Asia:

  • Japan Aug Adjusted Current Account: : ¥1.43T v ¥1.52Te; Trade Balance: -¥219.3B v -¥208.0Be
  • China PBoC set yuan reference rate: 6.9019 v 6.8957 prior (weakest fix since May 2017)
  • S&P: China recent RRR cut was not enough to boost select lending, dids not signal significant change in monetary policy

Europe:

  • IMF cut its global 2018 and 2019 GDP growth forecast by 0.2% to 3.7% (first cut since 2016); risk of balance had shifted to the downside due to escalating trade conflicts and tighter financial conditions
  • Italy’s EU Affairs Minister Savona was confident that if necessary ECB’s Draghi would prevent another crisis in Europe
  • EU Chief Brexit negotiator Barnier expected to delay publishing the union’s blueprint for a post-Brexit relationship with Britain after signals of new concessions from Downing Street

Macro

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  • (DE) Germany: Reports Trade surplus of €18.3B in August, up from €15.9B as imports fell-2.7% m/m. A sharp correction, although after four months of strong gains, the trend still points higher, while the second consecutive contraction in exports, which fell back -0.1% m/m in August, is more of a concern. It will add to concerns that growing trade tensions are hitting Germany’s exports and the manufacturing sector in particular. Accumulated data for the year though still show exports up 4.2% y/y, although this compares to imports which were up 5.8% y/y.
  • (IT) Italy: Bank of France Governor said Italy’s high debt/weak growth combination is “too unbalanced”. He went on to say investors as well as European authorities are questioning whether Italian debt is sustainable, adding that it is up to Italy to decide how to improve growth without raising debt, or face the risk of higher yields because “some investors could judge Italian debt to be too risky”.
  • (UK) UK: September BRC retail sales fell -0.2% y/y on a LfL basis, the worst print in five months. The report also highlighted that Brexit uncertainty has been impacting an otherwise robust consumer sector. There was weakness in both food and non-food categories, while the back-to-school rush failed to impact apparel sales. The BRC found that shopper confidence has fallen, with those expecting to be financially better off over the year ahead falling from 26% in July to 22% in September.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 0% at 372, FTSE +0.1% at 7238, DAX -0.1% at 11938, CAC-40 0% at 5301, IBEX-35 +0.3% at 9232, FTSE MIB +0.3% at 19900, SMI -0.2% at 8951, S&P 500 Futures -0.3%]

Market Focal Points/Key Themes:

Equities

  • On the corporate front, Ceconomy shares trade sharply lower after the company cuts its outlook after the close, with Wirecard trading almost 5% higher after providing longer term targets and affirming its outlook, reversing some of the losses seen yesterday. Robert Walters is also a notable riser after its Q3 update, with Aviva also rising after its CEO steps down. Looking ahead notable earners include Helen of Troy and AZZ.
  • Consumer discretionary: Ceconomy AG [CEC.DE] -18% (profit warning), WPP [WPP.UK] -0.7% (review of Ford contracts), Robert Walters [RWA.UK] +4.5% (earnings), Greggs [GRG.UK] +7.5% (trading update)
  • Energy: SBM Offshore [SBMO.NL] +5.58% (analyst upgrade), Trevi [TFI.IT] +11.5% (capital strengthening)
  • Financials: Aviva [AV.UK] +2% (CEO to step down)
  • Technology: Wirecard [WDI.DE] +5% (announces FY25 targets; affirms FY18 outlook)

Speakers

  • BOE Financial Policy Committee (FPC) maintained its countercyclical capital buffer at 1% noting that the banking system was strong enough to withstand a disorderly, cliff-edge Brexit. No-deal Brexit finance risks would require urgent EU action to avoid disruption in derivative markets; inaction would be costly to EU businesses. UK banking sector stress test to be released on Dec 5th
  • Sweden Central Bank (Riksbank) Dep Gov Skingsley reiterated view that Riksbank was quite near its 1st potential rate hike if economy developed as expected. Noted that a hike would not be tightening but a reduction of prior expansion (stimulus)
  • Italy Dep PM Salvini: Govt won’t change budget plan, convinced it will generate jobs and wealth
  • Italy Fin Min Tria reiterated that the govt 2019 budget deficit to GDP target of 2.4%. Called for constructive discussions with EU over its budget and stressed that needed to be calm on all sides in dialogue. Economic growth was the only way to improve public finances; structural deficit would recover once GDP and employment were back at pre-crisis levels. Govt wanted to reduce its Debt-to-GDP ratio; low growth is hindering this task and saw the need to boost economic growth
  • Italy Parliamentary Budget Office (fiscal watchdog) likely to reject Gov 2019 fiscal plan
  • Norway Central Bank (Norges) Gov Olsen stated that it waseady to normalize monetary policy and reiterated his view of suggesting a cautious approach to rate setting
  • Germany’s IW Institute study on potential ‘no-deal’ Brexit situation: Could cut German exports to UK by almost 60%
  • Germany BDI Industry Association: Hard Brexit would be a disaster for Germany, Europe
  • China Foreign Ministry reiterated stance that would not use the CNY currency (Yuan) as a toll in the trade dispute
  • IEA chief Birol: IEA not currently discussing oil -stockpile release. Saudi Arabia couldn pump 11M bpd; confident that they would do all they could

Currencies

  • USD maintained its firm tone in the session as US Treasuries were still holding last week’s gains in yields.
  • Dealers noted that the EUR/USD pair seemed to be capped by technicals for the time being. Uncertainty over Italy continued as Italy Fin min Tria testified in his parliament that the country must grow in order to reduce its deficits. Italian 10-year yield continue to move higher as it retested above the 3.60% area.

Fixed Income

  • Bund Futures trades at 157.81 down 25 ticks as the 10-year Bund continues to move further away from 0.55% level. A downside break of 157.25 sees 155.69 initially. To the upside 158.50 remains initial resistance.
  • Gilt futures trades at 119.89 down 13 ticks following the move in Treasuries. Continued support at 120.50, with a continued move higher targeting 123.93 then 124.00.
  • Monday’s liquidity report showed Friday’s excess liquidity fell from €1.896T to €1.893T. Use of the marginal lending facility stayed fell from €70M to €58M.
  • Corporate issuance saw EDP and Volkswagen come to the primary market

Economic Data:

  • (DE) Germany Aug Current Account Balance: €15.3B v €16.2Be; Trade Balance: €17.2B v €16.2Be; Exports M/M: -0.1% v +0.4%e; Imports M/M: -2.7% v -0.1%e
  • (DK) Denmark Aug Current Account Balance (DKK): 8.7B v 13.0Be; Trade Balance: 5.0B v 8.5Be
  • (FI) Finland Aug Preliminary Trade Balance: -€0.4B v -€0.5B prior
  • (NO) Norway Aug GDP M/M: -0.1% v -0.1 prior; Mainland GDP M/M: -0.5% v +0.3%e
  • (CZ) Czech Aug National Trade Balance (CZK): 2.3B v 1.5Be
  • (CZ) Czech Sept CPI M/M: -0.3% v -0.1%e; Y/Y: 2.3% v 2.5%e
  • (HU) Hungary Aug Preliminary Trade Balance: €0.1B v €0.4Be
  • (HU) Hungary Sept CPI M/M: 0.3% v 0.1%e; Y/Y: 3/6% v 3.5%e (highest annual pace since 2013)

Fixed Income Issuance

  • (EU) ESM opened its books to sell €3.0B in Jan 2022 bonds; guidance seen -20bps to mid-swaps; order boook over €5.3B
  • (UK) DMO opened its book to sell 1.625% Oct 2071 Gilts; guidance seen -1.00 to -1.25bps to UK Treasuries
  • (NL) Netherlands Debt Agency (DSTA) sells €435M vs. €1.0B indicated in 2.75% Jan 2047 DSL; Yield: 1.184% v 1.420% prior
  • (ID) Indonesia sold total IDR20T in 3-month and 9-month Bills, 5-year, 15-year, 20-year bonds
  • (ES) Spain Debt Agency (Tesoro) sold total €4.6B vs. €4.0-5.0B indicated range in 6-month and 12-month Bills

Looking Ahead

  • (PT) Bank of Portugal Releases Data on Banks
  • (UR) Ukraine Sept CPI M/M: 1.2%e v 0.0% prior; Y/Y: 8.7%e v 9.0% prior
  • (SE) Sweden Opposition Leader to report to Speaker
  • (MX) Mexico Sept ANTAD Same-Store-Sales Y/Y: No est v 5.0% prior
  • 05.30 (UK) Weekly John Lewis LFL sales data
  • 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
  • 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
  • 05:30 (ZA) South Africa to sell combined ZAR2.4B in 2030, 2037 and 2048 bonds
  • 05:30 (DE) Germany to sell €500M in 0.1% I/L 2026 Bonds
  • 05:30 (BE) Belgium Debt Agency (BDA) to sell €0.9-1.3B in 12-month Bills
  • 05:30 (IT) Italy Parliamentary Budget Office (fiscal watchdog) in Parliament on Govt fiscal outline
  • 06:00 (US) Sept NFIB Small Business Optimism: 108.0e v 108.8 prior
  • 06:00 (IE) Ireland Aug Property Prices M/M: No est v 1.0% prior; Y/Y: No est v 10.4% prior
  • 06:00 (PT) Portugal Releases Industrial Sales, Employment Report
  • 06:45 (US) Fed’s Kaplan (non-voter, dove) in NY
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (TR) Turkey Fin Min Albayrak to announce program to counter inflation
  • 07:45 (US) Weekly Goldman Economist Chain Store Sales
  • 08:05 (UK) Baltic Dry Bulk Index
  • 08:15 (CA) Canada Sept Housing Starts: 210.0Ke v 201.0K prior
  • 08:55 (US) Weekly Redbook Sales
  • 09:00 (MX) Mexico Sept CPI M/M: 0.4%e v 0.6% prior; Y/Y: 5.0%e v 4.9% prior; CPI Core M/M: 0.3%e v 0.3% prior
  • 09:00 (RU) Russia Q3 Preliminary Current Account Balance: $24.0Be v $19.1B prior
  • 09:00 (EU) Weekly ECB Forex Reserves
  • 09:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)
  • 09:30 (EU) ECB’s Villeroy (France) speaks in Paris
  • 10:35 (US) Fed’s Williams with Indonesia Central Bank Gov Warjiyo
  • 10:35 (UK) BOE’s Broadbent in House of Lords
  • 11:30 (US) Treasury to sell 4-Week and 52-Week Bills
  • 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
  • 13:00 (US) Fed’s Harker speaks on Importance of Education to the Economy
  • 16:00 (US) Weekly Crop Progress Report
  • 16:30 (US) Weekly API Oil Inventories
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