Notes/Observations
- Doubts creep into markets of upcoming US-China trade talks
- European data continues to underwhelm; German Factory orders adds to region’s recession fears
- EU Investor Sentiment Index falls to a 6 1/2 year low
Asia:
- China Sept Foreign Reserves: $3.092T v $3.105Te (1st decline in 4 months) while gold components rose for the 11th consecutive month
- China said to have narrowed the scope for trade deal with the US and are signaling they are reluctant to agree to a broad trade deal pursued by President Trump
- China soldiers issued arrest warning to Hong Kong protesters Sunday after they pointed lasers at the China barracks in HK (1st direct interaction with mainland military forces amid the 4 months of protests)
Europe/Mideast:
- Portugal Election Results: Socialist party won, but fell short of an outright majority (106 of 230 seats), PM Costa vowed to work with partners in parliament. Socialists took about 37% of the vote and boosted the number of seats in parliament to at least 106 from 86 currently. PM Costa said to be willing to renew his informal alliance with the Communists
Brexit:
- PM Johnson will seek a Supreme Court ruling on a no deal Brexit. PM is prepared to start a legal action in an attempt to ensure Britain can leave the the EU this month with or without a deal . Move seen as avoiding having to ask EU for a Brexit extension as required by Benn Act
- Scottish Court of Session said to rule on Monday (Oct 7th) on what sanctions could be imposed on PM Johnson if he fails to comply with Benn Act forcing him to ask for a Brexit extension if there’s no deal
- French President Macron: EU Brexit deal decision to come ”at the end of the week”. Said to have told UK PM Johnson the EU would decide at the end of the week whether a Brexit deal was going to be possible – PM Johnson op -ed in weekend papers reiterated his pledge to take Britain out of the EU by Oct 31st with or without a deal
Americas:
- Fed’s George (hawk, voter): Leaving US rates unchanged would have been appropriate given moderate growth, benign inflation outlook and record low unemployment. Muted inflation would not warrant policy response unless downside risks materialize. If consumer was losing confidence then may reconsider rates, currently consumers have been confident amid wage gains
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.14% at 380.74, FTSE +0.05% at 7,159.25, DAX -0.03% at 12,009.11, CAC-40 -0.10% at 5,482.79, IBEX-35 -0.10% at 8,953.00, FTSE MIB -0.15% at 21,437.50, SMI +0.42% at 9,869.00, S&P 500 Futures -0.46%]
- Market Focal Points/Key Themes: European Indices trade mixed, tracking a mixed session in Asia, while US futures trade lower as trade fears linger. On the corporate front shares of Osram Licht and AMS decline after AMS failed to reach the minimum shareholder approval for its take over of Osram, vowed to continue to purse the acquisition. SIG Plc trades almost 20% lower after warning on full profits, with Ter Beke another notable decliner having cut its full year EBITDA outlook due to the financial impact of the recall and temporary cessation of activities at Offerman Aalsmee. In other news Biom’Up gains on approval of Hemoblast Bellows; TP Group rises on a contract win while Lundin Petroleum and Aker BP rise on the start of production from Johan Sverdrup fields.
Equities
- Consumer discretionary: TER Beke [TERB.BE] -13% (profit warning)
- Healthcare: Bayer [BAYN.DE] +1% (lawsuit trial delayed), Biom’Up [BUP.FR] +14% (approval)
- Technology: AMS [AMS.CH] -4%, Osram Licht [OSR.DE] -4% (OSRAM bid failed), Dialog Semiconductor [DLG.DE] -0.5% (acquisition)
- Materials: SIG [SHI.UK] -19% (profit warning; divestments), Petra Diamons [PDL.UK] +7% (tender)
Speakers
- Italy Econ Min Gualtier stated that saw 2020 GDP growth of 0.6% as cautious and looked to avoid a VAT increase with balanced deficit target
- Italy Stats Agency (Istat) Monthly Economic Note noted that the short-term outlook remained negative as the Sept leading indicators pointed to continued weakness in economy
- Italy business lobby Confindustria maintained its 2019 GDP growth forecast at 0.0% and set 2020 growth at 0.4%
- Norway released its 2020 Budget Forecasts that maintained both its 2019 and 2020 non-oil growth outlook at 2.7% and 2.5% respectively. Planned 2020 budget impulse of -0.2% of trend mainland GDP and saw its 2020 structural non-oil budget (NOK): 243.6B
- Finland Finance Ministry updated its economic forecasts which cut the 2019 and 2020 GDP growth forecasts. Cut 2019 GDP growth from 1.6% to 1.5% and cut 2020 GDP growth from 1.2% to 1.0%
- Japan PM Abe stated in his parliament that it was not true that Japan promised to buy more of US corn (**Reminder: On Aug 25th reports circulated that Japan would purchase an additional 2.5M tons of corn from US this year compared typical annual imports of ~10M tons)
- OPEC Sec Gen Barkindo: OPEC+ alliance focused on full compliance with agreed upon oil production cuts. Saw end-2019 compliance around 136%
- Russia Energy Min Novak: Russia should lower Oil-industry taxes to bring into production some 10B Tonnes of currently uneconomic oil reserves
- ECB: Current aggregate level of NPLs remain elevated by international comparison
Currencies/Fixed Income
- Some doubts began to surface on the US-China trade front ahead of key high-level talks later this week. Reports circulated that China would be reluctant to agree to any broad trade deal pursued by President Trump and would hold out until after the 2020 Presidential elections. The USD received a slight bid while the Yen and CHF currencies were a tad firmer on safe-haven flows.
- Continued weak economic data out of Europe placed a headwind for the Euro. EUR/USD unable to get back above the 1.10 in the session. Weaker-than-expected German manufacturing orders data for August continue the trend of recent months and heightened potential recession fears for the region.
Economic data
- (SE) Sweden Maklarstatistik Sept Housing Prices Y/Y 2% v 2% prior; Apartment Prices Y/Y: 3% v 3% prior-
- (DE) Germany Aug Factory Orders M/M: -0.6% v -0.3%e; Y/Y: -6.7% v -6.4%e
- (NO) Norway Aug Industrial Production M/M: -2.1% v +0.6% prior; Y/Y: -9.2% v -5.7% prior
- (NO) Norway Aug Manufacturing Production M/M: -1.1% v -0.2%e; Y/Y: 1.7% v 3.8% prior
- (DK) Denmark Aug Industrial Production M/M: -1.1% v +4.1% prior
- (ZA) South Africa Sept Gross Reserves: $54.9B v $49.9Be; Net Reserves: $44.1B v $45.1Be
- (SE) Sweden Sept SEB Swedish Housing-Price Indicator: 46 v 38 prior
- (CZ) Czech Aug Industrial Output Y/Y: -3.8% v -3.3%e; Construction Output Y/Y: -2.4% v +3.6% prior
- (CZ) Czech Aug National Trade Balance (CZK): +8.6B v -0.5Be
- (CH) Swiss Sept Foreign Currency Reserves (CHF): 776.9B v 767.0B prior
- (HU) Hungary Aug Industrial Production M/M: % v 1.7% prior; Y/Y: % v 4.9%e
- (MY) Malaysia end-Sept Foreign Reserves: $103.0B v $103.5B prior
- (AT) Austria Sept Wholesale Price Index M/M: +0.3% v -0.6% prior; Y/Y: % v -1.2% prior
- (UK) Sept Halifax House Price M/M: -0.4% v +0.1%e; 3M/Y: 1.1% v 1.6%e
- (SE) Sweden Sept Budget Balance (SEK): -3.6B v 30.1B prior
- (TW) Taiwan Sept Trade Balance: $3.1B v $5.8Be; Exports Y/Y: -4.6% v +0.8%e; Imports Y/Y: -0.6% v -3.7%e
- (CH) Swiss weekly Total Sight Deposits (CHF): 592.2B v 592.2B prior; Domestic Sight Deposits: 480.1B v 477.9B prior
- (EU) Euro Zone Oct Sentix Investor Confidence: -16.8 v -13.0e (lowest since 2013)
- (SG) Singapore Sept Foreign Reserves : $272.2B v $272.4B prior
Fixed Income Issuance
- (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 3-month bills; Avg Yield: 1.28% v 1.24% prior; Bid-to-cover: 2.48x v 2.61x prior
Looking Ahead
- (IL) Israel Sept Foreign Currency Balance: No est v $119.8B prior
- (MX) Citibanamex Survey of Economists
- (IT) Bank of Italy (BOI) Sept Balance-Sheet Aggregates Target2 Liabilities: No est v €433B prior
- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell 6-month bills
- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
- 06:00 (IL) Israel Aug Chain Store Sales M/M: No est v 1.7% prior
- 06:00 (IE) Ireland Aug Industrial Production M/M: No est v 1.4% prior; Y/Y: No est v -0.7% prior
- 06:00 (RO) Romania to Sell 500 Million Lei of 4% 2022 Bonds
- 06:45 (US) Daily Libor Fixing
- 07:00 (MX) Mexico July Gross Fixed Investment: -7.8%e v -8.8% prior
- 07:00 (IL) Israel to sell 2022, 2028, 2029 and 2047 bonds
- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 07:30 (CL) Chile Sept Trade Balance: -$0.3be v +$0.1B prior; Total Exports: No est v $0.6B prior; Total Imports: No est v $5.8B prior; Copper Exports: No est v $3.1B prior
- 07:30 (CL) Chile Sept International Reserves: No est v $39.5BN prior
- 08:00 (PL) Poland Sept Official Reserves: No est v $116.6B prior
- 08:00 (CL) Chile Aug Nominal Wage M/M: No est v 0.6% prior; Y/Y: No est v 5.0% prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance
- 09:00 (FR) France Debt Agency (AFT) to sell combined €3.7-4.9B in 3-month, 6-month and 12-month Bills
- 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: expected to leave Base rate unchanged at 0.25%
- 09:00 (BR) Brazil Sept Vehicle Production: No est v 269.8K prior; Vehicle Sales: No est v 243.0K prior; Vehicle Exports: No est v 36.7K prior
- 10:00 (SE) Sweden FSA Head Erik Thedeen
- 10:20 (US) Fed’s Kashkari (non-voter, dove)
- 10:30 (TR) Turkey Sept Cash Budget Balance (TRY): No est v 5.7B prior
- 11:30 (US) Treasury to sell 3-month and 6-month bills
- 15:00 (US) Aug Consumer Credit: $15.0Be v $23.3B prior
- 16:00 (US) Weekly Crop Progress Report
