Major European PMI Manufacturing exceeds expectations

Notes/Observations

- Major European Oct preliminary PMI Manufacturing data all beat expectations and in expansion territory (France, Germany and Euro Zone)

Weekend Merger deals:

-AT&T [T]agreed to buy Time Warner [TWX] for $107.5 / share

- BEAV: Rockwell Collins to acquire B/E Aerospace for $8.3B

- GNW: China Oceanwide to acquire Genworth Financial for $2.7B or $5.43/shr

- TD: TD Bank and Ameritrade said to be close to finalizing $4B deal for Scottrade

 

Overnight/weekend

Asia:

- Japan trade surplus higher than expected (¥0.5T vs. ¥0.4Te) as components beat expectations. Exports fell -6.9% (12th consecutive decline), but smaller than expected -10.8%; Imports were likewise down 16.3% but better than expected 17.0%.

Europe:

- (ES) Spain's opposition Socialist Party voted to stand aside and allow PM Rajoy to form a govt, ending 10-month political impasse after 2 inconclusive elections

- (BE) EUs Tusk gave Belgium a deadline of Mon to reach a CETA trade deal decision or postpone the EU/Canada trade summit

- (UK) Britain could cut corporate tax to 10% (from 20%) if EU refuses to agree a post-Brexit free trade deal or blocks UK-based banks from accessing its market

Energy:

- Russia Energy Min Novak: Did not want to give numbers regard potential freeze or cut as the level to depend on the deal reached by OPEC. Could not give a decision yet on freezing or cutting as were considering a few options

- Saudi Arabia's Energy and Industry Minister Al-Falih: Oil markets are on the way to being re-balanced

- Kuwaiti Oil Min: Expected the oil price to be between $50-$60 for the next 15 months

Sovereign rating summary (Fri)

- Canadian rating agency DBRS affirmed Portugal sovereign rating at BBB (low), Stable trend

- Fitch affirmed Italy sovereign rating at BBB+; outlook revised to Negative from Stable

- S&P affirmed France sovereign rating at AA; outlook revised to Stable from Negative

 

Economic data

- (JP) Japan Sept Supermarket Sales Y/Y: -3.2% v -2.9% prior

- (SG) Singapore Sept CPI M/M: 0.0% v 0.1%e; Y/Y: -0.2% v -0.%e, CPI Core Y/Y: 0.9% v 0.9%e

- (FR) France Oct Preliminary Manufacturing PMI: 51.3 v 50.0e (1st expansion in 8 months), Services PMI: 52.1 v 53.0e, Composite PMI: 52.2 v 52.8e

- (CZ) Czech Oct Business Confidence: 14.3 v 14.3 prior; Consumer Confidence: 6.5 v 4.0 prior, Composite (Consumer & Business) Confidence: 12.8 v 12.3 prior

- (DE) Germany Oct Preliminary Manufacturing PMI: 55.1 v 54.4e, Services PMI: 54.1 v 51.5e, Composite PMI: 55.1 v 53.3e

- (TW) Taiwan Sept Industrial Production Y/Y: 5.0% v 5.2%e

- (EU) Euro Zone Oct Preliminary Manufacturing PMI: 53.3 v 52.6e, Services PMI: 53.5 v 52.4e, Composite PMI: 53.7 v 52.8e

Fixed Income Issuance:

- None seen

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 +0.9% at 3,102, FTSE +0.2% at 7,033, DAX +0.8% at 10,797, CAC-40 +0.7% at 4,567, IBEX-35 +1.3% at 9,216, FTSE MIB +0.9% at 17,321, SMI flat at 8,035, S&P 500 Futures +0.5%]

Market Focal Points/Key Themes: European equity indices are trading higher across the board as PMI data across Europe came in higher than expected; Banking shares in the Eurostoxx trading higher as a sector; shares of Philips leading the gains in the index after releasing their Q3 results; Commodity, mining, and energy stocks generally trading higher, as Brent and WTI maintains its stance above $50/bbl; Upcoming scheduled US earnings (pre-market) include ACCO Brands, Boise Cascade, BE Aerospace, Rockwell Collins, Kimberly-Clark, Restaurant Brands, T-Mobile US, and VF Corp.

 

Equities (as of 09:50 GMT)

- Consumer Discretionary: [French Connection FCCN.UK +11.5% (may be considering sale)]

- Healthcare: [Koninklijke Philips PHIA.NL +4.2% (Q3 results), Roche ROG.CH -0.2% (Novartis said to put the sale of its Roche stake on hold)]

- Industrials: [Aixtron AIXA.DE -5.8% (German government has withdrawn its approval for a Chinese takeover), Cobham COB.UK -17.8% (trading update), Syngenta SYNN.CH -6.7% (Reportedly Chemchina did not make any concessions by its deadline for its $43B bid for Syngenta to the EU)]

- Technology: [Fusionex FXI.UK +17.1% (trading update)]

 

Speakers

- BOE's Shafik: Building up domestic resilience helps protect forces that BOE cannot control

- Spain interim PM Rajoy: Spain will have a working government soon

- Greece PM Tsipras: Greece's first bailout review was officially completed; €1.7B sub-tranche to be released on Monday

- ECB's Nouy (SSM chief): Banks needed to rethink their business models and adapt them to the changed environment as low interest rates put pressure on the profitability of banks

- Iran Deputy Oil Min Zamaninia: Would encourage other OPEC members to join output freeze plan

- Libya National Oil Company spokesperson reiterated oil output to reach 600K bpd at end of October (v 485K at end of Sept)

 

Currencies

- The USD consolidated recent gains in a quiet session. Dealers noted that monetary policy divergence and global capital flows have been the catalyst for recent USD strength and the greenback has the technical legs for further gains

- EUR/USD unable to move unable to move back above the 1.09 level after ECB's Draghi might have hinted at extending the QE program at the upcoming December meeting.

- PBoC fixed Yuan weaker again with USD/CNY mid-point set at 6.7690

Fixed Income:

- Bund futures trade at 164.40 up 18 ticks on mixed PMI data out of France, and stronger composite PMI data out of Germany. Having broke 164.52 early in the session continuation sees 164.87 followed by 165.03 then 165.42. A reversal continues to target 163.91 initially followed by 163.60 then 163.21.

- Gilt futures trade at 127.24 up 31 ticks maintaining the uptrend tracking Bund futures despite strength in Equities. Continuation higher targets 127.53 then 127.80 followed by 127.95.A move lower looks to close the gap at 126.89 then 126.31 and 125.82. Short Sterling futures trades flat to 1bp higher with Jun17/18 trading fractionally lower at 8/9bp.

- Monday's liquidity report showed Friday's excess liquidity rise to €1.061T a rise of €2B from €1.059T prior. This was primarily due to AFs and MonPol portfolios falling to negative €631.0B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €38M from €74M prior.

- Corporate issuance saw no issuance on Friday with the week seeing $28.6B come to market via 19 issuers and 27 tranches. Including SSA $56.9B came to market, marking the 8th time this year volume has topped $50B. For the week ahead analysts estimate around $25B coming to market.

 

Looking Ahead

- (EU) European Parliament meets in Plenary Session in Strasbourg

- (PT) Portugal releases Year-to-Date Budget Report

- 05:30 (DE) Germany to sell €1.5B in 12-month

- 05:30 (BE) Belgium Debt Agency (BDA) to sell to sell combined €1.5-1.8B in 2026, 2031 and 2045 OLO Bonds

- 06:00 (UK) Oct CBI Trends Total Orders: -5e v -5 prior, Selling Prices: No est v 5 prior, Business Optimism: No est v -47 prior

- 06:00 (DE) German Bundesbank Monthly Bulletin

- 06:25 (BR) Brazil Central Bank Weekly Economists Survey

- 06:45 (US) Daily Libor Fixing

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)

- 08:00 (CL) Chile Sept PPI M/M: No est v -0.9% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Sept Chicago Fed National Activity Index: -0.13e v -0.55 prior

- 08:30 (CA) Canada Aug Wholesale Trade Sales M/M: 0.6%e v 0.3% prior

- 08:50 (FR) France Debt Agency (AFT) to sell €5.2-6.4B in 3-month, 6-month and 12-month Bills

- 09:00 (MX) Mexico Sept Unemployment Rate (Seasonally Adjusted): 3.7%e v 3.7% prior; Unemployment Rate NSA (Unadj): 4.0%e v 4.0% prior

- 09:00 (CN) China Sept Conference Board Leading Economic Index: No est v 0.9% prior

- 09:00 (US) Fed's Dudley (dove, FOMC voter)

- 09:05 (US) Fed's Bullard speaks on Economy, Monetary Policy in Arkansas

- 09:30 (EU) ECB announces Covered-Bond Purchases

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

- 09:45 (US) Oct Preliminary Markit Manufacturing PMI: 51.5e v 51.5 prior

- 09:50 (UK) BOE to buy £1.17B in APF Gilt purchase operation

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

- 12:15 (CH) SNB's Jordan speaks in Basel

- 13:00 (BR) Brazil Weekly Trade Balance

- 13:30 (US) Fed's Evans speaks in Chicago

- 14:00 (US) Fed's Powell (moderate, FOMC voter)

- 15:30 (CA) Bank of Canada (BOC) Gov Poloz

- 16:00 (US) Weekly Crop Progress Report