UK Retail Sales shines despite rainy weather

 EU mid-market update: UK retail sales shines despite rainy weather; Xi lifts tech stocks; Death of Hamas leader might signal real change to status quo of Israel/Hamas war.

Notes/observations

- Better than expected UK retail sales pares BOE rate cut bets, lifting Sterling ~0.5% and causing FTSE100 to underperform Europe. Stats agency ONS attributed beat to computers and telecommunications retailers, but was offset by weakness in supermarkets, due to bad weather and households cutting back on luxury food.

- Tech stocks rally after China Pres Xi vowed to support the sector. Chinese retail sales, GDP and production data was mixed, and PBOC provided more details on previously announced rate cuts and stimulus.

- Traders digest the anticlimactic ECB rate decision yesterday as fresh ECB members commentary today reiterates same message. Market sees another cut at Dec meeting and price in small chance for 50bps (20%).

- BOJ officials returned to verbal intervention tactics after USD/JPY pair tested 150 level yesterday for the first time since early Aug.

- For the first since assassination attempt in mid-July. Polymarket betting market now prices more than 60% chance for Trump to win US presidential race. Chance of Republican sweep is above 40%, highest level since July as well.

- NHC notes 50% chance of short-lived tropical depression or storm formation during next 48 hours for widespread showers and thunderstorms continue across the northwestern Caribbean Sea.

- Upcoming US Premarket Earnings: ALV, RF, FITB, SLB, PG, AXP, ALLY, SFNC.

- Asia closed mixed with Hang Seng outperforming +3.6%. EU indices are -0.2% to +0.6%. US futures are 0.0% to +0.4%. Gold +0.5%, DXY -0.2%; Commodity: Brent +0.1%, WTI +0.1%; Crypto: BTC +0.7%, ETH +0.3%.

Asia

- Japan Sept National CPI Y/Y: 2.5% v 2.5%e; CPI Ex Fresh Food (Core) Y/Y: 2.4% v 2.3%e.

- China Sept New Home Prices M/M: -0.7% v -0.7% prior; Used Home Prices M/M: -0.9% v -1.0% prior.

- China Q3 GDP Q/Q: 0.9% v 1.1%e; Y/Y: 4.6% v 4.5%e.

- China Sept Industrial Production Y/Y: 5.4% v 4.6%e.

- China Sept Retail Sales Y/Y: 3.2% v 2.5%e.

- China Sept YTD Urban Fixed Assets Y/Y: 3.4% v 3.3%e.

- China Sept YTD Property Investment Y/Y: -10.1% v -10.0%e.

- China Sept Surveyed Jobless Rate: 5.1% v 5.3%e.

- China PBOC confirmed that 7-Day Reverse Repo Rate would be cut by 20bps (**Note: Previously announced on Sept 24th).

- China PBoC Gov Pan Gongsheng noted that Loan Prime Rate to decrease by 20-25bps at the Oct 21st operation (**Note: Previously announced on Sept 24th).

- China PBoC launched the SFISF Operation from Fri (Oct 18th)/. Provided specific directions for stock buybacks and reloans to increase holdings; loan and credit funds. Noted that the 1st batch of SFISF quotas exceeded CNY200B (**Reminder: On Oct 10th PBOC confirmed to set up Securities, Funds, Insurance company swap facility [SFISF] of CNY500B).

- Japan top FX diplomat Mimura noted that recent JPY currency (Yen) moves had are somewhat rapid and one-sided; Sense market with high sense of urgency.

Mid-East

- Israeli official confirmed that Hamas leader Yahya Sinwar had been killed in Gaza.

- Pres Biden stated that hopefully Israel PM Netanyahu would end the war soon, discussed with him; Plan to send Sec State Blinken to Israel.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.19% at 524.90, FTSE -0.27% at 8,362.31, DAX +0.21% at 19,628.75, CAC-40 +0.39% at 7,613.36, IBEX-35 -0.23% at 11,877.15, FTSE MIB +0.23% at 35,121.00, SMI -0.05% at 12,302.10, S&P 500 Futures +0.17%].

Market focal points/key themes: European indices open generally lower and remained under pressure through the early part of the session; Israel closed for holiday; among sectors holding on to gains are consumer discretionary and technology; sectors pulling to the downside include health care and real estate; focus on release of EMA’s CHMP decisions; earnings expected in the upcoming US session include Autoliv, Procter & Gamble and American Express.

Equities

- Consumer discretionary: LVMH [MC.FR] +3.0% (China economic data and PBOC confirms cutting rates; head of Wines/Spirits unit to leave LVMH), Basic-Fit [BFIT.NL] +5.0% (9M results).

- Healthcare: EssilorLuxottica [EL.FR] -1.5% (Q3 results, affirms FY guidance - post close) - Industrials: Maersk [MAERSKB.DK] +3.0% (Tier1 analysts note spot container rates under pressure, focus shifting to November spot rate hike attempts and US elections), Volvo [VOLVA.SE] -1.0% (Q3 results, misses estimates, postpones battery cell plant) - Technology: ASML Holding [ASML.NL] +2.5% (Samsung delays taking deliveries of ASML high-end chipmaking equipment for its upcoming Texas factory), Future plc [FUTR.UK] -10.0% (CEO to step down) - Telecom: Elisa [ELISA.FI] -5.0% (Q3 results, affirms FY rev and raises EBITDA).

Speakers

- ECB Survey of Professional Forecasters (SPF) maintained 2024 HICP (EU Harmonized CPI) at 2.4% while trimming te 2025 forecast from 2.0% to 1.9%. Survey maintained 2024 GDP growth forecast at 0.7% and cut 2025 GDP from 1.3% t0 1.2%.

- ECB's Villeroy (France) stated that would continue to cut rates; pace would had 'agile pramatism'; upcoming meetings to have 'total optionality'. Should reach 2% inflation target sooner than expected in 2025.

- ECB’s Vasle (Slovenia) reiterated Council statement of no pre-commitment to rate path and inflation to return to target 'in course' of 2025.

- ECB's Muller (Estonia) blog comments noted that economic growth to be 'more modest'; Risks around services and wages remained.

- Poland Fin Min Domanski commented that 2025 GDP growth may exceed 4%.

- China President Xi reiterated stance to strive to achieve 2024 targets.

- China PBOC Dep Gov Liu Lei stated that PBOC to ‘pay attention’ to forward guidance.

- BOJ Gov Ueda reiterated that BOJ was watching market with high sense of urgency. Must be vigilant to market, FX moves and impact on pricing.

Currencies/fixed income

- USD retraced some of its gains during a quiet EU session. Some risk appetite was prompted after China data deluge generally beat expectations and PBoC provided details on previously announced rate cuts and stimulus measures.

- EUR/USD at 1.0840 area as ECB officials echo Lagarde post rate decision statement of no pre-set course for rate path.

- GBP/USD moved back above the 1.30 level as UK Aug Retail sales data beat consensus to rise for the 3rd straight month.

- USD/JPY moved back below the 150 level as Japanese officials again brought up that recent moves had are somewhat rapid and one-sided.

Economic data

- (UK) Sept Retail Sales (ex-auto/fuel) M/M: +0.3% v -0.3%e; Y/Y: 4.0% v 3.1%e (3rd straight monthly rise).

- (UK) Sept Retail Sales (including auto/fuel) M/M: +0.3% v -0.4%e; Y/Y: 3.9% v 3.2%e.

- (SE) Sweden Sept Unemployment Rate: 8.2% v 7.9% prior; Unemployment Rate (seasonally adj): 8.6% v 8.4%E; Trend Unemployment Rate: 8.5% v 8.5% prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 168.4K v 156.5K tons prior.

- (TH) Thailand May Foreign Reserves w/e Oct 4th: $240.0B v $240.7B prior.

- (EU) Euro Zone Aug Current Account Balance: €31.5B v €40.8B prior.

- (ES) Spain Aug Trade Balance: -€4.8B v -€3.2B prior.

- (RU) Russia Narrow Money Supply w/e Oct 11th (RUB): 18.43T v 18.35T prior.

- (HK) Hong Kong Sept Unemployment Rate: 3.0% v 3.0%e.

- (IT) Italy Aug Current Account Balance: €1.4B v €5.5B prior.

- (EU) Euro Zone Aug Construction Output M/M: +0.1% v -0.5% prior; Y/Y: -2.5% v -2.3% prior.

Fixed income issuance

- (IN) India sold total INR330B vs. INR330B indicated in 2031, 2039 and 2054 bonds.

Looking ahead

- (GR) Greece Aug Current Account Balance: No est v €0.2B prior.

- (PT) Portugal Aug Current Account Balance: No est v €1.2B prior.

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2033, 2043 and 2058 Bonds.

- 06:00 (UK) DMO to sell £4.5B in 1-month, 3-month and 6-month bills (£0B, £B and £B respectively).

- 07:30 (IS) Iceland to sell 2027 and 2037 Bonds.

- 07:30 (IN) India announces upcoming bill issuance (held on Wed).

- 07:30 (IN) India Forex Reserve w/e Oct 11th: No est v $701.2B prior.

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

- 08:30 (US) Sept Housing Starts: 1.350Me v 1.356M prior; Building Permits: 1.460Me v 1.470M prior (revised from 1.475M); Housing Starts M/M: -0.4%e v 9.6% prior; Building Permits M/M: -0.7%e v 4.6% prior (revised from 4.9%).

- 08:30 (US) Weekly USDA Net Export Sales.

- 10:00 (US) Fed’s Kashkari.

- 12:00 (CO) Colombia Aug Economic Activity Index (Monthly GDP) Y/Y: 1.6%e v 3.7% prior.

- 12:00 (EU) Potential sovereign ratings after European close (S&P on UK, Netherlands, Italy and Greece; Fitch on Italy and Sweden).

- 12:00 (US) Fed’s Waller.

- 13:00 (US) Weekly Baker Hughes Rig Count data.

- 15:00 (AR) Argentina Sept Trade Balance: $1.5Be v $2.0B prior.