China halts EV conquest across Europe, while Tesla stock rallies

EU mid-market update: Earnings whirlwind with flash PMIs intertwined gives bullish atmosphere as market adds to bets on ECB 50bps rate cuts in Dec; China halts EV conquest across Europe, while Tesla stock rallies.

Notes/observations

- Risk on appetite across Europe: Equities bidding and yields lower as pricing for 50bps cut out of ECB in Dec is amplified with miss in French flash PMIs. German surprised with a beat but remains in heavy contraction. ECB speaker commentary from Holzmann, Vasle and Centeno. Centeno suggested ECB is ‘behind the curve’ on easing. UK PMIs missed but remained in expansionary territory.

- Japan Fin Min Kato noted ‘one-sided FX moves’ and watching FX with ‘stronger’ sense of urgency, triggering >100pip drop in USD/JPY. Japan officials are notoriously pedantic on language, so addition of ‘stronger’ word read as important by analysts.

- Pressure of EU tariffs on imported China EVs being felt as China said to ask car makers to stop expanding in EU.

- Intra-day focus remains on earnings, with notable EU results from: Unilever, Nordic Semi, Siltronic, Renault, Anglo American, Barclays, Hermes, Beiersdorf, Equinor, Danone, Orange, BE Semiconductor and Dassault.

- Tesla up ~12% in premarket after earnings beat and providing FY25 outlook on the call, Boeing down ~3% after worker union rejected 35% pay offer deal and continues striking.

- Key US premarket earnings: UPS, HON, TXT, HAS, LUV, CNX, SAH, BFH, HOG, RS, CBRE, VC, R, ADT, TECK, VLO, DWO, NDAQ, AAL, DTE, DOV, TSCO, TAL, LH, SPGI, UNP, RDUS.

- Asia closed mixed with Hang Seng underperforming -1.3%. EU indices are +0.2-0.8%. US futures are -0.1% to +0.8%. Gold +0.8%, DXY -0.3%; Commodity: Brent +1.7%, WTI +1.8%; Crypto: BTC +0.4%, ETH -2.4%.

Asia

- Australia Oct Preliminary PMI Manufacturing: 46.6 v 46.7 prior [9th month of contraction).

- Japan Oct Preliminary Manufacturing PMI: 49.0 v 49.7 prior (4th straight contraction).

- South Korea Q3 Advance GDP (1st of 3 readings) Q/Q: 0.1% v 0.4%e; Y/Y:1.5% v 1.9%e.

- South Korea Nov Business Manufacturing Survey: 71 v 73 prior; Non-Manufacturing Survey: 69 v 71 prior.

- BOJ Gov Ueda noted that BOJ was still maintaining fairly easy monetary stance; Wanted to lift inflation expectations to a new level. Preoccupied with the right size of normalization in total. Difficult to quantify impact of policy on the carry trade; It's vital to make clear what the BOJ's policy strategy was.

- Japan Fin Min Kato provided some verbal intervention as he noted that saw "one-sided" and rapid moves in FX market; watching FX moves with 'stronger' sense of urgency.

- RBNZ Gov Orr noted that must be cognizant of unanticipated risks ahead; Low and stable inflation was again in sight. Monetary policy is still at a restrictive level.

Global conflict/tensions

- Renewed speculation that Israel was on the verge of launching an attack on Iran despite US pressure.

Europe

- ECB’s Holzmann (Austria, hawk): Unlikely to have 50bps cut at the Dec policy meeting but such a move is possible.

- ECB’s Panetta (Italy) noted it was still far from 'neutral' rate; Could not exclude that ECB might go below neutral. Would not take for granted that we stop at neutral.

- ECB’s Nagel (Germany) stated that was convinced we're more or less on track for 2% goal; Maintaining rate flexibility in every direction.

- ECB chief Lagarde stated that was satisfied with the progress of inflation; There's reason to believe inflation would move above 2% in next few months.

- ECB’s Lane (Ireland, chief economist) stated that had high conviction that disinflation was well on track; In process of dialing back restrictiveness.

- UK Chancellor of the Exchequer (Fin Min) Reeves to announce major change to fiscal rules releasing £50B for infrastructure projects spending.

Americas

- Federal Reserve Beige Book noted that economic activity was little changed in nearly all Districts since early September. Most Districts reported declining manufacturing activity.

- Latest offer by Boeing for a 35% salary increase has been rejected by Boeing employees (64% voting against the deal).

Speakers/fixed income/FX/commodities/erratum.

Equities

Indices [Stoxx600 +0.51% at 521.50, FTSE +0.75% at 8,320.52, DAX +0.53% at 19,486.45, CAC-40 +0.67% at 7,547.97, IBEX-35 +0.21% at 11,890.30, FTSE MIB +0.59% at 34,902.00, SMI +0.40% at 12,205.30, S&P 500 Futures +0.39%].

Market focal points/key themes: European indices open generally higher and advanced through the early part of the session; equities seen getting a boost after flash German PMI outperformed expectations; Israel closed for holiday; among sectors leading the way higher are telecom and consumer discretionary; lagging sectors include industrials and financials; luxury subsector supported following results from Hermes; KKR takes stake in ENI’s Enilive; earnings expected in the upcoming US session include UPS, Honeywell, Southwest, Nasdaq and Vinci.

Equities

- Consumer discretionary: Unilever [UNA.NL] +4.0% (Q3 results, affirms guidance; comments on US consumer), Kering [KER.FR] +2.0% (earnings).

- Consumer staples: Danone [BN.FR] +2.5% (Q3 revenue, notes challenging environment).

- Energy: Equinor [EQNR.NO] +1.5% (Q3 results, beats estimates, extra div, fourth tranche buyback, cuts capex guidance).

- Financials: Barclays [BARC.UK] +4.0% (Q3 results, raises UK unit NII guidance).

- Materials: Anglo American [AAL.UK] +4.5% (production results).

- Industrials: Airbus [AIR.FR] +0.5% (Boeing's striking union rejects wage deal), Renault [RNO.FR] +7.5% (Q3 results, affirms outlook; China reportedly asks automakers to stop EU expansion due to EV tariffs dispute), Michelin [ML.FR] -7.0% (earnings).

- Technology: Dassault Systèmes [DSY.FR] -2.0% (Q3 results, trims guidance), BE Semiconductor [BESI.NL] -3.5% (Q3 results, light Q4 guidance), Siltronic [WAF.DE] +6.5% (Q3 results, beats estimates, raises margin guidance), Atos [ATO.FR] +3.5% (Q3 revenue, update on restructuring and cash position).

- Telecom: Orange [ORA.FR] +1.5% (Q3 results).

Speakers

- ECB’s Centeno (Portugal, dove): ECB was probably behind the curve and should consider steeper rate cuts.

- ECB’s Vasle (Slovenia): No urgency in talking about undershooting inflation target.

- Russia Pres Putin stated at the BRICS Summit that to discuss peaceful settlements of conflicts and Mid-East tensions. Ukraine being used to create strategic threats to Russia. Mid-East settlement should be based on creation of independent Palestine State.

- Russia Econ Min Reshetnikov noted that the domestic economy was showing signs of cooling.

- Poland Central Bank (NBP) Member Dabrowski stated that Q2 was most likely to resume rate cuts.

- Thailand Central Bank (BOT) Dep Gov stated that it aimed to have a neutral policy stance; recent rate cut not the start of an easing cycle.

- China reportedly asks automakers to stop EU expansion due to tariffs.

Currencies/fixed income

- EUR/USD initially stayed below the 1.08 level as ECB members appear diverge on rate path as the 2% inflation target moved within close reach. Mixed PMI readings from France and Germany contributed to a continued clouding of the next ECB rate cut magnitude. Dealers continued to see a lower outlook for the pair as ECB likely to cut rates more than the Fed. Pair just above 1.08 as the mid-session approached.

- GBP/USD was around the mid-1.29 area with focus starting to looks towards next week’s Autumn presentation
USD/JPY moved lower towards 1.52.00 after Japan Fin Min Kato provided some verbal intervention as he noted that saw "one-sided" and rapid moves in FX market; watching FX moves with 'stronger' sense of urgency.

Economic data

- (FI) Finland Sept PPI M/M: 0.0% v -0.8% prior; Y/Y: -2.3% v -2.3% prior.

- (NO) Norway Sept Trend Unemployment Rate: 4.0% v 4.0% prior.

- (JP) Japan Sept Final Machine Tool Orders Y/Y: -6.4% v -6.5% prelim.

- (FR) France Oct Business Confidence: 97 v 98e; Manufacturing Confidence: 92 v 99e; Production Outlook Indicator: -12 v -11e; Own-Company Production Outlook: -3# v +5e.

- (CZ) Czech Oct Consumer Confid0.9 % v 19.4% prior.

- (ES) Spain Aug Total Mortgage Lending Y/Y: -3.5% v +25.8% prior; Mortgage Approvals Y/Y: 8.8% v 23.5% prior.

- (FR) France Oct Preliminary Manufacturing PMI: 44.5 v 45.0e (21st month of contraction); Services PMI: 48.3 v 49.9e; Composite PMI: 47.3 v 48.9e.

- (DE) Germany Oct Preliminary Manufacturing PMI: 42.6 v 40.8e (28th month of contraction); Services PMI: 51.4 v 50.6e; Composite PMI: 48.4 v 47.6e.

- (EU) Euro Zone Oct Preliminary Manufacturing PMI: 45.9 v 45.1e (28th month of contraction); Services PMI: 51.2 v 51.5e; Composite PMI: # v 49.7e.

- (TW) Taiwan Sept Unemployment Rate: 3.4% v 3.4%e.

- (TW) Taiwan Sept M2 Money Supply Y/Y: 5.6% v 5.8% prior; M1 Money Supply Y/Y: 4.1% v 4.1% prior.

- (UK) Oct Preliminary Manufacturing PMI: 503 v 51.5e (6th month of expansion); Services PMI: 51.8 v 52.4e; Composite PMI: 51.7 v 52.5e.

Fixed income issuance

- None seen.

Looking ahead

- G20 Finance Minister and central bank meeting (ECB’s Lagarde attends).

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:30 (CH) Swiss National Bank to sell 1-month and 6-month bills.

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

- 06:00 (UK) Oct CBI Industrial Trends Total Orders: -28e v -35 prior; Selling Prices: 9e v 8 prior; Business Optimism: -5e v -9 prior.

- 06:00 (FI) Finland to sell Bonds via Ori auction.

- 08:00 (CL) Chile Sept PPI M/M: No est v -2.7% prior.

- 08:00 (BR) Brazil Oct IBGE Inflation IPCA-15 M/M: 0.5%e v 0.1% prior; Y/Y: 4.4%e v 4.1% prior.

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

- 08:30 (US) Sept Chicago Fed National Activity Index: 0.50e v 0.12 prior.

- 08:30 (US) Initial Jobless Claims: 242Ke v 241K prior; Continuing Claims: 1.88Me v 1.867M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:45 (US) Fed's Hammack gives welcoming remarks.

- 09:00 (UK) BOE’s Mann.

- 09:00 (LT) ECB's Kazaks (Latvia).

- 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 18th: No est v $622.3B prior.

- 09:45 (US) Oct Preliminary S&P Manufacturing PMI: 47.5e v 47.3 prior; Services PMI: 55.0e v 55.2 prior; Composite PMI: 53.6e v 54.0 prior.

- 10:00 (US) Sept New Home Sales: 720Ke v 716K prior.

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

- 11:00 (US) Oct Kansas City Fed Manufacturing Activity: -8e v -8 prior.

- 12:00 (CA) Canada to sell 10-year bonds.

- 13:00 (IE) ECB’s Lane (Ireland, chief economist).

- 13:00 (US) Treasury to sell 5-Year TIPS.

- 13:15 (NO) Norway Central Bank (Norges) Gov Bache.

- 15:45 (UK) BOE Gov Bailey.

- 17:00 (NZ) New Zealand Oct ANZ Consumer Confidence: No est v 95.1 prior.

- 19:01 (UK) Oct GfK Consumer Confidence: -20%e v -20% prior.

- 19:01 (IE) Ireland Oct Consumer Confidence Index: No est v 71.9 prior.

- 19:30 (JP) Japan Oct Tokyo CPI Y/Y: 1.8%e v 2.1% prior (revised from 2.2%); CPI (ex-fresh food) Y/Y: 1.7%e v 2.0% prior; CPI (ex-fresh food and energy) Y/Y: 1.6%e v 1.6% prior.

- 19:50 (JP) Japan Sept PPI Services Y/Y: 2.7%e v 2.7% prior.

- 20:30 (SG) Singapore Q3 Final URA Private Home Prices Q/Q: No est v -1.1% prelim.

- 22:35 (CN) China to sell special 30 Year Bonds.

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