Sample Category Title

Sterling rebounds solidly today and there is new wave of buying coming in at early part of US session. Positive news regrading Brexit negotiation is the key driver of the Pound. It's reported that the Brexit agreement is now closer than ever. And, there are only a small number of issues that. Further than that, the texts regarding Irish backstop are even reported to be ready. Prime Minister Theresa May has told her Cabinet to get ready to sign the agreement tomorrow, or by latest Thursday. While these are unconfirmed news from unnamed sources, Sterling traders don't care how real they are and jump in.

New Zealand and Australian Dollar follow as the second and third strongest. They're clearly lifted by optimism that US and China are moving in the right direction to solve trade conflicts. Chinese Vice Premier Liu He would travel to the US shortly, to work with Treasury Secretary Steven Mnuchin on preparing the summit between Trump and Xi at the G20 summit on November 30. And it's believed that certain set of things would be agreed to avert further escalation of the tariff war. On the other hand, Yen is trading as the weakest one, followed by Dollar, as market sentiments stabilized, and lifted.

Technically, EUR/GBP's break of 0.8690 now confirms resumption of recent fall from 0.9098. GBP/JPY's strong rebound also put focus back to 149.70 resistance. GBP/USD might recover further but there is no sign of breaking 1.3174 resistance yet. Dollar has clearly lost some momentum and would consolidate for a while first.

UK unemployment rate rose to 4.1%, but wage growth accelerated

UK unemployment rate rose 0.1% to 4.1% in the three months ended September, above expectation of 4.0%. But wage growth showed clear acceleration. Average weekly earnings including bonus rose 3.0% 3moy in September, up from 2.7% and matched expectation. Weekly earnings excluding bonus rose 3.2% 3moy, up from 3.1%, beat expectation of 3.1%. Jobless claims rose 20.2k in October, higher than expectation of 4.3k.

German ZEW: No speedy recovery after current weak development, Eurozone even worse

German ZEW Economic Sentiment improved to -24.1 in November, up from -24.7 and beat expectation of -24.2. Current Situation index, however, dropped sharply to 58.2, down from 70.1 and missed expectation of 65.0. Eurozone ZEW Economic Sentiment dropped to -22.0, down from -19.4 and missed expectation of -17.3. Eurozone Current Situation dropped sharply by -13.8 to 18.2. ZEW noted that "the outlook for the Eurozone has deteriorated even more than it has for Germany."

ZEW President Professor Achim Wambach noted in the release "The figures for industrial production, retail sales and foreign trade in Germany all point towards a weak development of the German economy in the third quarter. This is reflected by the fact that the assessment of the current situation has experienced a decline. The expectations of the survey participants for the coming six months do not show any improvement. This means that, at the moment, they do not expect to see a speedy recovery of the currently weak development of the economy".

Also from Germany, CPI was finalized at 0.2% mom, 2.5% yoy in October. From Swiss, PPI rose 0.2% mom, 2.3% yoy in October.

ECB Praet: Some slowdown in Eurozone growth, significant stimulus still needed

ECB Chief Economist Peter Praet admitted in a speech that recent developments in the Eurozone "point to some slowdown in the pace of economic growth". The slowdown reflects "a loss of momentum in global activity". And, the retreat from strong growth of 2017 was "compounded by short term country-specific of sector-specific factors. Nevertheless, domestic demand "remained resilient" and sentiment indicators remained in "expansionary territory". He added that the underlying strength of the economy "continues to support our confidence that the sustained convergence of inflation to our aim will proceed." But "significant monetary policy stimulus is still needed".

On monetary policy, Praet emphasized that "winding-down of net asset purchases is not tantamount to a withdrawal of monetary policy accommodation." The "rotation" from net asset purchase towards enhanced forward guidance has "preserved the ample degree of monetary policy accommodation". And looking ahead, the key policy rates and forward guidance will become an "anchor" for monetary policy as end of asset purchase is nearing. The communications and the rate path will be "calibrated to ensure that inflation remains on a sustained adjustment path."

BoJ assets rose to JPY 553.6T, larger than Q2 GDP annualized

Latest data from BoJ showed that the central bank is holding JPY 553.6T of assets as of November 10. Among them, JPY 469.1T are Japanese government securities, accumulated through over five years of the Quantitative and Qualitative easing program.

The total assets now surpassed the countries' GDP. Based on Q2 (April to June) data, Japan's nominal GDP was annualized at JPY 552.8T. Q3's data might, due on Wednesday, might come in a bit lower due to natural disasters. Nevertheless, Japan is now the first among G7 countries to own a pool of assets larger than its own GDP.

The situation drew criticism that the ultra loose monetary policy is clearly not sustainable. Some noted that BoJ would suffer losses if it would have to raise interest rate. But that's not so much of an immediate problem. The bigger risk is that in case of real emergency, like a full blown disaster, BoJ will not be able to finance government bonds any more.

Australia business confidence dragged down by employment, wage growth constrained

Australia NAB Business Confidence dropped 2pts from 6 to 4 in October. Business Conditions also dropped 2pts from 14 to 12. Alan Oster, NAB Group Chief Economist noted that "the decline in the month was driven by weakness in the employment component – though at these levels the survey still suggests ongoing employment growth at around 20k per month. At this rate we should see recent labour market gains maintained".

Also, it's noted in the release that "surveyed wage bill measures and the official wage price index suggest that enough spare capacity has remained in the labour market to constrain a significant pickup in wage growth". Hence, "September quarter wage data to be released later this week will show a small rise in the pace of growth but that overall wage growth will remain low relative to history."

The data certainly supports the "no rush" stance of RBA.

EUR/GBP Mid-Day Outlook

Daily Pivots: (S1) 0.8701; (P) 0.8738; (R1) 0.8766; More...

EUR/GBP's break of 0.8690 temporary low indicates resumption of whole decline form 0.9098. Intraday bias is back on the downside for 0.8620 support first. Break will target 100% projection of 0.9098 to 0.8722 from 0.8939 at 0.8563 next. However, break of 0.8773 minor resistance will turn focus back to 0.8939 resistance instead.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). Medium term fall from 0.9305 is possibly in progress and could extend through 0.8620. On the upside, break of 0.8939 resistance is needed to indicate medium term reversal. Otherwise, outlook will remain cautiously bearish even in case of rebound.

Economic Indicators Update

Here are the latest developments in global markets:

• FOREX: Three-month average earnings including bonuses grew by 3.0% y/y in September in the UK, while the ex-bonus measure jumped by 3.2% y/y versus 3.1% expected. The pound, though, saw little upside as the unemployment rate inched up by 0.1 percentage points to 4.1%, while more importantly the Brexit pessimism remained elevated despite the British Cabinet Secretary saying that a divorce agreement is in a “touching distance”. Pound/dollar was flirting with the 1.29 key level (+0.40%) after dropping as low as 1.2825 on Monday. Pound/yen recorded a stronger rebound, jumping by 0.64% as interest for the safe-haven yen somewhat slowed down following encouraging trade headlines; sources supported that the US Treasury Secretary, Steven Mnuchin and the Chinese Vice Premier Liu He have started discussions to de-escalate trade tensions between the nations. This comes a few weeks ahead of a crucial meeting between Trump and the Chinese leader during the G20 gathering in Argentina. Turning to Eurozone, the Italian government is expected to submit a revised form of its budget plan today and while analysts think that Rome will stick to its deficit targets it would be interesting to see how Italy will achieve it. Euro/dollar was standing slightly higher at 1.1248 (+0.27%), while euro/pound was down at 0.8703 (-0.31%). Dollar/yen managed to break marginally above the 114.00 level despite US Treasury yields opening with a gap down today. The dollar index flattened around 97.53, near 1 ½-year highs. In antipodean markets, the risk-sensitive aussie/dollar and kiwi/dollar benefitted from trade optimism, crawling up by 0.36% and 0.52% respectively. Dollar/loonie paused around 1.3231 after reaching four-month highs at 1.3249 on Monday.
• STOCKS:  European stocks rebounded on Tuesday after closing lower in the previous day as the slump in the technology sector triggered by Apple’s weaker forecasts recovered with hopes the US and China could resume trade negotiations. Gains in telecoms were also supportive. The pan-European STOXX 600 and the bleu-chip Euro STOXX 50 climbed by 0.56% and 0.66% respectively at 1000 GMT. The German DAX 30 rose by 0.66%, the French CAC 40 increased by 0.42% and the UK’s FTSE 100 improved by 0.46%. The Italian FTSE MIB rose by 0.33%. In Asia markets closed mixed, with Japanese equities losing around 2.0% and Chinese stocks winning around 1.0%. In the US, futures tracking the S&P 500, Dow Jones and Nasdaq 100 are flashing green, pointing to a positive open after starting the week with sharp selling.
• COMMODITIES: Oil prices extended substantially lower after Trump’s OPEC tweet yesterday messaged that oil prices should remain lower, a day after Saudi Arabia said that OPEC and its allies are looking for a supply cut next year. WTI crude and Brent plunged by more than 2.0%, with the former sinking to $67/barrel, the lowest since April, and the latter diving to $58.51/barrel, a price never seen since February. In precious metals, the strength in the dollar pushed gold to a one-month low of $1,196.5/ounce (-0.35%).

Day Ahead: Italy’s budget and Brexit in spotlight; overnight Japan, Australia and China will publish economic data

The economic calendar will turn quiet in terms of data releases in the remainder of the day, however, the Brexit problem and the Italian budget story might keep investors on the toes in coming sessions. Overnight, Japan will release GDP growth figures, Australia will issue wage growth data and China will publish retail sales, industrial output, and urban investment.

In the Eurozone, any news on Italy’s budget could drive the euro during the day. Today is the deadline for the Italian government to adjust its fiscal demands after the EU commission rejected Rome’s proposed spending plans and asked for revision. The EU legislator body published its own projections for the Italian economy based on the policies Rome wants to put forward, concluding that Italy’s own growth forecasts are optimistic and that its deficit could be in fact 2.9% of GDP in 2019, instead of 2.4% the Italian government is insisting. While forecasts are for Italy to stand pat on its 2019 spending plans, sources support that the government could reduce its growth estimates for next year to persuade Brussels that deficit will not run above 2.4% of GDP in 2019.

Brexit will remain in the center stage as well as investors try to figure out whether negotiations are on a good path. Earlier in the day, David Lidington, the British Cabinet Office Minister, encouraged that a Brexit deal is “almost within touching distance” and could be concluded within 48 hours. Particularly, asked if a deal is possible in the next 24-48 hours, he said “still possible but not at all definite.”

In terms of data releases, preliminary Japanese GDP growth data for Q3 will come into view during the Asian morning on Wednesday (2350 GMT, Tuesday). Forecasts are for the Japanese economy to have posted a negative reading of 0.3% q/q, after growing by 0.7% in Q2, while on an annualized basis, the gauge is said to have declined by 1.0% compared to a strong 3.0% expansion seen previously – the highest since August 2017. Capital expenditures and consumption GDP components will be closely watched as well. In the wake of an upbeat GDP report, the yen could attract buying interest and vice versa.

In Australia, the wage price index for Q3 is expected to come higher at 2.3% y/y, from 2.1% in Q2 and the aussie is highly anticipated to cheer on the data if those surprise to the upside. Around 0200 GMT, the currency could see further volatility as China, Australia’s major export partner is scheduled to report on retail sales industrial output, and urban investment, all for October.

Chinese industrial output growth is expected to tick lower to 5.7% y/y versus 5.8% in the preceding month, while urban investment is estimated to inch up to 5.5% y/y from 5.4% before. Moreover, retail sales growth is expected to decline marginally to 9.1% y/y from 9.2% previously.

As of today’s, public appearances, Fed Board Governor Lael Brainard (permanent FOMC voting member) and Minneapolis Fed President Neel Kashkari will be speaking at 1500 GMT. Later at 1920 GMT, comments from Philadelphia Fed President Patrick Harker (non-voter in 2018) will be also in focus. Meanwhile in the Eurozone, ECB Vice President Luis de Guindos will be giving remarks at 1900 GMT at the Euro Finance Week event organized by Deutsche Bundesbank in Frankfurt, Germany.

After three straight losing sessions, EUR/USD has reversed directions and posted slight gains. In the Thursday session, the pair is trading at 1.1249, up 0.28% on the day. On the release front, German ZEW Economic Sentiment posted a dismal reading of -24.1, just above the estimate of -24.2 points. Eurozone ZEW Economic Sentiment fell to -22.0, much weaker than the estimate of -17.3 points. There are no major U.S. events for a second straight day. On Wednesday, there are key indicators on both sides of the pond. Germany and the eurozone will release GDP, while the U.S. releases CPI reports.

Inflation continues to rise higher in the United States. On Friday, the Producer Price Index (PPI) jumped 0.6%, its sharpest gain since January 2017. This easily beat the estimate of 0.2%. Core PPI was also sharp, with a gain of 0.5%, compared to a gain of 0.2%. Stronger inflation will reinforce expectations that the Fed will hike rates hike in December. Currently, the odds of a quarter-percent rate hike stands at 76%. On the consumer front, UoM consumer sentiment dropped to 98.3, down from 99.0 points. Still, this beat the forecast of 98.0 points.

The deadlock between Italy and the EU over Italy’s budget continues to weigh on the markets. The EU Commission has set midnight Tuesday as a deadline for Italy to revise its budget by Tuesday, which it argues raises Italy’s debt and is in breach of EU fiscal rules. However, Italian officials have flatly rejected the EU demands. Matteo Salvini, Italy’s interior minister, stated that the government would not change the budget by “one iota”. The EU could respond with stiff fines, worth billions of euros. There is serious concern in Brussels about that overspending by the Italian government could hurt Italian stocks and bonds, destabilize the banking sector and even lead to contagion in other eurozone members. With Rome and Brussels on a collision course, the fallout could weigh on European stock markets and the euro.

The Fed shows no signs of easing up on interest rate hikes, with Fed policymakers stating that interest rates will continue to rise until the “neutral rate” of between 2.5 percent and 3.5 percent is reached. This means we can expect rate hikes once a quarter in 2019, barring a sharp downturn in the economy. The policy of gradual increases is good news for the U.S dollar, and conversely is bearish for the euro, as higher interest rates means that the greenback is more attractive to investors.

Sterling rebounds broadly today, except versus Kiwi, as bears refuse to commit further selling. Stronger than expected UK wage growth in September does provide some support. But more importantly, there are rumors flying around about an imminent Brexit deal with the EU. It's reported that the "texts" are ready and they're just waiting for the nod from UK Prime Minister Theresa May. We'll see if both sides can really agree on something that paves the way to a November EU summit.

Australian and New Zealand Dollar are also strong on improved sentiment over optimism on US-China trade spat. China Vice Premier Liu He might travel to the US to meet with Treasury Secretary Steven Mnuchin shortly, to prepare for the meeting between Trump and Xi on November 30 at the G20 summit. Yen and Dollar are trading as the weakest ones, paring some of this week's gain. Canadian Dollar is back under pressure as WTI crude oil resumes recent free fall and hit as low as 58.33.

In other markets, major European indices are trading higher at the time of writing:

• FTSE is up 0.23%
• DAX is up 0.91%
• CAC is up 0.54%
• German 10 year yield is up 0.003 at 0.404
• Italian 10 year yield is up 0.020 at 3.467. German-Italian spread is above 300

Earlier in Asia

• Nikkei closed down -2.06% at 21810.52
• Hong Kong HSI rose 0.62% to 25792.87
• China Shanghai SSE rose 0.93% to 2654.88
• Singapore Strait Times dropped -0.47% to 3053.6
• Japan 10 year yield dropped further by -0.0026 to 0.117

WTI oil extends weakness on Tuesday to new multi-month low at $58.24, maintaining strong bearish tone, following Monday’s 3% fall.

Brief recovery attempt on Monday was short-lived, with fresh acceleration lower sparked by President Trump’s request to Saudi Arabia and OPEC not to cut oil production, which Saudi Arabia signaled previous day.

The global oil supply is hitting its record and starts to dent market balance, which keeps oil prices in the downward trajectory.

Risk of further weakening is high, as steep downtrend extends into six straight week, registering fall of over 20% so far and showing no signs of changing direction, despite strongly oversold studies.

Strong bearish sentiment continues to drive oil price lower.

Fresh negative signals on Tuesday came from OPEC monthly report which points on widening excess supply in 2019, global oil demand growth would slow and cartel’s monthly output rose in Oct despite lower contribution from Iran.

These factors weigh heavily on oil price which approaches strong technical support at $57.47 (weekly cloud base), loss of which would generate fresh bearish signal for extension towards next pivot at $55.35 (Fibo 61.8% of $42.04/$76.88).

Focus turns towards US API and EIA crude inventories reports which will be released on Wed/Thu respectively (delayed due to US holiday) and expected to show another build in crude stocks which would add to oil’s negative sentiment.

Res: 59.33, 60.00, 61.27, 61.52
Sup: 58.24, 58.06, 57.47, 56.08

Investors are hopeful that US and China would be able to strike a deal and there will be no more of a trade war. This very fact is leading the momentum in the markets today.

U.S. futures are trading higher as investors decided to ignore the pessimism from Wall Street. Last night’s sell-off was led by the tech sector. Apple and Amazon were the major culprits. Investor confidence was badly hurt when the news hit the wire that Apple’s sales outlook has been deteriorated, the company's stock fell over 5 percent yesterday and the worst element is that Apple's supplier's stock had even worse sell-off; Lumentum Holdings, one of the top maker of iPhone facial -recognition sensors had it’s stock's plummeted more than 30 percent and the theme was similar for other suppliers.

Having said, there is some optimism in the market as the talks between the US and China have begun once again ahead of the upcoming G20 meeting. Once again the hopes are that both countries would be able to strike a deal and put the woes of trade war behind them. Concerns around trade war have created a meaningful impact on the global growth and a lot of steam has come out of the equity market mainly because of this.

As for the currency market, the euro-dollar is still under pressure as the battle between Italy and Brusell over the Italian budget becomes more intense. Today is the deadline for the Italian government to resubmit their budget and we do not think enough progress is made on this. The EU previously rejected their previous budget and asked the country to resubmit the budget. The country is sticking to it’s original plan which includes higher benefit spending, reducing taxes and also lower the tax cuts. None of these gel well with the EU. Brussels told Italy several times already that the country needs to play by the rule or it will face tough measures. Today is that day for Italy.

Back in the U.S, Thersa May is closer in sealing a deal over Brexit- at least that is what she believes in her head. She has mentioned that she is confident that the UK is very close to "End game". This is despite the fact that she has lost a lot of support in her own corner and the opposing members of her party have one united goal which is not the same for Mrs May.

President Trump could not keep it quite and he has taken more aggressive approach to cool off the recent bounce in the oil market. He has made it clear that he dislikes the Idea of OPEC and it’s members cutting down the supply. Trump likes to see the oil price to move even more from it’s current level. Remember that the oil price has entered in a bear territory when you compare it’s price from it’s recent highs.

Nasdaq index reprsents a major opportunity for those who love volatilty. The index was down nearly 5% yesterday

It is all about NASDAQ today as the tech giant index took a beating yesterday. Apple and Amazon are the heavyweights of the Nasdaq 100 index and both stocks were brutally sold off yesterday. The NASDAQ 100 index’s 30-day volatility has surged to a level which we have not seen since 2011 and this has alarmed many investors. Higher volatility means bigger moves and presents more opportunities for day traders.

In terms of technical analysis, on a daily time frame, the price has dropped below the 50, 100 and 200-day moving averages (50 in pink, 100 in green and 200 in yellow respectively). This confirms that the bears are strongly in control of the price. Also looking at the recent trading action- yesterday’s candle, it appears that the sell-off has more room to go because we are still far off any major support. Hence, the odds of the price breaking the 7000 mark high. Moreover, the price has made lower highs (shown by the two circles on the chart) and as long as we do not break these resistance levels, the trend will remain to the downside.

• Focus remains on key European events – Brexit negotiations and Italian budget response to EU Commission
• Italy unlikely to make meaningful changes in its revised budge
• Brexit optimism still lingers as talks continue
• UK Wage data (ex-bonus) slightly higher than expectations with upward revision to back month; ILO Unemployment moves off recent four decade low level
• German Nov ZEW survey pointed to weak developments in Q3 German GDP growth
• Italy sold full amount in 3-tranche BTP issues with lower yields in shorter end of results
• High-level communication between US-China signaled a willingness on both sides to reach an accommodation

Asia:

• US Treasury Sec Mnuchin and China Vice Premier Liu He resumed talks and spoke by phone; the conversation did not lead to any 'breakthrough' (Note: high-level communication signaled a willingness on both sides to reach an accommodation). US said to demand that China put forward a concrete offer before negotiations on a trade deal could take place. Chinese officials resisting and wanted to talk first before making a formal proposal out of concerns they would lose leverage once they made a formal offer
• China Vice Premier Liu He to visit the US to pave the way for the Xi-Trump meeting at the upcoming G20 in Argentina

Europe:

• PM May stated that both sides were working hard to reach Brexit deal but significant issues remained; talks were now reaching their 'end game'. Govt won't accept a deal at any cost
• PM May said to have rejected latest Brexit deal draft because it did not give the UK a clear escape from a custom union if the EU started acting in bad faith on future trade deal talks
• Senior UK ministers said to be telling PM May to go for no-deal Brexit if EU won't make concessions
• ECB's Lautenschlager (Germany, SSM member): very much in favor of ending the asset purchase program
• UK Oct Visa Consumer Spending Y/Y: -0.2% v +0.2% prior (first decline in 3 months)

Americas:

• San Francisco Fed Pres Mary Daly (voter): 'Neutral' rate was uncertain so shouldn't view it as a stopping point; won't be surprised by a Dec rate hike and at least a couple more in 2019

Energy:

• President Trump: "Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!"

Macro

• (DE) Germany - German HICP inflation was confirmed at 2.4% y/y. This is due in large part due to energy price inflation, with prices for household energy increasing 6.0% y/y in October, and heating oil prices jumping 40% y/y. In Germany then, underlying inflation pressures are picking up as labor costs and wages continue to rise.
• (IT) Italy - Yields continue to rise amid reports that the government won't budge on the deficit target of 2.4%, but may agree to lower the growth forecast to 1.2%, in line with the Commission's projection and down from 1.5% predicted in the initial report. Under that lower growth forecast though the Commission predicted a deficit to GDP ratio of 2.9%, rather than the 2.4% in the official budget plan, so Finance Minister Tria would have to come up with considerable savings to convince the Commission that the budget target is realistic.
• (UK) United Kingdom - EU and UK negotiations are in the "endgame" according to Prime Minister May overnight. The Irish border backstop issue still remains unresolved. UK government sources cited by the BBC said that a deal needs to be done by tomorrow if there is to be a late-November EU summit. The BBC also yesterday cited three unnamed cabinet members saying that they are against the current Brexit plan, which followed Friday's resignation of cabinet member Joe Johnson, on the view that it will not pass in parliament.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.23% at 362.92, FTSE +0.21% at 7,067.69, DAX +0.52% at 11,383.80, CAC-40 +0.15% at 5,066.88, IBEX-35 +0.13% at 9,088.55, FTSE MIB -0.44% at 18,972.50, SMI +0.24% at 9,003.70, S&P 500 Futures +0.27%]
• Market Focal Points/Key Themes: European Indices rebound despite a mixed Asian session and sharp losses in Wallstreet yesterday, as US futures rebound. On a busy morning for corporate earnings, Telecom giant Vodafone outperforms after earnings and adjusted outlook; German Dax component Bayer trades higher after Q3 results beat estimates, while Uniper trades lower after guiding EBIT to the lower end of forecasts. Elior trades higher following a strategic review; Experian also rises after earnings. B&M is a notable decliner in the UK following cautious guidance. Oil futures trade over 2% lower ahead of the OPEC report with the major Oil names all trading lower, suppressing gains on the major indices. Looking ahead as we get to the back end of earnings season notable earners include retailer Home Depot, Tyson Foods, Beazer Homes and Advanced Auto Parts among others.

Equities

• Consumer discretionary: FirstGroup [FGP.UK] +9% (earnings; appoints CEO), DCC [DCC.UK] -1.5% (earnings; raises div), Elior [ELIOR.FR] +6.5% (contemplates separation options for its concession catering business), Tom Tailor [TTI.DE] -9.5% (earnings)
• Consumer staples: B&M European Value Retail SA [BME.UK] -9.5% (earnings; UK LFL sales missed consensus)
• Energy: Innogy SE [IGY.DE] n/c (earnings), Uniper [UN01.DE] -2.5% (earnings; adjusts outlook), Nordex [NDX1.DE] -14% (earnings, narrows outlook)
• Healthcare: Bayer [BAYN.DE] +1% (earnings), Astrazeneca [AZN.UK] +1%, SOBI [SOBI.SE] +4.5% (Astrazeneka o sell US rights for Synagis to Sobi), BTG [BTG.UK] +9% (earnings), Evotec AG [EVT.DE] -1.5% (earnings; affirms outlook)
• Industrials: Taylor Wimpey [TW.UK] -2.5% (trading update), Alfa Laval [ALFA.SE] +0.5% (capital markets day), paragon Ag [PGN.DE] +4.5% (earnings; affirms outlook), BBA Aviation plc [BBA.UK] +6% (capital markets day)
• Telecom: Vodafone [VOD.UK] +6% (earnings; adjusts outlook; said to potentially discuss 5G network in Italy with Telecom Italia), Telecom Italia [TIT.IT] -1.5% (CEO said to resign)

Speakers

• ECB's Praet (Belgium, chief economist) stated that recent developments pointed to a slowdown in the pace of economic growth and that significant monetary stimulus was still needed (comments in-line with recent Draghi post rate decision press conference). Reiterated Council view that underlying strength of region continued to support confidence that inflation convergence would continue. Policy would remain predictable and proceed at a gradual pace. Risks from protectionism were to the downside. Have seen substantial tightening of financial conditions in Italy with some spillover into Greece. There has been some discussions in Euro Zone about precautionary measures such as ESM to prevent spillovers from Italy; spillovers from Italy seen as limited
• ECB's Lautenschleager (Germany, SSM member): Growth within projections but have seen some softening. Overall economic growth was robust. Bank consolidation in Germany was positive (**note: in-line with views from Germany Bundesbank official Wuermeling)
• UK Govt official Lidington (de facto Dep PM): Optimistic that Brexit talks would result in a deal; almost within touching distance in Brexit talks. Deal was possible but not definite for this week
• UK Foreign Minister Hunt: Confident there was a solution on Brexit but entering a critical period. Reiterated that 95% of Brexit deal was done but the final 5% was difficult
• Ireland Ambassador to UK O'Neill: Brexit talks remain difficult. Reiterated EU view that wanted closest possible relationship with UK after Brexit but it could not damage the single market
• Italy Fin Min Tria: Growth target not a point of political negotiation
• Spain Fin Min Calvino stated that the domestic economy maintained a robust pace of growth
• German ZEW Economists stated that monthly data pointed to weak development in Q3 German GDP growth
• Hungary Fin Min Varga: 2018 GDP growth could well exceed 4%
• China Commerce Ministry official Li Chenggang: China-US economic teams were engaging for in depth contact; implementing understanding after Xi-Trump call

Currencies/ Fixed Income

• FX markets relatively quiet with focus on two key European events – Brexit negotiations and Italian budget response to EU Commission.
• EUR/USD steady at 1.1230 area. Dealers noted that the 10-year BTP-Bund spread continued to hover around the 300 basis point area as participants look towards outcome of the budgetary confrontation between Italy and the EU
• GBP/USD was firmer by almost 0.5% on Brexit optimism. Price action seemed to focus on comments from Govt official Lidington (de facto Dep PM) who remained optimi

Economic data

• (SE) Sweden Oct PES Unemployment Rate: 3.7% v 3.8% prior
• (NL) Netherlands Sept Retail Sales Y/Y: -0.7% v +4.5% prior
• (DE) Germany Oct Final CPI M/M: 0.2% v 0.2%e; Y/Y: 2.5% v 2.5%e
• (DE) Germany Oct Final CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: 2.4% v 2.4%e
• (FI) Finland Sept Final Retail Sales Volume Y/Y: -0.8% v -1.0% prelim
• (NO) Norway Q3 GDP Q/Q: 0.6% v 0.6%e; GDP Mainland Q/Q: 0.3% v 0.5%e
• (NO) Norway Sept GDP M/M: -0.5% v -0.2% prior; GDP Mainland M/M: -0.3% v -0.3% prior
• (FR) France Q3 Preliminary Wages Q/Q: 0.3% v 0.4%e; Private Sector Payrolls Q/Q: 0.2%0.3%e
• (ES) Spain Sept House transactions Y/Y: 9.7% v 7.4% prior
• (CH) Swiss Oct Producer & Import Prices M/M: 0.2% v 0.1%e; Y/Y: 2.3% v 2.2%e
• (CN) China Oct New Yuan Loans (CNY): 697.0B v 904.5Be prior
• (CN) China Oct M2 Money Supply: 8.0% v 8.4%e; M1 Money Supply Y/Y: % v 4.2%e; M0 Money Supply Y/Y: % v 2.8%e
• (CN) China Oct Aggregate Financing (CNY): 0.7T v 1.380Te
• (CZ) Czech Sept Current Account Balance (CZK): -3.0B v -1.4Be
• (UK) Oct Jobless Claims Change: +20.2K v +23.2K prior; Claimant Count Rate: 2.7% v 2.6% prior
• (UK) Sept Average Weekly Earnings 3M/Y: 3.0% v 3.0%e; Weekly Earnings (ex Bonus) 3M/Y: 3.2% v 3.1%e
• (UK) Sept ILO Unemployment Rate 3M/3M: 4.1% v 4.0%e; Employment Change 3M/3M: +23K v +25Ke
• (DE) Germany Nov ZEW Current Situation Survey: 58.2 v 65.0e; Expectations Survey: -24.1 v -26.0e
• (EU) Euro Zone Nov ZEW Expectations Survey: -22.0 v -19.4 prior

Fixed Income Issuance

• (NL) Netherlands Debt Agency (DSTA) sold €635M vs. €0.5-1.0B indicated range in 3.75% Jan 2042 DSL bond; Avg Yield: 0.984% v 2.315% prior
• (DE) Denmark sold DKK4.36B in 3-month Bills Yield: -0.700% v -0.700% prior; bid-to-cover: 3.51x v 1.0x prior
• (ES) Spain Debt Agency (Tesoro) sold €4.45B vs. €4.-5.0B indicated range in 6-month and 12-month Bills
• (ID) Indonesia sold total IDR4.12T vs. IDR4.0T target in 6-month Islamic Bills, 2-year, 4-year, 7-year and 15-year Project-based Sukuk (PBS)
• (ZA) South Africa sold total ZAR2.85B vs. ZAR2.85B indicated in 2023, 2032 and 2040 bonds
• (IT) Italy Debt Agency (Tesoro) sold total €5.5B vs. €4.0-5.5B indicated range in 2021, 2025 and 2038 BTP Bonds
• Sold €2.5B vs. €2.0-2.5B indicated range in 2.30% Oct 2021 BTP; Avg Yield: 1.98% v 2.51% prior; Bid-to-cover: 1.52x v 1.26x prior
• Sold €1.75B vs. €1.25-1.75B indicated range in 2.50% Nov 2025 BTP; Avg Yield: 3.12% v 3.28% prior; Bid-to-cover: 1.52x v 1.90x prior
• Sold €1.25B vs. €0.75-1.25B in 2.95% Sept 2038 BTP; Avg Yield: 3.90% v 3.28% prior; Bid-to-cover: 1.41x v 1.44x prior

Looking Ahead

• (IT) Italy Govt must respond to the EU's request to revise its draft budget proposal
• (UK) Cabinet vote on the current Brexit proposal (expected this week)
• (SE) Sweden Central Bank (Riksbank) Jansson begins 2-day visit to Linkoping
• (US) Commerce Dept draft report on auto tariffs to be reviewed by President Trump
• (FI) Finland announces upcoming RFGB bond auction for Nov 20th
• 05.30 (UK) Weekly John Lewis LFL sales data
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 05:30 (DE) Germany to sell €4.0B in 0% Sept 2020 Schatz
• 06:00 (IL) Israel Oct Trade Balance: No est v -$2.5B prior
• 06:00 (US) Oct NFIB Small Business Optimism: 108.0e v 107.9 prior
• 06:00 (PT) Portugal Oct Final CPI M/M: No est v 0.0% prelim; Y/Y: No est v 1.0% prelim
• 06:00 (PT) Portugal Oct Final CPI EU Harmonized M/M: No est v -0.4% prelim; Y/Y: No est v 0.9% prelim
• 06:00 (BR) Brazil Sept Retail Sales M/M: 0.0%e v 1.3% prior; Y/Y: 1.5%e v 4.1% prior
• 06:00 (BR) Brazil Sept Broad Retail Sales M/M: -0.5%e v +4.2% prior; Y/Y: 3.5%e v 6.9% prior
• 06:00 (TR) Turkey to sell Bonds
• 06:45 (US) Daily Libor Fixing
• 07:00 (IS) Iceland Unemployment Rate: No est v 2.3% prior
• 08:00 (PL) Poland Sept Current Account Balance: -€0.4Be v -€0.6B prior; Trade Balance: -€0.1Be v -€0.3B prior; Exports: €18.2Be v €17.2B prior; Imports: €18.3Be v €17.5B prior - 08:00 (RO) Romania Central Bank Minutes
• 08:00 (NO) Norway Central bank (Norges) Dep Gov Nicolaisen in Paris
• 08:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)
• 08:05 (UK) Baltic Dry Bulk Index
• 09:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Ohlsson (dissenter) speaks in Sundsvall
• 10:00 (US) Fed's Kashkari (non-voter, dove)
• 10:00 (US) Fed's Brainard (voter, dove)
• 10:30 (CA) Canada to sell 3-month, 6-month and 12-month
• 11:30 (US) Treasury to sell 8-Week Bills
• 12:30 (GR) ECB's Stournaras (Greece) in Geneva
• 14:00 (US) Oct Monthly Budget Statement: -$100.0Be v $119.1B prior
• 14:00 (ES) ECB's De Guindos (Spain) in Frankfurt
• 14:20 (US) Fed's Harker (non-voter, moderate) at fintech conference
• Share on Twitter Share on Facebook Share on Linkedin

The Australian dollar bounced on Tuesday as stocks stabilize and signs of easing US / China trade tensions offered fresh support.

Three-day fall from 0.7302 high hit two-week low at 0.7164, where bears were contained by 55SMA and subsequent bounce returned back to thick daily cloud, offsetting negative signal on Monday’s close below cloud base (0.7177).

Recovery attempts were supported by bullish momentum, but failed to sustain break above 10SMA pivot (0.7204), keeping the downside vulnerable.

Close above 10SMA would generate bullish signal for stronger recovery of three-day 0.7302/0.7164 fall, with emerge above cloud top (0.7247) needed to confirm scenario, supported by bullishly aligned daily studies.

Conversely, repeated close below daily cloud base would generate fresh bearish signal for extension towards 0.7128 support (Fibo 61.8% of 0.7020/0.7302 ascend /30SMA).

Res: 0.7204, 0.7218, 0.7237, 0.7257
Sup: 0.7177, 0.7161, 0.7146, 0.7128

US traders left to pick up the pieces from Monday's sell-off

The US session is heading for a slightly positive start on Tuesday, as traders return from the bank holiday weekend to pick up the pieces of another market sell-off on Monday.

A troubling sell-off at the start of the week has reignited fears that the market turbulence is not necessarily as behind us as we hoped, with Apple leading the tech sell-off as investors once again start talking about peak iPhone sales. Thankfully this hasn't yet triggered a wider sell-off but with investor sentiment still fragile, I'm not convinced we can take another day like Monday without a potential repeat of what we saw in October.

As it stands, futures suggest we're heading for modest gains on the open as the market pares Monday's declines. This is a very interesting test for the markets at the moment, if they can weather the storm at the start of the week without too much damage then investors may be encouraged, but that is far from guaranteed.

Sterling pares Monday's sizeable losses as May eyes Brexit “endgame”

The pound is paring gains this morning, as officials continue to talk up the prospect of a Brexit deal, while reiterating that the border backstop with Northern Ireland remains a sticking point. Given that this has been the case for some time, it doesn't fill me with optimism and its not providing much support for sterling either, which once again fell below 1.29 on Monday. Theresa May remains confident, claiming the talks are in the “endgame”, and it apparently meeting with her cabinet today after which we may have a better idea of how feasible a November deal actually is. I for one am not optimistic.

The UK data this morning barely provided a distraction, being far and away the least influential market event of the two impacting the currency right now. Low unemployment – which actually ticked higher to 4.1% - and slightly better wage growth (ex-bonus) of 3.2% is irrelevant if we're heading for a no deal Brexit and that certainly came across, as the pound barely wobbled in the aftermath of the release.

Deadline day for re-drafted Italian budget

With global risk appetite looking shaky once again, it's safe to say Italy's draft budget is up there as one of the most widely followed events today. The reports in recent days suggest the new draft will not contain a reduced deficit target and may instead focus on producing more realistic growth forecasts, which may not be enough to satisfy Brussels but could be the basis for talks that eventually avoid the need for sanctions.

Rome doesn't have much wiggle room though, with yields on its debt already having risen considerably and their investment grade status hanging by a thread. Whether the European Commission decides to capitalise on that and risk further fuelling the populist and eurosceptic mood in the country will be interesting to see, although I think they will want to avoid this given the rise of populist parties across the continent.