Risk off tone in Europe as European PMI's disappoint

Notes/Observations

-Risk off tone in Europe as France, Germany and European preliminary September PMI's all miss expectations

-Germany Manufacturing PMI records 10 year low, Eurozone Mfg PMI records 7 year low

-Asian Markets finished near lows as early optimism faded on China Vice Agriculture Minister clarified that cancelled visit to US farm states was unrelated to trade talks

Asia:

-China Vice Agriculture Minister's clarified that cancellation of planned visit to US farm states had nothing to do with the trade talks

-China and US deputy level talks were constructive and they agreed to continue talks on relevant issues

- China state press --NZD rises, New Zealand Shadow Board recommended no change in rates at the Sept 25th (Wed) RBNZ cash rate decision as was expected -Australian prelim manufacturing falls into contract for the first time in over 2 years

Europe/Mideast:

-France, Germany and European manufacturing and services PMI's miss forecasts.

-German manufacturing PMI falls to the lowest reading in over 10 years as uncertainty around trade wars, the outlook for the car industry and Brexit paralyzing order books.

-European PMI survey data indicate that GDP looks set to rise by just 0.1% in the third quarter, with momentum weakening as the quarter closed.

-UK tour operator Thomas Cook collapses after failing secure a rescue package.

Brexit:

-PM Johnson and US President Trump have agreed to reaching a very quick UK/US trade agreement by July 2020 according to reports

Energy:

-Reports suggest Aramco Oil fields repairs will take month rather than weeks to restore operations to full capacity

- Later reports suggest that Saudi Arabia Kurais and Abqaiq to fully restore Oil production by early next week

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.93% at 389.30, FTSE -0.75% at 7,289.65, DAX -1.46% at 12,285.85, CAC-40 -1.00% at 5,634.36, IBEX-35 -0.98% at 9,089.30, FTSE MIB -1.18% at 21,862.50, SMI -0.77% at 9,979.50, S&P 500 Futures -0.12%]

Market Focal Points/Key Themes:

Equities

European Indices trade lower with DAX underperforming other indices amid worse-than-expected and multi-year low PMI Manufacturing data coming out of Germany, France and Eurozone this morning. S&P 500 futures also erase earlier gains amid recession concerns and despite China's clarification of a Friday report about Chinese delegation cancelling visit to US farm states. On the corporate front shares of Thomas Cook were suspended from trading on its liquidation announcement. Its rival TUI rises sharply on LSE, some of European airlines stocks also trade higher. Shares of Marks & Spencer fell 3.5% on CFO succession, while Deutsche Bank and BNP Paribas confirm their hedge fund deal and both trade lower. On M&A front, UK-listed manufacturer of technical textiles Low & Bonar issues profit warning and consecutive offer to be acquired, its shares currently up more than 100%. Adler Real Estate makes acquisition in its space, trading now down almost 15%. In other news, ArcelorMittal and METRO trade lower on couple of analyst downgrades. Looking ahead notable earners include Cantel Medical Corp.

- Consumer discretionary: TUI [TUI.UK] +6.5% (rival Thomas Cook collapse), Marks & Spencer [MKS.UK] -3.5% (CFO leaves), Low & Bonar [LWB.UK] +102% (profit warning; to be acquired), METRO [B4B.DE] -3% (analyst action)

- Financials: Deutsche Bank [DBK.DE] -4% (deal with BNP), Adler Real Estate [ADL.DE] -14.5% (acquisition)

- Healthcare: GenSight Biologics [SIGHT.FR] +13% (data)

- Technology: XLMedia [XLM.UK] -22% (earnings; CFO steps down)

- Materials: ArcelorMittal [MT.NL] -6% (analyst action)

Speakers

(UK) PM Johnson: very likely Iran was behind Aramco attack; cautiously optimistic of reaching Brexit deal with EU

(UK) Foreign Min Raab: also believes likely Iran responsible for Saudi attack

(IR) Iran President Rouhani: US exaggerating damage to Aramco

(IL) Israel Fin Min Kahlon: Budget deficit to go down in 2020, no plan to raise taxes

Currencies/Fixed Income

EUR/USD: The Euro traded lower today as flash PMI figures came in weaker than expected and German composite now in contraction with the Manufacturing reading having the lowest reading since June 2009. This sent the Euro trading below the 1.10 handle to around 1.097. With the low for the the

EURU/USD over the last 2 years at 1.092. Looking at the week ahead we see Mario Draghi speaking today as well as IFO tomorrow and another Mario Draghi conference on Thursday.

GBP/USD: The Cable is currently trading slightly lower as traders await the result of last week's UK Supreme Court rulings on whether the Prime Minister's proroguing of parliament was legal. The reading can come out this afternoon but more than likely to be seen tomorrow. Looking ahead there's not much economic data scheduled however BOE Governor Carney is due to speak on Thursday. Levels to the upside are in the region of 1.258 and 1.239 to the downside.

Economic Data

(DE) GERMANY SEPT PRELIMINARY MANUFACTURING PMI: 41.4 V 44.0E (lowest reading since Jun 2009)

(EU) EURO ZONE SEPT PRELIMINARY MANUFACTURING PMI: 45.6 V 47.3E (lowest reading since Oct 2012)

(FR) FRANCE SEPT PRELIMINARY MANUFACTURING PMI: 50.3 V 51.2E (2nd consecutive month of expansion)

(ES) Spain June Trade Balance: -€2.5B v -€1.5B prior (PL) Poland Aug Construction Output Y/Y: 2.7% v 2.0%e

(CH) Swiss Weekly Total Sight Deposits (CHF): 592.1B v 592.4B prior

(CH) Swiss Aug M3 Money Supply Y/Y: 2.7% v 3.2% prior

**Fixed Income Issuance**

- Sweden sells SEK250M vs SEK180M of June 2025 Inflation-Linked Bond; Avg Yield: -2.0625% v -2.0491% prior

Looking Ahead

05:30 (SL) Sri Lanka National CPI (NCPI) Y/Y: No est v 2.2% prior

06:00 (UK) Sept CBI Retailing Reported Sales: No est v -49 prior; Distribution Sales: No est v -35 prior

06:00 (UK) Sept CBI Industrial Trends Total Orders: -15e v -13 prior; Selling Prices: No est v -2 prior

06:00 (IL) Iceland Aug Unemployment Rate: No est v 3.7% prior

07:00 (MX) Mexico July Retail Sales M/M: No est v -0.5% prior; Y/Y: No est v 1.0% prior

07:00 (BR) Brazil Sept FGV Consumer Confidence: No est v 89.2 prior

07:25 (BZ) Brazil Central Bank Weekly Economists Survey

08:00 (PL) Poland M3 Money Supply M/M: No est v 0.9% prior; Y/Y: No est v 9.9% prior

08:00 (UK) Daily Baltic Dry Bulk Index

08:30 (US) Aug Chicago Fed National Activity Index: No est v -0.36 prior

08:30 (CA) Canada July Wholesale Trade Sales M/M: 0.0%e v 0.6% prior

09:30 (BR) Brazil Aug Current Account Balance: No est v -$9.0B prior; Foreign Direct Investment (FDI): No est v $7.7B prior

09:45 (US) Sept Preliminary Markit Manufacturing PMI: 50.2e v 50.3 prior; Services PMI: 51.8e v 50.7 prior; Composite PMI: No est v 50.7 prior

11:00 (CO) Colombia Central Bank Interest Rate Decision: expected to leave Overnight Lending Rate unchanged at 4.25%

15:00 (CO) Colombia July Economic Activity Index (Monthly GDP) Y/Y: No est v 2.7% prior

17:00 (KR) South Korea Aug PPI Y/Y: No est v -0.3% prior

19:30 (AU) ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 109.3 prior