PM Johnson to revive push to get a Brexit deal done; focus on whether Parliamentary Speaker permits a meaningful vote

Notes/Observations

- Risk of a no-deal Brexit appears to be receding (most likely outcome is a deal, a softer Brexit, a snap election or a second referendum). Focus on whether UK Parliamentary Speaker John Bercow grants PM Johnson's request for a parliamentary vote on his Brexit plan Monday

Asia:

- China Vice Premier Liu He reiterates China will work with the US to address each other's core concerns on the basis of equality and mutual respect

- China PBOC Gov Yi Gang: The potential escalation of trade tensions and policy uncertainty were the major risk factors facing the world economy, and market forces were keeping China's yuan at an appropriate level

- BOJ Gov Kuroda: If needed BOJ would "certainly" cut short and medium term rates as part of easing;already had a flexible framework that allowed us to accelerate purchases of ETFs if markets became too volatile. BOJ equipped with unconventional tool kits, so there was no need to be too pessimistic about the effectiveness of monetary policy

- About 350K protesters in Hong Kong despite police ban on march. Rally drew broad-based support from regular citizens including young families and the elderly. More radical faction of largely young protesters later clashed with riot police.

Europe/Mideast:

- ECB Vasle (Slovenia) reiterated the IMF has urged euro zone countries with fiscal capacity to ease fiscal policy and stimulate economic growth

- Fitch affirmed UK's 'AA' sovereign rating; maintains Watch Negative

Brexit:

- UK Parliament backed move to delay approval of Brexit deal (voted in favor of Letwin amendment in a 322-306 vote)

- PM Johnson sent an unsigned letter to EU asking for a delay to Brexit to Jan 31, 2020, as well as 2 additional letters explaining that he did not want a delay and a copy of the law that requests the legislation be passed before approving and Brexit deal

- UK Senior Minister Michael Grove (in charge of no deal Brexit prep): UK to still leave the EU on October 31st; PM letter was sent because parliament required it to be sent but parliament can't change the prime minister's mind or change the government's policy or determination

- UK Foreign secretary Raab: cross-party coalition of 320 MPs would probably back agreement

- EU leaders held short meeting Sunday (Oct 20th) on Brexit: Saying that they would play for time rather than rush to decide on PM Johnson's not-request, request to delay Brexit

- French government said to have demanded a prompt "yes or no" from Britain over Boris Johnson's Brexit deal as European capitals appeared split on Sunday night over an extension and its duration

- EU said to be poised to grant three-month Brexit extension. Would delay Brexit until February if UK PM Johnson was unable to get his deal past MPs this week

Americas:

- Chile declared state of emergency after protests turn violent,

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.32% at 393.08, FTSE +0.10% at 7,157.42, DAX +0.56% at 12,704.86, CAC-40 +0.03% at 5,637.88, IBEX-35 +0.51% at 9,377.00, FTSE MIB +0.41% at 22,412.50, SMI +0.16% at 9,981.00, S&P 500 Futures +0.21%]

Market Focal Points/Key Themes:
European Indices trade higher as no deal Brexit risk appear to be fading. Asian Indices were mixed with US index futures trading higher. On the corporate shares of German traded SAP trade higher as the company reported strong margins and backed their current and midterm forecasts; SoCal gains on Q3 sales and outlook, with Sartorius and Sartorius Stedim also gaining on earnings. Meanwhile Just Eat declines over 5% on softer Q1 revenue growth, Trifast declines over 15% on tepid guidance due to challenging market conditions, with Fabege, and Kiadis Pharma among other decliners on earnings. In other news Wirecard continues to rebound as the company confirms an additional independent audit to be conducted by KPMG; Watchstone group gains as the company agrees terms of claims made by Slater & Gordon, while Capital and Counties Properties gains over 8% as Candy Ventures confirms a possible takeover bid. Looking ahead notable earners include Halliburton, Lennox International, and Old National Bancorp among others.

 

Equities

- Financials: Hypoport [HYQ.DE] -1% (earnings), Capital & Counties Properties [CPC.UK] +8% (Candy Ventures confirms offer)

- Healthcare: Smith and Nephew [SN.UK] -6.5% (CEO steps down), Bavarian Nordic [BAVA.UK] -8% (acquisition), Abivax [ABVX.FR] +19% (study result)

- Industrials: Trifast [TRI.UK] -18% (trading update)

- Technology: SAP [SAP.DE] +1.5% (earnings), Wirecard [WDI.DE] +7% (orders independent audit), Micro Focus [MCRO.UK] -7% (no offer), Watchstone [WTG.UK] +36% (settlement)

- Real Estate: Deutsche Wohnen [DWNI.DE] -1.5% (Berlin rent freeze)

 

Speakers

- European Research Group (ERG) chairman Baker: ERG would compromise to get UK out of EU. Would have to choke down our pride and vote in the national interest to get Brexit done

- German Econ Min Altmaier: We needed clarity on Brexit soon

 

Currencies/Fixed Income

Risk appetite finding some momentum as the threat of a no-deal Brexit outcome appeared to diminish. USD and JPY currencies softer while core bond yield were moving higher.

- GBP/USD re-approached a 5-month high as the risk of a no-deal Brexit appeared to be receding . Focus on whether UK Parliamentary Speaker John Bercow granted PM Johnson's request for a parliamentary vote on his Brexit plan Monday. UK Govt believed it had the voted needed to pass the Brexit deal. EUR/USD edging towards the 1.12 level

- USD/JPY continues to probe its key resistance level of 109 with dollar buy-stop orders were said to be building.

 

Economic Data

- (DE) Germany Sept PPI M/M: +0.1% v -0.1%e; Y/Y: -0.1% v -0.2%e

- (NO) Norway Q3 Industrial Confidence: 2.5 v 5.1 prior

- (NL) Netherlands Sept House Price Index M/M: 0.7% v 0.1% prior; Y/Y: 6.1% v 5.7% prior

- (CH) Swiss Sept M3 Money Supply Y/Y: 2.6% v 2.7% prior

- (JP) Japan Sept Convenience Store Sales Y/Y: -1.1% v +0.8% prior

- (CH) Swiss Weekly Total Sight Deposits (CHF): 592.4B v 592.2B prior; Domestic Sight Deposits: 482.6B v 484.1B prior

- (TW) Taiwan Sept Export Orders Y/Y: % v -4.6%e

- (PL) Poland Sept Retail Sales M/M: -4.0% v -1.7%e; Y/Y: 5.3% v 8.1%e; Real Retail Sales Y/Y: 4.3% v 6.2%e

- (GR) Greece Aug Current Account Balance: €1.9B v €1.3B prior

- (EU) Euro Zone 2018 Govt Debt/GDP Ratio: 85.9% v 85.1% prior

**Fixed Income Issuance**

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3-month bills; Avg Yield: 1.35% v 1.28% prior; Bid-to-cover: 2.12x v 2.48x prior

- (SK) Slovakia Debt Agency (Ardal) sold total €221.4M in 2028 and 2030 bonds

 

Looking Ahead

- 05:30 (SL) Sri Lanka Sept National CPI (NCPI) Y/Y: No est v 3.4% prior

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-Month bills

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)

- 06:00 (TR) Turkey to sell 2021 Bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (RO) Romania to sell 4.5% 2024 Bonds

- 07:00 (IL) Israel to sell bonds

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

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey

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

- 09:00 (BE) Belgium Oct Consumer Confidence: No est v -11 prior

- 09:00 (FR) France Debt Agency (AFT) to sell combined €3.6-4.8B in 3-month, 6-month and 12-month Bills

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

- 16:00 (US) Weekly Crop Condition Report