ECB expected to cut 25bps again

EU mid-market update: TSMC outshines ASML as chip demand stabilizes; ECB expected to cut 25bps again; Focus on US jobless claims and retail sales.

Notes/observations

- Light for macro events in first half of session as corporate earnings takes front seat. Traders eye up ECB decision at 08:15 ET, US Jobless Claims and Retail Sales at 08:30 ET.

- Overall theme sees US political risk premium unwind as Trump stretches poll lead and seasonal Christmas rally for equities approaches. However, Q3 earnings provides a choppy path ahead. Fed’s pre-emptive Sept jumbo rate cut to keep economy ticking, will be compared against real world corporate commentary on the health of US consumer.

- Nasdaq100 futures popped higher after TSMC Q3 beat expectations, with strong Q4 and FY24 Revenue guidance, raised from prior outlook; TSMC said AI demand is “extremely robust and just a beginning” and that 2025 and next five years look to be “very healthy” for the company; It also maintained semiconductor industry outlook for 10% growth in 2024, noting that “everything is stabilized and started to improve for overall chip demand”.

- Key EU Earnings: Nestle 9 month results lackluster, cuts FY guidance, real internal growth at 0.5%; Nokia missed estimates, adjusted FY guidance citing slower than expected recovery, cost cuts ahead of schedule; Pernod Ricard cites slow start to year in Q1 rev miss, but affirmed FY guidance, Americas sales decline less than analyst forecasted; ABB cut FY guidance due to weaker than expected discrete automation market; Entain raised FY guidance after NGR grew +10% in Q3.

- Asia closed mixed with Shanghai composite underperforming -1.0%. EU indices are +0.2-1.3%. US futures are +0.0-0.7%. Gold +0.3%, DXY +0.1%; Commodity: Brent +0.3%, WTI +0.3%; Crypto: BTC +0.4%, ETH +0.5%.

Asia

- Japan Sept Trade Balance: -¥294.3B v -¥316.0Be; Exports Y/Y: -1.7% v +0.9%e Imports Y/Y: 2.1% v 2.8%e.

- Australia Sept Employment Change: +64.1K v +25.0Ke; Unemployment Rate: 4.1% v 4.2%e; data dampened hopes of any rate cut by year-end.

- Japan ruling LDP party might lose outright majority at Oct 27th general election for the first time since 2009.

- PBOC Dep Gov Tao Ling: commented that had 'positive' feedback to Sept policy changes; Real Estate development loans will be extended until end-2026.

- China Housing Ministry, MOF and PBOC briefing noted it would expand white list of property projects to receive bank lending to CNY4T by end-2024 (currently at CNY2.2T). Vowed to stabilize property market from declining further.

Americas

- VP Kamala Harris interview on Fox stated that winning in November did not mean a continuation of the Biden presidency.

Energy

- Weekly API Crude Oil Inventories: -1.6M v +10.9M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.54% at 522.40, FTSE +0.23% at 8,348.10, DAX +0.65% at 19,577.65, CAC-40 +1.20% at 7,582.18, IBEX-35 +0.01% at 11,998.00, FTSE MIB +1.12% at 35,048.00, SMI +0.32% at 12,233.20, S&P 500 Futures +0.35%].

Market focal points/key themes: European indices open generally higher and maintained the trend through the early part of the session; Israel closed for holiday; among sectors trending higher are technology and financials; lagging sectors include consumer discretionary and real estate; tech sector supported after TSMC earnings beat; Sanofi partners with Orano Med; Aperam to acquire Universal Stainless; focus on ECB rate decision later in the day; earnings expected in the upcoming US session include KeyCorp, Travelers, EssilorLuxottica and Netflix.

Equities

- Consumer discretionary: Entain [ENT.UK] +4.0% (Q3 trading update), Deliveroo [ROO.UK] +2.5% (trading update).

- Consumer staples: Nestle [NESN.CH] +1.0% (9M results, cuts guidance), Pernod Ricard [RI.FR] +1.5% (Q1 results, affirms FY guidance).

- Materials: BHP Group [BHP.UK] -2.5% (production).

- Healthcare: Merck [MRK.DE] +6.0% (affirms FY guidance and provides mid-term outlook).

- Industrials: ABB [ABBN.CH] +1.5% (earnings), Airbus [AIR.FR] +3.0% (commercial headcount increase expected to be lower in Q3 v Q2, which will weigh less on profitability), Rentokil Initial [RTO.UK] -2.5% (Q3 trading update), Hella [HLE.DE] -1.0% (prelim results), Maersk [MAERSKB.DK] -1.5% (analyst downgrade).

- Technology: Infineon [IFX.DE] +1.5%, STMicroelectronics [STM.FR] +1.5%, ASML [ASML.NL] -1.5% (readacross from TSMC Q3 results and strong Q4/FY24 guidance above estimates and FY25 outlook).

- Telecom: Nokia [NOKIA.FI] -5.0% (Q3 results miss, cuts guidance), Publicis [PUB.FR] -1.5% (Q3 results, narrows FY rev guidance, affirms margins).

Speakers

- Sweden Central Bank (Riksbank) Dep Gov Bunge stated that saw further rate cuts ahead as it had more confidence that have left the period of high inflation behind.

- Poland Central Bank Dep Gov Kightley commented that CPI was seen peaking in Q1 2025 and then easing in H2 2025.

- Hungary Econ Min Nagy commented that Q3 domestic growth to be very close to zero; inflation is not an issue.

- Russia Central Bank (CBR) Gov Nabiullina commented that a decision on key rate hike was not predetermined and would look at all factors.

- Czech Central Bank (CNB) Gov Michl stated that would cut rates very cautiously.

Currencies/fixed income

- EUR/USD was steady around 1.0850 area with focus on ECB policy decisions. Dealers are unanimous that ECB to deliver a 25bps cut in its key rates as the case for easing has increased significantly since the Sept meeting. Most of the comments from ECB members have sounded increasingly focused on growth risks as disinflation has been somewhat faster than expected. Markets widely expect another cut at the next meet in December (total 100bp cuts in 2024). Focus will be on whether emphasis on communication would remain on data-dependence and decisions determined on meeting-by-meeting basis.

- GBP/USD staying below the 1.30 level as markets expect he pace of BOE rate cuts to pick up in the coming months.

- USD/JPY probing the 150 neighborhood as markets focus on the upcoming general elections later this month. Dealers noted that Japan ruling LDP party might lose outright majority.

- Oil prices edged lower in early European trade as markets monitored developments in the Middle East and await further details on China's stimulus plans.

Economic data

- (NL) Netherlands Sept Unemployment Rate: 3.7% v 3.7%e.

- (CH) Swiss Sept Trade Balance (CHF): 5.0B v 4.7B prior; Real Exports M/M: -3.5% v +1.4% prior; Real Imports M/M: +0.6% v -0.5% prior; Watch Exports Y/Y: -12.4% v +7.4% prior.

- (NO) Norway Q3 Industrial Confidence: 1.5 v 3.5 prior.

- (AT) Austria Sept Final CPI M/M: -0.1% v -0.1% prelim; Y/Y: 1.8% v 1.8% prelim.

- (EU) Euro Zone Sept Final CPI Y/Y: 1.7% v 1.8% prelim; Core CPI Y/Y: 2.7% v 2.7% prelim; CPI M/M: -0.1% v -0.1% advance.

- (EU) Euro Zone Aug Trade Balance: €11.0B v €17.6Be; Trade Balance NSA (unadj): €4.6B v €21.2B prior.

- (IT) Italy Aug Total Trade Balance: €1.4B v €6.9B prior; EU Trade Balance: -€1.4B v +€0.7B prior.

- (CY) Cyprus Sept CPI Harmonized M/M: -0.4% v +0.9% prior; Y/Y: 1.6% v 2.2% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.115B vs. €4.5-5.5B indicated range in 2031, 2034 and 2048 SPGB bonds.

- Sold €1.226B in 3.10% July 2031 SPGB bonds; Avg Yield: 2.646% v 3.132% prior; bid-to-cover: 2.19x v 1.78x prior.

- Sold €2.487B in 3.45% July 2034 SPGB; Avg Yield: 2.921% v 3.040% prior; Bid-to-cover: 1.74x v 2.07x prior.

- Sold €1.402B in 2.70% Oct 2048 SPGB bonds; Avg Yield: 3.507% v 3.926% prior; Bid-to-cover: 1.87x v 1.29x prior.

- (FR) France Debt Agency (AFT) sold total €11.995B vs. €10-12B indicated range in 2027, 2028, 2029 and 2030 bonds.

- Sold €3.932B in 2.50% Sept 2027 Oat; Avg Yield: 2.42% v 2.45% prior; Bid-to-cover: 2.46x v 2.48x prior.

- Sold €1.396B in 0.75% May 2028 Oat; Avg Yield: 2.45% v 2.46% prior; Bid-to-cover: 3.52x v 2.95x prior.

- Sold €3.640B in 2.75% Feb 2029 Oat; Avg Yield: 2.53% v 2.60% prior; Bid-to-cover: 2.44x v 2.28x prior.

- Sold €3.027B in 2.75% Feb 2030 Oat; Avg Yield: 2.61% v 2.62% prior; Bid-to-cover: 2.58x v 2.56x prior.

- (SE) Sweden sold total SEK500M vs. SEK500M indicated in 2032 and 2039 I/L Bonds.

Looking ahead

- (EG) Egypt Central Bank (CBE) Interest Rate Decision: Expected to leave Key Rates unchanged. Expected to leave Deposit Rate unchanged at 27.25%.

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

- 05:30 (CH) Swiss National Bank to sell 1-month and 3-month bills.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 05:50 (FR) France Debt Agency (AFT) to sell €1.75-2.5€B in inflation-linked 2029, 2034, 2036 and 2040 inflation-linked Bonds.

- 06:00 (PT) Portugal Sept PPI M/M: No est v 0.0% prior; Y/Y: No est v 2.0% prior.

- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave One Week Repo Rate unchanged at 50.00%.

- 07:00 (BR) Brazil Oct FGV Inflation IGP-10 M/M: 1.4%e v 0.2% prior.

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

- 08:15 (EU) ECB Interest Rate Decision: Expected to cut Key Rates by 25bps. Expected to cut Deposit Rate by 25bps to 3.25%; Expected to cut Main 7-Day Refinancing Rate by 25bps to 3.40%; Expected to cut Marginal Lending Facility by 25bps to 3.65%.

- 08:30 (US) Sept Advance Retail Sales M/M: 0.3%e v 0.1% prior; Retail Sales (ex-auto) M/M: 0.2%e v 0.1% prior; Retail Sales (ex-auto/gas): 0.3%e v 0.2% prior; Retail Sales (control group): 0.3%e v 0.3% prior.

- 08:30 (US) Oct Philadelphia Fed Business Outlook: 3.0e v 1.7 prior.

- 08:30 (US) Initial Jobless Claims: 260Ke v 258K prior; Continuing Claims: 1.865Me v 1.861M prior.

- 08:30 (CA) Canada Aug Int’l Securities Transactions: No est v 11.0B prior.

- 08:45 (EU) ECB Chief Lagarde post rate decision press conference.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 11th: No est v $629.9B prior.

- 09:00 (NO) Norway Central Bank (Norges) Gov Bache.

- 09:15 (US) Sept Industrial Production M/M: -0.1%e v +0.8% prior; Capacity Utilization: 77.8%e v 78.0% prior; Manufacturing Production: -0.1%e v +0.9% prior.

- 10:00 (US) Oct NAHB Housing Market Index: 42e v 41 prior.

- 10:00 (US) Aug Business Inventories: 0.3%e v 0.4% prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (US) Weekly DOE Oil Inventories.

- 11:00 (US) Fed’s Goolsbee.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 10 Year Bonds.

- 16:00 (US) Aug Total Net TIC Flows: No est v $156.5B prior; Net Long-term TIC Flows: No est v $135.4B prior.

- 16:00 (UK) BOE’s Woods.

- 17:00 (CL) Chile Central Bank (BCCh) Interest Rate Decision: Expected to cut Overnight Rate Target by 25bps to 5.25%.

- 19:30 (JP) Japan Sept National CPI Y/Y: 2.5%e v 3.0% prior; CPI Ex Fresh Food (Core) Y/Y: 2.3%e v 2.8% prior; CPI Ex Fresh Food, Energy (core-core) Y/Y: 2.0%e v 2.0% prior.

- 21:30 (CN) China Sept New Home Prices M/M: No est v -0.7% prior; Used Home Prices M/M: No est v -1.0% prior.

- 22:00 (CN) China Q3 GDP Q/Q: 1.1%e v 0.7% prior; Y/Y: 4.5%e v 4.7% prior; GDP YTD Y/Y: 4.9%e v 5.0% prior.

- 22:00 (CN) China Sept Industrial Production Y/Y: 4.6%e v 4.5% prior; Industrial Production YTD Y/Y: 5.7%e v 5.8% prior.

- 22:00 (CN) China Sept Retail Sales Y/Y: 2.5%e v 2.1% prior; Retail Sales YTD Y/Y: 3.3%e v 3.4% prior.

- 22:00 (CN) China Sept YTD Urban Fixed Assets Y/Y: 3.3%e v 3.4% prior.

- 22:00 (CN) China Sept YTD Property Investment Y/Y: -10.0%e v -10.2% prior; Residential Property Sales Y/Y: No est v -25.0% prior.

- 22:00 (CN) China Sept Surveyed Jobless Rate: 5.3%e v 5.3% prior.

- 22:35 (CN) China to sell 20 Year Special Bonds.

- 23:30 (JP) Japan to sell 3-Month Bills.