MNI US Open: Awaiting the Summit (and Johnson)

Fig 1. Bund yields remain close to their lows

Source: MNI, Bloomberg

OVERNIGHT NEWS

Johnson Will Not Walk Away From EU FTA Talks: Times

The Times reporting UK gov't sources saying that the UK will not walk away from FTA talks with the EU, despite disappointment with the EU not saying it would intensify talks.

• "Government sources said last night that Lord Frost's comment reflected his dismay that European leaders had "consciously removed" the commitment. "We have been trying to intensify the talks over the last couple of weeks and it has been the EU side that has been dragging their feet," one said. "People are a bit annoyed."
  They added that Mr Johnson would not walk away from the talks but Britain would not bow to EU demands."

FM Raab: We Are Close To Brexit Deal, PM To Speak Later On Subject

Speaking to Sky News Foreign Secretary Dominic Raab says that he believes the UK and EU are close to a deal on an FTA.

• Adds that "We are disappointed and surprised by the outcome of the European Council[...] we were told talks would intensify[...] some of that language has been taken out."
• Says that the PM will speak on the subject of Brexit talks later in the day.
• Raab states that the UK cannot be the one to make all the compromises on Brexit, and that the EU wants UK fisheries to remain under Brussels' control.

​Trump's Combative Town-Hall Event Stands in Stark Contrast With Biden's (NYT)

• President Trump flashed impatience with the persistent questioning of Savannah Guthrie in tense exchanges over QAnon and his taxes, among other topics.
• On the pandemic, the election's central issue, he and Joe Biden appeared to inhabit not just different television studios but different universes.

MNI POLICY: BOJ Eyeing Corp Price-Setting For Deflation Signs

Bank of Japan officials are paying close attention to corporate price-setting activity for signs of a decline, which could increase pressure on the bank to take policy action, MNI understands.

For full story see: https://marketnews.com/mni-policy-boj-eyed-corp-pr...

DATA

EZ SEP FINAL HICP +0.1% M/M, -0.3% Y/Y; AUG -0.2% Y/Y

EZ SEP FINAL CORE HICP +0.2% M/M; +0.2% Y/Y; AUG +0.4% Y/Y

BOND SUMMARY: Waiting for the Summit to end (and Johnson)

The European morning session has been dominated by one theme - Brexit. All of the focus we have had from clients has been asking what time will the EU Summit end and what time will Johnson talk. We expect Johnson to speak some time this afternoon, with a good chance he waits to hear the outcome of the EU Summit before he speaks and there is also a possibility that his speech will end up being after the European close. EU Summits are notorious for not running to schedule. News headlines today have stated that Johnson will continue to negotiate past today's Summit and seek urgency and a speeding up of the talks.

• Core fixed income has remained steady, trading well within yesterday's ranges but overall a little higher than yesterday's close. European peripheral spreads are marginally wider on the day.
• US retail sales, industrial production and Michigan confidence are all due for release later today and we are also due to hear from the Fed's Bullard and Williams.
• TY1 futures are up 0-1 today at 139-05 with 10y UST yields down -0.6bp at 0.727% and 2y yields down -0.4bp at 0.136%.
• Bund futures are up 0.15 today at 176.05 with 10y Bund yields down -1.2bp at -0.624% and Schatz yields down -0.7bp at -0.780%.
• Gilt futures are up 0.08 today at 136.71 with 10y yields down -0.9bp at 0.169% and 2y yields down -1.2bp at -0.69%.

FOREX SUMMARY

USD started the European session better bid, a continuation of the Asia session, but gains have been unwound.

• Investors and market participants are mostly sitting on the sideline ahead of the EU Summit and potential Brexit deal or no deal, extension or no extension outcomes.
• GBP took couple of legs higher, and remain sensitive on any Brexit/Trade headline.
• USD unwinding also helped Cable.
• Earlier, Raab: "We Are Close To Brexit Deal,", and later following Ireland Martin, noting constructive talks.
• ALL EYES are on potential timing for Boris, but NO set time yet.
• More likely that we will hear from him after the EU summit outcome, but these summits are notoriously known for not sticking at timings.
• EMFX are generally better bid against the USD, as Risk trade in green territory, following overnight news that US Trump would be willing to put forward any Stimulus that would be agreed between Pelosi and Mnuchin.
• Rand is the best performer in EM against the Greenback up 0.53%, but local desk report fairly subdued turnovers, as the Global awaits on the EU Summit.
• Looking ahead, US Retail sales, industrial production & the Uni of Michigan confidence. Fed William and Bullard.
• Earning season continues with State Street reporting today.
• All attention of course on the EU Summit conclusion.

European and US stocks generally on the front foot today

• Japan's NIKKEI down 96.6 pts or -0.41% at 23410.63 and the TOPIX down 14.1 pts or -0.86% at 1617.69.
• China's SHANGHAI closed up 4.175 pts or +0.13% at 3336.358 and the HANG SENG ended 228.25 pts higher or +0.94% at 24386.79.
• The German Dax up 74.46 pts or +0.59% at 12776.33, FTSE 100 up 57 pts or +0.98% at 5889.11, CAC 40 up 63.44 pts or +1.31% at 4900.26 and Euro Stoxx 50 up 24.24 pts or +0.76% at 3216.46.
• Dow Jones mini up 3 pts or +0.01% at 28390, S&P 500 mini up 0.75 pts or +0.02% at 3477, NASDAQ mini up 29 pts or +0.24% at 11904.5.

COMMODITES LEVEL UPDATE

• WTI Crude down $0.24 or -0.59% at $40.81
• Natural Gas up $0.01 or +0.43% at $2.787
• Gold spot up $2.06 or +0.11% at $1911.42
• Copper down $0.6 or -0.19% at $308.25
• Silver up $0.1 or +0.42% at $24.4181
• Platinum down $3.95 or -0.46% at $862.96