UK Q3 GDP fails to show any Brexit impact

Notes/Observations

- Steepening of the US yield curve works as a magnet for capital and keeping USD on form footing.

- Spain Unemployment Rate falls to lowest level since 2009 (18.9% v 19.3%e)

- Rate decisions out of Nordic region offers no surprises (both Riksbank and Norges keep policy steady)

- UK Q3 GDP beats expectations; not showing any initial effects from Brexit

Asia

- BOJ Gov Kuroda: Yield curve moving in line with shape we considered desirable at previous policy meeting; No need for any immediate change short, long-term rate target levels

- PBoC raised obscure rate signaling unwilling to provide limitless cheap funds. PBoC recently conducted auction of CNY80B in treasury funds to commercial banks as 3-month deposits were prices at 2.95%, highest level since May

Europe:

- UK Govt envoy for financial services says banks likely to lose passporting rights

 

Economic data

- (CH) Swiss Sept UBS Consumption Indicator: 1.59 v 1.53 prior

- (FI) Finland Oct Consumer Confidence: 15.8 v 14.4 prior; Business Confidence: -4 v -1 prior

- (ES) Spain Q3 Unemployment Rate: 18.9% v 19.3%e (7-year low)

- (SE) Sweden Oct Consumer Confidence: 105.1 v 98.7e; Manufacturing Confidence: 105.8 v 101.9e, Economic Tendency Survey: 106.1 v 102.8e

- (HU) Hungary Sept Unemployment Rate: 4.9% v 4.8%e

- (TR) Turkey Oct Economic Confidence: 80.6 v 87.8 prior

- (SE) Sweden Central Bank (Riksbank) left its Repo Rate unchanged at -0.50% (as expected)

- (SE) Sweden Sept Household Lending Y/Y: 7.5% v 7.5% prior

- (NO) Norway Central Bank (Norges) left its Deposit Rates unchanged at 0.50% (as expected)

- (EU) Euro Zone Sept M3 Money Supply Y/Y: 5.0% v 5.1%e

- (IT) Italy Oct Consumer Confidence (mixed): 108.0 v 108.6e; Manufacturing Confidence: 103.0 v 102.2e, Economic Sentiment: 102.4 v 101.2 prior

- (UK) Q3 Advance GDP (beat) Q/Q: 0.5% v 0.3%e; Y/Y: 2.3% v 2.1%e

- (HK) Hong Kong Sept Trade Balance (HKD): -39.7B v -38.9Be, Exports Y/Y: +3.6% v -0.4%e, Imports Y/Y: +4.1% v +1.3%e

 

Fixed Income Issuance:

- (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 6-month Bills; Avg yield: -0.295% v -0.257% prior; Bid-to-cover: 1.60x v 1.73x prior

- (SE) Sweden sold total SEK1.0B vs. SEK1.0B indicated in 2025 and 2026 I/L Bonds

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

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

Indices [Stoxx50 -0.4% at 3,069, FTSE -0.2% at 6,944, DAX -0.3% at 10,675, CAC-40 -0.6% at 4,507, IBEX-35 -0.6% at 9,118, FTSE MIB -0.1% at 17,269, SMI -0.2% at 7,880, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes: European equity indices are currently trading mixed after opening lower across the board as market participants await some macro-economic data out of the US; Banking shares generally trading higher in the Eurostoxx; shares of Barclays leading the gains in the FTSE 100 after releasing their results; Commodity and mining stocks trading notably lower in the index as WTI continues to trade sub-$50/bbl; Energy stocks trading marginally higher as Brent and WTI currently trade near flat.

A plethora of upcoming scheduled US earnings (pre-market) include Aetna, Altria, Autoliv, American Tower, Air Products and Chemicals, Avnet, Axalta Coating, Brunswick, BGC Partners, Bemis, Bristol-Myers, BorgWarner, Blackstone, CBRE, Celgene, Colfax, Colgate-Palmolive, Commercial Metals, CME, CMS Energy, ConocoPhillips, Carters, Cenovus Energy, Dow Chemical, Dr Pepper Snapple, EMCOR, Enterprise Products Partners, Ford Motor, Gannett, GNC, HCA, Intelsat, International Paper, Invesco, LKQ, L-3 Communications, Mednax, Mead Johnson, Marathon Petroleum, MPLX, Meritage Homes, National Oilwell Varco, Old Republic, Penn National Gaming, Pinnacle Foods, Potash, Praxair, Radian Group, Raytheon, Sealed Air, Sirius XM, Stanley Black & Decker, Teck Resources, Teradata, Timken, Thermo Fisher Scientific, Tempur Sealy, T. Rowe, Twitter, Domtar, UPS, Visteon, WESCO, and Xcel Energy.

 

Equities (as of 09:50 GMT)

- Consumer Discretionary: [Debenhams DEB.UK +2.9% (FY16 results)]

- Energy: [Amec Foster Wheeler AMFW.UK -20.0% (trading update), Statoil STL.NO +1.6% (Q3 results)]

- Financials: [Barclays BARC.UK +1.4% (Q3 results), BBVA BBVA.ES +0.2% (Q3 results), Deutsche Bank DBK.DE +0.1% (Q3 results)]

- Healthcare: [Fresenius Medical Care FME.DE +0.4% (Q3 results), Fresenius SE & Co FRE.DE -0.5% (Q2 results, raises outlook)]

- Industrials: [ABB ABBN.CH -6.3% (Q3 results), Arcadis ARCAD.NL -11.9% (Q3 results), Audi NSU.DE -0.6% (Q3 risk provisions adjustment), BASF BAS.DE -0.1% (final Q3 results), Kion KGX.DE -0.4% (final Q3 results), Technip TEC.FR +2.8% (Q3 results, raises outlook), Volkswagen VOW3.DE -0.5% (Q3 results, raises outlook)]

- Materials: [Wacker Chemie WCH.DE +0.7% (Q3 results)]

- Technology: [Altran ALT.FR -1.5% (Q3 sales), STMicroelectronics STM.FR +7.6% (Q3 results), Schneider Electric SU.FR -3.1% (Q3 sales)]

- Telecom: [BT Group BT.UK -2.0% (Q2 results), Royal KPN KPN.NL +1.1% (Q3 results), Nokia NOK1V.FI -6.7% (Q3 results), Telefonica TEF.ES -2.3% (Q3 results)]

- Utilities: [Suez Environment SEV.FR +1.9% (9M results)]

 

Speakers

- Sweden Central Bank (Riksbank) Statement noted that it would keep low Repo Rate for longer (assessed that the repo rate needs to be held at -0.50% for six months longer than forecast in September). Thus it pushed back view for 1st rate hike until early 2018 (prior view that 1st rate hike seen in H2 of 2017). No changes in current QE bond buying program; to run through H2 2016 (**Note last amended back in April). It reiterated view of having high level of preparedness to make policy even more expansionary

- Sweden Central Bank (Riksbank) Gov Ingves post rate decision press conference noted that rexit and European banks were two uncertain factors. Exchange rate played a big role in inflation and added that a weak SEK currency was not a disadvantage . He saw slightly increased likelihood of a rate cut

- Norway Central Bank (Norges) Statement noted that the overall, developments since September did not differ substantially from the projections in the September Monetary Policy Report. It did add that consumer price inflation had been lower than expected.

- Norway Central Bank (Norges) Gov Olsen post rate decision press conference noted that NOK currency (Krone) was stronger than its Sept forecast. High housing growth has continued

- UK Fin Min Hammond stated that fundamentals of UK economy were strong but would need to adjust to new relationship with EU. He added that UK was well placed to deal with challenges

- Turkey Central Bank (CBRT) Gov Cetinkaya Quarterly Inflation Report reiterated to continue a cautious stance in monetary policy and would finalize monetary policy simplification in reasonable time. The 5% inflation target was reachable in the medium term. It maintained 2016 inflation at 7.5% but raised 2017 inflation from 6.0% to 6.5%

- Italy PM Renzi stated that was not demanding budget concessions from EU and was prepared to respond for clarification of budget. Without emergency expenses linked to migrant crisis and earthquake, budget deficit/GDP ratio would have been 1.9%

- Spain interim PM Rajoy stated that govt might meet EU demands cuts of less than €5.5B (**Note: responds to reports that EU Commission saw Spain's current plan of budget deficit to GDP ratio of 3.6% as too high)

- IMFs Lagarde reiterated view that Brexit uncertainty was harmful for the UK. Situation is not healthy as the only thing we know at this time is the timetable

 

Currencies

- Steepening of the US yield curve works as a magnet for capital and keeping USD on firm footing.

- USD/JPY consolidating near 3-month highs. The BoJ meets on policy next week and expected to maintain a steady policy. (still most dealers anticipating a further easing in monetary policy in 2017)

- GBP received support from better-than-expected Q3 GDP data. GBP/USD receovered session losses to approach the mid-1.22 area.

- The SEK currency was choppy in the aftermath of the Riksbank decision to keep policy steady. EUR/SEK initially fell to test 9.68 before markets noted the central bank maintained its dovish tone and pushed back its 1st expected rate hike by 6 months into early 2018

- Norway Central Bank did not alter its hawkish Sept rhetoric which helped the NOK currency (Krone) firm against the majors. EUR/NOK fell over 0.5% to test lower end of 8.97 area.

 

Fixed Income:

- Bund futures trade at 162.61 down 42 ticks trading in sympathy with Gilts following stronger UK GDP numbers. Continued downside targets 162.24 followed by 161.93. A retrace 163.28 initially followed by 163.69 then 164.06 yesterday high.

- Gilt futures trade at 125.28 down 80 ticks trading new contract lows as a GDP of 0.5% came ahead of consensus cutting the odds for further action from the BoE. Further momentum lower targets Brexit Gap top at 125.16 . A rebound targets 126.40 followed by 126.89 yesterday high. Short Sterling futures continues to widen with futures down 1-4bp. Jun17/18 trading higher at 15bp bid rebound some 17bp from lows.

- Thursday's liquidity report showed Wednesday's excess liquidity rose to a record €1.107T a rise of €10B from €1.097T prior. This was primarily due to AFs and MonPol portfolios falling to negative €674.3B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility rose to €245M from €55M prior.

- Corporate issuance saw $10.6B via 5 issuers led by Danone $5.5B 4 part offering following on from the €6.2B offering. Other issuers included American Express $1B 2 part offering and Daimler $2.5B 3 part offering. This puts the weeks issuance at just over $25B matching consensus.

 

Looking Ahead

- (CO) Colombia Sept Retail Confidence: No est v 30.1 prior; Industrial Confidence: No est v 7.9 prior

- 05:30 (ZA) South Africa Sept PPI M/M: +0.2%e v -0.1% prior; Y/Y: 7.1%e v 7.2% prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds

- 06:00 (UK) Oct CBI Retailing Reported Sales: -2e v -8 prior, Total Distribution: No est v 17 prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (UK) Ukraine Central Bank Interest Rate Decision: Expected cut Key Rate by 50bps to 14.50%

- 07:00 (BR) Brazil Sept National Unemployment Rate: 11.9%e v 11.8% prior

- 08:00 (AT) ECBs Nowotny (Austria) in Cyprus

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Initial Jobless Claims: 255Ke v 260K prior; Continuing Claims: 2.05Me v 2.06M prior

- 08:30 (US) Sept Preliminary Durable Goods Orders: 0.0%e v 0.1% prior; Durables Ex Transportation: +0.2%e v -0.2% prior; Capital Goods Orders (Non-defense ex aircraft): -0.1%e v +0.9% prior; Capital Goods Shipments (Non-defense/ ex aircraft): +0.3%e v -0.1% prior

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

- 09:00 (IS) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.10%

- 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 21st: No est v $391.4B prior

- 10:00 (US) Sept Pending Home Sales M/M: +1.1%e v -2.4% prior; Y/Y: No est v 4.0% prior

- 10:00 (BR) Brazil to sell 2022 LFT - 09/01/2022

- 10:00 (BR) Brazil to sell 2017, 2018 and 2020 LTN

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

- 11:00 (US) Oct Kansas City Fed Manufacturing Activity: 3e v 6 prior

- 13:00 (LX) ECBs Mersch (Luxembourg)

- 13:00 (US) Treasury to sell 7-Year Notes