German ZEW recovers from recent uncertainty aided by improving growth

Notes/Observations

- German economic expectations rebound in Sept aided by solid Q2 GDP growth and no uncertainty expected in the upcoming German Federal elections

Overnight

Asia:

- China Foreign Min Wang: Reiterates view that North Korea nuclear issue must be resolved peacefully with talks. To strictly follow UN resolutions and assume its international obligations

- US Defense Sec Mattis: there are military options that exist for North Korea that would not put Seoul at grave risk. Discussed reintroduction of nuclear weapons to Korean Peninsula with S. Korean counterpart

Europe:

- BOE Gov Carney reiterated MPC view that some BOE tightening may be needed in coming months spare capacity was being absorbed a bit faster rate than anticipated; rate hikes will be limited and gradual

- PM May said to convene special Brexit cabinet meeting in order to bind Foreign Sec Johnson to her vision of Brexit before her key speech in Florence on Friday, Sept 22nd

Americas:

- Bank of Canada's (BOC) Lane: Paying close attention to impact of stronger CAD currency. Each decision is a live decision. Rates are still quite low to what we feel is a neutral level for rates

- Trade Rep Lighthizer: China's broad effort to subsidize its industries is a threat to the world trading system; WTO has been unable to handle China's threat to trade under current rules

Economic data

- (EU) Euro Zone July Current Account (Seasonally Adj): €25.1B v €22.8B prior; Current Account NSA: €32.5B v €29.8B prior

- (IT) Italy July Current Account: €8.6B v €5.3B prior

- (DE) Germany Sept ZEW Current Situation Survey: 87.9 v 86.2Be; Expectation Survey: 17.0v 12.0e

**Fixed Income Issuance:

- (ID) Indonesia sold total IDR17.5T in 3-month and 9-month Bills; 5-year,10-year,20-year and 30-year Bonds

- (ES) Spain Debt Agency (Tesoro) sold total €2.95B vs. €2.5-3.5B indicated range in 3-month and 9-month Bills

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx600 -0.1% at 381.7, FTSE +0.2% at 7268, DAX -0.1% at 12547, CAC-40 flat at 5229, IBEX-35 +0.4% at 10383, FTSE MIB flat at 22367, SMI +0.1% at 9060, S&P 500 Futures flat]

Market Focal Points/Key Themes: European Indices trade mostly higher across the board in range bound trade as Indices remain muted ahead of tomorrow's FOMC rate decision. The FTSE trades higher as the Sterling continues to give back some ground after the large gains seen of late. On the corporate front Ocado is one of the leading decliners after posting Q3 results while Fingerprint cards continues to see weakness after guiding Q3 Revenues yesterday. M&A activity continues to be in Focus with BASF acquiring Solvay's Polyamides business for €1.6B, whilst Eurofins Scientific acquired EAG Laboratories for $780M in cash meanwhile Haldex trades lower in Sweden after Knorr-Bremse withdrew their bid. Looking ahead to the US morning notable earners include Autozone, Apogee and Yingli Green ENergy.

Equities

- Consumer discretionary [Ocado [OCDO.UK] -4.3% (Earnings), Hugo Boss [BOSS.DE] -2.8% (Analyst downgrade), Intertrust [INTER.NL] -3.5% (CFO steps down)] -Consumer Staples [Eurofins [ERF.FR] +5.2% (Acquistion)]

- Industrials: [Haldex [HLDX.SE] -3% (Knorr Bremse withdraws offer)]

- Technology: [FIngerprint Cards [FINGB.SE] -11% (Follow through, Analyst downgrade)]

- Telecom: [Kinepolis [KIN.BE] +6% (Acquisition)]

- Healthcare:[Solvay [SOLB.BE] -1.4% (Divests Polyamides business to BASF)]

Speakers

- France Fin Min Le Maire: 2018 budget will be fair and support the economy; Govt likely to cut spending by €16B in 2018. Lowered the2017 budget deficit to GDP ratio from 3.0% to 2.9% and 2018 budget deficit to GDP ratio to 2.6% (prior govt estimate was 2.7%)

- France Finance Ministry 2018 Budget Statement (official release): Planned budget deficit to GDP of 2.6% and net tax cut of €10B

- Spain Fin Min de Guindos: Govt to approve 2018 budget on Friday, Sept 22nd

- German ZEW Economists noted that the improved morale was due to solid Q2 GDP growth, rise in bank lending and investment by both govt and private companies. Saw no uncertainty expected in upcoming German elections and concerns over stronger Euro currency have faded

- Bank of Korea (BOK) Aug Minutes noted that one member saw its current monetary policy as accommodative but needed to change stance. Timing is important in reducing monetary easing; 2% CPI meant bigger need to reduce easing

- Japan PM Abe to hold press conference on Monday, Sept 25th (**Note: Reports circulated that Abe would call a snap election as soon as Sept 25th to take advantage of the uptick in approval ratings and the disarray in the main opposition party)

- Iraq Oil Min Al-Luaibi: Current oil production cuts are going fine; prices and global markets are improving. Iraq and other oil producers seek an additional 1% in production cuts but no decision made.

Currencies

- USD/JPY edged towards the 112 level on speculation that PM Abe would soon call a snap election t to take advantage of the uptick in approval ratings and the disarray in the main opposition party. The weaker yen currency amid expectations that victory for the ruling coalition would mean continuation of current BOJ policies

- GBP/USD was back below the 1.35 level after hitting key technical resistance at 1.36. PM May reportedly to convene special Brexit cabinet meeting in order to bind Foreign Sec Johnson to her vision of Brexit before her key speech in Florence on Friday, Sept 22nd.

- EUR/USD locked in recent range just under the 1.20 level. Better German ZEW data kept the tailwinds behind the Euro while concerns over its recent strength seemed to have faded

Fixed Income

- Bund futures trade at 161.13 up 7 ticks as markets await the Fed Meeting and ECB speakers. Continued downside targets 161.03 while upside resistance stands initially at 162.07, followed by 163.27.

- Gilt futures trade at 125.59 up 17 ticks as more banks predict a November BOE hike. Continued downside eyeing 124.91. Upside targets 127.90 then 128.24.

- Monday's liquidity report showed Friday's excess liquidity fell to €1.7652T from €1.7655T and use of the marginal lending facility fell to €102M from €109M.

- Corporate issuance saw $5.5B come to market via 8 issuers headlined by Bunge Limited Finance Corp $1B 2-part senior unsecured note offering and Expedia $1B 10-year senior unsecured note offering

Looking Ahead

- (FI) Finland's Government meeting on 2018 Budget

- 05.30 (UK) Weekly John Lewis LFL sales data

- 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills

- 05:30 (EU) ECB allotment in 7-day Main Financing Tender (MRO) tender

- 05:30 (UK) DMO to sell 1.5% Conventional July 2047 Gilts

- 06:00 (IL) Israel July Manufacturing Production M/M: No est v 1.9% prior

- 06:00 (IL) Israel Aug Unemployment Rate: No est v 4.1% prior

- 06:30 (EU) ESM to sell 6-Month Bills

- 07:45 (US) Weekly Goldman Economist Chain Store Sales

- 07:45 (UK) BOE Financial Policy Committee (FPC) Kohn

- 08:00 (HU) Hungary Central Bank (NBH) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.90%

- 8:00 (PL) Poland Aug Sold Industrial Output M/M: +3.2%e v -8.5% prior; Y/Y: 5.9% e v 6.2% prior, Construction Output Y/Y: 24.0%e v 19.8% prior

- 08:00 (PL) Poland Aug Retail Sales M/M: 0.7%e v 0.6% prior; Y/Y: 7.1%e v 7.1% prior, Real Retail Sales Y/Y: 6.7%e v 6.8% prior

- 08:00 (PL) Poland Aug PPI M/M: 0.4%e v 0.3% prior; Y/Y: 2.9%e v 2.2% prior

- 08:30 (US) Aug Housing Starts: 1.174Me v 1.16M prior; Building Permits: 1.22Me v1.230M prior (revised from 1.223M)

- 08:30 (US) Q2 Current Account: -$116.0Be v -$116.8B prior

- 08:30 (US) Aug Import Price Index M/M: 0.4%e v 0.1% prior; Y/Y: 2.2%e v 1.5% prior; Import Price Index ex Petroleum M/M: 0.2%e v 0.0% prior

- 08:30 (US) Aug Export Price Index M/M: 0.2%e v 0.4% prior; Y/Y: No est v 0.8% prior

- 08:30 (CA) Canada July Manufacturing Sales M/M: -1.9%e v -1.8% prior

- 08:55 (US) Weekly Redbook Sales - 09:00 (BE) Belgium Sept Consumer Confidence: No est v 2 prior

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:00 (RU) Russia Aug Unemployment Rate: 5.1%e v 5.1% prior, Real Disposable Income: 0.0%e v -0.9% prior, Real Wages Y/Y: 3.8%e v 4.6% prior

- 09:00 (RU) Russia Aug Real Retail Sales M/M: 3.1%e v 3.8% prior; Y/Y: 1.1%e v 1.0% prior

- 09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement

- 09:00 (RU) Russia announces weekly OFZ bond auction

- 09:50 (UK) BOE to buy £1.125B in in APF Gilt purchase operation (over 15 years)

- 11:00 (BR) Brazil to sell I/L 2022, 2026, 2035 and 2055 Bonds

- 11:30 (US) Treasury to sell 4-Week Bills

- 16:30 (US) Weekly API Oil Inventories