European equities rise amid TLTRO announcement

EU Market Update: European equities rise amid TLTRO announcement; Treasury yields pare gains

Notes/Observations

- US dollar pares some of its gains vs European majors after trading higher directly following the Fed commentary; JPY broadly weaker

- GBP volatile as voting beings for Scottish referendum

- Core European bonds open lower, tracking Treasuries, amid focus on Fed's rate path and exit strategy

- Spain and France sell debt at record low yields

- Italy Debt Chief suggested that low yields are not sustainable for investors in the long term

- Peripheral Bonds pare gains amid below expectation TLTRO take-up

- Commodities broadly weaker after FOMC statement

- SNB notes the risk of Swiss deflation has increased again

- China's property prices continue to slow

- ECB announces governor rotation schedule for 2015

Key Economic Data in session

- (EU) ECB allots €82.6B in Targeted LTRO operation (TLTRO) vs. €133Be; Received 255 in bids.

- (NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 1.50%; AS EXPECTED; Rate to remain at current level until end-2015

- (CH) SNB LEAVES 3-MONTH LIBOR TARGET RATE UNCHANGED AT 0.00%, AS EXPECTED; Risk of Swiss deflation has increased again

- (UK) AUG RETAIL SALES EX AUTO M/M: 0.2% V 0.3%E; Y/Y: 4.5% V 4.8%E

- (UK) AUG RETAIL SALES INCL. AUTO M/M: 0.4% V 0.4%E; Y/Y: 3.9% V 4.0%E

- (SE) SWEDEN Q2 FINAL GDP Q/Q: 0.7% V 0.2%E; Y/Y: 2.6% V 1.9%E

Fixed Income

- Spain Debt Agency (Tesoro) Sells €3.57B v €2.5-3.5B indicated range in new 0.5% 2017 bonds; avg yield: 0.565% (record low) v 0.692% prior; bid-to-cover: 1.90x v 3.95x prior

- France Debt Agency sells total €7.99B v €7-8.0B indicated range in 2016 and 2019 Oats at record low yields

- Sells €2.697B in 0.25% 2016 Oat; Avg Yield: 0.01% v 0.09% prior; Bid-to-cover: x v 2.2x prior

- Sells €1.265B in 1.0% May 2019 Oat; Avg Yield: 0.30% v 0.68% prior; Bid-to-cover: x v 1.96x prior

- Sells €4.03B in 0.50% 2019 Oat; Avg Yield: 0.39% v 0.55%; Bid-to-cover: 1.59x v 1.69x prior

Equities

Indices [Stoxx50 +0.9%, FTSE 100 +0.5% at 6,817, DAX +1% at 9,757, CAC-40 +0.8% at 4,467, IBEX-35 +0.9% at 11,006, FTSE MIB +0.6% at 21,236, SMI flat at 8,820, S&P 500 Futures +0.3% at 1,998]

Market Focal Points/Key Themes: European equity markets open slightly higher ahead of TLTRO announcement as dealers assess recent Fed statement, Bayer rises on spin-off plan, Sulzer supported by merger speculation

By Sector

Healthcare [Bayer BAYN.DE +4.5% (plan to float material science unit), Stada SAZ.DE +2% (broker commentary) Industrials [Sulzer SUN.CH +7% (merger speculation); HeidelbergCement HEI.DE

-1% (broker commentary)] Consumer Discretionary [EasyJet EZJ.UK +2% (raised dividend payout ratio); French Connection FCCN.UK -10% (reported H1 loss)] Technology [Monitise MONI.UK -24% (Visa mulling options regarding its stake) Stoxx50 sectors [Consumer Non-Cyclical +1%, Technology +0.8%, Telecom +0.5%, Consumer Cyclical +0.5%, Industrials +0.4%, Basic Materials +0.3%, Utilities +0.3%, Financials +0.3%, Energy +0.1%]

FIXED INCOME/FX/COMMODITIES

Currencies/Fixed Income:

- GBP/USD Traded from 1.6260 to 1.6320 ahead of the opening of voting for the Scottish referendum. Sterling sold back off after poor retail sale before reversing and continuing higher later in the morning. O/N Fri vol traded near 35% (after trading near 4% over the past month)

- USD/CHF - Traded lower by 40 pips after the SNB kept rates on hold and maintained the current EUR/CHF floor (a small minority of analysts were looking for a cut)

- USD/SEK Traded from 7.17 to 7.12 after final Q2 GDP came in well above estimates

- USD/NOK Traded sharply lower from 6.43 to 6.36 after the Norges bank left rates unchanged and vowed to keep rates steady until the end of 2015

Looking Ahead

- 06:00 (UK) Sept CBI Industrial Trends Total Orders: 9e v 11 prior; Selling Prices: No est v -1 prior

- 06:00 (MY) Malaysia Central Bank (BNM) Interest Rate Decision: expected to leave Overnight Policy Rate unchanged at 3.25% (13/21 no change remainder see hike)

- 06:00 (RO) Romania to sell 2019 Bonds

- 07:00 (RU) Russia Gold and Forex Reserve w/e Sept 12th: No est v $464.2B prior

- 08:00 (PL) Poland Central Bank Sept Minutes

- 08:15 (US) Baltic Dry Bulk Index - 08:30 (US) Initial Jobless Claims: No est v 315K prior; Continuing Claims: No est v 2.487M prior

- 08:30 (CA) Canada July Int'l Securities Transactions (CAD): No est v -1.1B prior

- 08:30 (US) Weekly USDA Net Export Sales

- 08:30 (US) Aug Housing Starts: 1.035Me v 1.093M prior; Building Permits: 1.035Me v 1.057M prior (revised from 1.052M)

- 08:45 (US) Fed Chair Yellen in Washington DC

- 09:00 (ZA) South Africa Central Bank (SARB) pre-decision press conference on Interest Rates (Decision usually about 15-20 minutes into the press conference)

- 10:00 (US) Sept Philadelphia Fed Business Outlook: 22.5e v 28.0 prior

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 11:00 (US) Treasury Note announcement

- 11:00 (US) Fed to purchase $0.25-0.35B in Notes

- 11:15 (BR) Brazil to sell 2015, 2016 and 2018 Bills

- 11:15 (BR) Brazil to sell Fixed-rate 2021 and 2025 bonds

- 12:00 (US) Q2 Household Change in Net Worth: No est v $1.490T prior

- 12:00 (CO) Colombia Q2 GDP Q/Q: No est v 2.3% prior; Y/Y: No est v 6.4% prior

- 13:00 (US) Treasury to sell $13B in 10-Year TIPS Reopening

- 15:00 (US) API Monthly Statistical Report