US banks to start Q3 earnings season, Tesla event leave investors underimpressed

EU Mid-Market Update: US banks to start Q3 earnings season; Tesla event leave investors underimpressed; Focus on China fiscal meeting tomorrow with bated breath for more stimulus.

Notes/observations

- UK Monthly GDP and German Final CPI in line; UK Autumn Budget in near term horizon on Oct 30th.

- Crude fades slightly as Israel press reports the Cabinet has not reached ‘concrete’ decision on response to Iran yet.

- US banks Blackrock, JPMorgan and Wells Fargo to reports in premarket and kick off Q3 earnings season.

- French bond yields are little changed following Govt unveiling draft of 2025 budget. Targeting 5% deficit in 2025. Most of details were pre-announced or leaked ahead of time; One measure - six months freeze in French state pensions - is being opposed by all three main blocs in the much divided National Assembly, so question remains whether the draft passes through parliament by the Dec 21st’s deadline.

- Tesla trades ~5% lower in premarket as ‘We Robot’ event showcased Robotaxi/Cybercab, Robovan (for up to 20 people) and update to Optimus robot (humanoid assistant). Analysts were disappointed by pricing and timeframe which seemed unrealistically positive, no mention of cheaper “Model 2” vehicle and the lack of partnership announcement with transport or food delivery co. Both Uber and Lyft shares trading higher premarket.

- Asia closed mixed with Shanghai underperforming -2.6%. EU indices are -0.2% to +0.2%. US futures are -0.1% to -0.4%. Gold +0.4%, DXY -0.2%; Commodity: Brent -1.2%, WTI -1.2%; Crypto: BTC -0.1%, ETH +1.1%.

Asia

- Bank of Korea (BOK) cuts the 7-day Repo Rate by 25bps to 3.25% (as expected) and moved into easing mode with its 1st rate cut since May 2020. Statement removed restrictive stance and stated to carefully determinate rate cut pace.

- BOK Gov Rhee post rate decision press conference noted that the decision to cut by 25bps was not unanimous with dissenter seeking steady rates. BOK is in process of adjusting rates to neutral level and has room for more cuts, as rate is above neutral level. Concerns over financial stability remain; members who voted for cut to monitor its impact on debt.

- New Zealand Sept Manufacturing PMI: 46.9 v 46.1 prior (18th month of contraction).

- New Zealand Sept Food Prices M/M: 0.5% v 0.2% prior.

- New Zealand Aug Net Migration: No est v 3.0K prior.

- Awaiting weekend comments from China MOF which is to hold briefing about "intensifying" fiscal policy adjustment and economic development.

Global conflict/tensions

- Israel Cabinet said not to have reach a concrete decision on response to recent Iran missile attack.

- Reports circulated that Pres Biden and PM Netanyahu were nearer a consensus on Israel’s strike plans for Iran as gaps between the US and Israel on the nature and scope of the attack has narrowed. Response Israel was planning was still slightly more severe than what the White House would like to see.

- Iran said to have warned of potential change in nuclear doctrine if Israel targeted its facilities.

Europe

- France Govt presented its 2025 Budget which would cut spending and raise taxes to achieve a 5% budget deficit in 2025.

- Swiss National Bank Vice Chair stated that its primary tool was the interest role; FX transaction was the secondary too.

Americas

- Fed's Bostic (hawk, voter for 2024; non-voter for 2025) was open to skipping a rate cut at Nov or Dec meeting; Latest inflation and labor market data provided the Fed the 'ability to be patient.

- Fed's Williams (voter): Job market unlikely to be inflation driver going forward; Expects economy will allow Fed to cut rates further.

- Peru Central Bank (BCRP) leaves Reference Rate unchanged at 5.25% (not expected) for its 1st pause in 3 decisions under the current phase of the easing cycle.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.15% at 519.28, FTSE -0.12% at 8,227.95, DAX +0.06% at 19,221.45, CAC-40 +0.11% at 7,549.51, IBEX-35 -0.01% at 11,655.00, FTSE MIB -0.14% at 34,031.00, SMI +0.18% at 12,094.82, S&P 500 Futures -0.14%].

Market Focal Points/Key Themes: European indices opened mixed with a downward bias that was reversed to generate moderate gains in early trading; among sectors inclined to the upside are communication services and technology; sectors trending lower include industrials and consumer discretionary; Saga to sell AICL unit to Ageas; Sanofi negotiation sale of half Opella to CF&R; Nippon steel agrees to sell stake in Calvert to ArcelorMittal to facilitate acquisition of US Steel; unofficial start of Q3 earnings season with major US banks reporting later in the day such as JPMorgan, Blackrock, Wells Fargo and Bank of New York Mellon.

Equities

- Consumer discretionary: Zalando [ZAL.DE] +1.5% (prelim results; raised outlook), TomTom [TOM2.NL] +6.0% (Q3 results), THG Holdings [THG.UK] -5.5% (placement), PostNL [PNL.NL] -1.5% (ING cuts to hold).

- Consumer staples: J Sainsbury [SBRY.UK] -4.5% (Qatar Investment Authority (QIA) offering 109M shares valued at $400M).

- Energy: BP [BP.UK] -0.5% (trading update; raises Q3 production outlook), Siemens Energy [ENR.DE] +2.5% (JPMorgan raised to neutral), Ceres Power [CWR.UK] -3.0% (Goldman Sachs cuts to neutral).

- Financials: Saga plc [SAGA.UK] +8.5% (earnings; partnership with Ageas).

- Industrials: BASF [BAS.DE] -1.0% (JPMorgan cuts to neutral), Thales [HO.FR] -1.5% (Berenberg cuts to hold) - Technology: ASML [ASML.NL] +0.5% (Santander raised to neutral).

Speakers

- France EU Affairs Min Haddad was concerned that about impact of high debt on French sovereignty.

- Germany reportedly to lift 2025 net new debt by ~10% to €56.5B.

- Fed's Goolsbee (non-voter for 2024; voter for 2025) spoke on a podcast and reiterated inflation had cooled and job market was strong. Did not see convincing evidence that the economy is overheating despite a gangbusters September jobs report.

- China said to consider opening stock index futures and govt bonds futures market to foreign investors.

Currencies/fixed income

- USD was slightly softer during a quiet EU session. Markets focused on upcoming China fiscal meetings on Sat plus trepidation ahead of Iran/Israel escalation. Israel Cabinet said not to have reach a concrete decision on response to recent Iran missile attack. Upcoming US session will see the release of the Fed’s favorite inflation - PPI series.

- GBP/USD drifted higher after UK economy returned to growth in August but the pace of expansion was weaker than in the first half of the year.

- EUR/USD hovering in the mid-109 area with focus on next week’s expected ECB rate cut.

- USD/JPY steady at 148.70.

Economic data

- (NL) Netherlands Aug Trade Balance: €11.1B v €11.2B prior; Exports Y/Y: -2.1% v +2.0% prior; Imports Y/Y: -0.2% v -1.2% prior.

- (FI) Finland Aug Current Account Balance: €0.7B v €0.6B prior.

- (UK) Aug Monthly GDP M/M: 0.2% v 0.2%e; 3M/3M:0.2% v 0.3%e.

- (UK) Aug Industrial Production M/M: 0.5% v 0.2%e; Y/Y: -1.6% v -0.5%e - (UK) Aug Manufacturing Production M/M: 1.1% v 0.2%e; Y/Y: -0.3% v -0.4%e.

- (UK) Aug Construction Output M/M: 0.4% v 0.5%e; Y/Y: +0.3% v -0.2%e.

- (UK) Aug Index of Services M/M: 0.1% v 0.2%e; 3M/3M: 0.1% v 0.3%e.

- (UK) Aug Visible Trade Balance: -£15.1B v -£18.9Be; Overall Trade Balance: -£1.0Bv -£5.9Be.

- (DE) Germany Sept Final CPI M/M: 0.0% v 0.0% prelim; Y/Y: 1.6% v 1.6% prelim.

- (DE) Germany Sept Final CPI EU Harmonized M/M: -0.1% v -0.1% prelim; Y/Y: 1.8% v 1.8% prelim.

- (NO) Norway Q3 House Price Index Q/Q: 0.8% v 1.2% prior.

- (RO) Romania Sept CPI M/M: 0.3% v 0.3%e; Y/Y: 4.6% v 4.7%e.

- (CH) Swiss SECO Consumer Confidence: -33.7 v -33.0e.

- (TR) Turkey Aug Current Account Balance: $4.3B v $4.2Be.

- (TR) Turkey Aug Retail Sales Y/Y: 13.3% v 5.4% prior.

- (TR) Turkey Central Bank (TCMB) Oct Inflation Expectation Survey: Next 12-month inflation outlook: % v 27.5% prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 156.5K v 140.4K tons prior.

- (TH) Thailand May Foreign Reserves w/e Oct 4th: $240.7B v $243.2B prior.

- (RU) Russia Narrow Money Supply w/e Oct 4th (RUB): 18.35T v 18.30T prior.

Fixed income issuance

- (IT) Italy Debt Agency (Tesoro) sold total €9.5B vs. €7.5-9.5B indicated in 3-year, -7-year, 15-year and 30-year BTP Bonds (5 tranches).

- Sold €2.0B vs. €1.5-2.0B indicated range in 3.45% July 2027 BTP bonds; Avg Yield: 2.68% v 2.62% prior; bid-to-cover: 1.70x v 1.60x prior.

- Sold €B vs. €1.0-1.5B indicated range in 2.65% Dec 2027 BTP bonds; Avg Yield: 2.67% v 3.48% prior; Bid-to-cover: 1.79x v 1.49x prior.

- Sold €3.5B v €3.0-3.5B indicated range in 3.45% July 2031 BTP bonds; Avg Yield: 3.19% v 3.15% prior; bid-to-cover: 1.61x v 1.86x prior.

- Sold €1.25B vs. €1.0-1.25B indicated range in 4.15% Oct 2039 BTP bonds; Avg Yield: 3.88% v 4.27% prior; bid-to-cover: 1.87x v 1.64x prior.

- Sold €B vs. €1.0-1.25B in 3.45% Mar 2048 BTP; Avg Yield: 4.04% v 3.06% prior; Bid-to-cover: 1.90x v 1.82x prior.

Looking ahead

- (DE) Germany Aug Current Account Balance: No est v €16.0B prior.

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2031, 2038 and 2046 Bonds.

- 06:00 (UK) DMO to sell £4.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £2.5B respectively).

- 07:30 (IN) India Forex Reserve w/e Oct 4th: No est v $705.9B prior.

- 08:00 (IN) India Aug Industrial Production Y/Y: 1.0%e v 4.8% prior.

- 08:00 (IS) Iceland Sept Unemployment Rate: No est v 3.2% prior.

- 08:00 (BR) Brazil Aug IBGE Services Volume M/M: 0.2%e v 1.2% prior; Y/Y: 3.8%e v 4.3% prior.

- 08:00 (MX) Mexico Aug Industrial Production M/M: 0.2%e v 0.2% prior; Y/Y: 0.4%e v 2.1% prior; Manufacturing Production Y/Y: 0.9%e v 1.6% prior.

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

- 08:30 (US) Sept PPI Final Demand M/M: 0.1%e v 0.2% prior; Y/Y: 1.6%e v 1.7% prior.

- 08:30 (US) Sept PPI (ex-food/energy) M/M: 0.2%e v 0.3% prior; Y/Y: 2.6%e v 2.4% prior.

- 08:30 (US) Sept PPI (ex-food/energy/Trade) M/M: 0.2%e v 0.3% prior; Y/Y: No est v 3.3% prior.

- 08:30 (CA) Canada Sept Net Change in Employment: +27.5Ke v +22.1K prior; Unemployment Rate: 6.7%e v 6.6% prior; Full Time Employment Change: No est v -43.6K prior; Part Time Employment Change: No est v +65.7K prior; Participation Rate: 65.1%e v 65.1% prior; Hourly Wage Rate YoY: No est v 4.9% prior.

- 08:30 (CA) Canada Aug Building Permits M/M: -7.8%e v +22.1% prior.

- 09:00 (RU) Russia Q3 Preliminary Current Account: $3.6Be v $17.4B prior.

- 09:00 (IN) India announces upcoming bill issuance (held on Wed).

- 09:45 (US) Fed's Goolsbee at Symposium.

- 10:00 (US) Oct Preliminary University of Michigan Confidence: 71.0e v 70.1 prior.

- 10:45 (US) Fed’s Logan.

- 10:30 (CA) Canada Q3 Overall Business Outlook Survey: No est v -2.9 prior; Future Outlook Sales: No est v 1 prior.

- 12:00 (RU) Russia Sept CPI M/M: 0.4%e v 0.2% prior; Y/Y: 8.6%e v 9.1% prior.

- 12:00 (RU) Russia Sept CPI Core M/M: No est v 0.6% prior; Y/Y: No est v 8.4% prior.

- 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report.

- 12:00 (EU) Potential sovereign ratings after European close (Moody’s on Belgium; Fitch on France).

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

Weekend:

(CN) China Sept CPI YoY: 0.6%e v 0.6% prior; PPI YoY: -2.6%e v -1.8% prior.