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Analysis

All about earnings as major EU banks perform well, Nasdaq 100 futures dip after Alphabet results

Notes/observations

- Macro story little changed as Q3 earnings flood in for both EU and US. Nasdaq 100 futures trade lower after Google owner Alphabet results after the close. Tech giant Microsoft also reported.

- Reminder that ECB is expected to pause in tomorrow's decision. Would be 1st pause in the current tightening cycle after 10 decisions.

- EU Earnings Recap: Deutsche Bank sees further buybacks in 2024 after beating estimates on top and bottom line, corporate bank rev >20% y/y; Heineken (beverages) Q3 saw organic beer volume decline less than feared and affirmed guidance; Lloyds (bank) trades little changed after Q3 results with affirmed FY guidance; Santander (bank) mixed results and sees positive momentum in 2024; Dassault (software) trades higher after raising FY23 EPS guidance.

- Asia closed mixed with Indias NIFTY50 underperforming at -0.8%. EU indices are -1.2% to -0.1%. US futures are -0.6% to +0.1%. Gold -0.1%, DXY +0.1%; Commodity: Brent +0.1%, WTI -0.1%, TTF +1.8%; Crypto: BTC -0.5%, ETH -2.4%.

Asia

- Australia Q3 CPI Q/Q: 1.2% v 1.1%e; Y/Y: 5.4% v 5.3%e.

- Australia Sept CPI Y/Y: 5.6% v 5.3%e v 5.2% prior.

- South Korea Oct Consumer Confidence: 98.1 v 99.7 prior.

- Japan govt said to consider one-time ¥40K ($267) tax-cut per person to ease inflation's pain; Overall tax cut would cost around ¥5T ($33.4B).

- Japan reportedly considers one-year income and resident tax cuts from June 2024 - press.

- RBA Gov Bullock noted that there was risk inflation would prove more stubborn than expected and interest rates might have to rise further.

- China top parliament body passes bill to adjust 2023 central budget; Approved extra CNY1T issuance of new sovereign debt/bonds in Q4; To speed up issuance and usage of new local govt debt.

- China Vice Fin Min noted that high quality growth needed better disaster prevention; China government debt levels still in reasonable range despite a modest rise in budget deficit ratio this year.

- China Pres Xi said to meet with US California Gov later today, Oct 25th in Beijing.

- Reports circulated that China needed another RRR cut citing the the rise in the 7-day repo rate.

Conflict regions

- US Sec of State Blinken stated that did not seek conflict with Iran, but if Iran or its proxies attacked then we would defend. Would work with China to prevent conflict from widening.

- Iran UN Envoy stated that Iran's commitment to regional peace and stability was 'unwavering'.

- President Biden and Saudi Crown Prince spoke about “ongoing diplomatic and military efforts to deter state and non-state actors from widening the conflict.

- S&P cut Israel sovereign outlook from Stable to Negative.

- Saudi Arabia Fin Min Al-Jadaan: Do not want Israel-Hamas to derail any de-escalation; Non-oil GDP growth to be 6.5% at year-end.

Europe

- Germany IFO Economist following survey said services is stabilizing and will see slightly growth in Q4. Believes ECB may have room to cut rates in H2 2024.

- Russia Dep Foreign Min Ryabkov confirmed Russia received US proposals on arms control to resume stability dialogue, currently studying them.

- Russia upper house of parliament confirms revoking nuclear tests ban treaty ratification - press.

- Italy PM Meloni said must avoid weakening common support for Ukraine.

- Turkey Pres Erdogan said will not compromise on growth or give in to inflation.

Energy

- Weekly API Crude Oil Inventories: -2.7M v -4.4M prior.

Americas

-US, Australia and Japan to announce additional security cooperation; To include launching an undersea internet cable project and maritime wharf infrastructure investment, and boosting rare earth minerals cooperation - press.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.27% at 433.90, FTSE +0.05% at 7,393.31, DAX -0.24% at 14,845.25, CAC-40 -0.32% at 6,871.42, IBEX-35 -0.40% at 8,939.93, FTSE MIB -0.71% at 27,376.00, SMI -0.34% at 10,341.90, S&P 500 Futures -0.38%].

Market focal points/Key themes: European indices open with a bias to the downside, with the move lower accelerating through the early hours of trading; better performing sectors include consumer discretionary and financials; sectors leading the way lower include real estate and materials; banking subsector supported by better than anticipated earnings from Deutsche Bank; Frasers raises stake in in boohoo; focus on upcoming BOC rate decision; earnings expected in the upcoming US session include Atlas Copco, Greenbrier, Owens Corning and Meta.

Equities

- Consumer discretionary: Nokian Renkaat [TYRES.FI] -15.5% (outlook cut).

- Consumer staples: Heineken [HEIA.NL] +2.0% (trading update).

- Financials: Deutsche Bank [DBK.DE] +6.5% (earnings), Lloyds [LLOY.UK] -2.0% (earnings), Banco Santander [SAN.ES] -0.5% (earnings).

- Materials: Akzo Nobel [AKZA.NL] -3.5% (earnings).

- Industrials: SSAB [SSABA.SE] +5.5% (earnings), Porsche [P911.DE] -1.0% (trading update).

- Technology: ASM International [ASM.NL] +7.5% (earnings), STMicroelectronics [STM.FR] -1.0%, Infineon [IFX.DE] -2.0% (sector competitor TXN earnings), Worldline [WLN.FR] -49.5% (trading update).

- Telecom: Telenor [TEL.NO] +4.5% (earnings).

Speakers

-Czech Central Bank (CNB) Member Kubicek said considering either cut or hold at Nov 2nd meeting. Higher core inflation in 2024 is a reason for being cautious.

-IMF Managing Dir Georgieva said inflation is still high and that requires interest rates to remain high, throwing more cold water on growth.

-UK Chancellor of Exchequer (Fin Min) Hunt said will not mandate consolidation of pension schemes to increase investment in growth companies.

Currencies/fixed income

- USD remained on steady footing following more resilient US data in the aftermath of the PMI readings on Monday. Greenback benefiting as expectations that the Fed could continue to raise interest rates just because the economic data looked so strong.

- EUR/USD hovering around the 1.06 area as recession clouds loom over the region. Dealers note that ECB was expected to pause for the 1st time in its current tightening cycle at its decision later this week.

- USD/JPY staying below the pivotal 150 level after being tested the past few session. Market remain wary of potential BOJ FX intervention. Recent press reports have circulated that the BOJ could again tweak its Yield Control policy due to the recent surge in global interest rates.

- An uptick in Australia CPI data made the upcoming November meeting a ‘live’ one.

Economic data

- (SE) Sweden Sept PPI M/M: +1.8% v -0.7% prior; Y/Y: -4.6% v -5.9% prior.

- (ES) Spain Aug Total Mortgage Lending Y/Y: -10.2% v -20.5% prior; Mortgage Approvals Y/Y: -22.7% v -18.8% prior.

- (ES) Spain Sept PPI M/M: 1.4% v 1.2% prior; Y/Y: -8.6% v -10.0% prior.

- (TR) Turkey Oct Capacity Utilization: 77.4 v 77.3% prior.

- (TR) Turkey Oct Real Sector (Manufacturing) Confidence (Adj : 105.3 v 105.1 prior; Real Sector Confidence (unadj): 105.1 v 104.4 prior.

- (DE) Germany Oct IFO Business Climate Survey: 86.9 v 86.0e; Current Assessment Survey: 89.2 v 88.5e; Expectations Survey: 84.7 v 83.5e.

- (EU) Euro Zone Sept M3 Money Supply Y/Y: -1.2% v -1.8%e.

- (CH) Swiss Oct Expectations Survey: -37.8 v -27.6 prior.

Fixed income issuance

- (VN) Vietnam Finance Ministry sold total VNM4.0T vs. VNM4.0T indicated in 5-year, 10-year and 15-year bonds.

- (IN) India sold total INR240B vs. INR240B indicated in 3-month, 6-month and 12-month bills.

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3.5% Oct 2042 bonds; Avg Yield: 3.81% v 3.38% prior, bid-to-cover: 1.60x v 2.32x prior.

- (SE) Sweden sold total SEK2.5B vs. SEK2.5B indicated in 2028 and 2045 Bonds.

- (UK) DMO sold £3.0B in 3.75% Jan 2038 Gilts; Avg Yield: 4.871% v 4.447% prior; bid-to-cover: 2.97x v 2.56x prior; Tail: 0.4bps v 1.1bps prior.

- (IT) Italy Debt Agency (Tesoro) sold €2.5B vs. €2.0-2.5B indicated range in 3.60% Sept 2025 BTP Bonds; Avg Yield: 3.99% v 3.97% prior; Bid-to-cover: 1.58x v 1.62x prior.

- (IT) Italy Debt Agency (Tesoro) sold €1.5B vs. €1.0-1.5B indicated range in 1.50% May 2029 inflation linked bonds (BTPei); Real Yield: 2.24% v 2.05% prior; bid-to-cover: 1.55x v 2.38x prior.

- (GR) Greece Debt Agency (PDMA) sold €812.5M vs. €625M indicated in 6-month Bills; Avg Yield: 3.92% v 3.90% prior; Bid to cover: 1.36x v 2.06x prior.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell combined €2.0B in 2035 and 2038 bonds.

- 05:30 (EU) ECB allots €B in 3-month LTRO tender at fixed 4.50% vs. €1.90B prior.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (FR) France Q3 Total Jobseekers: No est v 2.799M prior.

- 07:00 (US) MBA Mortgage Applications w/e Oct 20th: No est v -6.9% prior.

- 07:00 (BR) Brazil Oct FGV Consumer Confidence: No est v 97.0 prior.

- 07:00 (UK) Weekly PM Question time in House.

- 07:00 (RU) Russia OFZ Bond auction (if any).

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 09:00 (BE) Belgium Oct Business Confidence: No est v -14.4 prior.

- 10:00 (CA) Bank of Canada (BoC) Interest Rate Decision: Expected to leave Interest Rates unchanged at 5.00%.

- 10:00 (US) Sept New Home Sales: 680Ke v 675K prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:00 (CA) Bank of Canada (BOC) Gov Macklem post rate decision press conference.

- 11:30 (US) Treasury to sell 2-Year FRN.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (RU) Russia Sept Industrial Production Y/Y: 5.6%e v 5.4% prior.

- 13:00 (EU) ECB chief Lagarde.

- 13:30 (BR) Brazil Sept Total Federal Debt (BRL): No est v 6.265T prior.

- 13:00 (US) Treasury to sell 5-Year Notes.

- 15:00 (AR) Argentina Aug Supermarket Sales Y/Y: No est v -2.5% prior; Shop Center Sales Y/Y: No est v 10.2% prior.

- 16:35 (US) Fed Chair Powell.

- 17:00 (KR) South Korea Nov Business Manufacturing Survey: No est v 67 prior; Non-Manufacturing Survey: No est v 77 prior.

- 18:00 (AU) RBA Gov Bullock.

- 19:00 (KR) South Korea Q3 Advance GDP (1st of 3 readings) Q/Q: 0.5%e v 0.6% prior; Y/Y: 1.1%e v 0.9% prior.

- 19:50 (JP) Japan Sept PPI Services Y/Y: 2.0%e v 2.1% prior.

- 20:30 (AU) Australia Q3 Export Price Index Q/Q: -3.0%e v -8.5% prior; Import Price Index Q/Q: +0.1%e v -0.8% prior.

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