Continued conciliatory tones in US-China trade talks aids risk appetite

Notes/Observations

- UK Oct PMI data beats expectations and avoids another month of contraction.

- Continued optimism on the US-China trade front; hope that US would consider rolling back some tariffs

- China PBoC makes a symbolic cut to its MLF facility

Asia:

- US and Chinese officials said to be actively considering rolling back some tariffs to clinch the partial trade deal under negotiation

- China Oct Caixin PMI Services hits an 8-month low ( 51.1 v 51.5e)

- China PBoC cuts medium-term loan rate for first time since 2016 (move seen as symbolic)

- RBA left the Cash Rate Target unchanged at 0.75% (as expected) and noted that the expectations of further monetary easing had generally been scaled back over the past month and financial market sentiment had improved a little.

- Australia Treasury maintained RBA inflation target between 2-3%. Stated that there would be no changes to official agreement on monetary policy due to global uncertainties

- BOJ Gov Kuroda reiterated BOJ would persistently continue with easing and was not limited to just rate cuts

Europe/Mideast:

Brexit:

- House of Commons elects Lindsay Hoyle to be new Speaker - Northern Ireland's Pro-EU Nationalist parties said to have agreed to stand back from 3 seats in parliament to boost chances for Anti-Brexit candidates

Americas:

- US said to be considering removing some tariffs from China goods in order to secure partial trade deal. White House said to be considering whether to roll back tariffs on $112B of China imports that were introduced at a 15% rate on Sept 1st.

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.09% at 403.80, FTSE +0.41% at 7,399.80, DAX +0.19% at 13,161.78, CAC-40 +0.11% at 5,830.56, IBEX-35 -0.24% at 9,394.00, FTSE MIB +0.07% at 23,327.50, SMI -0.06% at 10,330.50, S&P 500 Futures +0.27%]

Market Focal Points/Key Themes: European Indices trade mostly higher, tracking firmer US Indices as trade optimism continues to drive the markets. On the earnings shares of Associated British Foods gains as the company reported results which met estimates; Schaeffler rises sharply on earnings and the stepping down of its CFO; Dufry also gains on earnings and Revenue growth and confirmed outlook, with Baffkafrost, Ratos, Evonik, Wood Group, and Lundbeck among other names rising on earnings. Danish Jewelry names Pandora declines over 10% on a big earnings miss and lowered outlook; Telefonica also declines on a Q3 loss and affirmed outlook, Hugo Boss declines on final Q3 results and affirmed outlook, with Siemens Gamesa, Hellofresh, IWG, Adecco and Ypsomed among other names declining on earnings. In other news Pihlajalinna gains almost 40% after Mehilainen Yhiot makes €16.00/shr offer; while Grammer gains as the company announced a JV with FAWSN Group. Looking ahead notable earners include Tapestry, Allegan, Mylan, Regeneron, Emerson Electric and US Foods Holding among others.

 

Equities

- Consumer discretionary: Hugo Boss [BOSS.DE] +0.5% (earnings), AB Foods [ABF.UK] +4% (earnings), Watkin Jones [WJG.UK] +3.5% (trading update), Pandora [PNDORA.DK] -12% (earnings), IWG [IWG.UK] -1.5% (earnings)

- Consumer staples: Imperial Brands [IMB.UK] +1.5% (earnings; initial guidance), Adecco [ADEN.CH] -1% (earnings; divestment)

- Energy: Siemens Gamesa [SGRE.ES] -3% (earnings)

- Healthcare: Lundbeck [LUN.DK] +4% (earnings)

- Industrials: Schaeffler [SHA.DE] +9% (earnings; CFO to step down)

 

Speakers

- ECB's Muller (Estonia): domestic economy was still strong in EU

- ESM's Regling: Euro Zone has strong fundamentals; slowdown brought upon by external factors

- Italy Stats Agency (Istat) Monthly Economic Note: Domestic economy to continue steadying

- Italy govt coalition said to present budget amendment to introduce a new tax on airline ticket

- South Africa President Ramaphosa said he was concerned by the change in sovereign outlook by Moody's. New Eskom CEO to be named soon

- Sweden Central Bank (Riksbank) Oct Minutes: Difficult to say when it would be appropriate to raise the interest rate again after an expected increase in December. Economic activity was slowing faster than expected

- Sweden Fin Min Andersson: Social Democrats said to want to abandon the surplus target and to introduce a target for a balanced budget

- Norway Central Bank (Norges) Financial Stability Report noted that bank stress tests showed banking sector would be able to absorb loss in downturn. Household debt was high but its accumulation was slowing

- Malaysia Central Bank (BNM) Policy Statement reiterated that current monetary policy stance is accommodative and supportive of economic activity. It saw 2019 GDP growth within projections and pace sustained into 2020. BNM added that 2019 inflation was low and saw 2020 inflation to remain modest but average higher

- Bank of Korea Oct Minutes showed that the vote to cut rates by 25bps was not unanimous. A BOK member noted that it was hard to say whether current policy rate was accommodative; the 1.25% rate was not low given macro conditions. A BOK member noted that the 1.50% rate level was accommodative enough

- China Foreign Ministry Spokesman Geng Shuang reiterated President Xi and President Trump were in contact through various means

- China Communist Party reiterated stance to continue with push of CNY currency (Yuan) internationalization. To improve negative list system for foreign investment

- OPEC Medium-term Outlook saw global oil demand grow decelerating in 2019-2024 period to 900K bpd in 2024 (compared to 1.1M bpd in 2019). Forecasted 2040 oil demand at 110.6M bpd vs. prior forecast of 111.7M bpd

 

Currencies/Fixed Income

- FX price action was quite subdues for the major trading pairs as risk appetite continued to get some tailwinds on continued optimism on the 1st phase of the US-China trade agreement.

- USD/CNY tested below the 7.00 level for the 1st time in 3 months (stronger Yuan currency) as US and China said to be considering rolling back some tariffs to achieve a partial trade deal

- USD/JPY was reapproaching the key 109 resistance area as the risk-on sentiment was helping to soften the JPY currency with the conciliatory tones in US-China trade talks

 

Economic Data

- (MY) Malaysia Central Bank (BNM) left the Overnight Policy Rate unchanged at 3.00%

- (ZA) South Africa Oct PMI (whole economy): 49.4 v 49.0e (6th straight contraction)

- (SE) Sweden Oct PMI Services: 49.5 v 49.8 prior; PMI Composite: 48.6 v 48.8 prior

- (FR) France Sept YTD Budget Balance: -€109.0B v -€123.1B prior

- (ES) Spain Oct Net Unemployment Change: +97.9K v +62.1Ke

- (ZA) South Africa Q3 BER Consumer Confidence: -7 v +3e

- (TW) Taiwan Oct Foreign Reserves: $472.5B v $469.5B prior

- (SE) Sweden Sept Private Sector Production M/M: -0.3% v +0.4% prior; Y/Y: 1.4% v 2.8% prior

- (SE) Sweden Sept Industrial Orders M/M: -0.2% v -1.6% prior; Y/Y: -1.5% v -0.6% prior

- (SE) Sweden Sept Industry Production Value Y/Y: 0.9% v 2.1% prior; Service Production Value Y/Y: 1.6% v 2.6% prior

- (NG) Nigeria Oct PMI: 56.9 v 57.1 prior

- (UK) Oct New Car Registrations Y/Y: -6.7% v +1.3% prior

- (UK) Oct Services PMI: 50.0 v 49.7e (avoids a 2nd month of contraction); Composite PMI: 50.0 v 49.4e (avoided a 2nd month of contraction)

- (UK) Oct Official Reserves Changes: $2.2B v $0.5B prior

- (EU) Euro Zone Sept PPI M/M: -0.1% v +0.1%e; Y/Y: -1.2% v -1.2%e

**Fixed Income Issuance**

- (ID) Indonesia sold total IDR24.3T vs. IDR15.0T target in in 3-month and 12-month bills and 5-year, 10-year, 15-year, and 20-year bonds

- (ZA) South Africa sold total ZAR4.53B vs. ZAR4.53B indicated in 2030, 2037 and 2048 bonds

- (AT) Austria Debt Agency (AFFA) sold total €1.04B 2024 and 2029 RAGB bonds

 

Looking Ahead

- 05:30 (UK) Weekly John Lewis LFL Sales data

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

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

- 05:30 (DE) Germany to sell €500M in 0.5% Apr 2030 inflation-linked bonds (Bundei)

- 05:30 (UK) DMO to sell £2.75B in conventional 0.875% 2029 Gilts

- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 6-month bills

- 05:40 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)

- 06:00 (IE) Ireland Oct Unemployment Rate: No est v 5.3% prior

- 06:00 (IE) Ireland Sept Industrial Production M/M: No est v 1.1% prior; Y/Y: No est v -6.3% prior

- 06:00 (BR) Brazil Central Bank (BCB) Oct COPOM Minutes - 06:00 (TR) Turkey to sell Bonds

- 06:30 (TR) Turkey Oct Real Effective Exchange Rate (REER): No est v 76.66 prior

- 06:30 (EU) ESM to sell €2.5B in 3-month bills; Avg Yield: % v -0.5556% prior; Bid-to-cover: x v 2.65x prior (Oct 8th 2019)

- 07:00 (BR) Brazil Oct PMI Services: No est v 51.8 prior; PMI Composite: No est v 52.5 prior

- 07:00 (BR) Brazil Sept manufacturing PPI M/M: No est v 0.6% prior; Y/Y: No est v 0.2% prior

- 07:00 (CL) Chile Sept Retail Sales Y/Y: 1.8%e v 2.3% prior; Commercial Activity Y/Y: No est v 3.2% prior

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

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

- 08:00 (US) Fed's Barkin (non-voter, hawk)

- 08:00 (RU) Russia announces upcoming OFZ Bond issuance

- 08:30 (US) Sept Trade Balance: -$52.4Be v -$54.9B prior

- 08:30 (CA) Canada Sept Int'l Merchandise Trade (CAD): -0.7Be v -1.0B prior

- 08:55 (US) Weekly Redbook LFL Sales data

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:30 (NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: No est v +0.5% prior

- 09:45 (US) Oct Final Services PMI: 51.0e v 51.0 prelim; Composite PMI : No est v 51.2 prelim

- 09:45 (SE) Sweden Central Bank (Riksbank) Gov Ingves

- 10:00 (US) Sept JOLTS Job Openings: 7.063Me v 7.051M prior

- 10:00 (US) Oct ISM Non-Manufacturing Index: 53.5e v 52.6 prior

- 10:00 (MX) Mexico Weekly International Reserve data

- 11:00 (NZ) New Zealand Oct QV House Prices Y/Y: No est v 2.4% prior

- 11:30 (US) Treasury to sell 52-Week Bills

- 12:40 (US) Fed's Kaplan (dove, non-voter)

- 13:00 (US) Treasury to sell 3-Year Notes

- 16:30 (US) Weekly API Oil Inventories

- 16:45 (NZ) New Zealand Q3 Unemployment Rate : 4.1%e v 3.9% prior

- 16:45 (NZ) New Zealand Q3 Employment Change Q/Q: 0.2%e v 0.7% prior (revised from 0.8%); Y/Y: 0.9%e v 1.4% prior (revised from 1.7%)

- 18:00 (KR) South Korea Sept Current Account Balance: No est v $5.3B prior; Balance of Goods (BOP): No est v $4.8B prior

- 18:00 (US) Fed's Kaskkari (dove, non-voter)

- 18:50 (JP) BOJ Sept Minutes (two meetings ago)

- 19:00 (CO) Colombia Oct CPI M/M: 0.2%e v 0.2% prior; Y/Y: 3.9%e v 3.8% prior

- 19:00 (CO) Colombia Oct Core CPI M/M: No est v 0.2% prior; Y/Y: No est v 3.4% prior

- 19:30 (JP) Japan Oct Final PMI Services: No est v 50.3 prelim; PMI Composite: No est v 49.8 prelim

- 20:00 (PH) Philippines Sept Trade Balance: -$3.1Be v -$2.4B prior; Exports Y/Y: 1.3%e v 0.6% prior; Imports Y/Y: -6.4%e v -11.8% prior

- 21:10 (JP) BOJ Outright Bond Purchase operation in 10~25 Years and over 25 Years~

- 22:00 (CN) China to sell 3-Year and 7-Yrear Upsized Government Bond

- 22:35 JP) Japan to sell 10-Year JGB Bonds