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6 Nov 2018
GLOBAL MARKETS OVERVIEW:
Europe: Major European stock indices traded with a mixed tone yesterday. Italy (-0.56%) and Germany (-0.21%) underperformed, while Portugal (+0.16%) and Spain (+0.20%) outperformed.
STOXX 600 closed negative for the first time in 6 sessions (-0.16%) with 12 out of 19 sectors closing negative. Oil & Gas (+1.52%) and Utilities (+0.94%) outperformed, while Financial Services (-1.51%) and Technology (-1.55%) were hit the hardest.
Eurozone sovereign debt market: 10-year EGB traded with a mixed tone yesterday. Germany and Spain outperformed, while Italy and Greece underperformed. 10-year Bunds yields were marginally down 0.1bps to 0.424%, and 10-year SPGBs yields were down 0.6bps to 1.562%. On the other hand, 10-year BTPS yields were up 0.5bps to 3.320%, while 10-year GGBs yields were up 1bps to 4.248%.
ECB Governing Council member and central bank of Finland Governor Olli Rehn considered that European monetary policy still has some way to go. He still sees the eurozone economy needing a degree of monetary policy support in order to converge in a sustainable manner with sustainable price stability.
PSPP net settlements for last week, reported yesterday, came in at a negative €1,410mn. This comes after the previous week’s €3,531mn and brings the net total to €2,086.014bn. ABSPP3 net purchases came out at €6mn in the week ending on 2 November, from net purchases of €52mn the week before, to a new net total of €27.318bn. CBPP3 net purchases stood at €571mn for the week ending on 2 November (vs. a negative €495mn in the week ending on 26 October), to a new net total of €260.999bn. Finally, net additions in theCSPP reached €727mn, after €801mn the week before. The new net total stood at €174.184bn. Therefore, total net asset purchase settlements reached a negative €106mn for the week ending on the 2 November, compared to €3,889mn the week before.
Portugal: PSI20 closed positive yesterday (+0.16%, for the first time in 3 sessions), with 9 out of 18 members closing negative. NOS (+1.59%) and Galp Energia (+1.25%) outperformed, while Sonae (-1.97%) and Mota Engil (-2.92%, down 52.83% YTD) were the main laggards.
FX & Commodities: Gold fell by 0.11% yesterday (-0.06% as we type), while the first future of Brent rose 0.47% (-0.57% as we type). The euro strengthened by 0.17% against the US dollar (-0.03% as we type).
US Equity & Debt Markets: S&P500 recovered from earlier losses to finish the session up by 0.56%. 8 out of the 11 major industry groups recorded gains, with Real Estate (+1.69%) and Energy (+1.61%) as the main outperformers. 10-year UST yields fell by 1.1bps to 3.202%.
Latin America: In Argentina, according to the September central bank monthly survey, the median expectation for 2018, 2019 and 2020 inflation increased by 2.7ppt, 0.8ppt and 0.6ppt to 47.5%, 27.8% and 19.6%, respectively. In Chile, the IMACEC monthly real GDP rose by 2.3%y/y in September (vs. consensus +2.0%y/y), after +3.2%y/y in August. Excluding mining, monthly GDP rose 2.5%y/y, after +4.0%y/y in August. In Colombia, CPI inflation stood at +0.12%m/m in October (vs. consensus +0.15%), consistent with an annual rate of +3.33%y/y (vs. consensus +3.36%y/y). Core CPI inflation stood at +3.78%y/y.
Asia: Stocks traded with a mixed tone: TOPIX +1.16%, HANG SENG +0.67% as we type, SHANGHAI COMPOSITE -0.23%, HSCEI +0.83%as we type, TAIEX -0.66%, KOSPI +0.61% and S&P/ASX200 +0.98%.
OUR TAKE ON THE LATEST MACRO DATA:
US: October ISM Non-Manufacturing Index
The ISM non-manufacturing index fell from 61.6 in September to 60.3 in October (vs. consensus 59.0). Despite the decline recorded, the index remains at a high level by historical standards and consistent with an above-trend pace of expansion.
The details of the survey showed declines in business activity (-2.7 points to 62.5, still above the 6-month average), prices paid (-2.5 points to 61.7) and employment (-2.7 points to 59.7, still above the 6-month average). The new orders component remained broadly flat at 61.5, above the 6-month average of 60.7, which is an encouraging signal.
A weighted average of the ISM manufacturing and non-manufacturing is still consistent with a pace of GDP growth too high (see chart). A decline in ISM indices should take place over coming months. Nevertheless, the economy is likely to keep growing at a rate above potential.
UK: October Markit/CIPS Services PMI
The Markit/CIPS Services PMI declined from 53.9 in September to 52.2 in October (vs. consensus 53.3), suggesting a slowdown in growth by the sector at the start of 4Q18. This is the lowest reading since March. The new orders component weakened in October, which also represents a negative signal for coming months. Given the decline also posted by the manufacturing sector, the Markit/CIPS composite PMI fell by 2 points to 52.1 in October (vs. consensus 53.4), well below the 3Q18 average of 53.9, a quarter where the economy is expected to have expanded by 0.6%q/q (first estimate to be released on Friday).
US: September Trade Balance:
September trade deficit widened to $54bn from $53.3bn in August (vs consensus $53.6bn). It is the widest trade gap since February. Imports rose 1.5%m/m in September to $266.58bn from $262.75bn in August. Exports rose 1.5%m/m in September to $212.57bn from $209.45bn in August.
Spain: October Registered Unemployment
According to data released by the Ministry of Employment and Social Security, registered unemployment rose 1.63%m/m (-6.12%y/y) in October. This is the third month in a row that registered unemployment rises after an increase of 1.50%m/m in August and 0.64%m/m in September.
Semapa: From October 31 2018, the fund Santander Acciones Españolas holds 1,143,190 shares (previously held 1,166,673 shares) corresponding to 1.4067% of the share capital and voting rights of Semapa. The fund Small caps España held 471,188 shares, corresponding to 0.5798% of the share capital and voting rights of Semapa. In total, the securities investment funds managed bySantander Asset Management came to hold, as of 31 October 2018, 1,614,378 shares, corresponding to 1.9864% of the share capital and voting rights of Semapa, thus being below the threshold of 2% of qualifying holding (Semapa’s filing on CMVM)
BCP: BCP informed that the European Banking Authority has published the results of the 2018 EU-wide stress test, which has involved a significant sample of banks in the EU, with outcomes for 48 banks having been disclosed. The ECB has conducted a parallel stress test for other banks under its supervision, including BCP. BCP’s CET1 phased-in ratio stood at 9.14% under the adverse scenario, 384 basis points aggravation from end-2017, comparing favorably to an average 410 bps aggravation for the 48 banks tested by EBA (300 bps aggravation, comparing to 395 bps, respectively, under a fully implemented basis (BCP’s filing on CMVM)
Mota-Engil: Mota-Engil informed that, in accordance with the resolution of the Company’s Annual General Shareholder’s Meeting held on May 11 2018, it has acquired on 31 October 2018, 10000 shares at different prices. Mota-Engil now holds 4,808,461 treasury shares, corresponding to 2.0246% of its share capital (Mota-Engil’s filing on CMVM)
Mota-Engil: The group announced the launch of a partial and voluntary exchange offer for two bond emissions (5.50% 22 April 2019 and 3.90% 3 February 2020), for a total amount of €65mn. Mota-Engil will offer in exchange the bond 4.50% 28 November 2022 (Mota-Engil’s filling on CMVM)
Siemens Gamesa: FY18 sales reached €9.12bn (vs. consensus €9.27bn), while FY adjusted EBIT stood at €693mn (vs. consensus €660.6mn). The group said that FY18 guidance remains in place (Bloomberg)
Spain: Economy Minister Nadia Calvino said the Spanish government is working to persuade other parties to provide the votes it needs to pass a budget for 2019 but if they refuse the government can roll over its 2018 spending plan instead (Bloomberg)
Endesa: Endesa reported EBITDA for the nine-month period of €2.79bn vs €2.55bn y/y. 9M18 revenue of €15.4bn vs €14.82bn y/y. 9M18 EBIT of €1.64bn and 9M18 Net Income of €1.19bn (Bloomberg)
Italy: German Finance Minister Olaf Scholz said a nation like Italy with debt worth 130% of GDP has to proceed far more cautiously and that euro-region members must follow similar budget strategies to foster financial stability (Bloomberg)
Italy: “If one, any, EU country says SGP rules are of no interest to us, there have to be consequences”, Peter Kazimir, Slovak Finance Minister, said in tweet referring to Italy. (Bloomberg)
Ferrari: Ferrari reported revenue for 3Q18 that was 2.6% below consensus expectations, 3Q18 revenue of €838mn (vs. estimate €860.7mn), 3Q18 adjusted EBITDA of €278mn (vs. estimate of €282.3mn), 3Q18 net income of €287mn (vs estimate of €204.1mn), and 3Q18 EPS of €1.52. Ferrari confirmed guidance for 2018 (Bloomberg)
Italgas: Italgas reported 9M18 EBITDA of €629.2mn, 9M18 EBIT of €333.9mn, 9M18 net income of €226.4mn, 9M18 operating cash-flow of €590mn, and net debt €3.73bn. Company CEO confirmed FY targets (Bloomberg)
Deutsche Post: 3Q18 EBIT reached €376mn (vs. consensus €393.9mn). The group disclosed 3Q18 revenues of €14.85bn (vs. consensus €14.94bn). Confirms 2018-2020 earnings targets (Bloomberg)
WHAT TO WATCH TODAY: Final Markit services and composite PMIs for October in the Eurozone will be the highlight of today’s economic calendar.
In the US, focus should be on US midterm elections.
CVS Health and Ralph Lauren will report quarterly earnings today before the market opens.
In Brazil, the central bank will publish today the minutes from the 31 October COPOM meeting. At that meeting, the COPOM decided to leave the SELIC policy rate unchanged at 6.50%, in a unanimous decision. In Chile, the central bank will also publish today the minutes from the 18 October MPC meeting. At that meeting, the MPC raised the policy rate by 25bps to 2.75%.
In the US, the Treasury will issue $27bn across the 10-year sector.
EDPR reports 3Q18 tomorrow before market opens.
Already this morning, Germany released a 0.3%m/m increase in factory orders in September, following a +2.5%m/m increased in the previous month (revised from +2.0%m/m). The increase was driven by domestic orders, while foreign orders contracted.
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