Notes/Observations
- UK opinion polls showed increased support for conservative party
- Continued optimism over US-China trade talks
- China PBoC again tweaks another short-term rate (2nd move this month) . Cut its seven-day reverse repurchase rate by 5bps for its 1st cut in four years (Note: Cut the MLF rate by 5bps earlier in month)
Asia:
- Chinese Commerce Ministry (MOFCOM): US and China had ‘constructive discussions’ about core concerns during teleconference among high level trade negotiators on Saturday morning (Nov 16th). China’s Vice Premier Liu He, US trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin were on the call
- China PBOC cut the rate on 7-day reverse repo by 5bps to 2.50% (first cut since 2015)
- PBOC quarterly monetary policy report: China economy faced increasing downward pressure and more uncertainties, but remained under control. To prevent rising inflation expectations from spreading; will fine tune policy based on economic and inflation conditions. PBoC maintained its prudent monetary policy stance.
- US govt said to be preparing to extend licenses to allow US companies to use Huawei equipment for anotgher 90 days, (current extension due to expire on Monday, Nov 18th)
- Hong Kong gov’t spokesman stated that China PLA presence to clear debris and barricades left by protesters in HK on Saturday was initiated as a ‘voluntary community activity’ by the military. Hong Kong’s government did not request assistance from the People’s Liberation Army (PLA).
Europe/Mideast:
- ECB’s Muller (Estonia): Needed to be aware of side effects of policy. ECB could buy other assets if the situation became worse
- Canadian ratings agency DBRS affirmed Italy sovereign rating at BBB (high), Stable trend
- Fitch affirmed Ireland sovereign rating at A+; outlook Stable
Brexit:
- PM Johnson: Every Conservative parliamentary candidate has personally pledged to vote his Brexit deal through the House of Commons if he wins a majority
Americas:
- Fed’s Daly (dove, non-voter): low inflation despite low unemployment created an opportunity for the economy. Accommodative policy can bring more workers into the labor force and push inflation back up to the 2% target level
- Fed Financial Stability Report: low rates could lead to erosion in lending standards; warned prolonged low rates could spark instability
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.47% at 406.30 , FTSE -0.05% at 7,299.65, DAX -0.08% at 13,231.06, CAC-40 -0.25% at 5,924.28, IBEX-35 -0.04% at 9,258.00, FTSE MIB -0.22% at 23,537.50, SMI +0.36% at 10,347.50, S&P 500 Futures +0.17%]
Market Focal Points/Key Themes:
- European indices trading mostly lower following mixed indices in Asia and slightly higher US futures.
- Volkswagen trades lower after holding an investor day and reducing it’s FY20 revenue and profit outlook.
- Greenyard Foods up 14% following solid H1 results and operational recovery; the company has now decided not to pursue a share placing or sale of prepared division. Diploma up slightly on strong FY earnings results. Kingspan down despite solid trading update with 9M revenues increasing 8% y/y and guiding FY trading profit growth +8-10% y/y. IQE diving 19% following trading update that saw the company cutting FY revenue outlook and anticipating mid-single digit adjusted operating loss.
- In M&A news, Spanish exchange Bolsas y Mercados Espanoles (BME) jumps ~35% following confirmation that it has received an all cash tender offer for of €34/shr from privately-held Swiss Six Group for a transaction valued at €2.8B. Euronext has today confirmed that it is also in talks with BME to acquire the company; Euronext shares up as well on the news. Brady rallying 45% on confirmation of potential takeover offer. Consort Medical gaining +43% after agreeing to takeover offer from Recipharm for 1,010p/shr in cash, representing premium of ~39%. Qiagen rallying a further 12% today after the company confirmed it is exploring a sale after receiving several indications of interest last week. Sage Group flat after announcing disposal of Sage Pay to US Bancorp payments unit Elavon for £232M in cash. Aviva down following plans to keep Asian business following strategic review of unit.
- In other news Nicox tanking 11% after private placement for 3.3M share issuance raising €12.5M in proceeds to advance NCX 470 into Phase III in Glaucoma.
Equities
- Consumer staples: Greenyard Foods [GREEN.BE] +14% (earnings; strategy)
- Materials: Kingspan [KGP.UK] -3% (trading update)
- Financials: Bolsas y Mercados Espanoles [BME.ES] +38% (several offers), Brady [BRY.UK] +45% (confirms potential offer), Aviva [AV.UK] -3% (Asian unit review)
- Healthcare: Consort [CSRT.UK] +43% (to be acquired), Nicox [COX.FR] -8% (placing)
- Industrials: Volkswagen (VOW3.DE] -1% (investor day)
- Technology: Qiagen [QIA.DE] +12% (confirms several offers), IQE [IQE.UK] -21.5% (trading update)
Speakers
- ECB’s De Guindos (Spain): Reiterates stance that recession in region was unlikely and that ECB would not hit limits on asset purchases in near term. One of the most significant vulnerabilities of Euro Area banks relates to their weak profitability prospects. Might need to make countercyclical buffers more prominent
- Netherlands Planning Agency (CPB): Saw GDP YoY growth pace slowing to 1.1% in 2022-25 period (**Note: Recent Q3 YoY was 1.9%)
- Hungary Central Bank Gov Matolcsy: 2019 CPI seen around 3.3%
- Hungary Fin Min Varga: To cut personal income tax below the 10% level in 2021 at the earliest
- Thailand Central Bank (BOT) Gov Veerathai: Could cut 2019 GDP growth forecast from the current 2.8% level. US-China trade war was a key factor in hurting the domestic economy and that the indirect impact would not disappear, even if the US and China reached a phase one initial trade deal
- IMF expected Philippines GDP growth to strengthen going to 2020
Currencies/ Fixed Income
- GBP/USD was higher by 0.7% as various UK opinion polls showed increased support for conservative party. PM Johnson noted that every Conservative parliamentary candidate had personally pledged to vote his Brexit deal through the House of Commons if he won a majority. Pair trading at 1.2975 area by mid-session.
- Continued risk appetite helped to soften the JPY and CHF currencies but remained locked within recent ranges. Chinese Commerce Ministry (MOFCOM) noted that US and China had ‘constructive discussions’ about core concerns during teleconference among high level trade negotiators on Saturday.
- USD/JPY holding below the 109 level while USD/CHF hovered around the 0.9900 area during the session.
Economic Data
- (NG) Nigeria Oct CPI Y/Y: 11.6% v 11.2%e
- (CN) China Oct Foreign Direct Investment (CNY) at 69.2B; Y/Y: 7.4% prior
- (CZ) Czech Oct PPI Industrial M/M: -0.3% v +0.1%e; Y/Y: 0.9% v 1.3%e
- (HK) Hong Kong Oct Unemployment Rate: 3.1% v 3.0%e
- (CH) Swiss Weekly Total Sight Deposits (CHF): 590.2B v 591.5B prior; Domestic Sight Deposits: 502.9B v 504.1B prior
Fixed Income Issuance
- (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 6-month Bills; Avg Yield: 1.22% v 1.21% prior; Bid-to-cover: 3.07x v 3.25x prior
- (SK) Slovakia Debt Agency (Ardal) sold total €158.5M vs. 200.0M indicated in 2031 and 2047 bonds
Looking Ahead
- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell 6-month bills
- 05:30 (BE) Belgium Debt Agency (BDA) to sell 2029 and 2031 OLO Bonds
- 06:00 (IL) Israel to sell 2022, 2023, 2026, 2029 and 2045 bonds
- 06:00 (RO) Romania to sell 4.5% 2024 Bonds
- 06:25 (BR) Brazil Central Bank Weekly Economists Survey
- 06:30 (CL) Chile Q3 GDP Q/Q: 0.7%e v 0.8%prior; Y/Y: 3.3%e v 1.9% prior
- 06:30 (CL) Chile Q3 Current Account Balance: -$3.2Be v -$2.9B prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 07:30 (EU) ECB’s de Cos (Spain) in Madrid
- 08:00 (RU) Russia Oct Industrial Production Y/Y: 2.5%e v 3.0% prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:05 (IE) ECB’s Lane (Ireland, chief economist)
- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on bond auction
- 09:00 (FR) France Debt Agency (AFT) to sell combined €3.4-4.6B in 3-month, 6-month and 12-month Bills
- 10:00 (US) Nov NAHB Housing Market Index: 71e v 71 prior
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
- 12:00 (US) Fed’s Mester (hawk, non-voter) at University of Maryland
- 16:00 (US) Sept Net Long-term TIC Flows: No est v -$41.1B prior; Total Net TIC Flows: No est v $70.5B prior
- 16:00 (US) Weekly Crop Progress Report
- 16:45 (NZ) New Zealand Q3 PPI Output Q/Q: No est v 0.5% prior; PPI Input Q/Q: No est v 0.3% prior
- 17:05 (AU) RBA’s Kent participate on Sydney
- 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence: No est v 111.1 prior
- 19:30 (AU) RBA Nov Minutes
- 20:10 (JP) BOJ Outright Bond Purchase Operation for maturities between 1~3 Years, 3~5 Years and 5~10 Years
- 22:00 (TH) Thailand Central Bank to sell combined THB70B in 3-month and 6-month
- 22:35 (JP) Japan to sell 12-month bills
- 23:30 (TW) Taiwan to sell TWD20B in 2-year Bonds
