Focus On UK Legislative Process For Brexit

Notes/Observations

• Key votes in UK Parliament on the PM Johnson’s Brexit deal; markets ponder whether there was enough time for the legislation to be passed ahead of the Oct 31st Brexit deadline (even if MPs back the deal); Would EU grants an extension???
• US-China trade deal optimism of a written agreement mid-November helps to boosts risk appetite

Asia:

• China Foreign Min Wang Yi expressed confidence in reaching an investment deal with EU and would like to move ahead on trade agreement talks as soon as possible
• PBOC makes largest daily injection in open market operation (OMO) since late May amid focus on tax payments

Brexit:

• UK House of Commons Speaker Bercow announce there would be no meaningful vote on Monday (yesterday) on PM Johnson’s Brexit deal and added that was hard to see a significant change of circumstance that would warrant a reconsideration on the next sitting day
• PM Johnson to concentrate his efforts on fast-tracking the detailed law he needs to pass through Parliament. Beginning Tuesday and completing its passage through the Commons by Thursday. It would then go to the House of Lords, Parliament’s upper chamber in an attempt to deliver Brexit by his Oct. 31 deadline
• House of Commons Leader Rees-Mogg stated that the 2nd reading of the EU Withdrawal Agreement Bill would take place on Tuesday (Oct 22nd) and planned to conclude House proceedings on the Brexit bill on Thurs, Oct 24th
• UK Minister Gove stated that UK had yet to receive a response from EU to PM Johnson’s extension letters; there’s no certainty that EU would grant an extension. Must take steps now to take care of increased possibility of ‘no deal’; we are intensifying contingency arrangements
• Opposition parties held informal talks about amendments to customs union to find support from enough parliament members to block PM Johnson Brexit deal –

Americas:

• US Trade Rep Lighthizer: target is to have Phase 1 of China trade deal finished by time of Chile APEC summit but there remain some issues to resolve (implies Nov 13-14th)
• Canada Election Results: PM Trudeau wins a 2nd term as Liberal Party on pace to form minority government

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.15% at 393.64, FTSE +0.19% at 7,177.25, DAX +0.05% at 12,754.10, CAC-40 -0.32% at 5,630.40, IBEX-35 -0.09% at 9,394.00, FTSE MIB -0.26% at 22,419.50, SMI -0.25% at 9,966.50, S&P 500 Futures -0.08%]
• Market Focal Points/Key Themes: European Indices trade mostly lower ahead of a busy week for earnings. Asian Indices were mostly higher with US index futures trading slightly lower. On the corporate shares of Swiss banking giant UBS trades higher as the company reported earnings which beat forecasts, while Revenues came in line; Novartis trades little changed as the company beat top and bottom line and raised outlook; Swedish traded Saab also rises on a profit beat and affirmed outlook, with Software Ag, Basware, Galp Energia and Kuehne & Nagel among other notable gainers. Shares of AMS trades over 3% lower on earnings reversing initial gains; Thales declines on Q3 Revenue numbers, with Reckitt Benckiser declining on a profit warning. Randstad, Imerys and Biomerieux among other names declining on earnings. In other news Just Eat shares trade over 20% higher after receiving an improved 710p/shr offer from Naspers Prosus N.V, which was subsequently rejected; Senvion gains on comments regarding the sale of its European assets, while OHL gains on reports Villar Mir looks to sell its stake to Mexican investors Amodio family. Looking ahead notable earners include McDonalds, United Technologies, Jetblue, UPS, Kimberly-Clark, Lockheed Martin and Biogen among others.

Equities

• Consumer discretionary: Just Eat [JE.UK] +25% (again offered to be acquired), Bunzl [BNZL.UK] -3% (trading update)
• Materials: Imerys [NK.FR] -10% (CEO steps down)
• Energy: Senvion [SEN.DE] +15% (divestment)
• Financials: UBS [UBSG.CH} +1.5% (earnings)
• Healthcare: Novartis [NOVN.CH] -1% (earnings; raises outlook), Reckitt Benckiser [RB.UK] -4% (earnings; cuts outlook)
• Industrials: Saab [SAABB.SE] +5% (earnings), Thales [HO.FR] -2% (earnings)
• Technology: AMS [AMS.CH] -1% (earnings), Software [SOW.DE] +9% (earnings), Basware [BAS1V.FI] +8.5% (earnings)
• Telecom: Sunrise Communications [SRCG.CH] +1.5% (earnings)

Speakers

• ECB Q3 Lending Survey: Credit standards for consumers tightened in quarter. Q4 demand for mortgages and consumer credit seen increasing while business credit was seen unchanged
• EU Commission commented on various 2020 draft budgets and believed that Italy’s 2020 budget draft was not in line with policy requirements; asked for clarifications. France budget also appeared to be in breach of rules. EU also saw Belgium, Portugal and Spain draft budgets in breach of recommendations
• Italy Finance Min official noted that the EU reaction was normal part of process; to give clarifications by Wed, Oct 23rd
• EU’s Tusk commented that the request for Brexit extension made the situation more complex; was still consulting leaders on UK request for Brexit extension. Brexit delay to depend on what UK Parliament decides or does not do. EU to react to Brexit delay request in coming days and was prepared for all scenarios
• EU’s Juncker stated that was not possible for EU Parliament to ratify Brexit before UK Parliament. Stressed that EU has done all in its power to ensure an orderly Brexit
• Turkey President Erdogan: If promises given to Turkey by US were not kept, then would go ahead with Syria operation more strongly
• Russia Econ Min Oreshkin: Russia 2019 CPI to be below 3.8%
• Thailand Fin Min Uttama Savanayana: Cabinet approved more stimulus steps to aid economy
• Hong Kong Finance Chief Paul Chan urged Parliament to pass relief measures as city grappled with the economic fallout of ongoing political turmoil. HK Govt announced a range of relief measures targeting travel agents and the transportation industry
• Senior Chinese diplomat Wang Yi: China must take necessary coutermeasures to protect its interest

Currencies/Fixed Income

• The GBP was off its recent 6-month highs as PM Johnson finally get the opportunity to put his Brexit deal up to vote. The PM will ask lawmakers on Tuesday to support the Brexit withdrawal deal he struck with the bloc’s leaders last week and to push the agreement through Parliament before a Oct 31st deadline. GBP/USD trades at 1/2930 area as markets pondered whether there was enough time for the legislation to be passed ahead of the Oct 31st Brexit deadline (even if MPs backed the deal) and whether the EU would grant an extension. If lawmakers approved the broad outlines of Johnson’s deal, and the timetable for making it legislation, they would spend the next two days debating and voting on possible amendments. USD trying to find some fresh legs after recent consolidation among various major and emerging market currencies. EUR/USD lower by 0.1% at 1.1140 while USD/JPY staying below the key 109.00 resistance level.

Economic Data

• (NL) Netherlands Oct Consumer Confidence Index: -1 v -2 prior
• (NL) Netherlands Aug Consumer Spending Y/Y: 1.4% v 1.5% prior
• (FI) Finland Sept Unemployment Rate: 5.9 v 6.1% prior
• (ZA) South Africa Aug Leading Indicator: 103.8 v 103.7e
• (MY) Malaysia mid-Oct Foreign Reserves: $103.3Be v $103.0B prior
• (TW) Taiwan Sept Unemployment Rate: 3.7% v 3.7%e – (PL) Poland Sept Construction Output Y/Y: 7.6% v 6.7%e
• (HK) Hong Kong Sept CPI Composite Y/Y: 3.2% v 3.3%e
• (UK) Sept Public Finances (PSNCR): £2.7B v £6.4B prior; Net Borrowing: £8.7B v £8.9Be; Central Government NCR: £14.8B v £5.7B prior; PSNB (ex-Banking Groups): £9.4B v £9.7Be
• (ES) Spain Aug Trade Balance: -€4.0B v -€2.5B prior

Fixed Income Issuance

• (ID) Indonesia sold total IDR27.2T vs. IDR15.0T target in in 3-month and 9-month bills and 5-year, 10-year, 15-year,20-year and 30-year bonds
• (EU) ESM opened its book to sell EUR-denominated 5-year note; guidance seen -8bps to mid-swaps with order book over €4.0B
• (ZA) South Africa sold total ZAR4.53B vs. ZAR4.53B indicated in bonds

Looking Ahead

• (IL) Israel Central Bank Oct Minutes
• 05:30 (UK) Weekly John Lewis LFL Sales data
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 05:30 (UK) DMO to sell £3.0B in 0.625% Jun 2025 Gilts
• 05:40 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)
• 06:00 (IL) Israel Q2 Final GDP Annualized (3rd reading): No est v 1.0% prelim
• 06:00 (UK) Oct CBI Industrial Trends Total Orders: -30e v -28 prior; Selling Prices: No est v 12 prior; Business Optimism: -30e v -32 prior
• 06:00 (IE) Ireland Sept PPI M/M: No est v 0.3% prior; Y/Y: No est v -4.4% prior
• 06:00 (TR) Turkey to sell Bonds
• 06:30 (EU) ESM to sell €3.0B in 6-month bills – 07:00 (MX) Mexico Sept Unemployment Rate (Seasonally Adj): No est v 3.6% prior; Unemployment Rate NSA (unadj): No est v 3.7% prior
• 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%; Expected to leave Overnight Deposit Rate unchanged at -0.05%
• 08:00 (PL) Poland Sept M3 Money Supply M3 M/M: 0.7%e v 0.6% prior; Y/Y: 9.8%e v 9.9% prior
• 08:00 (BR) Brazil Mid-Oct IBGE Inflation IPCA-15 M/M: 0.0%e v 0.1%; Y/Y: 2.7%e v 3.2% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (RU) Russia announces upcoming OFZ Bond issuance
• 08:30 (CA) Canada Aug Retail Sales M/M: 0.5%e v 0.4% prior; Retail Sales (Ex-auto) M/M: +0.1%e v -0.1% prior
• 08:55 (US) Weekly Redbook LFL Sales data
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:00 (HU) Hungary Central Bank Gov post rate decision statement
• 09:30 (BR) Brazil Sept Tax Collections (BRL): 118.1Be v 120.0B prior
• 10:00 (US) Oct Richmond Fed Manufacturing Index: -7e v -9 prior
• 10:00 (US) Sept Existing Home Sales: 5.45Me v 5.49M prior
• 10:00 (MX) Mexico Weekly International Reserves
• 10:30 (CA) Canada Q3 BoC Senior Loan Officer Survey: No est v -5.8 prior; Overall Business Outlook Survey: No est v 0.2 prior; Future Sales Business Outlook: No est v 23 prior – 13:00 (US) Treasury to sell 2-Year Notes
• (IT) Italy Debt Agency (Tesoro) announcement for upcoming CTZ issuance on Oct 25th
• 15:00 (CO) Colombia Aug Economic Activity Index (Monthly GDP) Y/Y: 3.4%e v 3.7% prior
• 15:00 (AR) Argentina Sept Trade Balance: No est v $1.2B prior; Total Exports: No est v $5.6B prior; Total Imports: No est v $4.4B prior
• 16:30 (US) Weekly API Oil Inventories