– European Indices trade mixed following sharp losses yesterday; Bond Yields decline, Crude also trades lower
– European export names rise despite tariffs imposed by the US on EU goods following the WTO ruling
– European Services PMI mostly lower, UK Service PMI reaches 6 month low
Asia:
-Bank of Japan (BOJ) Funo: No comments if further easing is needed at Oct meeting, Oct meeting will be a very important meeting
-North Korea (KCNA) confirms test fired new type of submarine-launched ballistic missile (SLBM) and it was successful
Europe/Mideast:
– European Export names rise as the US imposed retaliatory tariffs on EU aircraft and agricultural and industrial goods are seen to be below expectations. Airbus, Pernod Ricard and Remy Cointreau among the names rising sharply.
– France’s FinMin Le Maire reiterated US sanctions against the EU is an economic and political mistake, and that the EU could retaliate; If US rejects the hand we have extended in AIrbus trade dispute we are ready to respond with sanctions
– UK Service PMI misses forecasts and falls into contractionary territory marking a 6 month low
– European Services PMI data mostly fell short of expectations, with the Euro Zone, Germany, France, and Spain all missing forecasts, while Spain beat.
– German markets closed for National Unity day
– Former Italy PM Gentiloni: EU could accept global deals on corporate taxation that targets all large firms not only tech giants; It is important to move towards simpler fiscal rules ; Cannot accept aggressive tax competition within EU countries; Maximum tax rates are among possible solutions to counter aggressive tax competition
– ECB’s Rehn (Finland): must avoid prolonged period of low inflation with zero rates as it would constrain policy capacity; Bank of Finland May cut 2019 GDP forecast; Medium term inflation seen clearly below ECB target; deflation risk quite small
– Ireland Fin Min O’Donovan: Brexit proposals basis for discussions, not deal; Border checks are unacceptable, this cant’ be the ‘final landing page’; There are huge issues in Brexit proposals, particularly in relations to customs; There is progress on Brexit, however it is a long way to go; No deal Brexit would break UK law; EU parliament Brexit group is concerned about part of proposal relating to Northern Irish consent, customs control
Brexit:
– Reportedly PM Boris Johnson’s recent plan appears to be getting support from the DUP, ERG and a few labour MPs
– UK Minister Gove says he believes PM Johnson’s Brexit plan has a ‘good’ chance of being approved by parliament; will leave the EU on Oct 31st if we do not get a Brexit deal
– UK PM Johnson to give statement on Brexit proposals at ~10:30AM GMT (6:30AM EST) to House of Commons
Americas: –
-Fed Evans (dove, voter): he is open-minded about Oct meeting; ISM was a negative number for manufacturing; it was a confirmation of FOMC view and he is concerned Energy:
-Russian Energy Min Novak says Oil demand growth to recover in 2020 after a weak 2019, Oil demand growth next year will be higher than 1M b/d
– Saudi Energy Min Zanganesh: We are at 11.3Mbpd of production capacity, current;y stabilized production at 9.9mbpd
Equities
Indices [Stoxx600 -0.02% at 377.46, FTSE -0.64% at 7,076.67, DAX closed, CAC-40 +0.58% at 5,459.48, IBEX-35 +0.37% at 8,945.00, FTSE MIB +0.36% at 21,375.50, SMI +0.01% at 9,758.00, S&P 500 Futures +0.40%] Market Focal Points/Key Themes: Equities European Indices erase earlier losses and trade mostly higher across the board following yesterday big sell-off. The FTSE continues to underperform as Brexit uncertainty continues. US S&P futures currently trade up 0.3%. On the corporate front, shares of some European companies such as Airbus, Remy Cointreau, Diageo all rise sharply following US imposed tariffs on EU agricultural and industrial goods with some exceptions. Swedish retail giant H&M rise in Stockholm on rise in Q3 revenue and profits on year-to-year basis, while UK-listed financial derivatives dealer CMC Markets rise following its trading update. Meanwhile designer brand Ted Baker issued 2nd profit warning this year in its worse-than-expected earnings release. It trades lower 36% on LSE and set for worst day since 1997 market debut. In other news, Imperial Brands’ CEO announced to step down, company’s shares trade slightly higher on it. Looking ahead notable earners include PepsiCo and Constellation Brands.
– Consumer discretionary: Remy Cointreau [RCO.FR] +6%, Diageo [DGE.UK] +2% (US tariffs), Ted Baker [TED.UK] -36% (earnings; profit warning), H&M [HMB.SE] +6% (earnings)
– Consumer staples: Imperial Brands [IMB.UK] +0.5% (CEO steps down)
– Financials: CMC Markets [CMCX.UK] +7% (trading update)
– Industrials: Airbus [AIR.FR] +4% (US tariffs)
(FR) France’s European Affairs Minister Montchalin: US tariffs decision is major political mistake
(UK) Brexit Secretary Barclay: We are focused on getting a deal; will negotiate these proposals with EU; If there was no deal checks would need to be put in place by Irish government
(US) Fed Evans (dove, voter): he is open-minded about Oct meeting – speaking at Central Banking Conference
(EU) ECB’s Rehn (Finland): must avoid prolonged period of low inflation with zero rates as it would constrain policy capacity
(ES) ECB’s De Guindos (Spain): The Euro Area risk outlook is again tilted to the downside – at Central Banking Conference
(IE) Ireland Fin Min O’Donnovan: Brexit proposals basis for discussions, not deal
(SA) Saudi Fin Min Mohammed al-Jadaan: We are at 11.3Mbpd of production capacity
(RU) Russia Energy Min Novak: Oil demand growth to recover in 2020 after a weak 2019
USD: The USD index trades lower for the 3rd straight day after briefly making a new 2 year high. After the trade war with China goes nowhere and the US now will impose retaliatory tariffs on EU air aircraft and agricultural products. Levels to the down side are in the 98.00 region
EUR/USD: The Euro remains relatively flat today as everyone awaits the response from the EU regarding PM Johnson’s recent Brexit proposals. Levels to the upside are in the region of 1.102 and to the down side of 1.088.
GBP/USD: Cable trades sideways today as volatility is expected to pick up as we begin to see further comments with either backing or opposing. Today PM Johnson is due to discuss his plan in the House of Commons at 1130 UK time.
(UK) SEPT PMI SERVICES: 49.5 V 50.3E (lowest reading since Mar 2019)
(EU) EURO ZONE SEPT FINAL SERVICES PMI: 51.6 V 52.0E (lowest reading since Jan 2019)
(DE) GERMANY SEPT FINAL SERVICES PMI: 51.4 V 52.5E (lowest reading since Sept 2016)
(IT) ITALY SEPT SERVICES PMI: 51.4 V 50.5E
(ES) SPAIN SEPT SERVICES PMI: 53.3 V 53.9E
(TR) TURKEY SEPT CPI M/M: 1.0% V 1.4%E; Y/Y: 9.3% V 9.7%E
(EU) Euro Zone Aug Retail Sales M/M: 0.3% v 0.3%e; Y/Y: 2.1% v 2.0%e
(EU) Euro Zone Aug PPI M/M: -0.5% v -0.3%e; Y/Y: -0.8% v -0.4%e
(SE) Sweden Sept PMI Services: 49.8 v 54.1 prior (RU) Russia Sept PMI Services: 53.6 v 52.5e (third consecutive expansion)
(ZA) South Africa Sept PMI (whole economy): 49.2 v 49.7 prior
(HU) Hungary Aug Retail Sales Y/Y: 5.8% v 5.6%e
(EU) Euro Zone Aug PPI M/M: -0.5% v -0.3%e; Y/Y: -0.8% v -0.4%e
(EU) Euro Zone Aug Retail Sales M/M: 0.3% v 0.3%e; Y/Y: 2.1% v 2.0%e
**Fixed Income Issuance**
– (ES) SPAIN DEBT AGENCY (TESORO) SELLS TOTAL €2.92B VS. €2.5-3.5B INDICATED RANGE IN 2029 AND 2048 BONDS; SELLS TOTAL €524M VS. €250-750M INDICATED RANGE IN 2027 INFLATION-LINKED BONDS
-(FR) FRANCE DEBT AGENCY (AFT) SELLS TOTAL €9.498B VS. €8.0-9.5B INDICATED IN 2029, 2050, AND 2055 BONDS
(RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to leave Interest Rate unchanged at 2.50%
07:00 (MX) Mexico Sept Consumer Confidence: 43.6e v 43.4 prior
07:00 (ZA) South Africa Aug Electricity Production Y/Y: No est v -0.6% prior; Electricity Consumption Y/Y: No est v -1.9% prior
07:30 (US) Sept Challenger Job Cuts: No est v 53.5K prior; Y/Y: No est v 39.0% prior
08:00 (CL) Chile Aug Retail Sales Y/Y: 1.2%e v 1.8% prior; Commercial Activity Y/Y: No est v 6.5% prior
08:00 (UK) Daily Baltic Dry Bulk Index
08:30 (US) Initial Jobless Claims: 215Ke v 213K prior; Continuing Claims: 1.654Me v 1.65M prior
08:30 (US) Weekly USDA Net Export Sales
09:00 (RU) Russia Gold and Forex Reserve w/e Sept 27th: No est v $532.6B prior
09:00 (BR) Brazil Sept PMI Services: No est v 51.4 prior; PMI Composite: No est v 51.9 prior
09:00 (SG) Singapore Sept Purchasing Managers Index (PMI): 49.9e v 49.9 prior; Electronics Sector Index: No est v 49.4 prior
09:45 (US) Sept Final Markit Services PMI: 50.9e v 50.9e prelim; Composite PMI: No est v 51.0 prelim
10:00 (US) Aug Factory Orders: -0.2%e v 1.4% prior; Factory Orders (ex-transportation): No est v 0.3% prior
10:00 (US) Aug Final Durable Goods Orders: No est v 0.2% prelim; Durables Ex Transportation: No est v 0.5% prelim; Capital Goods Orders (non-defense/ex-aircraft); No est v -0.2% prelim; Capital Goods Shipments (non-defense/ex-aircraft); No est v 0.4% prelim
10:00 (US) Sept ISM Non-Manufacturing Inde: 55.1e v 56.4 prior
10:30 (US) Weekly EIA Natural Gas Inventories
15:00 (AR) Argentina Aug Industrial Production Y/Y: -6.8%e v -1.9% prior; Construction Activity Y/Y: No est v -1.7% prior
EUR/USD has risen toward 1.10 after US ISM Non-Manufacturing PMI plummeted to 52.6 points, the worst in three years. Fears of a recession and further monetary stimulus weigh on the dollar.
GBP/USD has risen above 1.24 after weak US data sent the dollar plunging. Earlier, the pound advanced as Conservatives seem untied around PM Johnson’s Brexit plan. The EU’s Tusk said the bloc is still unconvinced.
The USD/JPY pair lost more than 50 pips in a matter of minutes in the American session on Thursday after the data published in the United States revealed that the business activity in the service sector expanded at a much softer pace than expected in September.
The largest portion of the American economy continued its long running expansion but with waning energy in September weighed down by trade issues and a contracting factory sector.
Fears of a US recession are growing after ISM’s Purchasing Managers’ Index for the Non-Manufacturing sector has dropped to 52.6 points in September – the worst in three years – and indicating a slowdown in America’s largest sector.
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