European inflation data improving for the most part

Notes/Observations

- Global yields try to continue to move higher as inflation outlook improves

- Germany and Spanish inflation picture improving in Oct; France misses

- US Q3 GDP data could provide opportunity for Fed to upgrade the economic assessment in its Nov statement and boost prospects for a December rate hike

 

Overnight

Asia:

- BOJ Gov Kuroda: Personally did not believe BoJs JGB buying would change significantly under the new framework; could see some fluctuations but would not be the same as tapering

- Japan Sept National CPI in line with expectation at -0.5% y/y

- China PBoC continues to set Yuan Mid-point lower (6.7858 v 6.7736 prior); lowest CNY currency setting since 2010

Europe:

- ECB's Mersch (Luxembourg): longer we remain in low interest rate environment, the stronger the side effects will be

- Spain Acting PM Rajoy failed to reach majority in initial parliamentary vote to form govt; to face second vote later in week

 

Economic data

- (JP) Japans BOJ Sept National CPI Ex Fresh Food, Energy (core-core) Y/Y: 0.2% v 0.3%e

- (FR) France Q3 Advance GDP (miss) Q/Q: 0.2% v 0.3%e; Y/Y: 1,1% v 1.2%e

- (NO) Norway Q3 Industrial Confidence: -5 v 0e

- (FR) France Oct Preliminary CPI (miss) M/M: 0.0% v 0.2%e; Y/Y: 0.4% v 0.5%e

- (FR) France Oct Preliminary CPI EU Harmonized M/M: 01% v 0.2%e; Y/Y: 0.5% v 0.6%e

- (FR) France Sept Consumer Spending (miss) M/M: -0.2% v +0.3%e; Y/Y: 0.7% v 1.1%e

- (DE) Germany Oct CPI Saxony M/M: 0.3% v 0.1% prior; Y/Y: 0.9% v 0.7% prior

- (CH) Swiss Oct KOF Leading Indicator (beat): 104.7 v 101.8e

- (ES) Spain Oct Preliminary CPI (beat) M/M: 1.1% v 0.8%e; Y/Y: 0.7% v 0.3%e

- (ES) Spain Oct Preliminary CPI EU Harmonized M/M: 0.8% v 0.6%e; Y/Y: % v 0.3%e

- (ES) Spain Q3 Preliminary GDP Q/Q: 0.7% v 0.7%e; Y/Y: 3.2% v 3.1%e

- (AT) Austria Q3 GDP Q/Q: 0.5% v 0.1% prior; Y/Y: 1.3% v 1.2% prior

- (DE) Germany Oct CPI Brandenburg M/M: 0.2% v 0.4% prior; Y/Y: 0.9% v 0.7% prior

- (DE) Germany Oct CPI Hesse M/M: 0.3% v 0.0% prior; Y/Y: 0.8% v 0.6% prior

- (DE) Germany Oct CPI Bavaria M/M: 0.2% v 0.2% prior; Y/Y: 0.8% v 0.8% prior

- (AT) Austria Oct Manufacturing PMI: 53.9 v 53.5 prior

- (NO) Norway Oct Unemployment Rate: 2.8% v 2.8%e

- (DE) Germany Oct CPI Baden Wuerttemberg M/M: 0.2% v 0.3% prior; Y/Y: 0.8% v 0.7% prior

- (DE) Germany Oct CPI North Rhine Westphalia M/M: 0.3% v 0.1% prior; Y/Y: 0.9% v 0.7% prior

- (PT) Portugal Oct Consumer Confidence: -11.6 v -12.4 prior; Economic Climate Indicator: 1.3 v 1.4 prior

- (EU) Euro Zone Oct Business Climate Indicator: 0.55 v 0.46e; Consumer Confidence (Final): -8.0 v -8.0e, Economic Confidence: 106.3 v 104.9e, Industrial Confidence: -0.6 v -1.6e, Services Confidence: 12.0 v 10.0e

**Fixed Income Issuance:

- (IN) India sold total INR137.9B vs. INR150B indicated in 2022, 2026, 2034 and 2055 bonds

- (IT) Italy Debt Agency (Tesoro) sold total €5.25B vs. €4.25-5.25B indicated range in 5-year and 10-year BTP Bonds

- Sold €2.75B vs €2.25-2.75B indicated in 0.35% Nov 2021 BTP; Avg Yield: 0.57% v 0.28% prior; Bid-to-cover: 1.38x v 1.30x prior

- Sold €2.5B vs €2.0-2.5B indicated in 1.25% Dec 2026 BTP ; Avg Yield: 1.60% v 1.21% prior; Bid-to-cover: 1.34x v 1.43x prior

- (IT) Italy Debt Agency (Tesoro) sold €3.25B vs. €2.75-3.25B indicated in new Feb 2024 CCTeu (Floating Rate Bond) Avg Yield 0.59% v 0.33% prior; Bid-to-cover: 1.30x v 1.50x prior

- (ZA) South Africa sold total ZAR650M vs. ZAR650M indicated in I/L 2029, 2033, and 2050 bonds

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

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

Indices [Stoxx50 -0.7% at 3,062, FTSE-100 -0.6% at 6,943, DAX -0.7% at 10,643, CAC-40 -0.2% at 4,525, IBEX-35 -0.8% at 9,126, FTSE MIB -0.9% at 17,276, SMI -0.5% at 7,882, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes: European equity indices are trading sharply lower as market participants await US GDP data later today; Financial stocks generally lower across Europe; shares of AB InBev leading losses in the Eurostoxx after releasing their Q3 results; shares of Sanofi however trading positive after releasing their Q3 results higher than expectations; Consumer discretionary stocks providing some support in the FTSE 100 with shares of IAG trading notably higher after releasing their Q3 results, with construction homebuilders Barratt, Berkeley and Taylor Wimpey also trading higher; Oil and commodity stocks across Europe generally trading lower as WTI maintains its stance below $50/bbl.

A plethora of upcoming scheduled US earnings (pre-market) include Aarons, AbbVie, AutoNation, Aon, Apollo Global Management, Barnes, Bloomin Brands, Calpine, Chevron, ExxonMobil, Goodyear Tire & Rubber, Hershey, Huntsman, Legg Mason, LifePoint Health, MasterCard, Newell Brands, PBF Energy, Phillips 66, Royal Caribbean Cruises, Tenneco, Ventas, and Xerox.

 

Equities (as of 09:50 GMT)

- Consumer Discretionary: [Anheuser Busch InBev ABI.BE -4.5% (Q3 results), International Consolidated Airlines IAG.UK +2.4% (Q3 results)]

- Energy: [ENI ENI.IT -2.1% (Q3 results), Total FP.FR -1.9% (Q3 results)]

- Financials: [Banco Sabadell SAB.ES -4.4% (Q3 results), BNP Paribas BNP.FR -0.8% (Q3 results), Danske Bank BANSKE.DK -2.6% (Q3 results, raises outlook), RBS RBS.UK -2.1% (Q3 results), UBS UBSN.CH -0.2% (Q3 results)]

- Healthcare: [Novo Nordisk NOVOB.DK -13.8% (Q3 results, outlook, analyst downgrade), Sanofi-Aventis SAN.FR +6.9% (Q3 results)]

- Industrials: [Aker Solutions AKSO.NO -3.4% (Q3 results), Electrolux ELUXB.SE +1.6% (Q3 results) Linde LIN.DE +2.9% (Q3 results), SSAB SSABA.SE -4.2% (Q3 results)]

- Technology: [Agfa Gevaert AGFB.BE +3.3% (Confirms receipt of potential acquisition offer from CompuGroup), Rexel RXL.FR -2.0% (Q3 results, cuts outlook)]

- Telecom: [Proximus PROX.BE +0.9% (Q3 results, raises outlook), SES SESG.FR +6.7% (Q3 results)

 

Speakers

- ECB's Coeure (France) noted that it was clear that monetary policy was having the desired effect but cautioned the prolong use of unconventional measures posed risks. Fiscal policy must shoulder greater share of burden and postponing structural reforms was not a valid option

- ECB's Linde (Spain): Any reduction in QE should be slow rather than abrupt

- ECB's Lane (Ireland): More severe Brexit could hurt consumer confidence. Market reaction to Brexit vote so far had been orderly. Prepared for every possible degree of Brexit negotiations; must assume the worst. Market expectations based on ECB statement that QE would continue after March if needed

- Japan Fin Min Aso: could not rule out another delay in planned 2nd phase of sales tax hike

- Japan Chief Cabinet Sec Suga: PM has sole right to dissolve Lower House

- Thailand Finance Ministry saw 2016 GDP at 3.3% with Q3 growth between 3.3-3.5%

 

Currencies

-USD continued to receive support from higher bond yields.

- USD/JPY rallied to a fresh three-month high above 105.35 as US yields press higher. US Q3 GDP data could provide the opportunity for Fed to upgrade the economic assessment in its Nov statement and boost prospects for a December rate hike. A positive read on US growth would be supportive of the dollar against the safe-haven yen.

- BoE rate cut is very unlikely next week. The GBP was steady but gave up the gains registered after yesterday better-than-expected UK GDP data. GBP/USD at 1.2170 heading into the US session.

**Fixed Income:

- Bund futures trade at 162.12 up 8 ticks rebounding of contract lows as yields continue to rise amid slightly stronger inflation readings out of Europe with the 2-30s spread widening to levels not seen since August. Futures fell sharply in early trade before retracing with a move back below 161.37 targeting 161.00 psychological support followed by 160.83. A continued rebound eyes 162.53 initially followed by 163.28.

- Gilt futures trade at 125.13 down 2 ticks having traded as low as 124.59 as global yields continue to rise . Further momentum lower targets 124.26 then 123.85. A rebound targets 125.64 followed by 126.43 yesterday high. Short Sterling futures consolidated with the curve flat. Jun17/18 consolidating around 14/15bp following the run up in the past 2 weeks.

- Friday's liquidity report showed Thursday's excess liquidity fell to €1.095T a fall of €12B from €1.107T prior. This was primarily due to AFs and MonPol portfolios rising to negative €664.3B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €210M from €245M prior.

- Corporate issuance saw $8.5B come to market via 7 deals lead by UTX 5 part $4B offering and Equate Petrochemical $2.25B 2 part offering. This puts the week issuance at over $30B, ahead of estimates. In the EURO space €5.0B came to market yesterday via 10 tranches lifting weekly volume to the third highest this year. For the week ending October 26th Lipper US Fund flows reported IG Funds net inflows of $1.7B bringing YTD inflows to $42.8B, High Yield Funds saw et outflows of $48.36M bringing YTD inflows to $10.9B.

 

Looking Ahead

- (IT) Italy Debt Agency (Tesoro) to sell combined €4.25-5.25B in 5-year and 10-year BTP Bonds

- (IT) Italy Debt Agency (Tesoro) to sell €2.75-3.25B in July 2023 CCTeu (Floating Rate Bond)

- (BR) Brazil Oct CNI Consumer Confidence: No est v 103.1 prior

- (EU) EU's Juncker, Switzerland President Schneider-Ammann in Brussels

- (IE) Northern Ireland court to rule on Brexit challenge

- 06:00 (PT) Portugal Sept Retail Sales M/M: No est v 0.2% prior; Y/Y: No est v 2.9% prior

- 06:00 (PT) Portugal Sept Industrial Production M/M: No est v -1.1% prior; Y/Y: No est v 1.0% prior

- 06:00 (BR) Brazil Oct FGV Inflation M/M: 0.2%e v 0.2% prior; Y/Y: 8.8%e v 10.7% prior

- 06:00 (UK) DMO to sell combined £B in 1-month, 3-month and 6-month Bills (£0.5B, 1.0B and £3.0B respectively)

- 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave Key Rate unchanged at 10.00%

- 06:45 (US) Daily Libor Fixing - 07:30 (IN) India Weekly Forex Reserves

- 08:00 (DE) Germany Oct Preliminary CPI M/M: 0.2%e v 0.1% prior; Y/Y: 0.8%e v 0.7% prior

- 08:00 (DE) Germany Oct Preliminary CPI EU Harmonized M/M: 0.1%e v 0.0% prior; Y/Y: 0.7%ev 0.5% prior

- 08:00 (CL) Chile Sept Total Copper Production: No est v 455.4K tons prior

- 08:00 (CL) Chile Sept Manufacturing Production Y/Y: -2.0%e v +2.4% prior; Industrial Production Y/Y: -0.6%e v +2.8% prior

- 08:00 (CL) Chile Sept Retail Sales Y/Y: 3.8%e v 0.2% prior

- 08:00 (CL) Chile Sept Unemployment Rate: 7.0%e v 6.9% prior

- 08:00 (ZA) South Africa Sept Budget Balance (ZAR): No est v -16.7B prior

- 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming issuance

- 08:15 (US) Baltic Dry Bulk Index - 08:30 (US) Q3 Advance GDP Annualized Q/Q: 2.6%e v 1.4% prior; Personal Consumption: 2.6%e v 4.3% prior

- 08:30 (US) Q3 Advance GDP Price Index: 1.4%e v 2.3% prior; Core PCE Q/Q: 1.6%e v 1.8% prior

- 08:30 (US) Q3 Employment Cost Index: 0.6%e v 0.6% prior

- 09:00 (BE) Belgium Q3 GDP Q/Q: No est v 0.5% prior; Y/Y: No est v 1.4% prior

- 10:00 (US) Oct Final Michigan Confidence: 88.2e v 87.9 prelim

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

- 14:30 (MX) Mexico Sept YTD Budget Balance (MXN): No est v -202.9B prior

Weekend

(IS) Iceland holds General Election