UK Growth Slowed Into Lockdown

Notes/Observations

• Pace of the rebound in UK growth slowed in September

Asia:

• RBNZ Assistant Gov Hawkesby stated that less stimulus was now required than thought in August; Would respond if funding for lending program did not delivery enough stimulus

Coronaviurs:

• Total global cases 52.1M (+1.3% d/d); total deaths 1,28M (+1.1% d/d)

Europe:

• PM Johnson senior aide Lee Cain has resigned as communications director despite being offered role of Chief of Staff. Resignation said to be attributed to internal tensions at 10 Downing Street
• UK’s Brexit negotiator David Frost is remaining in his position

Americas:

• Georgia Sec of State Raffensperger (Republican) stated that saw no sign of widespread fraud in Georgia vote and believed ballots were counted accurately

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.29% 387.42, FTSE -0.51% at 6,349.86, DAX -0.47% at 13,154.40, CAC-40 -0.63% at 5,410.72, IBEX-35 -0.47% at 7,757.00, FTSE MIB -0.32% at 20,925.50, SMI +0.06% at 10,538.70, S&P 500 Futures -0.14%]
• Market Focal Points/Key Themes: European indices open lower across the board but moderated losses as the session progressed; focus returning to record number of covid infections as reality of timeline for vaccine sets in; better performing sectors include consumer discretionary and telecom; industrials and financials sectors among those trading to the downside; results from Siemens weigh on DAX; Nokia and Deutsche Telekom expand 5G collaboration; earnings expected in the upcoming US session include Cisco Systems, Walt Disney , Deutsche Euroshop and Applied Materials

Equities

• Consumer discretionary: Burberry {BRBY.UK] +3.5% (trading update), Fraport [FRA.DE] -6% (traffic)
• Energy: RWE [RWE.DE] -1% (earnings)
• Financials: Zurich Insurance [ZURN.CH] +1% (9M update)
• Healthcare: Merck KGaA [MRK.DE] +2% (earnings), Astrazeneca [AZN.UK] -1% (trial failure)
• Industrials: Siemens [SIE.DE] -4% (earnings)
• Telecom: Deutsche Telekom [DTE.DE] -1% (earnings)

Speakers

• BOE Gov Bailey stated that economic recovery was uneven, Q3 GDP data was in line with BOE forecasts. Recent news on vaccine is encouraging but need to remain cautious. Did not see any great need for yield control measure. Reiterated view of not having any precise date in mind when negative rates would be usable. More Brexit information regarding UK’s future relationship with the EU could affect the chance of policy action at the December MPC meeting
• ECB’s de Guindos (Spain) stated that fiscal support should be scaled up in some areas. Must carefully manage the fiscal exit in the medium term
• ECB Economic Bulletin noted that the resurgence in coronavirus (COVID-19) infections presented renewed challenges to public health and the growth prospects
• German Fin Min Scholz: Economic outlook appearing better compared to a few week back
• Sweden Central Bank (Riksbank) Breman: 2nd wave of pandemic likely to hit country; reiterated stance that Rikebank had ample room to do more
• UK Gov Official Gove: Progress being made in Brexit negotiations but differences remain
• German regulator Bafin chief Hufeld: Banks should remain cautions on capital. Did not expect period of low interest rates and pandemic to cause a systemic banking crisis but some banks would fail
• India Fin Min Sitharaman stated that the country was experiencing a strong recovery; Confirmed to make new stimulus announcement with 12 new schemes. It included an eEmployment scheme to generate opportunities during Covid-19 recovery phase. To extend emergency credit line guarantees for stressed sectors
• US Special envoy Abrams stated that there would be more sanctions imposed on Iran
• IEA Monthly Oil Report cut its 2020 global oil demand contraction from -8.5M bpd to -8.8M bpd while raising the 2021 global oil demand growth from 5/5M bpd to 5.8M bpd. Current fundamentals were too weak to offer firm support to prices. Global oil inventory to rise over 1M bpd in Nov amid recovering Libyan, US Supply. Vaccines unlikely to significantly increase oil demand until well Into 2021. Unless fundamentals change then task of re-balancing oil market would make slow progress

Currencies/Fixed Income

• USD was slightly weaker against most of the major pairs in a quiet session.
• EUR/USD higher by 0.3% to move above the 1.18 level. Some analysts noted that a dovish ECB Bank stance at the December policy meeting would provide a headwind for the pair and support further widening of US-German bond yield spread
• GBP/USD continued to drift from recent 2-month highs as Brexit uncertainty remained

Economic Data

• (FI) Finland Sept Final Retail Sales Volume Y/Y: 3.7% v 1.9% prior
• (UK) Q3 Preliminary GDP Q/Q: 15.5% v 15.8%e; Y/Y: -9.6% v -9.4%e
• (UK) Sept GDP M/M: 1.1% v 1.5%e
• (UK) Q3 Preliminary Private Consumption Q/Q: 18.3% v 17.4%e; Government Spending Q/Q: 7.8% v 12.0%e; Gross Fixed Capital Formation Q/Q: 15.1% v 11.9%e; Exports Q/Q: 5.1% v 10.4%e ; Imports Q/Q: 13.2% v 19.0%e
• (UK) Q3 Preliminary Total Business Investment Q/Q: 8.8% v 14.7%e; Y/Y: -20.7% v -26.1% prior
• (UK) Sept Industrial Production M/M: 0.5% v 1.0%e; Y/Y: -6.3% v -6.1%e
• (UK) Sept Manufacturing Production M/M: 0.2% v 1.0%e; Y/Y: -7.9% v -7.4%e
• (UK) Sept Construction Output M/M: 2.9% v 2.1%e; Y/Y: -10.0% v -11.7%e
• (UK) Sept Index of Services M/M: 1.0% v 1.3%e; 3M/3M: 14.2% v 14.6%e
• (UK) Sept Visible Trade Balance: -£9.4B v -£9.3Be; Overall Trade Balance: £0.6B v £0.9Be; Trade Balance Non EU: -£1.7B v -£2.4Be
• (DE) Germany Oct Final CPI M/M: 0.1% v 0.1%e; Y/Y: -0.2% v -0.2%e
• (DE) Germany Oct Final CPI EU Harmonized M/M: 0.0% v 0.0%e; Y/Y: -0.5% v -0.5%e
• (ES) Spain Sept House transactions Y/Y: -1.1% v -12.1% prior
• (SE) Sweden Oct CPI M/M: -0.1% v -0.1%e; Y/Y: 0.3% v 0.4%e; CPI Level: 336.97 v 337.00e
• (SE) Sweden Oct CPIF M/M: 0.0% v -0.1%e; Y/Y: 0.3% v 0.3%e
• 03:30 (SE) Sweden Oct CPIF (ex-energy) M/M: 0.2% v 0.2%e; Y/Y: 1.1% v 1.0%e
• (IS) Iceland Oct International Reserves (ISK): 928B v 943B prior
• (ZA) South Africa Q3 Unemployment Rate: 30.8% v 31.0%e (record high)
• (ZA) South Africa Sept Total Mining Production M/M: -0.3% v +1.1%e; Y/Y: -2.8% v -2.5%e; Platinum Production Y/Y: -0.5% v +12.5% prior; Gold Production Y/Y: -0.7% v -14.1% prior
• (EU) Euro Zone Sept Industrial Production M/M: -0.4% v +0.6%e; Y/Y: -6.8% v -5.8%e

Fixed income Issuance

• (RU) Russia opened its book to sell EUR-denominated 7-year and 12-year bonds
• (HU) Hungary to sell EUR-denominated 10-year and 30-year bonds
• (DK) Denmark sold total DKK5.64B in 3-month, 6-month, 9-month and 12-month bills
• (SE) Sweden sold total SEK1.0B vs. SEK1.0B indicated in 2025 and 2030 inflation-linked bonds
• (UK) DMO sold £3.0B in new 0.25% 2031 Gilts; Avg Yield: 0.496% v 0.244% prior; bid-to-cover: 2.51x v 3.00x prior; Tail: 0.2bps v 0.1bps prior
• (IT) Italy Debt Agency (Tesoro) sold total €6.0B vs. €5.0-6.0B indicated range in 3-year, 7-year and 15-year BTP bonds
• Sold €3.0B vs. €2.5-3.0B indicated in 0.00% Jan 2024 BTP; Avg Yield: -0.19% (record low) v -0.14% prior; Bid-to-cover: 1.41x v 1.40x prior
• Sold €1.75B vs. €1.25-1.75B indicated range in 0.95% Sept 2027 BTP; Avg Yield: 0.35% v 0.34% prior; Bid-to-cover: 1.58x v 1.76x prior
• Sold €1.25B vs. €1.0-1.25B indicated range in 1.45% Mar 2036 BTP; Avg Yield: 1.05% v 1.91% prior; bid-to-cover: 1.53x v 1.42x prior

Looking Ahead

• (IE) Ireland Debt Agency (NTMA) to sell €1.0-1.25B in 2030 and 2050 IGB bonds
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year Bonds
• 05:50 (HU) Hungary Central Bank One-Week Deposit Rate Setting (current stands at 0.75%)
• 06:00 (IE) Ireland Oct CPI M/M: No est v -0.4% prior; Y/Y: No est v -1.2% prior
• 06:00 (IE) Ireland Oct CPI EU Harmonized M/M: No est v -0.4% prior; Y/Y: No est v -1.2% prior
• 06:00 (IL) Israel Oct Trade Balance: No est v -$1.7B prior
• 06:00 (RO) Romania to sell RON500M in 3.25% 2026 Bonds
• 06:30 (UKL) DMO to sell £1.25B in 1.625% Oct 2054 Gilts; Avg Yield: % v 0.816% prior; bid-to-cover: x v 2.23x prior; Tail: bps v 0.2bps prior (Aug 25th 2020)
• 07:00 (BR) Brazil Sept IBGE Services Sector Volume Y/Y: -7.8%e v -10.0% prior
• 07:00 (IN) India Oct CPI Y/Y: 7.3%e v 7.3% prior
• 07:00 (IN) India Sept Industrial Production Y/Y: -1.9%e v -8.0% prior
• 08:00 (RU) Russia Gold and Forex Reserve w/e Nov 6th: No est v $584.0B prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Oct CPI M/M: 0.1%e v 0.2% prior; Y/Y: 1.3%e v 1.4% prior
• 08:30 (US) Oct CPI (ex-food/energy) M/M: 0.2%e v 0.2% prior; Y/Y: 1.7%e v 1.7% prior
• 08:30 (US) Oct CPI Index NSA: 260.474e v 260.28 prior; CPI Core Index (seasonally Adj): 269.576e v 269.264 prior
• 08:30 (US) Oct Real Avg Weekly Earnings Y/Y: No est v 4.1% prior; Real Avg Hourly Earning Y/Y: No est v 3.3% prior
• 08:30 (US) Initial Jobless Claims: 732Ke v 751K prior; Continuing Claims: 6.90Me v 7.285M prior
• 08:30 (US) Weekly USDA Net Export Sales
• 10:00 (CO) Colombia Sept Trade Balance: -$0.7Be v -$0.8B prior; Total Imports: $3.4Be v $3.6B prior
• 10:30 (US) Weekly EIA Natural Gas Inventories
• 11:00 (US) Weekly DOE Oil Inventories
• 11:00 (RU) Russia Q3 Advance GDP Y/Y: -4.0%e v -8.0% prior
• 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
• 11:45 (EU) ECB chief Lagarde with BOE’s Bailey and Fed chief Powell at ECB Forum
• 12:00 (CA) Canada to sell C$5.0B in 0.5% 2030 Bonds
• 13:00 (MX) Mexico Oct Total Formal Job Creation: No est v +113.9K prior
• 13:00 (US) Treasury to sell 30-year bonds
• 13:00 (US) Fed’s Evans at Detroit Community Forum
• 14:00 (US) Oct Monthly Budget Statement: -$275.0Be v -$124.6B prior
• 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to cut Overnight Rate by 25bps to 4.00% (50-50 prob)
• 14:00 (AR) Argentina Oct National CPI M/M: 3.1%e v 2.8% prior; Y/Y: 36.3%e v 36.6% prior
• 13:30 (CA) Bank of Canada (BOC) Wilkins speech
• (EG) Egypt Central Bank Interest Rate Decision: Expected to cut Deposit Rate by 50bps to 8.25%; Current Lending Rate at 9.75%
• 16:30 (NZ) New Zealand Oct Manufacturing PMI: No est v 54.0 prior
• 16:45 (NZ) New Zealand Oct Food Prices M/M: No est v -1.0% prior
• 18:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 0.25%
• 22:00 (KR) South Korea Sept M2 Money Supply M/M: No est v 0.3% prior; “L” Money Supply M/M: No est v 0.0% prior
• 22:00 (CN) China to sell 30-Yr Upsized Government Bonds
• 23:00 (MY) Malaysia Q3 GDP Q/Q: +16.5%e v -16.5% prior; Y/Y: -4.3%e v -17.1% prior
• 23:00 (MY) Malaysia Q3 Current Account Balance (MYR): 30.6Be v 7.6B prior
• 23:30 (JP) Japan to sell 3-Month Bills