Notes/Observations
- Focus on Brexit talks as key UK deadline approaches to reach a deal
- Equity markets remain optimistic about fiscal stimulus in the United States
- China PBoC makes it easier to bet against the yuan saw the currency weaken (Note: PBoC move seen to curb recent yuan appreciation)
Asia:
- China PBOC to cut the FX risk reserve ratio to 0% [from 20%], effective from Monday (Oct 12th); The move relates to certain FX forwards trading by financial firms – financial press [Reminder: In Sept 2017 PBoC removed the reserve conditions for yuan forwards trade from 20% to zero; Analysts then noted that the removal of reserve requirement showed China was getting uncomfortable with recent yuan strength]
- China PBOC sets Yuan reference rate: 6.7126 v 6.7796 prior [Reminder: China PBOC expected to set the yuan mid-point at 6.7052]
- China Central Bank (PBoC) Gov Fan: Deteriorating US-China relations are presenting huge risks to the tech supply chain security for Domestic Financial Network
- Optimism circulating that the upcoming speech would have President Xi Jinping announce more reforms during his address in the southern city of Shenzhen
North Korea unveiled a new ICBM at its military parade (as speculated)
Europe:
- EU Leaders said to be insist on tough enforcement powers in a Brexit deal. Believe that UK PM Johnson’s attempt to override the Brexit treaty showed he can’t be trusted
- UK PM Johnson told German Chancellor Merkel that progress must be made in post-Brexit trade talks with the European Union in coming days to bridge “significant gaps”. Stressed that achieving a deal in the coming days would be beneficial f
- British and EU negotiators said to have agreed to keep talking to offset the most disruptive aspects of a no-deal Brexit even if trade negotiations break down. Barnier and Frost agreed that even if a wider deal proves impossible to reach, contact will continue.
- UK PM Johnson was expected to make a statement Monday, Oct 12th setting out significant new restrictions for parts of the country with high virus infection rates and a new tiered system for local lockdowns
- ECB’s Lane (Ireland, chief economist): Reiterates stance that was important not to put exchange rate at center of policy making, as FX is just one issue affecting. Saw uncertainty diminishing in the autumn, but next phase of recovery to be tougher
- Americas: White House spokesperson Farah: wants to keep coronavirus aid number below $2T (from Oct 9th)
- House Speaker Pelosi rejected admin’s increased stimulus offer saying it fell short on virus testing, worker safety and child care
- US stimulus talks are at ‘impasse’; both Democrats and Republicans are said to have shown resistance to Trump’s latest stimulus offer; Some Republicans raised concerns about the cost of Trump’s stimulus offer of ~$1.9T.
Energy:
- Libya ends force majeure related to the Sharara oil field (capacity of up to 300K bpd, largest oil field in Libya)
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 % at , FTSE -0.08% at 6,011.98, DAX +0.20% at 13,077.45, CAC-40 +0.36% at 4,964.77, IBEX-35 -0.16% at 6,940.00, FTSE MIB +0.18% at 19,630.50, SMI +0.21% at 10,341.61h, S&P 500 Futures +0.36%]
- Market Focal Points/Key Themes: European indices open modestly higher but slipped later in the session to trade mixed; better performing sectors include telecom and financials; energy and consumer discretionary sectors on the downside; French PM reiterated has no plans to raise taxes; reportedly Italy looking into increasing restrictions on gatherings; reportedly Orange looking to sell rural fiber business; focus on series of European central bank speakers; no major earnings events expected during Americas session with US markets open though with civic holiday.
Equities
- Consumer discretionary: Marston’s [MARS.UK] -4% (Liverpool restrictions), Amigo Holdings [AMGO.UK] +8% (CEO open letter)
- Industrials: Daimler [DAI.DE] +1.5% (analyst action)
- Technology: Aveva [AVV.UK] -4% (trading update), Landis+Gyr [LAND.CH] -6% (earnings)
Speakers
- ECB’s Schnabel (Germany) reiterated stance that is crucial to swiftly put the recovery fund into action
- BoE Dep Gov Woods stated that negative rates could have wider implications for the banking sector. For negative rates to be effective the financial sector would need to be operationally prepared
- EU Budget chief Hahn: To begin issuing Recovery Fund bonds in Q2 2021 with average maturity of 15 years
- Turkey Central Bank (CBRT) raises the TRY-denominate (Lira) reserves requirement by 200bps
- India Fin Min Sitharaman: Consumer demand needed a boost as pandemic had adversely impacted the economy; need to be done in a fiscally prudent way. Expected additional demand boosters to total INR1.0T
- India Economic Affairs Sec Bajaj maintained its FY borrowing target at INR12T noting that its takes into account fiscal measures
Currencies/Fixed Income
- USD consolidated its losses from Friday’s session. Overall markets continue betting that Democrat Joe Biden was more likely to win the US presidency and offer a larger economic package
- EUR/USD holding above the 1.18 level in quiet trade on Monday. ECB officials were out in force in the weekend press striking a dovish tone in a challenging environment.
- USD/CNY was higher after PBoC cut its FX risk reserve ratio from 20% to 0% with markets eyeing the move to help curb recent yuan appreciation
Economic Data
- (SE) Sweden Sept PES Unemployment Rate: 5.3% v 5.6% prior
- (NL) Netherlands Aug Trade Balance: €3.8B v €6.1B prior
- (SE) Sweden Oct SEB House-Price Indicator: 58 v 46 prior
- (DE) Germany Sept Wholesale Price Index M/M: 0.0% v -0.4% prior; Y/Y: -1.8% v -2.2% prior
- (DK) Denmark Sept CPI M/M: -0.1% v -0.4% prior; Y/Y: 0.6% v 0.5% prior
- (DK) Denmark Sept CPI EU Harmonized M/M: -0.2% v -0.4% prior; Y/Y: 0.5% v 0.4% prior
- (NO) Norway Q3 House Price Index Q/Q: 2.5% v 1.1% prior
- (RO) Romania Sept CPI M/M: -0.1% v -0.1% prior; Y/Y: 2.5% v 2.8%e
- (JP) Japan Sept Preliminary Machine Tool Orders Y/Y: -15.0% v -23.2% prior
- (CZ) Czech Sept CPI M/M: -0.6% v -0.3%e; Y/Y: 3.2% v 3.5%e
- (CZ) Czech Aug Export Price Index Y/Y: -0.5% v 1.2% prior; Import Price Index Y/Y: -2.9% v -1.4% prior
- (TR) Turkey Aug Current Account Balance: -$4.6B v -$4.4Be
- (TR) Turkey July Unemployment Rate: 13.4% v 13.4% prior
- 04:00 (CH) Swiss weekly Total Sight Deposits (CHF): 704.6B v 705.1B prior; Domestic Sight Deposits: 633.1B v 635.4B prior
Fixed Income Issuance
- None seen
Looking Ahead
- (MX) Mexico Sept ANTAD Same-Store Sales Y/Y: No est v -3.0% prior
- 05:30 (DE) Germany to sell combined €3.0B in 3-month and 9-month BuBills
- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
- 06:00 (IL) Israel to sell 2023, 2025, 2030, 2051 bonds (6 tranches)
- 06:00 (RO) Romania to sell RON300M in 4.75% 2034 Bonds
- 06:45 (US) Daily Libor Fixing
- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 07:00 (MX) Mexico Aug Industrial Production M/M: 2.4%e v 6.9% prior; Y/Y: -10.3%e v -11.3% prior; Manufacturing Production Y/Y: -7.9%e v -9.0% prior
- 07:00 (ZA) South Africa Aug Manufacturing Production M/M: 4.2%e v 7.6% prior; Y/Y: -7.8%e v -10.6% prior
- 07:00 (CZ) Czech Central Bank to comment on CPI data
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 08:00 (IN) India Sept CPI Y/Y: 6.9%e v 6.7% prior
- 08:00 (IN) India Aug Industrial Production Y/Y: -7.6%e v -10.4% prior
- 08:00 (ES) Spain Debt Agency (Tesoro) announcement of size on upcoming issuance
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 09:00 (RU) Russia Aug Trade Balance: $5.2Be v $4.3B prior; Exports: $24.9Be v $23.7B prior; Imports: $19.4Be v $19.4B prior
- 09:00 (FR) France Debt Agency (AFT) to sell €4.1-5.3B in 3-month, 6-month and 12-month bills
- 09:45 (EU) ECB weekly QE bond buying update
- 10:00 (UK) BOE’s Haskel
- 11:00 (SE) Sweden Central bank (Riksbank) Skingsley on panel Discussion Prize
- 11:00 (ES) ECB’s De Guindos (Spain)
- 12:00 (UK) BOE Gov Bailey
- 12:45 (IT) ECB’s Panetta (Italy)
- 13:00 (MX) Mexico Sept Total Formal Job Creation: No est v +92.4K prior
- 16:00 (US) Weekly Crop Progress Report
- 17:45 (NZ) New Zealand Sept Total Card Spending M/M: No est v -7.0% prior; Retail Card Spending M/M: No est v -7.9% prior
- 17:45 (NZ) New Zealand Sept Food Prices M/M: No est v 0.7% prior
- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 95.7 prior
- 19:01 (UK) Sept BRC Sales Like-For-Like Y/Y: No est v 4.7% prior
- 19:50 (JP) Japan Sept M2 Money Stock Y/Y: 9.0%e v 8.6% prior; M3 Money Stock Y/Y: 7.3%e v 7.1% prior
- 21:30 (KR) Bank of Korea (BOK) to sell KRW700B in 1-Year Bonds
- 23:30 (HK) Hong Kong to sell 3-month and 6-monthBills
