Notes/Observations
- Eurogroup meets today with Italy budget high on the agenda
- Preparations for a final Brexit deal said to be more advanced than previously disclosed; Irish officials downplay euphoria
- UK Oct Services PMI misses expectations but remained in expansion for the 27th straight month
- EU Nov Investor Confidence data slips (8.8 v 9.8e)
- US sanctions on Iranian oil ?ows go back into e?ect.
- Large focus on US midterm elections (Tuesday) and FOMC policy decision (Thursday).
Asia:
- BOJ released its Minutes from its Sept 18-19 meeting (2 meetings ago) and reiterated that was appropriate to continue easing persistently
- China Oct Caixin PMI Services registers its lowest reading since Sept 2017 (50.8 v 52.8e)
- China PBoC announced first medium-term lending facility (MLF) operation use since Sept
Europe:
- PM May said to have secured private concessions from Brussels that would keep the whole of Britain in a customs union, avoiding a hard border in Northern Ireland. Also also on track for a “future economic partnership” (FEP) agreement with EU
- UK Brexit Min Raab said to have privately demanded the right to pull UK from EU’s Ireland backstop after 3 months. Raab said to press PM May to take Brexit hard line over Irish border; urging her to support the plan to pull the UK out of ‘backstop’ plan with just 3 months’ notice
- ECB sources noted that no decision on new TLTRO action expected at the Dec policy meeting
Energy:
- US re-imposed sanctions on Iran oil transactions (as expected)
Macro
- (IT) Italy: Eurozone finance ministers are likely to put further pressure on Italy this week over the planned budget overshoots. Latest growth data highlighted that the government’s budget projections, which are focusing on reducing debt and deficit levels through higher growth are far too optimistic. European Commission VP Dombrovskis repeated that the budget needs “substantial adjustments”.
- (US) United States: Tuesday’s Congressional election is obviously the main focus of the week. The base case is that the Democrats take back control of the House and Republicans maintain a Senate majority. Such a result would severely impact President Trump’s agenda. The potential for gridlock might be taken relatively bullishly by the bond market as it may hinder increased fiscal stimulus, the broader market may not like the headwinds to the potential for further economic growth.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.2% at 364.2, FTSE 0% at 7097, DAX +0.2% at 11541, CAC-40 +0.1% at 5108, IBEX-35 +0.5% at 9035, FTSE MIB -0.3% at 19324, SMI +0.1% at 9003, S&P 500 Futures -0.1%]
- Market Focal Points/Key Themes: European Indices trade mixed this morning in a flat trading day so far following weaker Asian markets and mixed US index futures. Spanish IBEX outperforms while UK Indices trade flat after Services PMI missed consensus. On the corporate front shares Hiscox, Dufry, among decliners after earnings, while Vopak in the Netherlands trades higher after a rise in profits. Onxeo rises ~20% after positive results from its phase 1 study of AsiDNA; Ingenico also rises after the departure of its CEO. Looking ahead notable earners include Ferrari, PG&E, Loews and Seaworld Entertainment among others.
Equities
- Consumer discretionary: Ingenico [ING.FR] +3.5% (CEO departure), Dufry AG [DUFN.CH] -3.5% (earnings),
- Real Estate: Vopak [VPK.NL] +5% (earnings)
- Energy: Serica Energy [SQZ.UK] +12.5% (acquisition, OFAC license conditions positive), Naturgy Energy Corp (prior Gas Natural SDG) [NTGY.ES] +0.5% (earnings), SMA Solar Technology [S92.DE] +2% (recent strength in solar energy companies being attributed to press speculation that China may lift solar installation targets for 2020)
- Financials: Hiscox [HSX.UK] -7.5% (trading update), Gam Holding [GAM.CH] +3% (reportedly rebuffs Schroders approach for hedge fund unit)
- Healthcare: Roche [ROG.CH] -0.5% (CEO weekend interview comments), Onxeo [ONXEO.FR] +20% (positive interim results of study)
- Industrials: PostNL [PNL.NL] -0.5% (earnings)
- Technology: STMicroelectronics NV [STM.FR] -0.5% (buyback program), U-Blox [UBXN.CH] -9.5% (analyst action)
Speakers
- Ireland Foreign Min Coveney: Would never agree on a time-limited backstop; would not agree on UK unilateral end to backstop
- Brexit negotiators said to reach consensus on financial services. Worked up a short draft text that would go into declaration on future ties that outlines parameters for post-Brexit trade talks
- EU’s Dombrovskis reiterated stance that Italy budget plan needed substantial adjustment; in discussions with Italian authorities
- France Fin Min Me Maire stated that expected an accord with Germany on digital tax by December. France to present energy plans in coming weeks
- Turkey Fin Min Albayrak: Inflation trend is positive; to meet year end goals on inflation
- Sweden Speaker Norlen presented next step in Governement Formation Process: To give Kristensson (Moderate) a new attempt to form govt
- BOJ to hold its 8th round of meetings with bond group between Dec 5-7th
Currencies/Fixed Income
- US Mid-term elections has polls and betting markets indicating that the Democrats would likely to take control of the House, while the Republicans were likely to retain Senate control. Key issues on the outcome would be whether to expect further fiscal stimulus, and what the implications there were for trade policy. A unified Republican control would be viewed as more bullish, while on the latter, a divided government could de-escalate the current trade conflict.
- GBP/USD was hovering around below the 1.30 level but off last week’s highs. Reports circulated that PM May had secured private concessions from Brussels that would keep the whole of Britain in a customs union, avoiding a hard border in Northern Ireland. Preparations for a final Brexit deal were for more advanced than previously disclosed. However, Irish officials played down any euphoria of a breakthrough on the Irish border issue.
- EUR/USD was little changed and remaining below the 1.14 level in the session.
Economic data
- (IN) Oct India PMI Services: 52.2 v 50.9 prior (5th month of expansion); PMI Composite: No est v 51.6 prior
- (IE) Ireland Oct Services PMI: 57.2 v 58.7 prior ; Composite PMI: 56.1 v 58.4 prior
- (TR) Turkey Oct CPI M/M: 2.7% v 2.5%e; Y/Y: 25.2% v 25.0%e; CPI Core Index Y/Y: 24.3% v 25.1%e
- (TR) Turkey Oct PPI M/M: 0.9% v 10.9% prior; Y/Y: 45.1% v 46.2% prior
- (BR) Brazil Oct FIPE CPI: 0.5% v 0.5%e
- (SE) Sweden Oct PMI Services: 56.3 v 56.6 prior
- (ES) Spain Oct Net Unemployment M/M: +52.2K v +20.4K prior
- (CZ) Czech Sept Retail Sales Y/Y: -2.2% v +0.9%e; Retail Sales (ex Auto) Y/Y: 1.4% v 3.0%e
- (HU) Hungary Aug Final Trade Balance: €0.0B v €0.0B prior
- (HU) Hungary Oct Manufacturing PMI: 57.3 v 54.2 prior
- (ZA) South Africa Oct PMI: 46.9 v 48.0 prior
- (TW) Taiwan Oct Foreign Reserves: $460.2B v $460.4B prior
- (NG) Nigeria Oct PMI: 54.4 v 56.3 prior
- (UK) Oct New Car Registrations Y/Y: -2.9% v -20.5% prior
- (CH) Swiss weekly Total Sight Deposits (CHF): 577.5B v 578.0B prior; Domestic Sight Deposits: 469.9B v 470.1B prior
- (CN) China Q3 Preliminary Current Account: $16.0B v $5.8B prior
- (UK) Oct PMI Services: 52.2 v 53.3e (27th month of expansion); Composite PMI: 52.1 v 53.4e
- (EU) Euro Zone Nov Sentix Investor Confidence: 8.8 v 9.8e
- (ID) Indonesia Oct Consumer Confidence: 119.2 v 122.4 prior
Fixed Income Issuance
- (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 3-month bills; Avg Yield: 0.78% v 0.68% prior; Bid-to-cover: 2.94x v 2.68x prior
Looking Ahead
- (UR) Ukraine Central Bank Oct Minutes
- (UR) Ukraine Oct Official Reserve Assets: No est v $16.6B prior
- 05:25 (BR) Brazil Central Bank Weekly Economists Survey
- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell 6-month bills
- 06:00 (RO) Romania to sell Bonds
- 06:00 (IL) Israel to sell Bonds
- 06:30 (CL) Chile Sept Economic Activity Index (Monthly GDP) M/M: -0.2%e v -0.1% prior; Y/Y: 2.0%e v 3.2% prior; Economic Activity Index (Ex-Mining) Y/Y: No est v 4.0% prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (CL) Chile Sept Retail Sales Y/Y: 3.0%e v 4.8% prior; Commercial Activity Y/Y: No est v 6.0% prior
- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 07:45 (EU) ECB De Guindos (Spain) in Brussels
- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming auctions
- 08:10 (UK) Baltic Dry Bulk Index
- 08:25 (CA) Bank of Canada (BOC) Gov Poloz speech in London, UK
- 08:50 (FR) France Debt Agency (AFT) to sell combined €3.9-5.1B in 3-month, 6-month and 12-month BTF Bills
- 09:00 (MX) Mexico Sept Leading Indicators M/M: No est v 0.1 prior
- 09:00 (MX) Mexico Oct Vehicle Domestic Sales: No est v 114.7K prior
- 09:00 (EU) Euro Group Finance Ministers meet in Brussels
- 09:30 (NO) Norway Central Bank (Norges) Dep Gov Nicolaisen s in London
- 09:30 (EU) ECB announces Covered-Bond Purchases
- 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
- 09:45 (US) Markit Oct Final Services PMI: 54.7e v 54.7 prelim; Composite PMI: No est v 54.8 prelim
- 10:00 (US) Oct ISM Non-Manufacturing Index: 59.4e v 61.6 prior
- 11:30 (US) Treasury to sell 3-Month and 6-month Bills
- 13:00 (US) Treasury to sell $37B in 3-Year Notes
- 13:00 (DE) German Chancellor Merkel receives Prize From German Newspaper Publishers
- 16:00 (US) Weekly Crop Report
