HomeContributorsFundamental AnalysisMarkets Remain Subdued Ahead Of US Payroll Data

Markets Remain Subdued Ahead Of US Payroll Data

Notes/Observations

  • RBI cuts rates again (as expected) and keeps door open for more easing to aid its economy
  • Markets await US payrolls data and cues from Fed Chair Powell; labor market likely remaining robust
  • China Vice Premier Liu He poised to visit Washington next week for trade talks

Asia:

  • Hong Kong Executive Council approved anti-mask law (would allow Lam to authorize arrests, detentions and deportations; censor the press; seize property; along with total control of all transport, manufacturing and trade in the city)
  • Australia Aug Retail Sales M/M: 0.4% v 0.5%e
  • RBA Financial Stability Report noted that its resilience to shocks was rising but risks remain. Households remain well placed to service its debt.

Europe/Mideast:

Brexit:

  • PM Johnson said to have been given one week by the EU to revise its Brexit offer or face postponement of Brexit. EU leaders said to otherwise not discuss it at the upcoming Oct summit if not revised
  • PM Johnson said to have a backup plan if the EU turns down his deal; Johnson said to have not ruled out accepting the backstop with a time limit
  • EU said to be open but not convinced by PM Johnson’s new Brexit plans EU’s Tusk was one of several senior officials to voice doubts over the PM’s Withdrawal Agreement EUBarnier said to have told a private meeting of senior European diplomats that the latest post Brexit plan for arrangements on Ireland’s border from PM Johnson for arrangements on Ireland’s border fell far short of his conditions for a deal
  • EU Parliament statement noted that it had grave concerns about new UK Brexit plan; the plan did not “even remotely” work for the Irish border. UK PM Johnson’s new proposals did not represent the basis for a deal

Americas:

  • Fed Vice Chair Clarida (moderate, voter): Focus of the Fed was to keep the economy in a good place; growth was solid with inflation stable. Consumer was in a ‘good place;’ Would not comment on probability of additional rate cuts
  • Sec of State Pompeo: Will certainly talk to EU over trade tariffs, Will do our best to accommodate each country over tariffs but this was definitely an unfair trading relationship

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +0.19% at 378.26, FTSE +0.41% at 7,106.65, DAX +0.06% at 11,932.51, CAC-40 +0.18% at 5,448.31, IBEX-35 % at #, FTSE MIB % at #, SMI +0.35% at 9,794.50, SP 500 Futures -0.25%]

Market Focal Points/Key Themes:

  • European Indices trade mostly higher tracking a mixed session in Asia, with US futures slightly lower after strong gains seen yesterday.
  • On the corporate front Swiss traded Aryzta trades over 10% higher following the sale of its stake in Picard for €156M; the LSE gains on reports that some shareholders are calling for an increase bid and high cash component from the Hong Kong Stock Exchange. UK insurers trade heavy as the FCA proposes potential new measure that include banning or restricting practices like raising prices for consumers who renew year on year to tackle concerns about general insurance pricing. RSA, L&G, Saga,Direct Line and Admiral among the names trading lower.
  • On the earnings front, MQ holdings falls after a decline in profits and revenue, with Quantum genetics gaining in France on a lower loss.

Equities

  • Consumer discretionary: Aryzta [ARYN.CH] +7% (to divest majority of its Picard stake), MQ Holding [MQ.SE] -19% (earnings)
  • Energy: BP [BP.UK] +1% (CEO to retire)
  • Financials: LSE [LSE.UK] +2% (some investors call on HSEX to up bid)
  • Technology: Infineon [IFX.DE] +1%, AMS [AMS.CH] +3%, STMicro [STM.FR] +2% (Apple to raise production)

Speakers

  • Germany Dep Fin Min Kukies reiterated stance that does not see country in a prolong recession
  • France Farming Ministry official: To support wine producers after US tariffs
  • Sweden Central Bank (Riksbank) DepdGov Jansson (dissenter): Had experienced a rapid worsening of the domestic economic situation and believes a rate hike was not a good idea. Could do more with monetary policy if we had to, but our ammunition was not unlimited. Believed that the weak SEK currency (Krona) weakness was not primarily due to monetary policy; there was risk that the currency could weaken further
  • Czech Central Bank Sept Minutes: Expect to debate a rate hike at the Nov meeting
  • Russia Central Bank Dep Gov Yudayeva reiterated CBR stance that saw some scope for more rate cuts
  • Hong Kong Chief Executive Lam confirmed to ban face masks in protests from Saturday, Oct 5th. Protesters could face a year in jail for wearing masks. Says HK had endured over 400 protests and that violence was escalating
  • Hong Kong Finance Secretary Paul Chan: stated that the govt would not consider introducing capital controls. Hong Kong’s core competitiveness had not been damaged by the internal or external pressures
  • India Central Bank (RBI) Policy Statement noted that the vote to cut rates was not unanimous (5-1) but maintained its accommodative stance
  • India Central Bank (RBI) Gov Das post rate decision press conference noted that it had policy space to address growth. MPC was seeking to intensify its measures at address the economic slowdown . Saw no reason to doubt govt commitment on its fiscal deficit target as govt had option to make up shortfall in revenues from other sources

Currencies/ Fixed Income

  • USD was steady ahead of the Sept non-farm payroll report. The week has exhibited some skittishness about global economy amid a series of weak data from the euro zone and the US and the prospect of fresh tariffs from the US on certain exports from the EU. This saw the index trade lower for the fourth straight day. Levels to the downside are in the region of 98.00 and 99.67 to the upside.
  • EUR/USD holding under the 1.10 level as it has traded higher for four straight days, while USD/JPY was at 106.7-0 area.
  • GBP/USD just under the 1.2350 area as dealers continued to focus on Brexit developments. There was some optimism of a possible Brexit breakthrough bythe EU Leader summit later this month, as the bloc gave the UK PM Johnson a week to revise his Brexit deal on the Irish backstop.

Economic data

  • (IN) India Sept PMI Services: 48.7 v 52.4 prior (1st contraction in 3 months and lowest since Feb 2018)
  • (IN) India Central Bank (RBI) cut its Repurchase Rate by 25 bps to 5.15% (as expected)
  • (FR) France Aug YTD Budget Balance: -€123.1B v -€109.7B prior
  • -(DE) Germany Construction PMI: 50.1 v 46.3 prior
  • (RU) Russia Narrow Money Supply w/e Sept 27th (RUB): 10.56T v 10.63T prior
  • (IT) Italy Q2 YTD Budget Deficit to GDP Ratio: 4.0% v 7.1% prior
  • (UK) Sept New Car Registrations Y/Y: +1.3% v -1.6% prior
  • (NG) Nigeria Sept PMI Services: 57.1 v 56.4 prior
  • (IS) Iceland Sept Preliminary Trade Balance (ISK): -17.1B v -12.0B prior

Fixed Income Issuance

  • None seen

Looking Ahead

  • 05:30 (IN) India to sell INR160B in 2021, 2026, 2029, 2039, and 2059 bonds
  • 06:00 (FI) Finland Govt Confidence vote in Parliament
  • 06:00 (UK) DMO to sell €6.5B in 1-month, 3-month and 6-month bills (ÂŁ1.0B, ÂŁ3.0B and ÂŁ2.5B respectively)
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (MX) Mexico Sept Vehicle Production: No est v 337.5K prior; Vehicle Exports: No est v 281.8K prior
  • 07:30 (TR) Turkey Sept Real Effective Exchange Rate (REER): No est v 76.77 prior
  • 07:30 (IN) India Weekly Forex Reserve
  • 08:00 (UK) Daily Baltic Dry Bulk Index
  • 08:00 (IN) India announces upcoming bill issuance (held on Wed)
  • 08:30 (US) Sept Change in Nonfarm Payrolls: +145Ke v +130K prior; Change in Private Payrolls: +130Ke v +96K prior; Change in Manufacturing Payrolls: +3Ke v +3K prior
  • 08:30 (US) Sept Unemployment Rate: 3.7%e v 3.7% prior; Underemployment Rate: No est v 7.2% prior; Labor Force Participation Rate: 63.2%e v 63.2% prior
  • 08:30 (US) Sept Average Hourly Earnings M/M: 0.3%e v 0.4% prior; Y/Y: 3.2%e v 3.2% prior; Average Weekly Hours: 34.4e v 34.4 prior
  • 08:30 (US) Aug Trade Balance: -$54.5Be v -$54.0B prior
  • 08:30 (CA) Canada Aug Int’l Merchandise Trade (CAD): -1.2Be v -1.1B prior
  • 08:30 (US) Fed’s Rosengren (hawk) at Boston Fed Conference:
  • 09:00 (RU) Russia Sept CPI M/M: -0.1%e v -0.2% prior; Y/Y: 4.0%e v 4.3% prior
  • 09:00 (RU) Russia Sept CPI Core M/M: 0.2%e v 0.2% prior; Y/Y: 4.0%e v 4.3% prior
  • 09:00 (RU) Russia Q4 Consumer Confidence Index: No est v -15 prior
  • 10:00 (CA) Canada Sept Ivey Purchasing Managers Index (Seasonally Adj): No est v 60.6 prior; PMI (unadj): No est v 58.6 prior
  • 10:25 (US) Fed’s Bostic
  • 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Czech Republic; S&P on France and Estonia, DBRS on Portugal)
  • 13:00 (US) Weekly Baker Hughes Rig Count data
  • 14:00 (CO) Colombia Central Bank Minutes
  • 14:00 (US) Fed Chair Powell at Fed Event
  • 14;10 (US) Fed’s Brainard
  • 16:00 (US) Fed’s Quarles (hawk, voter)
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