Notes/Observations
BOE poised to hike rates for the 1st time in almost a decade; economist view the move as a mistake
German Unemployment Rate holds steady at post reunification lows
UK Contruction PMI moved back into expansion territory
Trump said to name Powell as the next Fed Chair (to replace Yellen)
Overnight
Asia:
China Commerce Ministry (MOFCOM): Consumption in Q4 likely to maintain steady and high growth; Concerned about US solar trade remedy proposals
Australia Sept Trade Balance registers its 11th straight surplus ( $1.8B v $1.2Be)
Europe:
European Banking Authority (EBA) said to postpone publication of bank stress test results because European banks can’t provide timely valid data for the calculations. ECB Banking Supervisor now has to adjust process of its regulatory review (SREP) in coming year
UK Parliament approved an unanimous motion to release Brexit impact studies on 58 sectors of the economy
Americas:
FOMC left its Interest Rate Range unchanged between 1.00-1.25% (as expected); core inflation remained soft even though gasoline price rise after hurricanes boosted overall inflation in Sept
President Trump to announce Fed Chairman nominee Thursday, Nov 2nd at 15:00 ET (19:00 GMT) (as speculated); to tap Fed’s Powell as Chair, replacing Yellen
US House GOP members expected to release their tax plan (said to propose 12% repatriation tax rate on cash and 5% rate on non-cash holdings)
Energy:
Saudi Arabia Oil Min Al-Falih: sees OPEC+ renewing resolve to normalize oil inventories. Hoped for consensus at oil producers meeting in Vienna later this month
Economic Data
(JP) Japan Oct Consumer Confidence: 44.5 v 43.6e
(CH) Swiss Oct SECO Consumer Confidence: -2 v 0e
(HU) Hungary Oct Manufacturing PMI: 58,3 v 57.5e
(PL) Poland Oct Manufacturing PMI: 53.4 v 54.0e
(ES) Spain Oct Manufacturing PMI: 55.8 v 54.8e (48th month of expansion and highest since May 2015)
(IT) Italy Oct Manufacturing PMI: 57.8 v 56.5e (14th month of expansion and highest since Feb 2011)
(FR) France Oct Final Manufacturing PMI: 56.1 v 56.7e (confirmed 13th month of expansion)
(DE) Germany Oct Final Manufacturing PMI: 60.6 v 60.5e (confirmed 35th month of expansion)
(DE) Germany Oct Unemployment Change: -11K v -10Ke; Unemployment Rate: 5.6% v 5.6%e
(EU) Euro Zone Oct Final Manufacturing PMI:58.5# v 58.6e (confirmed 50th month of expansion and highest since Feb 2011)
(UK) Oct Construction PMI: 50.8 v 48.5e (moves back into expansion)
Fixed Income Issuance:
(ES) Spain Debt Agency (Tesoro) sold total €B vs. €3.5-4.5B indicated range in 2022, 2027 and 2040 Bonds
Sold €1.42B in 0.45% Oct 2022 SPGB; Avg yield: 0.336% v 0.530% prior, Bid-to-cover: 1.82x v 2.12x prior
Sold €1.67B in 1.45% Oct 2027 SPGB; Avg yield: 1.457% v 1.627% prior; Bid-to-cover: 1.35x v 1.79x prior
Sold €0.94B in 4.9% 2040 SPGB; Avg yield 2.462% v 2.646% prior, bid-to-cover 1.57x v 1.87x prior
(ES) Spain Debt Agency (Tesoro) sold €M vs. €250-750M indicated range in 0.65% Nov 2027 Inflation-linked bonds (SPGBei); Real Yield: % v 0.371% prior; Bid-to-cover: x v 1.94x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 flat at 396.6, FTSE +0.1% at 7494, DAX -0.2% at 13445, CAC-40 flat at 5511, IBEX-35 flat at 10505, FTSE MIB +0.5% at 23110, SMI flat at 9265, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes:
European Indices trade flat this morning consolidating recent gains with another busy morning of earnings and the impending rate decision from the BoE in which analysts eye the first rate increase in a decade.
Financial giants Credit Suisse and ING reported strong results this morning, while in the retail space Hugo Boss outperforms after raising full year guidance. Edreams trades sharply higher in Spain after raising FY18 and FY20 outlook and explores strategic alternatives.
Looking ahead notable earners include AmerisourceBergen, Ralph Lauren and Hyatt, after the close notable earners include Apple.
Equities
Consumer discretionary [Hugo Boss [BOSS.DE] +5.9% (Earnings), Edreams [EDR.ES] +17.5% (Raises outlook, explores alternatives), Morrisons (MRW.UK) -1.3% (Q3 update)]
Industrials: [Pfeiffer Vacuum (PFE.DE) +5.5% (Earnings)]
Financials: [Credit Suisse [CSGN.CH] +3.8% (Earnings)]
Healthcare: [Sanofi [SAN.FR] -1.9% (Earnings), Fresenius SE [FRE.DE] -1.1%]
Speakers
Norway Central Bank (Norges) Financial Stability Report: Sector vulnerable to household debt and house prices. Largest banks were resilient to pronounced downturn in economy
ESM’s Regling reiterated view of need to complete banking union. EU did not need full fiscal union. Saw only a few steps needed to make EMU region more resilient
Catalan Poll: Secessionist bloc to win 68 seats in the 135 seat regional parliament (slight majority)
Taiwan Central Bank Sept Minutes: Some members saw real rates as relatively high and concerned about domestic demand
Currencies
USD was softer in quiet trading but off its worst levels ahead of some key events in the session. On the US front President Trump is expected to name Powell as his nominee for the Fed Chair position while GOP members to unveil details of the tax reform plan.
BOE was said to be poised to raise interest rates for the first time in almost a decade. Dealers noted that the central bank’s policy outlook had been the main driver for sterling in recent months. For the time being the increased expectations of a hike have temporarily overshadowed Brexit concerns. However, a poll of economists believed that a rate hike at this time would be a mistake for the UK economy. GBP/USD saw its earlier gains evaporate with the pair trading at 1.3250 just ahead of the NY morning.
EUR/USD was off its best levels ahead of the NY morning with the pair up 0.1% at 1.1635
Fixed Income
Bund futures trade at 162.71 up 1 ticks as core euro-bonds are little changed during a public holiday for Austria, Belgium, France, Portugal and Spain. Support lies at 161.00, followed by 160.38. Resistance stands initially at 163.51, followed by 164.25.
Gilt futures trade at 124.19 down 2 ticks, with the focus remaining on the BOE meeting. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.
Thursday’s liquidity report showed Wednesday’s excess liquidity rose to €1.838T from €1.825T and use of the marginal lending facility rose to €237M from €172M
Corporate issuance saw 3 issuers raise $2.5B in the primary market
Looking Ahead
(IL) Israel Central Bank (BOI) Oct Minutes
05:50 (FR) France Debt Agency (AFT) to sell €7.5-8.5B in 2028, 2031 and 2048 Oats
06:00 (CY) Cyprus Oct CPI M/M: No est v 0.3% prior; Y/Y: No est v -0.4% prior
06:00 (EU) Daily Euribor Fixing
06:30 (HU) Hungary Debt Agency (AKK) to sell Floating Bonds
06:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills
07:00 (ZA) South Africa Sept Electricity Production Y/Y: No est v 0.8% prior; Electricity Consumption Y/Y: No est v 1.7% prior
07:15 (NO) Norway Central Bank (Norges) Dep Gov Matsen in Trondheim
07:30 (US) Oct Challenger Job Cuts: No est v 32.4K prior; Y/Y: No est v -27.0% prior
07:45 (US) Daily Libor Fixing
08:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to raise Interest Rates by 25bps to 0.50%
08:00 (UK) BOE Nov Minutes
08:00 (UK) BOE Inflation Report
08:00 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to raise Repurchase Rate by 25bps to 0.50%
08:30 (US) Initial Jobless Claims: 235Ke v 233K prior; Continuing Claims: 1.89Me v 1.893M prior
08:30 (US) Q3 Preliminary Nonfarm Productivity: 2.5%e v 1.5% prior; Unit Labor Costs: 0.4%e v 0.2% prior
08:30 (US) Weekly USDA Net Export Sales
08:30 (UK) BOE Gov Carney press conference on QIR
08:30 (US) Fed’s Powell (voter, moderate) at event
09:00 (RU) Russia Gold and Forex Reserve w/e Oct 27th: No est v $425.6B prior
09:00 (SG) Singapore Oct Purchasing Managers Index: 51.9e v 52.0 prior
09:00 (US) Republican Tax Plan announcement
09:05 (UK) Baltic Dry Bulk Index
09:15 (CZ) Central Bank Gov Rusnok to hold post Rate Decision press conference
10:30 (US) Weekly EIA Natural Gas Inventories
11:00 (DK) Denmark Oct Foreign Reserves (DKK): No est v 464.3B prior
12:00 (CA) Canada to sell 2-Year Bonds
12:20 (US) Fed’s Dudley (dove, FOMC voter) at alternative rate round-table event
13:00 (IT) Italy Oct New Car Registrations Y/Y: No est v 8.1% prior
15:00 (US) President Trump expected to announce Fed Chair position
