Markets are mixed following disappointing data from Europe and Japan

EU Mid-Market Update: Markets are mixed following disappointing data from Europe and Japan; BOE rate decision in focus

Notes/Observations

- German Exports fall 5%, the lowest in eight months in further signs of Europe's slowing economy.

- Deutsche Bank shares reverses initial losses after talk of a capital hike recedes

- Cable settling over $1.53 ahead of the BoE rate decision

Economic data

(DE) GERMANY AUG CURRENT ACCOUNT BALANCE: €12.3B V €16.7BE; TRADE BALANCE NSA: €19.6B V €19.0BE

- Exports M/M: -5.2% v -0.9%e (lowest level in eight months)

- Imports M/M: -3.1% v 2.2% prior

(GR) GREECE JULY UNEMPLOYMENT RATE: 25.0% V 25.4%E (lowest since August reading)

(NL) NETHERLANDS SEPT CPI M/M: -0.2% V -0.3% PRIOR ; Y/Y: 0.6% V 0.8% PRIOR

Fixed Income Issuance:

(IE) IRELAND DEBT AGENCY (NTMA) SELLS €1B VS. €1.0B INDICATED IN 2.4% MAY 2030 IGB BOND; AVG YIELD 1.653% V 1.820% PRIOR; BID-TO-COVER: 2.28X V 2.75X PRIOR

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 -0.2% at 3,212, FTSE +0.1% at 6,330, DAX +0.1% at 9960, CAC-40 flat at 4,656, IBEX-35 -0.5% at 10090, FTSE MIB 0.1% at 22090, SMI -0.6% at 8,660, S&P 500 Futures -0.5%]

- Market Focal Points/Key Themes: European stocks opened largely flat to drift higher as the session advanced; disappointing German export data weighted on sentiment, although offset by expectations of further ECB easing; a reported increase in US crude stockpiles yesterday put pressure on oil and energy stocks; commodities also impacted by far-east fears, pulling down materials stocks; BOE interest rate decision expected later

**Sectors:

- Consumer discretionary [Hays HAS.UK -5.0% (Q1 update)]

- Energy [Tullow Oil TLW.UK +1.7% (Gabon agreement)]

- Financials [Deutsche Bank DBK.DE 1.14% (profit warning)]

Speakers

(CZ) Czech Central Bank Vice Gov Hampl: Bank's FX commitment can be held as long as the economy needs it

(IT) Italy Fin Min Padoan: Economic figures out of Italy are encouraging

(SW) Sweden Central Bank (Riskbank) Skingsley: will make futher adjustments if needed

Currencies

- The major FX markets against the dollar are generally trading with positive sentiment this morning; cable and the euro both showing strength against the dollar; USD/JPY trading relatively quiet but trades small down on the morning session

- The EUR/USD had a relatively quiet early morning session before a sudden rally mid-way through the morning session at 03.15 ET pushed the euro up through its highs, currently trading in the mid to high range on the morning session from its early morning lows of 1.1247 to highs of 1.1310

- The GBP/USD is trading higher on the late morning session, continuing its upwards trend from yesterday's session. Cable currently trading towards its morning highs of 1.5337 from its early morning lows of 1.5298

- The USD/JPY trades midrange on the overall morning session from its early morning highs of 119.907 to lows of 119.625

**Fixed Income:

Bund futures trade at 156.57, up 40 ticks, as early risk-off sentiment takes hold. Analysts see an initial closing of the gap at 156.15 before seeing a correction to 155.50 and 155.21. To the upside, analysts eye a break of today's highs at 156.65 to target 157.23, then 157.83. Today sees Ireland tap its 15 year IRISH for €1.0B the equivalent of 10K Bund futures.

Gilt futures trade at 118.79, up 28 ticks as traders await today BoE policy decision and minutes. 118.54 fills the gap with a break of support at 118.44, seeing 118.21 next, with 117.83 the eventual target. Analysts eye resistance at 119.00 initially followed by 119.36, with a break seeing 119.64 next.

Thursday's liquidity report showed Wednesday's excess liquidity rose to €519.4B, an increase of €9.3B from €510.1B prior. This was primarily due to AFs and MonPol portfolios falling to negative €95.7B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €17M from €633M. Today's report reflects the reduced MRO demand of €2B.

**Political/In the Papers:

(SY) NATO Chief Stoltenberg: Russia actions in Syria "reasons for concern"

- Has to be a political solution in Syria IMF issues warning over threat from emerging economies: company and bank finances are stretched thin, with $3.3T in "overborrowing" according to its estimates

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)

- 05:30 (ZA) South Africa Aug Total Mining Production M/M: No est v 1.1% prior; Y/Y: No est v 5.6% prior; Platinum Production Y/Y: No est v 71.8% prior; Gold Production Y/Y: No est v -7.4% prior

- 07:00 (UK) BOE Interest Rate Decision:** **Expected to leave both Interest Rate and Asset Purchase Target (APT) unchanged at £375B

- 07:00 (UK) Bank of England Oct Minutes

- 07:00 (ZA) South Africa Aug Manufacturing Production M/M: No est v 0.3% prior; Y/Y: No est v 5.6% prior

- 07:00 (CL) Chile Sept CPI M/M: No est v 0.7% prior; Y/Y: No est v 5.0% prior; CPI Ex Food and Energy M/M: No est v 0.4% prior

- 07:30 (EU) ECB account of the monetary policy meeting (Minutes)

- 08:00 (RU) Russia Gold and Forex Reserve w/e Oct 2nd: No est v $ prior

- 08:15 (CA) Canada Sept Annualized Housing Starts: 202Ke v 216.9K prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Initial Jobless Claims: 274Ke v 277K prior; Continuing Claims: 2.20Me v 2.19M prior

- 08:30 (CA) Canada Aug New Housing Price Index M/M: 0.2e v 0.1% prior; Y/Y: No est v 1.3% prior

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

- 09:00 (MX) Mexico Sept CPI M/M: No est v 0.2% prior; Y/Y: No est v 2.6% prior; CPI Core M/M: No est v 0.2% prior

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

- 14:00 (US) Fed Minutes from Sept. 16-17 FOMC Meeting

- 21:00 (PH) Philippines Aug Exports: No est v $5.3B prior; Y/Y: No est v 1.8% prior