Rise and shine everyone.
We have an extremely busy week of Central Bank decisions, employment data for the US and global PMIs.
The big news this morning is the German preliminary GDP reading that come in negative at -0.1% QoQ vs. Est of -0.3%. This puts the YoY GDP Growth at -0.3%. Meanwhile, Sweden’s 3Q GDP came in at -1.2% QoQ vs. -0.7% est. and -1% prior.
US Equity Futures are trading higher this morning after a tough close on Friday, possibly setting up for a relief rally given we’re close to month end. Bond Yields are marginally higher with the Yield Curve steepening marginally to -0.162%. Gold crossed 2000/oz on Friday and is holding the level this morning. Bitcoin and the US Dollar remain flat. Oil has pulled since Friday by -1.3%.
Asia and Australia
Asia equities finished mixed Monday. Mainland China equities rose again to continue a week-long outperformance, Hang Seng held back by energy stocks but still closed flat and well off its trough. Small gains for Seoul and Taipei, most of Southeast Asia and India found support. Japan and Australia followed overnight Wall Street indexes lower.
20 listed Chinese companies announced share buyback plans over weekend and major mutual fund house E Fund Management said it would spend more than CNY200M in one of its own products. Beijing's ongoing attempts to shore up the sliding stock market, follows Central Huijin state fund announcement last Monday that it would buy CNY17B of domestic ETFs.
Australia Retail sales rose 0.9% m/m in September, above consensus 0.3% and follows 0.2% in the previous month. This is a welcome sign for the economy but, perhaps not as great for inflation which is still trending higher than expected.
For Asia, all eyes will be on the Bank of Japan meeting with a decision to be released around 11pm ET. This meeting also comes with their Quarterly Outlook Report. There’s been a lot of speculation about the widening of the YCC and change in inflation estimates, while balancing concerns around yields, equities and the currency. We don’t expect them to announce the end of easing though.
Europe, Middle East, Africa
European equity markets higher, also following some of the uptick in Asia and setting up for a relief rally after last week.
German GDP: highlighted notable drop in private consumer spending, but there were also positive impulses from investment in equipment. However, confidence indicators remain at very low levels despite showings signs of bottom out. We’re of the view that Germany will go into recession during the winter. This is one quarter of negative GDP on the books now and we believe Q4 will likely come in negative as well.
Euro Area October Economic Sentiment gauge published by the European Commission inched down to 93.3 in October, from a revised 93.4 a month earlier. Economists had predicted a drop of 93.0. Dropped for the 6th month.
Germany bellwether state, North Rhine-Westphalia, posted first negative monthly inflation print since May 2023 and lowest annual pace since June 2021. Meanwhile, Spain’s preliminary CPI also came in lower than expected, at 0.3% m/m vs 0.7% expected, or 3.5% y/y vs 3.8% expected.
Eurozone earnings so far for Q3 surprised 1% to the upside, or (1%) to the downside ex-financials. Yet, analysts still lowering estimates also as industrial guidance and new order activity from EZ PMIs point towards sequential deceleration in demand. European banks have mostly beat estimates but with rates peaking, challenging loan demand, rising deposit betas and delinquencies, outperformance seen slowing from here. Cyclical sectors such as autos hit hard and are set to underperform defensives more into year-end, with Defensives holding up better as macro backdrop worsens.
The UAW expanded its strike against General Motors on Saturday, to include its Spring Hill, Tennessee, engine plant, a move that could stall GM's large pickup production and increase its financial pain. The expansion of the seven-week strike leaves GM the only Detroit automaker without a contract deal. Chrysler-owner Stellantis reached and agreement with the UAW on Saturday and Ford on Wednesday.
Sofi Technologies Reports Q3 (Sep) loss of $0.03 per share, $0.05 better than the FactSet Consensus of ($0.08); revenues rose 34.6% year/year to $564.2M vs the $511.3M FactSet Consensus. Co issues raised guidance for FY23, sees FY23 revs of $2.045B to $2.065B from $1.974B to $2.034B vs. $2.03B FactSet Consensus.
McDonald’s delivers a double beat. Reports Q3 (Sep) earnings of $3.17 per share, $0.17 better than the FactSet Consensus of $3.00; revenues rose 14.0% year/year to $6.69B vs the $6.56B FactSet Consensus. Global comparable sales increased 8.8%, reflecting strong comparable sales across all segments: U.S. increased 8.1%; International Operated Markets segment increased 8.3%; International Developmental Licensed Markets segment increased 10.5%.
Chart of the Day
November 1 is the Treasury General Account refunding announcement. It is widely expected that issuances will increase.
We expect another round of coupon Treasury supply increase at the 1 November refunding announcement, in similar magnitude to the increase announced at the August refunding. The increase in coupon auction sizes will likely be across the yield curve. We expect USD48bn 3Y note, USD40bn 10Y note, and USD25bn 30Y bond to be auctioned at the November refunding, representing a USD2bn increase per tenor. 2Y, 5Y, and 10Y auction sizes could see a larger increase than other maturities, such as 7Y and 20Y, where demand has been less strong. - Credit Agricole
(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)