Notes/Observations
- European Manufacturing PMIs mixed as risk-on sentiment drives markets higher -US futures sharply higher; US agrees trilateral trade deal with Mexico which will be called ‘USMCA’
Asia:
- China September Caixin and Official Government Manufacturing PMI fall short of consensus
- Japan Tankan Q3 Large Manufacturing Index marks 3 straight fall and registers lowest reading since June 2017; Outlook and All Industry Capex fall short of forecasts
Europe:
- September Manufacturing readings in Europe mixed: Spain, Italy, Euro Zone missed forecasts, UK beats, Germany and France confirmed prelim readings.
- IHS notes Germany export Sales fell for the first time in three years, gloomiest outlook for output since May 2015 -La Repubblica reports that the EU Commission set to reject Italy’s budget plans in November
Americas
- US and Canada agree new trilateral trade deal with Mexico which will be called ‘USMCA’
- Tesla shares up over 13% in premarket after Elon Musk reached agreement with the SEC; relinquished Chairman role but remains as CEO
Macro
- (CH) China: The NBS manufacturing PMI fell to 50.8 in September, from 51.3 in August. The new export order sub-index fell to 48.0 from 49.4, and the imports to 48.5. Both at their weakest levels since February 2016 reflecting the increasing impact of the U.S.-China trade war on China’s manufacturing export sector.
- (SK) South Korea: September exports fell -8.2% y/y with the government reporting it was mainly due to Chuseok holiday. As one of the world’s most export-oriented economies, South Korea is sensitive to global growth and the export reading is a notoriously accurate global cyclical indicator. Thus October’s reading will be eyed for evidence of whether this was a one-off
- (US) US: The NAFTA (USMCA) deal will not be voted on in the U.S. until 2019, which could see a Democratic controlled House and/or Senate and hence be a major roadblock for President Trump to gain approval. While formal approval is still due, the deal will sharply reduce uncertainty over trade that has been a headwind for some firms in Canada, Mexico and the U.S. The deal adds to the probability of a 25 bps rate hike from the Bank of Canada at their October 24 meeting.
- (UK) Eurozone: The final Eurozone manufacturing PMI for September was revised slightly lower to 53.2 from 53.3 in the flash reading and down from 54.6 in August . MarkIt highlighted that exports rose only slightly, which weighed on total orders growth as well as production, with global trade concerns pushing confidence down to a near three year low. The all-important German number was confirmed at a 25 month low.
- (IT) Italy: The Italian PMI reading hit a 25 month low of 50.0 stalling for the first time in two years. It adds to the risk that the manufacturing sector will slide into a recession as political concerns and the government’s expected confrontation with the EU add to trade uncertainties. MarkIt said the “survey paints the worst trade picture for over five years, with export growth having slumped sharply from a series record high in late 2017 to near-stagnation in September”.
- (DE) Germany: Aug retail sales unexpectedly fell-0.1% m/m against expectations for a rebound of 0.5% m/m from the -0.4% m/m drop in July. The annual rate still improved to 1.6% y/y from 0.9% y/y in the prior month, but the second consecutive drop over the month left the three month trend rate at 0.1%, the lowest since April. Worth caveating that German retail sales are often subject to heavy revisions and only cover a portion of overall consumption.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx50 +0.6% at 3,421, FTSE +0.1% at 7,520, DAX +0.7% at 12,335, CAC-40 +0.4% at 5,513, IBEX-35 +0.6% at 9,448, FTSE MIB 1.5% at 21,021, SMI +0.3% at 9,118, S&P 500 Futures +0.6%]
- Market Focal Points/Key Themes: European indices open mixed with a slight positive bias, later to move broadly positive as the session wore on (notable exception being Portugal); risk sentiment positive after new US a-nd Canada reach trade agreement; energy stocks supported by crude prices; financials among worst performing sectors; Israel and Cyprus closed for holiday; facebook disclosed accounts were hacked, supporting net security firms; airlines impacted following profit warning from Ryanair; upcoming events expected in the US session include earnings Cal-Maine Foods, as well as monthly US auto sales data
Equities
- Consumer discretionary: Casino Guichard-Perrachon CO.FR +0.8% (asset sale), Hugo Boss BOSS.DE +3.5% (analyst action), Just Group JUST.UK -8.8% (CFO to step down), Kaufman & Broad KOF.FR +5.3% (results, analyst action), Ryanair RYA.UK -8.4% (outlook)
- Financials: FBD Holdings FBD.IE +2.5% (note buyback)
- Healthcare: Realm Therapeutics RLM.UK +6.1% (takeover interest)
- Industrials: Linde AG LIN.DE +1.6% (merger approval in China), Trelleborg TRELB.SE -1.9% (analyst action)
- Materials: Avocet Mining AVM.UK -21.3% (results)
- Technology: Computacenter Plc CCC.UK +1.0% (acquisition)
- Telecom: Telecom Italia TIT.IT -1.9% (analyst action)
Speakers
- (UK) Fin Min Hammond: what we need to do is to protect our trading relations with EU; we don’t want no-deal Brexit with EU
- (IN) Govt says intervening on IL&FS due to bearing on economy; management needed to stop financial collapse of IL&FS – US financial press
- (IT) Italy’s EU Affairs Minister Savona: no discussion on Euro – Italian press
Currencies
- The dollar Index trades weaker on risk-on sentiment, USDTRY dips below 6 down over 1.4%.
- The Indian Rupee continues to drop with the USDINR pair rising once again approaching 73 as Oil continues to rise nearing a 4 year high.
Fixed Income
- Bund Futures trades at 158.60 down 30 ticks as as BTPs pare losses, Bund futures block supports spread tightening. A downside break of 158.25 sees 157.69 initially.
- Gilt futures trades at 120.78 down 26 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 €1.841T to €1.824T. Use of the marginal lending facility stayed rose from €29M to €130M.
- Corporate issuance saw high grade issuers raise $12.7B last week
Economic Data:
- (ES) SPAIN SEPT MANUFACTURING PMI: 51.4 V 52.6E (lowest since Aug 2016)
- (UK) SEPT MANUFACTURING PMI: 53.8 V 52.5E (26th month of expansion)
- (IT) ITALY SEPT MANUFACTURING PMI: 50.0 V 50.2E
- (FR) FRANCE SEPT FINAL MANUFACTURING PMI: 52.5 V 52.5E
- (DE) GERMANY SEPT FINAL MANUFACTURING PMI: 53.7 V 53.7E (confirms 45th month of expansion)
- (EU) EURO ZONE SEPT FINAL MANUFACTURING PMI: 53.2 V 53.3E (confirms 62nd month of expansion)
- (DE) GERMANY RETAIL SALES M/M: -0.1% V +0.5%E; Y/Y: 1.6% V 1.6%E
- (UK) AUG MORTGAGE APPROVALS: 66.4K V 64.5KE
- (UK) AUG NET CONSUMER CREDIT: £1.1B V £1.3BE; NET LENDING: £2.9B V £3.5BE
- (EU) EURO ZONE AUG UNEMPLOYMENT RATE: 8.1% V 8.1%E
- (IN) INDIA SEPT MANUFACTURING PMI: 52.2 V 51.7 PRIOR (14th month of expansion)
- (UK) Aug M4 Money Supply M/M: 0.2% v 0.9% prior; Y/Y: 1.2% v 2.1% prior
- (CZ) Czech Sept Manufacturing PMI: 53.4 v 54.4e (26th month of expansion)
- (CH) Swiss Sept Manufacturing PMI: 59.7 v 62.1e
- (CH) Swiss Aug Real Retail Sales Y/Y: +0.4% v +1.7%e
- (ES) Spain Sept Adjusted Retail Sales Y/Y: 0.3% v 0.4%e; Retail Sales (unadj) Y/Y: 0.3% v -0.6% prior
- (GR) Greece Sept Manufacturing PMI: 53.6 v 53.9 prior (16th month of expansion)
- (IT) ITALY AUG UNEMPLOYMENT RATE: 9.7% V 10.5%E
- (PL) Poland Sept Preliminary CPI M/M: 0.2% v 0.2%e; Y/Y: 1.8% v 1.9%e
- (NO) Norway Sept Manufacturing PMI: 55.7 v 56.4e (3rd month of expansion)
- (NL) Netherlands Sept Manufacturing PMI: 59.8 v 59.1e (61st month of expansion)
- (TR) Turkey Sept Manufacturing PMI: 42.7 v 46.4 (6th straight contraction)
- (PL) Poland Sept Manufacturing PMI:50.5 v 51.3e (46th month of expansion)
- (HU) Hungary Sept Manufacturing PMI: 53.8 v 56.2 prior (34th month of expansion)
- (SE) Sweden Sept Manufacturing PMI: 55.2 v 53.5e
- (RU) Russia Sept Manufacturing PMI: 50.0 v 49.4e (1st month of non-contraction)
- (IE) Ireland Sept Manufacturing PMI: 56.3 v 57.5 prior (64th month of expansion)
- (DK) Denmark Sept Manufacturing PMI Survey: 53.2 v 59.1 prior
- (ZA) South Africa Sept Manufacturing PMI: 43.2 v 44.6e (BE) Belgium Aug Unemployment Rate: 6.5% v 6.6% prior
Looking Ahead
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 07:30 (CL) Chile Sept International Reserves: No est v $36.8B prior
- 07:30 (CL) Chile Sept Trade Balance: No est v -$0.3B prior
- 07:30 (IN) India Aug Eight Infrastructure (key industries) Y/Y: No est v 6.6% prior
- 08:00 (CZ) Czech Sept Budget Balance (CZK): No est v 14.8B prior
- 08:05 (UK) Baltic Dry Bulk Index
- 08:30 (CA) Canada Aug MLI Leading Indicator M/M: No est v 0.1% prior
- 09:00 (BR) Brazil Sept Manufacturing PMI: No est v 51.1 prior
- 09:30 (CA) Canada Sept Manufacturing PMI: No est v 56.8 prior
- 09:45 (US) Sept Final Markit Manufacturing PMI: 55.6e v 55.6 prelim
- 10:00 (MX) Mexico Central Bank Economist Survey
- 10:00 (US) Aug Construction Spending M/M: 0.4%e v 0.1% prior
- 10:00 (US) Sept ISM Manufacturing: 60.0e v 61.3 prior; Prices Paid: 71.4e v 72.1 prior
- 10:00 (MX) Mexico Aug Total Remittances: No est v $2.9B prior
- 10:30 (MX) Mexico Sept Manufacturing PMI: No est v 50.7 prior
- 12:00 (IT) Italy Sept New Car Registrations Y/Y: No est v 9.5% prior
- 13:00 (MX) Mexico Sept IMEF Manufacturing Index: No est v 51.6 prior; Non-Manufacturing Index: No est v 49.9 prior
- 16:00 (US) Weekly Crop Progress Report
