European Indices mainly negative following downbeat European Manufacturing PMI

Notes/Observations

- European Indices trade mixed, bond yields higher, Oil futures higher, Gold futures lower

- WTO cuts 2019 and 2020 growth forecasts as trade conflicts heighten uncertainty

- Aussie dollar trades lower following RBA rate cut

 

Asia:

- Australia RBA cuts rates to 0.75% to a fresh record low, reiterating that it is reasonable to expect extended period of low rates

- New Zealand Q3 Business confidence falls to a 10 year low

- Japan Q3 Tankan Large manufacturing Index beat forecasts but marked the 3rd consecutive decline and recorded a 6 year low

- China military parade shows off new DF-41 a new long range intercontinental nuclear missile; also anti-ship missiles, next generation main battlefield tanks, advanced drone and unmanned underwater vehicles

- Japan 10 year debt auction received poor invester demand spurring a sharp sell off in 10 year JGB futures; futures saw the biggest daily fall in 3 years

 

Europe/Mideast:

- European manufacturing PMI’s remain mostly in contractionary terroritory

- UK, Germany, Euro Zone beat forecasts; Spain, Italy and France missed

- European bond yields rise despite downbeat PMI readings, following the poor Japananese 10 year auction

- WTO cuts 2019 World trade growth from 2.6% to 1.2%; Cuts 2020 World trade growth from 3.0% to 2.7%

 

Brexit:

- UK PM Johnson: EU and Dublin are not talking about the proposal we are going to present; Difficulty is around the Customs Union

- Confident of making a good offer; Not planning to produce the proposal now, it will presented in Brussels

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.21% at 392.30, FTSE -0.14% at 7,397.65, DAX -0.04% at 12,422.94, CAC-40 -0.11% at 5,671.54, IBEX-35 +0.35% at 9,277.00, FTSE MIB +0.50% at 22,218.50, SMI -0.35% at 10,043.00, S&P 500 Futures +0.26%]

 

Market Focal Points/Key Themes:

Equities

European Indices trade mixed, amid mostly higher markets in Asia and higher US futures despite stronger dollar. European PMI Manufacturing data mostly disappoints with sharp notable contractions in Swiss and Swedish activity.
On the corporate front shares of building materials producer Ferguson rise sharply on LSE following its full-year earnings and raised dividend. UK-listed Bakery chain Greggs erases earlier gains and trades lower 5% on trading update. Furniture and flooring firm SCS made cautious comments regarding new fiscal year activity, also trading lower almost 5%.
Meanwhile, Credit Suisse issued statement on investigation’s findings and announced few top-level resignations. Shares of Swiss bank trade slightly up.
In other news Deutsche Post holds investor day this morning, issued new mid-term outlook.
Looking ahead notable earners include McCormick & Company.

- Consumer discretionary: Ferguson [FERG.UK] +4% (earnings; raises dividend), Greggs [GRG.UK] -5% (trading update), SCS [SCS.UK] -5% (earnings), Deutsche Post [DPW.DE] -1.5% (investor day), Next Fifteen [NFC.UK] -12% (earnings; acquisition)

- Financials: Credit Suisse [CSGN.CH] +0.5% (developments on investigation)

- Telecom: Masmovil Ibercom [MAS.ES] +9% (raises outlook)

 

Speaker

(US) Fed Evans (dove, voter): after rate cuts Fed should leave policy on hold for some time; US still on path for solid 2.25% GDP growth this year

(UK) UK PM Johnson: EU and Dublin are not talking about the proposal we are going to present; Difficulty is around the Customs Union

(UK) Irish Europe Min McEntee: UK proposals to date are not acceptable, not seen credible alternative yet

- (IT) Italy PM Conte: Process to revoke highway concessions underway

- (JP) Japan LDP Moriyama:To pass US trade deal in coming session, to put in effect quickly

 

Currencies/ Fixed Income

USD: The USD index traded higher today at 99.53 after breaking through the 2 year high last night. The strength in the USD is seen as further countries continue to show weakness so traders move to a flight to safety in the USD.

EUR/USD: The Euro traded lower again against the USD as it traded at its lowest in just over 2 years. The Euro showed weakness after German state CPI readings came in less than previous readings. Levels to the upside are in the region of 1.11 and 1.082 to the downside.

GBP/USD: Cable continues its slide lower as it continues its 5 consecutive day down as it approaches its 2 year low just below 1.20. Volatility is seen in the short term as the UK and EU await PM Johnsons new Brexit plan, a plan he believes will be good for both sides. Levels to the upside are in the 1.258 region and to the downside near 1.198.

 

Economic Data

(UK) SEPT PMI MANUFACTURING: 48.3 V 47.0E (5th straight month of contraction)

(DE) GERMANY SEPT FINAL MANUFACTURING PMI: 41.7 V 41.4E (confirms lowest reading since Jun 2009)

(EU) EURO ZONE SEPT FINAL MANUFACTURING PMI: 45.7 V 45.6E (confirms lowest reading since Oct 2012 and 8th straight month of contraction)

(FR) FRANCE SEPT FINAL MANUFACTURING PMI: 50.1 V 50.3E (confirms 2nd consecutive month of expansion)

(IT) ITALY SEPT MANUFACTURING PMI: 47.8 V 48.1E (lowest reading since Mar 2019)

(ES) SPAIN SEPT MANUFACTURING PMI: 47.7 V 48.2E (lowest reading since Apr 2013)

(SE) Sweden Sept PMI Manufacturing: 46.3 v 52.0e (largest monthly drop since Sept 2008 and lowest level since early 2013)

(CH) Swiss Sept PMI Manufacturing: 44.6 v 46.7e

(NL) Netherlands Sept Manufacturing PMI: 51.6 v 51.0e

(NO) Norway Sept PMI Manufacturing: 50.4 v 53.5e

(PL) Poland Sept Manufacturing PMI: 47.8 v 47.9e (11th straight month of contraction)

(TR) Turkey Sept Manufacturing PMI: 50.0 v 48.0 prior (ends 17 months pace of contraction)

(PL) Poland Sept Preliminary CPI M/M: -0.1% v +0.1%e; Y/Y: +2.6% v +2.7%e

(CZ) Czech Republic Sept Manufacturing PMI: 44.9 v 43.7e (10th straight month of decline)

(GR) Greece Sept Manufacturing PMI: 53.6 v 54.9 prior

(CZ) Czech Q2 Final GDP Q/Q: 0.7% v 0.7%e; Y/Y: 2.8% v 2.7%e

 

Fixed Income Issuance

(HU) Hungary Debt Agency (AKK) sells total HUF15B vs. HUF15B target in 3-month Bills; Avg Yield: -0.03% v -0.03% prior; Bid-to-cover: 3.00x v 1.37x prior

 

Looking Ahead

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

06:00 (IE) Ireland Sept Unemployment Rate: No est v 5.2% prior

07:30 (CL) Chile Aug Economic Activity Index (Monthly GDP) M/M: 0.1%e v 0.2% prior; Y/Y: 2.6%e v 3.2% prior

(US) Sept 2019 Vehicle Sales numbers expected throughout the day

07:45 (US) Weekly Chain Store Sales data

08:00 (CZ) Czech Sept Budget Balance (CZK): No est v -15.4B prior

08:00 (BR) Brazil Aug Industrial Production M/M: 0.1%e v -0.3% prior; Y/Y: -3.2%e v -2.5% prior

08:00 (UK) Daily Baltic Dry Bulk Index

08:30 (CA) Canada July GDP M/M: 0.1%e v 0.2% prior; Y/Y: 1.4%e v 1.5% prior

08:30 (CA) Canada Aug MLI Leading Indicator M/M: No est v 0.3% prior

08:55 (US) Weekly Redbook LFL Sales data

09:00 (BR) Brazil Sept PMI Manufacturing: No est v 52.5 prior

09:00 (EU) Weekly ECB Forex Reserves

09:30 (CA) Canada Sept Manufacturing PMI: No est v 49.1 prior

09:45 (US) Sept Final Markit Manufacturing PMI: 51.0e v 51.0 prelim

10:00 (US) Sept ISM Manufacturing: 50.0e v 49.1 prior; Prices Paid: 50.5e v 46.0 prior

10:00 (US) Aug Construction Spending M/M: 0.5%e v 0.1% prior

10:00 (MX) Mexico Aug Total Remittances: $3.2Be v $3.3B prior

10:00 (MX) Mexico weekly International Reserve data

10:00 (MX) Mexico Central Bank Economist Survey

10:30 (MX) Mexico Sept PMI Manufacturing: No est v 49.0 prior

10:30 (NZ) Fonterra Dairy Auction

11:00 (CO) Colombia Aug Exports: $3.3Be v $3.3B prior

12:00 (IT) Italy Sept New Car Registrations Y/Y: No est v -3.1% prior

12:00 (NZ) New Zealand Sept QV House Prices Y/Y: No est v 2.3% prior

13:00 (MX) Mexico Sept IMEF Manufacturing Index: 48.0e v 47.4 prior; Non-Manufacturing Index: 48.5e v 47.7 prior

14:00 (BR) Brazil Sept Trade Balance: $3.2Be v $3.3B prior; Total Exports: $19.5Be v $18.9B prior; Total Imports: $16.4Be v $15.6B prior

16:30 (US) Weekly API Oil Inventories