EU data on falling inflation and declining GDP pivoted bond yields

EU Mid-Market Update: EU data on falling inflation and declining GDP pivoted bond yields to the downside on expectations of lower interest rates; Israel ground invasion not as intense as feared.

Notes/observations

- Equities given tailwinds by falling EU bond yields after Spain and German state CPIs came in cooler than expectations. GDP data showed Germany, Sweden and Austria contracting.

- Additional risk appetite following Israel’s ground invasion of Gaza which is seen as ‘less intense’ and more ‘tactical’ than originally thought, playing down the idea of highly charged Iranian response. Middle East weekend events have dropped crude prices.

- ECB speakers pushed back against market rate path expectations, with Simkus and Kazimir both says ‘premature to see rate cuts in H1 2024’.

- EU Earnings Recap: HSBC (bank) Q3 pretax missed estimates but $3.0B buyback seen as higher than expected. Glencore (miner) Q3 production in line to meet FY23 guidance. Erste (bank) top and bottom line beat, but CFO sees NIM as peaking.

- Asia closed mixed with Nikkei225 underperforming at -1.0%. EU indices are +0.6-1.0%. US futures are +0.5-0.7%. Gold -0.7%, DXY 0.0%; Commodity: Brent -1.5%, WTI -1.7%, TTF +5.7%; Crypto: BTC +0.7%, ETH +1.9%.

Asia

- China Foreign Min Wang Yi stated that both sides hoped that Sino-US relations would stabilize as soon as possible; The 'road to San Francisco' would not be smooth and was not on autopilot. Many issues between the two countries but both sides believed it was useful to maintain dialogue (**Reminder: Sec State Blinken and Wang Yi met for over 6 hours over the weekend in DC.).

- Japan Keidanren (business lobby) said to urge companies to consider base pay increases.

-Reserve Bank of New Zealand (RBNZ) issues Financial Stability Report: New Zealand's financial system resilience compares well with advanced economies'.

Mid-East

- Israel Defense Forces have entered the Gaza Strip over the weekend and were operating on the ground with support from troops in the air and at sea.

- Israel's UN envoy stated that the only way to destroy Hamas was to root them out of their tunnels and their subterranean 'city of terror'.

- Israeli army said to have struck villages in Southern Lebanon - press.

- Iranian Foreign Min Hossein denies directing groups attacking US assets in Syria, Iraq
Turkey President Erdogan stated that the West was fully responsible for bloodshed in Gaza (**Reminder: Previously Erdogan stated that Hamas was not a terrorist organization but a liberation group).

-Israeli troops and armor push deeper into the northern Gaza Strip, reaching built-up areas - press.

Europe

- Fitch affirmed France sovereign rating at AA; Outlook Stable.

- Canadian ratings agency DBRS affirmed Italy sovereign rating at BBB (high), Stable trend.

- Russia Defense Min Shoigu: Ready for talks on post-conflict settlement of Ukraine crisis.

- Swiss National Bank (SNB) adjusts remuneration of sight deposits: Lowers threshold factor from 28 to 25.

Americas

- US official noted that US and China meetings in Washington were candid and in depth; Agreed to work toward a Biden-Xi meeting in November.

- WSJ's Timiraos: Officials look for signs that wages and prices are cooling even as spending, jobs remain robust; Fed officials are likely to keep the door open to another hike in December or beyond.

Energy

- Fire broke out at Afipsky oil refinery in Krasnodar, Russia; Explosion heard; Fire has been extinguished - press.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.56% at 432.00, FTSE +0.81% at 7,350.51, DAX +0.62% at 14,778.55, CAC-40 +0.45% at 6,825.77, IBEX-35 +1.02% at 9,009.29, FTSE MIB +0.81% at 27,508.00, SMI +0.58% at 10,383.90, S&P 500 Futures +0.72%].

Market Focal Points/Key Themes: European indices open higher across the board and stayed upbeat through the early part of the session; better performing sectors include real estate and utilities; among lagging sectors are materials and industrials; oil & gas subsector under pressure after Brent falls below $90/bbl; Clariant acquires IFF’s cosmetic ingredients unit; reportedly Spanish government considering small stake in Telefonica; Ascential to sell its digital commerce unit to Omnicom and WGSN to Apax funds; reportedly Vodafone near deal to sell half of its Spanish unit to Zegona; focus on release of German CPI later in the day; earnings expected in the upcoming US session include McDonald’s, Qiagen, Loews and Piaggio.

Equities

- Consumer discretionary: Ascential [ASCL.UK] +36.5% (divestiture for combined EV of £1.4B and cash proceeds of £1.2B), Electrolux [ELUXB.SE] +4.0% (Panasonic earnings; analyst action).

- Energy: Siemens Energy [ENR.DE] +8.5% (Chairman comments).

- Financials: HSBC [HSBA.UK] +1.5% (earnings; buyback), Natwest [NWG.UK] -0.5% (analyst action - cut to Hold at Soc Gen).

- Industrials: Stellantis [STLA.NL] +0.5% (deal with UAW).

- Materials: ArcelorMittal [MT.NL] -4.5% (Kazakh leader orders end of cooperation with ArcelorMittal following mine disaster), Glencore [GLEN.UK] +1.0% (production update), Clariant [CLN.CH] +1.0% (earnings).

- Telecom: Pearson [PSON.UK] +1.5% (trading update, £300M buyback).

Speakers

- Singapore Central Bank (MAS) Chief Menon reiterated monetary policy remains appropriately tight; keeping medium-term monetary policy orientation - press.

- Swiss SNB Vice Chair Schlegel said it cannot be ruled out that further tightening of monetary policy may be necessary; This depends on how inflation develops.

- Poland Dep Fin Min Sobon said domestic inflation in Oct will be ~7%.

- ECB's Vujcic (Croatia, hawk) stated we have a disinflation process and have finished with the process of raising interest rates for now.

- ECB's Enria (SSM chief) said fragmenting market raises risks - FT interview.

- ECB’s Kazimir (Slovakia, hawk) said ECB rates to stay at peak for next few quarters; Rate cut bets for H1 2024 are 'entirely misplaced'.

- ECB's Simkus (Lithuania) says no need for more hikes right now; Would be surprised to see a rate cut in H1 2024.

Currencies/fixed income

- USD/JPY trades at 149.60, with BOJ decision expected overnight with unchanged policy as consensus..

- GBP and EUR dropped as German state CPI and Spain flash CPI shows inflation continued to fall. Sweden and Austria Q3 GDP registered contractions, weighing on rate expectations for the Euro Zone. EUR bounced back after German GDP beat consensus, albeit still contracting

Economic data

-(NZ) New Zealand Sept Filled Jobs M/M: 0.4% v 0.2% prior.

-(IL) Israel Aug Manufacturing Production M/M: 5.5% v 1.9% prior.

-(AU) Australia Sept Retail Sales M/M: 0.9% v 0.3%e.

-(KR) South Korea Sept Retail Sales Y/Y: 9.5% v 3.3% prior.

- (NL) Netherlands Oct Producer Confidence: -1.8 v -2.2 prior.

- (FI) Finland Oct Consumer Confidence: -12.6 v -11.5 prior; Business Confidence: -21 v -21 prior.

- (FI) Finland Sept Preliminary Retail Sales Volume Y/Y: -3.3% v -2.1% prior.

- (ZA) South Africa Sept M3 Money Supply Y/Y: 7.7%e v 8.0%e; Private Sector Credit Y/Y: 4.6% v 3.5%e.

- (DE) Germany Oct CPI North Rhine Westphalia M/M: -0.1% v 0.2% prior; Y/Y: 3.1% v 4.2% prior.

- SE) Sweden Q3 GDP Indicator Q/Q: 0.0% v 0.3%e; Y/Y: -1.2% v -0.8%e.

- (SE) Sweden Sept GDP Indicator M/M: -0.5% v -0.5% prior; Y/Y: -3.0% v 0.1% prior.

- (SE) Sweden Aug Non-Manual Workers’ Wages Y/Y: 4.5% v 4.1% prior.

- (NO) Norway Sept Credit Indicator Growth Y/Y: 4.1% v 4.1% prior.

- (ES) Spain Oct Preliminary CPI M/M: 0.3% v 0.7%e; Y/Y: 3.5% v 3.8%e.

- (ES) Spain Oct Preliminary CPI EU Harmonized M/M: 0.3% v 0.5%e; Y/Y: 3.5% v 3.8%e; CPI Core Y/Y: 5.2% v 5.6%e.

- (CH) Swiss Oct KOF Leading Indicator: 95.8 v 95.8e.

- (AT) Austria Q3 GDP Q/Q: -1.2% v -1.1% prior; Y/Y: -0.6% v -0.8% prior.

- (AT) Austria Sept PPI M/M: 0.4% v 0.3% prior; Y/Y: -3.8% v -2.4% prior.

- (TR) Turkey Oct Economic Confidence: 96.5 v 95.4 prior.

- (DE)Germany Q3 Preliminary GDP Q/Q: -0.1% v -0.2%e; Y/Y: -0.3% v -0.7%e; GDP NSA (unadj) Y/Y: -0.8% v -1.0%e.

- (DE) Germany Oct CPI Hesse M/M: -0.1% v 0.3% prior; Y/Y: 3.6% v 4.7% prior.

- (DE) Germany Oct CPI Bavaria M/M: 0.0% v 0.3% prior; Y/Y: 3.7% v 4.1% prior.

- (DE) Germany Oct CPI Baden Wuerttemberg M/M: 0.0% v 0.2% prior; Y/Y: 4.4% v 5.1% prior.

- (CH) Swiss weekly Total Sight Deposits (CHF): 472.1B v 478.8B prior; Domestic Sight Deposits: 463.1B v 469.7B prior.

-(IS) Iceland Oct CPI M/M: 0.6% v 0.4% prior; Y/Y: 7.9% v 8.0% prior.

Fixed income issuance

-(KR) Bank of Korea (BOK) sells KRW1.0T in 3-month Monetary Stabilization Bonds: Yield: 3.600%.

- (DK) Denmark sold total DKK in 3-month and 6-month bills.

Looking ahead

- (BR) Brazil Formal Sept Total Formal Job Creation: No est v 220.8K prior.

- (IL) Israel Sept Leading ‘S’ Indicator M/M: No est v 0.1% prior.

-05:30 (UK) Sept Net Consumer Credit: No est v £1.6B prior; Net Lending: No est v £1.2B prior.

- 05:30 (UK) Sept Mortgage Approvals: No est v 45.4K prior.

- 05:30 (UK) Sept M4 Money Supply M/M: No est v +0.2% prior; Y/Y: No est v -0.8% prior; M4 (ex-IOFCs) 3-month Annualized: No est v -2.1% prior.

- 06:00 (EU) Euro Zone Oct Economic Confidence: No est v 93.3 prior; Industrial Confidence: No est v -9.0 prior; Services Confidence: No est v 4.0 prior; Consumer Confidence (final): No est v -17.9 advance.

- 06:00 (DE) Germany Oct CPI Saxony M/M: No est v 0.3% prior; Y/Y: No est v 5.4% prior.

- 06:00 (BE) Belgium Q3 Preliminary GDP Q/Q: No est v 0.2% prior; Y/Y: No est v 0.9% prior.

- 06:00 (IS) Iceland Oct CPI M/M: No est v 0.4% prior; Y/Y: No est v 8.0% prior.

- 06:00 (EU) Daily Euribor Fixing.

- 06:25 (EU) Daily ECB Liquidity Stats.

- 06:30 (BE) Belgium CPI Oct M/M: No est v -0.7% prior; Y/Y: No est v 2.4% prior.

- 06:30 ((DE) Germany to sell combined €5.0B in 3-month and 9-month BuBills.

- 07:00 (PT) Portugal Oct Consumer Confidence: No est v -22.9 prior; Economic Climate Indicator: No est v 1.3 prior.

- 07:00 (PT) Portugal Sept Retail Sales M/M: No est v -3.0% prior; Y/Y: No est v -0.3% prior.

- 07:00 (BR) Brazil Oct FGV Inflation IGPM M/M: No est v 0.4% prior; Y/Y: No est v -6.0% prior.

- 07:00 (IS) Iceland to sell 3-month and 6-month Bills.

- 07:00 (RO) Romania to sell RON400M in 4.25% Apr 2036 Bonds.

- 07:00 (IL) Israel to sell combined ILS2.0B in 2026, 2028, 2029, 2031, 2032 and 2052 bonds.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 09:00 (ZA) South Africa Sept Monthly Budget Balance (ZAR): No est v -47.3B prior.

- 09:00 (DE) Germany Oct Preliminary CPI M/M: 0.2%e v 0.3% prior; Y/Y: 4.0%e v 4.5% prior.

- 09:00 (DE) Germany Oct Preliminary CPI Harmonized M/M: 0.1%e v 0.2% prior; Y/Y: 3.6%e v 4.3% prior.

- 09:00 (UK) Daily Baltic Dry Bulk Index.

- 09:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 09:00 Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 10:00 (FR) France Debt Agency (AFT) to sell €4.9-6.5B in 3-month, 6-month and 12-month bills.

- 10:30 (US) Oct Dallas Fed Manufacturing Activity: -16.0e v -18.1 prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 12:00 (CA) Canada to sell 2 Year Bonds.

- 13:00 (SE) Sweden Central Bank (Riksbank) Gov Thedeen.

- 16:00 (US) Weekly Crop Progress Report.

- 17:45 (NZ) New Zealand Sept Building Permits M/M: No est v -6.7% prior.

- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 78.2 prior.

- 19:00 (KR) South Korea Sept Industrial Production M/M: No est v 5.5% prior; Y/Y: No est v -0.5% prior; Cyclical Leading Index: No est v 0.0% prior.

- 19:30 (JP) Japan Sept Jobless Rate: 2.6%e v 2.7% prior; Job-To-Applicant Ratio: 1.29e v 1.29x prior.

- 19:50 (JP) Japan Sept Retail Sales M/M: 0.2%e v 0.2% prior; (revised from 0.1%) Y/Y: 6.0%e v 7.1% prior (revised from 7.0%); Dept. Store, Supermarket Sales Y/Y: No est v 6.0% prior.

- 19:50 (JP) Japan Sept Preliminary Industrial Production M/M: +2.5%e v -0.7% prior; Y/Y: -2.3%e v -4.4% prior.

- 20:00 (NZ) New Zealand Oct ANZ Business Confidence: No est v 1.5 prior; Activity Outlook: No est v 10.9 prior.

- 20:01 (IE) Ireland Oct Consumer Confidence: No est v 58.8 prior.

- 20:01 (UK) Oct Lloyds Business Barometer: No est v 36 prior.

- 20:01 (UK) Oct BRC Shop Price Index Y/Y: No est v 6.2% prior.

- 20:30 (AU) Australia Sept Private Sector Credit M/M: 0.3%e v 0.4% prior; Y/Y: No est v 5.1% prior.

- 21:30 (CN) China Oct Manufacturing PMI (Govt Official): 50.2e v 50.2 prior; Non-Manufacturing PMI: 51.8e v 51.7 prior; Composite PMI: No est v 52.0 prior.

- 22:00 (SG) Singapore Sept M2 Money Supply Y/Y: No est v 4.2% prior; M1 Money Supply Y/Y: No est v -5.6% prior.

- (JP) Bank of Japan (BoJ) Interest Rate Decision: Expected to leave Interest Rate on Excess Reserves (IOER) and Yield Curve Control (YCC) unchanged (**Note: Quarterly Staff Projections dur out as well).

- 23:00 (TH) Thailand Central Bank to sell THB50B in 3-month bills.