notes/Observations
US Non-farm payroll expected to rebound from the hurricane-affected Sept report
Negative economic impact of Brexit is the main challenge for BOE
Overnight
Asia:
China Oct Caixin Serv PMI: 51.2 v 50.6 prior
Australia Sept Retail Sales data mixed M/M: 0.0% v 0.4%e; Q3 Ex Inflation Q/Q: 0.1% v 0.0%e
Europe:
ECB’s Weidmann (Germany) reiterated that ECB board members were in agreement that accommodative monetary policy remains necessary. He noted that it was far too early to discuss successor for Draghi (**Note: term ends in Nov 2019)
Spain state prosecutor asks judge to issue arrest warrant for former Catalan President Puigdemont (**Note: Puigdemont: Arrests are an attack on democracy; demands end to political repression)
Americas:
President Trump appointed Jerome Powell to the Fed Chair position (as expected)
GOP leadership tax plan summary document: To set tax brackets at zero, 12%, 25%, 35% and 39.6%. Would keep mortgage interest tax deduction for existing loans and newly purchased homes up to $500K [reduced from $1M] and allow state and local property taxes deduction up to $10K
President Trump: House Republican tax bill important step towards tax relief; will work tirelessly to deliver historic tax cuts and reforms
White House National Security Adviser McMaster: Trump will reiterate North Korea is threat to entire world on Asia trip (**Note: Trump embarks on a 10-dayt Far East trip on Fri)
Venezuela President Maduro stated that would restructure all foreign debt after Fri, Nov 3rd
Economic Data
(IN) India Oct PMI Services: 51.7 v 50.7 prior (2nd month of expansion), PMI Composite PMI: 51.3 v 51.1 prior
(IE) Ireland Oct Services PMI: 57.5 v 58.7 prior (62nd month of expansion but lowest since Nov 2016), Composite PMI: No est v 57.6 prior
(RU) Russia Oct PMI Services: 53.9 v 55.0e (21st month of expansion), PMI Composite: 53.2 v 54.8 prior
(TR) Turkey Oct CPI M/M: 2.1% v 1.7%e; Y/Y: 11.9% v 11.5%e; CPI Core Index Y/Y: 11.8% v 11.2%e
(ZA) South Africa Oct PMI (whole economy): 49.6 v 48.5 prior
(SE) Sweden Oct PMI Services: 61.4 v 63.8 prior
(ES) Spain Oct Net Unemployment M/M: +56.8K v +27.9K prior
(NG) Nigeria Oct PMI: 55.8 v 54.9 prior
(NO) Norway Oct Unemployment Rate: 2.4% v 2.5%e
(UK) Oct Services PMI: 55.6 v 53.3e (15th month of expansion), Composite PMI: 55.8 v 53.8e
Fixed Income Issuance:
(IN) India sold total INR150B vs. INR150B indicated in 2024, 2027, 2034 and 2051 bonds
(ZA) South Africa sold ZAR vs. ZAR800M indicated in I/L 2029, 2033 and 2046 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.2% at 395.6, FTSE +0.3% at 7576, DAX +0.4% at 13493, CAC-40 flat at 5511, IBEX-35 -0.9% at 10359, FTSE MIB +0.1% at 23064, SMI +0.1% at 9291, S&P 500 Futures +0.1%]
Market Focal Points/Key Themes:
European Indices trade mostly higher across the board with the exception of the Spanish Ibex, as Indices trade in a sideways fashion ahead of October’s US Non Farm Payrolls.
A number of components from the French CAC reported, with Air France down sharply after initially touching a multi year high following results, while SocGen trades lower after missing estimates. Altice trades lower after trimming its outlook and Lonmin trades over 15% lower after its production update and the delay of their FY results.
Elsewhere renewable energy stock are under pressure after proposed US tax changes that could cut tax credit by over a third.
Looking ahead notable earners include Duke Energy and CBRE.
Equities
Consumer discretionary [Air France [AF.FR] -8.2% (Earnings), L’Oreal [OR.FR] -0.6% (Earnings)]
Materials: [Lonmin [LMI.UK] -20% (Trading update, to delay FY results)]
Financials: [ SocGen [GLE.FR] -3.3% (Earnings), Axa [CS.FR] -1.6% (Earnings)]
Telecom: [ Altice [ATC.NL] -10.0% (Earnings)]
Energy: [Vestas Wind [VWS.DK] -9.5% (Proposed US tax changes)]
Speakers
ECB’s Nowotny (Austria): ECB took right decision at last week policy meeting. Reiterated economy was improving substantially but not there yet. Inflation moving in the right direction and believed it could be higher than current expectations in 2018. Reiterated too early to discuss an end date for QE and that the ECB would not run into any scarcity issues on bond buying
BOE Dep Gov Broadbent: Spare capacity has been diminishing (in-line with recent QIR). Nov rate hike was a moderate one and might need a couple more rate hikes (**Note: BOE currently forecasting 2 hikes by 2020). Brexit was clearly having some impact on economy; affecting investment and spending
ECB’s Angeloni (SSM board member): To rigorously review bank’s plans to reduce bad loans
Greece PM Tsipras: Greek bailout review will close soon
Norway Central Bank (Norges) Dep Gov Nicolaisen: Low rate globally limits monetary policy maneuvers
Russia govt spokesperson: President Putin could meet Trump on sideline of APEC Summit meeting in Vietnam
Currencies
FX market was holding steady after Trump chose Jerome Powell as the new Federal Reserve chair (as speculated). US Non-farm payroll expected to rebound from the hurricane-affected Sept report and keep the door open for a 3rd rate hike in Dec.
EUR/USD at 1.1645 area ahead of the NY morning.
GBP/USD continued its soft tone following Thursday’s dovish rate hike by the BOE. Pait hit a 1-month low at 1.3040 in the session. Dealers noted that BOE dropped wording that interest rates may need to rise more than markets expected and that BOE Gov Carney had now linked the future path of rates to the outcome of the Brexit talks. Focus was on the PMI Services data which beat expectations and helped the GBP to move off its worst levels. The data gave some justification to the recent BOE rate hike
Fixed Income
Bund futures trade at 162.81 up 17 ticks, and back towards the October high. Support lies at 162.00, followed by 161.50. Resistance stands initially at 163.51, followed by 164.25.
Gilt futures trade at 125.30 up 14 ticks following yesterday’s BOE rate hike that investors interpreted as dovish. Continued upside eyeing 125.75 then 126.47. Downside targets include 124.90 then 124.24.
Friday’s liquidity report showed Thursday’s excess liquidity rose to €1.849T from €1.838T and use of the marginal lending facility rose to €188M from €237M
Corporate issuance saw 5 issuers raise $4.0B in the primary market. For the week ending Nov 1st Lipper fund flows reported IG fund net inflows of $3.6B and High yield funds reported net inflows of $1.2B, most since August.
Looking Ahead
06:00 (EU) Daily Euribor Fixing
06:00 (FR) France Debt Agency (AFT) announces upcoming auctions
06:30 (AT) ECB’s Nowotny (Austria)
06:30 (NO) Norway Central Bank (Norges) Gov Olsen in Bergen
06:30 (ZA) South Africa to sell ZAR800M in I/L 2029, 2033 and 2046 bonds
07:00 (IE) Ireland Oct Live Register Monthly Change: No est v -0.3K prior
07:00 (UK) DMO to sell combined £3.5B in 1-month, 3-month and 6-month Bills (£0.5B, £1.0B and £2.0B respectively)
07:30 (IN) India Weekly Forex Reserves
07:45 (US) Daily Libor Fixing
08:00 (CL) Chile Sept Retail Sales Y/Y: 4.3%e v 6.0% prior
08:30 (US) Oct Change in Nonfarm Payrolls: +313Ke v -33K prior, Change in Private Payrolls: +302Ke v -40K prior, Change in Manufacturing Payrolls: +15 v -1K prior
08:30 (US) Oct Unemployment Rate: 4.2%e v 4.2% prior, Underemployment Rate: No est v 8.3% prior
08:30 (US) Oct Average Hourly Earnings M/M: 0.2%e v 0.5% prior; Y/Y: 2.7%e v 2.9% prior; Average Weekly Hours: 34.4e v 34.4 prior
08:30 (US) Sept Trade Balance: -$43.3Be v -$42.4B prior
08:30 (CA) Canada Oct Net Change in Employment: +15.0Ke v +10.0K prior; Unemployment Rate: 6.2%e v 6.2% prior
08:30 (CA) Canada Sept Intl Merchandise Trade (CAD): -3.0Be v -3.4B prior
09:05 (UK) Baltic Dry Bulk Index
10:00 (US) Sept Final Durable Goods Orders: 2.0%e v 2.2% prelim; Durables Ex Transportation: No est v 0.7% prelim
10:00 (US) Sept Factory Orders: 1.2%e v 1.2% prior; Factory Orders (ex-transportation): No est v 0.4% prior
10:00 (US) Oct ISM Non-Manufacturing Composite: 58.5e v 59.8 prior
10:00 (MX) Mexico Sept Leading Indicators M/M: No est v 0.17% prior
10:45 (US) Oct Final Markit Services PMI: 55.9e v 55.9 prelim, Composite PMI: No est v 55.7 prelim
11:00 (EU) Potential European sovereign ratings after European close
(BE) Belgium Sovereign Debt to be rated by Moody’s
(NO) Norway Sovereign Debt to be rated by DBRS
(TR) Turkey Sovereign Debt to be rated by S&P
12:15 (US) Fed’s Kashkari (dove, voter)
13:00 (US) Weekly Baker Hughes Rig Count data
15:00 (CO) Colombia Oct Total PPI M/M: No est v 0.4% prior
16:15 (FR) ECB’s Coeure (France)
