Risk appetite finds its groove again

Notes/Observations

- Risk appetite surges as FBI director Comey again exonerated Clinton on emails; not changed its conclusions reached in July(**Note: Trump claimed Clinton being protected by a rigged system)

- US non-farm payrolls on Friday keeps the case for December FOMC rate hike intact

 

Overnight

Asia:

- China govt appoints Xiao Jie as new Finance Minister, replacing Lou Jiwei who has resigned

- BOJ Sept 20-21 policy meeting minutes: members agreed to adjust policy as appropriate

- Japan Vice Fin Min of International Affairs (currency chief) Asakawa reiterated govt view that Japan faced risks like Brexit and slowdown in China; Worried about excessive volatility following US elections

Europe:

- Portugal Parliament approved 2017 budget in the initial vote (1st reading)

- Greece PM Tsipras reshuffles cabinet reshuffle; keeps Tsakalotos as Fin Min**; **Papadimitriou to become Econ Min

Americas:

- FBI has not changed its conclusions reached in July following review of new emails in the Clinton case

- National polls mixed ahead of Tuesdays election

Energy:

- Magnitude 5.3 earthquake reported in central Oklahoma with no immediate reports of damage to oil-storage facilities

 

Economic data

- (DE) Germany Sept Factory Orders (miss) M/M: -0.6% v +0.1%e; Y/Y: 2.6% v 3.4%e

- (TW) Taiwan Oct Trade Balance: $4.4B v $5.0Be, Exports Y/Y: +9.4% v +2.2%e, Imports Y/Y: +19.5% v 5.4%e

- (CH) Swiss Oct Foreign Currency Reserves (CHF): 630.3B v 629.0B prior

- (CH) Swiss Oct CPI M/M: 0.1% v 0.2%e; Y/Y: -0.2% v 0.0%e

- (CH) Swiss Oct CPI EU Harmonized M/M: 0.1%v 0.0% prior; Y/Y: -0.3% v -0.3% prior

- (UK) Oct Halifax House Prices (beat) M/M: 1.4% v 0.2%e; 3M/Y: % v 5.2%e

- (CN) China Oct Foreign Reserves: $3.121T v $3.133Te (lowest level since Dec 2011)

- (EU) Euro Zone Nov Sentix Investor Confidence (beat): 13.1 v 8.6e

- (EU) Euro Zone Sept Retail Sales M/M: -0.2% v -0.3%e; Y/Y: 1.1% v 1.2%e

Fixed Income Issuance:

- (NO) Norway sold NOK4.0B vs. NOK4.0B indicated in 4-month Bills; Avg Yield: 0.51% v 0.62% prior; Bid-to-cover: 2.62x v 1.72x prior

- (NL) Netherlands Debt Agency (DSTA) sold total €2.39B vs. €2.0-4.0B indicated range in 3-Month and 6-Month Bills

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 +1.7% at 3,006, FTSE +1.3% at 6,782, DAX +1.7% at 10,431, CAC-40 +1.8% at 4,457, IBEX-35 +1.7% at 8,939, FTSE MIB +2.2% at 16,679, SMI +1.7% at 7,723, S&P 500 Futures +1.5%]

Market Focal Points/Key Themes: European equity indices are trading sharply higher as uncertainty over the US Presidential elections start to wane, with market participants pricing in fresh hopes that Hillary Clinton will win the upcoming US Presidential election after being exonerated in the recent email scandal; Eurostoxx gains being led by banking stocks; shares of HSBC leading the sector gains in the FTSE 100 after releasing Q3 results higher than expected; Energy, commodity and mining stocks also trading notably higher in the FTSE 100 as Brent and WTI pare back some recent losses, trading higher in the morning session.

A plethora of notable upcoming scheduled US earnings (pre-market) include Air Canada, BMC, Core-Mark, Cognizant Technology, Dean Foods, First Data, Global Partners, HSN, Horizon Pharma, Synders Lance, MGM Resorts, ON Semiconductor, Ply Gem, Rockwell Automation, Scripps Network, Sysco Corp, Vishay Intertechnology, Windstream, and Westrock.

 

Equities (as of 09:50 GMT)

- Consumer Discretionary: [Ryanair RYA.UK +5.3% (Q2 results, outlook), Tesco TSCO.UK -1.2% (Tesco Bank customer account hacks)]

- Financials: [HSBC HSBA.UK +4.4% (Q3 results)]

- Healthcare: [Actelion ALTN.CH +2.3% (MERIT study positive results), Koninklijke Philips PHIA.NL +1.8% (partnership agreement with Masimo)]

- Industrials: [Ahlstrom AHL1V.FI +5.0% (to merge with Munksjo), PostNL PNL.NL +5.1% (Q3 results, Bpost improved €5.65/shr offer)]

- Technology: [Redcentric RCN.UK -71.0% (trading update), Smiths Group SMIN.UK +1.5% (Divests Wallace unit for €140M)]

 

Speakers

- ESM approved Spain's fourth early repayment; debt to be €34.7B with last reimbursement set for end-2027

- Ireland PM Kenny: Ireland still on route to reach deficit target

- Taiwan Central Bank gov Perng Fai-nan: To continue loose monetary policy to aid economy. Country to see an economic recovery in 2016

- OPEC Sec Gen Barkindo reiterated view that OPEC was committed to the Algiers accord and that Russia was on board with OPEC's output action

 

Currencies

- The USD was on a firm path against the major pairs. Dealers noting that the likelihood of a meaningful Dollar rise in a Clinton win scenario was rising after FBI director Comey again exonerated Clinton on emails. FBI did not changed its conclusions reached back in July. Dealers noted that the USD had fallen sharply over the past week, as polls had tightened into the upcoming election.

- The greenback also aided by sentiment that the Fed's Normalization was on track regardless of US Election as October data reinforced the view that the US economy continued to grow at a decent pace.

- Major levels ahead of the NY morning had EUR/USD at 1.1065; USD/JPY at 104.44, GBP/USD at 1.2390

Fixed Income:

- Bund futures trade at 162.23 down 26 ticks on risk on trade after Hilary Clinton was cleared of any wrong doing by the FBI helping boost European indices. A continued move lower sees initial support at 161.94 today's low followed by 161.73 and 161.37 followed by 160.83.A move higher targets 162.42 gap fill followed by 162.78 then 163.28 and 163.69.

- Gilt futures trade at 125.80 down 58 ticks pushing back towards Friday lows tracking European Bond futures lower. A continued move lower targets 125.35 with momentum eyeing 124.75. A move higher 126.42 gap fill followed by 126.68. Short Sterling futures trade down 2 to 3bp across the curve with Jun17Jun18 steepening slightly from Friday lows to 11/12bp.

- Monday's liquidity report showed Friday's excess liquidity rose to €1.139T a rise of €9B from €1.130T prior. This was primarily due to AFs and MonPol portfolios falling to negative €711.5B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility rose to €206M from €150M prior.

- Corporate issuance saw just shy of $11B come to market last week in what was a relatively light week for issuance, with this week's forecast between $5-10B. In Europe €13.7B came to market via 29 tranches with analysts forecasting between €10-15B for the week ahead.

 

Looking Ahead

- (IL) Israel Oct Foreign Currency Balance: No est v $98.4B prior

- 05:25 (BR) Brazil Central Bank Weekly Economists Survey

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell 3-Month and 6-Month Bills

- 05:45 (EU) OECD chief Gurria in Vienna

- 05:45 (UK) BOEs Brazier (FPC member)

- 06:00 (DE) German Fin Minn Schaeuble

- 06:30 (CL) Chile Sept Economic Activity Index (Monthly GDP) M/M: 1.0%e v 0.4% prior; Y/Y: 2.2%e v 2.5% prior

- 06:30 (CL) Chile Oct Trade Balance: -$0.1Be v +$0.1B prior, Total Exports: $4.5Be v $4.8B prior, Total Imports: $4.7Be v $4.6B prior, Copper Exports: No est v $2.3B prior

- 06:30 (CL) Chile Oct International Reserves: No est v $39.4B prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)

- 07:00 (CL) Chile Sept Nominal Wage M/M: 0.4%e v 0.5% prior; Y/Y: 5.3%e v 5.5% prior

- 08:00 (PL) Poland Oct Official Reserves: No est v$111.9B prior

- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week (if any)

- 08:15 (US) Baltic Dry Bulk Index

- 08:20 (BR) Brazil Oct Vehicle Production: No est v 170.8K prior; Vehicle Sales: No est v 160.0K prior, Vehicle Exports: No est v 38.8K prior

- 08:50 (FR) France Debt Agency (AFT) to sell combined €52-6.4B in 3-month, 6-month and 12-month bills

- 09:00 (MX) Mexico Oct Consumer Confidence: 83.3e v 84.1 prior

- 09:00 (EU) Euro-Area Finance Ministers (Eurogroup) meet in Brussels

- 09:30 (EU) ECB announces Covered-Bond Purchases

- 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

- 09:50 (UK) Bank of England (BOE) bond-buying operation results

- 10:00 (US) Oct Labor Market Conditions Index Change: No est v -2.2 prior

- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills

- 15:00 (US) Sept Consumer Credit: $17.5Be v $25.9B prior

- 15:00 (MX) Mexico Banamex Survey of Economists