Notes/Observations
German Chancellor Merkel faces tough coalition talks following German Election results
German Business moral drops slightly in Sep
PM Abe calls snap election, to seek ¥2T economic package
Overnight
Asia:
Election results in New Zealand saw ruling National Party with 46.6% and Labour with 35.5%. With neither party winning enough seats to have a majority in parliament.
Eight China cities, including Shijiazhuang, Chongqing, Nanchang, Nanning and Guiyang imposed curbs on home resales as part of campaign to cool home prices
(JP) PM Abe to dissolve lower house on Sept 28th (confirms will call snap election); confirms to seek ¥2.0T ($17.8B) economic package
Europe:
German Chancellor Angela Merkel re-elected for fourth term taking just shy of 33% of the vote, Her conservative CDU/CSU bloc and SPD results were lowest in almost 70 years.
Current coalition partner, the social democratic SPD, says it will go into opposition after historic losses.
Nationalist party took a notable part of the vote (13%) which will see the AFD Party enter parliament for first time
German IFO index edges downward, but remains well above its long term average
UK credit rating cut to Aa2 from Aa1 at Moody’s
Americas
The US widens scope of Travel ban to include North Korea, Venezuela and Chad
Oil:
Iraqi Kurds vote in independence referendum from Iraq
Economic data
(DE) GERMANY SEPT IFO BUSINESS CLIMATE: 115.2 V 116.0E; CURRENT ASSESSMENT: 123.6 V 124.7E
Expectation Survey: 107.4 v 108e
(ES) Spain Aug PPI M/M: -0.1% v -0.1% prior; Y/Y: 3.2% v 3.0% prior
Fixed Income Issuance:
Non seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 +0.1% at 3,546, FTSE -0.2% at 7,298, DAX +0.3% at 12,627, CAC-40 flat at 5,281, IBEX-35 -0.6% at 10,245, FTSE MIB +0.1% at 22,544, SMI +0.2% at 9,158, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes: European stocks opened lower, but drifted upwards as the session progressed; peripheral markets underperforming; political uncertainty following election results over weekend weighed on sentiment; UK stocks in focus after Moody’s cut country’s risk rating; Alstom and Siemens disclose entered discussions to merge train units; commodities weakened, weighing on energy and materials stocks; attention turning to ECB’s Draghi speech later today and Fed Chair Yellen tomorrow
Equities
Consumer discretionary: Aryzta ARYN.CH +2.2% (results), Autogrill AGL.IT -2.3% (analyst action), Norwegian Air NAS.NO +3.2% (unit awarded flight permission in US), Sodexo SW.FR -0.3% (analyst action), Unilever UNA.NL +0.1% (acquisition)
Energy: Tullow Oil TLW.UK +5.9% (expected to resume drilling)
Industrials: Alstom ALO.FR +1.1% (talks with Siemens), Fincantieri FCT.IT +4.4% (contract award)
Materials: Essentra ESNT.UK +2.6% (hurricane update)
Technology: AMS AMS.CH -4.3% (bond issue), Imagination Technologies IMG.UK +32.1%(takeover), Nets NETS.DK 6.4% (takeover offer)
Speakers
(UK) BOE Financial Policy Committee: Reiterates plan to lift capital buffer in November – Statement
German IFO economists: The index in Manufacturing fell significantly, the industrial companies were at a high level significantly less satisfied with their current situation
Banks would suffer losses of £30B in stress test
(FR) ECB’s Villeroy (France): Sees French GDP growth as fast as 1.7% in 2017
OPEC Sec Gen Barkindo: Outlook for Global Oil market is improving
(JP) Bank of Japan (BOJ) Gov Kuroda: Reiterates to continue with powerful monetary easing to reach 2% inflation as soon as possible – speech in Osaka
Currencies
Politics dominated currency trading as both euro and kiwi fell against their major trading partners following the German and New Zealand elections
USD/KRW won led gains as tensions eased on the Korean peninsula
Fixed Income
Bund futures trade at 161.69 up 53 ticks following the German elections and disappointing IFO release. Continued downside targets 161.03 while upside resistance stands initially at 162.07, followed by 163.27.
Gilt futures trade at 124.07 up 26 ticks following Moody’s downgrade on late Friday. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.
Monday’s liquidity report showed Friday’s excess liquidity rose to €1.743T from €1.734T and use of the marginal lending facility rose to €122M from €116M.
Corporate issuance saw $16.7B last week via 31 tranches, bringing YTD issuance to above $1.04T. For the week ahead analysts forecast around $15-20B to come to market.
In Euro denominated issuance ~€26.9B came to market via 40 issuers and 48 tranches
Looking Ahead
07:25 (BR) Brazil Central Bank Weekly Economists Survey
07:30 (TR) Turkey Sept Capacity Utilization: No est v 78.8% prior
07:30 (TR) Turkey Sept Real Sector Confidence (Seasonally Adj): No est v 110.2 prior; Real Sector Confidence (unadj): No est v 110.2 prior
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Aug Chicago Fed National Activity Index: -0.25e v -0.01 prior
09:00 (CN) China Aug Conference Board Leading Economic Index
09:00 (MX) Mexico July IGAE Economic Activity (Monthly GDP) Y/Y: No est v 2.4% prior
10:30 (US) Sept Dallas Fed Manufacturing Activity: 11.5e v 17 prior
16:00 (US) Weekly Crop Progress Report
