Notes/Observations
- Major PMI Manufacturing data mixed but remain in expansion territory. Both Germany and Euro Zone register fastest pace in more than two years
- Brexit talks said to hit a snag on State Aid in trade negotiations
Asia:
- Japan Q3 Tankan Large Manufacturing Index saw its 1st improvement in 11 quarters but still missed expectations (-27 v -24e; Outlook Survey: -17 v -16e
- Japan Sept Final PMI Manufacturing: 47.7 v 47.3 prelim (confirms 17 months of contraction)
- Australia Sept Final PMI Manufacturing: 55.4 v 55.5 prelim (confirms 4th month of expansion)
- China market closed until Fri Oct 9th as it began begins Golden Week ; Hong Kong closed until Monday and S Korea closed today
- Tokyo Stock Exchange trading was halted due to a systems issue
Americas:
- President Trump signed stopgap funding bill to avert a govt shutdown (as expected). Senate passed stop gap spending Bill that stopped a govt shutdown until Dec 11th
- Treasury Sec Mnuchin stated that had a productive meeting with Speaker Pelosi, Made a lot of progress, but still no stimulus; Stimulus deal is in neighborhood of $1.5-2.2T; Had agreed on direct payments to Americans; Proposed $400/week in unemployment benefits; Offered Pelosi additional aid for state and local governments; Did not expect progress to be made until Thurs (Oct 1st)
- White House Chief of Staff Meadows reiterated view that stimulus offer was >$1.5T and included $20B for airlines (would extend aid for airlines for 6 months)
- House said to have officially pushed the vote on their covid relief bill until Thursday in order to allow Speaker Pelosi and Tsy Sec Mnuchin one more day to bridge their differences.
- Fed extended restrictions on large banks’ dividends and buybacks into Q4 (for firms with over $100B in assets)
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.19% at 361.78, FTSE +0.61% at 5,901.85, DAX -0.30% at 12,721.90, CAC-40 +0.30% at 4,817.69, IBEX-35 -0.07% at 6,712.00, FTSE MIB +0.29% at 19,069.50, SMI +0.78% at 10,266.12, S&P 500 Futures +0.59%]
- Market Focal Points/Key Themes: European indices trade higher after the open but traded mixed later in the session; improvement in sentiment attributed to better results from retail companies, while failure to reach agreement on state aid in Brexit talks impacted sentiment; Rolls Royce confirms rights offering; Konecranes and Cargotec announced merger; earnings expected in the upcoming US session include Pepsico, Bed Bath and Beyond, ConAgra and Constellation Brands
Equities
- Consumer discretionary: H&M [HMB.SE] +6% (earnings), Cargotec [CBCBV.FI] +22%, Konecranes [KCR.FI] +16% (merger), Connect Group [CNCT.UK] +28% (trading update)
- Healthcare: Smith & Nephew [SN.UK] +3% (trading update), Bayer [BAYN.DE] -10% (outlook), GENFIT [GNFT.FR] -12% (earnings)
- Industrials: Manz [M5Z.DE] +5% (order), Rolls Royce [RR.UK] -5% (recapitalization offering)
- Technology: Restore [RST.UK] +8% (trading update)
Speakers
- ECB’s De Cos (Spain reiterated Council that recent data showed a certain slowdown in August. Reiterated stance that ECB is willing to re-calibrate measures and introduce new ones
- EU and UK said to have failed to close the differences on State aid during talks this week
- EU said to start legal action against UK on internal market bill (as anticipated). To send formal infringement notice by letter (**Reminder: UK Parliament saw the MPs give their final backing to government plans to override parts of its Brexit agreement with the EU)
- EU Commission President Von der Leyen issued a statement that the UK had one month to respond to EU letter
- Sweden Central Bank (Riksbank) Sept Minutesnoted that the recent inflation had been higher than expected but statistics were currently difficult to interpret. Scope to rate cut are limited but could not be ruled out. Expansion of balance sheet remained an important tool
- Philippines Central Bank (BSP) Policy Statement stressed it was prepared to deploy full arsenal of tools if needed. CPI was seen at a slower path with balance of risk to inflation to the downside for 2020
- Tokyo Stock Exchange: To replace hardware and restart its system to resume trade on Friday (Oct 2nd)
Currencies/Fixed Income
- USD began the session on a soft footing as speculation continued that US would find an agreement on its Covid-19 stimulus bills. The greenback was off its worst level as the session progressed as Brexit concerns seemed to reappear.
- GBP was softer after reports circulated that EU and UK had failed to close the differences on State aid during this week’s round of negotiations. Also adding the GBP woes’ was a report that EU began the legal action against UK on internal market bill (as anticipated). GBP/USD was lower by almost 0.75% to test 1.2835 as the situation casted doubt on the ability to strike a trade deal.
- EUR/USD well contained in the 1.15-1.20 trading range. Euro failed to gain much ground despite PMI data that showed Germany and Euro Zone registering their fastest pace in more than two years
Economic Data
- (RU) Russia Sept PMI Manufacturing: 48.9 v 51.1 prior (moves back into contraction)
- (AU) Australia Sept Commodity Index: 94.2 v 93.2 prior – (SE) Sweden Sept PMI Manufacturing: 55.3 v 53.8 prior (3rd month of expansion)
- (CH) Swiss Sept CPI M/M: 0.0% v 0.0%e; Y/Y: -0.8% v -0.8%e; CPI Core Y/Y: -0.3% v -0.4%e
- (CH) Swiss Sept CPI EU Harmonized M/M: -0.1% v -0.1% prior; Y/Y: -1.1% v -1.4% prior
- (CH) Swiss Aug Real Retail Sales Y/Y: 2.5% v 3.6% prior
- (NL) Netherlands Sept Manufacturing PMI: 52.5 v 54.0e (2nd straight expansion)
- (HU) Hungary Sept Manufacturing PMI: 48.8 v 53.7e (1st contraction in 3 months)
- (PL) Poland Sept PMI Manufacturing:50.8# v 52.4e (3rd month of expansion)
- (TR) Turkey Sept PMI Manufacturing: 52.8 v 53.8e(4th straight expansion)
- (ES) Spain Sept Manufacturing PMI: 50.8 v 50.5e (moves back into expansion)
- (CH) Swiss Sept PMI Manufacturing: 53.1 v 54.0e (2nd straight expansion)
- (CZ) Czech Republic PMI Sept PMI Manufacturing: 50.7 v 51.0e (1st expansion in 22 months)
- (TH) Thailand Sept Business Sentiment Index: 47.5 v 45.7 prior
- (IT) Italy Sept Manufacturing PM: 53.2 v 53.5 (3rd month of expansion and highest since Jun 2018 )
- (FR) France Sept Final Manufacturing PMI: 51.2 v 50.9e (confirmed move back into expansion and highest reading since Jan 2020)
- (DE) Germany Sept Final Manufacturing PMI: 56.4 v 56.6e (confirmed 3rd straight expansion and highest reading since July 2018)
- (EU) Euro Zone Sept Final Manufacturing PMI: 53.7 v 53.7e (confirmed 3rd month of expansion and highest reading since Aug 2018)
- (GR) Greece Sept Manufacturing PMI: 50.0 v 49.4 prior (1st non-contraction in 7 months)
- (NO) Norway Sept PMI Manufacturing: 50.3 v 46.1 prior (1st expansion in 7 months)
- (IT) Italy Aug Preliminary Unemployment Rate: 9.7% v 10.2%e
- (PL) Poland Sept Preliminary CPI M/M: 0.2% v 0.0%e; Y/Y: 3.2% v 3.0%e
- (PH) Philippines Central Bank (BSP) left the Overnight Borrowing Rate unchanged at 2.25% (as expected)
- (UK) Sept Final Manufacturing PMI: 54.1 v 54.3e (confirmed its 4th straight expansion)
- (EU) Euro Zone Aug Unemployment Rate:8.1 % v 8.1%e
- (EU) Euro Zone Aug PPI M/M: 0.1% v 0.1%e; Y/Y: -2.5% v -2.7%e
- (BE) Belgium Aug Unemployment Rate: 5.1% v 5.0% prior
- (ZA) South Africa Sept Manufacturing PMI: 58.3 v 55.5e (5th month of expansion)
- (DK) Denmark Sept PMI Survey: 54.4 v 52.3 prior (5th month of expansion)
Fixed Income Issuance
- (ES) Spain Debt Agency (Tesoro) sold total €3.349B vs. €3.0-4.0B indicated range in 2025, 2030 and 2066 SPGB Bonds
- Sold €1.19B in 0.0% Jan 2025 SGPB bonds; Avg Yield: -0.322% v -0.276% prior; Bid-to-cover: 2.89x v 4.88x prior
- Sold €896M in 1.25% Oct 2030 SPGB; Avg Yield: 0.224% v 0.263% prior; Bid-to-cover: 3.16x v 3.03x prior
- Sold €1.27B in 3.45% July 2066 SPGB; Yield: 1.307% v 1.691% prior; Bid-to-cover: 1.27x v 1.11x prior
- (ES) Spain Debt Agency (Tesoro) sold €480M vs. €250-750M indicated range in 0.70% Nov 2033 Inflation-linked bonds; Real Yield: -0.392% v -0.432% prior; Bid-to-cover: 1.95x v 1.76x prior
- (FR) France Debt Agency (AFT) sold €11.5B vs. €10.0-11.5B indicated range in 2030, 2034, 2040 and 2052 Bonds
- Sold €5.508B in 0.00% Nov 2030 Oat; Avg Yield: -0.25% v -0.19% prior; Bid-to-cover: 1.82x v 1.65x
- Sold €1.680B in 1.25% May 2034 Oat; Avg Yield: -0.09% v +0.11% prior; Bid-to-cover: 2.13x v 2.14x prior
- Sold €2.245B in 0.50% May 2040 Oat; Avg Yield: 0.17%; bid-to-cover: 1.99x (no history’ syndicated on May 27th 2020)
- Sold €2.067B in 0.75% May 2052 Oat; Avg Yield: 0.43% v 0.53% prior; Bid-to-cover: 1.81x v 1.99x prior
- (UK) DMO sold £3.25B in 0.125% Jan 2023 Gilts; Avg Yield: -0.051% v -0.060% prior; Bid-to-cover: 2.57x v 2.49x prior; Tail: 0.3bps v 0.4bps prior
- (SE) Sweden sold total SEK1.0B in I/L 2026 and 2030 Bonds
Looking Ahead
- (PE) Peru Sept CPI M/M: 0.0%e v -0.1% prior; Y/Y: 1.7%e v 1.7% prior
- (ZA) South Africa Sept Naamsa Vehicle Sales Y/Y: -25.0%e v -26.3% prior
- (RO) Romania Sept International Reserves: No est v $41.3B prior
- (IT) Italy Sept Budget Balance: No est v -€3.5B prio
- (EU) EU Council begins 2-day summit
- 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds
- 06:00 (IL) Israel Aug Chain Store Sales M/M: No est v 0.6% prior
- 06:00 EU Commission President Von der Leyen
- 06:00 (RO) Romania to sell RON700M in 3.65% 2025 bonds
- 06:30 (UK) DMO to sell £2.0B in 1.25% Oct 2041 Gilts
- 06:45 (US) Daily Libor Fixing
- 07:00 (ZA) South Africa Aug Electricity Production Y/Y: No est v -4.5% prior; Electricity Consumption Y/Y: No est v -3.5% prior
- 07:30 (US) Sept Challenger Job Cuts: No est v +115.8K prior; Y/Y: No est v 116.5% prior
- 07:30 (CL) Chile Aug Economic Activity Index (Monthly GDP) M/M: 4.8%e v 1.7% prior; Y/Y: -8.7%e v -10.7% prior; Economic Activity (ex-mining) Y/Y: No est v -12.00% prior
- 08:00 (CZ) Czech Sept Budget Balance (CZK): No est v -230.3B prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:30 (US) Aug Personal Income: -2.5%e v +0.4% prior; Personal Spending: 0.8%e v 1.9% prior; Real Personal Spending (PCE): 0.5%e v 1.6% prior
- 08:30 (US) Aug PCE Deflator M/M: 0.3%e v 0.3% prior; Y/Y: 1.2%e v 1.0% prior
- 08:30 (US) Aug PCE Core Deflator M/M: 0.3%e v 0.3% prior; Y/Y: 1.4%e v 1.3% prior
- 08:30 (US) Initial Jobless Claims: 850Ke v 870K prior; Continuing Claims: 12.20Me v 12.580M prior
- 08:30 (CA) Canada Aug MLI Leading Indicator M/M: No est v -0.3% prior
- 08:30 (US) Weekly USDA Net Export Sales
- 09:00 (RU) Russia Gold and Forex Reserve w/e Sept 25th: No est v $590.9B prior
- 09:00 (BR) Brazil Sept PMI Manufacturing: No est v 64.7 prior
- 09:30 (CA) Canada Sept Manufacturing PMI: No est v 55.1 prior
- 09:45 (US) Sept Final Markit Manufacturing PMI: 53.5e v 53.5 prelim
- 10:00 (US) Sept ISM Manufacturing: 56.4e v 56.0 prior; Prices Paid: 58.8e v 59.5 prior
- 10:00 (US) Aug Construction Spending M/M: 0.7%e v 0.1% prior
- 10:00 (MX) Mexico Aug Total Remittances: $3.6Be v $3.5B prior
- 10:00 (MX) Mexico Central Bank Economist Survey
- 10:00 (CA) Canada to sell new 10-year bond
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 10:30 (MX) Mexico Sept PMI Manufacturing: No est v 41.3 prior
- 11:00 (CO) Colombia Sept PMI Manufacturing: No est v 51.2 prior
- 11:00 (CO) Colombia Aug Exports: $2.5Be v $2.6B prior
- 11:00 (US) Fed’s Williams moderates panel at Fintech conference
- 11:45 (IE) ECB’s Lane (Ireland, chief economist) online conference
- 12:00 (IT) Italy Sept New Car Registrations Y/Y: No est v -0.4% prior
- 13:00 (MX) Mexico Sept IMEF Manufacturing Index: 47.5e v 45.0 prior; Non-Manufacturing Index: 47.0e v 46.1 prior
- 14:00 (BR) Brazil Sept Trade Balance: $7.1Be v $6.6B prior; Total Exports: $19.4Be v $17.7B prior; Total Imports: $12.2Be v $11.1B prior
- 15:00 (US) Fed’s Bowman
- 17:00 (NZ) New Zealand Sept Consumer Confidence Index: No est v 100.2 prior
- 19:30 (JP) Japan Aug Jobless Rate: 3.0%e v 2.9% prior; Job-To-Applicant Ratio: 1.05e v 1.08 prior
- 19:50 (JP) Japan End-Sept Monetary Base: No est v -¥582.9T prior
- 21:30 (AU) Australia Aug Retail Sales M/M: -4.2%e v +3.2% prior
- 23:30 (JP) Japan to sell 3-Month Bills
