Notes/Observations
- Focus remained on UK politics and Brexit as Downing Street said to be preparing for a no confidence motion in Theresa May as Conservative leader
Asia:
- Japan Fin Min Aso: Q3 GDP decline was impacted by natural disasters, exports probably impacted by trade issues
- US and China said to have doubled down on efforts to reach an agreement in the growing trade war, at the G-20 meeting later this month in Argentina (Note: Lighthizer’s office issued statement denying the reports). Commerce Sec Ross stated that the US still planned China tariff boost to 25% in January and the meeting between Trump and Xi to focus on the “big picture.”
Europe:
- UK PM May stated that approach on Brexit was to put national interest first; did not judge harshly on colleagues who reached a different conclusion
- Conservative Party power sharing alliance with Northern Ireland DUP party is reportedly over unless PM May is replaced
- Some UK MPs expect a ‘no confidence’ vote on PM May on Monday (Nov 19th). Under the Conservative party’s rules PM May has to win a simple majority of 315 Tory MPs – 158 MPs in a no confidence vote
Americas:
- Fed’s Powell: wages are now in a range reflecting inflation and productivity; I am carefully monitoring wages; haven’t increased as quickly as hoped
Macro
- (UK) United Kingdom – News that Michael Gove affirmed his allegiance to Prime Minister May was seen by many as reducing the odds for a confidence vote, and at the least increases the odds of May surviving in the event that one does eventually arise. Most political pundits seem to believe May would survive a confidence vote, if it came to that, though the prospects for her Brexit plan to pass a parliamentary vote, which is set to take place on December 10,looks increasingly unlikely.
- (EU) ECB – President Draghi confirmed the path to phasing out QE. The ECB intends to end net asset purchases in December – subject to data. The ECB will at least stop to expand its balance sheet, even if the negative interest rate policy and ongoing re-investments will keep monetary policy very expansionary. Draghi also sent a thinly veiled warning to Italy when he said that high debt countries shouldn’t lift debt levels further and respect the rules of the European Union.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.4% at 359.7, FTSE +0.2% at 7048, DAX +0.5% at 11411, CAC-40 +0.3% at 5048, IBEX-35 +0.3% at 9099, FTSE MIB +0.7% at 19032, SMI +0.6% at 8920, S&P 500 Futures -0.4%]
- Market Focal Points/Key Themes: Equities European Indices trade slightly higher across the board following a mixed session in Asia and a positive session in the US. US futures however are pointing to a lower open with the Nasdaq sharply lower after weak earnings from Nvidea, and outlook which fell substantially short of estimates. On the European corporate front Vivendi outperforms after earnings and acquisition, with Talgo, Kier Group and Good Energy among other notable risers after earnings and trading updates. Vallourec declines sharply after missing estimates and swinging the a loss. Elsewhere Tobacco names continue to be under pressure following a statement from the FDA on a potential ban of mental cigarettes; on the M&A front ABB trades higher after talk of selling their Power Grid business, Astaldi also rises after Salini Impregilo presents non-binding preliminary interest. Looking ahead notable earners include Helmerich and Payne and Viacom.
- Consumer discretionary: Vivendi Universal [VIV.FR] +6% (earnings; acquisition and comments on UMG sale rumor)
- Consumer staples: Imperial Brands [IMB.UK] +1.5%, British American Tobacco [BATS.UK] +0.5% (statement on FDA’s potential ban of menthol cigarettes)
- Financials: CNP Assurances [CNP.FR] -0.5% (earnings), ABN AMRO Holding [ABN.NL] -2.5% (capital markets day)
- Healthcare: Astrazeneca [AZN.UK] -1.5% (provides study update), Hutchison China MediTech Ltd [HCM.UK] -18% (announces trial results)
- Industrials: Vallourec [VK.FR] -20% (earnings; transformation plan), Scania [SCVA.SE] -3% (Volvo said to sue company), Kier Group [KIE.UK] +3% (trading update), ABB Ltd [ABBN.CH] +2.5% (reportedly in talks with China state Grid, Mitsubishi and Hitachi to sell its Power Grid Business), Astaldi [AST.IT] +21% (Salini Impregilo presents non-binding prelim interest), Talgo [TLGO.ES] +5.5% (earnings; buyback program)
- Technology: Basware [BAS1V.FI] +46% (confirms press speculation on tender offer), Wirecard [WDI.DE] +0.5% (partnership with MasterCard)
- Utilities: Good Energy [GOOD.UK] +16% (trading update)
Speakers
- ECB’s Draghi reiterated view that the regional economy had lost some momentum but believed the recent slowdown was temporary; growth outlook remained broadly balanced. Reiterated that expected economic expansion to continue in the coming years and saw no reason for it to come to an abrupt end. Patience and persistence was still needed in policy and reiterated view that underlying inflation had yet to show convincing trend up. Forward guidance had been effective in anchoring expectations about the future path of rates and preventing undo tightening. Anticipated net asset purchases to end in Dec and would be better placed in December to make a full assessment on outlook
- EU Trade Commissioner Malmstrom believed that US sought a larger trade deal that included agriculture. Stated that there was ‘no chance’ that would be agreed to
- EU’s Dombrovskis reiterated stance Italy’s draft budget for 2019 significantly deviates from commitment and openly deviate from EU budget rule
- UK PM May stated that was still working with North Ireland DUP party; no row about Foster supporting govt. Did not have a testy exchange with DUP leader Foster. Have not yet appointed a new Brexit Sec yet; to do so in coming days. Had a good conversation with Michael Gove
- Northern Ireland DUP party official Donaldson (part of coalition): Could review confidence and supply agreement with Conservatives
- Northern Ireland DUP party Brexit Spokesman Wilson: Focused on defeating Brexit deal
- Reports circulated that the necessary 48 letters were in to the 1922 Committee and Downing Street was preparing for a no confidence motion in Theresa May as Conservative leader
- Russia Central Bank Gov Nabiullina stated that it was not in a tightening cycle. Reiterated that restarting FX purchases depended on currency volatility and could recoup lost purchases over three years
- Japan Abe: To order a 2nd extra budget after returning to Japan
Currencies/Fixed Income
- The USD was on slightly soft footing but the focus remained on UK politics.
- GBP began the session on firmer tone as PM May survived the initial flow of resignations in her Cabinet and reports that the 1922 Committee had yet to receive the necessary 48 letters to begin a confidence motion. The bulk of the GBP’s gain eroded as the session wore on as Downing Street was said to be preparing for a no confidence motion in Theresa May as Conservative leader
Economic data
- (DE) Germany Oct Wholesale Price Index M/M: 0.3%e v 0.4% prior; Y/Y: 4.0% v 3.5% prior
- (TR) Turkey Sept Industrial Production M/M: -2.7% v +0.3%e; Y/Y: -2.7% v +1.5%e
- (CN) Weekly Shanghai copper inventories (SHFE): 134.7K v 142.2K prior
- (AT) Austria Oct CPI M/M: 0.3% v 0.8% prior; Y/Y: 2.2% v 2.0% prior
- (RU) Russia Narrow Money Supply w/e Nov 9th: 10.30T v 10.27T prior
- (CZ) Czech Oct PPI Industrial M/M: 0.2%e; Y/Y: 3.3%e
- (CZ) Czech Sept Export Price Index Y/Y: 1.4% v 1.6% prior; Import Price Index Y/Y: 2.4% v 2.9% prior
- (HK) Hong Kong Q3 GDP Q/Q: 0.1% v 0.6%e; Y/Y: 2.9% v 3.3%e – (HK) Hong Kong Oct Unemployment Rate: 2.8%e v 2.8% prior
- (IT) Italy Sept Industrial Sales M/M: 0.0% v 1.3% prior; Y/Y: 3.9% v 3.2% prior
- (IT) Italy Sept Industrial Orders M/M: -2.9% v +4.9% prior; Y/Y: -0.9 v +0.8% prior
- (EU) Euro Zone Oct Final CPI Y/Y: 2.2% v 2.2%e; CPI Core Y/Y: 1.1% v 1.1%e; CPI M/M: 0.2% v 0.2%e
- (IT) Italy Sept Total Trade Balance: €1.3B v €2.6B prior; Trade Balance EU: €1.2B v €0.8B prior
- (CY) Cyprus Oct CPI Harmonized M/M: -0.3%% v +0.2% prior; Y/Y: 1.9% v 1.7% prior
Fixed Income Issuance
- (IN) India sold total INR120B vs. INR120B indicated in 2020, 2023, 2032, 2035 and 2055 bonds
- (ZA) South Africa sold total ZAR650M vs. ZAR650M indicated in 2025, 2038 and 2046 I/L bonds
Looking Ahead
- (BE) Belgium Debt Agency (BDA) announcement on upcoming OLO Bond auction
- (CO) Colombia Oct Consumer Confidence Index: -1.8%e v -0.7 prior
- 05:30 (BR) Brazil Sept Economic Activity Index (Monthly GDP) M/M: -0.2%e v +0.5% prior; Y/Y: 0.8%e v 2.5% prior
- 06:00 (UK) DMO to sell €3.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £2.0B respectively)
- 06:30 (IN) India Weekly Forex Reserves w/e Nov 9th: No est v $393.1B prior
- 06:45 (US) Daily Libor Fixing
- 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond issuance (held on Thursdays)
- 08:10 (UK) Baltic Dry Bulk Index – 08:30 (CA) Canada Sept Int’l Securities Transactions (CAD): No est v 2.8B prior
- 08:30 (CA) Canada Sept Manufacturing Sales M/M: +0.1%e v -0.4% prior
- 08:30 (US) Weekly USDA Net Export Sales
- 09:15 (US) Oct Industrial Production: 0.2%e v 0.3% prior; Capacity Utilization: 78.2%e v 78.1% prior; Manufacturing Production: 0.2%e v 0.2% prior
- 11:00 (US) Nov Kansas City Fed Manufacturing Activity: 11e v 8 prior
- 11:00 (EU) Potential sovereign ratings after European close: (Netherlands; and Switzerland Sovereign Debt to be rated by S&P; Austria Sovereign Debt to be rated by Moody’s; Romania Sovereign Debt to be rated by Fitch)
- 11:30 (US) Fed’s Evans (non-voter, dove) speaks at Fixed Income Forum Roundtable
- 13:00 (US) Weekly Baker Hughes Rig count data
- 16:00 (US) Sept Total Net TIC Flows: No est v $108.2B prior; Net Long-term TIC Flows: No est v $131.8B prior
