US tax reform momentum seemed to have slowed for the time being

Notes/Observations

- President Trump arrives in China; greeted by another Chinese trade surplus

- US tax reform momentum seemed to have slowed as GOP talk about holding corporate tax cuts back by a year

 

Overnight

Asia:

- (CN) China Oct Trade Balance (USD-denominated): $38.2B v $39.1Be, Exports Y/Y: 6.9% v 7.1%e, Imports Y/Y: 17.2% v 17.0%e

- BOJ member Funo: reiterated that important to continue current powerful easing as still some distance from inflation target. Noted that would not necessarily keep policy unchanged until 2% inflation was reached

- US President Trump speech to Korea National Assembly: World cannot tolerate rogue regime that threatens it with nuclear devastation; all responsible nations must join forces to isolate North Korea and deny it any form of support

Europe:

- EU official said to discuss Brexit transition stance at a meeting on Wed, Nov 8th
Americas:

- Senate GOP reportedly considering a 1-year delay on corporate tax in reform bill (**Note: Delay would save $100B in the bill). Could face resistance from Trump who has sought immediate implementation

- Fed's Harker (hawk, voter): Reiterates Fed on pace to hike rates in Dec 2017; 2018 hinges on inflation

- Bank of Canada (BOC) Gov Poloz: economy was likely to need less monetary stimulus over time; BOC would be cautious in adjusting policy rate in the future. inflation was behaving well within the normal zone of tolerance

Energy:

- Weekly API Oil Inventories: Crude: -1.6M v -5.1M prior

 

Economic Data

- (TH) Thailand Central Bank (BOT) left its Benchmark Interest Rate unchanged at 1.50% (as expected)

- (FR) France Sept Trade Balance: -€4.7B v -€4.7Be

- (ES) Spain Sept Industrial Output NSA Y/Y: 0.2 v 2.3% prior; Industrial Output SA Y/Y: 3.4% v 3.1%e

- (CZ) Czech Oct Unemployment Rate: 3.6% v 3.6%e

- (ZA) South Africa Oct Sacci Business Confidence: 92.9 v 93.0 prior

Fixed Income Issuance:

- (IN) India sold total INR110B vs. INR110B indicated in 3-month, 6-month and 12-month Bills

- (SE) Sweden sold SEK 10Bvs. SEK10B indicated in 3-month bills; Avg Yield:-0.8304% v -0.7460% prior; Bid-to-cover: x v 2.43x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.1% at 394.3, FTSE flat at 7515, DAX flat at 13385, CAC-40 -0.1% at 5475, IBEX-35 -0.3% at 10197, FTSE MIB -0.6% at 22836, SMI +0.2% at 9234, S&P 500 Futures flat]

Market Focal Points/Key Themes:

European Indices trade mixed this morning, trading little changed as Macro data remained light. The deluge of earnings continued this morning, notably in Germany E.ON which reported slightly better then expected results, Hannover Re cuts its outlook amidst the recent natural disasters, while Wirecard is under pressure after being linked to the recently release paradise papers. In the UK M&S reversed earlier gains after reporting H1 results, in France Credit Agricole weighs after lower Q3 profits and in the Netherlands Supermarket giant Ahold Delhaize trades sharply higher after strong results.
Looking ahead, notable earners in the US include Humana, Wendy's and MGM resorts.

 

Equities

- Consumer discretionary [Marks & Spencer [MKS.UK] -1.5% (Earnings), JD Weatherspoons [JDW.UK] +0.3% (Earnings), Ahold Delhaize [AD.NL] +5% (Earnings), Wizz Air [WIZZ.UK] -8% (Earnings)]

- Financials: [Credit Agricole [ACA.FR] -4.3% (earnings)]

- Technology: [Wirecard [WDI.DE] -2.7% (Link to paradise papers)]

- Healthcare: [Lundbeck [LUN.DK] -4% (Earnings)]

- Utilities: [SSE [SSE.UK] +0.3% (Earnings, agreement with Innogy)]

- Energy: [ E.ON [EOAN.DE] +1.1% (Earnings), Tullow Oil [TLW.UK] +2.9% (Trading update)]

 

Speakers

- BOE Agents Summary: Pay growth has edged up and expected to be higher in 2018 as recruitment difficulties had intensified. Forecasted pay settlements between 2.5-3.5% next year. Saw modest growth in investment in the coming year

- France Fin Min Le Maire: France and Germany should harmonized their corporate tax rates by end of 2018. To form working groups to discuss next steps of Euro Zone reforms

- Greece PM Tsipras reiterated working intensively to conclude third bailout review

- German Leading Economic Institutes (Advisors) noted that ECB should urgently communicate a strategy for the normalization of policy and should quickly reduce asset purchases and end the program earlier. Believed that QE undermined the effectiveness and credibility of the ESM crisis mechanism. Raised 2017 GDP growth forecast from 1.4% to 2.0% and 2018 GDP growth forecast from 1.% to 2.2%

- Russia Fin Min Siluanov: Venezuela ready to restructure debt owed to Russia

- Russia govt spokesperson: Probability of a Trump/Putin meeting on sidelines of upcoming APEC Summit in Vietnam was high

- White House official: President Trump to decide whether North Korea would be labeled a state sponsor of terrorism by the end of his current Asia trip. Reiterated that China is not doing enough under UN sanctions

- Thailand Central Bank policy statement noted that the decision was unanimous to keep policy steady and reiterated that its accommodative policy was still needed. Monetary policy still supported the country's economic recovery at a time of high household debt. Domestic economy was expected to grow at a faster pace than its previous assessment, driven by growth in exports and improvement in domestic demand. THB currency (Baht) price movement within regional peers.

 

Currencies

- USD was softer against most major pairs after reports circulated that that Senate Republicans could postpone the $845 million corporate tax cut until 2019. Dealers noted that the prospect of delays could hurt the greenback’s luster for now.

- Overall price action has seen quiet session with narrow ranges. EUR/USD hovering around the 1,16 area while USD/JPY at 113.70.

 

Fixed Income

- Bund futures trade at 163.47 up 16 ticks, underpinned with core bond. Support lies at 162.00, followed by 161.50. Resistance stands initially at 163.51, followed by 164.25.

- Gilt futures trade at 125.65 up 18 ticks with the focus on BOE Financial Policy Committee Kohn's speech. Continued upside eyeing 125.75 then 126.47. Downside targets include 124.90 then 124.24.

- Wednesday's liquidity report showed Tuesday’s excess liquidity rose to €1.8720T from €1.8645T and use of the marginal lending facility climbed to €238M from €197M

- Corporate issuance saw $13.3B come to the primary market via 6 issuers, headlined by Oracle's five-part bond offering.

 

Looking Ahead

- (UR) Ukraine Oct CPI M/M: No est v 2.0% prior; Y/Y: 14.1%e v 16.4% prior

- (NL) Netherlands Debt Agency (DSTA) announces upcoming DSL bond auction for Tues, Nov 14th

- 05:30 (CL) Chile Central Bank's Traders Survey

- 05:30 (DE) Germany to sell €3.0B in 0% Oct 2022 BOBL

- 05:30 (PT) Portugal Debt Agency (IGCP) to sell 4.125% Apr 2027 OT

- 06:00 (CL) Chile Oct CPI M/M: +0.3%e v -0.2% prior; Y/Y: 1.6%e v 1.5% prior

- 06:00 (PT) Portugal Q3 Unemployment Rate: No est v 8.8% prior

- 06:00 (IE) Ireland Sept Property Prices M/M: No est v 2.0% prior; Y.y: No est v 12.2% prior

- 06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%

- 06:00 (RU) Russia to sell combined RUB25B in OFZ bonds

- 06:45 (US) Daily Libor Fixing

- 06:50 (UK) BOE Financial Policy Committee (FPC) Kohn at conference in London

- 07:00 (US) MBA Mortgage Applications w/e Nov 3rd: No est v -2.6% prior

- 08:00 (HU) Hungary Central Bank (NBH) Oct Minutes

- 08:00 (RU) Russia Oct Official reserve Assets: $426.5Be v $424.8B prior

- 08:05 (UK) Baltic Dry Bulk Index

- 08:15 (CA) Canada Oct Annualized Housing Starts: 211.0Ke v 217.3K prior (revised 217.1K)

- 08:30 (CA) Canada Sept Building Permits M/M: +1.0%e v -5.5% prior

- 10:00 Poland Central Bank Gov Glapinski to hold post rate decision press conference

- 10:30 (US) Weekly DOE Crude Oil Inventories

- 11:00 (IT) Italy Debt Agency (Tesoro) announces upcoming BTP bond auction for Monday, Nov 13th

- 12:00 (CA) Canada to sell 5-Year Bonds

- 13:00 (US) Treasury to sell $23B in 10-Year Notes

- 13:00 (DE) German Chancellor Merkel at church event

- 15:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave Cash Rate (OCR) unchanged at 1.75%