Silver as an investment

World Stocks Hit 4th Consecutive Record High, Bonds Rise On ECB QE Report

World stocks rose to a 4th consecutive record highs, while the dollar headed for its worst week; U.S. stock-index futures are steady, with European and Asian stocks higher ahead of much anticipated US inflation data, which is expected to give cues on the outlook for the Federal Reserve’s interest rates. MSCI’s all world equity index was up 0.1% after hitting record highs on Thursday. Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan hit a 10-year high, up 0.3 percent on the day.

The Stoxx Europe 600 Index rose 0.3%, led by steelmakers and miners as most industrial metals gained and WTI crude rose back above $51 a barrel. The dollar nudged lower as investors awaited the U.S. latest inflation data. Sterling pared gains after European Commission President Jean-Claude Juncker said “new problems” were emerging “day after day” in the Brexit withdrawal process. The British currency had rallied earlier on a report that the EU may offer the U.K. a two-year transition period to stay in the union.

Elsewhere, Asian stocks rose for a sixth day, the longest winning streak in three months, on optimism that U.S. economic data will prompt gradual rate hikes by the Federal Reserve. The MSCI Asia Pacific Index rose 0.5 percent to 166.47 as of 4:59 p.m. in Hong Kong, the highest level since November 2007. In Tokyo, the Nikkei 225 powered past 21,000 and completed a nine-day winning streak. The equities benchmark in the Philippines rose to a record, while mainland Chinese shares trading in Hong Kong extended their advance to a two-year high. The MSCI Asia Pacific Index has advanced 23 percent this year, poised for its sharpest annual gain since 2009. The gauge is trading at 14 times 12-month forward estimated earnings, highest since January.

The Asian highlight was once again Japan’s Nikkei 225 Stock Average, which completed a nine-day winning streak to close above 21,000 for the first time since November 1996. Fast Retailing Co., which accounts for about 6.5 percent of the measure, contributed most to its rise, after the company predicted that international sales for its Uniqlo chain will surpass those in Japan this fiscal year and reported the biggest jump in annual earnings in more than a decade on Thursday. The Topix index rose to a fresh decade-high even as the yen advanced against the dollar for a second day. The gauge was boosted by electronics makers and retailers. Both indexes posted a fifth consecutive week of gains, the longest weekly rally this year. The market will target the 22,000 mark next for the Nikkei 225, anticipating a currency rate of 115 yen per dollar and positive earnings continuing in the following fiscal year, said Takuya Takahashi, a strategist at Daiwa Securities Co. in Tokyo.

The U.S. later today will publish data on consumer prices and retail sales for September. Fed minutes released Wednesday showed several policy makers looking for stronger evidence of price gains before supporting a third interest-rate increase this year.

“The market is pricing another rate increase in December and it won’t derail the bounce in the U.S. economy because there won’t be a sharp rate ascent,” said Noel Reyes, chief investment officer at Security Bank Corp. in Manila. “Also, improving economic outlook in Asia, Europe and the U.S. are translating to better performance for stocks.”

Among the main overnight reports which pushed European bonds higher was a trial balloon “leak” to bother Reuters and Bloomberg, according to which the ECB was considering cutting quantitative easing in half to €30 billion euros  a month from the current pace of €60 billion, according to officials familiar with the debate. While the central bank’s governors are split on the need to identify an end date for purchases, a pledge to keep buying bonds until September may offer grounds for compromise, they said.

“For the ECB, duration of the program should trump monthly purchases,” Royal Bank of Canada economists including Sam Hill said in a client note. “This should anchor front-end rates firmly, through the forward guidance linking interest rates to the duration of the bond buying, and steepen the yield curve.”

Following the reports, the EURUSD first dropped, then spiked, and ultimately dumped on what, on the surface at least, would look like hawkish news.

Also overnight we got the latest trade data from China, which missed modestly on exports, even as imports rose more than expected.

  • Chinese Trade Balance (CNY)(Sep) 193.0B vs. Exp. 266.05B (Prev. 286.50B). (Newswires)
    • Chinese Exports (CNY)(Sep) Y/Y 9.0% vs. Exp. 10.9% (Prev. 6.9%)
    • Chinese Imports (CNY)(Sep) Y/Y 19.5% vs. Exp. 16.5% (Prev. 14.4%)
  • Chinese Trade Balance (USD)(Sep) 28.47B vs. Exp. 38.00B (Prev. 41.99B). (Newswires)
    • Chinese Exports (USD)(Sep) Y/Y 8.1% vs. Exp. 10.0% (Prev. 5.5%)
    • Chinese Imports (USD)(Sep) Y/Y 18.7% vs. Exp. 14.7% (Prev. 13.5%)a

Commenting on the data, Goldman said, “Exports growth for China accelerated to 8.1% yoy in September from 5.6% yoy in August, slightly below consensus. Imports growth was also up to 18.7% yoy from 13.5% yoy in August, above expectations. In sequential terms, exports grew by 0.2% mom sa non-annualized, up from a fall of 0.2% in August. Imports increased by 2.4% mom sa non-annualized, moderating from 3.2% in August. The trade surplus moderated significantly to US$29.2bn from US$41.0bn in August. Sequential momentum in exports remained mild in September though picking up a bit, and has weakened significantly in Q3 as a whole to -4.5% from a significant rise of 12.0% in Q2. Trade prices might have decelerated modestly in Q3 (data on September trade prices have not been released), but sequential growth in real exports should have also moderated. This is consistent with our previous expectation that the strong exports growth we saw in H1 could probably be hard to maintain in H2. Going forward, sequential momentum in real exports should remain modest, and year-on-year growth will probably moderate due to a high base of Q4 last year.”

Elsewhere, in the U.S., the Trump administration’s tax plan clouded up as the president was said to voice frustration with certain aspects of the existing framework. Some Congressional Republicans have aired concerns, though Treasury Secretary Steven Mnuchin reiterated his confidence that a plan will get passed this year. Data Friday on prices and retail sales may give more clues about the Fed’s policy path amid a debate about whether low inflation is temporary or permanent.

“The hurricane effects will mean that interpretations of the data will be difficult,” John Cairns, a strategist at Rand Merchant Bank in Johannesburg, said in a client note. “Anyway, the Fed has made it clear that it intends to raise rates in December even if inflation remains weak.”

Overnight Fed’s Rosengren (Non-Voter, Soft Hawk) said a December hike is appropriate and that 3 rate hikes next year seems appropriate, while he added that low inflation gives the Fed the luxury of being gradual. Meanwhile, Fed’s Bostic (Non-Voter, N/A) repeated he is unsure if Fed will hike rates in December and said US is moving quickly towards full employment.

In geopolitical updates, the White House will keep the Iran nuclear deal for now, but wants Congress to make a list of actions that would prompt sanctions, according to NYT

Meanwhile, overnight bitcoin soared to just shy of $6,000 before easing back modestly.

In rates, the yield on 10-year Treasuries climbed one basis point to 2.33%. Germany’s 10-year yield dipped two basis points to 0.43 percent, the lowest in more than two weeks. Britain’s 10-year yield gained two basis points to 1.363 percent, the highest in more than eight months.  Spain’s 10-year yield fell three basis points to 1.608 percent, the lowest in more than a week.

In commodities, West Texas Intermediate crude gained 1.6 percent to $51.41 a barrel, the highest in more than a week.  Gold climbed less than 0.05 percent to $1,293.86 an ounce. Copper increased 0.3 percent to $3.13 a pound, hitting the highest in almost five weeks with its fifth consecutive advance.

Today we get earnings from Bank of America and First Horizon. Also on
the agenda are a number of data points, including CPI, retail sales and
Michigan sentiment.

Bulletin headline summary from RanSquawk

  • ECB is reported to mull reducing QE to EUR 30bln/month from January and extending it until at least September 2018
  • Indecisive trade in major EU bourses this morning with the Eurostoxx 50 relatively flat; traders await tier 1 US data
  • Looking ahead, highlights include US CPI, retail sales, business inventories, Uni. of Michigan and a slew of central bank speakers

Market Snapshot

  • S&P 500 futures little changed at 2,550.25
  • VIX Index down 0.4%, at 9.87
  • STOXX Europe 600 up 0.3% to 391.42
  • MSCI Asia up 0.5% to 166.47
  • MSCI Asia ex Japan up 0.3% to 549.57
  • Nikkei up 1% to 21,155.18
  • Topix up 0.5% to 1,708.62
  • Hang Seng Index up 0.06% to 28,476.43
  • Shanghai Composite up 0.1% to 3,390.52
  • Sensex up 0.9% to 32,463.58
  • Australia S&P/ASX 200 up 0.3% to 5,814.15
  • Kospi down 0.05% to 2,473.62
  • German 10Y yield fell 1.9 bps to 0.426%
  • Euro down 0.03% to $1.1827
  • WTI crude up 1.5% at $51.40
  • Brent up 1.8% to $57.25/bbl
  • Italian 10Y yield fell 4.4 bps to 1.848%
  • Spanish 10Y yield fell 1.7 bps to 1.62%
  • Gold spot up 0.03% to $1,294.15
  • U.S. Dollar Index down 0.02% to 93.04

Top Overnight News

  • The Trump administration is cutting tens of millions of dollars from organizations that help Americans enroll in Obamacare health plans
  • Trump is expected to refuse to certify that the multinational accord to curb Iran’s nuclear program sufficiently serves U.S. interests, though he will stop short of abandoning it, according to two senior administration officials; Trump’s Iran Decision Throws New Uncertainty Into Business Plans
  • European Central Bank officials are considering cutting their monthly bond buying by at least half starting in January and keeping their program active for at least nine months, according to officials familiar with the debate
  • China’s overseas shipments rose from a year earlier amid robust external demand, the latest sign Asian trade is strengthening as the global outlook brightens
  • Equity funds globally record inflows of $11.6b in the week to Oct. 11, the largest in 17 weeks, BofAML strategists write in note, citing EPFR Global data
  • Emerging markets equity funds see inflows of $3.3b, largest in 21 weeks; Japanese equity funds see inflows of $0.3b, first in 4 weeks
  • Turkey sent special forces and commandos over the border into Syria, the start of a joint mission with Russia and Iran whose stated goal is to monitor a cease-fire agreement and pacify a stronghold for Islamic militants — but one that also has major implications for the region’s Kurds
  • Trump Digs In on Health Care, Iran Deal; Bank of America, Wells Fargo Earnings; Samsung’s CEO Steps Down as Profit Beats
  • President Donald Trump’s administration took its most drastic step yet to roll back the Affordable Care Act on Thursday evening, cutting off a subsidy to insurers just hours after issuing an executive order designed to draw people away from the health law’s coverage markets
  • JPMorgan Chase & Co. and Citigroup Inc. kicked off banks’ earnings season by showing the effects of muted trading and concerns about consumer credit; both beat earnings as JPMorgan relied on improved lending margins, while Citigroup continued to squeeze costs
  • The chief executive officer of Samsung Electronics Co. is stepping down in a surprise resignation after decades at the company
  • The strength of the U.S. shale boom and prospects for electric vehicles are stoking fears for the oil industry’s future. But that’ll only make crude more valuable, one analyst says, boosting prices as high as $80 a barrel by 2022

Asia-Pac equity markets shrugged off the pullback in US stocks from record levels, although upside was somewhat capped as the region digested the latest Chinese trade figures. ASX 200 (+0.45%) and  Nikkei 225 (+1.0%) were mildly ositive with Australia underpinned by defensive stocks, while Nikkei 225 tested 21,200 and was led by strength in index heavyweight Fast Retailing after the Co. reported its FY net more than doubled. Elsewhere, Shanghai Comp. (+0.1%) and Hang Seng (+0.1%) traded indecisive after the PBoC skipped open market operations but then offered funds via its MLF facility and as participants mulled over mixed Chinese trade data. Finally, 10yr JGBs were initially subdued with demand sapped amid a positive risk tone in Japan, before an improved enhanced liquidity auction result for longer-dated JGBs supported in late trade. MAS (Singapore central bank) kept the appreciation of SGD NEER unchanged at 0%, while it also maintained the width and level of the policy band. MAS made a reference to neutral policy being appropriate for an extended period of time from the October 2016 Monetary Policy Statement and said that it sees Singapore economy likely to expand at a steady, but slightly slower pace in 2018 compared to 2017.

Top Asian News

  • China Exports Remain Resilient as Import Gains Signal Strength
  • Big Banks Winning in China Battle of Unequals as Curbs Bite
  • In Surprise Move, Samsung CEO to Step Down After Record Profit
  • ‘Enigma Network’ Crash Spurs Hong Kong’s Largest Financial Raid
  • Nomura Probe Said to Find No Evidence of Aomori Stock Sale Leaks

In European markets, there has been indecisive trade in major EU bourses this morning with the Eurostoxx 50 relatively flat. Focus in the session will be on the slew of central bank speakers and US data later in the session. Energy names have been supported by the upside in WTI and Brent crude futures, in which Brent briefly made a break above USD 57. In stock specific news, Bayer shares are  outperforming in the DAX after reports that BASF is to purchase the company’s seed unit for EUR 5.9bln. FTSE 100 the laggard today, slipping 0.4% amid the move higher in GBP, while the worst performing  stock in the FTSE, GKN, has seen a sharp drop after a profit warning. Bunds bolstered by latest ECB source reports and a technical short squeeze, which lifted the core 10 year bond future through this week’s previous peak and a new high for the month. EZ periphery debt also benefiting from suggestions that QE could be extended by 9 months at least (longer end of the previously touted 6-9 month range), and seemingly unperturbed by talk that the monthly pace of asset purchases could be scaled down relatively sharply to Eur30 bn from January 2018. Conversely, some signs of compromise in the form of a contingent 2-year Brexit transition offer from the EU, per media reports, has left UK Gilts languishing and underperforming again, with similar divergence seen at the short end  of the curve (ie Short  Sterling contracts down vs firmer Euribor and Eurodollar peers). US Treasuries largely holding modest gains made in wake of a solid 30 year auction, and braced for Friday’s key data  (CPI and retail sales, latter possibly carrying an upside skew on above consensus PPI).

Top European News

  • ECB Is Said to Consider Cutting QE Flow in Half in Next Year
  • Saudis Mull Slower Subsidy, Spending Cuts to Support Economy
  • Greece Dreams of Bailout-Free Existence as Creditor Audit Looms
  • More Than 400 Firms ‘Expelled’ From Catalonia: PP’s Hernando
  • Romania Ruling Party Defuses Crisis as Three Ministers Quit
  • BASF Enters Seeds Market as Bayer Sells $7 Billion in Assets

In currencies, Much of the latest FX volatility occurred post European close yesterday, as reports from Handelsblatt circulated, stating thatmEU Brexit negotiator Barnier could offer the UK a two-year transitional deal, with the offer tied to the UK meeting its exit obligations to the EU. Sterling has recovered all and more of the losses prompted by Barnier’s earlier comments on Thursday, as Cable breaks through 1.33, and above October’s previous highs to resume this week’s overall bullish trend. Comments could continue to dictate Sterling direction as many will await BoE’s Carney this evening. EUR/GBP initially followed the trend of the bullish pound, however, marginal support was seen on reports that the ECB is set to mull reducing QE to EUR 30bln/month from January and extending it until at least September 2018, while sources also stated that policymakers are in agreement about extending asset purchases at the October meeting, but are still debating the taper size. EUR 30bln over nine months  was initially perceived by markets as marginally hawkish. Nevertheless, the Euro has been offered against most of its major counterparts in early European trade, amidst comments from ECB’s Weidmann, stating again that he is against softening the capital key, and thus favouring Bunds. The Yen has outperformed generally, up 0.37% for the session vs the Usd, despite this week’s option expiries closing with just short of 2bln between 112.65 – 113.00. The pair trades sub-112.00, looking at the 200 DMA at 111.82. The dollar index has been muted, with much of the trade impetus coming from the other major currencies, as anticipation turns to tier 1 data (CPI and retail sales), then Yellen who is set to speak over the weekend.

In commodities, WTI and Brent crude futures hovering near intra-day highs this morning. Participants will be keeping an eye out on President Trumps remarks over the Iran nuclear deal, where it is expected that he will refuse to certify Iran’s compliance with the accord and as such this may lead to sanctions on Iran yet again. Additionally, Chinese trade data out last night showed that Chinese imports of crude oil climbed to the second highest level on record.

Looking at the day ahead, in the US it’s all eyes on the September CPI report, while last month’s retail sales numbers are also worth keeping a close eye on. The preliminary October University of Michigan consumer sentiment reading will also be out along with August business inventories data. Onto other events, the Fed’s Evans, Kaplan and Rosengren are all on the cards to speak on Friday. President Trump will speak on Iran later in the day and Wells Fargo / Bank of America also report earnings.

US Event Calendar

  • 8:30am: US CPI MoM, est. 0.6%, prior 0.4%; CPI Ex Food and Energy MoM, est. 0.2%, prior 0.2%
  • US CPI YoY, est. 2.3%, prior 1.9%; CPI Ex Food and Energy YoY, est. 1.8%, prior 1.7%
  • Real Avg Weekly Earnings YoY, prior 0.88%
  • 8:30am: Retail Sales Ex Auto MoM, est. 0.9%, prior 0.2%; Retail Sales Ex Auto and Gas, est. 0.4%, prior -0.1%; Retail Sales Control Group, est. 0.4%, prior -0.2%
  • 10am: U. of Mich. Sentiment, est. 95, prior 95.1; Current Conditions, est. 111.6, prior 111.7; Expectations, est. 85.3, prior 84.4
  • 10am: Business Inventories, est. 0.7%, prior 0.2%

DB’s Jim Reid concludes the overnight wrap

there’s definitely chocolate inflation in the modern world but is there any outside of the ‘brown gold’? Today’s US CPI number will likely cast a large shadow over the next month’s trading and is therefore a  key release. The market’s expectation is for a +0.6% mom headline number and +0.2% mom for the core. DB in is line with the market. Remember that last month (+0.2% core) marked the first time in 6 months that US CPI didn’t undershoot expectations. In terms of the details, headline CPI should get a boost from gas prices post the hurricane disruption so be a bit careful when interpreting this part. In  terms of the core, DB’s Brett Ryan expects some modest negative payback for rent and owners’ equivalent rent following a big monthly gain in August. Lodging away from home prices may also dip reflecting the weather events, as evidenced by the post Hurricane Katrina data. In fairness though this is overall a small part of the CPI data though. Don’t forget US retail sales is realised at the same time so something else to add to the mix.

Ahead of this the most interesting story yesterday was around Brexit with wildly conflicting stories buffeting the currency. Indeed Sterling had a bit of a roller coaster ride yesterday versus the Euro, falling as much as 0.9% intraday but closing up 0.55%. Initially, markets were disappointed on how negative Chief EU negotiator Michel Barnier was in his press conference after the fifth round of Brexit talks. He noted that “we have reached a state of deadlock…” over the Brexit divorce bill and “no deal will be a very a bad deal (for the UK)” and then followed up with firm comments like “to be clear on our side, we’ll  be ready to face any and all eventualities”. However, Sterling rebound after Handlesblatt reported (after the UK closed) that Barnier may still offer the UK a two-year transition deal provided that the deadlock can be overcome and there is still hope that sufficient progress can be made by the December summit if the UK provided more clarity on what PM May alluded to back in her Florence speech. DB’s Oliver Harvey believes next week’s European Council meeting will be an important turning point for talks. If unsatisfactory, it could increase the risks to the UK growth and may undermine market’s confidence in a BOE hike at its November meeting.

Onto the US tax reforms, where the plan continues to be to get something done by the end of the year. However, the rhetoric is stepping up now, with House speaker Paul Ryan noting “we’re going to keep everybody (in Congress) here to Christmas if we have to, I don’t care, it’s that important”. He added that he wants to wake up on New Year’s Day 2018 with the new tax code.

Staying with politics, the Italian government has now won all of the confidence votes to pass a new electoral law (375 vs. 215 against), which could potentially penalise the 5-Star Movement party (5SM). The bill will now go to the upper house later in the month where the government has no clear majority. Italy’s bond markets slightly outperformed yesterday, with 10y yields down 4.6bp, while core bond yields (UST 10y -3bp; Bunds -1.7bp; OATs -2.1bp) were also down slightly, but Gilts was broadly flat. At the 2y part of the curve, yields were mixed but little changed, with UST (-0.6bp) and Bunds (-1bp) down marginally, but Gilts (+0.6bp) and Italy BTPs (+1.2bp) rose.

Turning to equities and US bank results yesterday. US equities softened, with the S&P 500 (-0.17%), Dow (-0.14%) and Nasdaq (-0.18%) down slightly, impacted by weakness in the financials and telco sector, where AT&T dropped 6.1% after losing 90k video subscribers in 3Q due to heavy competition and the recent Hurricanes. Both Citi and JPM’s 3Q EPS beat consensus, mainly driven by better than expected cost discipline (at Citi) and lending margins (at JPM),but shares fell 3.43% and 0.88% respectively, partly due to concerns of a higher than expected build up in provisions for credit losses, albeit off a low base. Elsewhere, 3Q total trading income was weak but broadly similar to management’s prior guidance (JPM: -21% pcp vs. -20%; Citi -11% on pcp vs. -15%).

European markets were mixed but little changed, with the Stoxx (+0.03%) broadly flat, but the DAX (+0.09%) and FTSE 100 (+0.30%) both nudged up to a fresh record high. Elsewhere, the CAC (-0.02%) and Italy’s FTSE MIB (-0.68%) fell slightly.

Turning to the search for the next Fed Chair, White House Chief of Staff John Kelly said “all of the people who’ve been in to interview (with President Trump) have been first round draft choices…..we still have more to come”. He didn’t specify who the candidates were, but prior reports suggests a shortlist including: Mrs Yellen, Fed governor Jerome Powell, former Fed governor Kevin Warsh, Stanford University economist John Taylor and National economic council director Gary Cohn. Elsewhere, Treasury Secretary Mnuchin said President Trump hopes to make a decision within a month.One of the  candidates, the Fed’s Powell echoed his peers by saying “it’s likely that the process of (monetary) normalisation will proceed without significant disruption”, but cautioned that “significant risks of more adverse scenarios remains”. One area he has flagged is corporate debt in emerging markets, where the current situation may not be alarming, “but risks can be significant and bear close watching, especially in China”, where “markets reactions to even small surprises can be outsized”. For those who have missed it, our note “The next financial crisis” takes a closer look at this and other developing risks. Elsewhere, he said differences in the projections of interest rate moves between the Fed’s dot plot and market prices should be ‘taken with a grain of salt”.

Staying with central bankers’ commentaries. The Fed’s Brainard was a bit dovish, noting that temporary factors impact inflation both ways, “so that (temporary factors) cannot fully account for what we’ve been observing in the inflation data” and “…it seems to be that the Phillips curve is just not very important in the overall inflation process”. Further, she added that a lot of time-series work would suggests that we have actually seen “a reduction in the underlying trend rate of inflation that’s material”. Elsewhere, ECB’s Draghi reiterated that interest rates will remain low “well past” the end of QE. He added that the “well past” reference is “very, very important”. On wage inflation, he is seeing some progress, but “we’re still not there” yet.

This morning in Asia, markets are trading slightly higher.The Nikkei (+0.23%), ASX (+0.30%), Chinese bourses (up c0.2%) and Kospi (+0.15%) are up slightly, while the Hang Seng (-0.08%) is marginally down.

Quickly recapping other markets performance yesterday. Excluding Sterling, currencies were little changed with the US dollar index up 0.05% while Euro/ USD dipped 0.24%. In commodities, WTI oil fell 1.36% despite the last EIA report showing lower US crude inventories, in part as the IEA estimated that the decline in supply could be offset in 2018 due to rising output from US and other countries. Elsewhere, precious metals were marginally higher (Gold +0.15%; Silver +0.43%) while other base metals also increased slightly (Copper +0.93%; Zinc +1.53%; Aluminium +1.13%).

Away from the markets, the IMF’s MD Christine Lagarde was reasonably optimistic on global economic growth, noting “it’s broad based, more solid and it should get better”, but added that “it needs to get sustainable and benefit all”. The Fed’s Powell also agrees, noting “there have been signs lately that a sustainable global recovery may finally be materialising” although caveat it with “significant risks and uncertainties remain”.

This Sunday, we’ll see another election, this time over at Austriawhere the centre-right People’s Party (OVP) led by its 31 year old leader Sebastian Kurz is expected to win c33% of the votes. As per the Independent, an average of major pollsters (The Independent) suggest the other two parties are currently neck and neck, with FPO at c26% and the Social Democrats (SPO) at c24.4%. A renewed coalition between OVP and SPO is seen as less likely, which makes the far right, anti-immigrant and euro-sceptic FPO party in a strong bargaining position when forming the next coalition government. Mr Kurz has  been Austria’s foreign minister since 2013, with one of his key policies being “above all, we want to stop illegal immigration so there is order and security in our country”. So it will be interesting to see what an OVP & FPO tie up would mean for Europe if it eventuates.

Turning to job security in the world of politics. In the US, White House Chief of Staff Kelly said “I’m not getting fired and I don’t think I’ll fire anyone tomorrow”. In the UK, former Finance Chief Nigel Lawson suggested PM May should fire Chancellor Hammond over his negative Brexit comments, noting “what he is doing is very close to sabotage”. Later on, a spokesman for PM May said “May has full confidence in Hammond”. Elsewhere, the FT reported the UK government is planning to hire 2,000 more staff to deal specifically with Brexit. So all this is bubbling along in the background while tax reforms and Brexit  alks are underway.

Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the core September PPI (ex food and energy) was above consensus at 0.4% mom (vs. 0.2%) and 2.2% yoy (vs. 2.0% expected). Notably, the healthcare costs component edged up 0.1% mom so that throughyear inflation was broadly steady at 1.2% yoy, which at least suggests that healthcare will not be a drag on core PCE inflation like it was last month. Elsewhere, the weekly initial jobless claims (243k vs. 250k expected) and continuing claims (1.89m vs. 1.93m expected) were both lower than expectations, with continuing claims down to a new 44-year low.

The Eurozone’s August IP was higher than expectations at 1.4% mom (vs. 0.6%) and 3.8% yoy (vs. 2.6% expected), while France’s final September CPI reading was broadly in line at 1.1% yoy. In the UK, the BOE released its 3Q Credit Conditions Survey and Bank Liabilities Survey. For households, i) the availability of secured credit has increased slightly in 3Q, but ii) the availability of unsecured credit has decreased in 3Q and lenders expected a further substantial decrease in 4Q, likely a response to rising default rates for these loans. Finally, there was no change in the availability of credit to the corporate sector.

Looking at the day ahead, we get the final September CPI revisions for Germany and Italy. In the US it’s all eyes on the September CPI report, while last month’s retail sales numbers are also worth keeping a close eye on. The preliminary October University of Michigan consumer sentiment reading will also be out along with August business inventories data. Onto other events, the Fed’s Evans, Kaplan and Rosengren are all on the cards to speak on Friday. President Trump will speak on Iran later in the day and Wells Fargo / Bank of America also report earnings.