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22 Oct 2018
GLOBAL MARKETS OVERVIEW:
Europe: Major European stock indices traded with a mixed tone. Spain (+0.06%, following a Supreme Court’s decision to put on hold Thursday’s ruling) and the UK (+0.32%) outperformed, while Portugal (-0.68%) was hit the hardest.
STOXX 600 declined 0.12%, with 12 out of 19 sectors closing negative. Food & Beverages (+1.64%) and Utilities (+1.17%) outperformed, while Travel & Leisure (-1.77%) and Auto & Parts (-2.80%, following Daimler’s profit warning) were the main laggards.
Eurozone sovereign debt market: 10-year EGB traded with a mixed tone across the region. Italy, Greece and Portugal outperformed, while Germany and France underperformed. Italian yields decreased across the curve, with 10-year BTPS yields down 20.7bps to 3.473%, and 2-year BTPS down 35.2bps to 1.144%. This came after EU Economic and Financial Affairs Commissioner Pierre Moscovici said Italy budget of 2.4% deficit was not the key point in EU notes. In Greece, 10-year GGBs yields were down 9.3bps to 4.305%, while in Portugal, 10-year PGBs yields were down 1bps to 2.009%. On the other hand, 10-year Bunds yields were up 4.3bps to 0.457%, while 10-year OATs yields were up by 4.1bps to 0.834%.
Portugal: PSI20 closed negative (-0.68%), with 10 out of 18 members closing negative. Altri (+1.51%) and EDP (+0.99%) outperformed, while Navigator (-3.48%) and CTT (-3.61%) were the main laggards.
FX & Commodities: Gold finished the day little changed, +0.06% (+0.78% over the week). Gold recorded the third consecutive week of gains. The first future of Brent rose by +0.62% (-0.81% last week). The euro strengthened by 0.53% against the US Dollar ( -0.40% last week).
US Equity & Debt Markets: S&P500 finished the day little changed (-0.04%). 6 out of the 11 main industry groups finished the day with gains. Consumer Staples (+2.32%), Utilities (+1.58%) and Real Estate (+1.00%) were the major outperformers, while Health Care (-0.95%), Consumer Discretionary (-0.89%) and Energy (-0.82%) were the main laggards. 10-year UST yields rose by 1.3bps to 3.193%
Latin America: In Argentina, the government sees consumer prices rising 5%m/m in October, according to press reports citing a report prepared by economy minister Nicolas Dujovne. According to this document, 2018 inflation would end the year at 47.4%, after a 3%m/m increase in both November and December. In Brazil, Jair Bolsonaro is seen proposing the central bank’s formal independence if he wins the second round on 28 October, according to newspaper Estado de São Paulo.
Asia: Equity indices traded mostly with a positive tone: TOPIX +0.15%, HANG SENG +2.21% as we type, SHANGHAI COMPOSITE +4.09%, HSCEI +2.84% as we type, TAIEX +0.55%, KOSPI +0.25% and S&P/ASX200 -0.58%. In China, President Xi Jinping reiterated his commitment to the private sector and to alleviating poverty in the country.
OUR TAKE ON THE LATEST MACRO DATA:
US: September Existing Home Sales
September existing home sales decreased by 3.4%m/m, vs market expectations of a decrease of 0.9%m/m, to an annualized pace of 5.15mn. The August reading was revised from +0.0% m/m to -0.2% m/m.
Portugal: The Left Bloc party will back the government’s 2019 budget proposal in the general vote in parliament, according to Lusa (Bloomberg)
Navigator: The group has announced that Figueira da Foz’s mill has resumed production. Navigator estimates production losses from the mill stoppage at about 9,000-10,000 tons of paper. The company proceeds with work to repair damages from Hurricane Leslie (Bloomberg)
Spain: The European Commission said the planned structural deficit reduction of 0.4% of GDP is below the 0.65% requirement set out in July. The Commission said that it cannot exclude risk of deviation vs. the required effort, and invited Spanish government to summit additional information by 22 October. The European Commission also considered that it needs more information on French and Belgium budgets (Bloomberg)
Spain: Spain’s Supreme Court on Friday said it will review its decision that ruled that banks must pay a tax on mortgage loans that until now has been paid by their customers. The court will call a plenary session to decide whether to confirm the change to jurisprudence implied in the ruling, Chairman of Section 3 of the Supreme Court said. The Court decided to seek the plenary’s opinion because the ruling implies a “radical U-turn in the jurisprudence” and “considering the enormous economic and social impact” (Bloomberg)
DIA: Following a review process of 2018 financial outlook, DIA considered that certain adjustments required for the 2017 consolidated financial statements had a impact on equity of €56mn (Bloomberg)
DIA: S&P downgraded DIA to BB- from BBB+ (Bloomberg)
Daimler: Daimler said in statement that 3Q18 earnings of €2.49bn are significantly below market expectations. The company said main factor is an increase in expenses in connection with ongoing governmental proceedings, measures in various regions with regard to Mercedes-Benz diesel vehicles. Daimler group’ s 2018 EBIT to be significantly below prior-year level. Reassesses 2018 EBIT outlook for Mercedes-Benz Cars, while Daimler Buses said it will be “significantly” below prior-year level. Daimler Buses recorded decreasing demand in some markets (Bloomberg)
OHL: Fitch Ratings has revised OHL Outlook to Stable from Negative, while affirming the B+ rating. The revision of the Outlook reflects the disposal of OHL Concesiones, which allows OHL to use the proceeds to reduce its gross debt quantum and simultaneously simplify the group structure considerably. Its legacy projects, which had been contributing to EBITDA losses, have largely been resolved and Fitch expects OHL to return to positive EBITDA by 2019 (Bloomberg)
Philips: 3Q18 adjusted EBITDA reached €568mn (vs. consensus €584mn). 3Q18 comparable sales rose by +4% (vs. consensus +5.4%). 3Q18 total revenue stood at €4.3bn (vs. consensus €4.36bn). The group reiterated its targets for the 2017-2020 period of 4%-6% comparable sales growth and an average 100bps improvement in adjusted EBITDA margin. Moreover, Phillips reaffirmed that it is well on track to deliver annual savings of €400mn in 2018 (Bloomberg)
Lloyds: According to press reports, the bank is drawing up plans to buy back almost £2bn of stock next year (Bloomberg)
WHAT TO WATCH TODAY: There is not much in the economic data calendar that can impact markets.
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