Risk aversion sentiment and fresh virus restriction measures continue to spread

Notes/Observations

- Risk aversion flows pick up as further targeted measures are imposed in Europe to counter rising Covid-19 infections

- Risk sentiment also not aided by fading chances of an US stimulus deal before next month's election

- EU Sept inflation data suggest ECB grapple with persistently low inflation (could face further deteriorated from renewed Covid-19 measures); paints the picture for a compelling case for additional monetary stimulus

- EU Leaders meet on Brexit, other issues

Asia:

- Australia Oct Consumer Inflation Expectation Survey: 3.4% v 3.1% prio

r - Australia Sept Employment Change register its 1st decline in 4 months (-29.5K v -40.0Ke); Unemployment Rate: 6.9% v 7.0%e

- China Sept CPI Y/Y: 1.7% v 1.9%e

- (CN) China PBoC left its 1-Year Medium-Term Lending Facility Rate unchanged at 2.95%

- RBA Gov Lowe reiterates It is possible to cut rates to 10bps (Current rate 25bps). Noted that the Board had made no decisions about further easing and did not see increase in cash rate for 3 years (Reminder: On Oct 5th RBA left its policy steady and Reiterates stance that cash rate would not increase until progress was made towards full employment and inflation). RBA was grappling with if there is benefit in bringing down 10-year yields. Considering what benefits would come from buying longer dated Govt bonds

Corronavirus:

- Total global cases 38.4M (+1.0% d/d); total deaths:l 1.1M (+0.6% d/d)

Europe:

- EU Commission chief Von der Leyen and Council President Michel said to have told UK PM Johnson that the EU was ready to continue EU-UK trade talks but UK has to move on three unresolved issues - EU's Von der Leyen reiterated EU stance that was working on a deal with the UK but not at any price; still had a lot of work to do after Wed's call

- UK PM Johnson said to delay a decision on talks until after the European Council summit ends on Friday (Oct 16th). UK had previously noted that Oct 15th was its deadline to get a trade deal with EU

- UK chief negotiator Frost said to have told PM Johnson not to quit trade talks with the EU as deals to cover security/fishing were possible over the next 2 weeks. Frost advised a deal was not impossible although time was limited, both sides would need to work hard to reach a deal with daily talks

- BOE's Haldane (chief economist) noted that domestic businesses and consumers had shown remarkable flexibility in response to Covid which provided confidence that recovery would persist despite risks on the horizon

Americas:

- Treasury Sec Mnuchin reiterated view that still more work to do in certain areas of stimulus talks; reiterated call for Congress to authorize $300B from previous package Energy:

- Weekly API Crude Oil Inventories: -5.4M v +1M prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -2.28% at 362.18, FTSE -2.22% at 5,803.56, DAX -3.09% at 12,625.45, CAC-40 -2.35% at 4,825.47, IBEX-35 -1.92% at 6,784.00, FTSE MIB -2.57% at 19,104.50, SMI -2.14% at 10,072.90, S&P 500 Futures -1.06%]

Market Focal Points/Key Themes: European indices open broadly lower and continued to descend as the session wore on; risk sentiment impacted over prospect of further economic restrictions to combat rising number of covid cases across Europe; energy and industrial sectors lead to the downside; better performing sectors include utilities and telecom; airlines in particular affected by new covid measures; reportedly NRW state not to take stake in ThyssenKrupp; ElringKlinger enters JV with Airbus; Ryanair cuts winter capacity; earnings expected in the upcoming US session include Walgreens Boots Alliance, Morgan Stanley and Hochtief

Equities

- Consumer discretionary: AO World [AO.UK] +9% (trading update), Ryanair [RYA.UK] -4% (capacity cut), Domino's Pizza Group [DOM.UK] -8% (sales), Hays [HAS.UK] -1% (trading update), Publicis [PUB.FR] -1% (sales), Dunelm Group [DNLM.UK] -3% (trading update), Hostelworld [HSW.UK] -17% (trading update)

- Healthcare: Roche [ROG.CH] -2% (earnings)

- Industrials: Draegerwerk AG [DRW3.DE] +3% (prelim earnings)

- Technology: cyan [CYR.DE] +20% (earnings)

Speakers

- Bank of England (BOE) Credit Conditions & Bank Liabilities Surveys: Lenders reported that the availability of secured credit to households increased slightly in the three months to end-August 2020. The availability of unsecured credit to households decreased in Q3 and was expected to decrease slightly over the next quarter. Lenders reported that total funding volumes increased slightly in the three months to end-August 2020. Cost of borrowing ell in Q3, via both retail deposits and ‘other' funding.

- Brexit language said to have been 'toughened' in latest EU Draft document. EU said to no longer call on chief negotiator Barnier to "intensify" talks with the UK but just "continue" talks "in the coming weeks"

- EU leaders could hold emergency Brexit summit in November. EU diplomats said to predict Berlin meetings could be the moment trade deal with Britain received political blessing from heads of state and government

- Norway Central Bank (Norges) 3Q Bank Lending Survey: Household and Corporate largely unchanged in quarter

- Various political correspondents tweeted that London to move into Tier 2 lockdown procedures from Midnight Friday (Oct 16th)

- London Mayor Kahn confirmed he expected London to move into Tier 2 virus alert. Official announcement on alert to come in House of Commons

- US govt said to add AI and Semiconductor companies to Protection List

Currencies/Fixed Income

- Risk aversion flows aided the USD in the session as more virus restriction measures continue to be put back into various areas of

Europe.

- EUR/USD lower by 0.3% to test the 1.1700 area. EU Sept inflation data suggest ECB grapple with persistently low inflation (could face further deteriorated from renewed Covid-19 measures); paints the picture for a compelling case for additional monetary stimulus

- GBP/USD slumped to test below 1.2930 as various political correspondents tweeted that London to move into Tier 2 lockdown procedures to combat the spread of coronavirus . Brexit remains on the front burner as weel as EU Leaders gathered for a 2-day Summit. Talks were expected to continue for a few more week with a possible Nov Summit seen as key.

- Yields on core Europe contined to move lower. Germany 10-year govt yield at -0.61% (lowest level since March)

Economic Data

- (NL) Netherlands Sept Unemployment Rate: 4.4 v 4.8%e

- (FI) Finland Aug GDP Indicator Y/Y: -3.3% v -2.7% prior

- (DK) Denmark Sept PPI M/M: -0.4% v +0.9% prior; Y/Y: -1.3% v -1.0% prior

- (NO) Norway Sept Trade Balance (NOK): -8.0B v -3.4B prior

- (CH) Swiss Sept Producer & Import Prices M/M: +0.1% v -0.4% prior; Y/Y: -3.1% v -3.5% prior

- (FR) France Sept Final CPI M/M: -0.5% v -0.5%e; Y/Y: 0.0% v 0.1%e; CPI Ex-Tobacco Index: 103.80 v 103.80e

- (FR) France Sept Final CPI EU Harmonized M/M: -0.6% v -0.6%e; Y/Y: 0.0% v 0.0%e

- (SE) Sweden Sept Unemployment Rate: 8.3% v 8.8% prior; Unemployment Rate (seasonally adj): 9.0% v 9.1%e; Trend Unemployment Rate: 9.2% v 9.2% prior

- (PL) Poland Sept Final CPI M/M: 0.2% v 0.2% prelim; Y/Y: 3.2% v 3.2% prelim

- (IT) Italy Aug Industrial Sales M/M: 5.9% v 8.0% prior; Y/Y: -3.8% v -8.1% prior

- (IT) Italy Aug Industrial Orders M/M: 15.1% v 3.4% prior; Y/Y: +6.1% v -7.6% prior

- (TR) Turkey Sept Central Gov't Budget Balance (TRY): -29.7B v +28.2B prior

- (IT) Italy Aug General Government Debt: €2.579T v €2.561T prior

Fixed Income Issuance

- (AT) Austria Debt Agency (AFFA) opened book to sell EUR-denominated new 20-year RAGB bond via syndicate; guidance seen -2bps to mid-swaps

- (ES) Spain Debt Agency (Tesoro) sold €2.325B vs. €2.0-3.0B indicated range in new 0.00% Jan 2026 SPGB bonds; Avg Yield: -0.345% v -0.322% prior; bid-to-cover: 2.23x v 2.89x prior

- (FR) France Debt Agency (AFT) sold total €7.24B vs. €6.5-7.5B indicated range in 2025, 2026 and 2027 Bonds

- Sold €1.90B in 0.00% Mar 2025 Oat; Avg Yield: -0.70% v -0.48% prior; Bid-to-cover: 1.72x v 2.16x prior (Jun 18th 2020)

- Sold €3.155B in 0.00% Feb 2026 Oat; Avg Yield: -0.64% v -0.45% prior; bid-to-cover: 1.72x v 2.12x prior (July 16th 2020)

- Sold €2.185B in 2.75% Oct 2027 Oat; Avg yield: -0.59% v -0.38% prior, Bid-to-cover: 1.54x v 2.25x prior (July 16th 2020)

- (SE) Sweden sold SEK1.0B in 0.125% I/L 2026 bonds; Avg Yield: -1.4588% v -1.3821% prior; Bid-to-cover: 4.75x v 5.09x prior

- (IE) Ireland Debt Agency (NTMA) sold €750M vs. €750M indicated in 6-month Bills; Avg Yield: -0.580% v -0.550% prior; Bid-to-cover: 2.10x v 2.50x prior

Looking Ahead

- (NG) Nigeria Sept CPI Y/Y: % v 13.3%e

- 05:30 (ZA) South Africa Q2 Non-Farm Payrolls Q/Q: No est v 0.0% prior; Y/Y: No est v 0.0% prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds

- 05:50 (FR) France Debt Agency (AFT) to sell €0.5-1.0B in I/L 2030 and 2036 Bonds (Oatei)

- Sells € in 0.7% July 2030 Oatei; Real Yield: % v -1.14% prior; Bid-to-cover: x v 3.51x prior (Sept 17th 2020)

- To sell 0.10% Mar 2036 Oatei; Real Yield: %; bid-to-cover: x (no history, syndicated on July 8th 2020)

- 06:00 (IE) Ireland Aug Trade Balance: No est v €4.8B prior

- 06:00 (RO) Romania to sell RON700M in 4% 2023 Bonds

- 08:00 (BR) Brazil Aug Economic Activity Index (Monthly GDP) M/M: 1.6%e v 2.2% prior; Y/Y: -4.1%e v -4.9% prior

- 08:00 (UK) Daily Baltic Dry Bulk Index - 08:00 OPEC 2020 World oil Report

- 08:30 (US) Oct Empire Manufacturing: 14.0e v 17.0 prior

- 08:30 (US) Oct Philadelphia Fed Business Outlook Index: 14.3e v 15.0 prior

- 08:30 (US) Initial Jobless Claims: 825Ke v 840K prior; Continuing Claims: 10.55Me v 10.976M prior

- 08:30 (US) Sept Import Price Index M/M: 0.3%e v 0.9% prior; Y/Y: -1.2%e v -1.4% prior; Import Price Index (ex-petroleum) M/M: 0.5%e v 0.7% prior

- 08:30 (US) Sept Export Price Index M/M: 0.3%e v 0.5% prior; Y/Y: No est v -2.8% prior - 08:30 (CA) Canada Sept ADP Payroll Estimates: K v -205.4K prior

- 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 9th: No est v $585.8B prior

- 09:00 (CA) Canada Sept Existing Home Sales M/M: No est v 6.2% prior

- 09:00 (UK) BOE's Cunliffe - 09:00 (US) Fed's Bostic

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 11:00 (US) Weekly DOE Oil Inventories

- 11:00 (PE) Peru Aug Economic Activity Index (Monthly GDP) Y/Y: -10.3%e v -11.7% prior

- 11:00 (PE) Peru Sept Unemployment Rate: 15.0%e v 15.6% prior

- 11:00 (CO) Colombia Aug Manufacturing Production Y/Y: -6.5%e v -8.5% prior

- 11:00 (CO) Colombia Aug Retail Sales Y/Y: -10.7%e v -12.4% prior

- 11:00 (US) Fed's Quarles at annual IIF meeting

- 11:00 (US) Fed's Kaplan

- 11:30 (IL) Israel Sept CPI M/M: 0.0%e v 0.0% prior; Y/Y: -0.7%e v -0.8% prior

- 11:30 (US) Treasury to sell 4-week and 8-week bills

- 12:00 (RU) Russia Sept Industrial Production Y/Y: -5.9%e v -7.2% prior

- 12:00 (EU) ECB chief Lagarde

- 15:00 (AR) Argentina Aug Capacity Utilization: No est v 56.8% prior

- 15:00 (CO) Colombia Aug Industrial Production Y/Y: No est v -10.8% prior

- 17:00 (CL) Chile Central Bank (BCCh) Interest Rate Decision: Expected to leave Overnight Rate Target unchanged at 0.50%

- 17:00 (KR) South Korea Sept Export Price Index M/M: No est v -0.2% prior; Y/Y: No est v -6.8% prior

- 17:00 (KR) South Korea Sept Import Price Index M/M: No est v -1.1% prior; Y/Y: No est v -10.5% prior

- 17:00 (US) Fed's Kashkari on US Economic Outlook

- 17:30 (NZ) New Zealand Sept Business Manufacturing PMI: No est v 50.7 prior

- 19:00 (KR) South Korea Sept Unemployment Rate: 3.7%e v 3.2% prior

- 20:00 (US) Presidential Candidates hold town hall meetings (in leu of planned 2nd Debate

- 20:30 (SG) Singapore Sept Non-oil Domestic Exports M/M: -4.4%e v +10.5% prior; Y/Y: 11.5%e v 7.7% prior; Electronic Exports Y/Y: 19.8%e v 5.7% prior

- 22:00 (NZ) New Zealand Sept Non Resident Bond Holdings: No est v 49.5% prior

- 22:30 (KR) South Korea to sell KRW750B in Bonds

- 23:30 (JP) Japan to sell 3-Month Bills