Markets await Fed Chair speech

Notes/observations

- As we sit in final third of Q3 earnings season, sentiment hinges on debate over rate path timing. Market seems to think cuts are coming in 2024 but how long will central banks leave rates at currently restrictive levels before cutting to support growth, and if so, where are the indications of a struggling economy. If a soft landing becomes reality, can equities live in a higher rate environment. Traders look to commentary for hints, with Fed Chair Powell to speak later.

- EU Key Earnings Recap: Commerzbank strong quarter allowed a raise to guidance and planned €600M buyback; ABN Amro NII miss weighs on stock; Adidas Q3 disappointed with miss in op profit and poor outlook; Bayer Q3 missed across the board, sees soft growth ahead and continues to evaluate consumer health or crop science separation. Vestas beat consensus but cut and narrowed guidance, noting supply chain issues are not over.

- Asia closed mixed with KOSPI under-performing at -0.9%. EU indices are -0.2% to -0.4%. US futures are -0.1%. Gold -0.3%, DXY +0.3%; Commodity: Brent -0.6%, WTI -0.7%, TTF -0.7%; Crypto: BTC +1.4%, ETH +0.4%.

Asia

- New Zealand Q4 Inflation Expectation Survey with 1-year inflation expectations: 3.6% v 4.2% prior and 2-year outlook steady at 2.8%.

- BOJ Gov Ueda reiterated potential side effects of YCC include FX volatility. Not a must for real wages to be up when shifting policy. BOJ could move before or after real wages became positive.

- China PBOC Gov Pan Gongsheng reiterated would achieve its 2023 GDP growth target of ~5.0%.

- US senior official stated that Pres Biden and China Pres Xi summit scheduled for next Wed, Nov 15th; US hoped to reestablish top-level communication to avoid clash.

- Moody's affirmed Japan sovereign rating at A1; Outlook Stable.

Global conflict/tensions

- President Biden said to have urged PM Netanyahu to agree to a three-day pause in the fighting to allow progress in releasing some of the hostages held by Hamas in Gaza.

Europe

- ECB’s Nagel (Germany): Lively wage growth and falling labor supply will keep up pressure on inflation. Imperative to remain vigilant.

- ECB's Stournaras (Greece) reiterated view that if inflation fell below 3% on consistent basis then ECB could cut rates in H2 of 2024.

- IMF commented on ECB and stressed that it needed to keep rates at or close to 4% thru 2024 to reduce inflation.

-Think tank NIESR: Chancellor should ramp up investment instead of giving pre-election tax cuts in its upcoming Autumn Statement.

Americas

- Fed's Logan (voter): Inflation remains too high. Looked like inflation was trending toward 3%; Needed to be sensitive to inflation expectations. Core question was whether financial conditions were sufficiently restrictive.

- Fed’s Bowman (hawk) stated that continue to expect further rate hikes were needed; to closely watch incoming data.

- Treasury Semi-annual Foreign-Exchange report noted that no major U.S. trading partner manipulated the rate of exchange between its currency and the U.S. dollar. Six economies are on “Monitoring List” that merit close attention to their currency practices and macroeconomic policies: China, Germany, Malaysia, Singapore, Taiwan, and Vietnam (prior saw 7 countries; removed Switzerland).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.07% at 442.48, FTSE -0.12% at 7,401.43, DAX -0.38% at 15,095.45, CAC-40 -0.24% at 6,969.65, IBEX-35 +0.01% at 9,236.56, FTSE MIB -0.64% at 28,214.00, SMI -0.09% at 10,561.90, S&P 500 Futures -0.04%].

Market focal points/key themes: European indices open generally lower; sectors holding on to the green include consumer discretionary and health care; sectors leading the way lower include materials and real estate; Fresenius sells its Eugin unit to KKR portfolio company; OHB accepts KKR takeover offer; earnings expected during the upcoming US session include Walt Disney, Under Armour, Lyft and Moderna.

Equities

- Consumer discretionary: Adidas [ADS.DE] -1.5% (earnings), Deutsche Post [DPW.DW] +4.5% (earnings), Marks & Spencer [MKS.UK] +10.0% (earnings; reinstates dividend), Pandora [PNDORA.DK] +5.5% (earnings, raises guidance).

- Consumer staples: Koninklijke Ahold Delhaize [AD.NL] -8.5% (earnings; buyback).

- Financials: Commerzbank [CBK.DE] +4.5% (earnings, beats estimates, €600M buyback, guidance raise), Credit Agricole [ACA.FR] +1.0% (earnings, beats estimates), ABN Amro [ABN.NL] -8.5% (earnings).

- Healthcare: Bayer [BAYN.DE] -0.5% (earnings; business review ongoing).

- Industrials: Continental [CON.DE] +2.0% (earnings).

- Utilties: E.ON [EOAN.DE] -2.0% (earnings).

Speakers

- ECB Sept Consumer Expectation Survey: 1-year CPI Expectations: 4.0% v 3.5% prior. 3-year CPI Expectations: 2.5% v 2.5% prior.

- ECB's Lane (chief economist): Should not take a lot of comfort from inflation at 2.9%. Some progress on underlying inflation but not enough.

- ECB's Wunsch (Netherlands, hawk) stated that region was poised for soft landing in short term. Rate tightening has been doing its job, inflation has been falling rapidly. Entering a form of stagflation.

- ECB’s Makhlouf (Ireland) noted that the economy and financial system were still adjusting to change in interest rates by central banks.

- ECB's Kazaks (Latvia, hawk) noted that Council was holding rate steady so inflation could continue to decline. Reiterated that further rate hikes might not be needed.

- BOE Gov Bailey noted that policy was now restrictive and would need to be for an extended period; economic growth subdued. Noted that must be on alert on pressures to fragmentation.

- G7 Foreign Ministers Statement condemned terror attacks by Hamas and others against Israel. Emphasized Israel's right to defend itself. Stressed the need for urgent action to address the humanitarian crisp in Gaza.
Russia Central Bank Gov Nabiullina noted that capital control measures had decreased market volatility.

- Japan govt said to issue ¥8.875T in bonds for 2nd supplementary. FY23/24 Bond issuance to total ¥44.5T.

Currencies/fixed income

- USD holding steady as Fed speakers continue to leave the door open to further rate hikes. Focus turn to an upcoming speech from Fed Chair Powell on Wed. Dealers noted Fed speak providing the obligatory hawkish pushback to steer market expectations away from rate cuts.

- EUR/USD staying under the 1.07 level as dealers noted that recent EU data showing the region very close to recession.

Economic data

- (IT) Bank of Italy Reports on Balance-Sheet Aggregates.

- Sweden Oct Maklarstatistik Housing Prices Y/Y: -5.0% v -6.0% prior.

- (DE) Germany Oct Final CPI M/M: 0.0% v 0.0% prelim; Y/Y: 3.8% v 3.8% prelim.

- (DE) Germany Oct Final CPI Harmonized M/M: -0.2% v -0.2% prelim; Y/Y: 3.0% v 3.0% prelim.

- (HU) Hungary Sept Retail Sales Y/Y: -7.3% v -7.1% prior.

- (HU) Hungary Sept Preliminary Trade Balance: €1.3B v €0.7B prior.

- (FR) France Sept Trade Balance: -€8.9B v -€8.2B prior; Current Account Balance: -€2.5B v -€0.8B prior.

- (CZ) Czech Oct Unemployment Rate: 3.5% v 3.6%e.

- (IT) Italy Sept Retail Sales M/M: -0.3 v +0.1%e; Y/Y: 1.3% v 2.4% prior.

Fixed income issuance

- (DK) Denmark sold total DKK3.5B in 2033 and 2034 DGB Bonds.

- (SE) Sweden sold SEK2.5B vs. SEK2.5B indicated in 1.75% Nov 2033 bonds; Avg Yield: 2.7824% v 2.894% prior, bid-to-cover: 2.86x v 3.08x prior.

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 1.75% Feb 2027 Bonds; Avg Yield: 3.94% v 4.15% prior; Bid-to-cover: 1.56x v 2.55x prior.

- (UK) DMO sold £900M in 0.125% Mar 2051 Inflation-linked Gilts (UKTi); Real Yield: 1.314% v 1.330% prior; bid-to-cover: 3.18x v 2.54x prior.

Looking ahead

- (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to cut Base Rate by 25bps to 5.50%.

- (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to leave Interest Rates unchanged at 7.00%.

- 05:15 (US) Fed’s Cook.

- 05:15 (CH) Switzerland to sell 2034 and 2039 Bonds.

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

- 05:30 (DE) Germany to sell €4.0B in 2.60% Aug 2033 Bunds.

- 06:00 (EU) EU Commission to sell combined €2.5B in 3-month and 6-month bills.

- 06:00 (IL) Israel Sept Chain Store Sales M/M: No est v 0.4% prior.

- 06:00 (CL) Chile Oct CPI M/M: 0.5%e v 0.7% prior; Y/Y: 5.1%e v 5.1% prior.

- 06:00 (CL) Chile Oct CPI (ex-volatile items) M/M: No est v 0.2% prior; Y/Y: No est v 6.6% prior.

- 06:00 (BR) Brazil Oct FGV Inflation IGP-DI M/M: 0.6%e v 0.5% prior; Y/Y: -4.2%e v -5.3% prior.

- 06:00 (PT) Portugal Q3 Unemployment Rate: No est v 6.1% prior.

- 06:00 (RU) Russia OFZ Bond auction (if any).

- 06:30 (BR) Brazil Sept Nominal Budget Balance (BRL): -68.1Be v -106.6B prior; Primary Budget Balance: +11.9Be v -22.8B prior; Net Debt to GDP Ratio: 59.8%e v 59.9% prior.

- 07:00 (US) MBA Mortgage Applications w/e Nov 3rd: No est v -2.1% prior.

- 07:00 (BR) Brazil Sept Retail Sales M/M: +0.1%e v -0.2% prior; Y/Y: 2.2%e v 2.3% prior.

- 07:00 (BR) Brazil Sept Broad Retail Sales M/M: 0.0%e v -1.3% prior; Y/Y: 2.7%e v 3.6% prior.

- 07:30 (ES) ECB’s De Cos (Spain).

- 07:30 (CR) ECB’s Vujcic (Croatia).

- 08:00 (HU) Hungary Central Bank (MNB) Oct Minutes.

- 08:00 (RU) Russia Oct Official Reserve Assets: No est v $569.0B prior.

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

- (PL) Poland Central Bank (NBP) Interest Rate Decision (no set time).

- (RO) Romania Central Bank (NBR) Interest Rate Decision (no set time).

- 08:30 (CA) Canada Sept Building Permits M/M: -1.2%e v +3.4% prior.

- 09:00 (EU) European Finance Ministers (Eurogroup) with ECB chief Lagarde attending.

- 09:15 (US) Fed Chair Powell.

- 10:00 (US) Sept Final Wholesale Inventories M/M: 0.0%e v 0.0% prelim; Wholesale Trade Sales M/M: 0.9%e v 1.8% prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (CA) Canada to sell 5 Year Bonds.

- 13:00 (US) Treasury to sell 10-Year Notes.

- 13:30 (CA) Bank of Canada (BOC) Oct Summary of Deliberations.

- 16:45 (NZ) New Zealand Oct Total Card Spending M/M: No est v -0.1% prior; Retail Card Spending M/M: No est v -0.8% prior.

- 18:00 (CO) Colombia Oct CPI M/M: 0.4%e v 0.5% prior; Y/Y: 10.6%e v 11.0% prior.

- 18:00 (CO) Colombia Oct CPI Core M/M: 0.3%e v 0.5% prior; Y/Y: 10.6%e v 10.9% prior.

- 18:50 (JP) Japan Sept Current Account Balance: ¥2.978Te v ¥2.28T prior; Adj Current Account: ¥2.30Te v ¥1.635T prior; Trade Balance (BoP basis): ¥244.5Be v -¥749.5B prior.

- 18:50 (JP) Japan Oct Bank Lending Y/Y: No est v 2.9% prior; Bank Lending (ex-trusts) Y/Y: No est v 3.2% prior.

- 18:50 (JP) BOJ Nov Summary of Opinions.

- 19:01 (UK) Oct RICS House Price Balance: No est v -69% prior.

- 20:30 (CN) China Oct CPI M/M: N o est v +0.2% prior; Y/Y: -0.1%e v 0.0% prior; PPI Y/Y: -2.7%e v -2.5% prior.

- 21:00 (PH) Philippines Q3 GDP Q/Q: +1.9%e v -0.9% prior; Y/Y: 4.7%e v 4.3% prior.

- 21:00 (JP) Oct Tokyo Avg Office Vacancies: No est v 6.2% prior.

- 22:00 (TH) Thailand Oct Consumer Confidence: No est v 58.7 prior; Economic Confidence: No est v 53.2 prior.