Notes/Observations
PMI Services data mostly comes in below expectations (Miss: Italy, France, Germany; Beat: Euro Zone)
Euro Zone Sentix Confidence Index at fresh decade high
Overnight
Asia:
Bank of Japan (BOJ) Gov Kuroda reiterated BOJ to continue with powerful easing; Price moves weak compared with improvement in the economy. Corporate price setting stance was key to BOJ outlook. Expected companies’ stance on prices and wages to become more bullish
Bank of Japan (BOJ) Sept 20-21st Policy Meeting Minutes (2 meetings ago) noted that momentum towards price goal was being maintained. Discussed market participants concerns about YCC; most members shared view that BoJ should stick with current policy
During President Trump’s visit to the country, Japan to tell US it will strengthen sanctions against North Korea
Europe:
ECB’s Coeure (France) reiterated General Council view that exchange rate is not an ECB policy targe
Eurogroup Chief Dijsselbloem (outgoing): Will select the next head at the Dec meeting
ECB’s Smets (Belgium): To take some time until accelerating growth leads to wage pressure and inflation (in-line with general Council view)
BOE Gov Carney reiterated view that recent BoE rate hike is a modest adjustment. Possible that in the event of a bad Brexit deal, the BOE would not be able to cut interest rates in future because of that inflationary pressures
Italy President Mattarella could dissolve Parliament before end of 2017 in order to prepare for possible elections next March
Former Catalan President Puigdemont said to be released from custody with conditions. Puigdemont and four of his ministers were released by a judge in Belgium and the individuals are said to have been ordered to remain in Belgium at their given addresses. extradition is expected in 15 days
Americas:
NY Fed President Dudley (FOMC voter) to retire before term expires in Jan 2019; could leave as soon as the Spring of 2018
Treasury Sec Mnuchin reiterated goal to get tax bill to President Trump in 2017
Energy:
Saudi Arabia’s Crown Prince ordered the arrest of individuals including members of the royal family, ministers and investors. Eleven princes and four ministers were said to have been among those who were detained, along with businessman Alwaleed bin Talal.
Economic Data
(DE) Germany Sept Factory Orders M/M: +1.0% v -1.1%e; Y/Y: 9.5% v 7.1%e
(BR) Brazil Oct FIPE CPI (Sao Paulo) M/M: 0.3% v 0.3%e
(ES) Spain Oct Services PMI: 54.6 v 55.6e (48th month of expansion), Composite PMI: 55.1 v 54.6e
(CH) Swiss Oct CPI M/M: 0.1% v 0.1%e; Y/Y: 0.7% v 0.7%e
(CH) Swiss Oct CPI EU Harmonized M/M: 0.1% v 0.2% prior; Y/Y: 0.8% v 0.8% prior
(SE) Sweden Sept Industrial Production M/M: 2.2% v 2.0%e; Y/Y:4.5 % v 4.0%e
(IT) Italy Oct Services PMI: 52.1 v 52.9e (17th month of expansion but lowest since Oct 2016), Composite PMI:52.9 v 54.3e
(FR) France Oct Final Services PMI: 57.3 v 57.4e (confirmed 16th month of expansion and highest since March), Composite PMI: 57,4 v 57.5e
(DE) Germany Oct Final Services PMI: 54.7 v 55.2e (confirmed 52nd month of expansion and highest since Feb), Composite PMI: 56.6 v 56.9e
(EU) Euro Zone Oct Final Services PMI: 55.0 v 54.9e (confirmed 52nd month of expansion), Composite PMI: 56.0 v 55.9e
(EU) Euro Zone Sept PPI M/M: 0.6% v 0.4%e; Y/Y: 2.9% v 2.7%e
Fixed Income Issuance:
(NO) Norway sold NOK3.0B vs. NOK3.0B in 3-month Bills; Avg Yield: 0.43% v 0.38% prior; Bid-to-cover: 2.43x v 3.13x prior
Equities
Indices [Stoxx600 flat at 395.9 FTSE -0.1% at 7549, DAX -0.2 at 13453, CAC-40 -0.2 at 5507, IBEX-35 -0.3% at 10324, FTSE MIB -0.2% at 22963, SMI +0.1% at 9291, S&P 500 Futures +0.1%]
Market Focal Points/Key Themes:
European Indices trade slightly lower across the board consolidating recent gains, as the Spanish Ibex once again under performs.
Deutsche Telekom trades over 3% lower after majority owned T-Mobile ended merger talks with Sprint, while on the earnings front Vopak in the Netherlands reported weak results, while Post NL shares trade higher after Q3 results and affirmed outlook. Elsewhere Aldermore trades higher after the board approved the takeover approach from FirstRand, while in the healthcare space UCB trades higher after the FDA approves label extension for brivaracetam.
Looking ahead notable earners include Cardinal Health and Sysco.
Consumer discretionary [WIZZ.UK] +1.3% (Oct metric)]
Industrials: [Post NL [PNL.NL] +4.6% (Earnings)]
Financials: [Aldermore [ALD.DE] +2.4% (Board approves takeover by FirstRand for 313p/shr), Carillion [CLLN.UK] +2.2% (Contract win)]
Telecom: [Deutsche Telekom [DTE.DE] -3.1% (T-Mobile and Sprint end merger talks)]
Healthcare: [UCB [UCB.BE] +1.8% (FDA approves label extension for UCB’s brivaracetam for the treatment of partial onset seizures in pediatric epileptic patients)]
Real Estate: [Vopak [VPK.NL] -5.1% (Earnings)]
Speakers
ECB’s Praet (Belgium, chief economist) reiterated that substantial amount of accommodation is needed (in-line with General Council). Extension of QE program was justified by the continuing need for substantial monetary policy support
PM May: Pleased there has been progress on post-Brexit citizens right
Portugal Econ Min Cabral: Growth at 3.0% was sustainable
Japan Dep Chief Cabinet Sec Nishimura: Trump and Abe did not discuss any bilateral Free tared Agreement (FTA)
Currencies
USD was holding onto recent gains against the major pairs as markets believed that despite the softer-0than-expoecte jobs data on Friday there was little change in market expectations for the Fed to raise interest rates in December for a third time this year
USD/JPY pair hit 8-month highs just under 114.75
Fixed Income
Bund futures trade at 163.11 up 32 ticks, as the ECB expected to continue to front-load purchases, with focus on the latest monthly PSPP release which will include redemption data. Support lies at 162.00, followed by 161.50. Resistance stands initially at 163.51, followed by 164.25.
Gilt futures trade at 125.25 up 18 ticks and still near the October high. Continued upside eyeing 125.75 then 126.47. Downside targets include 124.90 then 124.24.
Monday’s liquidity report showed Friday’s excess liquidity rose to €1.860T from €1.849T and use of the marginal lending facility fell to €168M from €188M
Corporate issuance saw $26.8B sold last week in the primary market
Looking Ahead
05:25 (BR) Brazil Central Bank Weekly Economists Survey
05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 3-month bills
06:00 (IE) Ireland Sept Industrial Production M/M: No est v 1.4% prior; Y/Y: No est v 1.5% prior
06:00 (IN) India announces details of upcoming bond sale (held on Fridays)
06:30 (CL) Chile Sept Economic Activity M/M: -0.1%e v +0.3% prior; Y/Y: 1.6%e v 2.4% prior
06:30 (TR) Turkey Oct Effective Exchange Rate(REER): No est v 90.3 prior
06:45 (US) Daily Libor Fixing
07:00 (BR) Brazil Oct PMI Services: No est v 50.7 prior; PMI Composite: No est v 51.1 prior
08:05 (UK) Baltic Dry Bulk Index
08:50 (FR) France Debt Agency (AFT) to sell combined €4.2-5.4B in 3-month, 6-month and 12-month Bills
09:00 (MX) Mexico Oct Consumer Confidence: 88.6e v 89.2 prior
09:30 (EU) ECB announces Covered-Bond Purchases
09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
10:00 (CA) Canada Oct Ivey Purchasing Managers Index (Seasonally Adj): No est v 59.6 prior
11:30 (US) Treasuries to sell 3-Month and 6-Month Bills
12:00 (US) Fed’s Dudley (dove, FOMC voter) speaks to The Economic Club of New York
16:00 (US) Weekly Crop Progress Report
