Notes/Observations
- Major European Sept Preliminary PMI data showed a divergence between manufacturing and services sector; region highlighting a 2-speead recovery
- Manufacturing PMI Highlight: Beats: France, Germany; Euro Zone, UK; Services PMI Highlights: Misses: France, Germany, Euro Zone, UK)
- Spain Q2 Final GDP revised higher but remained a record contraction
- New restriction in UK has markets concerned that economic weakness would intensify and result in double dip recession.
Asia:
- Australia Sept Preliminary PMI Manufacturing registered its 4th month of expansion and highest since April 2018 (55.5 v 53.9 prior)
- Japan Sept Preliminary PMI Manufacturing registered its 17rth straight contraction but highest reading since Feb (: 47.3 v 47.2 prior)
- New Zealand Central Bank (RBNZ) left Official Cash Rate (OCR) unchanged at 0.25% (as expected); maintained its forward guidance and option of additional measures if necessary
- China expected to de-emphasize or cut its GDP target to ~5% (currently 6.5%) in its 14th 5 year plan
Europe:
- Scheduled EU leaders’ summit for this week pushed back until early Oct. Council President Michel said to delay meeting as he was forced him to self-quarantine. EU meeting rescheduled for Oct 2-3rd (next Thurs/Fri)
- UK Chancellor of the Exchequer Sunak (Fin Min) said looking at a range of support measures to subsidize workers’ wages in an attempt to avoid mass unemployment when the furlough scheme ends in Oct
- Internal Market Bill said to have cleared committee stage on Tuesday (yesterday) after the Govt table an amendment to head of a Tory rebellion
- Americas: – House passed a short-term spending bill to keep government funded through Dec. 11th. The measure to go to Senate for approval
Energy:
- Weekly API Crude Oil Inventories: +0.7M v -9.5M prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +1.44% at 362.70, FTSE +2.19% at 5,956.89, DAX +1.71% at 12,809.75, CAC-40 +1.95% at 4,866.07, IBEX-35 +1.84% at 6,771.00, FTSE MIB +1.58% at 19,194.50, SMI +0.72% at 10,430.50, S&P 500 Futures +0.50%]
- Market Focal Points/Key Themes: European indices open higher across the board; earnings expected in the upcoming US session include General Mills and Worthington Industries
Equities
- Consumer discretionary: Adidas [ADS.DE] +6%, Puma [PUM.DE] +5% (Nike results), PZ Cussons [PZC.UK] -3% (earnings and trading update)
- Industrials: Diploma [DPLM.UK] +21% (acquisition; placement)
- Technology: OSRAM Licht [OSR.DE] +14%, AMS [AMS.CH] +5% (control bid)
Speakers
- ECB’s Mersch (Luxembourg) stated that the Pandemic Bond buying Fund (PEPP) flexibility must not apply to QE and that he was not aware of push to extend PEPP to APP program. ECB risked legal trouble if it tried to extend the emergency powers of the PEPP to other asset purchase programs
- Germany Cabinet said to have approved the 2021 draft budget with new debt issuance of €96.2B
- Denmark Central Bank (Nationalbank) updated its GDP outlook which raised 2020 GDP forecast from -4.1% to -3.6% (smaller contraction) while cutting the 2021 GDP forecast from +4.2% to +3.6%
- BOJ Gov Kuroda reiterated stance that BOJ would not hesitate to add easing if necessary. Forward guidance showed its bias towards more easing if necessary and was closely watching impact of coronavirus
- Thailand Central Bank (BOT) Policy Statement noted that the decision to keep policy steady was unanimous. Reiterated policy stance that prepared to use additional tools if necessary and to closely watch THB currency (Baht). Prepared to use fresh steps in FX market. Fiscal policy needed major role to aid economy and to be a main driver
- Malaysia PM Muhyiddin stated that the govt was still standing firm and he remained the legitimate PM
- China Foreign Ministry reiterated it stance that the US was not qualified to comment on Xinjiang and that the US was interfering in its internal affairs
Currencies/ Fixed Income
- USD continued to firm for a 4th straight session as coronavirus restriction appeared to rattle sentiment in Europe. Better recent US data and mixed EU readings also aiding the greenback.
- EUR/USD tested 2-month lows below the 1.17 handle as major European Sept Preliminary PMI data showed a divergence between manufacturing and services sector; region highlighting a 2-speead recovery. Pair recovered to be little changed at mid-session and back above the 1.17 level.
- GBP/USD was also at 2-month lows as the economic impact of additional virus measures were announced. Cable softness due to concerns over a 2nd possible national lockdown. Dealers noted that main concern was whether weakness would intensify and result in double dip recession.
- European yields lower as concerns about rising Covid-19 infections and risks to the economic recovery rise. Dealers noted that PMI data supported demand for government bonds
Economic Data
- (NL) Netherlands Q2 Final GDP Q/Q: -8.5% v -8.5%e; Y/Y: -9.4% v -9.3%e
- (DE) Germany Oct GfK Consumer Confidence: -1.6 v -0.8e (7th straight decline)
- (NO) Norway July AKU Unemployment Rate: 5.2% v 5.2%e
- (ES) Spain Q2 Final GDP Q/Q: -17.8% v -18.5%e; Y/Y:-21.5 % v -22.1%e
- (MY) Malaysia Mid-Sept Foreign Reserves: $104.8B v $104.4B prior
- (TH) Thailand Central Bank (BoT) left the Benchmark Interest Rate unchanged at 0.50% (as expected)
- (FR) France Sept Preliminary Manufacturing PMI: 50.9 v 50.6e (moves back into expansion); Services PMI: 47.5 v 51.5e ; Composite PMI: 48.5 v 51.9e
- (DE) Germany Sept Preliminary Manufacturing PMI: 56.6 v 52.5e (3rd straight expansion and highest reading since Jun 2018); Services PMI: 49.1 v 53.0e Composite PMI: 53.7 v 54.0e
- (EU) Euro Zone Sept Preliminary Manufacturing PMI: 53.7 v 51.9e (3rd month of expansion and highest reading since Aug 2018) ; Services PMI: 47.6 v 50.6e; Composite PMI: 50.1 v 52.0e
- (PL) Poland Sept Consumer Confidence: -15.0 v -15.2 prior
- (PL) Poland Aug Unemployment Rate: 6.1% v 6.1%e
- (TW) Taiwan Aug Industrial Production Y/Y: 4.8% v 4.0%e
- (UK) Sept Preliminary PMI Manufacturing: 54.3 v 54.0e (4th straight expansion; Services PMI: 55.1 v 56.0e; Composite PMI: 55.7 v 56.1e
Fixed Income Issuance
- (IN) India sold total INR350B vs. INR350B indicated in 3-month, 6-month and 12-month bills
- (SE) Sweden sold total SEK5.0B vs. SEK5.0B indicated in 2028 and 2031 Bonds
Looking Ahead
- (UK) BOE to buy £1.47B in APF Gilt purchase operation (3-7 years)
- (RO) Romania Aug M3 Money Supply Y/Y: No est v 14.0% prior
- 05:30 (DE) Germany to sell €3.5B in 2035 Bunds
- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays)
- 06:00 (IL) Israel Aug Unemployment Rate: No est v 4.6% prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (RU) Russia to sell OFZ Bonds
- 07:00 (US) MBA Mortgage Applications w/e xxx: No est v -2.5% prior
- 07:00 (UK) Weekly PM Question time in House
- 07:00 (MX) Mexico July Retail Sales M/M: 6.1%e v 7.8% prior Y/Y: -12.0%e v -16.6% prior
- 07:00 (BR) Brazil Sept FGV Consumer Confidence: No est v 80.2 prior
- 08:00 (BR) Brazil Mid- Sept IBGE Inflation IPCA-15 M/M: 0.4%e v 0.2% prior; Y/Y: 2.6%e v 2.3% prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave 2-Week Repurchase Rate unchanged at 0.25%
- 09:00 (US) July FHFA House Price Index M/M: 0.5%e v 0.9% prior
- 09:45 (US) Sept Preliminary Markit Manufacturing PMI: 53.5e v 53.1 prior; Services PMI: 54.6e v 55.0 prior; Composite PMI: No est v 54.6 prior
- 09:45 (CZ) Czech Central Bank post rate decision press conference
- 10:30 (US) Weekly DOE Oil Inventories
- 12:00 (CA) Canada to sell 3-year Bonds
- 15:00 (AR) Argentina Q2 Unemployment Rate: No est v 10.4% prior
- 15:00 (AR) Argentina July Supermarket Sales Y/Y: No est v -1.5% prior; Shop Center Sales Y/Y: No est v -88.6% prior
- (CO) Colombia Aug Industrial Confidence: No est v -8.5 prior; Retail Confidence: No est v 7.1 prior
- 18:45 (NZ) New Zealand Aug Trade Balance (NZD): -0.4Be v +0.3B prior; Exports: 4.4Be v 4.9B prior; Imports: 4.8Be v 4.6B prior
- 19:50 (JP) BOJ July Minutes (2 meetings ago)
- 22:05 (NZ) New Zealand to sell 2024, 2031, 2037 and 2040 bonds
- 23:35 (JP) Japan to sell 40-Year JGB Bonds
