HomeContributorsFundamental AnalysisEuropean Indices Remain Muted Ahead Of Today's FOMC Rate Decision

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


  • 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


  • 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


  • 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


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

Economic Data:

  • (AT) Austria Sept Manufacturing PMI: 55.0 v 56.4 prior
  • (CH) Swiss Sept Credit Suisse Survey Expectations: -30.8 v -14.3 prior
  • (NO) Norway Jul AKU Unemployment Rate: 4.0% v 3.8%e
  • (FI) Finland Aug Preliminary Retail Sales Volume Y/Y: 1.1v 1.5% prior

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



  • 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


  • 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)


  • 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


  • 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
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