Macro turns to BOJ, Fed and BoE next week with ECB in rear mirror, Middle East conflict widens

Notes/Observations

- Little change to macro picture overnight following ECB rate decision. Major earnings continue to come in. Concern over bond yields dissipates slightly as US and EU yields retreat.

- Geopolitical tensions moved up a gear after middle east conflict fans out in the region, with US conducting airstrikes in Syria and separately a missile reportedly lands in Egypt from an aerial threat in the Red Sea.

- USD/JPY remains >150 with BOJ decision on Mon evening, current consensus for no change to policy.

- EU Earnings Recap: Remy Cointreau (beverages) dropped after big decline in Cognac sales and guidance cut; Sanofi (healthcare) taking CAC-40 index down following 2024 profit warning; Electrolux (appliances) fell after missing estimates and downbeat Q4 guidance, announced cost reduction program; IAG (airline group) had strong Q3 with better cost guidance, but analysts note lack of profit guidance; Natwest (bank) trimmed profit and margin guidance, Eni (oil and gas) beat estimates, raises op profit guidance and accelerates buyback.

- Asia closed higher with Hang Seng out-performing at +2.1%. EU indices are -0.3% to +0.6%. US futures are +0.4-1.0%. Gold +0.1%, DXY 0.0%; Commodity: Brent+2.5%, WTI +2.5%, TTF +0.3%; Crypto: BTC -1.1%, ETH -3.0%.

Asia

- New Zealand Oct Consumer Confidence Index: 88.1 v 86.4 prior.

- Japan Oct Tokyo CPI Y/Y: 3.3% v 2.8%e v; CPI (ex-fresh food) Y/Y: 2.7% v 2.5%e - 20:30 (SG) Singapore Q3 Final URA Private Home Prices.

- Australia Q3 PPI Q/Q: 1.8% v 0.5% prior; Y/Y: 3.8% v 3.9% prior.

- China Sept Industrial Profits Y/Y: 11.9% v 17.2% prior; YTD Y/Y: -9.0% v -11.7% prior.

- China Securities Journal article noted that analysts believe the PBOC would likely to cut RRR in Q4 to support bond issuance.

- Former China Premier Li Keqiang has died from a heart attack (**Reminder Li Keqiang stepped down from his post in March after serving two five-year terms).

Mid-East

- Israel carried out more raids in the Gaza strip overnight (**Note: said to have lasted several hours).

- US carried out strikes in Syria following attacks on its troops in the past week; President Biden ordered strikes against 2 facilities in Syria (**Reminder Oct 26th Pentagon stated that US troops had been attacked at least 12 times in Iraq and 4 times in Syria in the past week by Iran-affiliated groups).

- Iran's Foreign Min Amirabdollahian stated that the UN that if Israel's retaliation against Palestinian militants Hamas in the Gaza Strip did not end then the United States would ‘not be spared from this fire."

- Israeli Military: Projectile that hit Egypt appears linked to an aerial threat over Red Sea.

Europe

- Estonia PM Kallas: Confirms Finnish police have named the Chinese-owned and Hong-Kong-flagged container carrier NewNew Polar Bear as the prime suspect in damaging the Baltic connector Finland-Estonia gas pipeline early on Oct 8th.

- Goldman Sachs analyst believed ECB tightening cycle was completed and expected rate cuts to start in Q3 of 2024.

Americas

- South Korea and US said to conduct large-scale air drills on Oct 30-Nov 3rd - press.

- Treasury Sec Yellen stated that she would not be surprised if US growth was at 2.5% for 2023; Had the makings of a soft landing. Recent Q3 GDP report was a good strong number. Robust economy suggest higher for longer rate policy was appropriate.

- Chile Central Bank (BCCh) cut Overnight Rate Target by 50bps to 9.00% (less-than-expected).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.10% at c, FTSE +0.31% at 7,377.19, DAX +0.52% at 14,808.35, CAC-40 -0.45% at 6,858.00, IBEX-35 +0.76% at 9,030.76, FTSE MIB +0.57% at 27,666.00, SMI +0.33% at 10,401.60, S&P 500 Futures +0.62%].

Market focal points/Key themes: European indices opened mixed with a positive bias that grew dominant through the early trading hours; sectors leading the way higher include energy and materials; among lagging sectors are health care and communication services; CAC-40 underperforms other European bourses following Sanofi’s profit warning; reportedly Close Brothers seeing some interest for its wealth management operations from Canaccord Genuity; earnings expected in the upcoming US session include AON, Charter Communications, Exxonmobil and Auto Nation.

Equities

- Consumer discretionary: Electrolux [ELUXB.SE] -12.0% (earnings, cost reduction program), Ubisoft [UBI.FR] +9.5% (earnings), International Consolidated Airlines [IAG.UK] -1.5% (earnings; comments on bookings), Air France/KLM [AF.FR] -4.0% (earnings), Moncler [MONC.IT] -6.0% (earnings).

- Consumer staples: Remy Cointreau [RCO.FR] -9.5% (earnings, cuts guidance).

- Financials: Natwest [NWG.UK] -10.0% (earnings), UniCredit [UCG.IT] +1.5% (ECB approves buyback tranche), Danske Bank [DANSKE.DK] +5.5% (earnings).

- Healthcare: Sanofi [SAN.FR] -15.5% (earnings; strategy update; outlook).

- Industrials: Signify [LIGHT.NL] +10.5% (earnings).

Speakers

- ECB's Muller (Estonia, hawk) said rate of price increase is still too fast; Economy to determine how long rates stay at peak.

- Philippines Central Bank (BSP) Gov Remolona said more likely a 25bps rate hike in Nov, if we do decide to hike.

- ECB's Vasle (Slovenia, hawk) said EU inflation expected to slow further; Reiterates ECB line that current rate level is enough to curb inflation.

Currencies/fixed income

- USD was holding onto its weekly gains following solid US economic data on Thursday aid the case for higher-for-longer on interest rates.

- EUR/USD was around the 1.0550 area following the ECB pause on Thursday. Goldman Sachs analyst believed ECB tightening cycle was now finished and expected rate cuts to start in Q3 of 2024.

- USD/JPY stayed above the 150 level with focus on the BOJ rate decision on Tuesday. Lots of speculation whether the YCC could be again tweaked or even scraped. Tokyo CPI data was hotter overnight and this was viewed as a precursor the national reading.

Economic data

- (FI) Finland Sept House Price Index M/M: -0.8% v +0.4% prior; Y/Y: -6.8% v -6.6% prior.

- (SE) Sweden Sept Retail Sales M/M: -1.4% v -0.3%e; Y/Y: -3.8% v -1.7% prior.

- (NO) Norway Sept Retail Sales M/M: -0.3% v +0.1%e.

- (FI) Finland Aug Final Trade Balance: €0.0B v €0.1B prelim.

- (DK) Denmark Sept Retail Sales M/M: 0.0% v 3.7% prior ; Y/Y: 1.3% v -1.4% prior.

- (HU) Hungary Sept Unemployment Rate: 3.9% v 4.0%e.

- (FR) France Oct Consumer Confidence: 84 v 82e.

- (ES) Spain Q3 Preliminary GDP Q/Q: 0.3% v 0.2%e ; Y/Y: 1.8% v 1.7%e.

- (ES) Spain Sept Adjusted Retail Sales Y/Y: 6.5% v 7.1% prior; Retail Sales (unadj) Y/Y: 6.0% v 6.9% prior.

- (TH) Thailand Oct Foreign Reserves w/e Oct 20th: $210.7B v $211.4B prior.

- (CN) Weekly Shanghai copper inventories (SHFE): K v 58.2K tons prior.

- (AT) Austria Oct Manufacturing PMI: 41.7 v 39.6 prior (15th straight contraction).

- (IT) Italy Oct Consumer Confidence: 101.6 v 105.2e; Manufacturing Confidence: 96.0 v 96.0e; Economic Sentiment: 103.9 v 104.9 prior.

- (RU) Russia Narrow Money Supply w/e Oct 20th (RUB): 18.59T v 18.64T prior.

- (TW) Taiwan Sept Monitoring Indicator: 17 v 15 prior.

- (DE) Germany Oct CPI Brandenburg M/M: 0.0% v 0.3% prior; Y/Y: 4.6% v 5.6% prior (early release).

Fixed income issuance

- (IN) India sold total INR300B vs. INR300B indicated in 2026, 2037 and 2063 bonds.

Looking ahead

- (EU) Euro Summit (ECB chief Lagarde attending).

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2028, 2043 and 2050 Bonds.

- 06:00 (IE) Ireland Q3 Preliminary GDP Q/Q: No est v 0.5% prior; Y/Y: No est v -0.7% prior.

- 06:00 (IE) Ireland Oct Preliminary CPI EU Harmonized Y/Y: No est v 5.0% prior.

- 06:00 (IE) Ireland Sept Retail Sales Volume M/M: No est v -0.1% prior; Y/Y: No est v 3.6% prior.

- 06:00 (IT) Italy Aug Industrial Sales M/M: No est v -0.4% prior; Y/Y: No est v -1.6% prior.

- 06:00 (UK) DMO to sell £5.5B in 1-month, 3-month and 6-month bills (£1.0B, £2.0B and £2.5B respectively).

- 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to raise One-Week Auction Rate by 100bps to 14.00%.

- 07:00 (IL) Israel Aug Manufacturing Production M/M: No est v 2.1% prior.

- 07:30 (IN) India Weekly Forex Reserve w/e Oct 20th: No est v $585.9B prior.

- 08:00 (MX) Mexico Sept Trade Balance: -$0.4Be v -$1.4B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (RU) Russia Central Bank (CBR) Gov Nabiullina post rate decision press conference.

- 08:30 (US) Sept Personal Income: 0.4%e v 0.4% prior; Personal Spending: 0.5%e v 0.4% prior; Personal Spending (PCE): 0.2%e v 0.1% prior.

- 08:30 (US) Sept PCE Deflator M/M: 0.3%e v 0.4% prior; Y/Y: 3.4%e v 3.5% prior.

- 08:30 (US) Sept PCE Core Deflator M/M: 0.3%e v 0.1% prior; Y/Y: 3.7%e v 3.9% prior.

- 08:30 (BR) Brazil Sept Central Govt Budget Balance (BRL): +11.0Be v -26.4B prior.

- 09:00 (US) Fed’s Barr.

- 10:00 (US) Oct Final University of Michigan Confidence: 63.0e v 63.0 prelim.

- 11:00 (US) Oct Kansas City Fed Services Activity: No est v +2 prior.

- 11:00 (EU) Potential sovereign ratings after European close (Fitch on France & Sweden Sovereign Ratings; S&P on Finland & Sweden Sovereign Ratings; Moody's on Belgium, ESM & EFSF Sovereign Ratings.

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