Notes/Observations
Focus on Catalan President Puidgemont’s speech to the regional parliament Tuesday; might provide an "all-clear" that a declaration of independence was not imminent – UK Aug trade deficit of -£14.2B is the highest on record
Overnight
Asia:
Bank of Japan (BoJ) Gov Kuroda reiterated view that expects CPI to pick up pace towards 2% target; o maintain QQE with YCC for as long as needed to reach 2% inflation in stable manner. BOJ to expand monetary base until CPI overshoots 2%. Reiterated view that domestic economy is expanding moderately and would adjust monetary policy as needed to maintain economic momentum
PBOC Gov Zhou: China must press on with a "trinity" of reforms to fully realize an open economy. must embrace free trade and investment, let the market decide the yuan’s currency value, and scrap capital account controls
China Stats Bureau Chief: China had no problem meeting 2017 GDP growth target of ~6.5%, might beat target
Europe:
Eurogroup Chief Dijsselbloem: primary discussion was regarding role of ESM; confirmed election of new Eurogroup chair on Dec 4th (Dijsselbloem to serve out current term as Chair through mid-Jan). Ministers saw possible ESM role to play in preventing crises by giving bailout fund new instrument; ESM could be used to backstop single resolution fund
German position paper on ESM: the fund should monitor country risks in the same way the IMF does. New mandate should include predictable debt restructuring mechanism to ensure fair burden sharing between ESM and private creditors
ECB’s Lautenschlaeger (Germany): the time has come to put unconventional tools back into the box; should begin scaling back bond purchases at start of next year
Catalan separatists reportedly have offered Socialists a partnership to seek removal of PM Rajoy from power
Catalan President reportedly to declare a ‘gradual independence’. Declaration would not lead to parliamentary vote and to insist on Catalonia’s wish to negotiate with central govt and the need for mediation
UK PM May: Govt has made clear we have no intention of revoking Article 50; sought a creative solution to new economic relationship with EU post-Brexit
According to ORB poll 57% of voters want PM Theresa May to remain as prime minister until the end of the Brexit process
(UK) Sept BRC LFL Sales y/y: 1.9% v 1.3% prior (fastest pace of growth in 2017)
Energy:
OPEC’ Sec Gen Barkindo called for new members shall join output cuts, urged friends in the shale basins in North America to take this shared responsibility
Economic data
(CH) Swiss Sept Unemployment Rate: 3.0% v 3.0%e; Unemployment Rate (Seasonally Adj): 3.1% v 3.2%e
(DE) Germany Aug Current Account Balance: €17.8B v €17.0Be; Trade Balance: €21.6B v €19.5Be; Exports M/M: 3.1% v +1.1%e; Imports M/M: +1.2% v +0.5%e
(FI) Finland Aug Industrial Production M/M: No est v 0.4% prior; Y/Y: No est v 2.7% prior
(NO) Norway Sept CPI M/M: 0.6% v 0.7%e; Y/Y: 1.6% v 1.7%e
(NO) Norway Sept CPI Underlying M/M: 0.5% v 0.6%e; Y/Y: 1.0% v 1.2%e
(FR) France Aug Industrial Production M/M: -0.3% v +0.5%e; Y/Y: 2.7% v 1.5%e
(FR) France Aug Manufacturing Production M/M: -0.4% v +0.6% prior; Y/Y: 2.7% v 2.7%e
(HU) Hungary Sept CPI M/M: 0.1% v 0.2%e; Y/Y: 2.5% v 2.7%e
(DK) Denmark Sept CPI M/M: +0.1% v -0.1%e; Y/Y:1.6% v 1.4%e
(DK) Denmark Sept CPI EU Harmonized M/M: +0.1% v -0.4% prior; Y/Y: 1.6% v 1.4%e
(IT) Italy Aug Industrial Production M/M: 1.2% v 0.1%e; Y/Y: 5.7% v 2.5%e; Industrial Production WDA Y/Y: 5.6% v 2.9%e
(UK) Aug Industrial Production M/M: 0.2% v 0.2%e; Y/Y: 1.6% v 0.9%e
(UK) Aug Manufacturing Production M/M: 0.4% v 0.2%e; Y/Y: 2.8% v 1.9%e
(UK) Aug Visible Trade Balance: -€14.2B v -€11.2Be (largest deficit on record); Overall Trade Balance: -£5.6B v -£2.8Be; Trade Balance Non EU: -£5.8B v -£3.6Be
Fixed Income Issuance:
(EU) EFSF opened its book to sell €3.0B in Oct 2023 Bond; guidance -25bps to mid-swaps; order book over €8.0B
(ES) Spain Debt Agency (Tesoro) sold total €4.94B vs. €4.5-5.5B indicated range in 6-month and 12-month Bills
(ID) Indonesia sold total IDR7.0T in 3-month and 12-month Bills & 2-year,4-year,7-year and 15-Year Project-based Sukuk (PBS)
(SK) Slovakia Debt Agency (Ardal) opend its book to sell €1.0B in 30-year bonds; guidance seen +50bps to mid-swaps
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.1% at 390.0, FTSE +0.1% at 7513, DAX -0.2% at 12947, CAC-40 -0.1% at 5362, IBEX-35 -0.6% at 10179, FTSE MIB -0.7% at 22309, SMI +0.1% at 9267, S&P 500 Futures flat]
Market Focal Points/Key Themes: European Indices trade lower across the board with notable weakness in the FTSE MIB and Spanish Ibex, while the FTSE trades in positive territory following better Industrial production data. Focus remains on Spain with focus on Catalan President Puidgemont’s speech to the regional parliament later today. On the earnings front LVMH and Christian Dior trade higher after strong Q3 results, Dominos Pizza UK trades sharply higher following their trading update, as does Robert Walters after lifting its outlook. Retailer Pets-at-Home trades sharply lower after KKR sells 12.2M shares, while while Dassault Systems leads the decliners in France after Falcon 5X plane development issues.
Equities
Consumer discretionary [Christian Dior [CDI.FR] +2.1% (Earnings), LVMH [MC.FR] +2.3% (Earnings), Dominos Pizza [DOM.UK] +13.6% (Trading update), Robert Walters [RWA.UK] +8.2% (Earnings), Marston [MARS.UK] +4.7% (Earnings), Givaudan [GIVN.CH] +3.4% (Earnings), Pets at Home [PETS.UK] -7.6% (KKR sells 12.2% stake), Johnston Press [JPR.UK] -16% (Updates on strategic review: approaches largest bondholder to form ad hoc committee of bondholders)]
Industrials: [ Bossard Hlds [BOSN.CH] +3% (Earnings), Dassault Aviation [AM.FR] -4.2% (concerns about the development plans for the Falcon 5X plane)]
Healthcare: [Evotec [EVT.DE] +1.9% (Milestone payment)]
Speakers
President of European Parliament Tajani letter to ECB’s Draghi: deeply concerned about how decision on new bad loan guidelines has been undertaken
German IG Metall union recommended collective bargaining round of 6.0% for metal and electrical industry
BOJ Quarterly Regional Report (Sakura) raised its view in 4 of 9 regions ( remainder unchanged). Main factors for improvement in assessment due to stronger momentum in exports and production, private consumption growth, and public investment support from the implementation of the FY16 second supplementary budget
Russian Lawmaker: North Korean leadership claims to possess a ballistic missile with a range of 3,000 km and following modernization will be able to reach a US territory
Currencies
EUR/USD rebounded from recent losses after ECB’s Lautenschlaeger struck a hawkish note in her commentary on Monday in which she called for ECB to roll back asset purchases in 2018. Dealers did note that political overhang did persist in the region with focus on Catalan President Puidgemont’s speech to the regional parliament Tuesday. The recent split in the regions appetite for independence might provide an "all-clear" that such a declaration was not imminent. EUR/USD trading at 1.1780 just ahead of the NY morning.
GBP/USD was firmer ahead of Aug trade and production data. Dealers saw this was the last bit of ‘hard data’ ahead of UK Q3 GDP. The Industrial and Manufacturing data did beat expectations for the YoY readings. The market brushed aside the record breaking trade deficit for Aug. GBP/USD trading around 1.3185 just ahead of the NY morning.
Fixed Income
Bund futures trade at 161.55 up 10 ticks as markets eagerly await on Catalan President Puidgemont’s speech to the regional parliament. Continued downside targets 161.03 while upside resistance stands initially at 162.07, followed by 163.27.
Gilt futures trade unchanged at 123.96 following better than expected Industrial Production and Manufacturing data. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.
Tuesday’s liquidity report showed Monday’s excess liquidity fell to €1.791T from €1.798T and use of the marginal lending facility dropped to €185M from €195M.
Corporate issuance saw no issuance
Looking Ahead
(PT) Bank of Portugal releases Data on Banks
(MX) Mexico Sept ANTAD Same-Store Sales Y/Y: No est v 4.0% prior
05.30 (UK) Weekly John Lewis LFL sales data
05:30 (EU) ECB allotment in 7-day Main Financing Tender (MRO) tender
05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
05:30 (BE) Belgium Debt Agency (BDA) to sell €1.3-1.7B in 3-month and 12-month bills
05:30 (UK) DMO to sell £2.5B in 1.75% 2037 Gilts
06:00 (US) Sept NFIB Small Business Optimism: 105.0e v 105.3 prior
06:00 (FI) Finland to sell up to €1.0B in 0% Apr 2022 RFGB bonds; Avg Yield: % v -0.168% prior; Bid-to-cover: x v 1.53x prior (Apr 26th 2017)
07:30 (CL) Chile Sept Trade Balance: $0.4Be v $0.6B prior; Total Exports: $5.6Be v 6.1B prior; Total Imports: $5.0Be v $5.5B prior; Copper Exports: No est v $3.0B prior
07:30 (CL) Chile Sept International Reserves: No est v $38.5B prior
08:00 (UK) Sept NIESR GDP Estimate: No est v 0.4% prior
08:00 (BR) Brazil CONAB crop report
08:00 (RO) Romania Central Bank (NBR) Oct Minutes
08:00 (UK) Baltic Dry Bulk Index
08:15 (CA) Canada Sept Annualized Housing Starts: 211.0Ke v 223.2K prior
08:30 (CA) Canada Aug Building Permits M/M: -1.0% v -3.5% prior
09:00 (RU) Russia Q3 Preliminary Current Account Balance: -$2.8Be v +$2.8B prior
09:00 (EU) Weekly ECB Forex Reserves
09:00 (RU) Russia announces weekly OFZ bond auction
10:00 (MX) Mexico Weekly International Reserves
10:00 (US) Fed’s Kashkari (dove, voter)
10:00 (DE) German Chancellor Merkel with France President Macron in Frankfurt
11:00 (ES) Catalan parliament speaker calls plenary session
11:30 (US) Treasury to sell 3-Month and 6-Month Bills
11:30 (US) Treasury to sell 4-Week and 52-Week Bills
14:00 (CA) Bank of Canada (BOC) Wilkins
16:00 (US) Weekly Crop Condition report
