ACT: European Market Update: Equities Sell Off On US Rate
European Market Update
Equities sell off on US rate hike fear, and deepening scandal over Volkswagen weigh
Notes/Observations
Dollar gains ground as the US Fed's mixed signals (4th Fed member talked about a possible hike in 2015) create further confusion.
Car makers under pressure as a wider probe of the industry in the wake of Volkswagen AG admitting to rig emission tests in the U.S
FTSE 100, DAX and CAC all down more than 2%
Economic data
02:00 (CH) Swiss Aug Trade Balance (CHF): 2.87B v 2.8Be; Real Exports M/M: -2.4 v -1.7% prior; Real Imports M/M: -4.0 v -2.5% prior
02:00 (FI) Finland Aug Unemployment Rate: 8.3% v 8.4% prior
03:00 (ZA) South Africa July Leading Indicator: 92.8 v 94 prior
03:00 (DK) Denmark Sept Consumer Confidence: 5.0e v 8.0e
03:00 (DK) Denmark Aug Retail Sales M/M: 0.1% v 0.3%e prior; Y/Y: 0.2 v 3.4% prior
04:30 (UK) Aug Public Finances (PSNCR): -£0.22B v -£3.0B prior; Public Sector Net Borrowing: +£11.3Be v £8.8Be prior; Central Government NCR: -£0.2 v -£0.2B prior; PSNB ex Banking Groups: -£12.1Be v -£9.2B prior
05:00 (IS) Iceland Aug Wage Index M/M: No est v 1.1% prior; Y/Y: No est v 7.9% prior
(ES) Spain Debt Agency (Tesoro) sells total €3.296B vs. €3-4B indicated range in 3-Month and 9-Month Bills
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 -2.9%, FTSE -2.40% at , DAX -2.60% at 9,730, CAC-40 -2.50% at 4,456, IBEX-35 -3.0% at 9,575, FTSE MIB -2.3% at 21,200, SMI -2.4% at 8,550, S&P 500 Futures -1.5% at 1,934]
European stocks slipped in early trading, following general risk-off sentiment; safe-haven assets supported; oil dropped, impacting energy stocks; commodities broadly down adding weakness to materials stocks; automakers affected by potential fallout from Volkswagen emissions scandal (Peugeot UG.FR -6.5%, Renault RNO.FR -4.9%, Fiat Chrysler FCA.IT -3.8%, Daimler DAI.DE -3.4%, BMW BMW.DE -4.3%)
(UK) UK Chancellor Osborne: Exit from very loose monetary policy will come
(TR) Turkey FinMin Simsek: Conditions not in favor of EM economies
(ES) Spain PM Rajoy: Only threat to Spanish GDP is politcal instability
Currencies
FX markets had a mixed session against the dollar in the morning session despite little macroeconomic data out.
The EUR/USD was trading around the 1.12 handle overnight, with the Euro coming off on the early morning session before finding a bid to around the 1.12 handle.
The GBP/USD traded above the 200 day moving average as a support level for most of the night before cable came off and is now trading below that 200 day moving average. Cable remains range-bound between the lows of 1.5457 to highs of 1.5512 in the morning session.
The USD/JPY was more volatile on the session trading higher after the Bank of Japan left monetary policy unchanged last week, but with risks remaining clear.
Fixed Income
Bund futures trade at 155.35 up 50 ticks after dovish comments from ECB's Praet. A break of today's low will target 154.66 with analysts seeing a break to target 154.26 followed by 153.74. A break would see an extension to potentially 152.36 followed by 151.84. To the upside analysts eye 155.51 initially followed by 156.01 next. Continuation would see 156.49 then 156.83.
Today we saw the Netherlands sell €2.8B in its 3 year DSL the equivalent of 6K Bund futures.
UK Gilt futures** trades 118.18 up 30 ticks, in conjunction with the general risk off tone seen in the markets. Analysts still look for downside retracement to target 117.59 with 117.15 filling the gap. To the upside a break of 118.32 looks for continued strength to September highs at 118.63 followed by 119.35 contract highs the eventual target.
Monday's liquidity report showed Friday's excess liquidity fell to €480.0B a rise of €15.5B from €495.5B prior. This was primarily due to AFs and MonPol portfolios falling to negative €66.4B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €53M from €63M.
Looking Ahead
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave Key Rates unchanged; Expected to leave Benchmark Repurchase Rate at 7.50%; Expected to leave Overnight Lending Rate at 10.75%; Expected to leave Overnight Borrowing Rate at 7.25%
07:45 (US) Goldman Economist Chain Store Sales
08:00 (HU) Hungary Central Bank (NBH) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.35%
08:00 (BR) Brazil Sept IBGE Inflation IPCA-15 (mid-month) M/M: 0.4%e v 0.4% prior; Y/Y: 9.6%e v 9.6% prior
08:15 (US) Baltic Dry Bulk Index
08:55 (US) Weekly Redbook Sales
09:00 (US) July FHFA House Price Index M/M: 0.4%e v 0.2% prior
09:00 (EU) Weekly ECB Forex Reserves
08:55 (US) Weekly Redbook Sales
09:00 (EU) Weekly ECB Forex Reserves: € v € prior
10:00 (MX) Mexico Weekly International Reserves
10:00 (EU) Euro Zone Sept Advance Consumer Confidence: -7.0e v -6.9 prior
10:00 (US) Sept Richmond Fed Manufacturing Index: 2e v 0 (flat) prior
15:00 (AR) Argentina Aug Trade Balance: No est v $0.2B prior
16:30 (US) Weekly API Oil Inventories
20:00 (AU) Australia July Conf. Board Leading Index M/M: No est v -0.2% prior
21:00 (PH) Philippines July Trade Balance: -$0.1Be v -$0.6B prior; Imports Y/Y: -0.4%e v +22.6% prior
21:45 (CN) China Sept Preliminary Caixin China PMI Manufacturing: 47.5e v 47.3 prior
