European Indices Remain Muted Ahead Of Today’s FOMC Rate Decision

Sep 26 18, 10:53 GMT

Notes/Observations

European Indices trade mixed in quiet trade ahead of an expected rate hike by the FOMC
Focus on Italy as the populist coalition finalizing an agreement for next years fiscal targets which is expected to be announced tomorrow
Asian Indices traded higher, Nikkei tops 24K first time in 8 months

Asia:

According to a poll China unlikely to follow FED rate hike as economy slows and the trade war gets worse
Companies in China begin to hike prices as trade war sinks in, an increasing number of companies operating in China, including such multinationals as BMW and Daimler, are raising prices
New Zealand Sep ANZ rises to 4 Month high

Europe:

UK Prime Min May reportedly to lay out in speech today planing to cut UK corporate tax rates to lowest in the G20
Italy Deputy PM Di Maio: 5-Star Party will not support 2019 budget targets without its demands for ‘citizens income’ provision and pension reform; Wants budget deficit in the region of 2.4-2.5%
Italy Econ Min Tria has said to target a budget deficit of 1.9-2.0% while reports the Italian Government targeting deficit of 1.8-1.9%. Confirms new deficit targets to be presented tomorrow

Americas

FOMC expected to raises rates 25bps to 2.0% – 2.25%; the eighth rate-hike of the cycle

Economic Data:

Fixed Income Issuance:

Norway sells NOK3B vs. NOKB indicated in Apr 2028 Bond
Italy Debt Agency (Tesoro) sells €6.0B vs. €6.0B indicated in 12-month Bills; Avg Yield: 0.206% v 0.438% prior; Bid-to-cover: 1.64x v 1.87x prior
Sweden sells SEK5.0B vs. SEKB indicated in 6-month Bills

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 +0.1% at 3,423, FTSE flat at 7,506, DAX -0.1% at 12,362, CAC-40 +0.2% at 5,489, IBEX-35 flat at 9,492, FTSE MIB -0.1% at 21,644, SMI flat at 9,020, S&P 500 Futures +0.2%]
Market Focal Points/Key Themes: European indices open mixed with a slight positive bias, later moving negative with only French stocks slightly positive; consumer discretionary sector barely maintains positive; materials and telecom among worst performing sectors; Israel closed for holiday; automakers underperforming after BMW issues profit warning; financials in focus over press reports Unicredit considering merger with ABN Amro, BBVA, or Lloyds; attention turning to FOMC decision later in the day; earnings expected in the upcoming US session include Carmax and Bed Bath and Beyond

Equities

Consumer discretionary: Adidas ADS.DE -0.4% (sympathy with Nike results), Boohoo.com BOO.UK +8.9% (results), BMW BMW.DE -1.3% (reportedly German dealers refusing new contracts), Mitie MTO.UK -6.1% (profit warning), Scout24 G24.DE +0.4% (new CEO)
Financials: AA plc AA.UK -8.5% (results)
Industrials: Bouygues EN.FR +3.0% (analyst action), Danieli & Co DAN.IT +1.8% (results), Neopost NEO.FR -1.6% (results)
Technology: Rib Software RSTA.DE +1.1% (signs new investment contract)
Utilities: Engie ENGI.FR +0.5% (denies reactor sale)

Speakers

Italy Econ Min Tria: May accept 2019 deficit of 1.9-2.0% – press
Italian Gov targeting 2019 deficit of 1.8-1.9% – press -Italian Dep PM Di Maio: Wants 2019 budget deficit at 2.4-2.5%
(FR) France Fin Min La Maire: Euro Zone must discuss common budget this year; determined to secure fair taxation of digital giants
(TR) Turkey President Erdogan: court not politicians will decide fate of detained American pastor on Oct 12; he not authorized to let him go
(IT) Italy Fin Min Tria: Economic growth requires stability; Growth friendly policies can be gradually implemented
(EU) ECB’s Praet (Belgium, chief economist): Interest rate curve “fully coherent” with ECB’s objective; rising growth risks yet to impact hard data
(IR) Iran Oil Min Zanganeh: US can’t cut Iran oil sales without pushing up the price – Iranian press

Currencies

EUR/USD, GBP/USD, USD/YEN trade little changed ahead of today expected rate hike by the FOMC.

Fixed Income

Bund Futures trades at 157.99 up 7 ticks on optimism for Italy. Resistance moves to 161.82 then 163. A downside break of 158.25 sees 157.69 initially.
Gilt futures trades at 120.71 up 29 ticks following the move in Treasuries. Continued support at 120.50, with a continued move higher targeting 123.93 then 124.00.
Wednesday’s liquidity report showed Tuesday’s excess liquidity rose from €1.861T to €1.850T. Use of the marginal lending facility stayed fell from €563M to €8M.
Corporate issuance saw moderate IG issuance pace encourage tight spreads

Looking Ahead

05:30 (ZA) South Africa Q2 Non-Farm Payrolls Q/Q:-0.3%e v +0.6% prior; Y/Y: 0.6%e v 0.8% prior
06:00 (UK) Sept CBI Retailing Reported Sales: 19e v 29 prior
07:00 (US) MBA Mortgage Applications w/e Sept 21st: No est v % prior
07:00 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to raise 2-week Repurchase Rate by 25bps to 1.50%
08:05 (UK) Baltic Dry Bulk Index
09:00 (MX) Mexico Aug Unemployment Rate: 3.5%e v 3.5% prior
09:30 (BR) Brazil Aug Total Outstanding Loans (BRL) No est v 3.13T prior; M/M: No est v -0.2% prior
10:00 (US) Aug New Home Sales: 630Ke v 627K prior
10:30 (US) Weekly DOE Crude Oil Inventories
14:00 (US) FOMC Rate Decision: Expected to raise target range by 25bps to 2.00-2.25%
15:00 (AR) Argentina July Economic Activity Index (Monthly GDP) M/M: No est v -1.3% prior; Y/Y: +3.9%e v -6.7% prior
15:00 (AR) Argentina Aug Trade Balance: -$0.1Be v -$0.8B prior