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As with the week as a whole, today's schedule will inevitably see politics and earnings have the upper hand over the data run, which is primarily about the mixed overnight China CPI and PPI data, and the NY Fed Manufacturing survey (seen dipping to 20.5 from 24.4). Catalonian president Puidgemont's unsurprising defiance of Madrid's or rather PP PM Rajoy's call for a repudiation of the independence referendum, and his call for a 2 month period of negotiations, puts the ball firmly back in the court of the hapless PM. The risk is that Rajoy once again pushes what is seen by many as the Franco-ist button and puts Catalonia under Madrid's control, which will solve precisely nothing and merely entrench this Mexican stand-off. There are also the elections in Austria and Germany's Lower Saxony to digest, which many commentators are managing to successfully misinterpret. In respect of Austria, the so-called right wing shift is much less dramatic than it appears: firstly the two people's parties OVP and SPO saw their share of the vote rise, and as much as there was a strong showing for the right FPO, they did not quite manage to match the 29.9% they achieved in 1999. It is nevertheless a reminder to Frau Merkel that she needs to rethink her refugee and migrant policy, as the CDU's sister party CDU has already forced her to do, just so that she can try and negotiate with the FDP and Greens to form a so-called Jamaica coalition. As for the Lower Saxony vote, the drop in the AfD's vote share from the federal election's 9.9% to 6.2% should be noted. However the SPD's 'victory', achieving a 4.2 ppt rise to 36.9%, against a 2.4 ppt fall for the CDU to 33.6%, has probably a lot more to do with VW, the state's biggest employers, multiple woes and the potential for job losses as a consequence, which unsurprisingly the SPD is seen as more likely to try and mitigate than the CDU; the FDP and Green's vote share drops would tend to reinforce that impression. A close eye in Ireland and the will also be kept on the progress of Hurricane/Storm Ophelia as it forces large parts of Ireland to shut down, and is then expected to head towards Scotland.
On China's inflation data, CPI slipped as expected to 1.6% y/y from 1.8%, paced above all by very benign base effects in Food prices (as last year's pork price surge unwinds), which dropped to -1.4% y/y from 0.2% y/y, with the slighltly higher pace of Non-Food Prices (2.4% y/y from 2.3%) probably providing a better guide to the underlying trend in inflation. PPI by contrast continued its rebound, easily beating forecasts at 6.9% from 6.3%, and paced by rises in industrial and construction sector raw materials, which should come as no surprise given the rebound in many commodity prices over the month. However, this is perhaps less material in terms of what may come out from the Communist Party Congress that starts on Wednesday, and as importantly the upside risks for this week's GDP and monthly indicators implied by comments from PBOC's Zhou at the weekend. The latter suggested that China's H2 2017 GDP may be as high as 7.0% y/y (the credibility of the data is of course constantly under question, but is another issue). If correct, then expectations for Q3 GDP at 1.7% q/q (unch from Q2) and 6.8% y/y (vs. Q2 6.9%) look to be under-clubbed, as are expectations of a marginal bounce in Retail Sales (10.2% y/y vs. Aug 10.1%). This is all the more the case as Zhou picked out personal consumption as a particular area of strength, with FAI seen at 7.7% y/y (from 7.8%) and Industrial Production posting a sharper bounce to 6.5% y/y (from Aug 6.0%), though this will also likely benefit from base and working data effects as Friday's Trade data did.
-- RECAP: The Week Ahead - Bullet point highlights: 16 to 20 October 2017
- Politics will inevitably continue to be the primary source of unscheduled news, be that Brexit, Trump/USA, Middle East or North Korea related, with the start of the China 19th Communist Party Congress the other key event for the week.
- China and the UK also dominate the statistical schedule, which is otherwise quite light. China has Q3 GDP plus Retail Sales, Industrial Production, FAI and monetary / lending aggregates. The UK sees CPI, RPI, PPI, ONS House Prices, Retail Sales and PSNB. US looks to NAHB Housing Market Index, Housing Starts & Existing Home Sales, Canada has CPI & Retail Sales, Australia Unemployment and Japanese Trade.
- The US Q3 earnings season picks up speed, with a less financials dominated pallet: even if Blackstone, Goldman Sachs & Morgan Stanley are reporting, while elsewhere results from General Electric, Honeywell, Netflix, Philip Morris International, Procter & Gamble & Verizon are due, and internationally Daimler, SAP & Unilever will be among those under the microscope. It will also be the 30th anniversary of 1987's Black Monday crash on Thursday, which will doubtless spawn many column inches of commentary.
- Govt bond supply is reasonably busy in Europe (UK 10-yr, Germany 30-yr, France 3 to 7-yr, Spain 4 to 30-yr), while the US sees 30-yr TIPS, Japan 20-yr & Canada 4-yr.
========================== ** THE DAY AHEAD ** ===========================
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** TODAY'S EVENTS **
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Sweden 08:00 Riksbank's Ohlsson speaks at NMO conference
"Economic conditions for wage formation"
Luxembourg 08:30 EU FAC meeting
Spain 09:00 Deadline for Catalan President Puigdemont to decide
whether to declare independence for the region
----- LBMA/LPPM precious metals conference
U.S.A. 14:00 ECB's Angeloni speaks at European Economic Policy Forum
17:00 UK Finance Minister Hammond speaks at Economic Club
of New York
----- EIA Drilling productivity report
# HOLIDAYS: Argentina - Cultural Diversity Day; Colombia & Costa Rica - Columbus Day; Jamaica - National Heroes Day; Ukraine - Defender of the Fatherland Day
- Govt Bond Auctions / Buybacks
South Korea 02:30 KRW 1.2 Bln 2027 Treasuries
China 02:30 CNY 4.46 Bln 2027 Chongqing Munis
03:30 CNY 5.74.Bln 2020 Chongqing Special Munis
04:30 CNY 12.5.Bln 2022 Chongqing Special Munis
Slovakia 10:00 Size t.b.c. 0.0% 2023 & 1.375% 2027 Govts
Romania 10:00 Size t.b.c. 2.5% 2019 Govt
Lithuania 10:00 Size t.b.c. 0.7% 2024 Govt
Israel 11:00 Size t.b.c. 2.25% 2019, 1.25% 2022, I-L 0.75% 2027
& I-L 1.0% 2045 Govts
- Corporate Earnings:
Kuehne + Nagel (Q3), Celanese Corp (Q3) /// Charles Schwab (Q3 $0.41) • CSX (Q3 $0.51) • Netflix (Q3 $0.32)
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from Marc Ostwald
