Major European PMI data mix but remaining in expansionary territory

EU Mid-Market Update: Major European PMI data mix but remaining in expansionary territory; weak UK retail sales data dampens BOE Nov rate hike expectations.

Notes/Observations

- Bond yields moving higher as ‘transitory’ inflation still having markets believe central banks will enact earlier-than-anticipated interest rate hikes.

- Equity markets as higher corporate earnings recovery offset concerns about higher costs of borrowing and raw materials.

- Major European PMI data mixed in session; staying in expansion but at year lows: Manufacturing: Beats: Germany, Euro Zone, UK; Misses: France; Services: Beats: France, UK; Misses: Germany, Euro Zone).

- Weak Sept UK retail sales data spurred a dovish shift in BoE rate expectations (dampened the expectation of a Nov hike).

- Companies due to report during the NY morning include Autoliv, American Express, Cleveland-Cliffs, HCA, Honeywell, Regions Financial, Schlumberger, Seagate, VF Corp.

Asia

- China Property developer Evergrande said to have averted default with belated payment.

- Australia Oct Preliminary PMI Manufacturing: 57.3 v 56.8 prior (17th month of expansion).

- Japan Oct Preliminary PMI Manufacturing: 53.0 v 51.5 prior (9th month of expansion).

- Japan Sept National CPI data weak but moving in the right direction. Core registers its 1st positive reading since start of pandemic (YoY: +0.2%e v -0.4% prior; CPI ex-fresh food (core) Y/Y: 0.1% 0.1%e.

- RBA defended its bond target for 1st time in 8 months as it offered to buy A$1.0B of 2024 bonds. RBA trying to defend its 0.1% three-year yield target after the April 2024 security surged above 0.17% this week.

- President Biden vowed to protect Taiwan; US Would protect Taiwan and had commitment to do so.

Europe

- BOE's Pill (chief economist): November BOE meeting was live; UK inflation was likely to rise 'close to or even slightly above 5%.

- PM Johnson said to accept a limited role for the ECJ to interpret EU law in Northern Ireland in order to secure a deal with the EU.

- UK Oct GfK consumer Confidence: -17 v -16e as higher inflation and climbing Covid rates weighed on sentiment.

- German Chancellor Merkel said to have urged France President Macron and other EU leaders to drop threats to punish Poland amid fears the battle over rule of law could collapse the bloc.

Americas

- President Biden: Thinks close to deal [referring to economic agenda]; does not expect broad corporate tax rate hike to be in [reconciliation] bill.

- Fed's Williams (FOMC voter): Longer run inflation expectations in line with 2.0% goal.

Energy

- Russia President Putin stated that was possible for Russia to increase gas supplies to Europe and could quickly start gas supplies via Nord Stream 2 pipeline.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 +0.55% at 472.26, FTSE +0.40% at 7,218.80, DAX +0.60% at 15,564.75 , CAC-40 +1.03% at 6,755.07, IBEX-35 -0.01% at 8,943.50 , FTSE MIB +0.47% at 26,650.00, SMI -0.04% at 12,034.67, S&P 500 Futures -0.03%].

Market Focal Points/Key Themes: European indices open generally higher; sectors leading to the upside include technology and real estate; sectors starting the day in the red include energy and telecom; oil and gas subsector under pressure following reports from China on thermal coal pricing; Siltronic delays talks with GlobalWafers; JD Sports acquires majority stake in Cosmos; Sainsbury’s terminates discussion to sell its banking unit; earnings expected during the upcoming US session include American Express, Honeywell and Schlumberger.

Equities

- Consumer discretionary: L'Oreal [OR.FR] +6% (earnings), Remy Cointreau [RCO.FR] +2% (earnings), JD Sports Fashion [JD.UK] +3% (acquisition).

- Financials: London Stock Exchange [LSEG.UK] -4% (trading update).

- Industrials: Air Liquide [AI.FR] +1% (earnings), Renault [RNO.FR] -2% (earnings; production loss estimate), SAAB [SAABB.SE] -2.5% (earnings).

- Technology: Siltronic [WAF.DE] -1.5% (delays talks with GlobalWafers).

Speakers

- Sweden Central Bank (Riksbank) Dep Gov Ohlsson noted that temporary inflation couldn boost expectations thus expectations risks becoming self-fulfilling. Riksbank was fully focused on inflation going forward. Believed that higher inflation will last longer then previously thought.

- Sweden Central Bank (Riksbank) BusinessSurvey: Activity continued to strengthen for companies; supply shock to last into 2022.

- India PM Modi stated that all sectors in economy were optimistic and the festival season would boost activity.

- China President Xi stated that Oil Field construction was important to China; country's energy supply must be in its own hands.

- China Foreign Ministry spokesperson Wang Wenbin stated that Taiwan was an inalienable part of China; US should abide by the one-China principle.

Currencies/Fixed income

- Some safe-haven flows unwound after reports that China Property developer Evergrande had averted default with belated payment.

- EUR/USD steady in the session at 1.1640 area as the various major European PMI data was mixed but remaining in expansion territory.

- GBP/USD hovering around the 1.38 area as negative UK retail sales data spurred a dovish shift in BoE rate expectations.

- Focus remained on bond yields which have continued to rise and appear moving towards a self-fulfilling prophecy. Markets continue to bet that central banks would enact earlier-than-anticipated interest rate hikes. German 10-year Bund yield at -0.07 for its highest level since May 2019.

Economic data

- (NO) Norway Q3 Industrial Confidence: 8.8 v 11.0 prior.

- (UK) Sept Retail Sales (ex-auto/fuel) M/M: -0.6% v +0.3%e; Y/Y: -2.6% v -1.6%e (5th month of declines).

- (UK) Sept Retail Sales (including auto/fuel) M/M: -0.2% v +0.6%e; Y/Y: -1.3% v -0.4%e.

- (FR) France Oct Preliminary PMI Manufacturing: 53.5 v 54.0e (11th month of expansion and lowest reading since Jan 2021); PMI Services: 56.6 v 55.5e; PMI Composite: 54.7 v 54.7e.

- (DE) Germany Oct Preliminary PMI Manufacturing: 58.2 v 56.6e (16th month of expansion and lowest reading Jan 2021); PMI Services: 52.4 v 55.2e; PMI Composite: 52.0 v 54.3e.

- (CN) Weekly Shanghai copper inventories (SHFE): 39.8 v 41.7K tons prior.

- (EU) Euro Zone Oct Preliminary PMI Manufacturing: 58.5 v 57.1e (16th month of expansion); PMI Services: 54.7 v 55.4e; PMI Composite: 54.3 v 55.2e.

- (RU) Russia Narrow Money Supply w/e Oct 15th (RUB): 14.42T v 14.39T prior.

- (TW) Taiwan Sept Unemployment Rate: 3.9% v 4.0%e.

- (UK) Oct Preliminary PMI Manufacturing: 57.7 v 56.0e (17th straight expansion); PMI Services: 58.0 v 54.5e; PMI Composite: 56.8 v 54.0e.

- (HK) Hong Kong Sept CPI Composite Y/Y: 1.4% v 3.0%e.

- (IS) Iceland Sept Wage Index M/M: 0.7% v 0.3% prior; Y/Y: 7.7% v 7.9% prior.

Fixed income issuance

- (IN) India sold total INR240B vs. INR240B indicated in 2023, 2026, 2035 and 2050 bonds.

Looking ahead

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

- 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2033, 2046 and 2050 Bonds.

- 06:00 (IE) Ireland Sept PPI M/M: No est v -0.8% prior; Y/Y: No est v -1.4% prior.

- 06:00 (UK) DMO to sell £2.0B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively).

- 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to raise Key 1-Week Auction Rate by 50bps to 7.25%.

- 06:45 (US) Daily Libor Fixing.

- 07:30 (IN) India Weekly Forex Reserve w/e Oct 15th: No est v $639.5B prior.

- 07:30 (IN) India announces upcoming bill issuance (held on Wed.

- 07:30 (IS) Iceland to sell 2025 and 2026 Bonds.

- 08:00 (PL) Poland Sept M3 Money Supply M/M: 0.6%e v 0.4% prior; Y/Y: 8.6%e v 9.1% prior.

- 08:00 (CL) Chile Sept PPI M/M: No est v 2.7% prior.

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

- 08:30 (CA) Canada Aug Retail Sales M/M: +2.0%e v -0.6% prior; Retail Sales (ex-auto) M/M: +2.6%e v -1.0% prior.

- 08:30 (BR) Brazil Sept Current Account Balance: -$1.5Be v +$1.7B prior; Foreign Direct Investment (FDI): $5.0Be v $4.5B prior.

- 09:00 (IT) Bank of Italy (BOI) Quarterly Economic Bulletin.

- 09:45 (US) Oct Preliminary Markit PMI Manufacturing: 60.5e v 60.7 prior; PMI Services: 55.2e v 54.9 prior; PMI Composite: No est v 55.0 prior.

- 10:00 (US) Fed’s Daly.

- 11:00 (EU) Potential sovereign ratings after European close (S&P on UK, Greece and EFSF; Fitch on Netherlands, Austria and Finland sovereign ratings).

- 11:00 (US) Fed Chair Powell participates on panel.

- (CO) Colombia Sept Industrial Confidence: No est v 15.6 prior; Retail Confidence: No est v 43.5 prior.

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

- 14:00 (US) Sept Monthly Budget Statement: -$59.0Be v -$124.6B prior.