Markets rally fades after Clinton seen as winning first Presidential debate

Notes/Observations

- Equity markets reverse course after initial risk on rally; Bunds trade at fresh contract highs, Gilts 3 week high

- Oil drops as markets doubt the chances of any policy decision during the Sept 28th meeting

 

Overnight

Asia:

- Clinton viewed as winning first Presidential debate leading to initial risk on tone, a CNN post-debate poll shows 62% v 27% in favor of Clinton

- Commodity currencies rally as Trump is seen as negative for trade

- China Industrial Profits (Aug) Y/Y 19.5% v 11% prior; largest increase in 35 months

Europe:

- Iran not ready to freeze output at current levels, need more time for discussions

- Iran wants 12.7% of any new OPEC output ceiling, keen to regain market share

- Sweden Retail Sales disappoints as declining trend remains

 

Economic data

- (DE) GERMANY AUG IMPORT PRICE INDEX M/M: -0.2% V -0.1%E; Y/Y: -2.6% V -2.5%E

- (FI) Finland Sept Consumer Confidence: 14.4 v 15.7 prior; Business Confidence: -1 v -8 prior

- (HU) Hungary Aug Unemployment Rate: 4.9% v 5.0%e

- (SE) Sweden Aug Retail Sales M/M: +0.6% v +0.5%e; Y/Y: 2.8% v 3.7%e

- (SE) Sweden Aug PPI M/M: +1.0% v -0.3% prior; Y/Y: -0.3% v -1.1% prior

- (SE) Sweden Aug Household Lending Y/Y: 7.5% v 7.6% prior

- (SE) Sweden Aug Trade Balance (SEK): -10.3B v +0.5B prior

- (EU) EURO ZONE AUG M3 MONEY SUPPLY Y/Y: 5.1% V 4.9%

- (IT) Italy July Industrial Sales: +2.1% v -1.1% prior; Y/Y: -0.7% v -2.7% prior

- (IT) Italy July Industrial Orders M/M: -10.8% v -2.8% prior; Y/Y: -11.8% v -4.2% prior

- (TW) TAIWAN AUG INDUSTRIAL PRODUCTION Y/Y: +7.7% V +4.0%E

Fixed Income Issuance:

- (NL) NETHERLANDS DEBT AGENCY (DSTA) SELLS €0.75-1.0B VS. €1.25B INDICATED RANGE IN 4.0% JAN 2037 DSL BONDS; AVG YIELD: 0.298% V 2.674% PRIOR

- (IT) ITALY DEBT AGENCY (TESORO) SELLS €2.5B VS. €2.0-2.5B INDICATED RANGE IN 0% MAR 2018 CTZ; AVG YIELD: -0.216% V -0.150% PRIOR; BID-TO-COVER: 1.80X V 1.64X PRIOR

- (IT) Italy Debt Agency (Tesoro) sells €939M vs. €0.5-1.0B indicated range in 1.25% Sept 2032 I/L BTP Bond (BTPei); Avg yield: 0.63% v 1.00% prior; Bid-to-cover: 1.35x v 1.52x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:15 GMT)
Indices [Stoxx50 -0.3% at 2,966, FTSE -0.2% at 6,803, DAX -0.8% at 10,310, CAC-40 -0.4% at 4,391, IBEX-35 -0.4% at 8,675, FTSE MIB -0.7% at 16,073, SMI -0.1% at 8,154, S&P 500 Futures +0.2%]

Market Focal Points/Key Themes: European equity indices opened higher following the first Presidential debate where analysts considered Clinton did better than rival Trump, initially easing markets across Asia and Europe; Equity markets trading lower across the board however at the time of writing; financial stocks in the Eurostoxx mixed with shares of Santander, BNP Paribas and BBVA trading higher but shares of Deutsche Bank, Intesa Sanpaolo and SocGen trading lower; shares of Orange leading the gains seen in the index after receiving a tier-1 analyst upgrade; shares of Carnival leading gains in the FTSE 100 after releasing better than expected results yesterday; travel stocks however generally weighing down the index with shares of IAG and EasyJet trading notably lower; shares of Wolseley also weighing down the index after releasing earnings; upcoming scheduled US earnings (pre-market) include Factset Research Systems, and IHS Markit.

 

Equities (as of 09:50 GMT)

- Consumer Discretionary: [Boohoo.com BOO.UK +0.5% (H1 results, raises outlook, analyst upgrade), Card Factory CARD.UK +2.2% (H1 results), Caverion CAV1V.FI +4.1% (names new CEO), Thomas Cook Group TCG.UK -1.0% (trading update), Wolseley WOS.UK -3.4% (FY15/16 results)]

- Financials: [Legal & General LGEN.UK -0.8% (Announces Retirement Division was on track to double its new business sales in 2016)]

- Healthcare: [Redx Pharma REDX.UK +13.7% (Announces Discovery of breakthrough antibiotic compounds)]

- Telecom: [Orange ORA.FR +2.7% (analyst upgrade)]

- Utilities: [United Utilities UU.UK +1.1% (trading update)]

 

Speakers

- (IR) Iran Oil Min Zanganeh: We need more time for more consultations; Not willing to freeze output at current level - comments from of Algier

- (JP) Bank of Japan (BOJ) Dep Gov Nakaso: Japan's growth potential has fallen below 0.5%; Structural reforms to boost potential growth crucial - comments from Tokyo

- (JP) Japan PM Abe: BOJ's new framework intended to strengthen monetary policy and achieve 2% inflation target at earliest possible time

- (RU) Russia Energy Minister Novak: Russia hopes OPEC talks result in some kind of agreement

- (CH) SNB's Moser: Reiterates viewpoint that monetary policy is working well; Sees mostly downside risks - financial press

- (SE) Sweden Central Bank (Riksbank) Gov Ingves: Prepared to do more if it is necessary - speaks alongside Riksbank's Jansson

- (TR) Turkey Econ Min Zeybekci: Sees 2016 GDP forecast below 4%

 

Currencies

- GBP/USD had quite a volatile morning with the majority of the session trading below the 1.30 handle. Cable showing some false breakouts above the 1.30 handle but resistance persisting this morning at that level. Key support levels seen at 1.2863 and 1.2796.

- USD/JPY paring back a lot of yesterday's gains after comments from Japan's PM Abe and Dep Gov Nakaso comments; with market participants eyeing a break below 100 as significant support

- The Mexican Peso rallied against the USD overnight, with the USD/MXN falling just over 2% during the Presidential debate; Currently paring back some losses but overall still trading sharply lower in the morning sesssion

Fixed Income:

- Bund futures trade at 165.97 up 47 ticks trading at fresh contract highs taking out previous highs seen back on Sep 7th as the initial Trump Clinton debate risk on tone faded. A continued move higher targets 166.17 followed by 166.37 extension. A move back below 165.46 low sees 164.87, 164.54 then 164.17 support levels.

- Gilt futures trade at 131.05 up 30 ticks trading at 3 week highs on the back of weaker equities. Continued upside sees 131.43,followed by 131.54. A move lower continues to target 130.48 then 130.15 swing low followed by 129.77 to close Wednesday's the gap. Short Sterling futures trade 1-2 bp higher across the curve continuing to flatten as Jun17/18 trade new low at -1/-2bp.

- Tuesday's liquidity report showed Monday's excess liquidity fell to €1.004T a fall of €5B from €1.009T prior. This was primarily due to AFs and MonPol portfolios rising to negative €596.3B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €33M from €72M prior.

- Corporate issuance saw 7 issuers set to price $5.6B led by Kroger's 3 part $1.75B offering. This puts month issuance at $135.5B and YTD issuance $1.12T up 7% on last year. For the week ahead Viacom could come to market with a $1B offering.

 

Looking Ahead

- 05:30 (ZA) South Africa Q2 Non-Farm Payrolls Q/Q: No est v -0.2% prior; Y/Y: No est v no prior

- 05.30 (UK) Weekly John Lewis LFL sales data

- 06:00 (UK) Sept CBI Retailing Reported Sales: 5e v 9 prior, Total Distribution: No est v 17 prior

- 07:00 (BR) Brazil Sept FGV Consumer Confidence: No est v 79.3 prior

- 07:00 (BR) Brazil Sept FGV Construction Costs M/M: 0.4%e v 0.3% prior

- 07:30 (BR) Brazil Central Bank (BCB) Quarterly Inflation Report

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

- 08:00 (BR) Brazil Aug PPI Manufacturing M/M: No est v -0.2% prior; Y/Y: No est v 4.9% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:55 (US) Weekly Redbook Sales

- 09:00 (US) July S&P/Case-Shiller 20 City HPI M/M: 0.0%e v -0.1% prior; Y/Y: 5.0%e v 5.1% prior; House Price Index (HPI): No est v 189.87 prior

- 09:00 (US) S&P/Case-Shiller (overall) HPI M/M: No est v 0.21% prior; Y/Y: No est v 5.07% prior

- 09:00 (US) House Price Index (HPI): No est v 182.42 prior

- 09:00 (EU) Weekly ECB Forex Reserves: € v €272.0B prior

- 09:00 (MX) Mexico Aug Trade Balance: -$2.2Be v -$1.8B prior

- 09:30 (ZA) South Africa Crop Estimate Committee: 2nd winter-crop output forecast

- 09:45 (US) Sept Preliminary Markit Services PMI: 51.2e v 51.0 prior, Composite PMI: No est v 51.5 prior

- 10:00 (US) Sept Consumer Confidence: 98.8e v 101.1 prior

- 10:00 (US) Sept Richmond Fed Manufacturing Index: -2e v -11 prior

- 10:00 (MX) Mexico Weekly International Reserves

- 15:00 (AR) Argentina July Economic Activity Index (Monthly GDP) M/M: No est v -0.3% prior; Y/Y: -4.0%e v -4.3% prior

- 15:00 (AR) Argentina Aug Trade Balance: $0.1Be v $0.3B prior

- 16:30 (US) Weekly API Oil Inventories