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1 Oct 2018
GLOBAL MARKETS OVERVIEW:
Europe: The session was negative for the major European stock indices. Italy (-3.83%) underperformed, following the release of the budget plans by the Italian government.
STOXX 600 (-0.83%) closed negative, with only two sectors registering gains: Food & Beverages (+0.13%) and Travel & Leisure (+0.13%). Banks (-2.76%) and Insurance (-1.76%) were hit the hardest.
Eurozone sovereign debt market: Mixed session for 10-year EGB yields. 10-year BTPS increased by 25.7 bps to 3.138%. Greece (+12bps to 4.119%) also underperformed.
Portugal: PSI20 closed 1.20% lower on Friday, on the back of the negative mood in Europe. Galp Energia (+0.89%) and F. Ramada (+0.51%) were the only members in the index that closed positive. The remaining 16 members closed on the red. Mota-Engil (-4.3%) and BCP (-3.5%) were hit the hardest.
FX & Commodities: The first future of Brent finished the day up by 1.22% (+0.35% as we type). Gold closed 0.68% higher (-0.39% as we type). EUR/USD finished the day -0.32% lower (-0.22% as we type). According to press reports, US President Donald Trump and Saudi King Salman bin Abdulaziz spoke over the weekend, and discussed efforts to maintain supplies to ensure the stability of the oil market.
Asia: With domestic Chinese and Hong Kong indices closed, major equity indices traded with a mixed tone: TOPIX +0.04% (with the Nikkei 225 index reaching a high since 1991), KOSPI -0.18%, TAIEX +0.41% and S&P/ASX200 -0.57%.
China’s official manufacturing PMI declined to 50.8 in September, from 51.3 in August (vs, consensus 51.2). All the major sub-indexes weakened. The official non-manufacturing PMI stood at 54.9 in September (vs. consensus 54.0), after 54.2 in August, reflecting the rise in the construction PMI. Meanwhile, the Caixin manufacturing PMI came out at 50.0 in September (vs. consensus 50.5), after 50.6 in August, the weakest reading since May 2017. The output and new orders sub-indexes both weakened in September.
US Equity & Debt Markets: S&P500 closed unchanged on theday. 5 out of the main 11 sectors closed positive: Utilities (+1.51%) and Real Estate were the main outperformers Financials (-1.06%) and Materials (-0.68%) suffered the most.
Latin America: In Brazil, according to a poll released by CNT/MDA, Jair Bolsonaro continues to lead voting intentions for the 1st round of the presidential elections that takes place next Sunday with 28.2% (unchanged vs. 17 Setpember). He is followed by Fernando Haddad with 25.2% (vs. 17.6% previously), Ciro Gomes (9.4%), Geraldo Alckmin (7.3%) and Marina Silva (2.6%). 2nd round simulations show Fernando Haddad beating Jair Bolsonaro (42.7% vs. 37.3% vs. 35.7% - 39.0% as of 17 September).
In Japan, BoJ Tankan business sentiment weakened in Spetember.
OUR TAKE ON THE LATEST MACRO DATA:
Eurozone: September Flash HICP Inflation
Euro area flash HICP inflation for September came out in line with consensus expectations at 2.1%y/y, after 2.0%y/y in August. However, core HICP inflation disappointed at 0.9%y/y, slowing down from 1.0%y/y in August and standing below consensus expectations of 1.1%y/y. Details released by Eurostat showed NEIG and services inflation remaining stable at 0.4%y/y and 1.3%, respectively. Energy inflation accelerated to 9.5%y/y (vs. 9.2%y/y in August), while food inflation stood at 2.7%y/y (vs. 2.4%y/y in August), reflecting higher inflation in unprocessed food (from 2.5%y/y to 3.2%y/y).
US: August Personal Spending/Income Report
Nominal personal income rose +0.3%m/m in August (vs. consensus +0.4%m/m), while nominal personal spending increased 0.3%m/m, in line with consensus expectations. Wage and salary growth was solid in August, rising by 0.5%m/m, while growth in disposable income rose 0.3%m/m. The saving rate remained stable at 6.6%. Real disposable income rose 0.2%m/m in August. The 3-month annualised change in real personal consumption expenditures stood at 3.8% in August (vs. 4.3% in July).
The headline PCE index rose 0.1%m/m (+0.108% rounded to three decimals), while core PCE inflation was flat (+0.037% rounded to three decimals). Consensus expected 0.1%m/m gains for both headline and core PCE inflation. This leaves headline and core PCE inflation at 2.2%y/y and 2.0%y/y, respectively, in line with consensus expectations.
US: Chicago Purchasing Manager Index
The index dropped from 63.6 in August to 60.4 in September, below consensus of 62.0. The index reached a 5-month low.
US: September University of Michigan Consumer Sentiment Index:
The Michigan index final reading for September stood at 100.1 (vs. preliminary reading of 100.8), below the survey expectations of 100.6, but above the August print of 96.2. The index reached the highest level since March 2018.
The current conditions gauge advanced to 115.2 from 110.3 in August, below the preliminary reading of 116.1. The expectations measure climbed to 90.5 from 87.1 in the previous month, vs. preliminary reading of 91.1.
Sonae: Sonae has agreed to buy Corpfin Capital’s 60% stake in Tomenider, owner of Arenal Perfumerias, for about €45mn, according to a regulatory filing. Arenal is a parapharmacy and perfume retail Company with 41 stores in the north of Spain. The company had sales of €97mn in 2017. Arenal’s founding Vazquez family will keep a 40% stake in Tormenider and will continue managing the business, according to Sonae. The transaction is expected to conclude during 1Q19 (Bloomberg)
EDP: Capital Group Companies reduced its stake in EDP to 2.958% as of 28 September, according to a regulatory filing (Bloomberg)
Merlin: Merlin Properties Socimi plans to put 800,000 square meters of logistics space on the market over the next three years, CEO Ismael Clemente told El Pais in interview (Bloomberg)
Red Electrica: The group’s new Chairman Jordi Sevilla has put the plan to buy Hispasat on hold, according to Expansion (Bloomberg)
Italy: Deputy Premier Matteo Salvini denounced what he calls a “Europe which threatens to put the government and Italians under its control” (Bloomberg)
Italy: European Commission Vice President Valdis Dombrovskis said that what emerges so far from the budget discussions in Italy does not seems to be in line with the stability and growth pact. He added that a formal European Commission opinion will be given once the formal plan is submitted by mid-October. According to Valdis Dombrovskis, it is important for Italy to stay on track with a responsible fiscal policy, given that the country has the second-highest debt-to-GDP ratio in the EU (Bloomberg)
Italy: Deputy Prime Minister Luigi Di Maio said Italy is not seeking a clash with the European Union and dialog with institutions and private investors will now start (Bloomberg)
Italy: Deputy Premier Matteo Salvini said the markets will come to terms with the budget (Bloomberg)
Ryanair: The group cut its full-year profit view to €1.10bn-€1.20bn due to higher prices of unhedged oil, lower traffic and higher €261mn costs from recent strikes. Raynair had previously forecast FY19 profit of €1.25bn-€1.35bn (Bloomberg)
WHAT TO WATCH TODAY: Focus should be on the final Markit manufacturing PMI reading for September.
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