Overnight
Asia:
- Japan Aug Core Machine Orders M/M: 3.4% v 1.0%e; Y/Y: 4.4% v 0.7%e
- Japan govt raises assessment of machine orders, orders showing signs of pick up (**Note: prior view was that orders were in a lull)
Europe:
- Catalan President Puigdemont: asks for mandate to declare Catalonia an independent state; proposed to suspend referendum results for several weeks in order to hold talks
- Spain Deputy PM Saenz: Catalan President has put Catalonia into uncertain situation; Any dialogue must be within the law. PM Rajoy to consider next steps at cabinet meeting on Wed, Oct 11th
- PM May: getting close to agreement regarding EU citizens rights; reiterates UK will not be throwing EU citizens out of the country
- ECB General Council said to have an agreement not to raise rates until well past the end of bond buying
- Ireland Fin Min Donohoe: no additional plans for bad bank NAMA after its mandated conclusion
Americas:
- Fed’s Kaplan (moderate, voter): will be assessing the progress of the US economy toward full employment and looking for more signs of upward inflation as while weighing potential interest-rate hikes
- President Trump: doesn’t believe argument with Sen Corker (R-TN) will hurt tax reform. Intends to adjust tax reform plan to make it stronger
- White House: No adjustments to make to tax framework at this time; President reached decision on an overall Iran strategy; willing to work with Corker on taxes; will make announcement on Iran deal by Friday
- Bank of Canada (BOC) Wilkins: Canada household sector is vulnerable to a negative shock due to indebtedness levels
- Mexico Foreign Min Videgaray: we’ll only move forward with NAFTA if it’s good for Mexico. Reiterated Mexico would not pay for or participate in any physical barrier between the US and Mexico
Energy:
- 58.5% (1.02M bpd) of current Gulf of Mexico oil production still shut in due to Hurricane Nate effects (vs 85% yesterday) – govt agency BSEE
Economic data
- (JP) Japan Sept Preliminary Machine Tool Orders: 45.3% v 36.2% prior
- (TR) Turkey Aug Current Account Balance: -$1.2B v -$1.4Be
- (ES) Spain Sept Final CPI M/M: 0.2% v 0.2%e; Y/Y: 1.8% v 1.8%e
- (ES) Spain Sept Final CPI EU Harmonized M/M: 0.6% v 0.6%e; Y/Y: 1.8% v 1.9%e
- (ES) Spain Sept CPI Core M/M: 0.0% v 0.2% prior; Y/Y: 1.2% v 1.2%e
- (TW) Taiwan Sept Trade Balance: $6.7B v $5.9Be; Exports Y/Y: 28.1% v 13.6%e; Imports Y/Y: 22.2% v 9.8%e
Fixed Income Issuance:
- (IN) India sold total INR110B vs. INR110B indicated in 3-month, 6-month and 12-month bills
- (DK) Denmark sold total DKK4.98B in 3-month and 6-month bills
- (SE) Sweden sold SEK10B vs. SEK10B indicated in 3-month Bills; Avg Yield: -0.6964% v -0.7542% prior; Bid-to-cover: 2.47x v 2.51x prior
- (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 12-month Bills; Avg yield: -0.344% v -0.326% prior; Bid-to-cover: 1.96x v 1.86x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 flat at 390.0, FTSE flat at 7535, DAX 0.1% at 12956, CAC-40 -0.2% at 5354, IBEX-35 +1.3% at 10272, FTSE MIB 0.1% at 22349, SMI +0.1% at 9276, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes:
European Indices trade little change across the board with the exception of the Spanish Ibex which trades sharply higher after the Catalonia president suspended results of the independence referendum for several weeks.
In corporate news Gerresheimer and Cropenergies trade higher after results, while Dunelm trades sharply higher after strong Q1 results and LFL sales. Merlin Entertainment trades lower after reportedly refuting claims its in talks with SeaWorld, whilst Spanish Banks rebound in Spain helping the Ibex outperform.
Looking ahead to the US morning, as we enter into Earnings season, notable earners include Delta Airlines and Blackrock and Fastenal.
Equities
- Consumer Discretionary: Dunelm [DNLM.UK] +5.0% (Q1 update)
- Industrials: Gerresheimer [GXI.DE] +1.0% (Earnings), Mondi [MNDI.UK] -6.2% (Profit warning), GEA Group [G1A.DE] +6.4% (Elliott’s Paul Singer announces 3.01% stake)
- Material: CropEnergies [CE2.DE] +1.2% (Earnings, lifts outlook)
- Healthcare: Smith and Nephew [SN.UK] +4.0% (Elliot Management (Singer) has reportedly built a stake)
- Technology: Agfa Gevaert [AGFB.BE] +3.3% (To separate the HealthCare IT activities into a stand-alone legal entity structure and organization)
Speakers
- ECB’s Smets (Belgium): Favors extended QE taper and believed that a certain extension maters for QE exits. Re-calibration to be gradual and cautious
- Chancellor of Exchequer Hammond (Fin Min): Domestic economy was being affected by uncertainty. Prepared to spend if no-agreement in Brexit negotiations when necessary; needed to determine what is a realistic worst case scenario that we can plan for
- Catalonia govt spokesperson Turull: Central govt application of article 155 would mean that its refuse dialogue
- Poland Central Bank’s Zyzynski reiterated view that difficult to talk about interest rate increases; inflation was not that high
- Sweden Central Bank (Riksbank) Dep Gov Jochnick: Reiterates wage inflation remained subdued. Believed that labor market tightness will support wages down the road
- S&P analyst: Return of growth in South Africa could stabilize the sovereign rating
- China Foreign Ministry reiterated its view that all sides should exercise restraint over North Korea situation. US warship entered its waters; such action harms sovereignty
Currencies
- USD was slightly lowers as markets awaited the FOMC minutes to be released later today. Dealers noted that currencies of current-account deficit countries were the exciting assets to play for a sustained reaction to today’s release of the FOMC minutes
- Numerous dealers and analysts noted that the Euro currency was poised to move higher. Catalan’s President Puigdemont backing away from breaking the link to Madrid should normalize Spanish markets, allowing sovereign spreads to come in and the IBEX to rally. ECB taper talks was also another factor. EUR/USD at 2-week highs above 1.1840 just ahead of the NY morning.
Fixed Income
- Bund futures trade at 161.30 little change as Spanish political tensions ease. Continued downside targets 161.03 while upside resistance stands initially at 162.07, followed by 163.27.
- Gilt futures trade at 123.80 down 11 ticks with no major UK releases due for today. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.
- Wednesday’s liquidity report showed Tuesday’s excess liquidity fell to €1.790T from €1.791T and use of the marginal lending facility rose to €221M from €185M.
- Corporate issuance saw $13.4B come to market via 4 Issuance was headlined by Broadcom Corp $4B issuance and Northrop Grumman $8.25B 5 part offering.
Looking Ahead
- (IT) Italy to hold confidence vote on electoral laws
- (US) President Trump meets Canada PM Trudeau in White House (NAFTA discussions)
- 05:30 (DE) Germany to sell €3.0B 2022 BOBL
- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 2022 and 2027 OT bonds
- 06:00 (RU) Russia announces weekly OFZ bond auction; to sell combined RUB30B in 2024 and 2027 OFZ bonds
- 06:30 (DE) German Gov updates Fall economic forecasts
- 07:00 (US) MBA Mortgage Applications w/e Oct 6th: No est v -0.4% prior
- 07:00 (BR) Brazil Oct IGP-M Inflation (1st Preview): 0.4%e v 0.3% prior
- 07:00 OPEC Monthly Report
- 07:15 (US) Fed’s Evans (dove, voter) on economy and monetary policy
- 07:30 (CL) Chile Central Bank Traders Survey
- 07:30 (CL) Chile Central Bank Economist Survey
- 08:00 (BR) Brazil Aug Retail Sales M/M: 0.1%e v 0.0% prior;’ Y/Y: 4.4%e v 3.1% prior
- 08:00 (BR) Brazil Aug Broad Retail Sales M/M: 0.6%e v 0.2% prior; Y/Y: 8.5%e v 5.7% prior
- 08:00 (UK) Baltic Dry Bulk Index
- 08:00 (NO) Norway Central Bank (Norges) Dep Gov Nicolaisen
- 10:00 (US) Aug JOLTS Job Openings: 6.135Me v 6.170M prior
- 11:00 (BR) Brazil to sell Fixed Rate 2023 and 2027 Bonds
- 11:00 (BR) Brazil to sell 2018, 2019 and 201 LTN Bills
- 11:30 (BR) Brazil weekly Currency Flows Weekly
- 12:00 (US) DOE Short-Term Crude Outlook
- 13:00 (US) Treasury to sell 3-Year Notes
- 13:00 (US) Treasury to sell 10-Year Notes Reopening
- 14:00 (US) FOMC Sept Meeting Minutes
- 14:40 (US) Fed’s Williams (moderate, non-voter)
- 14:50 (BE) ECB’s Praet (Belgium) speaks in New York
- 16:30 (US) Weekly API Oil Inventories
