- Euro under pressure on weaker Core CPI
- Italian Indices tank on higher budget deficit agreement
- Weak Yen helps push Nikkei to 27 year high
Asia:
- Nikkei reaches highs not seen since early 1990s
- Bank of Japan cuts super-long bond purchases in Oct (as expected)
- Japan Aug Prelim Industrial Production misses consensus, Retail Sales beats, Jobless rate falls to 2.4% lowest level since early 1990s.
- China Commerce Min spokesperson: extreme pressure from US will not cripple the Chinese economy
Europe:
- Italy is said to have agreed on a 2019 budget plan coming at the high end of expectations at 2.4%; Tax cuts and pension reforms have been agreed upon, and the agreement will not raise the sales tax.
- Italy requests Fin Min Tria stay on as Finance minister
- Core Eurozone CPI falls below forecasts and adds pressure on the Euro
- UK final Q2 GDP reading revised slightly lower
Macro
- (IT) Italy: Markets unimpressed by the populists’ push for a higher deficit/GDP ratio. The appointment of Tria as Finance Minister during the formation of the Eurosceptic coalition government had helped to bring yields down from highs, but as yesterday’s struggle suggests, he may not be strong enough to keep the populists under control.
- (FR) France: August Consumer Spending jumped 0.8% m/m in August, significantly boosted by a 4.1% m/m increase in spending on durable goods. Car purchases jumped 10.1% y/y in August ahead of new EU emissions tests on September 1. This suggests that the strong August number may be a one-off and not be sustainable.
- (DE) Germany: German jobless numbers dropped 23K to a record low of 5.1%. The jobless rate is rapidly approaching the neutral rate, highlighting that structural unemployment remains elevated, with the ongoing shortage in skills underpinning unemployment.
- (UK) UK: According to the Research Centre for Social Research’s poll-of-polls, 52% of the UK’s population would now favor remain versus 48% favoring leave. The tracker used the average share of the vote in six of the most recent polls.
- (EU) Eurozone: September HICP inflation ticked up to 2.1% y/y. As with the German number yesterday, the core rate actually ticked lower to 0.9%. The heatwave across Europe impacted harvests but is not directly translating into higher food price inflation. The ECB thus can point to the dip in the core rate to continue to justify its current accommodative policy stance, especially as food consumption is effectively price inelastic.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx50 -0.7% at 3,426, FTSE -0.1% at 7,540, DAX -0.7% at 12,346, CAC-40 -0.3% at 5,522, IBEX-35 -1.0% at9,432 , FTSE MIB -2.7% at 20,922, SMI flat at 9,109, S&P 500 Futures flat]
- Market Focal Points/Key Themes: European indices open down across the board with Italy leading the way, maintaining negative as the session progressed; high deficit agreement from Italy puts markets on edge; financials impacted following Italy budget agreement; auto sector also underperforming; consumer discretionary among better performers; attention on month- and semester-end macroeconomic data; Czechia closed for holiday; upcoming earnings expected in the US session include BlackBerry and Vail Resorts; next week China will be closed for Golden Week holiday
Equities
- Consumer discretionary: Beter Bed BBED.NL +0.8% (asset sale), easyjet EZJ.UK -0.4% (guidance), Publicis PUB.FR -0.3% (Accenture reportedly not to bid), WPP WPP.UK -1.7% (Reportedly US prosecutorial probe in ad market)
- Energy: Spie SPIE.FR +2.9% (analyst action)
- Financials: Moscow Exchange MOEX.RU -4.9% (will not pay interim dividend), Royal & Sun Alliance Insurance Group RSA.UK -9.0% (trading update), Serco Group SRP.UK +15.1% (trading update)
- Healthcare: Essity ESSITY-A.SE -3.5% (restructuring)
- Industrials: Astaldi AST.IT -14.7% (applies for creditor protection), BASF BAS.DE -2.2% (outlook), Dialight Plc DIA.UK -6.0% (outlook), SAAB SAABB.SE +8.0% (contract)
- Materials: K+S AG SDF.DE +1.8% (impact from stoppage)
Speakers
- (EU) ECB’s Lane (Ireland): Italy budget plan will be analyzed; Budget plan will feed into Dec
- (IN) India FIn Min: Had detailed discussion on States Revenue position at today GST council meeting
- (IT) Italy Dep PM Di Maio: We must have dialogue with Europe and not argue
- (IT) Italy’s Salvini: FInMin Tria not in danger, he’s a member of the government
Currencies
- EUR/USD trades lower following the Italian Budget agreement and lower Core Eurozone CPI. Currently pair trades 1.1605, a 2 week low.
- GBP/USD ticked lower on a revised Y/Y GDP print, coming of a high of 1.3090
Fixed Income
- Bund Futures trades at 158.67 up 20 ticks after Rome agrees on a higher deficit target. Resistance moves to 161.82 then 163. A downside break of 158.25 sees 157.69 initially.
- Gilt futures trades at 121.10 up 23 ticks following the move in Treasuries. Continued support at 120.50, with a continued move higher targeting 123.93 then 124.00.
- Friday’s liquidity report showed Thursday’s excess liquidity fell from €1.855T to €1.841T. Use of the marginal lending facility stayed fell from €48M to €29M.
- Corporate issuance saw 2 issuers raises $3.3B in the primary market; Lipper fund flows saw inflows of $1.8B, while High Yield had $1.6B of outlflow
Economic Data:
- (UK) Q2 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.2% V 1.3%E (UK) Q2 Current Account: -ÂŁ20.3B v -ÂŁ19.4Be
- (ES) SPAIN SEPT PRELIMINARY CPI M/M: 0.2% V 0.2%E; Y/Y: 2.2% V 2.2%E
- *(FR) FRANCE SEPT PRELIMINARY CPI M/M: -0.2% V -0.2%E; Y/Y: 2.2% V 2.3%E
- (FR) FRANCE AUG CONSUMER SPENDING M/M: 0.8% V 0.3%E; Y/Y: 1.3% V 0.7%E
- (DE) GERMANY SEPT UNEMPLOYMENT CHANGE: -23K V -9KE; UNEMPLOYMENT CLAIMS RATE: 5.1% V 5.2%E
- (FR) France Aug PPI M/M: 0.2% v 0.6% prior; Y/Y: 3.7% v 4.0% prior (ES) Spain Q2 Final GDP Q/Q: 0.6% v 0.6%e; Y/Y: 2.5% v 2.7%e
- (CH) Swiss Sept KOF Leading Indicator: 102.2 v 100.0e
- (SE) Sweden Aug Retail Sales M/M: 0.8% v 1.0%e; Y/Y: 2.0% v 0.6%e
- (NO) Norway Sept Unemployment Rate: 2.3% v 2.2%e
Looking Ahead
- 06:00 (IE) Ireland Aug Retail Sales Volume M/M: No est v +6.5% prior; Y/Y: No est v 5.5% prior
- 06:00 (PT) Portugal Aug Industrial Production M/M: No est v 0.7% prior; Y/Y: No est v -1.7% prior
- 06:00 (PT) Portugal Aug Retail Sales M/M: No est v -1.0% prior; Y/Y: No est v 2.2% prior
- 07:30 (IN) India Weekly Forex Reserves
- 08:00 (BR) Brazil Aug National Unemployment Rate: 12.2%e v 12.3% prior
- 08:00 (ZA) South Africa Aug Budget Balance (ZAR): -9.2Be v -96.0B prior
- 08:00 (ZA) South Africa Aug Trade Balance (ZAR): -1.8Be v -4.7B prior
- 08:00 (CL) Chile Aug Industrial Production Y/Y: 0.0%e v -1.6% prior
- 08:00 (CL) Chile Aug Unemployment Rate: 7.2%e v 7.3% prior
- 08:15 (UK) Baltic Dry Bulk Index – 08:30 (US) Aug PCE Core M/M: 0.1%e v 0.2% prior; Y/Y: 2.0%e v 2.0% prior
- 08:30 (US) Aug PCE Deflator M/M: 0.1%e v 0.1% prior; Y/Y: 2.2%e v 2.3% prior
- 08:30 (US) Aug Personal Income: 0.4%e v 0.3% prior; Personal Spending: 0.3%e v 0.4% prior
- 08:30 (CA) Canada Aug Industrial Product Price M/M: -0.4%e v -0.2% prior; Raw Materials Price Index M/M: No est v % prior; Y/Y: No est v 0.7% prior
- 08:30 (CA) Canada July GDP M/M: 0.1%e v 0.0% prior; Y/Y: 2.2%e v 2.4% prior
- 09:00 (RU) Russia Q2 Final Current Account: No est v $22.3B prior
- 09:30 (BR) Brazil Aug Nominal Budget Balance (BRL): -58.2Be v -29.2B prior; Primary Budget Balance: -16.0Be v -3.4B prior
- 09:45 (US) Sept Chicago Purchasing Manager: 62.0e v 63.6 prior
- 10:00 (MX) Mexico Aug Net Outstanding Loans (MXN): No est v 4.27T prior
- 10:00 (US) Sept Final University of Michigan Confidence: 100.5e v 100.8 prior
- 11:00 (CO) Colombia Aug National Unemployment Rate: No est v 9.7% prior
- 13:00 (US) Weekly Baker Hughes Rig Count data