European Indices mixed following German Election results

Notes/Observations

- German Chancellor Merkel faces tough coalition talks following German Election results

- German Business moral drops slightly in Sep

- PM Abe calls snap election, to seek ¥2T economic package

 

Overnight

Asia:

-Election results in New Zealand saw ruling National Party with 46.6% and Labour with 35.5%. With neither party winning enough seats to have a majority in parliament.

-Eight China cities, including Shijiazhuang, Chongqing, Nanchang, Nanning and Guiyang imposed curbs on home resales as part of campaign to cool home prices

-(JP) PM Abe to dissolve lower house on Sept 28th (confirms will call snap election); confirms to seek ¥2.0T ($17.8B) economic package

Europe:

-German Chancellor Angela Merkel re-elected for fourth term taking just shy of 33% of the vote, Her conservative CDU/CSU bloc and SPD results were lowest in almost 70 years.

-Current coalition partner, the social democratic SPD, says it will go into opposition after historic losses.

-Nationalist party took a notable part of the vote (13%) which will see the AFD Party enter parliament for first time

-German IFO index edges downward, but remains well above its long term average

-UK credit rating cut to Aa2 from Aa1 at Moody's

Americas

The US widens scope of Travel ban to include North Korea, Venezuela and Chad

Oil:

Iraqi Kurds vote in independence referendum from Iraq

 

Economic data

(DE) GERMANY SEPT IFO BUSINESS CLIMATE: 115.2 V 116.0E; CURRENT ASSESSMENT: 123.6 V 124.7E

- Expectation Survey: 107.4 v 108e

-(ES) Spain Aug PPI M/M: -0.1% v -0.1% prior; Y/Y: 3.2% v 3.0% prior

Fixed Income Issuance:

-Non seen

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities
Indices [Stoxx50 +0.1% at 3,546, FTSE -0.2% at 7,298, DAX +0.3% at 12,627, CAC-40 flat at 5,281, IBEX-35 -0.6% at 10,245, FTSE MIB +0.1% at 22,544, SMI +0.2% at 9,158, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes: European stocks opened lower, but drifted upwards as the session progressed; peripheral markets underperforming; political uncertainty following election results over weekend weighed on sentiment; UK stocks in focus after Moody's cut country's risk rating; Alstom and Siemens disclose entered discussions to merge train units; commodities weakened, weighing on energy and materials stocks; attention turning to ECB's Draghi speech later today and Fed Chair Yellen tomorrow

 

Equities

- Consumer discretionary: Aryzta ARYN.CH +2.2% (results), Autogrill AGL.IT -2.3% (analyst action), Norwegian Air NAS.NO +3.2% (unit awarded flight permission in US), Sodexo SW.FR -0.3% (analyst action), Unilever UNA.NL +0.1% (acquisition)

- Energy: Tullow Oil TLW.UK +5.9% (expected to resume drilling)

- Industrials: Alstom ALO.FR +1.1% (talks with Siemens), Fincantieri FCT.IT +4.4% (contract award)

- Materials: Essentra ESNT.UK +2.6% (hurricane update)

- Technology: AMS AMS.CH -4.3% (bond issue), Imagination Technologies IMG.UK +32.1%(takeover), Nets NETS.DK 6.4% (takeover offer)

 

Speakers

(UK) BOE Financial Policy Committee: Reiterates plan to lift capital buffer in November - Statement

-German IFO economists: The index in Manufacturing fell significantly, the industrial companies were at a high level significantly less satisfied with their current situation

- Banks would suffer losses of £30B in stress test

-(FR) ECB's Villeroy (France): Sees French GDP growth as fast as 1.7% in 2017

-OPEC Sec Gen Barkindo: Outlook for Global Oil market is improving

-(JP) Bank of Japan (BOJ) Gov Kuroda: Reiterates to continue with powerful monetary easing to reach 2% inflation as soon as possible - speech in Osaka

 

Currencies

- Politics dominated currency trading as both euro and kiwi fell against their major trading partners following the German and New Zealand elections

- USD/KRW won led gains as tensions eased on the Korean peninsula

 

Fixed Income

- Bund futures trade at 161.69 up 53 ticks following the German elections and disappointing IFO release. Continued downside targets 161.03 while upside resistance stands initially at 162.07, followed by 163.27.

- Gilt futures trade at 124.07 up 26 ticks following Moody’s downgrade on late Friday. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.

- Monday's liquidity report showed Friday’s excess liquidity rose to €1.743T from €1.734T and use of the marginal lending facility rose to €122M from €116M.

- Corporate issuance saw $16.7B last week via 31 tranches, bringing YTD issuance to above $1.04T. For the week ahead analysts forecast around $15-20B to come to market.
In Euro denominated issuance ~€26.9B came to market via 40 issuers and 48 tranches

 

Looking Ahead

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey

- 07:30 (TR) Turkey Sept Capacity Utilization: No est v 78.8% prior

- 07:30 (TR) Turkey Sept Real Sector Confidence (Seasonally Adj): No est v 110.2 prior; Real Sector Confidence (unadj): No est v 110.2 prior

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (US) Aug Chicago Fed National Activity Index: -0.25e v -0.01 prior

- 09:00 (CN) China Aug Conference Board Leading Economic Index

- 09:00 (MX) Mexico July IGAE Economic Activity (Monthly GDP) Y/Y: No est v 2.4% prior

- 10:30 (US) Sept Dallas Fed Manufacturing Activity: 11.5e v 17 prior

- 16:00 (US) Weekly Crop Progress Report