Notes/Observations
- Fed holds steady citing global risks; could raise pressure for more QE by ECB and BOJ
- Greece goes to polls for 3rd time this year; Syriza party and New Democracy party neck-and-neck in polls
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 -1.6%, FTSE -0.6% at 6,153, DAX -1.8% at 10,041, CAC-40 -1.5% at 4,582, IBEX-35 -1.4% at 9,967, FTSE MIB -1.7% at 21,715, SMI -1.1% at 8,757, S&P 500 Futures -0.1% at 1,976]
- Market Focal Points/Key Themes: European stocks drop in early trading after the Fed decided to leave interest rates on hold and renewed concerns over global growth; the move lower was led by automakers and luxury stock; quadruple witching day could affect volatility; Deutschebank said to close corporate banking unit in Russia; Worlpay decided to continue with IPO, snubbing offers from Ingenico (ING.FR +9.7%) and Wirecard (WDI.DE +1.9%); utilities and materials bucked the trend, up slighly in early trading
Sectors:
- Consumer discretionary [Hellas HLE.DE -2.1% (cuts outlook)]
- Consumer staples [Poundland PLND.UK +2.9% (merger cleared)]
- Industrials [Deutz DEZ.DE -0.2% (broker move)]
- Materials [Ferrexpo FXPO.UK -28.8% (Ukraine update)]
Speakers
- Germany regulator Bafin reiterated that low interest rate environment weighing upon German banking sector over 5-year period. Expected aggregate to see pretax profit decline of 25%.
- Czech banking sector said to be preparing for negative deposit rates (Note: Czech Central Bank next rate decision is next week (Thursday, Sept 24th)
- Japan Parliament said to reject a censure motion against PM Abe
- Indonesia Central Bank Gov Martowardojo stated that he saw low probability that Fed would raise rates at its Dec policy meeting
Currencies
- The USD was softer and at fresh multi-week lows against the majors as investors pondered whether the dovish tilt to the Fed outlook implied more speed bumps ahead.
- The EUR/USD was at 3-weeek highs and holding above the 1.1450 level with bias likely to remain to the upside for the time being.
- The JPY was firmer and holding below the 120 handle against the USD. The stronger yen weighed upon Japanese stocks with Nikkei falling by 2% in the session.
- Several analysts noted that the Fed rhetoric could raise the pressure for more QE by ECB and BOJ. For the time being the USD was softer due to the dovish hold expressed by the Fed
- Commodity and emerging market bloc benefited from the Fed's decision to postpone its rate lift-off. The Thai Baht having its best 2-day gain in two years
Fixed Income:
- Bund futures trade at 154.85, up 115 ticks as a more dovish FED put a bid into Bonds. A break of today's low and gap fill at 154.66 has analysts targeting initial support at 154.26 with a break extending to 153.74. To the upside a break of the highs would target 155.34, followed by the week's high at 155.51.
- UK Gilt futures trades 118.18, up 95 ticks, in sympathy with the risk off tone seen this morning. Analysts look for downside retracement to target 117.59, with 117.15 filling the gap. To the upside a break of today's high at 118.42 looks for continued strength to September highs at 118.63 followed by 119.35 contract highs the eventual target.
- Friday's liquidity report showed Thursday's excess liquidity rose to €495.0B, up €0.7B from €494.3B prior. This was primarily due to AFs and MonPol portfolios rising to negative €81.4B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €59M from €72M.
Political/In the Papers:
- (BR) Brazil's opposition parties file request in Congress to impeach President Rousseff. Request was backed by some members of Rousseff's main political ally (PMDB party) whose votes would be needed to succeed in ousting the president.
Looking Ahead
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- 06:00 (UK) DMO to sell combined £4.5B in 1-month, 3-month and 6-month Bills (£2.0B, 0.5B and £2.0B respectively)
- 06:00 (IS) Iceland cancels Bond auction
- 6:30 (EU) ECB's Coeure (France) in Paris
- 06:45 (US) Daily Libor Fixing
- 07:00 (IT) Italy Fin Min Padoan in Rome
- 07:00 (UK) BOE's Haldane
- 07:00 (UK) BOE Quarterly Bulletin
- 07:30 (IN) India Weekly Forex Reserves
- 07:30 (TR) Turkey Central Bank TCMB Survey of Expectations
- 08:15 (US) Baltic Dry Bulk Index
- 08:30 (CA) Canada Aug CPI M/M: 0.0%e v 0.1% prior; Y/Y: 1.3%e v 1.3% prior; Consumer Price Index: 127.3e v 127.3 prior
- 08:30 (CA) Canada Aug CPI Core M/M: 0.2%e v 0.0% prior; Y/Y: 2.1%e v 2.4% prior
- 08:30 (CA) Canada Aug CPI (Seasonally Adj) M/M: No est v 0.2% prior; CPI Core (Seasonally adj) M/M: No est v 0.2% prior
- 09:00 (MX) Mexico Q2 Aggregate Supply and Demand: 3.1%e v 3.5% prior
- 09:00 (RU) Russia Aug PPI M/M: 1.0%e v 1.5% prior; Y/Y: 13.7%e v 13.1% prior
- 09:30 (DE) German Finance Ministry's Spahn at Conference, Berlin
- 10:00 (US) Aug Leading Index: +0.2%e v -0.2% prior
- 10:00 (BR) Brazil Sept CNI Industrial Confidence: No est v 37.1 prior
- 11:00 (EU) Potential Sovereign rating after European closes
- 11:30 (IT) Italy Fin Min Padoan
- 12:00 (US) Q2 Household Change in Net Worth: No est v $1.629T prior
- 12:00 (IT) Italy Cabinet discusses 2016 budget
- 13:00 (US) Weekly Baker Hughes Rig Count data
- 15:00 (AR) Argentina Q2 GDP Q/Q: No est v 0.2% prior; Y/Y: 2.3%ev 1.1% prior
- 17:00 (CO) Colombia July Trade Balance: -$1.0Be v -$0.8B prior; Total Imports: $4.5Be v $4.2B prior
- (UR) Ukraine Q2 Final GDP Y/Y: No est v -14.7% prelim
- (CO) Colombia Aug Retail Confidence: No est v 18.2 prior; Industrial Confidence: No est v 0.1 prior
- (PE) Peru Central Bank 3Q Inflation Report
- (BR) Brazil July Economic Activity Index (Monthly GDP) M/M: -0.3%e v -0.6% prior; Y/Y: -4.4%e v -1.2% prior
Weekend:
- Sun (GR) Greece holds Parliamentary elections
Economic data
- (JP) Japan Aug Nationwide Dept Sales Y/Y: 2.7% v 3.4% prior; Tokyo Dept Store Sales Y/Y: 6.1 v 7.2% prior (5th month of improvement)
- (FR) France Q2 Final Wages Q/Q: 0.3% v 0.3% prelim
- (EU) Euro Zone July Current Account SA: €22.6B v €24.9B; Current Account NSA: €33.8B v €30.6B prior
- (CN) Weekly Shanghai copper Inventories: 147.9K v 140.8K prior
- (IT) Italy July Current Account Balance: €6.7B v €3.5B prior
Fixed Income Issuance:
- (ZA) South Africa solds total ZAR650M in I/L 2033, 2038 and 2050 Bonds
Contributed by Trade The News