Notes/Observations
- ECB: no material changes in policy or guidance expected today; key discussion point may be the risks on the outlook ( Draghi might have to defend the positive growth outlook)
- German IFO Survey comes in below expectations, continuing a string of weaker data for the region
- Norway Central Bank (Norges) left the Deposit Rates unchanged at 0.75% (as expected); and maintained the path for another hike next quarter
Asia:
- South Korea Q3 Preliminary GDP misses expectations as BOK considers a rate hike (Q/Q: 0.6% v 0.8%e; Y/Y: 2.0% v 2.3%e
- BOJ Deputy Gov Wakatabe: Taking strong steps to burst bubble could push economy into serious recession; still talks on feasibility of tightening monetary policy as a preemptive step against rise in asset prices
- Fitch affirmed Australia sovereign rating at AAA; outlook stable
Europe:
- PM May meeting to the 1922 committee of Conservative MPs (back benchers): PM gave several examples of what concessions EU had made to Britain. Tells the rank-and-file members of Parliament to hold their nerve as she pursued a Brexit deal (no-leadership challenge at the closed-door meeting)
- Italy PM Conte stated that there was no plan B on 2019 budget; did not ask Putin to buy Italian sovereign bonds
- Italy Dep PM Salvini: Italy govt would oppose any new taxes in next EU budget
Americas:
- Fed Beige Book noted that wage growth was mostly characterized as modest or moderate
- Fed’s Bostic (dove, voter): US economy was chugging along ‘quite well’; Fed’s view was to let the economy stand on its own
Energy
- Iraq Parliament confirmed Thamer Ghadhban as new Oil Minister. He noted that Iraq would cooperate with OPEC members to stabilize the oil market and help tp keep fair prices for producers/consumers
Macro
- (DE) Germany: Confidence continues to wane as evidenced by October Ifo business climate index which fell back to 102.8 from 103.7. The expectations reading dipped to 99.8 from 100.9, while the current assessment number declined to 105.9 from 106.6. Read in conjunction with recent weaker PMI readings is yet more evidence that growth momentum is slowing rapidly especially in Germany where the manufacturing sector is particularly hit by global trade tensions. This weekend’s regional election also brings the political risk element into play especially if there’s a similar disastrous result as last weekend’s election in Bavaria.
- (EU) ECB: The ECB is widely expected to keep policy and rate guidance unchanged at today’s meeting, the focus will be on President Draghi’s response to the latest sell-off in BTPs that were triggered by the standoff between Rome and the EU over Italy’s budget proposals. Draghi will likely stick to plans to confirm the phasing out of asset purchases by the end of the year, but at the same time, likely to stress once again that asset purchases are now part of the bank’s regular toolkit and can be revived if necessary. Remains likely that rates will be on hold at least through the summer of next year, with ECB’s Rehn suggesting recently that markets are right to price in the first move in the last quarter of 2019.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.06% at 353.46, FTSE -0.29% at 6,942.59, DAX +0.11% at 11,204.31, CAC-40 +0.79% at 4,992.04, IBEX-35 +1.02% at 8,766.00, FTSE MIB +0.95% at 18,660.50, SMI -0.49% at 8,690.50, S&P 500 Futures +0.74%]
Market Focal Points/Key Themes:
Equities
- European Indices have reversed earlier sharp declines to trade mainly higher across the board ahead of today’s ECB rate meeting. Asian Indices traded lower across the board, while US futures rebound after sharp declines yesterday in which the Nasdaq dropped over 4%.
- On a busy day for corporate earnings, WPP drops sharply in the UK after a decline in Rev and cutting its outlook. AB Inbev is another notable faller after missing on the top and bottom line. Meanwhile PSA group rallies on upbeat production outlook, Capgemini rises over 4% after beat and raised outlook, Daimler, Covestro, UBS, Schneider Electric, Kion Group and LLoyds among other notable risers after earnings.
In the M&A space CEVA logistics rises over 30% after a strategic partnership with CMA CGM whereby it will offer CHF30/shr who wish to exit. In the US Tesla rose sharply in after hours after a beat on the top and bottom line and strong cash flow generation, Microsoft also beat on the top and bottom line and continued seeing growth in its cloud business. Looking ahead notable earners include Comcast, American Airlines, Merck, Twitter and Bristol Myers among others. - Consumer discretionary: WPP [WPP.UK] -16% (earnings; outlook cut), Puma [PUM.DE] +9% (earnings; outlook raise), Anheuser-Busch InBev [ABI.BE] -8% (earnings)
- Consumer staples: ICA Gruppen [ICA.SE] +10.5% (earnings)
- Energy: Equinor [EQNR.NO] +0.5% (earnings)
- Financials: UBS [UBSG.CH] +1.5% (earnings), Lloyds [LLOY.UK] +1.5% (earnings, CFO to retire), DNB NOR [DNB.NO] -5% (earnings)
- Healthcare: argenx [ARGX.BE] -4% (earnings)
- Industrials: Daimler [DAI.DE] +2.1% (earnings), PSA [UG.FR] +5% (earnings, adjusts outlook), CEVA Logistics [CEVA.CH] +32% (deal with CMA CGM), ABB Ltd [ABBN.CH] -3.0% (earnings, cautious outlook), Norwegian Air [NAS.NO] +6% (earnings; debt continues to increase), Kion Group [KGX.DE] +14% (earnings), VAT Group [VACN.CH] -1.5% (earnings, outlook cut, new CEO), MTU Aero Engines Holding [MTX.DE] +3% (earnings, outlook raise)
- Technology: Schneider Electric [SU.FR] +6% (earnings, outlook raise), GB Group [GBG.UK] -7.5% (trading update), Capgemini SA [CAP.FR] +4.5% (earnings, outlook raise)
- Telecom: Orange [ORA.FR] -0.1% (earnings), Nokia [NOKIA.FI] +1% (earnings; Op margin outlook cut)
- Materials: Covestro [1COV.DE] +3.0% (earnings)
Speakers
- Italy Dep PM Di Maio reiterated view that was confident Italy/Germany bond yield spread would decline in the next few weeks as Italy talked with EU over budget
- Italy Dep PM Salvini stated that was in full agreement with Fin Min Tria on 2019 budget
- UK Brexit Min Raab reiterated to strive for best deal with EU. UK Parliament to have a choice between deal and alternatives. Risk of no deal was real if EU engaged in intransigent approach. Would not accept Northern Ireland proposal which left in a separate customs arrangement to the rest of the UK
- Ireland PM Varadkar reiterated that wanted an orderly Brexit. Needed guarantee on “no hard border”. Could consider UK custom union plan but the proposal would have to be on a level play field; would not be an alternative to a backstop
- Norway Central Bank (Norges) Policy Statement noted that the outlook and balance of risks did not have appeared to have changed substantially since September. Reiterated that the current assessment of the outlook and balance of risks suggested that the key policy rate would most likely be increased further in 2019 Q1. Underlying inflation was close to the 2 percent target
- German IFO Economists stated that growing uncertainties were taking its toll. Would be difficult to achieve GDP growth forecast of 0.6% for Q4 but it did maintain its overall 2018 GDP growth forecast at 1.7%
- Sweden National Debt Office Borrowing Forecast made no changes to its 2018 or 2019 needs. To sell SEK32B in nominal bonds in 2018 and SEK in 2019 with I/L bonds maintained at SEK9.0B for both years. Borrowings to rise to SEK40B for nominal bonds in 2020
- China Commerce Ministry (MOFCOM) spokesperson Gao Feng: Reiterates that has a sincerity for trade talks with US
- China State Funds said to support ‘pockets’ of the declining market
- Saudi Oil Min Al-Falih: Agreed with Russia to extend agreement to preserve oil market stability. If increase in oil inventories continued there would be a downward intervention to achieve balance
Currencies/ Fixed Income
- EUR/USD little changed in the session as it hovered around the 1.14 level. Main focus to be on the upcoming ECB decision but analysts were not expecting any material changes in policy or guidance. Key discussion likely to point on risks to the outlook given tarde uncertainties and looming Brexit ( Draghi might have to defend the positive growth outlook). German IFO Survey also came in below expectations, continuing a string of weaker data for the region.
- GBP/USD holding under the 1.29 level after PM May’s meeting to the 1922 committee of Conservative MPs did not trigger any leadership challenge.
Economic data
- (NO) Norway Aug AKU Unemployment Rate: 4.0% v 4.0%e
- (FI) Finland Sept Preliminary Retail Sales Volume Y/Y: -1.0% v +1.6% prior
- (ES) Spain Q3 Unemployment Rate: 14.6% v 14.9%e
- (ES) Spain Sept PPI M/M: 0.7% v 0.4% prior; Y/Y: 5.2% v 5.1% prior
- (SE) Sweden Oct Consumer Confidence: 99.5 v 103.3e, Manufacturing Confidence: 115.4 v 117.0e, Economic Tendency Survey: 108.0 v 111.0e
- (AT) Austria Aug Industrial Production M/M: -1.4% v -0.1% prior; Y/Y: 2.8% v 4.8% prior
- (SE) Sweden Sept PPI M/M: 1.2% v 0.0% prior; Y/Y: 10.1% v 9.3% prior
- (SE) Sweden Sept Household Lending Y/Y: 5.9% v 6.0%e
- (NO) Norway Central Bank (Norges) left the Deposit Rates unchanged at 0.75% (as expected)
- (DE) Germany Oct IFO Business Climate: 102.8 v 103.2e; Current Assessment: 105.9 v 106.0e, Expectations Survey: 99.8 v 100.4e
- (HK) Hong Kong Sept Trade Balance (HKD): -47.7B v -58.0Be; Exports Y/Y: 4.5% v 8.6%e; Imports Y/Y: 4.5% v 10.5%
Fixed Income Issuance
- (SE) Sweden sold SEK500M in 0.125% I/L 2027 Bond; Avg Yield: -1.4452% v -1.5219% prior; Bid-to-cover: 2.2X v 3.26x prior
Looking Ahead
- (BR) Brazil Sept Central Govt Budget Balance (BRL): No est v -19.7B prior
- (AR) Argentina Oct Consumer Confidence: No est v 33.7 prior
- 05:30 (ZA) South Africa Sept PPI M/M: 0.5%e v 0.6% prior; Y/Y: 6.2%e v 6.3% prior
- 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)
- 06:00 (CA) Canada Oct CFIB Business Barometer: No est v 61.4 prior
- 06:00 (FR) France Q3 Total Jobseekers: No est v 3.441M prior
- 06:00 (UK) Cabinet update on Brexit
- 06:00 (RO) Romania to sell Bonds
- 06:45 (US) Daily Libor Fixing
- 07:00 (UR) Ukraine Central Bank Interest Decision: Expected to leave Key Rate unchanged at 18.00%
- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision; Expected to leave One-Week Repo rate unchanged at 24.00% (Note: restored credibility from its Sept move)
- 07:30 (TR) Turkey Oct Real Sector Confidence (seasonally Adj): No est v 90.4 prior; Real Sector Confidence (NSA): No est v 89.6 prior, Capacity Utilization: No est v 76.2 % prior
- 07:45 (EU) European Central Bank (ECB) Interest Rate Decision: Expected to leave 7-Day Main Refinancing Rate unchanged at 0.00%
- 08:00 (PL) Poland Central Bank (NBP) Oct Minutes
- 08:05 (UK) Baltic Dry Bulk Index
- 08:30 (US) Initial Jobless Claims: 215Ke v 210K prior; Continuing Claims: 1.64Me v 1.640M prior
- 08:30 (US) Sept Advance Goods Trade Balance: -$75.1Be v -$75.5B prior (revised from -$75.8B)
- 08:30 (US) Sept Preliminary Wholesale Inventories M/M: 0.5%e v 1.0% prior, Retail Inventories M/M: No est v 0.7% prior
- 08:30 (US) Sept Preliminary Durable Goods Orders: -1.5%e v +4.4% prior; Durables Ex Transportation: 0.4%e v 0.0% prior, Capital Goods Orders (Non-defense/ex-aircraft): +0.5%e v -0.9% prior, Capital Goods Shipments (Non-defense/ex-aircraft): +0.4%e v -0.2% prior
- 08:30 (US) Weekly USDA Net Export Sales
- 08:30 (EU) ECB chief Draghi post rate decision press conference
- 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 19th: No est v $460.4B prior
- 09:00 (MX) Mexico Aug Retail Sales M/M: 0.0%e v +0.6% prior; Y/Y: 3.8%e v 4.2% prior
- 09:30 (BR) Brazil Sept Current Account: +$0.4Be v -$0.7B prior; Foreign Direct Investment (FDI): $7.1Be v $10.6B prior
- 10:00 (US) Sept Pending Home Sales M/M: 0.0%e v -1.8% prior; Y/Y: -2.6%e v -2.5% prior
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (US) Oct Kansas City Fed Manufacturing Activity: 14e v 13 prior
- 13:00 (US) Treasury to sell 7-Year Notes
- 15:00 (AR) Argentina Aug Economic Activity Index (monthly GDP) M/M: No est v 1.4% prior; Y/Y: -2.8%e v -2.7% prior
