Notes/Observations
Central Bank decisions in focus (BOJ on Tues, Fed on Wed, BOE on Thurs) with focus on normalization of policy
German State CPI readings seen below consensus for the Overall German data; affirmed ECB stance that interest rates were seen at present level well past the end of QE program
Iceland heads to coalition talks to form govt after vote; populists gain
Next Fed Chair remain the most important factors in assessing Fed policy outlook; Trump decision likely this week and seems to be leaning toward Powell at this point
Overnight
Asia:
BOJ Gov Kuroda likely to stay for another 5 year term after his current term ends on April 2018. Govt will proposed list of possible candidates for Gov and Dep Govs in January
Europe:
ECB’s Coeure (France): Hopeful that have seen the last extension of QE bond buying program. QE program would run until inflation clearly moved towards the 2% target
ECB’s Smets (Belgium): Permanently low inflation would be dangerous if people had grown accustomed to a weaker price trend
SNB Vice president Zurbruegg: Reiterates view that country need negative interest and the readiness to intervene in currency markets in order to be able to fulfill our monetary policy mandate
El Mundo Catalan poll: Anti-independence parties winning 43.4% support; Pro-independence parties at 42.5%
Germany 2017 budget surplus could hit €14B. New projection due to solid economic growth and growing tax revenues
German Federal Court of Auditors: Germany will have saved €109B in interest payments on €1.3T debt by 2020 because of ECB’s low rate policy
Recent sovereign ratings:
S&P affirmed Germany sovereign rating at AAA; outlook Stable
S&P affirmed United Kingdom sovereign rating at AA; outlook Negative
S&P raised Italy sovereign rating one notch to BBB from BBB-; outlook Stable
Fitch affirmed United Kingdom sovereign rating at AA; outlook Negative
Fitch affirmed Netherlands sovereign rating at AAA, Outlook Stable
Americas:
President Trump reportedly leaning towards naming Powell as Fed chair; decision likely this week (Oct 30th thru Nov 3rd)
First charges said to be filed in Mueller investigation
Economic Data
(NL) Netherlands Oct Producer Confidence: 8.2 v 8.6e
(DE) Germany Sept Retail Sales M/M: 0.5% v 0.5%e; Y/Y: 4.1% v 3.0%e
(NO) Norway Sept Retail Sales W/Auto Fuel M/M: -0.8% v -0.6% prior
(TR) Turkey Oct Economic Confidence: 101.4 v 103.0 prior
04:00 (AT) Austria Sept PPI M/M: No est v 0.2% prior; Y/Y: No est v 1.4% prior
(DE) Germany Oct CPI Saxony M/M: 0.0% v 0.2% prior; Y/Y: 1.8% v 2.0% prior
(ES) Spain Q3 Preliminary GDP Q/Q: 0.8% v 0.8%e; Y/Y: 3.1% v 3.1%e
(ES) Spain Oct Preliminary CPI M/M: 0.9% v 0.8%e; Y/Y: 1.6% v 1.6%e
(ES) Spain Oct Preliminary CPI EU Harmonized M/M: 0.6% v 0.4%e; Y/Y: 1.7% v 1.7%e
(CH) Swiss Oct KOF Leading Indicator: 109.1 v 106.5e
(DE) Germany Oct CPI Bavaria M/M: -0.1% v +0.2% prior; Y/Y: 1.5% v 1.8% prior
(DE) Germany Oct CPI Hesse M/M: -0.2% v +0.3% prior; Y/Y: 1.6% v 2.1% prior
(DE) Germany Oct CPI Baden Wuerttemberg M/M: -0.2% v +0.3% prior; Y/Y: 1.5% v 1.9% prior
(AT) Austria Oct Manufacturing PMI: 59.4 v 59.4 prior
(DE) Germany Oct CPI North Rhine Westphalia M/M: 0.0% v 0.1% prior; Y/Y: 1.6% v 1.9% prior
(UK) Sept Mortgage Approvals: 66.2K v 66.0Ke
(UK) Sept Net Consumer Credit: £1.6B v £1.5Be; Net Lending: £3.8B v £4.0Be
(UK) Sept M4 Money Supply M/M: No est v 0.9% prior Y/Y: No est v 4.4% prior
(PT) Portugal Oct Consumer Confidence: 2.1 v 1.5 prior; Economic Climate Indicator: 2.1 v 2.1 prior
Fixed Income Issuance:
(DK) Denmark sold total DKK1.94B in 1-month and 3-month bills
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 flat at 393.4, FTSE -0.1% at 7498, DAX +0.1% at 13229, CAC-40 +0.1% at 5495, IBEX-35 +1.4% at 10339, FTSE MIB +0.3% at 22739, SMI -0.3% at 9158, S&P 500 Futures -0.2%]
Market Focal Points/Key Themes: European Indicies trade mixed this morning with notable out performance from the Spanish Ibex which trades over 1% higher while the Swiss SMI and FTSE 100 trade slightly weaker. HSBC reported Q3 results which were largely in line with estimates, while AkerBP trades higher after strong results. In the M&A space, Novartis signs an MOU with Advanced Accelerator Applications valued at $3.9B and Akzo Nobel confirmed its in talks with Axalta on merger of Paints and Coatings business. Looking ahead notable earners include Loews, Roper Tech and Cooper Tire & Rubber
Equities
Materials: [Akzo Nobel [AKZA.NL] -0.8% (Confirms merger negotiations of Paints and coatings business with Axalta)]
Financials: [ HSBC [HSBA.UK] -0.9% (Earnings)]
Technology: [Fugro [FUR.NL] -10% (Earnings)]
Healthcare: [Poxel [POXEL.FR] +38% (Strategic partnership), GenNeuro [GNRO.FR] +33% (GeNeuro and Servier Announce Promising post hoc Analyses of Six-Month Data from CHANGE-MS Phase 2b Study )]
Energy: [EDF [EDF.FR] -2.2% (Cuts outlook), AkerBp [AKERBP.NO] +4.0% (Earnings)]
Speakers
South Africa Central Bank’ Mminele: SARB is concerned that CPI expectations were still too close to the upper end of range. Negative impact of low confidence on domestic GDP was increasing. Aggressive easing could result in disappointing returns
Currencies
Some key central bank rate decision during the week. The Fed is expected to hold steady while keeping the door open for a 3rd hike this year. The BOE is seen raising rates for the 1st time since 2007 at its meeting on Thursday. BOJ is expected to keep its policy steady when it meets on Tuesday.
Next Fed Chair remain the most important factors in assessing Fed policy outlook; Trump decision likely this week and seems to be leaning toward Powell at this point. Analysts noted that if Trump nominated Powell to replace Yellen it would imply continuity in the Federal Reserve’s interest rate and the balance sheet policy, at least for a time
EUR/USD pair was steady in the session. The situation is Spain still simmered after the central government took control of the Catalan region on Friday and there were signs anti-separatists was gaining momentum. However, uncertainty could be high given pro and anti-independence parties were roughly neck-and-neck in the polls
GBP/USD higher by 0.2% at 1.3160 as BOE was preparing to begin to normalize monetary policy after nearly a decade of super-loose conditions. However, the central bank tightening to begin under a backdrop of weak growth and heightened uncertainty as the UK heads towards Brexit in March 2019
Fixed Income
Bund futures trade at 162.45 up 5 ticks confirming the post-ECB sentiment shift. Support lies at 161.00, followed by 160.38. Resistance stands initially at 162.75, followed by 163.51.
Gilt futures trade at 124.16 up 6 ticks, with the focus remaining on BOE meeting on Thursday. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.
Monday’s liquidity report showed Friday’s excess liquidity rose to €1.828T from €1.810T and use of the marginal lending facility rose to €328M from €253M
Corporate issuance sees primary set to break October issuance record.
Looking Ahead
(BE) Belgium Oct CPI M/M: No est v -0.1% prior; Y/Y: No est v 2.0% prior
(DE) Germany Oct CPI Brandenburg M/M: No est v 0.2% prior; Y/Y: No est v 1.6% prior
(MX) Mexico Sept YTD Budget Balance (MXN): No est v 105.4B prior
(BR) Brazil Oct CNI Consumer Confidence: No est v 98.5 prior
06:00 (EU) Euro Zone Oct Business Climate Indicator: 1.40e v 1.34 prior; Final Consumer Confidence: -1.0e v -1.0 advance
06:00 (BR) Brazil Oct FGV Inflation IGPM M/M: 0.3%e v 0.5% prior; Y/Y: -1.3%e v -1.5% prior
06:00 (EU) Daily Euribor Fixing
06:00 (IT) Italy Debt Agency (Tesoro) to sell €4.0-5.0B in 5-year and 10-year BTP Bonds
06:00 (IT) Italy Debt Agency (Tesoro) to sell €3.0-3.5B in new Apr 2025 CCTeu (Floating Rate bond)
06:00 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
06:25 (BR) Brazil Central Bank Weekly Economists Survey
06:30 (PT) ECB’s Costa (Portugal) in Lisbo
07:00 (IL) Israel Aug Manufacturing Production M/M: No est v -2.2% prior
07:00 (PT) Portugal Sept Industrial Production M/M: No est v 4.7% prior; Y/Y: No est v 10.4% prior
07:00 (PT) Portugal Sept Retail Sales M/M: No est v -1.3% prior; Y/Y: No est v 3.2% prior
07:00 (IL) Israel to sell 2022, 2026, 2027 and 2047 bonds – 07:45 (US) Daily Libor Fixing
08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
08:00 (CL) Chile Sept Total Copper Production: No est v 508.6K tons prior
08:00 (CL) Chile Sept Manufacturing Production Y/Y: -1.5%e v +1.4% prior; Industrial Production Y/Y: 2.0%e v 5.1% prior
08:00 (ZA) South Africa Sept Budget Balance (ZAR): No est v -12.6B prior
08:30 (US) Sept Personal Income: 0.4%e v 0.2% prior; Personal Spending: +0.9%e v -0.1% prior
08:30 (US) Sept PCE Core M/M: 0.1%e v 0.1% prior; Y/Y: 1.3%e v 1.3% prior
08:30 (US) Sept PCE Deflator M/M: 0.4%e v 0.2% prior; Y/Y: 1.6%e v 1.4% prior
08:30 (BR) Brazil Sept Primary Budget Balance (BRL): -23.4Be v -9.5B prior; Nominal Budget Balance: -55.8Be v -45.5B prior
09:00 (DE) Germany Oct Preliminary CPI M/M: 0.1%e v 0.1% prior; Y/Y: 1.7%e v 1.8% prior
09:00 (DE) Germany Oct Preliminary CPI EU Harmonized M/M: 0.1%e v 0.0% prior; Y/Y: 1.7%e v 1.8% prior
09:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week
09:05 (UK) Baltic Dry Bulk Index
09:50 (FR) France Debt Agency (AFT) to sell combined €4.3-5.5B in 3-month, 6-month and 12-month Bills
10:00 (BE) Belgium Q3 preliminary GDP Q/Q: No est v 0.4% prior; Y/Y: No est v 1.5% prior
10:30 (US) Oct Dallas Fed Manufacturing Activity: 21.0e v 21.3 prior
10:30 (EE) ECB’s Hansson (Estonia) in Tallinn
10:30 (EU) ECB announces Covered-Bond Purchases
10:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
11:30 (US) Treasuries to sell 3-Month and 6-Month Bills
16:00 (US) Weekly Crop Progress Report
