Notes/Observations
Awaiting Barnier and Davis comments following their 6th monthly round of Brexit negotiations.Earlier hints no no major progress being made
PM May was prepared to increase its offer for the financial settlement of Brexit divorce from the current £20B offer
Evolution of inflation remains key for the judgement of global risk appetite
Overnight
Asia:
Bank of Japan (BOJ) Summary of Opinions at Oct. 30-31th Meeting: should maintain easing policies until the inflation mandated is achieved. It did caution that additional easing could cause more side-effects than positive effects.
RBA Quarterly statement lowered its inflation forecasts through 2019 and now saw sub 2% core inflation until mid-2019: GDP growth forecasts little changed. Held rates steady to provide appropriate economic support and saw 3.25% GDP growth by end 2019.
China to remove foreign ownership limit in domestic banks; raises the foreign stake ceiling in brokerages to 51% v 49% prior (in-line with speculation)
Europe:
EU official: there has not been a breakthrough in talks on Brexit bill; negotiators still in talks over EU citizens’ rights
UK PM May said to reiterate her commitment to securing 2-year Brexit implementation period when she meets with European business organization
SNB’s Jordan: reiterated negative interest rates are still necessary and had room to maneuver on rates if necessary
Spain govt said to be pushing for the release of 8 former Catalan govt officials and expects them to be freed in time to campaign in December’s elections
Americas:
House Ways & Means Committee approves its version of the tax reform bill (Vote was 24-16 along party lines). House Majority Leader McCarthy noted that the full House to vote on tax bill on House floor next week
White House: President Trump will not have formal meeting with Russia President Putin in Vietnam on sidelines of APEC Summit due to scheduling conflicts
Fed’s Williams (moderate, non-voter): Rate rise in December makes sense. Penciling in 3 further hikes in 2018 and expected US interest rate to return to a normal level of about 2.5%
Economic Data
(DK) Denmark Oct CPI M/M: 0.1% v 0.1%e; Y/Y: 1.5% v 1.5%e
(DK) Denmark Oct CPI EU Harmonized M/M: 0.1% v 0.1% prior; Y/Y: 1.4% v 1.4%e
(NO) Norway Oct CPI M/M: 0.1% v 0.3%e; Y/Y: 1.2% v 1.4%e
(NO) Norway Oct CPI Underlying M/M: 0.3% v 0.2%e; Y/Y: 1.1% v 1.0%e
(RO) Romania Oct CPI M/M: 1.3% v 0.5% prior, Y/Y: 2.6% v 2.2%e
(FR) France Sept Industrial Production M/M: 0.6% v 0.5%e; Y/Y: 3.2% v 3.0%e
(FR) France Sept Manufacturing Production M/M: 0.4% v 0.8%e; Y/Y: 3.1% v 3.4%e
(FR) France Q3 Preliminary Private Sector Payrolls Q/Q: 0.2% v 0.3%e; Wages Q/Q: 0.3% v 0.3%e
(HK) Hong Kong Q3 GDP Q/Q: 0.5% v 0.6%e; Y/Y: 3.6% v 3.5%e
(UK) Sept Industrial Production M/M: 0.7% v 0.3%e; Y/Y: 2.5% v 1.4%e
(UK) Sept Manufacturing Production M/M: 0.7% v 0.3%e; Y/Y: 2.7% v 2.4%e
(UK) Sept Visible Trade Balance: -£11.3B v -£12.8Be, Overall Trade Balance: -£2.8B v -£4.3Be, Trade Balance Non EU: -£3.0B v -£5.0Be
Fixed Income Issuance:
(IN) India sold total INR150B vs. INR150B indicated in 2022, 2031, 2033 and 2046 bonds
(IT) Italy Debt Agency (Tesoro) sold €5.5B vs. €5.5B indicated in 12-month Bills; Avg yield: -0.395% v -0.344% prior; Bid-to-cover: 2.46x v 1.96x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.3% at 388.8, FTSE -0.2% at 7468, DAX -0.3% at 13138, CAC-40 -0.4% at 5387, IBEX-35 -0.6% at 10083, FTSE MIB -0.3% at 22571, SMI -0.5% at 9133, S&P 500 Futures -0.5%]
Market Focal Points/Key Themes: European Indices trade weaker across the board gradually edging lower during the session, as continued profit taking and worries over the US Tax overhaul weigh. After the close yesterday Allianz reported in line results and affirmed there outlook despite the recent natural disasters, while in the materials space ArcelorMittal reported results which beat on the top and bottom line. Leonardo trading in Italy is one of the leading decliners after cutting their outlook. In the luxury space Richement reported solid results with double digit gains across China, Hong Kong and the UK, however a cautious outlook weighs on the stock. Looking ahead notable earners include retailer JC Penny.
Equities
Consumer discretionary [Richemont [CFR.CH] -4.3% (Earnings), Capita [CPI.UK] -1.8% (Capita Financial Managers to pay up to £66M as part of settlement related to Connaught), Stroeer Media [SAX.DE] +2.0% (Earnings)] – Materials: [ArcelorMittal [MT.NL] +2.8% (Earnings)]
Industrials: [ Tecnicas Reunidas [TRE.ES] -14% (Earnings) , Leonardo-Finmeccanica [LDO.IT] -19% (Earnings, cuts outlook), Vallourec [VK.FR] -3% (Earnings)]
Financials: [Allianz [ALV.DE] +0.8% (Earnings)] – Healthcare:[Getinge [GETIB.SE] -3.2% (Strategy update)]
Real Estate: [ GallifordTry [GFRD.UK] +1.4% (trading update)]
Speakers
PM May said to be prepared to increase its offer for the financial settlement of Brexit divorce from £20B
ECB’s Nowotny (Austria): ECB should end QE after Sept if economy allows; ECB guidance does not allow a rate hike before 2019. Agrees with Bundesbank Gov Weidmann on necessity for QE end-date. He saw no ECB rate hike before 2019
ECB’s Stournaras (Greece): Greek banks have shown progress in dealing with non-performing loans (NPLs). Unemployment, public debt and NPLs were challenges for the Greek economy
Czech Central Bank Nov Minutes: More appropriate to raise rates gradually from a financial stability point of view. Sharp one-off increase in interest rates could lead the CZK currency (Krone) to sharp appreciation (as ECB extended its QE bond buying program)
Poland EU Affairs Min Szymansk: Brexit deal will be reached at the very last minute. Could be march but it would be better in December
China President Xi: Studying the option of opening free-trade ports
President Trump: Expressed strong desire to conduct trade on a fair basis; will make bilateral trade deals with any APEC nation. Spoke openly and directly with China President Xi regarding trade deficits and would no longer tolerate chronic trade abuses. Those countries that played by the rules will be the closest economic partners
Venezuela and Russia to sign debt agreement of possible installments over 10 years on Nov 15th
Currencies
USD consolidated its soft tone from the following sessions as the US tax reform had hit hurdles. The greenback was poised for its biggest weekly drop in 4 weeks on tax concerns. US policy makers delayed the corporate tax cut by one year, set a higher "pass-through" rate for small business, and completely repealing the State and Local Tax deduction.
GBP was steady ahead of the Barnier and Davisd press conference following the 6th monthly round of Brexit negotiations. Reports circulated that PM May was prepared to increase its offer for the financial settlement of Brexit divorce from the current £20B offer
Fixed Income
Bund futures trade at 162.44 down 32 ticks, as Wednesday’s mid-session reversal sees price poised to close at the lows of the week. Support lies at 162.00, followed by 161.50. Resistance stands initially at 163.51, followed by 164.25.
Gilt futures trade at 124.78 down 45 ticks following the drop by Treasuries. Continued upside eyeing 125.75 then 126.47. Downside targets include 124.24 then 123.74.
Friday’s liquidity report showed Thursday’s excess liquidity was little changed at €1.873T and use of the marginal lending facility climbed to €532M from €515M
Corporate issuance saw for the week ending Nov 8th Lipper fund flows reported IG fund net inflows of $4.7B and High yield funds reported net outflows of $622M.
Looking Ahead
(MX) Mexico Oct Nominal Wages: No est v 5.1% prior
05:30 (CL) Chile Central Bank Economist Survey
05:30 (ZA) South Africa to sell combined ZAR800M in I/L bonds
06:00 (BR) Brazil Oct IBGE Inflation IPCA M/M: 0.5%e v 0.2% prior; Y/Y: 2.8%e v 2.5% prior
06:00 (UK) DMO to sell combined £3.5B in 1-month, 3-month and 6-month Bills (£0.5B, £2.0B and £2.0B)
06:30 (IN) India Weekly Forex Reserves
06:30 (UK) EU/UK joint press conference following current round of monthly Brexit negotiations
06:30 (IS) Iceland to sell Bonds – 06:45 (US) Daily Libor Fixing
07:00 (IN) India Sept Industrial Production Y/Y: 3.6%e v 4.3% prior
07:30 (LX) ECB’s Mersch (Luxembourg)
08:00 (RU) Russia Sept Trade Balance: $8.8Be v $6.6B prior; Exports: $30.0Be v $29.0B prior; Imports: $20.5Be v $22.4B prior
08:00 (UK) Oct NIESR GDP Estimate: No est v 0.4% prior
08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming issuance
08:00 (IN) India announces upcoming Bill auction (held on Wed)
08:05 (UK) Baltic Dry Bulk Index
09:00 (MX) Mexico Sept Industrial Production M/M: -0.6%e v +0.3% prior; Y/Y: -0.8%e v -0.5% prior, Manufacturing Production Y/Y: 2.8%e v 3.3% prior
10:00 (US) Nov Preliminary University of Michigan Confidence: 100.9e v 100.7 prior
11:00 (EU) Potential sovereign ratings after EU close (Egypt and Ukraine Sovereign Debt to be rated by S&P; Greece Sovereign Debt to be rated by DBRS and Hungary Sovereign Debt to be rated by Fitch
(UR) Ukraine Sovereign Debt to be rated by S&P
13:00 (US) Weekly Baker Hughes Rig Count data
14:00 (CO) Colombia Central Bank Oct Minutes
