Sample Category Title

CRUDE OIL: The commodity may be hesitating but it retains its broader medium term uptrend. On the downside, support resides at the 53.50 level where a break will expose the 53.00 level. A cut through here will set the stage for a run at the 52.50 level. Further down, support resides at the 52.00 level. On the upside, resistance resides at the 54.50 level. Further out, resistance comes in at the 55.00 level. A break above here will aim at the 55.50 level and then the 56.00 level followed by the 56.50 level. Its weekly RSI is bullish and pointing higher suggesting more strength in the medium term. All in all, CRUDE OIL remains biased to the upside in the medium term.

• US Employment Costs Expected to See Moderate Growth;
• EUR Edges Lower on Mixed Inflation and Growth Data;
• BoJ Revises Inflation Forecasts Lower and Retains Accommodative Stance.

US equity markets are on course to open a little higher on the final trading day of the month, with the S&P 500 and Dow eyeing new record highs as more companies line up to report on the third quarter.

US Employment Costs Expected to See Moderate Growth

While it's been a busy session in Europe with notable economic releases from the eurozone and overnight with the Bank of Japan making its latest monetary policy decision, the US is looking a little quieter, with the bulk of the week's economic events coming over the course of the next few days. The only notable US releases due today is the employment cost index which has been gradually improving but remains quite volatile. Higher costs typically mean higher prices and goes some way to explaining why the inflation data has underperformed expectations.

The euro is edging lower on Tuesday following a mixed batch of economic data that will likely complicate matters should it continue into next year. The eurozone economy grew by 2.5% last quarter compared to a year ago, while unemployment fell below 9% for the first time since January 2009, in a clear sign that the region remains on a positive trajectory and is continuing to gather momentum.

EUR Edges Lower on Mixed Inflation and Growth Data

While that will be reassuring to ECB policy makers as they wind down their stimulus program on the expectation that it will lead to higher inflation, the CPI numbers themselves will be less encouraging. Prices rose by 1.4% in October compared to a year ago, while core prices rose by only 1.1%, both of which are well below the ECBs sole mandate of below but close to 2% inflation. While the other economic data may give the impression that this will improve over the medium term, the experience of other central banks should act as a warning against such assumptions and discourage against being too keen to tighten.

One of those that can vouch for this is the BoJ, which is dealing with unemployment at 2.8%, annualised growth of 2.5% and yet inflation remains at only 0.7% which is the highest in two and a half years, at which point it was only higher as a result of the sales tax increase. The central bank overnight left its monetary policy unchanged and reduced its inflation forecasts to the year to March 2018 to 0.8% from 1.1% in a further sign that the job of driving inflation to 2% is far from straightforward in the current economic environment.

BoJ Revises Inflation Forecasts Lower and Retains Accommodative Stance

Still, the central bank is convinced it will happen gradually and remains committed to achieving its target, albeit not yet through more stimulus as one dissenter on the board preferred. The yen softened a little overnight in response to the downward revision to inflation expectations and continues to trade around its lowest levels in six months against the dollar. Should the dollar have a strong end to the year as looks possible, we could see the pair trading back at levels not seen since the end of last year.

The DAX has inched higher in the Tuesday session. Currently, the DAX is at 13,229.50, up 0.09% on the day. On the release front, Eurozone data was a mix. CPI reports missed their estimates, while Preliminary Flash GDP beat the forecast. On Wednesday, the markets will be keeping a close eye on the Federal Reserve, which will release its monthly rate statement.

The eurozone released key inflation and GDP data, and the results were lukewarm. CPI Flash Estimate edged down to 1.4%, shy of the forecast of 1.5%. Core CPI Flash Estimate dipped to 0.9%, short of the estimate of 1.1%. There was better news from Preliminary Flash GDP, which remained unchanged at 0.6%, above the estimate of 0.5%. Unemployment continues to head lower, dropping to 8.9%. This is the lowest level since March 2009. The ECB has announced that it will begin tapering its asset purchase program, as the eurozone economy has rebounded in 2017. Still, inflation remains persistently below the ECB's target of around 2 percent. The asset purchase program has been extended to April 2018, but the ECB could implement an extension if economic data tails off or if inflation fails to move upwards.

In Germany, retail sales rebounded in impressive fashion, gaining 0.5% after two straight declines. On an annualized basis, retail sales gained 4.1%, indicative of strong consumer spending. Germany Preliminary CPI edged down to 0.0%, shy of the forecast of 0.1%. This follows two consecutive readings of 0.1% and points to continuing low inflation in an otherwise robust economy.

The uncertainty and tension remain at fever pitch in Catalonia. The central government has dissolved the Catalan government and parliament, after imposing direct rule on Catalonia. The Catalan government declared independence just before Madrid invoked Article 155 of Spain's constitution. The Spanish government has drawn up charges of rebellion against Catalan President Carles Puidgemont, but he has skipped town, and is reportedly in Belgium. It remains unclear what Puidgemont will do next - he could request political asylum or even declare a government-in-exile. Elections have been slated for December 21, and two parties from Puidgemont's coalition have declared they will participate in the election. With Catalans split down the middle on independence, this saga is likely to continue for some time.

The British pound continues to move higher against the U.S dollar during the European trading session, after breaking above the key 1.3201 level. Intraday U.S dollar weakness and the expected rate hike from the Bank of England on Thursday are supporting British pound buying interests. The GBPUSD pair currently trades around the price-highs of the day, ahead of the release of Consumer Confidence in the upcoming U.S trading session.

Buying interest in the GBPUSD pair remains firm whilst price-action holds above the key 1.3201 technical level. Further buying interest towards the 1.3222 and 1.3268 levels should be expected.

Should the GBPUSD move below the 1.3201 technical level in the upcoming trading session, selling towards the 1.3178 and 1.3157 support remains likely.

The EURUSD pair continues to struggle to gain traction above the key 1.1644 resistance level, as weaker than expected eurozone inflation data and political woes in Spain, weigh on euro intraday trading sentiment. Multiple technical price failures around the 1.1644 level during the European session, have pressured the EURUSD pair back towards the 1.1630 region. Traders now look to the release of key United States Consumer Confidence data, which due out in the upcoming U.S session.

The EURUSD pair remains intraday bearish while trading below the 1.1644 level, further declines towards the 1.1610 and 1.1580 support level look increasingly likely.

Should EURUSD pair hold price-action above the 1.1644 level for on a multi-time frame basis, further buying towards the 1.1680 and 1.1713 can be expected.

SNB report solid interim results

The Swiss National Bank published interim results for the first three quarters of the year. After mixed mid-year results - the SNB reported an interim profit of CHF 1.2 billion - the last update brought the smile back to the SNB and all Swiss cantons. As of 30 September, the SNB reported a profit of CHF 33.7bn, which results mostly from a profit on foreign currency positions (30.3bn). Gold holdings appreciated by CHF 2.3bn. The central bank made a profit of CHF 1.5bn from negative interested it charges.

Looking at the details, the SNB benefited from a solid equity market that increased the valuation of its equity positions by CHF 14.4bn, plus a dividend income of CHF 2.5bn. On the other hand, the central bank suffered a valuation loss of CHF 4bn on its bond positions that was however offset by an interest income of CHF 6.8bn. Finally, the continuous depreciation of the Swiss franc over the summer months allowed the SNB to record exchange rate-related gains of CHF 10bn. Indeed, on a trade-weighted basis the Swiss franc fell more than 4.1% between July and September. The CHF depreciation was particularly pronounced against the EUR (-4.50%), the British pound (-4%) and most Scandinavian currencies.

Although Swiss cantons will almost surely receive a piece of the cake, they will have to wait to get the final result and the year is not over yet. The Swiss franc really had a nice ride over the last few months, however one cannot rule out a slight correction as investors are slowly trimming their risky positions as we move into the next year. On Tuesday morning, EUR/CHF has stabilized at around 1.16.

JPY reliant on US policy

As was widely expected the BoJ held its policy strategy unchanged. The vote was 8-1 with the lone dissenter (policy board member Goushi Kataoka) voting for additional easing measures such as examining 10 year 0.0% and 15 year 0.20% yield targets. In their quarterly outlook report, the bank downgraded core inflation forecasts to 0.8% from 1.1% in 2017 and 1.4 from 1.5% in 2018. Member continued to expect their 2% inflation target rate would be reached by 2019. A bright spot was growth, which was revised marginally higher to 1.9% from 1.8%. At the accompanying press conference Governor Kuroda reiterated, that discussion of exit strategy was premature.

Effect on JPY was muted, as USDJPY was range-bound between 112.95 and 113.25. In regards to FX, BoJ policy is losing effectiveness to debase the JPY as years of Abenomics has exhausted traders. Any adjustment in the BoJ ultra-accommodative policy would be unlikely unless CPI climbed well above 1% in a smooth trend. However, markets could see micro tuning with slowing its purchasing this year limitations on the volume of JGBs in rotation, but a maintenance of YCC should not be a problem.

FX prices has reconnected with US yields (especially US 10yr yields) indicated that the fate of USDJPY is no longer in the hands of BoJ but dependent on policy decision in the US. The failure of the USDJPY to break 115 suggests correction to 112.30 to loosen extended longs. PM Abe recent decisive electoral victory and probability that BoJ Governor Haruhiko Kuroda will be reappointed in April indicated JPY weakening policy will remain although less effective, in effect.

The euro has posted small losses in the Tuesday session. Currently, EUR/USD is trading at 1.1634, down 0.15% on the day. On the release front, Eurozone data was mixed, as CPI Flash Estimate missed the estimate, while Preliminary Flash GDP beat the forecast. In the US, today’s key event is CB Consumer Confidence, which is expected to improve to 121.1 points. Wednesday is a busy day, with the US releasing two key events – ADP Nonfarm Payrolls and ISM Manufacturing PMI. As well, the FOMC will release its monthly rate statement.

In the eurozone inflation slowed in October. CPI Flash Estimate edged down to 1.4%, shy of the forecast of 1.5%. Core CPI Flash Estimate dipped to 0.9%, short of the estimate of 1.1%. There was good news as well, as Preliminary Flash GDP remained unchanged at 0.6%, above the estimate of 0.5%. Unemployment continues to head lower, dropping to 8.9%. This is the lowest level since March 2009. The ECB has announced that it will begin tapering its asset purchase program, as the eurozone economy has rebounded in 2017. Still, inflation remains persistently below the ECB’s target of around 2 percent. The asset purchase program has been extended to April 2018, but the ECB could implement an extension if economic data tails off or if inflation fails to move upwards.

The Spanish government has dissolved the Catalan government and parliament, after imposing direct rule on Catalonia. The Catalan government declared independence just before Madrid invoked Article 155 of Spain’s constitution. The Spanish government has drawn up charges of rebellion against Catalan President Carles Puidgemont, but he has skipped town, and is reportedly in Belgium. It’s unclear what Puidgemont will do next – he could request political asylum or declare a government-in-exile. Elections have been slated for December 21, and two parties from Puidgemont’s coalition have declared they will participate in the election. With Catalans split down the middle on independence, this saga is likely to continue for some time.

EURUSD is slow and it may be because of closed markets in Germany because of Reformation Day. So DAX is not moving at the moment, but it may open much higher tomorrow if US stocks will continue to move higher. In fact, there was a three wave retracement on E-mini S&P500 which looks like a completed wave four so price may be back at the highs soon.

S&P500, 1H

While stocks are headed up we may continue to see stronger dollar, especially against commodity currencies and against euro now as well. There is a nice rally from 1.1570, but it’s slow so probably a corrective leg that can stop at 1.1670/80 intraday resistance, where fourth wave rally can be limited. A drop back to the lows is in our view as long as 1.1729 is not breached.

EURUSD, 1H

Notes/Observations

Overnight

Asia:

China Oct Manufacturing PMI (official govt) 51.6 v 52.0e; Non-Manufacturing PMI: 54.3 v 55.4 prior; Policy makers may be incrementally more relaxed about supporting growth after the Party Congress

Bank of Japan (BOJ) left its policy steady (as expected). Left Interest Rate on Excess Reserves (IOER) unchanged at -0.10% and maintained its policy framework of "QQE with Yield Control" around 0.00% and asset purchases at annual pace of ¥80T. Vote was 8 to 1 with Kataoka (new member) again dissenting

BOJ Outlook for Economic Activity and Prices raised FY17/18 GDP growth outlook from 1.8% to 1.9% and maintained FY18/19 GDP growth outlook at 1.4% and FY19/20 GDP growth outlook at 0.7%. Cut FY17/18 core CPI outlook from 1.1% to 0.8%; Cut FY18/19 core CPI outlook from 1.5% to 1.4% but maintained FY19/20 core CPI (excluding effect of consumption tax hike) at 1.8%

Japan Sept Jobless rate in-line at 2.8% and again matched its lowest rate since Jun 1994

Europe:

Chancellor of Exchequer Hammond (Fin Min) is under pressure to abandon fiscal targets, but pledges to respect fiscal rules

Fitch on Spain: Sovereign rating reflects persistent Catalonia tension. Escalation that significantly worsened the outlook for Spanish growth and public finances could prompt negative action on the sovereign rating (**Reminder: On July 21st Fitch affirmed Spain sovereign rating at BBB+; revises outlook to Positive from Stable)

UK Oct GFK Consumer Confidence: -10 v -10e

Americas:

White House Press Sec Sanders: White House wants to pass House tax bill by Thanksgiving (the same time frame given by Speaker Ryan). President Trump has no intention of firing Special Counsel Mueller; indictments announced today have nothing to do with the President or his –campaign

White House: President Trump to make announcement on Fed Chair decision on Thursday (Nov 2). Most recnt speculation that Trump was likely to name Jerome Powell as Fed Chair

Treasury Sec Mnuchin: Treasury was not seeing a lot of demand for ultra long bonds; to continue to monitor market for interest

Economic Data

(FR) France Q3 Advance GDP Q/Q: 0.5% v 0.5%e; Y/Y: 2.2% v 2.1%e

(TR) Turkey Sept Trade Balance: -$8.1B v -$8.1Be

(FR) France Oct Preliminary CPI M/M: 0.1% v 0.1%e; Y/Y: 1.1% v 1.0%e

(FR) France Oct Preliminary CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: 1.2% v 1.2%e

(FR) France Sept Consumer Spending M/M: 0.9% v 0.6%e; Y/Y: 2.8% v 1.9%e

(FR) France Sept PPI M/M: 0.5% v 0.4% prior; Y/Y: 2.1% v 1.9% prior

(TW) Taiwan Q3 Preliminary GDP Y/Y: 3.1% v 2.2%e

(AT) Austria Q3 Preliminary GDP Q/Q: 0.6% v 0.7% prior; Y/Y: 2.6% v 2.8% prior

(IT) Italy Sept Preliminary Unemployment Rate: 11.1% v 11.1%e (matched lowest level since 2012)

(ZA) South Africa Q3 Unemployment Rate: 27.7% v 27.7% prior (matched highest level since 2003)

Fixed Income Issuance:

(ID) Indonesia sold total IDR22.5T vs. IDR15T target in 3-month and 9-month Bills; 5-year, 10-year 15-year Bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.2% at 394.7, FTSE 0.4% at 7515, DAX +0.1% at 13229, CAC-40 +0.2% at 5502, IBEX-35 +0.4% at 10484 , FTSE MIB flat at 22758, SMI +0.4% at 9214, S&P 500 Futures +0.2%]

Market Focal Points/Key Themes:

European Indices trade higher across the board, continuing the upward momentum with good earnings from Oil Giant BP, Airbus and Ryanair underpinning the rise. Advertising giant WPP trades higher despite cutting their full year outlook, while Gerberit and BNP Paribas trade lower after missing estimates.

Looking notable earners include Pfizer, Under Armour, Lumber Liquidators and Kellogg.

Equities

Consumer discretionary [ Just Eat [JE.UK] +3.9% (Q3 update, raises outlook), RyanAir [RYA.UK] +4.9% (Earnings)]

Industrials: [Airbus [AIR.FR] +2.3% (Earnings), Geberit [GEBN.CH] -4.6% (Earnings), Weir Group [WEIR.UK] -6.2% (Trading update, cuts outlook), SCA [SCAB.SE] +4% (Earnings), - Oerlikon [OERL.CH] +2.8% (Earnings)]

Financials: [BNP Paribas [BNP.FR] -3.3% (Earnings)]

Energy: [BP [BP.UK] +3.5% (Earnings), Siemens Gamesa [SGRE.ES] +5.8% (Contract)]

Speakers

Russia Central Bank 1st Dep Gov Yudaeva reiterated that govt opposed to capital controls. Had the tools to maintain stability under current sanctions

Russia Central Bank Oct 12-month Inflation Expectation Survey: Households see CPI at 9.9% v 9.6% prior survey

BOJ Gov Kuroda post rate decision press conference reiterated that domestic economy was expanding moderately while downside risks to prices were larger. To continue with easing to hit 2% inflation target asap. BOJ was far from price target and no need to change Yield Control (YCC). He added that BOJ saw no need to adjust all easing package at once at some point in the future. Upward pressure on wages was growing steadily. Important for govt to maintain faith on fiscal reform; have not given up on primary budget surplus discipline

Bank of Korea (BOK) Gov Lee Ju-yeol: To check if the solid growth trend continues and also check price movements before any change in policy

Currencies

FX markets were subdued at month end with German markets closed for public holiday.

The GBP/USD little changed with focus on the upcoming BOE rate decision on Thursday. For the month of October the GBP was weaker as dealers noted that the 1st interest-rate increase in a decade would not enough to offset their concerns over Brexit negotiations

USD/CHF was just below parity but the recent weakening of the CHF franc currency helped the SNB report a record 9-month net profit of CHF 33.7B.

Fixed Income

Bund futures trade at 162.75 up 3 ticks poised to end October at month’s high. Support lies at 161.00, followed by 160.38. Resistance stands initially at 163.51, followed by 164.25.

Gilt futures trade at 124.51 up 18 ticks, with the focus remaining on the BOE meeting on Thursday. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.

Tuesday’s liquidity report showed Monday’s excess liquidity rose to €1.833T from €1.828T and use of the marginal lending facility rose to €431M from €328M

Corporate issuance shows primary sees busiest October on record.

Looking Ahead

(ES) Spain Sept YTD Budget Balance: No est v -€21.5B prior

(AT) Austria Debt Agency (AFFA) announcement on upcoming RAGB bond auction on Wed, Nov 7th

06:00 (EU) Euro Zone Oct Advance CPI Estimate Y/Y: 1.5%e v 1.5% prior; CPI Core Y/Y: 1.1%e v 1.1% prior

06:00 (EU) Euro Zone Q3 Advance GDP Q/Q: 0.5%e v 0.6% prior; Y/Y: 2.3%e v 2.3% prior

06:00 (EU) Euro Zone Sept Unemployment Rate: 9.0%e v 9.1% prior

06:00 (IT) Italy Oct Preliminary CPI (NIC incl. tobacco) M/M: +0.1%e v -0.3% prior; Y/Y: 1.3%e v 1.1% prior

06:00 (IT) Italy Oct Preliminary CPI EU Harmonized M/M: 0.2%e v 1.8% prior; Y/Y: 1.3%e v 1.3% prior

06:00 (GR) Greece Aug Retail Sales Value Y/Y: No est v 2.3% prior; Retail Sales Volume Y/Y: No est v 1.6% prior

06:00 (EU) Daily Euribor Fixing

06:00 (ZA) South Africa to sell combined ZAR2.65B in 2032, 2040 and 2048 bonds

06:15 (CH) Switzerland to sell 3-month Bills

06:30 (UK) Weekly John Lewis LFL sales data

06:30 (EU) ECB allotment in 7-day Main Financing Tender (MRO) tender

06:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills

06:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 6-month bills

07:00 (IT) Italy Sept PPI M/M: No est v 0.5% prior; Y/Y: No est v 1.6% prior

07:00 (BR) Brazil Sept National Unemployment Rate: 12.4%e v 12.6% prior

07:00 (IL) Israel Sept Unemployment Rate: No est v 4.1% prior

07:45 (US) Weekly Goldman Economist Chain Store Sales

07:45 (US) Daily Libor Fixing

08:00 (CL) Chile Sept Unemployment Rate: 6.5%e v 6.6% prior

08:00 (ZA) South Africa Sept Trade Balance (ZAR): 10.0Be v 5.9B prior

08:00 (IN) India Sept Eight Infrastructure (Key) Industries: No est v 4.9% prior

08:30 (US) Q3 Employment Cost Index (ECI): 0.7%e v 0.5% prior

08:30 (CA) Canada Aug GDP M/M: 0.1%e v 0.0% prior; Y/Y: 3.5%e v 3.8% prior

08:30 (CA) Canada Sept Industrial Product Price M/M: 0.5%e v 0.3% prior; Raw Materials Price Index M/M: 0.4%e v 1.0% prior

08:55 (US) Weekly Redbook Retail Sales

09:00 (US) Aug S&P/Case-Shiller 20-City M/M: 0.40%e v 0.35% prior; Y/Y: 5.90%e v 5.81% prior; House Price Index (HPI): No est v 201.99 prior

09:00 (US) Aug S&P/Case-Shiller (overall) HPI Y/Y: No est v 5.94% prior, House Price Index (HPI): No est v 194.1 prior

09:00 (BR) Brazil Oct PMI Manufacturing: No est v 50.9 prior

09:00 (PL) Poland Oct Preliminary CPI M/M: 0.4%e v 0.4% prior; Y/Y: 2.1%e v 2.2% prior

09:00 (US) The FOMC begins its 2-day policy meeting (Decision on Wed)

09:05 (UK) Baltic Dry Bulk Index

09:45 (US) Oct Chicago Purchasing Manager: 60.0e v 65.2 prior

10:00 (US) Oct Consumer Confidence: 121.0e v 119.8 prior

10:00 (EU) Weekly ECB Forex Reserves:

10:00 (MX) Mexico Q3 Preliminary GDP Q/Q: 0.0%e v 0.6% prior; Y/Y: 1.6%e v 1.8% prior

10:00 (RU) Russia announces weekly OFZ bond auction

10:00 (BR) Brazil to sell I/L 2022, 2026, 2035 and 2055 Bonds

11:00 (CO) Colombia Sept National Unemployment Rate: No est v 9.1% prior; Urban Unemployment Rate: No est v 9.9% prior

11:00 (MX) Mexico Sept Net Outstanding Loans (MXN): No est 3.869T prior

11:30 (US) Treasury to sell4-Week Bills

15:00 (AR) Argentina Sept Industrial Production Y/Y: 4.8%e v 5.1% prior; Construction Activity Y/Y: No est v 13.0% prior

15:30 (CA) Bank of Canada (BOC) Gov Poloz in Parliament

16:30 Weekly API Petroleum Inventories

Crude oil has surged. Strong resistance given at 52.86 (28/09/2017) has been broken. The commodity is monitoring 1-year high. Expected to show continued increase.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. For the time being the pair lies in an upside momentum. Strong support lies at 35.24 (05/04/2016) while resistance can now be found at 55.24 (03/01/2017 high).