No-Deal Brexit Outcome Appearing More Likely

Notes/Observations

• Risk appetite loses some luster after China urged US to withdraw decision to blacklist Chinese companies, adding that retaliatory moves might come
• Doubts rising of any potential Brexit deal ahead of next week EU leader Summit; no-deal outcome scenario rising

Asia:

• China Sept Caixin PMI Services: 51.3 v 52.0e
• China Commerce Ministry (MOFCOM) stated that it was prepared to do a partial trade deal and then negotiate the harder issues next year; China won’t change IP laws, but would deal with the issue administratively
• China confirmed Vice Premier Liu He and PBOC Gov Yi Gang to attend trade talks in the US

Brexit:

• UK Borrowing could reportedly increase to almost £100B a year if a no deal Brexit happens (*8Note: Borrowing for the UK Public sector was ~£47B last year)

Americas:

• President Trump: China’s supply chain was cracked; reiterates China wanted to do a deal; think China was coming to make a deal
• US Commerce Dept to place 28 Chinese govt and commercial organizations onto ‘entity list’ citing Beijing’s treatment of Uighur Muslims and other predominantly Muslim ethnic minorities

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.33% at 381.64, FTSE +0.04% at 7,200.87, DAX -0.35% at 12,054.20, CAC-40 -0.33% at 5,503.22, IBEX-35 -0.51% at 8,998.00, FTSE MIB -0.31% at 21,585.50, SMI -0.32% at 9,882.50, S&P 500 Futures -0.10%]

Market Focal Points/Key Themes:

Equities

• European Indices trade mostly lower reversing the earlier gains, after a firmer session in Asia and slightly weaker US Index futures. Brexit deal concerns weigh on Cable, helping the FTSE outperform.
• On the corporate front share of low cost airliner Easyjet declines sharply, reversing earlier gains after the company raised the midpoint of their guidance; Aryzta falls as Revenue missed forecasts, Wirecard also declines having traded higher initially as the company did raise its 2025 Vision outlook while Vestjysk gains as the company raised its outlook.
• In other news B&O gains as the company named a new CEO; Nordex gains over 7% following a takeover offer by Acciona; LSE declines as HKEX will not pursue with its offer, while European 5G names Ericsson and Nokia gain on reports US officials are considering support in order to compete with Huawei.
• Looking ahead notable earners include Domino’s Pizza, AZZ and Helen of Troy.
• Consumer discretionary: EasyJet [EZJ.UK] -5% (trading update), PageGroup [PAGE.UK] -8.5% (cuts outlook)
• Financials: London Stock Exchange [LSE.UK] -6% (HKEX withdraws offer), Spar Nord [SPNO.DK] +1% (raises outlook), Countrywide [CWD.UK] +8% (new COO)
• Industrials: Nordex [NDX1.DE] +5%, Acciona [ACI.UK] -4% (placement; offer)
• Technology: Wirecard [WDI.DE] -4% (CMD)

Speakers

• Norway Central Bank (Norges) Gov Olsen: Deposit Rate likely to stay at 1.50% level for the coming years as inflation is close to target
• UK PM’s advisers said to be preparing for Brexit talks to collapse citing EU’s refusal to move on Irish border question
• DUP deputy leader Dodds: Looked difficult to get an Brexit agreement by the end of this week
• BBC’s Laura Kuenssberg tweeted: PM spoke to Merkel at 8am this morning – No 10 source says she said there could only be a deal if Northern Ireland stayed in Customs Union, if not, then deal was ‘overwhelmingly unlikely’
• German BGA exporters association cut its 2019 Export forecast from 1.5% to 0.5%; trade situation would only improve in H2 2020 at the earliest
• UK Govt published tariff rate changes to ease supply chain for HGVs, Biothanol and clothing
• Philippines Central Bank Chief Diokno: Sept rate cut likely the last one for this year but will continue with RRR cuts as inflation improves
• Hong Kong Police Daily Briefing: Over 200 shops and utilities have been damaged since Fridat, Oct 4th
• China Foreign Ministry Spokesman Geng Shuang: strongly opposed US blacklisting companies and noted it did not have any human rights issue in Xinjiang. Would take measures to safeguard interests and had no intent to intervene in US domestic politics

Currencies/ Fixed Income

• Risk appetite lost some luster after China urged US to withdraw decision to blacklist some Chinese companies, adding that retaliatory move might come
• Doubts rose of any potential Brexit deal ahead of next week EU leader Summit; no-deal outcome scenario rising.
• USD: The USD index bounced back yesterday after halting a week long slide. The USD today has sold off after President Trump’s comments yesterday warning Turkey of any actions after he announced the US would be pulling out of the Turkey Syria operation. Levels in the USD are seen in the region of 99.67 region to the upside and 98.00 to the downside. Volatility could pick up as we see FOMC meeting minutes tomorrow.
• GBP/USD The cable continues its slide sideways as the country awaits some clarity out of the UK regarding Brexit. Levels are seen to the upside in the region of 1.241 and 1.22 to the downside.

Economic Data

• (NL) Netherlands Sept CPI M/M: -0.6%e v +0.4% prior; Y/Y: 2.6% v 2.8% prior
• (NL) Netherlands Sept CPI EU Harmonized M/M: -1.1% v +0.6% prior; Y/Y: 2.7% v 3.0%e
• (CH) Swiss Sept Unemployment Rate: 2.1% v 2.1%e; Unemployment Rate (Seasonally Adj): 2.3% v 2.3%e
• (DE) Germany Aug Industrial Production M/M: 0.3% v 0.0%e; Y/Y: -4.0% v -4.3%e
• (FR) France Aug Trade Balance: -€5.0B v -€5.0Be
• (FR) France Aug Current Account Balance: -€2.5B v -€0.3B prior
• (ES) Spain Aug Industrial Output NSA Y/Y: -0.5% v +3.3% prior; Industrial Output SA Y/Y: 1.7% v 0.6%e; Industrial Production M/M: 0.9% v 0.0%e
• (CZ) Czech Aug Retail Sales Y/Y: 1.4% v 3.6%e; Retail Sales (ex-auto) Y/Y: 3.7% v 4.1%e
• (CZ) Czech Sept Unemployment Rate: 2.7% v 2.7%e
• (HU) Hungary Sept CPI M/M: 0.1% v 0.1%e; Y/Y: 2.8% v 2.9%e
• (SE) Sweden Aug Private Sector Production M/M: +0.6% v -0.3%e; Y/Y: 2.9% v 1.0%e
• (SE) Sweden Aug Industrial Orders M/M: -1.8% v +0.1% prior; Y/Y: -1.1% v -2.8% prior
• (SE) Sweden Aug Industry Production Value Y/Y: 2.5% v 3.1% prior; Service Production Value Y/Y: % v 1.4% prior
• (IT) Italy Aug Retail Sales M/M: -0.6% v +0.1%e; Y/Y: 0.7% v 2.3%e
• (CZ) Czech Sept International Reserves: $143.3B v $144.7B prior
• (HU) Hungary Sept YTD Budget Balance (HUF): -303.6B v -510.8B prior

Fixed Income Issuance

• (GR) Greece Debt Agency (PDMA) opens book to sell 3.875% Mar 2029 bond via syndicate; Yield guidance seen around 1.55%
• (NL) Netherlands Debt Agency (DSTA) sold €1.075B vs. €1.0-2.0B indicated range in 2.75% 2047 DSL bond; Avg Yield: -0.048% (record low) v +1.184% prior
• (ES) Spain Debt Agency (Tesoro) sold total €4.58B vs. €4.0-5.0B indicated range in 6-month and 12-month
• (ID) Indonesia sold toal IDR23.8T in 3-month and 12-month bills and 5-year, 10-year, 15-year and 20 bonds
• (AT) Austria Debt Agency (AFFA) sold total €1.27B vs. €1.27B indicated in 10-year and 30-year RAGB bonds
• (CH) Switzerland sold CHF418.9M in 3-month bills; Avg Yield: -0.912% v -0.821% prior
• (HU) Hungary Debt Agency (AKK) sold total HUF15B vs. HUF15B target in 3-month Bills; Avg Yield: -0.04% v -0.03% prior; Bid-to-cover: 2.37x v 3.00x prior
• (DE) Germany sold €385M vs. €500M indicated in 0.5% Apr 2030 I/L bonds (Bundei); Real Yield: -1.40% v -1.22% prior; Bid-to-cover: 2.2x v 2.0x prior
• (BE) Belgium Debt Agency (BDA) sold total €1.65B in 3-month and 12-month bills

Looking Ahead

• (PT) Bank of Portugal Sept ECB financing to Portuguese Banks: No est v €18.7B prior
• (UK) BOE’s BOE’s Tenreyro with ECB members Land (Ireland and de Cos (Spain) on panel in Frankfurt
• 06:00 (US) Sept NFIB Small Business Optimism Index: 102.5e v 103.1 prior
• 06:00 (TR) Turkey to sell Bills
• 06:30 (EU) ESM to sell €3.5B in 3-month bill
• 06:45 (US) Daily Libor Fixing
• 07:00 (CL) Chile Sept CPI M/M: 0.3%e v 0.2% prior; Y/Y: 2.4%e v 2.3% prior
• 07:00 (BR) Brazil Sept FGV Inflation IGP-DI M/M: +0.4%e v -0.5% prior; Y/Y: 2.8%e v 4.3% prior
• 07:45 (US) Goldman Economist Chain Store Sales
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (RU) Russia announces upcoming OFZ Bond issuance
• 08:15 (CA) Canada Sept Annualized Housing Starts: 220.0Ke v 226.6K prior
• 08:30 (US) Sept PPI Final Demand M/M: 0.1%e v 0.1% prior; Y/Y: 1.8%e v 1.8% prior
• 08:30 (US) Sept PPI Ex Food and Energy M/M: 0.2%e v 0.3% prior; Y/Y: 2.3%e v 2.3% prior
• 08:30 (US) Sept PPI Ex Food, Energy, Trade M/M: 0.2%e v 0.4% prior; Y/Y: No est v 1.9% prior
• 08:30 (CA) Canada Aug Building Permits M/M: 1.2%e v 3.0% prior
• 08:55 (US) Weekly Redbook LFL Sales data
• 09:00 (EU) Weekly ECB Forex Reserves
• 10:00 (MX) Mexico weekly International Reserve data
• 11:30 (US) Treasury to sell 52-Week Bills
• 13:00 (US) Treasury to sell 3-Year Notes
• 13:35 (US) Fed’s Evans in Chicago
• 13:50 (US) Fed Chair Powell speaks at NABE Conference in Denver
• 16:30 (US) Weekly API Oil Inventories
• 17:00 (US) Fed’s Kashkari (non-voter, dove) on panel