Notes/Observations
- UK Brexit Min Raab resigned citing he could support indefinite backstop arrangement; Questions arise whether PM May could hold onto power and whether Brexit deal would pass in parliament (5th UK resignation during the EU session today; more likely)
- EU Leader Summit to take place on Nov 25th to endorse the Brexit deal
- UK Oct Retail sales data misses expectations but back month revised higher across the board
- Both Indonesia and Philippines Central Banks hike rates to counter inflationary pressures
Asia:
- Australia Oct Employment Change: +32.8K v +20.0Ke; Unemployment Rate: 5.0% v 5.1%e
- Australia Nov Consumer Inflation Expectation: 3.6% v 4.0% prior
- China govt reportedly sent written response including concessions to US regarding trade reforms but said to remain short of the type of structural changes being pushed for by the US
Europe:
- UK PM May won Cabinet backing for her Brexit plan; she warned it’s her deal, no deal or no Brexit at all
- PM May stated that the collective decision of the cabinet was to support the Brexit deal; believed this was the best deal that could be negotiated. Saw difficult days ahead and this deal would come under intense scrutiny, as it should. Confirmed she would make a statement to Parliament on Thurs, Nov 15th
- Brexiteers stated that there would be enough letters by ‘lunch tomorrow’ to force confidence vote against PM May
- Letters said to been submitted to the powerful 1922 Committee that governs the leadership of the Conservatives
- EU commission released draft UK Brexit withdrawal agreement: UK would be allowed to request an extension of the Transition Period at any time before July 1, 2020; Transition Period could be extended by mutual consent. Backstop protocol based on maintaining full alignment with EU’s internal market and the customs union; until future relationship applies, the EU and UK would establish a single customs territory with Northern Ireland in the same customs territory as Britain
Americas:
- Fed Chair Powell: challenges included how much further to hike and at what pace; pretty good reason economy stays on healthy track; reiterated all meetings were live
Energy:
- Weekly API Oil Inventories: Crude: +8.8M v +7.8M prior
Macro
- (UK) United Kingdom – Gilts rallied after Brexit Minister Dominic Raab resigned. There had been speculation of further resignation the whole morning with May reportedly struggling to get the deal past the cabinet. Now there are rumblings of a call for a no confidence vote today against the PM May due to Brexiteer anger running so high. It is likely then that political drama is likely over the coming weeks. Even if there is no ousting, May’s Brexit plan looks to be all but consigned to the dustbin.
- (EU) European Union – European Council President Tusk tweeted: “If nothing extraordinary happens, we will hold a #EUCO to finalise and formalize the #Brexit agreement on Sunday 25 November at 9h30.” The wary tone of Tusk’s tweet reflects the reality of May’s “worst of both worlds” plan, which is unpopular with significant numbers of both Eurosceptic and Europhile MPs.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.65% at 359.90, FTSE -0.09% at 7,027.45, DAX -0.20% at 11,390.06, CAC-40 -0.52% at 5,042.74, IBEX-35 -0.54% at 9,057.35, FTSE MIB -0.66% at 18,952.50, SMI -0.32% at 8,907.50, S&P 500 Futures -0.06%]
- Market Focal Points/Key Themes: European Indices trade mixed this morning, with the FTSE outperforming on the back of a steep drop in the British Pound after initial strength following a cabinet agreement on the wording of a post Brexit deal. A host of PM’s have resigned included Brexit Minister Dominic Raab after saying he can’t support the draft proposal. US futures trade slightly higher after another day of losses yesterday. On the corporate front UK Banking names decline following the draft Brexit proposal and the subsequent MP resignations. Recent IPO Aston Martin Legonda trades sharply lower after earnings; Royal Mail falls after initial strength following a decline in profits. Elsewhere K+S, Pirelli, OHL, Bovis Homes, VolkerWeseels among other notable decliners after earnings. Henkel trades higher after a rise in earnings, with Ion Beam, Bougues, AMS and Singlulus Tech are among other risers following results. Looking ahead notable earners include retail giant Walmart as well as JC Penny, Energizer and Berry Global among others.
Equities
- Consumer discretionary: Aston Martin Lagonda Global Holdings [AML.UK] -7% (earnings; raises unit sales outlook; comments on Brexit deal impact), Card Factory [CARD.UK] +1.5% (trading update), Hugo Boss [BOSS.DE] n/c (capital markets day)
- Consumer staples: Sixt [SIX2.DE] +1.5% (final earnings; affirms outlook)
- Energy: Scatec Solar [SSO.NO] +12% (Equinor acquires minority stake in company)
- Financials: Royal Bank of Scotland [RBS.UK] -4%, Lloyds Banking Group [LLOY.UK] -2.5%, Barclays [BARC.UK] -3% (Brexit minister Raab resigns), UBS [UBSG.CH] -1.5% , Credit Suisse [CSGN.CH] -1.5% (Swiss Competition Commission Weko launches probe of several Swiss financial companies), Investec [INVP.UK] -1.5% (earnings), Intermediate Capital Group [ICP.UK] +8% (earnings)
- Healthcare: MDxHealth [MDXH.BE] -12% (analyst action)
- Industrials: Bouygues [EN.FR] +3.5% (earnings), Royal Mail [RMG.UK] -0.5% (earnings), Henkel [HEN3.DE] +3.5% (earnings; affirms outlook), Volkerwessels [KVW.NL] -7% (earnings; cuts outlook)
- Technology: AMS [AMS.CH] -1.5% (profit warning)
- Materials: K+S AG [SDF.DE] -1.5% (earnings; cuts outlook)
Speakers
- EU Brexit Chief Negotiator Barnier stated that the agreement with Britain was fair and balanced but had no time to lose. Still had a long road ahead, on both sides with work on declaration on future relationship with Britain to be intense.
- EU’s Tusk stated that had secured vitals interest of EU27 and the EU Commission intended to agree on declaration by next Tuesday, Nov 20th. Negotiations were only about damage control; did not share PM May’s enthusiasm on Brexit. Confirmed EU Leader Summit to take place on Nov 25th to endorse the Brexit deal
- UK Brexit Min Raab resigned citing he could support indefinite backstop arrangement. Could not reconcile terms of proposed deal with promises made in our manifesto letter
- UK Secretary of State for Work and Pension Esther Mcvey and Northern Ireland Minister Shailesh Vara said to both tendered their resignations (minor minsters)
- Ireland Foreign Min Coveney: EU would likely endorse withdrawal agreement but Brexit contingency plans continue
- Ireland Fin Min Donohoe stated that expected Brexit deal to be passed but was preparing for all scenarios
- EU Official: Could not speculate about the failure of Brexit deal
- Sweden Acting PM Lofven: Am at the disposal to try to form a govt
- Northern Ireland Minister Shailesh Vara said to resign from PM May’s Cabinet claiming that the Brexit agreement did not provide for the United Kingdom being a sovereign independent country leaving the shackles of the EU
- Suella Braverman (Junior Min) has resigned from the Brexit dept. Former chair of the ERG.
- Northern Ireland DUP official Wells (part of coalition): Believe that PM May will face a no-confidence vote
- Russia President Putin stated that was ready to restore full-scale cooperation with US. Discussed oil price with Trump at recent Paris gathering. He saw $70/barrel as a suitable price and noted that Russia would continue its cooperation with OPEC. Saw oil prices as unstable at this time; could move either higher or lower
- Russia Central Bank Zabotkin (Monetary Policy Chief): Hope that a timely rate hike would create the conditions for monetary easing in late 2019 or in early 2020. Recent oil price fluctuations were still within central bank forecasts
- Indonesia Central Bank Policy Statement noted that today’s rate hike was aimed at lowering the current account deficit and to anticipate rising global rates. To continue to take measures to stabilize the IDR currency (Rupiah) and strengthen coordination with govt on CPI
- Philippines Central bank (BSP) Policy Statement noted that inflationary expectations remained elevated and today’s action was to temper CPI expectations. Ready to take all necessary actions to address inflation. Prospect for domestic economy were favorable
- China Commerce Ministry (MOFCOM) stated that it hoped US and China could resolve trade dispute through dialogue and negotiations. Reiterated domestic indicators were within a reasonable range and saw no change in the country’s fundamentals. China would sincerely open up its markets
Currencies/Fixed Income
- The GBP currency was broadly weaker to test 18 month lows in the aftermath of UK Brexit Min Raab resignation. The move brought into question whether PM May could hold onto power and if the Brexit deal would pass in parliament. The prospects of a hard Brexit also put into question the pace of BOE rate hikes. The prospects of a 2019 hikes appeared to be scaled back given the political developments in the UK on Brexit. GBP/USD lower by over 1.5% to trade below 1.2800 while EUR/GBP cross was higher by over 1.4% at 0.8820. Analysts noted that yesterday’s cabinet’s non-unanimous approval of the draft Brexit agreement pointed to several hurdles ahead.
- The 10-year Gilt yield was lower by over 10bps to test below 1.37%; 5-year Gilt lower by 15bps nearing 0.92% (biggest drop since the actual Brexit vote back in Jun 2016)
Economic data
- (NL) Netherlands Oct Unemployment Rate: 3.7% v 3.7% prior
- (EU) EU27 Oct New Car Registrations: -7.3% v -23.5% prior
- (DK) Denmark Oct PPI M/M: +0.8% v -0.5% prior; Y/Y: 6.1% v 5.8% prior
- (NO) Norway Oct Trade Balance (NOK): 34.9B v 22.2B prior
- (FI) Finland Sept Current Account Balance: +€0.1B v -€0.3B prior
- (TR) Turkey Aug Unemployment Rate: 11.1% v 11.2%e
- (ID) Indonesia Central Bank (BI) raised the Reverse Repo Rate by 25bps to 6.00% (not expected)
- (TR) Turkey Oct Central Gov’t Budget Balance (TRY): -5.4% v -6.0B prior
- (PH) Philippines Central Bank (BSP) raised the Overnight Borrowing Rate by 25bps to 4.75% (as expected) for its 4th straight rate hike
- (SE) Sweden Unemployment Rate: 5.5% v 6.1%e; Unemployment Rate (Seasonally Adj): 6.0% v 6.4%e; Trend Unemployment Rate: 6.3 v 6.5% prior
- (UK) Oct Retail Sales (Ex-Auto/Fuel) M/M: -0.5% v +0.2%e; Y/Y: 2.7% v 3.4%e
- (UK) Oct Retail Sales (Including Auto/Fuel) M/M: -0.5% v +0.2%e; Y/Y: 2.2% v 2.8%e
- (IT) Italy Sept General Government Debt: €2.331T v €2.327T prior
- (EU) Euro Zone Sept Trade Balance (Seasoanly adj): €13.4B v €16.3Be; Trade Balance NSA (unadj): €13.1B v €11.7B prior
Fixed Income Issuance
- None seen
Looking Ahead
- 05:30 (PL) Poland switch auction (buy 3 tranches; sell 5 tranchesin Bonds)
- 05:30 (UK) DMO to sell £2.0B in 1.75% Sept 2037 Gilts
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month bills
- 06:00 (RO) Romania to sell Bonds
- 06:00 (IE) Ireland Sept Trade Balance: No est v €3.7B
- 06:30 (TR) Turkey Central Bank TCMB Survey of Expectations
- 06:45 (US) Daily Libor Fixing
- 07:15 (FR) ECB’s Coeure (France) at conference
- 08:00 (PL) Poland Oct CPI Core M/M: 0.3%e v 0.0% prior; Y/Y: 0.9%e v 0.8% prior
- 08:00 (RU) Russia Gold and Forex Reserve w/e Nov 9th: No est v $459.7B prior
- 08:10 (UK) Baltic Dry Bulk Index
- 08:10 (BE) ECB’s Praet (Belgium, chief economist) in Brussels
- 08:30 (US) Nov Philadelphia Fed Business Outlook: 20.0e v 22.2 prior
- 08:30 (US) Nov Empire Manufacturing: 20.0e v 21.1 prior
- 08:30 (US) Oct Advance Retail Sales M/M: 0.5%e v 0.5%e v 0.1% prior; Retail Sales (Ex Auto) M/M: 0.5%e v 0.1% prior; Retail Sales (Ex Auto/Gas): 0.4%e v 0.0% prior; Retail Sales Control Group: 0.4%e v 0.5% prior
- 08:30 (US) Oct Import Price Index M/M: 0.1%e v 0.5% prior; Y/Y: 3.3%e v 3.5% prior; Import Price Index (ex-Petroleum) M/M: 0.0%e v 0.0% prior
- 08:30 (US) Oct Export Price Index M/M: 0.1%e v 0.0% prior; Y/Y: No est v 2.7% prior
- 08:30 (US) Initial Jobless Claims: 213Ke v 214K prior; Continuing Claims: 1.63Me v 1.623M prior
- 08:30 (CA) Canada Oct Teranet/National Bank House Price Index M/M: No est v 0.0% prior; Y/Y: No est v 2.1% prior; HPI Index: No est v 226.23 prior
- 08:30 (CA) Canada Oct ADP Payrolls Report
- 09:00 (BE) Belgium Sept Trade Balance: No est v -€0.9B prior
- 09:00 (CA) Canada Oct Existing Home Sales M/M: -0.2%e v -0.4% prior
- 09:35 (ES) ECB’s De Guindos (Spain) at bankers association
- 10:00 (US) Sept Business Inventories: 0.3%e v 0.5% prior
- 10:00 (US Fed’s Quarles (hawk, FOMC voter) to appear before Senate Banking Panel
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (US) Weekly DOE Crude Oil Inventories
- 11:00 (CO) Colombia Q3 GDP Q/Q: No est v 0.6% prior; GDP NSA Y/Y: 2.6%e v 2.8% prior; GDP SA Y/Y: 2.7%e v 2.5% prior
- 11:00 (US) Treasury announcement for upcoming TIP auction on Wed, Nov 21st
- 11:30 (IL) Israel Oct CPI M/M: 0.2%e v 0.1% prior; Y/Y: 1.1%e v 1.2% prior
- 11:30 (US) Fed Chair Powell
- 13:00 (US) Fed’s Bostic (dove, voter) in Madrid
- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: expected to raise Overnight Rate by 25bps to 8.00%
- 14:00 (CO) Colombia Sept Economic Activity Index (Monthly GDP) Y/Y: 3.0%e v 2.3% prior
- 14:00 (AR) Argentina Oct National CPI M/M: 5.5%e v 6.5% prior; Y/Y: No est v 40.5% prior
- 15:00 (US) Fed’s Kashkari (dove, non-voter) speaks to Minnesota AgriGrowth Council
