Core Bonds open higher ahead of Draghi testimony

Notes/Observations

- Asian equities decline led by Shanghai (China 10-yr bond yield declines by over 5bps); China HSBC Manufacturing PMI due Monday night

- Some partially attribute weakness in Shanghai to IPO concerns

- NZD pares election induced gains; Commodity currencies track weakness in commodity prices

- ECB's Visco suggested that the current easing measures have been effective vs Euro

- Euro Zone government bond yields open generally lower ahead of Draghi testimony and amid declines in Asian gov't bond yields; Peripherals later underperform led by Spain (amid Catalonia concerns)

- Commodities led lower by copper as China continues to play down any large scale stimulus

- Tesco declines weigh on FTSE 100

- (EU) ECB's Liikanen: Reiterates growth will happen but it will be slower; prolonged periods of low inflation has a negative impact

- Italy PM office: Have freed ~€30B to pay debts owed by public sector bodies to suppliers - Italian press

- Poland Central Bank Official Osiatynski (dovish): Reiterates 50bps rate cut in Oct would be very justified - Polish press

- CEQ.NO: Confirms Mitsubishi has offered NOK96/shr (14.3% premium to Friday close); total deal worth NOK8.88B

Key Economic Data in session

- (TW) TAIWAN AUG EXPORT ORDERS: 5.2% V 7.4%E; Export orders from China Y/Y: 2.9% v +9.2% prior

- (CH) Swiss Aug M3 Money Supply Y/Y: 3.4% v 3.5% prior

Fixed Income

- (FR) On Friday Sept 19th, Moody's affirmed France at Aa1; maintained negative outlook [contrary to press report this week that said it would downgrade to Aa2]

Equities

Indices [Stoxx50 -0.1%, FTSE 100 -0.6% at 6,795, DAX -0.2% at 9,778, CAC-40 -0.1% at 4,458, IBEX-35 0.1% at 11,009, FTSE MIB -0.1% at 20,960, SMI -0.3% at 8,812, S&P 500 Futures -0.5% at 1,994]

Market Focal Points/Key Themes: Equity markets open lower following negative leads from Shanghai, M&A (Siemens confirms bid for Dresser-Rand, Cermaq rises on bid from Mitsubishi Corp), Weaker commodity prices weigh on mining sector, Total cut 2015 production forecast

By Sector

Consumer Discretionary [Tesco TSCO.UK -8% (possible restatements), Air France AF.FR -3% (extended strike)] Industrials [Sulzer SUN.CH -4% (ended talks with Dresser-Rand)] Stoxx50 sectors [Consumer Cyclical -1%, Basic Materials -0.7%, Industrials -0.6%, Basic Materials -0.6%, Energy -0.5%, Financials -0.1%; Utilities +0.7%, Telecom flat, Technology flat, Consumer Non-Cyclical flat]

FIXED INCOME/FX/COMMODITIES

Currencies/Fixed Income:

- Dollar came off its highs in the Asian session, weakness carried into early European morning. USD/CHF weakened slightly while the Swissie remained unchanged against euro. Sterling rose ahead of the open. Long term Treasuries rose on traders looking for a deal. AUD/USD headed to a multi-month low with nothing in sight to reverse its course, breaking 0.8900 level. Yen remained mixed through the session finding some strength in commodity currencies.

Looking Ahead

- 06:00 (TR) Turkey to sell 2019 Fixed Bonds

- 06:00 (RO) Romania to sell 2025 Bonds

- 06:45 (US) Daily Libor Fixing

- 07:30 (BR) Brazil Central Bank Weekly Economists Survey

- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming 3-Month and 9-Month Bill auction

- 08:15 Baltic Dry Bulk Index

- 08:30 (US) Aug Chicago Fed Nat Activity Index: No est v 0.39 prior

- 08:50 (FR) France Debt Agency (AFT) to sell combined € in 3-month, 6-month and 12-month Bills

- 09:00 (EU) ECB President Draghi Testifies Before Euro Parliament Economic and Monetary Committee (Brussels)

- 09:00 (IL) Israel Central Bank Interest Rate Decision; Expected to leave Base Rate 0.25%

- 09:00 (MX) Mexico Aug Unemployment Rate (unadj): : No est v 5.5% prior; Unemployment Rate (Seasonally Adj): No est v 4.8% prior (revised from 5.2%)

- 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

- 09:45 (UK) BOE reverse auction; to purchase £1.6B in 3-7 year Gilts (residual)

- 10:00 (US) Aug Existing Home Sales: No est v 5.15M prior

- 10:00 (EU) Euro Zone Sept Advance Consumer Confidence: No est v -10.0 prior

- 10:05 (US) Fed's Dudley speaks in New York

- 11:30 (US) Treasury to sell $ in 3-Month and 6-Month Bills

- 12:40 (CA) BOC Dep Gov Wilkins speaks at CFA Society

- 16:00 (US) Crop Condition Report

- 21:45 (CN) China HSBC Sept Preliminary Manufacturing PMI: No est v 50.2 prior