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TradeTheNews.com EU Mid-Market Update: US mid-term elections in focus; Russia and US are said to be discussing holding in-person talks on strategic nuclear weapons
Tue, 08 Nov 2022 5:15 AM EST
**Notes/Observations**
-Market participants awaiting double barreled catalysts with US Mid-Terms today and US CPI on Thurs
- Russia and US are reportedly discussing holding in-person talks on strategic nuclear weapons (the first time since Ukraine war escalation started in Feb 2022); Talks may take place in the Middle East
-UK BOE's Pill alluded to finely nuanced MPC attitude change after recently balancing the risk of recession with lowering inflation, the Central Bank has previously declared complete focus to driving down inflation as first and only priority. New comments shed color that MPC stance to now incorporate economic outlook as a decision in future rate hikes. Reminder that last Thurs, BOE declared the UK to already be in a recession since Q3 and to remain for up to 2 years
-Asia closed mixed with NZX50 -1.2%. EU indices are mixed between -0.2% and +0.4%. US futures are +0.2%. Gold -0.4%, DXY +0.2%; Commodity: Brent -0.9%, WTI -1.1%, UK Nat Gas +5.1%; Crypto: BTC -4.4%, ETH -4.9%
Asia:
- China leaders said to be considering steps towards reopening the economy, but no timeline set. A return to pre-pandemic level of activity not likely before end of 2023
- BOJ Summary of Opinions noted that domestic consumer inflation likely to continue accelerating as firms pass on higher costs
- Japan Govt said to be adding ~Â¥1.4T of loans for the second extra budget
- New Zealand Q4 Inflation Expectation Survey (2-year outlook): 3.6% v 3.1% prior
- Australia Oct Final PMI Services: 49.3 v 49.0 prelim (confirms move back into contraction)
Europe:
- ECB chief Lagarde reiterated stance that must bring inflation back to 2% target in the medium term. Reiterated inflation remained much too high and inflation expectations needed to remain anchored
- ECB's Kazaks (Slovenia) stated that there was no pivot; and still believed inflation was a problem. To continue raising rates. Discussion about the size of the step was appropriate. There was no need to take a pause at the turn of the year and should continue hiking into next year’
- UK PM Sunak reportedly to increase pensions and benefits in line with inflation
- UK to announce a 'major' LNG gas purchase deal with the US after the COP27 climate summit
Americas:
- Fed's Barkin (non-voter) stated that would have made sense if Fed had started tightening earlier; saw promising signs on inflation
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
Equities
Indices [Stoxx600 +0.21% at 419.22, FTSE -0.04% at 7,296.85, DAX +0.25% at 13,567.00, CAC-40 -0.13% at 6,408.49, IBEX-35 +0.20% at 7,978.38, FTSE MIB +0.14% at 23,525.00, SMI +0.42% at 10,795.80, S&P 500 Futures +0.18%]
Market Focal Points/Key Themes: European indices open lower across the board but later turned around to trade mixed; better performing sectors include telecom and financials; sectors leading into the red include consumer discretionary and industrials; Carrefour and Publicis enter retail media JV; IMI acquires Heatmiser; Volvo cars to divest its stake in Aurobay to Geely; earnings expected in the upcoming US session include Perrigo, Banco BPM, Clear Channel Outdoor and Walt Disney
***Equities***
- Consumer discretionary: Pandora [PNDORA.DK] +7% (earnings), Deutsche Post DHL [DPW.DE] -1% (earnings; raises outlook), Ubisoft Entertainment [UBI.FR] -4% (offering), Persimmon [PSN.UK] -7.5% (trading update)
- Consumer staples: Associated British Foods [ABF.UK] +5% (earnings), Carrefour [CA.FR] -1.5% (strategy update; JV)
- Financials: Hammerson [HMSO.UK] +10% (trading update)
- Healthcare: Bayer [BAYN.DE] -2.5% (earnings)
- Industrials: Schaeffler [SHA.DE] +8% (earnings; cost cuts), Renault [RNO.FR] -3% (strategy update; partnerships)
Speakers*
- ECB’s De Guindos (Spain) reiterated stance that would continue raising rates to level that ensured inflation to come back in line for price stability. Saw inflation hovering around 10.7% over next few months and the start to decline in H1 2023. To proceed with a lot of caution and prudence in regard to QT with the process to begin in 2023
- ECB’s Nagel (Germany) reiterated stance that size of rate hikes were data and outlook dependent; must continue normalizing policy but not let up too early. Believed that ECB should continue with tightening even if it weighed on growth
- BOE's Pill (chief economist) stated that most concern is whether inflation would persist in the country; could not declare victory over 2nd round effects. Needed to raise rates to tighten monetary policy but not set on any pre-set pace. Noted that gas price increase was a big shock for UK economy; Energy price increase was squeezing household income. Country was moving into a recession.
- SNB' President Jordan stated that the policy decisions were not based entirely on our inflation forecast but must be based on a firm commitment to the objective of price stability
- Russia Central Bank (CBR) Gov Nabiullina stated that was softening capital controls as situation stabilized but no need for further liberalization at this time. Current One-Week Auction rate level reflects raised level of uncertainty and high inflation expectations
- Japan Fin Min Suzuki stated that the Cabinet had approved the extra budget. Noted that the stimulus budget spending would make Japan's fiscal position even more severe, and it must seek an exit from such massive fiscal stimulus
**Currencies/ Fixed Income**
- USD was steady with US mid-term elections in mind. Dealers pondered whether gridlock outcome or even Republican sweep could occur and its implications on policy. Overall, the conclusion appeared to be a scenario where Congress would not have an easy time adding to fiscal stimulus through next year. The greenback rally could stall if the Fed could take its foot off the pace of recent rate hikes
Economic Data
- (SE) Sweden Oct Maklarstatistik Housing Prices Y/Y: -5% v -3% prior; Apartment Prices Y/Y: -6% v -6% prior
- (NL) Netherlands Oct CPI M/M: 1.1% v 2.4% prior; Y/Y: 14.3% v 14.5% prior
- (NL) Netherlands Oct Final CPI EU Harmonized M/M: 1.3% v 1.3% prelim; Y/Y: 16.8% v 16.8% prelim
- (FR) France Sept Trade Balance: -€17.5B v -€14.7Be; Current Account: -€7.3B v -€5.9B prior
- (FR) France Q3 Preliminary Private Sector Payrolls Q/Q: 0.4% v 0.5% prior
- (TW) Taiwan Oct Trade Balance: $3.0B v $4.9Be; Exports Y/Y: -0.5% v -6.0%e; Imports Y/Y: +8.2% v -5.0%e
- (TW) Taiwan Oct CPI Y/Y: 2.7% v 2.8%e; CPI Core Y/Y: 3.0% v 2.7%e; WPI Y/Y: 11.1% v 12.2% prior
- (CZ) Czech Oct Unemployment Rate: 3.5% v 3.5%e
- (CZ) Czech Sept Retail Sales (ex-auto) Y/Y: -5.6% v -7.8%e
- (HU) Hungary Sept Retail Sales Y/Y: 3.0% v 1.5%e
- (HU) Hungary Sept Industrial Production M/M: +1.6% v -0.8%e; Y/Y: 11.6% v 8.8%e
- (IT) Italy Sept Retail Sales M/M: 0.5% v 0.2%e; Y/Y: 4.1% v 4.4% prior
- (CZ) Czech Oct International Reserves: $130.5B v $132.6B prior
- (EU) Euro Zone Sept Retail Sales M/M: 0.4% v 0.4%e; Y/Y: -0.6% v -1.1%e
**Fixed income issuance:
- (UK) DMO opened its book to sell GBP-denominated 3.75% Jan 2038 Gilt via syndicate; guidance seen +6.0-6.5bps to UK treasury
- (NL) Netherlands Debt Agency (DSTA) sold €2.49B vs. €1.5-2.5B indicated range in 0.5% July 2032 DSL bonds; Avg Yield: 2.627% v 1.488% prior
- (ZA) South Africa sold total ZAR3.9B vs. ZAR3.9B indicated in 2030, 2032 and 2044 bonds
- (ID) Indonesia sold total IDR10T vs. IDR10T target in bills and bond
- (ES) Spain Debt Agency (Tesoro) sold total €4.33B vs. €4.0-5.0B indicated range in 6-month and 12-month bills
- (PL) Poland opened its book to sell USD-denominated 5-year and 10-year notes via syndicate
- (TR) Turkey opened it book to sell $1.5B in 9.875% 2028 eurobonds via syndicate
- (AT) Austria Debt Agency (AFFA) sold total €1.15B vs. €1.15B indicated in 2028 and 2032 RAGB bonds
**Looking Ahead**
- (RO) Preview Romania Central Bank (NBR) Interest Rate Decision
prior
- (CO) Colombia Oct Consumer Confidence: -16.0e v -11.5 prior
- 05:25 (EU) Daily ECB Liquidity Stats
- 05:25 (CH) Switzerland to sell 3-month Bills
- 05:30 (DE) Germany to sell €6.0B in new 2.2% Sept 2024 Schatz
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 12-month bills
- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO
- 06:00 (US) Oct NFIB Small Business Optimism: 91.3e v 92.1 prior
- 06:00 (CL) Chile Oct CPI M/M: 0.9%e v 0.9% prior; Y/Y: 13.3%e v 13.7% prior
- 06:00 (BR) Brazil Oct FGV Inflation IGP-DI M/M: -0.7%e v -1.2% prior; Y/Y: 5.5%e v 7.9% prior
- 06:00 (FI) Finland to sell combined €2.0B in 6-month and 9-month bills
- 06:45 (US) Daily Libor Fixing
- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:00 (SE) Sweden Central Bank (Riksbank) Breman
- (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to raise Interest Rates by 50bps to 6.75%
- 08:55 (US) Weekly Redbook LFL Sales data
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:45 (UK) BOE Gilt sale auction
- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills
- 12:30 (NL) ECB's Wunsch (Netherlands)
- 13:00 (US) Treasury to sell 3-Year Notes
- 14:00 (AR) Argentina Sept Industrial Production Y/Y: No est v 7.6% prior; Construction Activity Y/Y: No est v 7.3% prior
- 14:00 (BR) Brazil Oct Vehicle Production: No est v 207.8K prior; Vehicle Sales: No est v 194K prior; Vehicle Exports: No est v 28.5K
- 16:30 (US) Weekly API Oil Inventories
- 16:45 (NZ) New Zealand Oct Total Card Spending M/M: No est v 2.5% prior; Retail Card Spending M/M: No est v 1.4% prior
- 18:00 (KR) South Korea Oct Unemployment Rate: 2.9%e v 2.8% prior
- 18:50 (JP) Japan Sept BoP Current Account: ¥250.0Be v ¥58.9B prior; Adj Current Account: +¥0.0Be v -¥530.5B prior; Trade Balance (BOP): -¥1.683Te v -¥2.49T prior
- 18:50 (JP) Japan Oct Bank Lending Y/Y: No est v 2.3% prior; Bank Lending (ex-trusts) Y/Y: No est v 2.6% prior
- 20:30 (CN) China Oct CPI M/M: No est v 0.3% prior; Y/Y: 2.4%e v 2.8% prior; PPI Y/Y: -1.6%e v +0.9% prior
- 20:30 (KR) Bank of Korea to sell KRW800B in 1-Year Bonds
- 21:35 (CN) China to sell C1-year and 7-year Upsized Bonds
- 21:35 (CN) China to sell 3-month bills
- 22:30 (JP) Japan to sell 6-Month Bills
- 22:35 (JP Japan to sell 30-year JGB BondsEU Mid-Market Update: BOE's landmark moment as its poised to begin QT
Tue, 01 Nov 2022 5:40 AM EST
**Notes/Observations**
-Global risk appetite ignited by reports China is constructing a "Reopening Committee' for their economy. News lifted Hang Seng 5% and carried momentum over to European indices and US futures. China Foreign Ministry commented on speculation and noted they 'were not aware of the situation', but did not specifically deny the rumors.
-ECB's Lagarde noted recession risk had increased, and stated inflation is too high (following record high Euro Zone CPI Estimate yesterday of 10.7% YoY)
-Ahead of BOE decision on Thurs, a reminder that BOE begin their Gilt sales today with first auction of £750M in short-term maturities
-All Saints Day holiday underway across parts of Europe with Croatia, Hungary, Poland, Slovakia and Slovenia closed.
-Asia closed higher with Hang Seng outperforming at +5.3%. EU indices are 0.6-1.7% high. US futures are +0.5% to +0.8%. Gold +0.5%, DXY -0.4%; Commodity: Brent +1.0%, WTI +0.9%, UK Nat Gas +9.9%; Crypto: BTC -0.5%, ETH +0.7%
Asia:
- RBA raised Cash Rate Target by 25bps to 2.85% (as expected). Reiterated forward guidance that expected to continue increase rates for period ahead with size and timing of future hikes to be data determined. CPI to peak at 8.0% later this year (**Note: in-line with recent 2023 budget view from govt)
- China Oct Caixin PMI Manufacturing registered it’s (3rd straight contraction (49.2 v 48.5e)
- Japan Oct Final PMI Manufacturing confirmed 21 months of expansion (50.7 v 50.7 prelim)
- Australia Oct Final PMI Manufacturing confirmed 30th month of expansion (52.7 v 52.8 prelim)
- BOJ Gov Kuroda reiterated stance that must maintain easy policy to support economy in midst of recovery from pandemic
- Japan Fin Min Suzuki: Additional sharp weakening in the JPY is unfavorable in the current situation with Inflation as an issue
Ukraine Conflict:
Russia Defense Ministry stressed that Russia was suspending, not withdrawing from, the Black Sea grain initiative
Americas:
- President Biden stated that energy companies had reported Q3 profits that were 'hard to believe' and 'outrageous', the result of 'profiteering'; Confirmed White House would work with Congress to address these excess profits
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
Equities
Indices [Stoxx600 +1.20% at 417.14, FTSE +1.43% at 7,196.30, DAX +0.93% at 13,377.27, CAC-40 +1.55% at 6,364.05, IBEX-35 +0.97% at 8,033.77, FTSE MIB +1.57% at 23,007.00, SMI +0.71% at 10,904.60, S&P 500 Futures +0.68%]
Market Focal Points/Key Themes: European indices open higher across the board and advanced further as session progressed; reduced trading across Europe due to holiday; all sectors start the day higher, with leaders including energy and consumer discretionary; lagging sectors include telecom and real estate; reportedly Lufthansa returns to bid for ITA Airways; earnings expected in the upcoming US session include AMD, Uber, Mondelez and Eli Lilly
***Equities***
- Consumer staples: ForFarmers [FFARM.NL] -13% (trading update)
- Energy: Uniper [UN01.DE] +5.5% (mild Nov forecast for Europe), BP [BP.UK] -1% (earnings; raises outlook; buyback)
- Healthcare: AstraZeneca [AZN.UK] +1.5% (full vaccine approval in EU)
- Technology: Prosus [PRX.NL] +7.5% (refutes article on Tencent)
- Materials: Ferrexpo [FXPO.UK] +4% (resume partial operations in Ukraine)
***Speakers***
- ECB chief Lagarde reiterated stance that not yet reached destination on rates and stressed that ECB was committed to doing whatever it took to get inflation back to the 2% target
- ECB’s Schnabel (Germany) stated that needed to get a grip on inflation dynamics
- South Africa Central Bank (SARB) Gov Kganyago stated that must not loosen grip on inflation or fall behind our peers as rates normalize
- RBA Gov Lowe stated that not hiking would allow inflation become entranced. To ensure that inflation surge is temporary. Reiterated view that inflation was expected to increase further and peak at 8.00% by the end
- China's Zhengzhou (capital city of Henan Province) said to have loosened some COVID controls from today,
- China Foreign Ministry stated that was not aware of the situation when asked about social media reports that China was forming a reopening Committee
**Currencies/ Fixed Income**
- Some risk-on appetite saw the USD soften ahead of Wednesday’s FOMC decision. Overall the market expects the Fed to hike by 75bps with its narrative being focused on battling inflation
- EUR/USD steady at 0.9920. Recent EU data suggested inflation peak was not likely in near future with many countries likely to remain around double-digit levels in the coming months.
- GBP/USD at 1.1525 as BOE was poised to kick off active sales of Gilts following the recent turmoil of the former Truss mini-budget
- USD/JPY was back below 148 level as dealers remain wary of potential Japan FX intervention.
***Economic Data***
- (RU) Russia Oct Manufacturing PMI: 50.7 v 50.1e (6th straight expansion)
- (DE) Germany Sept Import Price Index M/M: -0.9% v +0.6%e; Y/Y: 29.8% v 31.0%e
- (UK) Oct Nationwide House Price Index M/M: -0.9% v -0.3%e; Y/Y: 7.2% v 8.2%e
- (TR) Turkey Oct Manufacturing PMI: 46.4 v 46.9 prior (8th straight contraction)
- (TH) Thailand Oct Business Sentiment Index: 47.8 v 49.6 prior
- (SE) Sweden Oct PMI Manufacturing: 46.8 v 48.9 prior (2nd straight contraction)
- (NL) Netherlands Oct Manufacturing PMI: 47.9 v 49.2e (2nd straight contraction)
- (CH) Swiss Q4 SECO Consumer Confidence: -46.6 v -42.5e
- (CZ) Czech Q3 Advance GDP (1st reading) Q/Q: -0.4% v -0.3%e; Y/Y: 1.6% v 1.7%e
- (CH) Swiss Oct PMI Manufacturing: 54.9 v 55.6e (27th month of expansion)
- (CZ) Czech Republic Oct PMI Manufacturing: 41.7 v 44.1e (5th straight contraction)
- (HK) Hong Kong Sept Retail Sales Value Y/Y: 0.2% v 1.7%e; Retail Sales Volume Y/Y: -1.5% v -0.3%e
- (NG) Nigeria Oct PMI Manufacturing: 53.6 v 53.7 prior
- (GR) Greece Oct Manufacturing PMI: 48.1 v 49.7 prior (4th straight contraction)
- (NO) Norway Oct PMI Manufacturing: 53.1 v 50.3 prior (26th month of expansion)
- (ZA) South Africa Oct Manufacturing PMI: 50.0 v 48.0e (moved back into expansion)
- (UK) Oct Final Manufacturing PMI: 46.2 v 45.8e (confirmed (3rd straight contraction and lowest since May 2020)
**Fixed income issuance:
- (ID) Indonesia sod total IDR1.37T vs. IDR5.0T target in Islamic bills and bonds (sukuk)
- (ZA) South Africa sold total ZAR3.9B vs. ZAR3.9B indicated in 2030, 2040 and 2048 bonds
**Looking Ahead**
- (IT) Italy Oct Budget Balance: No est v -€15.4B prior
- (RO) Romania Oct International Reserves: No est v $49.4B prior
- (ZA) South Africa Oct Naamsa Vehicle Sales Y/Y: No est v 10.8% prior
- (US) Oct Total Vehicle Sales released during session
- 06:00 (DK) Denmark Oct PMI Survey: No est v 49.8 prior
- 06:00 (EU) Daily Euribor Fixing
- 06:15 (CH) Switzerland to sell 3-month Bills
- 06:25 (EU) Daily ECB Liquidity Stats
- 06:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
- 06:30 (DE) Germany to sell combined €500M in 2033 and 2046 inflation-linked bonds (Bundei)
- 06:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 6-month bills )
- 06:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
- 07:00 (BR) Brazil Central Bank (BCB) Oct Minutes
- 08:00 (BR) Brazil Sept Industrial Production M/M: -0.7%e v -0.6% prior; Y/Y: 0.7%e v 2.8% prior
- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
- 08:55 (US) Weekly Redbook LFL Sales data
- 09:00 (CZ) Czech Oct Budget Balance (CZK): No est v -270.9B prior
- 09:00 (BR) Brazil Oct Manufacturing PMI: No est v 51.1 prior
- 09:00 (UK) Daily Baltic Dry Bulk Index
- 09:30 (CA) Canada Oct Manufacturing PMI: No est v 49.8 prior
- 09:45 (US) Oct Final S&P/Markit Manufacturing PMI: 49.9e v 49.9 prelim
- 10:00 (US) Sept Construction Spending M/M: -0.5%e v -0.7% prior
- 10:00 (US) Oct ISM Manufacturing: 50.0e v 50.9 prior; Prices Paid: 53.0e v 51.7 prior
- 10:00 (US) Sept JOLTS Job Openings: 9.625Me v 10.05M prior
- 10:00 (EU) Weekly ECB Forex Reserves
- 11:00 (CO) Colombia Oct PMI Manufacturing: No est v 52.8 prior
- 11:00 (MX) Mexico Sept Total Remittances: $5.0Be v $5.1B prior
- 11:00 (CO) Colombia Sept Exports $5.0Be v $4.6B prior
- 11:00 (MX) Mexico Central Bank Economist Survey
- 11:00 (PE) Peru Oct CPI M/M: 0.5%e v 0.5% prior; Y/Y: 8.4%e v 8.5% prior
- 11:30 (MX) Mexico Oct Manufacturing PMI : No est v 50.3 prior
- 11:30 (US) Treasury to sell 52-Week Bills
- 12:00 (NZ) New Zealand Oct Corelogic House Prices Y/Y: No est v 2.8% prior
- 13:00 (IT) Italy Oct New Car Registrations Y/Y: No est v 5.4% prior
- 14:00 (BR) Brazil Oct Trade Balance: $4.1Be v $4.0B prior; Total Exports: $28.0Be v $29.0B prior; Total Imports: $23.8Be v $25.0B prior
- 14:00 (MX) Mexico Oct IMEF Manufacturing Index: No est v 50.1 prior; Non-Manufacturing Index: No est v 50.9 prior
- 16:00 (NZ) Reserve Bank of New Zealand (RBNZ) Financial Stability Review (FSR)
- 16:30 (US) Weekly API Oil Inventories
- 17:45 (NZ) New Zealand Q3 Unemployment Rate: 3.2% v 3.3% prior
- 17:45 (NZ) New Zealand Q3 Employment Change Q/Q: 0.5%e v 0.0% prior; Y/Y: 0.3%e v 1.6% prior
- 18:00 (CO) Colombia Central Bank Oct Minutes
- 19:00 (KR) South Korea Oct CPI M/M: 0.4%e v 0.3% prior; Y/Y: 5.7%e v 5.6% prior; CPI Core Y/Y: 4.5%e v 4.5% prior
- 19:50*(JP) Japan Oct Monetary Base Y/Y: No est v -3.3% prior; Monetary Base End of Period: No est v ¥618.1T prior
- 20:01 (UK) Oct BRC Shop Price Index Y/Y: No est v 5.7% prior
- 20:30 (PH) Philippines Oct PMI Manufacturing: No est v 52.9 prior
- 20:30 (AU) Australia Sept Building Approvals M/M: -10.0%e v +28.1% prior
- 22:35 (CN) China to sell 2-year and 5-year Upsized Bonds
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