German Business Climate Improves But Expectations Fall To A 10 Year Low

Notes/Observations

• European Indices trade mostly higher as yields rise
• Markets await UK prorogation decision and Australian PM Lowe economic update

Asia:

• Japan Sept prelim PMI Manufacturing contracted at the sharpest rate since Feb, following on from weak PMIs seen in Europe
• PBoC Governor says they are not in a rush to roll out massive rate cuts or QE, have room to make adjustments but that is treasured
• RBA Gov Lowe to deliver an Economic update later today, where he is expected to signal another rate cut

Europe/Mideast:

• German IFO Business climate and current assessment improves slightly in August but expectations misses forecasts and reaches a 10 year low.
• France Business Confidence came slightly ahead on expectations

Brexit:

• EU Brexit negotiator maintained his pessimistic tone, seeing no reason for optimism on a solution to the Irish backstop
• UK Supreme court to rule on whether PM Johnson acted lawfully in proroguing parliament with the decision due at 10.30UK time.

Americas: –

• US Treasury Sec Mnuchin said talks with China Vice Premier Liu He will resume during the week of Oct 7 [Earlier on Monday, Mnuchin said Chinese Vice Premier Liu He will visit next week for talks]

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.18% at 390.52, FTSE -0.06% at 7,321.61, DAX +0.13% at 12,358.57, CAC-40 +0.22% at 5,642.98, IBEX-35 +0.40% at 9,129.65, FTSE MIB +0.24% at 21,953.50, SMI +0.10% at 10,007.50, S&P 500 Futures +0.30%]
• Market Focal Points/Key Themes: European Indices trade slightly higher across the board with FTSE100 underperforming other indices ahead of UK Supreme Court ruling to be issued later in the session. US futures also trade higher amid recession concerns worldwide on better-than-expected German IFO institute data. On the corporate front, shares of Thomas Cook’s rival TUI rise 2% following its trading update and affirmed outlook. SAF-Holland in Frankfurt trades sharply lower on profit warning, UK-listed Entertainment One fell after providing trading update, while UK chain of greeting card and gift stores Card Factory among notable risers this morning after earnings and special dividend. In other news, shares of healthcare company Evotec rose almost 7% on announcement of notable collaboration with Takeda Pharmaceuticals. Looking ahead notable earners include Carmax, Blackberry, Manchester United, IHS Markit and Jabil Circuit.

Equities

• Consumer discretionary: TUI [TUI.UK] +2% (trading update), Entertainment One [ETO.UK] -1% (trading update)
• Healthcare: Evotec [EVT.DE] +6.5% (collaboration)
• Industrials: SAF-Holland [SFQ.DE] -22% (profit warning), Kloeckner [KCO.DE] +3% (analyst action), Nordex [NDX1.DE] +3% (contract award)
• Technology: Card Factory [CARD.UK] +3% (earnings; special dividend)

Speakers

• (DE) Germany Econ Min Altmaier: To propose tax cut for unlisted companies; Agrees to discuss corporate tax cut
• (FR) ECB’s Villeroy (France): says global economy looks increasingly uncertain; rate cut, new guidance are powerful combination
• (SE) Sweden Central Bank (Riksbank) Dep Gov Jansson (dissenter): we have seen a tendency to lower inflation expectations
• (SE) Sweden Central Bank (Riksbank) Gov Ingves: Sweden’s strong labor market is slowing down
• (UK) EU Brexit negotiator Barnier: I see no reason for optimism that EU and Britain can find solution to question of Irish backstop – press
• (ID) Indonesia Fin Min Mulyani: Indonesia 2020 fiscal policies aimed at keeping growth above 5%

Currencies/Fixed Income

• EUR/USD: The Euro rebounded slightly yesterday after the weak flash PMI readings. The pair continues to trade below the 1.10 level as the short term trend appears to approach the 2 year low of 1.093. Further in the Week we will see Draghi speak which could increase volatility.
• GBP/USD: Cable has traded sideways after its sell off yesterday as trading desks wait to hear the UK Supreme court ruling on whether the proroguing of parliament was legal. This could increase volatility in the pair. Levels to the upside are in the region of 1.258 and 1.239 to the downside.

Economic Data

• (DE) GERMANY SEPT IFO BUSINESS CLIMATE SURVEY: 94.6 V 94.5E; CURRENT ASSESSMENT SURVEY: 98.5 V 96.9E, Expectations Survey: 90.8 v 92.0e
• (FR) FRANCE SEPT BUSINESS CONFIDENCE: 106 V 105E
• (UK) AUG PUBLIC FINANCES (PSNCR): +£6.4B V -£13.5B PRIOR; NET BORROWING: £5.8B V £6.5BE
• (PL) Poland Aug Unemployment Rate: 5.2% v 5.2%e
• (CZ) Czech Sept Consumer Confidence Index: 1.0 v 2.8 prior; Business Confidence: 11.6 v 12.5 prior
• (TR) Turkey Sept Real Sector Confidence (Seasonally Adj): 99.7 v 102.1 prior; Real Sector Confidence NSA (unadj): 98.8 v 102.5 prior
• (FI) Finland Aug Unemployment Rate: 6.1% v 6.0% prior
• (FI) Finland Aug PPI M/M: -0.2% v +0.5% prior; Y/Y: -1.0% v -0.8% prior

Fixed Income Issuance

• (PH) Philippines sells PHP0B (nil) vs PHP20B indicated in 20-year bonds (rejects all bids) (ID) Indonesia sells total IDR18T vs.IDR15T target in 6-month and 9-month bills

Looking Ahead

• 05:30 (UK) Weekly John Lewis LFL Sales data
• 06:00 (UK) CBI Industrial Trends Total Orders: -16e v -13 prior; Selling Prices: 0e v -2 prior
• 06:30 (UK) Bank of Spain (BOS) updates economic forecasts
• 07:00 (BR) Brazil Central Bank (BCB) Sept COPOM Meeting Minutes
• 07:45 (US) Goldman Economist Chain Store Sales
• 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave base Rate unchanged at 0.90%; Leave Overnight Deposit Rate unchanged at -0.05%
• 08:00 (BR) Brazil Mid-Sept IBGE Inflation IPCA-15 M/M: 0.1%e v 0.1% prior; Y/Y: 3.2%e v 3.2% prior
• 08:00 (CL) Chile Aug PPI M/M: No est v 0.1% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:55 (US) Weekly Redbook LFL Sales data
• 09:00 (US) July FHFA House Price Index M/M: 0.3%e v 0.1% prior (revised from 0.2%)
• 09:00 (BE) Belgium Sept Business Confidence: -5.5e v -5.8 prior
• 09:00 (US) July S&P Case-Shiller 20-City M/M: 0.1%e v 0.04% prior; Y/Y: 2.10%e v 2.13% prior; House Price Index (HPI): No est v 217.65 prior
• 09:00 (US) July S&P Case-Shiller (overall) HPI Y/Y: 2.90%e v 3.13% prior; Overall HPI Index: No est v 210.71
• 09:00 (EU) Weekly ECB Forex Reserves
• 10:00 (US) Sept Richmond Fed Manufacturing Index: 1e est v 1 prior
• 10:00 (MX) Mexico Weekly International Reserve data
• 10:00 (US) Sept Consumer Confidence: 133.0e v 135.1 prior
• 11:30 (IT) Italy Treasury (Tesoro) announces upcoming issuance; to sell €B in BTP and CCTeu on Friday, Sept 27th
• 15:00 (AR) Argentina July Shop Center Sales Y/Y: No est v -6.1% prior; Supermarket Sales Y/Y: No est v -13.2% prior
• 16:30 (US) Weekly API Oil Inventories
• 18:45 (NZ) New Zealand Aug Trade Balance (NZD): -1.4Be v -0.7B prior; Exports: 4.1Be v 5.0B prior; Imports: 5.6Be v 5.7B prior
• 19:50 (JP) BOJ July Minutes (2 meetings ago)
• 19:50 (JP) Japan Aug PPI Services Y/Y: 0.5%e v 0.5% prior
• 21:00 (AU) Australia Aug Skilled Vacancies M/M: No est v 0.4% prior
• 22:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave Official Cash Rate unchanged at 1.00%