Notes/Observations
- Fed hints at a possible pause believing it has achieved a soft landing
- BOJ strengthened its forward guidance and joins the club of withdrawing calendar-based guidance
- China said to doubt that any long term trade deal was possible with President Trump
Asia:
- China Oct Manufacturing PMI: 49.3 v 49.8e (6th straight contraction)
- China said to have offered Macau as an alternative to the cancelled Chile APEC Summit. President Trump and Xi said to be working to sign a Phase One trade deal
- BOJ left its policy steady (as expected) but strengthened its forward guidance. Left Interest Rate on Excess Reserves (IOER) unchanged at -0.10% and maintained its policy framework of “QQE with Yield Control” around 0.00% and asset purchases at annual pace of ¥80T. Strengthened its forward guidance to keeping rates low or lower levels, as long as it is necessary to pay close attention to the possibility that momentum toward achieving the price stability target would be lost (removed its calendar-based time frame)
- BOJ Quarterly Outlook for Economic Activity and Prices cut the GDP and CPI forecasts for forecast horizon
- BOK Deputy Gov Yoon saw s room for further easing of monetary policy; premature to focus only on inflation
Brexit:
- Daily Mail poll: Conservatives hold 8-point lead over Labour (Conservative Party at 34%, Labour at 26, Liberal Democrat Party at 19%, Brexit Party at 12%)
Americas:
- FOMC cut Target Range by 25bps to 1.50-1.75% (as expected) with vote being 8-2 (George and Rosengren dissent, voting for no cut. To monitor incoming information ‘as it assesses appropriate policy path’
- Fed Chair Powell post rate decision press conference stated that the current stance of monetary policy was ‘likely to remain appropriate’ as long as model of economy continued to remain accurate; would respond accordingly if events materially affected outlook. Risks to the outlook as having moved in a positive direction since last meeting but not thinking about raising rates right now
- Brazil Central Bank (BCB) cut Selic Rate by 50bps to 5.00% (as expected) and hints to extend the current easing cycle as inflation remained benign
- Chile President Pinera: Chile to cancel the planned APEC Summit in Santiago next month amid ongoing protests. US Treasury Sec Mnuchin still reiterated that China trade deal would likely be signed in Nov
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.5% at 396.8, FTSE -0.7% at 7,280, DAX -0.5% at 12,841, CAC-40 -0.5% at 5,736, IBEX-35 -0.6% at 9,231, FTSE MIB +0.1% at 22,661, SMI -0.1% at 10,240, S&P 500 Futures -0.3%]
Market Focal Points/Key Themes:
Equities
- European Indices trade lower following a mixed session in Asia and slightly lower US Index futures. Markets reversed earlier gains on trade concerns as reports suggest China doubt a trade deal can be done with President Trump at the helm. On the corporate front shares of Fiat Chrysler gains almost 10%, with PSA Group down 10% as the companies agree to a 50/50 merger. Carpetright shares decline almost 50% as the company said it’s in talks for a possible offer by Meditor at 5p/shr. On the earnings front Airliner Air France trades sharply lower on a sharp fall in profits which missed forecasts; International consolidated Airlines also trades slightly lower as company on a slightly top and bottom line miss. Banking name BNP Paribas reverses earlier gains following better than expected results, UK listed Lloyds declines as profits missed estimates, with Swiss Re also declining after a drop in premium and fee income. Other notable earners include Royal Dutch Shell, which declines over 3% as the company did note growth concerns could weigh on its buyback after better then expected results, while ASM International, Geberit and Safran are among notable earners gaining this morning. Looking ahead notable earners include Cigna, DuPont, Estee Lauder, Fiat Chrysler, Celgene and Archer Daniels among others.
- Consumer discretionary: Fiat [FCA.IT] +9%, Peugeot Citroen [UG.FR] -12.3% (PSA Group and Fiat agree to 50/50 merger), Renault [RNO.FR] -3.0% (PSA FCA meger), Carpetright [CPR.UK] -47% (In talks of offer at 5p/shr, refinancing update), Air France [AF.FR] -4.4% (Earnings), Tom Tailor [TTI.DE] +7% (New CFO)
- Energy: Royal Dutch Shell [RDSA.NL] -3.1% (Earnings)
- Financials: Lloyds [LLOY.UK] -2% (earnings), BNP Paribas [BNP.FR] -1% (Earnings), Swiss Re [SREN.CH] -1.5% (Earnings)
- Industrials: Safran [SAF.FR] +1.7% (Revenue)
- Telecom: BT Group [BT.A.UK] +0.8% (Earnings)
- Technology: ASM International [ASM.NL] +8% (earnings)
Speakers
- ECB’s De Guindos (Spain): Reiterates Council view that risks to EU area growth were to the downside and that the economic slowdown was beginning to affect labor
- Turkey Central Bank (CBRT) Quarterly Inflation Report forecasts cut 2019 CPI from 13.9% to 12.0% while maintaining 2020 CPI at 8.2%. CBRT maintained view that inflation to gradually converge to target and saw CPI slowing to 5% in the medium term
- Turkey Central Bank Governor Uysa Quarterly Inflation Report press conference noted that the improvement in inflation outlook continued with the trend being downwards. He added that CBRT had used most of the space in loosening monetary policy
- BOJ Gov Kuroda post rate decision press conference stated that it would pay attention to risks towards momentum and reiterated stance that would not hesitate to take additional measures if necessary. Reiterated stance that CPI to gradually rise towards the 2% target but risks to the downside existed. Expected a delay in the pickup of the global economy and would not hesitate to add to easing if risks rose. BOJ had continued its very powerful easing persistently and had various options for additional easing and was not limited to rates. The adjusted forward guidance showed the BOJ’s easing stance. Low or lower rates to continue for a long time
- China said to doubt that any long term trade deal was possible with President Trump. China said to be unwilling to budge on big structural changes and would demand an end to tariffs for any phase 2 talks
- China Trade Association chief: China could remove extra tariffs on US farm products to help importers buy up to $50B worth
- China Foreign Ministry Spokesman Geng Shuang: President Trump and President Xi maintaining contact
- Taiwan Central Bank (CBC) Sept Minutes: 1 member believed govt should consider a rate cut while another suggested a rate cut would have limited effect
- North Korea said to have launched two unidentified projectiles toward East Sea
Currencies/Fixed Income
- USD was slightly softer against the major pairs in the aftermath of the FOMC’s 3rd rate cut since July. Dealers noted that Fed’s statement that it would likely hold off on further cuts would limit the greenback’s downside for the time being.
- A string of key economic data in the session (French, Italian and euro zone inflation, and Spanish, Italian and euro zone Q3 GDP) were all expected to show that inflation and growth in the bloc remained significantly soft and reinforced ECB Council view that risks to EU area growth were to the downside. EUR/USD was marginally higher at 1.1170 area but would likely face upside resistance and stay within the current trading range established over the summer.
- USD/JPY was lower after failing to get above the key 109 resistance level. BOJ kept its powder dry (as speculated) but did drop the calendar-based forward guidance to be open-ended. Some concerns that China did not believe that a long term trade deal was possible with President Trump prompted some risk aversion flows.
Economic Data
- (DE) Germany Sept Retail Sales M/M: 0.1% v 0.2%e; Y/Y: 3.4% v 3.3%e
- (NO) Norway Sept Credit indicator Growth Y/Y: 5.8% v 5.5%e
- (DK) Denmark Sept Gross Unemployment Rate: 3.7% v 3.8%e; Unemployment Rate (Seasonally Adj): 3.1% v 3.1% prior
- (TR) Turkey Sept Trade Balance: -$2.1B v -$2.0Be
- (FI) Finland Aug Final Trade Balance: -€0.3B v -€0.2B prelim
- (TH) Thailand Sept Current Account Balance: $3.5B v $2.8Be; Overall Balance of Payments (BOP): $B v $1.2B prior; Trade Account Balance: $2.7B v $3.6B prior; Exports Y/Y: -1.5% v -2.1% prior; Imports Y/Y: -4.5% v -15.5% prior
- (FR) France Oct Preliminary CPI M/M: -0.1% v 0.1%e; Y/Y: 0.7% v 0.9%e
- (FR) France Oct Preliminary CPI EU Harmonized M/M: -0.1% v 0.1%e; Y/Y: 0.9% v 1.1%e
- (TW) Taiwan Q3 Preliminary GDP Y/Y: 2.9% v 2.5%e
- (ES) Spain Q3 Preliminary GDP Q/Q: 0.4% v 0.4%e; Y/Y: 2.0% v 2.0%e
- (HU) Hungary Sept PPI M/M: 1.2% v 0.6% prior; Y/Y: 2.2% v 0.9% prior
- (HU) Hungary Aug Final Trade Balance: €0.1Bv €0.0B prelim
- (HK) Hong Kong Q3 Advance GDP Q/Q: -3.2% v -0.6%e; Y/Y: -2.9% v -0.3%e (officially enters into a technical recession)
- (IT) Italy Sept Preliminary Unemployment Rate: 9.9% v 9.6%e
- (NO) Norway Central Bank (Norges) Nov Bank Daily FX Purchases: -700M v -700M prior
- (PL) Poland Oct Preliminary CPI M/M: 0.2% v 0.3%e; Y/Y: 2.5% v 2.5%e
- (CZ) Czech Sept M2 Money Supply Y/Y: 7.9% v 7.3% prior
- (IS) Iceland Sept Final Trade Balance (ISK): -17.6B v -17.1B prelim
- (ES) Spain Aug Current Account Balance: €3.3B v €3.2B prior
- (SL) Sri Lanka Oct CPI Y/Y: 5.4% v 5.0%e
- (PT) Portugal Oct Preliminary CPI M/M: 0.1% v 1.1% prior; Y/Y: 0.0 v -0.1% prior (PT) Portugal Oct Preliminary CPI EU Harmonized M/M: -0.3% v +1.4% prior; Y/Y: -0.1% v -0.3% prior
- (ZA) South Africa Sept PPI M/M: 0.2% v 0.4%e; Y/Y: 4.1% v 4.3%e
Fixed Income Issuance
- None seen
Looking Ahead
- 06:00 (EU) Euro Zone Q3 Advance GDP Q/Q: 0.1%e v 0.2% prior; Y/Y: 1.1%e v 1.2% prior
- 06:00 (EU) Euro Zone Oct CPI Estimate Y/Y: 0.7%e v 0.9% prior; CPI Core Y/Y: 1.0%e v 1.0% prior; CPI M/M: 0.1%e v 0.2% prior
- 06:00 (EU) Euro Zone Sept Unemployment Rate: 7.4%e v 7.4% prior
- 06:00 (IT) Italy Oct Preliminary CPI M/M: -0.1%e v -0.6% prior; Y/Y: 0.3%e v 0.3% prior
- 06:00 (IT) Italy Oct Preliminary CPI EU Harmonized M/M: 0.2%e v 1.4% prior; Y/Y: 0.2%e v 0.2% prior
- 06:00 (GR) Greece Aug Retail Sales Value Y/Y: No est v -3.0% prior; Retail Sales Volume Y/Y: No est v -2.7% prior
- 06:00 (BE) Belgium Sept Unemployment Rate: No est v 5.5% prior
- 06:00 (CA) Canada Oct CFIB Business Barometer: No est v 59.3 prior
- 06:00 (EU) Daily Euribor Fixing
- 06:30 (HU) Hungary Debt Agency (AKK) 12-month bills
- 07:00 (IT) Italy Q3 Preliminary GDP Q/Q: 0.0%e v 0.0% prior; Y/Y: 0.2%e v -0.1% prior
- 07:00 (IL) Israel Sept Chain Store Sales M/M: No est v % prior
- 07:00 (IL) Israel Aug Manufacturing Production M/M: No est v 5.5% prior
- 07:00 (IL) Israel Sept Unemployment Rate: No est v 3.8% prior
- 07:00 (ZA) South Africa Sept Electricity Production Y/Y: No est v -2.4% prior; Electricity Consumption Y/Y: No est v -4.7% prior
- 07:30 (US) Oct Challenger Job Cuts: No est v 41.6K prior; Y/Y: No est v -24.8% prior
- 07:30 (IN) India Sept Eight Infrastructure 9Key) Industries: No est v -0.5% prior
- 08:00 (MX) Mexico Aug Gold Production: No est v 6.7K kilograms prior; Silver Production: No est v 312.2K kilograms prior; Copper Production: No est v 40.7K tons prior
- 08:00 (ZA) South Africa Sept Trade Balance (ZAR): 2.0Be v 6.8B prior
- 08:00 (BR) Brazil Sept National Unemployment Rate: 11.6%e v 11.8% prior
- 08:30 (US) Q3 Employment Cost Index (ECI): 0.7%e v 0.6% prior
- 08:30 (US) Sept Personal Income: 0.3%e v 0.4% prior; Personal Spending: 0.3%e v 0.1% prior; Real Personal Spending (PCE): 0.2%e v 0.1% prior
- 08:30 (US) Sept PCE Deflator M/M: 0.0%e v 0.0% prior; Y/Y: 1.4%e v 1.4% prior
- 08:30 (US) Sept PCE Core Deflator M/M: 0.1%e v 0.1% prior; Y/Y: 1.7%e v 1.8% prior
- 08:30 (US) Initial Jobless Claims: 215Ke v 212K prior; Continuing Claims: 1.68Me v 1.682M prior
- 08:30 (CA) Canada Aug GDP M/M: 0.2%e v 0.0% prior; Y/Y: 1.4%e v 1.3% prior
- 08:30 (CA) Canada Sept Industrial Product Price M/M: 0.2%e v 0.2% prior; Raw Materials Price Index M/M: +2.5%e v -1.8% prior
- 08:30 (BR) Brazil Sept Primary Budget Balance (BRL): -24.0Be v -13.4B prior; Nominal Budget Balance: -53.1Be v -63.6B prior; Net Debt to GDP Ratio: 55.0%e v 54.8% prior
- 08:30 (US) Weekly USDA Net Export Sales
- 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 18th: No est v $537.2B prior
- 09:00 (UK) Daily Baltic Dry Bulk Index
- 09:45 (US) Oct Chicago Purchase Manager Index (PMI): 48.0e v 47.1 prior
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (MX) Mexico Sept Net Outstanding Loans (MXN): No est v 4.689T prior
- 11:00 (CO) Colombia Central Bank Interest Rate Decision: expected to leave Overnight Lending Rate unchanged at 4.25%
- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
- 12:00 (CA) Canada to sell 2 Year Bonds
- 15:00 (US) Sept Agricultural Prices Paid: No est v 0.6% prior; Prices Received: No est v 0.9% prior
- 15:00 (AR) Argentina Aug Wages M/M: No est v 4.7% prior
