Notes/Observations
- Stock market volatility continue to be the focus
- France Q3 Advance GDP registered a slight miss (QoQ: 0.4% v 0.5%)
- Italy Q3 Preliminary GDP misses expectations (QoQ: 0.0% v 0.2%e)
- Various German State CPI reading were mixed compared to the upcoming national composite reading (due out later today)
- German labor market remained robust with Oct Unemployment Rate retesting post reunification lows (rate steady at 5.1%)
Asia:
- US said to implement next round of China tariffs if Trump talks with Xi fail (expected to meet at G20 on Nov 30th)
- US Commerce Dept said the Chinese company would not be allowed to purchase components from US companies without a special license; effective Oct 30th
- Japan Sept Jobless Rate 2.3% v 2.4%e with Job to applicant ratio hitting its highest level since Jan 1974 (1.64 v 1.63e)
Europe:
- UK Debt Management Office (DMO) cut its 2018/19 Gilt issuance remit by from £106.0B to £97.5B (reduction of £8.5B v £5.0Be.
- UK Office of Budget Responsibility (OBR) stated that it would sell entire RBS stake by 2023 or 2024: to sell £3.6B in shares in 2019/20, £2.5B in 2020/21, and further £20.6B in RBS shares by 2023-24. Stated that Hammond’s budget spent the fiscal windfall from lower borrowing rather than saving it
- EU Member States draft recommended ECB and EU Commission review alleged incidents of money laundering at EU banks by mid-2019 and consider taking new measures
Americas:
- President Trump: Predicts ‘great deal’ with China on trade; could see a trade deal with Brazil happening
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx50 -0.2% at 3,150, FTSE +0.2% at 7,037, DAX -0.3% at 11,299, CAC-40 -0.3% at 4,976, IBEX-35 -0.1% at 8,815, FTSE MIB -0.5% at 18,943, SMI +0.3% at 8,776, S&P 500 Futures +0.3%]
Market Focal Points/Key Themes:
- European Indices trade mixed this morning following a mainly higher session in Asia overnight and mixed US futures following weakness yesterday. The FTSE MIB underperforms after GDP came below exceptions. In another busy day on the corporate front, BP outperforms after strong results, with Volkswagen and Suez also trading higher after results. Notable names trading to the downside include Lufthansa, Reckitt Benckiser, BNP Paribas, Beiersdorft and Schaeffler after earnings. Elsewhere Restaurant Group trades sharply lower after acquiring Wagamama and reporting a decline in YTD LFL sales; Genmab also trades higher after positive top line results of its Phase III MAIA study. Looking ahead notable earners include Lumber Liquidators, Coca Cola, Cognizant Tech, Fiat, Pfizer and HCA among others.
Equities
- Consumer discretionary: Lufthansa [LHA.DE] -8% (earnings), Restaurant Group Plc [RTN.UK] -16% (trading update; acquisition), Straumann Holding [STMN.CH] +2.5% (earnings, raises outlook), Beiersdorf AG [BEI.DE] -1.5% (earnings), WH Smith [SMWH.UK] +3.5% (acquisition)
- Energy: BP Plc [BP.UK] +4% (earnings)
- Financials: BBVA [BBVA.ES] -1.5% (earnings), BNP Paribas [BNP.FR] -4.5% (earnings), Unicredit [ICG.IT] +2% (attributed to Italian press speculation that major Italian banks will pass stress tests on Friday, Nov 2)
- Healthcare: Reckitt Benckiser PLC [RB.UK] -5% (earnings), AstraZeneca [AZN.UK] +0.5% (divests prescription medicine rights), Genmab [GEN.DK] +7% (positive top-line results)
- Industrials: Volkswagen [VOW3.DE] +2.5% (earnings, affirms outlook), Schaeffler AG [SHA.DE] -3.5% (preliminary earnings; outlook cut), Geberit [GEBN.CH] -9% (earnings; outlook cut), Aixtron [AIXA.DE] +15% (earnings)
- Technology: Wirecard [WDI.DE] +0.5% (earnings)
- Utilities: Suez [SEV.FR] +2% (earnings, affirms outlook)
Speakers
- UK Chancellor of the Exchequer Hammond (Fin Min) made the media rounds after yesterday’s budget statement. He noted that a no deal Brexit would be a shock and could require fiscal stimulus. Believed that UK would reach a Brexit agreement with EU and a good Brexit deal will allow more public spending
- Italy Dep Fin MIn Garavaglia: Slowing GDP showed the need for investments
- Sweden Central Bank (Riksbank) Gov Ingves reiterated stance that coming rate hikes would be gradual. Reiterated that high household indebtedness is a concern
- Norway Central Bank (Norges) Dep Gov Nicolaisen reiterated view of seeing gradual rate hikes
- Japan PM Abe stated in parliament that to lay the groundwork for beating deflation in the next three years . Specific monetary procedure should be left up to BOJ and reiterated his trust in BOJ Gov Kuroda
- China Foreign Ministry spokesperson Lu Kang: US remarks on trade would not threaten it; to keep own path if US did not cooperate
- China ex-PBoC advisor Seng Songcheng: China should use its FX Reserves to stabilize the exchange rate when needed
- India Govt official stated that the RBI had taken a balanced view on policy rate
- IEA chief Birol stated that saw the oil market tightening in Nov; urged key oil producers to bring more barrels to the market
Currencies/ Fixed Income
- FX markets seemed listless in activity despite the plethora of GDP, inflation and confidence data releases out of Europe. There are a few G7 rate decision later this week (BOJ on Wed, BOE on Thursday) but no major changes were expected on the policy front
- EUR/USD steady at 1.1375 area but continued to see soft data stemming from member States as both France and Italy Q3 GDP data came in below expectations. ECB noted last week that recent incoming economic data had been weaker than expected but it reiterated risks to economic growth were still broadly balanced. The data could put another kink in the ECB 1st potential rate hike plan after the summer of 2019. Chancellor Merkel decision to stand down as leader of the CDU after her party’s dismal performance in the German state elections was also a headwind for the Euro as merkel was the key cheerleader for a united Europe. Dealers also noted the possibility of early election for Germany at some point .
- GBP/USD was softer to test 10-week lows below 1.2770 level as analysts noted the Hammond’s autumn budget would not translate into a material reversal in the country’s high public debt levels for some time as Brexit negotiations was producing a high level of uncertainty over the economic outlook
Economic data
- (NL) Netherlands Oct Producer Confidence Index: 5.9 v 5.7 prior
- (FR) France Q3 Advance GDP Q/Q: 0.4% v 0.5%e; Y/Y: 1.5% v 1.5%e
- (NO) Norway Sept Credit Indicator Growth Y/Y: 5.6% v 5.7%e
- (NO) Norway Sept Retail Sales (with auto/fuel) M/M: -0.7% v +0.2%e
- (FI) Finland Sept House Price Index M/M: +0.7% v -0.6% prior; Y/Y: 1.2% v 0.4% prior
- (FR) France Sept Consumer Spending M/M: -1.7% v -0.4%e; Y/Y: -1.5% v +0.6%e
- (CH) Swiss Oct KOF Leading Indicator: 100.1 v 101.0e
- (DE) Germany Oct CPI Saxony M/M: 0.2% v 0.4% prior; Y/Y: 2.5% v 2.3% prior
- (ES) Spain Oct Preliminary CPI M/M: 0.9% v 0.9%e; Y/Y: 2.3% v 2.2%e
- (ES) Spain Oct Preliminary CPI EU Harmonized M/M: 0.7% v 0.6%e; Y/Y: 2.3% v 2.3%e
- (ES) Spain Sept Adjusted Retail Sales Y/Y: -0.9% v +0.1% prior; Retail Sales (unadj) Y/Y: -3.1% v +0.3% prior
- Austria Sept PPI M/M: 0.3% v 0.3% prior; Y/Y: 3.3% v 3.5% prior
- (HU) Hungary Sept Unemployment Rate: 3.8% v 3.6%e
- (SE) Sweden Aug Non-Manual Workers Wages Y/Y: 2.6% v 2.5% prior
- (DE) Germany Oct Net Unemployment Change: -11K v -12Ke; Unemployment Claims Rate: 5.1% v 5.1%e
- (DE) Germany Oct CPI Brandenburg M/M: 0.1% v 0.3% prior; Y/Y: 2.3% v 2.1% prior
- (DE) Germany Oct CPI Hesse M/M: 0.1% v 0.5% prior; Y/Y: 2.2% v 1.9% prior
- (DE) Germany Oct CPI Bavaria M/M: 0.2% v 0.5% prior; Y/Y: 2.8% v 2.5% prior
- (IT) Italy Q3 Preliminary GDP Q/Q: 0.0% v 0.2%e; Y/Y: 0.8% v 1.0%e
- (ZA) South Africa Q3 Unemployment Rate: 27.5% v 27.4%e
- (PT) Portugal Consumer Confidence Index: -1.1 v -1.4 prior; Economic Climate Indicator: 2.4 v 2.4 prior
- (DE) Germany Oct CPI North Rhine Westphalia M/M: 0.1% v 0.4% prior; Y/Y: 2.4% v 2.3% prior
Fixed Income Issuance
- (DK) Denmark sold total DKK3.0B in 3-month and 6-month Bills
- (ZA) South Africa sold total ZAR2.4B vs. ZAR2.4B indicated in 2023, 2032 and 2048 bonds
- (ID) Indonesia sold total IDR5.625T vs. IDR4.0T target in 6-month Islamic Bills, 2-year, 4-year, 7-year and 15-year Project-based Sukuk (PBS)
Looking Ahead
- (DE) German Oct CPI Rhineland-Palatinate M/M: No est v 0.4% prior; Y/Y: No est v 2.4% prior
- (DE) Germany Oct CPI Baden Wuerttemberg M/M: No est v 0.6% prior; Y/Y: No est v 2.5% prior
- 06:00 (EU) Euro Zone Q3 Advance GDP Q/Q: 0.4%e v 0.4% prior; Y/Y: 1.8%e v 2.1% prior
- 06:00 (EU) Euro Zone Business Climate Indicator: 1.16e v 1.21prior; Consumer Confidence (final reading): -2.7e v -2.7 advance; Economic Confidence: 110.0e v 110.9 prior; Industrial Confidence: 3.9e v 4.7 prior; Services Confidence: 14.0e v 14.6 prior
- 06:00 (IT) Italy Oct Consumer Confidence Index: 115.1e v 116.0 prior; Manufacturing Confidence: 105.0e v 105.7 prior; Economic Sentiment: No est v 103.7 prior
- 06:00 (EU) Daily Euribor Fixing
- 06:00 (IT) Italy Debt Agency (Tesoro) to sell €3.5-4.5B in 5-year and 10-year BTP bonds
- 06:00 (IT) Italy Debt Agency (Tesoro) to sell €-0.5-1.0B in Sept 2025 CCTeu (Floating Rate Note); Avg Yield: % v 1.77% prior; Bid-to-cover: x v 1.67x prior (Sept 27th 2018)
- 06:15 (BE) Belgium Oct CPI M/M: No est v 0.0% prior; Y/Y: No est v 2.4% prior
- 06:15 (CH) Switzerland to sell 3-month Bills
- 06:30 (UK) Weekly John Lewis LFL sales data
- 06:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
- 06:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
- 06:30 (BE) Belgium Debt Agency (BDA) to sell €2.0-2.4B in 3-month and 6-month Bills
- 07:00 (UK) Oct CBI Retailing Reported Sales: 20e v 23 prior; Total Distribution: No est v 26 prior
- 07:00 (IE) Ireland Sept Retail Sales Volume M/M: No est v -3.3% prior; Y/Y: No est v 2.5% prior (revised from 2.6%)
- 07:00 (PT) Portugal Sept Industrial Production M/M: No est v 2.7% prior; Y/Y: No est v 2.9% prior
- 07:00 (PT) Portugal Sept Retail Sales M/M: No est v 1.1% prior; Y/Y: No est v 3.8% prior
- 07:00 (BR) Brazil Sept National Unemployment Rate: 11.9%e v 12.1% prior
- 07:00 (BR) Brazil Oct FGV Inflation IGPM M/M: 0.9%e v 1.5% prior; Y/Y: 10.8%e v 10.0% prior
- 07:45 (US) Weekly Goldman Economist Chain Store Sales
- 07:45 (US) Daily Libor Fixing
- 08:00 (ES) Spain Sept YTD Budget Balance: No est v -€18.9B prior
- 08:00 (ZA) South Africa Sept Budget Balance (ZAR): -5.0Be v -7.9B prior
- 08:55 (US) Weekly Redbook Sales
- 09:00 (US) Aug S&P Case Shiller 20-City M/M: 0.10%e v 0.09% prior; Y/Y: 5.8%e v 5.92% prior; House Price Index (HPI): No est v 213.76 prior
- 09:00 (US) Case-Shiller (overall) HPI Y/Y: No est v 6.00% prior, Overall HPI Index: No est v 205.35 prior
- 09:00 (DE) Germany Oct Preliminary CPI M/M: 0.1%e v 0.4% prior; Y/Y: 2.4%e v 2.3% prior
- 09:00 (DE) Germany Oct Preliminary CPI EU Harmonized M/M: 0.1%e v 0.4% prior; Y/Y: 2.4%e v 2.2% prior
- 09:05 (UK) Baltic Dry Bulk Index
- 09:30 (BE) ECB’s Praet (Belgium, chief economist)
- 10:00 (US) Oct Consumer Confidence: 136.0e v 138.4 prior
- 10:00 (MX) Mexico Q3 Preliminary GDP Q/Q: +0.5%e v -0.2% prior; Y/Y: 2.4%e v 2.6% prior
- 10:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)
- 10:10 (DE) ECB’s Lautenschlaeger (Germany, SSM)
- 11:00 (MX) Mexico weekly International Reserves data
- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
- 16:30 (US) Weekly API Oil Inventories
- (MX) Mexico Sept YTD Budget Balance (MXP): No est v -230.8B prior
