Euro Continues To Rally Underpinned By Better Than Expected IFO Data

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Notes/Observations

  • German IFO beats, keeps Euro and Yields bid -Sterling appreciates on Brexit Minister Raab comments
  • European Indices trade slightly lower across the board tracking losses in Asia

Asia:

  • Japan said to consider bilateral trade agreement with the US; could lead to lower tariffs on US agriculture imports and avoid higher tariffs on Japanese autos.
  • US tariffs on $200B in China goods take effect, China has canceled upcoming trade talks with US amid escalating tariff threats
  • China says door of negotiations always open, but talks will not happen under tariff threat

Europe:

  • UK Brexit Minister Raab on radio interview confident will get deal at the end, confident progress will be made; Cable rises -Reportedly aides to PM May have started contingency planning for possible snap election in November, Brexit Minister Raab reiterated the UK is standing firm on Brexit proposals, no election is planned
  • UK Foreign Sec Hunt refuses to rule out Canada-style Brexit deal
  • German September IFO comes ahead of consensus but declines slight from the prior month, uncertainty growing among companies Energy At meeting on Sunday, OPEC+ affirmed plans to gradually continue increasing crude output in line with decision from the summer
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Economic Data:

  • (DE) GERMANY SEPT IFO BUSINESS CLIMATE: 103.7 V 103.2E; CURRENT ASSESSMENT: 106.4 V 106.0E
  • (CH) SNB Total Sight Deposits for Week Ended Sept 21st (CHF): 577.6B v 577.1B prior

Fixed Income Issuance:

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx50 -0.3% at 3,419, FTSE -0.1% at 7,480, DAX -0.3% at 12,389, CAC-40 -0.2% at 5,481, IBEX-35 -0.5% at 9,543, FTSE MIB -0.5% at 21,427, SMI % at , S&P 500 Futures -0.2%]
  • Market Focal Points/Key Themes: European indices open broadly lower and remain negative as the session wore on; risk sentiment impacted over trade concerns as US tariffs come into effect and China cancels trade talks; consumer discretionary sector among worst performers, especially autos; Sky confirmes to be acquired by Comcast; Randgold confirms to be acquired by Barrick; over weekend rumors surfaced that Casino rejected offer from Carrefour, which was later denied by Carrefour; attention turning to the Fed’s monetary policy decision later in the week

Equities

  • Consumer discretionary: Gerry Weber GW1.DE -19.9% (studying restructuring), Sky SKY.UK +8.8% (to be acquired), Tarkett TKTT.FR -4.9% (analyst action), Thomas Cook TCG.UK -19.7% (trading update, CFO steps down), Tomtom TOM2.NL -5.6% (Toyota to add Android Auto)
  • Consumer staples: Greenyard GREEN.BE +0.2% (asset sale)
  • Energy: Tullow Oil TLW.UK +1.6% (exploration update)
  • Healthcare: Coloplast COLOB.DK -2.5% (analyst action), Mithra Pharmaceuticals MITRA.BE +2.6% (licence deal), Solvay SOLB.BE +0.8% (investor update)
  • Materials: Randgold RRS.UK +3.6% (to be acquired)
  • Utilities: Engie ENGI.FR -0.6% (cuts outlook)

Speakers

  • (IT) Italy FinMin Tria to fix 2019 deficit at 1.6%; Gov may talk with EU on possibly wider gap – press
  • (CN) China says door of negotiation always open, but talks should be based on mutual respect and equality; Trade talks will not happen under tariff threat – press
  • (UK) UK Brexit Secretary Raab: Wants a good deal with the EU, but ready for a no deal – radio interview IFO Economist Wohlrabe: Despite good business sentiment there is increasing uncertainty among companies (IR) Iran Oil Min Zanganeh: OPEC + meeting yield no positive result for President Trump

Currencies

  • GBPUSD trades firmer reclaiming the 1.31 handle after comments with UK Brexit Min Raab says confident will make progress on Brexit. The Indian rupee continues to weaken, with the USD/INR rising to a high of 72.73 as suspected central bank intervention helped cap gains. Trade concerns continue to weigh as China cancels trade talks with the US.

Fixed Income

  • Bund Futures trades at 158.84 down 22 ticks after German IFO business morale falls less than expected. Resistance moves to 161.82 then 163. A downside break of 158.25 sees 157.69 initially.
  • Gilt futures trades at 121.08 down 20 ticks following the move in Treasuries. Continued support at 120.50, with a continued move higher targeting 123.93 then 124.00.
  • Monday ‘s liquidity report showed Friday’s excess liquidity rose from €1.851T to €1.861T. Use of the marginal lending facility stayed steady from €30M to €21M.
  • Corporate issuance saw high grade issuers raise $34.3B in the primary market last week

Looking Ahead

  • 06:00 (UK) Sept CBI Industrial Trends Total Orders: 4e v 7 prior
  • 07:00 (BR) Brazil Sep FGV Consumer Confidence: # v 83.8 prior
  • 07:25 (BR) Brazil Central Bank Weekly Economists Survey
  • 07:30 (TR) Turkey Sept Real Sector Confidence (Seasonally Adj): No est v 96.3 prior; Real Sector Confidence (NSA): No est v 96.4 prior, Capacity Utilization: No est v 77.8% prior
  • 08:00 (PL) Poland Aug M3 Money Supply M/M: 0.6%e v 0.3% prior; Y/Y: 7.5%e v 7.3% prior
  • 08:00 (CL) Chile Aug PPI M/M: No est v -2.8% prior
  • 08:05 (UK) Baltic Dry Bulk Index
  • 08:30 (US) Aug Chicago Fed National Activity Index: 0.20e v 0.13 prior
  • 08:30 (CA) Canada July Wholesale Trade Sales M/M: +0.4%e v -0.8% prior
  • 09:00 (BE) Belgium Sept Business Confidence: -0.6e v -0.3 prior
  • 09:30 (BR) Brazil Aug Current Account: -$1.3Be v-$4.4B prior; Foreign Direct Investment (FDI): $9.5Be v $3.9B prior
  • 10:30 (US) Sept Dallas Fed Manufacturing Activity: 31.0e v 30.9 prior
  • 16:00 (US) Weekly Crop Progress Report
 
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