European Indices continue to rise despite sluggish European manufacturing growth

Notes/Observations

-German and French Manufacturing PMIs miss estimates, Services PMIs mixed

-Asian Stocks continue to recover; Shanghai Comp has biggest weekly rise in 2.5 years

-Japan Long end yields hit multi-month high after BoJ trims daily purchases

Asia:

-Japan 30-yr yield hits highest level since Oct 2017 after BoJ trims daily purchases of over 25-year JGBs; 40-yr JGB yield trades above 1.04% (highest since Jan), Yen hits two month lows

-S&P affirms Australia sovereign rating at AAA; raises outlook to Stable from Negative -Japan core CPI edges higher but remains well below the BoJ 2% target

-Asian Indices closed sharply higher , Shanghai composite rises 4.3% for the week its biggest weekly gain in 2.5 years

-India's NIFTY 50 suffered mid day plunge before recovering; Dewan housing traded as much as 60% lower on liquidity concerns before recovering after management commentary

Europe:

-France PMI fell short of estimates marking a 3 month low as a result of a broad-based slow down across the manufacturing and service sector

-German PMIs came in mixed with manufacturing confidence taking a big hit in September, deteriorating to its lowest in almost four years

-UK senior minister reportedly suggests PM May will have to rewrite her Chequers Brexit plan

 

Economic Data:

(FR) FRANCE SEPT PRELIMINARY MANUFACTURING PMI: 52.5 V 53.3E

(FR) Services PMI: 54.3 v 55.3e (26th month of expansion)

(DE) GERMANY SEPT PRELIMINARY MANUFACTURING PMI: 53.7 V 55.7E

(DE) Services PMI: 56.5 v 55.0e (63rd month of expansion)

(EU) EURO ZONE SEPT PRELIMINARY MANUFACTURING PMI: 53.3 V 54.5E

(EU) Services PMI: 54.7 v 54.4e (63rd month of expansion)

(UK) AUG PUBLIC FINANCES (PSNCR): +£3.1B V -£19.2B PRIOR; NET BORROWING: +£5.9B V +£3.0BE

(CH) Swiss Aug M3 Money Supply Y/Y: 2.5% v 2.4% prior

(NL) Netherlands Q2 Final GDP Q/Q: 0.8% v 0.7%e; Y/Y: 3.1% v 2.9%e

(PL) Poland Aug Retail Sales M/M: 0.9% v 1.0%e; Y/Y: 9.0% v 9.1%e

(FR) France Q2 Wages Q/Q: 0.4% v 0.4%e

(FR) France Q2 Final GDP Q/Q: 0.2% v 0.2%e; Y/Y: 1.7% v 1.7%e

Fixed Income Issuance:

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 +0.7% at 3,428, FTSE +0.8% at 7,429, DAX +0.7% at 12,418, CAC-40 +0.8% at 5,494, IBEX-35 +0.6% at 9,639, FTSE MIB +0.9% at 21,588, SMI +0.3% at 9,024, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European indices open broadly higher and maintained the trend as the session wore on; UK equities supported on Brexit comments; Italy supported during budget talks; markets influenced by quadruple witching day; materials stocks among best performers with all sectors trading in the green; potential interest in Deliveroo from Uber dragging on delivery stocks such as Just eat and Delivery Hero; news flow light with no major earnings expected during US session

 

Equities

- Consumer discretionary: EuropaCorp ECP.FR +5.3% (potential asset sale), Moss Bros MOSB.UK -13.3% (results)

- Consumer staples: Danone BN.FR +0.5% (analyst action)

- Energy: Repsol REP.ES -2.5% (Caixabank sells stake)

- Industrials: Alstom ALO.FR +0.9% (contract win)

- Materials: Nyrstar NYR.BE -35.4% (profit warning), Vicat VCT.FR +5.7% (discussions with Ciplan)

- Technology: Smiths Group SMIN.UK -6.4% (results)

 

Speakers

-(CN) China Foreign Ministry: lodged stern representations with U.S.; strongly urges U.S. to withdraw sanctions

-(CY) Cyprus Fin Min Georgiades: last few years have been good for domestic economy; will continue reform agenda

 

Currencies

USD/INR rose to an intraday high of 72.47 before fading after a sharp spike lower in Indian Indices on liquidity concerns of Indian Housing name Dewan Housing. GBP/USD falls from highs approaching the 1.31 handle as the EU warns the UK of a possible No-deal Brexit. Down support initially lies around 1.3171

 

Fixed Income

- Bund Futures trades at 158.89 up 2 ticks after mixed PMI readings in Europe. Resistance moves to 161.82 then 163. A downside break of 158.25 sees 157.69 initially.

- Gilt futures trades at 120.92 down 5 ticks following the move in Treasuries. Continued support at 120.50, with a continued move higher targeting 123.93 then 124.00.

- Friday 's liquidity report showed Thursday's excess liquidity fell from €1.862T to €1.851T. Use of the marginal lending facility stayed steady from €30M to €30M.

- Corporate issuance saw 5 high grade issuers raise $6.7B in the primary market; lipper fund flows IG came in at $1.2B, while HY saw $966M of inflows

 

Looking Ahead

- 06:00 (IE) Ireland Aug PPI M/M: No est v -1.7% prior; Y/Y: No est v -0.8% prior

- 07:00 (BR) Brazil Sept FGV Consumer Confidence: No est v 83.8 prior

- 07:30 (CL) Chile Central Bank Meeting Minutes

- 07:30 (IN) India Weekly Forex Reserves

- 08:00 (BR) Brazil Sept IBGE Inflation IPCA-15 M/M: 0.2%e v 0.1% prior; Y/Y: 4.4%e v 4.3% prior

- 08:15 (UK) Baltic Dry Bulk Index

- 08:30 (CA) Canada Aug CPI M/M: No est v 0.5% prior; Y/Y: No est v 3.0% prior, CPI Core- Common Y/Y: No est v 1.9% prior, CPI Core- Median Y/Y: No est v 2.0% prior, CPI Core- Trim Y/Y: No est v 2.1% prior, Consumer Price Index: No est v 134.3 prior

- 08:30 (CA) Canada July Retail Sales M/M: +0.3%e v -0.2% prior; Retail Sales Ex Auto M/M: +0.6%e v -0.1% prior

- 09:00 (MX) Mexico July Retail Sales M/M: No est v 0.0% prior; Y/Y: No est v 3.7% prior

- 09:45 (US) Sept Preliminary Markit Manufacturing PMI: 55.0e v 54.7 prior, Services PMI: 55.0e v 54.8 prior, Composite PMI: No est v 54.7 prior

- 13:00 (US) Weekly Baker Hughes Rig Count data

- 15:00 (CO) Colombia July Economic Activity Index (Monthly GDP) Y/Y: 3.0%e v 2.9% prior