Continued Optimism Peculates On The Trade Front

Notes/Observations

• Trade optimism continues to help unwind safe-haven flow

Asia:

• Australia Sept Retail sales miss expectations (MoM: 0.2% v 0.4%e)
• China Commerce Ministry (MOFCOM): China-US talks on Friday (Nov 1st) achieved consensus in principle; talks were constructive (**Note: Liu had had phone talks with Lighthizer and Mnuchin)
• WTO issued ruling in favor of China approving $3.6B in sanctions on the US

Europe/Mideast:

• Moody’s affirmed South Africa sovereign rating at BAA3 (lowest level of lower medium-grade) but cut the outllok from stable to negative

Brexit:

• PM Johnson said to abandon the threat of a no deal in Tory election manifesto. PM focus would beon getting the Brexit deal approved
• Various UK polling data showed Conservatives in the lead
• Yougov poll: Conservative party: 39% v 36% prior; labour party: 27% v 21% prior; Liberal Democrats: 16% v 19% prior; Brexit: 7% v 13% prior
• Comres/S.Express: Tories 36% , Labour 28% , Lib Dems 18% , Brexit Party 10%
• Deltapoll/MOS: Tories 40% , Labour 28% , Lib Dems 14% , Brexit Party 11%
• Opinium/Observer: Tories 42% , Labour 26% , Lib Dems 16% , Brexit Party 9%
• Orb: Tories 36% , Labour 28% , Lib Dems 14% , Brexit Party 12%

Americas:

• US Commerce Sec Ross stated that had positive conversations with Europe, Japan and South Korea and might not need to impose auto tariffs later this month; talks with individual companies about their capital investment plans might help avoid tariffs
• US official on WTO ruling: US was disappointed by WTO decision; decision would not impact ongoing US-China trade talks

Energy:

• Iran supreme leader Khamenei: Iran to continue to reduce its Nuclear commitments until it reached a desired result
• Saudi Aramco officially launched its IPO to begin trading in Saudi Arabia in Dec; bank valuations putting Aramco worth at $1.5T or under with the high side seen at $2.27T

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.76% at 402.46, FTSE +0.89% at 7,367.45, DAX +1.05% at 13,097.26, CAC-40 +0.89% at 5,813.29, IBEX-35 +0.64% at 9,388.00, FTSE MIB +1.14% at 23,196.50, SMI +0.62% at 10,315.50, S&P 500 Futures +0.46%]

Market Focal Points/Key Themes:

• European Indices trade higher across the board on trade optimism following a firmer session in Asia and higher US index futures.
• On the earnings front shares of low cost carrier Ryanair trades sharply higher on earnings beat, however the company did warn on growth due to delays on the 737 Max; Siemens Healthineers rises sharply, trading at a record on strong Q4 numbers as revenue was driven by its imaging division, while Acerinox, BBVA and Lok n Store group also trade higher on earnings.
• Norwegian traded Next Biometric group trades over 20% lower on a profit warning, with Post NL and Hiscox other notable names declining on earnings.
• In other news Auto names rise following positive comments from US Commerce Secretary Ross, with the likes of Daimler, Continental, BMW and VW among the names rising, International Consolidated airlines also gains after acquiring Air Europa for €1.0B in cash.
• Looking ahead notable earners include Sysco, Sprint Corp, Under Armor and Ferrari among others.

Equities

• Consumer discretionary: Ryanair [RYA.UK] +7% (earnings), IAG [IAG.UK] +1.5% (acquistion), PostNL [PNL.NL] -7.5% (earnings)
• Energy: iGas Energy [IGAS.UK] -14% (UK orders moratorium on fracking)
• Healthcare: Siemens Healthineers [SHL.DE] +6% (earnings; initial outlook)
• Industrials: Continental [CON.DE] +4%, Daimler [DAI.DE] +3% (US Ross comments on auto tariffs)
• Technology: Wirecard [WDI.DE] +2.5% (buyback)
• Telecom: Telefonica Deutschland [O2D.DE] +2% (earnings)

Speakers

• Norway Central Bank (Norges) Gov Olsen: Weak NOK currency (Krone) might be likely affected by lower oil dependency
• US Commerce Sec Ross said to have met Chinese Premier Li as progress seen on trade issues
• China Premier Li reiterated stance that both US and China needed to meet each other half-way in trade talks

Currencies/ Fixed Income

• EUR/USD was fractionally lower as the major European PMI manufacturing data highlighted the fragile outlook for the region. Pair at 1.1165 are just ahead of the mid-session. Levels to the upside are at 1.118 and 1.113 to the downside.
• GBP currency was little changed in the session with GBP/USD at 1.2930 area. Market participants assessed the latest opinion polls for the Dec. 12th election. Dealers noted that the likelihood of a Tory majority win seemed to be waning as PM Johnson’s lead shrink in numerous polls. Levels to the upside in the cable are above the 1.30 handle and 1.28 to the downside.
• The ZAR currency (Rand) was firmer after Moody’s affirmed South Africa sovereign rating at BAA3. USD/ZAR at 14.7820 area with rand firmer by 1.5%
• The TRY currency (Lira) was slightly firmer as CPI data continued to improve and remaining in the single digits. USD/TRY trading at 5.6950 with the Lira firmer by 0.3%

Economic Data

• (CH) Swiss Q4 SECO Consumer Confidence: -10.4 v -8.0e
• (TR) Turkey Oct CPI M/M: 2.0% v 2.1%e; Y/Y: 8.6% v 8.6%e; CPI Core Index Y/Y: 6.7% v 7.0%e
• (TR) Turkey Oct PPI M/M: 0.2% v 0.1% prior; Y/Y: 1.7% v 2.5% prior
• (BR) Brazil Oct FIPE CPI (Sao Paulo): % v 0.0% prior
• (HU) Hungary Oct Manufacturing PMI: 51.9 v 51.8e (46th month of expansion)
• (PL) Poland Oct PMI Manufacturing: 45.6 v 48.1e (12th straight contraction and lowest since Jun 2009)
• (ES) Spain Oct Manufacturing PMI: 46.8 v 47.5e (5th straight contraction and lowest reading since Apr 2013)
• (IT) Italy Oct Manufacturing PMI: 47.7 v 47.7e(12th straight contraction)
• (FR) France Oct Final Manufacturing PMI: 50.7 v 50.5e (confirmed 3rd month of expansion)
• (DE) Germany Oct Final Manufacturing PMI: 42.1 v 41.9e (confirmed 10th straight contraction)
• (EU) Euro Zone Oct Final Manufacturing PMI: 45.9 v 45.7e (confirmed the 9th straight month of contraction)
• (CH) Swiss Weekly Total Sight Deposits (CHF): 591.9B v 592.4B prior; Domestic Sight Deposits: 493.8B v 487.9B prior
• (EU) Euro Zone Nov Sentix Investor Confidence: -4.5 v -13.8e (moved off 6-year lows)
• (UK) Oct Construction PMI: 44.2 v 44.1e (6th month of contraction)

Fixed Income Issuance

• (NO) Norway sold NOKB vs. NOK3.0B indicated in 6-month Bills; Avg Yield: 1.21% v 1.21% prior; Bid-to-cover: 3.25x v 3.57x

Looking Ahead

• (UR) Ukraine Central Bank (NBU) Oct Minutes
• 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month bills
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
• 06:00 (IE) Ireland Sept Industrial Production M/M: No est v 1.1% prior; Y/Y: No est v -6.3% prior
• 06:25 (BR) Brazil Central Bank Weekly Economists Survey
• 06:30 (CL) Chile Sept Economic Activity Index (Monthly GDP) M/M: No est v 0.9% prior; Y/Y: 3.8%e v 3.7% prior; Economic Activity (ex-mining) Y/Y: 3.7%e v 3.5% prior
• 07:00 (MX) Mexico Oct Vehicle Domestic Sales: No est v 100.7K prior
• 07:00 (MX) Mexico Sept Leading Indicators M/M: No est v -0.03 prior
• 07:00 (IL) Israel to sell bonds
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 08:00 (SG) Singapore Oct Purchasing Managers Index: No est v 49.5 prior; Electronics Sector Index: No est v 49.1 prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (ES) Spain Debt Agency (Tesoro) announcement on upcoming issuance
• 09:00 (FR) France Debt Agency (AFT) to sell combined €3.5-4.7B in 3-month, 6-month and 12-month Bills
• 09:30 (UK) House of Commons holds election for new speaker
• 10:00 (US) Sept Factory Orders: -0.4%e v -0.1% prior; Factory Orders (ex-transportation): No est v 0.0% prior
• 10:00 (US) Sept Final Durable Goods Orders: -1.1%e v -1.1% prelim; Durables (ex-transportation): -0.3%e v -0.3% prelim; Capital Goods Orders (Non-defense/ex-aircraft): No est v -0.5% prelim; Capital Goods Shipments (Non-defense/ex-aircraft): No est v -0.7% prelim
• 11:00 (DK) Denmark Oct Foreign Reserves (DKK): No est v 445.0B prior
• 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
• 13:30 (EU) ECB chief lagarde
• 16:00 (KR) South Korea Oct Foreign Reserves: No est v $403.3B prior
• 16:00 (US) Weekly Crop Progress Report
• 16:30 (AU) Australia Oct AiG Performance of Services Index: No est v 51.5 prior
• 17:00 (AU) Australia Oct Final PMI Services: No est v 50.8 prelim; PMI Composite: No est v 50.7 prelim
• 17:00 (US) Fed’s Daly (dove, non-voter)
• 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 110.4 prior
• 18:50 (JP) Japan End-Oct Monetary Base: No est v ¥520.4T prior
• 19:00 (NZ) New Zealand Oct ANZ Commodity Price: No est v 0.0% prior
• 19:01 (UK) Oct BRC Sales Like-For-Like Y/Y: No est v -1.7% prior
• 19:01 (IE) Ireland Oct PMI Services: No est v 53.1 prior; PMI Composite: No est v 51.0 prior
• 19:30 (HK) Hong Kong Oct PMI: No est v 41.5 prior
• 19:30 (SG) Singapore Oct PMI: No est v 48.3 prior
• 20:00 (PH) Philippines Oct CPI Y/Y: 0.8%e v 0.9% prior
• 20:45 (CN) China Oct Caixin PMI Services: 51.5e v 51.3 prior; PMI Composite: No est v 51.9 prior
• 22:30 (AU) RBA Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 0.75%
• 23:00 (ID) Indonesia Q3 GDP Q/Q: 3.1%e v 4.2% prior; Y/Y: 5.0%e v 5.1% prior