South Africa assets sink after reports surface that Fin Min Gordhan to be arrested and charged with fraud

Notes/Observations

- German Oct ZEW beats expectations

- Various European CPI data comes in softer than expected (Hungary, Sweden)

- South Africa assets sink after reports surface that Fin Min Gordhan to be charged with fraud

 

Overnight

Asia:

- China Premier Li: Q3 economic growth was better than expected; domestic economy is operating within a reasonable range. Reiterated view that economy is still facing downward pressure

- RBNZ Assistant Gov McDermott: Policy will continue to be accommodative; current projects indicate further policy easing will be required

Europe:

- ECB's Visco (Italy): ECB exit from quantitative easing would be data-dependent, communicating the how and when was proving to be difficult

- (IT) According to EMG poll on Italian referendum (Dec 4th) show the 'No' camp leading by 4 points (32.3% support the 'Yes' vote, 36.3% favor No)

Americas:

- House Speaker Ryan wont defend or campaign with Trump but is not un-endorsing him

- Fed's Evans (dove, non-voter): even with a "very shallow path" of interest rate increases, inflation won't rise to 2% target until 2020; reiterates rate hike in December could be fine

 

Economic data

- (JP) Japan Sept Eco Watchers Current Survey: 44.8 v 45.8e; Outlook Survey: 48.5 v 48.0e

- (JP) Japan Sept Bankruptcies Y/Y: -3.4% v +14.9% prior

- (RO) Romania Sept CPI M/M: -0.1% v +0.3%e; Y/Y: -0.6% v -0.2%e

- (SE) Sweden Sept PES Unemployment Rate: 4.0% v 4.1% prior

- (HU) Hungary Sept CPI M/M: 0.2% v 0.2%e; Y/Y: 0.6% v 0.7%e

- (SE) Sweden Sept CPI (miss) M/M: 0.2% v 0.5%e; Y/Y: 0.9% v 1.2%e

- (SE) Sweden Sept CPI CPIF M/M: 0.2% v 0.5%e; Y/Y: 1.2% v 1.5%e, CPI Level: 316.91 v 316.38 prior

- (DE) Germany Oct ZEW Current Situation Survey (beat): 59.5 v 55.5e; Expectations Survey: 6.2 v 4.0e

Fixed Income Issuance:

- ESM opened its book to sell 6-year and 12-year bonds via; To sell 6-year bond with guidance seen at -20bps to mid-swaps and sell 1.125% May 2032 bond (12-year); guidance seen at -11bps to mid-swaps

- (ID) Indonesia sold total IDR6.15T vs. IDR12.0T target in 2022, 2031 and 2036 Bonds

- (NL) Netherlands Debt Agency (DSTA) sold €1.87B vs. €1.5-2.5B indicated range in 0.5% 2026 DSL bond; Yield: 0.153% v 0.043% prior

- (ES) Spain Debt Agency (Tesoro) sold total €5.23B vs. €4.5-5.5B indicated range in in 6-month and 12-month Bills

- Sold €550M in 6-month Bills; Avg Yield: -0.326% v -0.265% prior; Bid-to-cover: 5.33x v 7.30x prior

- Sold €4.68B in 12-month Bills; Avg Yield: -0.248% v -0.200% prior; Bid-to-cover: 1.72x v 1.81x prior

- (AT) Austria Debt Agency (AFFA) sold total €1.32B in 2026 and 2047 RAGB Bonds

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Index snapshot (as of 10:00 GMT)**

Indices [Stoxx50 -0.2% at 3,032, FTSE flat at 7,100, DAX -0.2% at 10,608, CAC-40 +0.1% at 4,500, IBEX-35 -0.2% at 8,684, FTSE MIB -0.3% at 16,586, SMI -0.1% at 8,162, S&P 500 Futures -0.3%]

Market Focal Points/Key Themes: European equity indices are trading generally lower across the board; Financial stocks trading lower adding weight to the indices; shares of Airbus the notable laggard in the Eurostoxx after the Polish Govt unilaterally pulled out of Caracal deal; LVMH leading the gains in the index after releasing 9-month results, with shares of Burberry leading the gains in the FTSE 100 in sympathy; both Brent and WTI maintaining its stance above $50/bbl sees energy, commodity and mining stocks trading higher; upcoming scheduled US earnings include (pre-market) Alcoa, Fastenal, and Bank of the Ozarks.

 

Equities (as of 09:50 GMT)

- Consumer Discretionary: [Brown N Group BWNG.UK +18.1% (final H1 results), Burberry BRBY.UK +2.6% (in sympathy with LVMH results), PageGroup PAGE.UK +3.4% (Q3 results), RWS Holdings RWS.UK +12.4% (trading update)]

- Financials: [Grainger GRI.UK +1.6% (trading update), Trygvesta TRYG.DK -0.9% (Q3 results)]

- Healthcare: [Biomerieux BIM.FR +0.3% (FilmArray receives FDA clearance)]

- Industrials: [Airbus AIR.FR -2.3% (Polish Govt unilaterally pulled out of Caracal deal), Entu ENTU.UK -12.2% (trading update)]

 

Speakers

- South Africa Prosecuting Authority confirmed that Fin Min Gordhan would be prosecuted; to appear in court on Nov 2nd

- EU Finance Ministers and officials (EcoFin) commented ahead of meeting in Luxembourg

- Eurogroup Dijsselbloem (Netherlands) stated that some banks might need higher capital requirements

- EU's Moscovici noted that_ _Greece had made important progress on arrears but talks on debt relief had not started. Still some analysis needed on Financial transaction tax (FTT) and lastly was still waiting for UK to trigger article 50; still need to cooperate with UK

- Spain Fin Min de Guindos stated that its 2016 budget deficit to GDP ratio seen at 4.6%

- ZEW Economists noted that German banks were a burden on economic outlook. Industry and exports were proving impulse for domestic economy but caution that political and economic risks were next particular dangers

- Czech Fin Min Babis: Brexit procedure might last 2-3 years and urged that both sides should solve Brexit asap

- Sweden Central Bank (Riksbank) Dep Gov Ohlsson stated that everything indicated that pressure on prices would be higher as a stronger economy led to higher inflation. Inflation target was important and looking at the long-term trend on inflation. He stressed that the underlying trend remained upwards

- Italy PM Renzi: Govt has approved earthquake fund decree

- BOJ, BOK and PBoC met in Tokyo today to exchange views on economy

- IEA Sept Monthly Oil Market Report forecast both 2016 and 2017 Global oil demand growth at 1.2M bpd with non-OPEC supply 2017 was unchanged at 57M b/d. OPEC Sept crude production +160Kb/d tp 33.64M b/d. OECD inventories -10M b/d to 3.09B barrels (**Note: 1st decline since March). Global oil supply could fall into line more quickly with demand if OPEC and Russia agree to a steep enough cut in production

 

Currencies

- Firmer USD main theme was Asia amid rising US treasury yields. The greenback was firmer against the major pairs.

- The GBP continued its losing string for a 4th session with GBP/USD back below the 1.23 level.

- EUR/SEK pair was higher after Sweden CPI miss and tested above the 9.72 area; highest level since May 2010

- USD/ZAR was higher by over 3% after reports circulated (later confirmed) that Fin Min Gordhan to be charged with fraud. Rand currency weakness was the largest percentage drop since Jun

Fixed Income:

- Bund futures trade at 163.52 up 10 ticks giving back the bulk of the morning gains as German ZEW come in ahead of estimates. Futures look for continued momentum eyeing 163.26 then 163.04 followed by contract lows at 162.63. A reversal eyes 163.80 then 164.30-52 followed by 165.03 then 165.42.

- Gilt futures trade at 127.65 up 24 ticks rebounding from fresh contract lows seen yesterday as Cable weakness continues to weigh. A move lower targets 127.17 gap fill and contract low with a push below targeting 127 the figure. A reversal sees 127.72 initially followed by 128.45 then 129.11 and 129.62. Short Sterling futures trade up 1 to 2bp across the strip recouping earlier losses with Jun17/18 trading at 6bp choice off a high as 8bp bid as the sharp steepening continues.

- Tuesday's liquidity report showed Monday's excess liquidity fell to €1.066T a fall of €3B from €1.069T prior. This was primarily due to AFs and MonPol portfolios rising to negative €635.3B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €7M from €82M prior.

- Corporate issuance saw European issuance pick up with €5.4B set to price dominated by non financials. Notable deals include Easyjet selling €500M in 7 year bonds, Chorus selling €500M 7 year bonds as well as CRH and SFR also selling €500M in bonds.

 

Looking Ahead

- (PT) Bank of Portugal reports Sept ECB financing to Portuguese Banks: No est v €23.1B prior

- (MX) Mexico Sept ANTAD Same-Store Sales Y/Y: 5.2%e v 1.7% prior

- 05.30 (UK) Weekly John Lewis LFL sales data

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills

- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 12-Month Bills

- 06:00 (US) Sept NFIB Small Business Optimism: 95.0e v 94.4 prior

- 06:00 (DK) Denmark Economic Council updates forecasts

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia announces weekly OFZ bond auction

- 07:00 (ZA) South Africa Aug Manufacturing Production M/M: No est v -1.5% prior; Y/Y: 1.3%e v 0.4% prior

- 07:00 (BR) Brazil Oct IGP-M Inflation (1st Preview): 0.1%e v 0.4% prior

- 07:45 (US) Weekly Goldman Economist Chain Store Sales

- 08:00 (PL) Poland Sept Final CPI M/M: No est v 0.0% prelim; Y/Y: No est v -0.5% prelim

- 08:00 (NO) Norway Central Bank (Norges) Dep Gov Nicolaisen

- 08:15 (CA) Canada Sept Annualized Housing Starts: 190.0Ke v 182.4K prior (revised from 182.7K)

- 08:15 (US) Baltic Dry Bulk Index

- 08:55 (US) Weekly Redbook Sales

- 09:00 (RU) Russia Q3 Preliminary Current Account Balance: $0.2Be v $1.5B prior

- 09:00 (EU) Weekly ECB Forex Reserves:

- 10:00 (US) Sept Labor Market Conditions Index Change: No est v -0.7 prior

- 10:00 (MX) Mexico Weekly International Reserves

- 11:00 (BR) Brazil to sell I/L Bonds

- 11:30 (US) Treasury to sell 1-Month, 3-Month, 6-Month Bills, 12-month Bills

- 16:00 (US) Weekly Crop Progress Report