EUR/USD hits 2-year lows

EU Market Update: Peripheral assets rise after euro zone CPI release, EUR/USD hits 2-year lows

Notes/Observations

- Treasury and Gilt yields rise after declining on Monday's session; Euro zone bond yields move lower following Euro Zone CPI data

- European officials continue to express content with weaker euro (French Economy Min Macron)

- Peripheral equity indices supported by weaker than expected core CPI data

- RBS rises on expectation of lower impairment charges; Peripheral equities outperform following Monday's underperformance

- AAPL: EU Commission comments on Ireland tax ruling: Apple does not comply with OECD rules and is illegal support

- ECB's Lautenschlager (Germany): SSM to look at national rule exceptions

- ECB's Visco (Italy): Reiterates tensions in euro area have diminished; ECB comprehensive assessment will restore confidence

Key Economic Data in session

- (EU) EURO ZONE SEPT ADVANCE CPI ESTIMATE Y/Y: 0.3% V 0.3%E; CPI CORE Y/Y: 0.7% V 0.9%E

- (UK) Q2 FINAL GDP Q/Q: 0.9% V 0.8%E; Y/Y: 3.2% V 3.2%E

- (EU) EURO ZONE AUG UNEMPLOYMENT RATE: 11.5% V 11.5%E

- (IT) ITALY AUG PRELIMINARY UNEMPLOYMENT RATE: 12.3% V 12.6%E

- (DE) GERMANY SEPT UNEMPLOYMENT CHANGE: +12K V -2KE; UNEMPLOYMENT RATE: 6.7% V 6.7%E

- (IT) ITALY SEPT PRELIMINARY CPI NIC INCL. TOBACCO M/M: -0.3% V -0.3%E; Y/Y: -0.1% V -0.1%E

- (UK) Q2 FINAL TOTAL BUSINESS INVESTMENT Q/Q: 3.3% V 1.6%E; Y/Y: 11.0% V 11.5%E

- (UK) Q2 Current Account Balance: -£23.1B v -£17.0Be

- (NO) NORWAY AUG RETAIL SALES W/AUTO FUEL M/M: 0.6% V 0.8%E

- (CH) SWISS SEPT KOF LEADING INDICATOR: 99.1 V 99.0E

- (UK) SEPT NATIONWIDE HOUSING PRICES M/M: -0.2% V 0.5%E; Y/Y: 9.4% V 10.4%E

- (IN) INDIA CENTRAL BANK (RBI) LEAVES REPURCHASE RATE UNCHANGED AT 8.00%, AS EXPECTED

Fixed Income

- (EU) ECB ALLOTS €89.1B 7-DAY MAIN REFINANCING TENDER AT FIXED 0.05% VS €90BE

Equities

Indices [Stoxx50 +0.7%, FTSE 100 flat at 6,647, DAX +0.3% at 9,452, CAC-40 +0.7% at 4,390, IBEX-35 +0.8% at 10,769, FTSE MIB +0.7% at 20,663, SMI +0.3% at 8,803, S&P 500 Futures +0.3% at 1,975]

Market Focal Points/Key Themes: Equity markets open slightly higher following the losses seen on Monday's session, RBS gains on guidance

By Sector

Financials [RBS RBS.UK +3% (lowered guidance for FY impairments); ICAP IAP.UK -1% (cautious outlook)]
Consumer Discretionary [Next NXT.UK -3% (cautious outlook)]
Stoxx50 sectors [Utilities +0.7%, Energy +0.7%, Financials +0.4%, Basic Materials +0.4%, Industrials +0.3%, Consumer Non-Cyclical +0.3%, Telecom +0.1%, Technology flat; Consumer Cyclical -0.6%]

FIXED INCOME/FX/COMMODITIES

Currencies/Fixed Income:

- Emerging market currencies are relatively quiet compared to yesterday with no real news out of protests in Hong Kong

- NOK - Higher by almost 0.6% after Norges bank announced they will buy NOK250M daily in Oct for first time from oil rev account to cover govt spending

- USD/INR Relatively unchanged after the RBI stood pat on rates

- EUR/USD Ran higher by 10-15 pips on better than expected German retail sales then drifted back down throughout the morning session breaking to 2-year lows around 1.2660 just before the release of Sept Eurozone CPI. After core CPI came in 0.2% lower than expected EUR/USD continued lower to 1.2620

Looking Ahead

- 06:00 (PT) Portugal Aug Industrial Production M/M: No est v 0.8% prior; Y/Y: No est v 3.5% prior

- 06:00 (PT) Portugal Aug Retail Sales M/M: No est v 2.6% prior; Y/Y: No est v 1.0% prior

- 06:00 (IT) Italy Aug PPI M/M: 0.0%e v 0.1% prior; Y/Y: -1.6%e v -1.6% prior

- 06:00 (MY) Malaysia M3 Money Supply Y/Y: No est v 5.7% prior

- 06:00 (TR) Turkey to sell 2016 and 2024 bonds

- 06:30 (IN) India Aug Fiscal Deficit (INR): No est v 2.7B prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia Finance Ministry decides whether to hold weekly OFZ Bond auction (held Wed if planned)

- 07:45 (US) Weekly ICSC Chain Store Sales

- 08:00 (PL) Poland Central Bank (NBP) Sept Inflation Expectations Survey: 0.0%e v 0.2% prior

- 08:00 (PL) Poland Q2 Current Account Balance: +€650Me v -€766M prior

- 08:00 (ZA) South Africa Aug Trade Balance (ZAR): No est v -6.9B prior

- 08:00 (ZA) South Africa Aug Budget Balance (ZAR): No est v -69.7B prior

- 08:00 (CL) Chile Aug Manufacturing Index Y/Y: No est v -4.1% prior

- 08:00 (CL) Chile Aug Unemployment Rate: No est v 6.5% prior

- 08:00 (CL) Chile Aug Total Copper Production: No est v 465.7K tons prior

- 08:00 (CL) Chile Aug Retail Sales Y/Y: No est v 1.5% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (CA) Canada July GDP M/M: No est v 0.3% prior; Y/Y: No est v 3.1% prior

- 08:30 (CA) Canada Aug Industrial Product Price M/M: No est v -0.3% prior; Raw Materials Price Index M/M: No est v -1.4% prior

- 08:55 (US) Weekly Redbook Retail sales

- 09:00 (US) Sept ISM Milwaukee: No est v 59.63 prior

- 09:00 (US) July S&P/ CaseShiller 20 City M/M: No est v -0.2% prior; Y/Y: No est v 8.07% prior (revised from 8.10%); Home Price Index: No est v 172.33 prior

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

- 09:30 (BR) Brazil Aug Nominal Budget Balance (BRL): No est v -32.7B prior; Primary Budget Balance (BRL): No est v -4.7B prior;; Net Debt to GDP Ratio: No est v 35.1% prior

- 09:45 (US) Sept Chicago Purchasing Manager: No est v 64.3 prior

- 09:45 (UK) BOE reverse auction; to purchase £1.6B in 15+ year gilts (residual)

- 10:00 (US) Sept Consumer Confidence Index: No est v 92.4 prior

- 10:00 (MX) Mexico Aug Net Outstanding Loans (MXN): No est v 2.583T prior

- 10:00 (MX) Mexico Weekly International Reserves

- 11:00 (IT) Italy Stats Agency (Istat) updates Economic Forecasts

- 11:30 (US) Treasury to sell 4-Week Bills

- 12:00 (CO) Colombia Aug National Unemployment Rate: No est v 9.3% prior; Urban Unemployment Rate: No est v 9.9% prior

- 13:30 (UK) BoE's Miles

- 15:00 (AR) Argentina Aug Industrial Production M/M: No est v -0.1% prior; Y/Y: No est v -0.7% prior

- 15:30 (MX) Mexico Aug YTD Budget Balance (MXN): No est v -339.9B prior

- 19:50 (JP) Japan Q3 Tankan Large Manufacturer Index: No est v 12 prior; Large Non-Manufacturer Index: No est v 19 prior

- 19:50 (JP) Japan Q3 Tankan Large Manufacturer Outlook Index: No est v 15 prior; Large Non-Manufacturer Outlook Index: No est v 19 prior

- 21:00 (CN) China Sept Manufacturing PMI: No est v 51.1 prior

- 21:30 (AU) Australia Aug Retail Sales M/M: No est v 0.4% prior