PM Johnson Battling To Sell His New Brexit Deal, Arithmetic For Passage Appears Close

Notes/Observations

• Focus on Brexit turns to Saturday’s UK Parliamentary meaningful vote of PM Johnson’s deal with EU; PM battling to sell his new Brexit deal to skeptical members of the Parliament; arithmetic is close

Asia:

• Japan Sept National core CPI inflation slows to near 2-1/2-year low (CPI Y/Y: 0.2% v 0.2%e; CPI Ex Fresh Food (core) Y/Y: 0.3% v 0.3%e
• China Q3 GDP slows to bottom end of target range (Q/Q: 1.5% v 1.5%e; Y/Y: 6.0% v 6.1%e)
• China Sept Industrial Production Y/Y: 5.8% v 4.9%e; Industrial Production YTD Y/Y: 5.8% v 5.5%e
• China Sept Retail Sales Y/Y: 7.8% v 7.8%e; Retail Sales YTD Y/Y: 8.2% v 8.1%e

Brexit:

• PM Johnson: very confident the UK Parliament will vote for the Brexit deal
• UK senior Labour Party sources (opposition) said to see fewer than 10 Labour MPs supporting PM Johnson’s deal on Saturday
• Northern Ireland DUP Brexit Spokesman Wilson: To encourage other MPs to oppose PM Johnson’s Brexit deal
• Chancellor of the Exchequer Javid (Fin Min): See decent chance that Brexit deal will be approved by Parliament on Saturday; will still leave on Oct 31 with no deal if necessary
• Scotland Supreme court will hear a legal bid to halt Brexit deal

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.20% at 392.30, FTSE -0.46% at 7,149.47, DAX -0.09% at 12,643.34, CAC-40 -0.47% at 5,646.43, IBEX-35 -0.13% at 9,328.00, FTSE MIB -0.18% at 22,335.50, SMI -0.39% at 9,970.00, S&P 500 Futures -0.13%]
• Market Focal Points/Key Themes: European Indices trad mixed, follwoing a mostly lower session in Asia and lower US Index futures as Brexit developments and a slew of corporate profit warnings are in focus. On the corporate front shares of French car giant Renault trades sharply lower, trading at over a 6 year low as the company cut its full year outlook as well as painting a rough outlook for 2020; Thales also declines on inline Q3 Revenues and lowered Organic growth forecast, while Danone falls over 6% on in line sales and trimmed sales outlook. Other notable earners include LSE which trades higher on a revenue beat, and the retirement of its CFO, with Vivendi, Getinge and Assa Abloy also outperforming, trading higher on strong Revenue growth. Volvo, Accor, Remy Cointreau and Nabaltec are among some of the other names trading lower on earnings. In other news Eurazeo trades lower as holder Tikehau Capital sells stake, whilst UCB gains following positive opinion recommending EVENITY Marketing Looking ahead notable earners include Coca-Cola, Schlumberger, American Express and Kansas City Southern among others.

Equities

• Consumer discretionary: Remy Cointreau [RCO.FR] -2% (earnings), Danone [BN.FR] -7% (earnings), Casino [CO.FR] +1% (earnings), Edenred [EDEN.FR] +5% (earnings), Accor [AC.FR] -1% (earnings), Deutsche Post DHL [DPW.DE] +1.5% (analyst action)
• Financials: LSE [LSE.UK] +2% (trading update)
• Industrials: Renault [RNO.FR] -13% (prelim earnings; cuts outlook), Volvo [VOLVA.SE] -2% (earnings), Assa Abloy [ASSAB.SE] +2% (earnings), Thales [HO.FR] -5% (earnings; outlook cut)
• Technology: – Telecom:

Speakers

• BOE’s Ramsden: Smooth Brexit outcome would put rate hikes on the table
• Northern Irish Democratic Unionist Party (DUP) spokesperson Wilson reiterated stance to encourage conservative lawmakers to vote with DUP and oppose PM Johnson’s deal
• Northern Ireland DUP MP Donaldson: Party to oppose Brexit deal as things stand; to continue to engage UK govt
• EU said to be preparing for another delay in order to avoid a no-deal Brexit
• Poland Central Bank official Sura: CPI would not exceed 3.5% in coming months. Most probable scenario was the stabilization of interest rates in the coming year .IIf inflation was within target, the MPC should focus on its second statutory mandate of supporting government’s economic policy
• Russia Central Bank (CBR) reportedly may cut interest rates more drastically
• BOJ Dep Gov Amamiya reiterated BOJ stance that must continue powerful monetary easing; needed to pay attention on risk to momentum of achieving price target. Reiterated assessment that domestic economy is expanding moderately
• Japan Cabinet Office (Govt) Oct Monthly Economic Report cut its overall assessment citing weak exports. It still saw the domestic economy as recovering at a moderate pace (1st cut since May)

Currencies/Fixed Income

• GBP/USD just under the 1.29 level as focus on Brexit turned to Saturday’s UK Parliamentary meaningful vote of PM Johnson’s deal with EU. The parliamentary arithmetic appeared very tight (PM needs 320 to win the vote). Dealers believe that GBP had legs to the upside should Parliament approve PM Johnson’s deal with 1.36 seen as key pivotal resistance. If Members of Parliament rejected the deal, Johnson will be legally obliged to request a delay but various scenarios could play out and still lead to a no-deal outcome. Goldman analyst updated its Brexit outcome scenarios which raises probability of Brexit deal from 60% to 65%and lowers probability of no-deal outcome from 15% to 10%
• EUR/USD near 2-month highs as the pair stayed above the 1.11 leve;
• USD/JPY holding below the key 109 level

Economic Data

• (CN) Weekly Shanghai copper inventories (SHFE): 152.5K v 134.5K tons prior
• (RU) Russia Narrow Money Supply w/e Oct 11th (RUB): 10.64T v 10.58T prior
• (EU) Euro Zone Aug Current Account (Seasonally Adj): €27.0 v €22.0B prior
• (PL) Poland Sept Sold Industrial Output M/M: 10.7% v 9.8%e; Y/Y: 5.6% v 5.0%e
• (PL) Poland Sept PPI M/M: 0.4% v 0.3%e; Y/Y: 0.9% v 0.5%e
• (IT) Italy Aug Current Account Balance: €6.0B v €8.4B prior
• (HK) Hong Kong Sept Unemployment Rate: 2.9% v 3.0%e

Fixed Income Issuance

• (IN) India sold total INR160B vs. INR160B indicated in 2021, 2026, 2029, 2039, and 2059 bonds

Looking Ahead

• (G20) ECB’s Draghi and Coeure (France) at IMF/World Bank in Washington
• 06:00 (UK) DMO to sell €6.5B in 1-month, 3-month and 6-month bills (£1.0B, £3.0B and £2.5B respectively)
• Sells £1.0B in 1-month bills; Yield: % v 0.7024% prior; bid to cover: x v 1.81x prior
• Sells £3.0B in 3-month bills; Yield: % v 0.7357% prior; bid to cover: x v 1.72x prior
• Sells £2.5B in 6-month bills; Yield: % v 0.7427% prior; bid to cover: x v 2.14x prior
• To sell combined £6.5B in 1-month, 3-month and 6-month Bills on Fri, Oct 25th (£1.0B, £2.5B and £3.0B respectively) http://www.dmo.gov.uk/data/pdfdatarheport?reportCode=D2.2A – 06:45 (US) Daily Libor Fixing
• 07:00 (BR) Brazil Oct IGP-M Inflation (2nd Preview): +0.7%e v -0.3% prior
• 07:30 (TR) Preview: Turkey Central Bank TCMB Survey of Expectations Next 12-months: No est v 12.2% prior
• 07:30 (CL) Chile Central Bank Traders Survey
• 07:30 (IN) India Weekly Forex Reserve w/e Oct 18th: No est v $437.8B prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:30 (CA) Canada Sept Teranet House Price Index (HPI) M/M: No est v 0.4% prior; Y/Y: No est v 0.6% prior; House Price Index: No est v 227.51 prior
• 09:00 (IT) Bank of Italy (BOI) Quarterly Economic Bulletin
• 09:00 (BR) Brazil Oct CNI Industrial Confidence: No est v 59.4 prior
• 09:00 (US) Fed’s Kaplan (dove, non-voter) in Washington
• 09:00 (IT) Bank of Italy Quarterly Economic Bulletin
• 10:00 (US) Sept Leading Index: 0.0%e v 0.0% prior
• 10:05 (US) Fed’s George (hawk, voter) on economy
• 11:00 (CO) Colombia Aug Trade Balance: -$1.3Be v -$1.1B prior; Total Imports: $4.7Be v $4.6B prior
• 11:00 (EU) Potential sovereign ratings after European close
• (SI) Slovenia Sovereign Debt to be rated by Moody’s
• (UK) United Kingdom Sovereign Debt to be rated by Fitch
• 11:30 (US) Fed Vice Chair Clarida on economy and policy
• 13:00 (US) Weekly Baker Hughes Rig Count

Weekend:

Saturday:

• (UK) House of Commons (Parliament) votes on PM Johnson’s deal with EU on Brexit