Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY:
- TECH STOCKS OUTPERFORMING POST-PANDEMIC PLAYS WITH YIELD CURVES FLATTENING
- BOE'S BAILEY: VACCINE BROADLY IN LINE WITH FORECASTS
- UK GDP DATA SHOWS ACTIVITY UP IN SEPT, BUT RECOVERY SLOWING
- JAPAN FINDS RECORD NEW CASES OF CORONAVIRUS: NHK
Fig. 1: UK Growth Continues, But Slows
ONS,BBG,MNI
NEWS:
B.O.E. (MNI): The latest news on the development of a vaccine is encouraging and a good news story for all, Bank of England Governor Andrew Bailey told an FT conference Thursday, although he said it was broadly in line with BOE conditioning forecasts that had built in a gradual improvement in a vaccine and therapeutic treatments from early 2021. Bailey, discussing QE impact, says in the post-Covid world, there may be more focus on the monthly flow of bond buying than pure stock, although not as much in March, and the debate is live. W
B.O.E. (MNI): Whatever the UK's upcoming trade arrangements with the European Union are will become part of the policy debate going forward, Bailey said. Bailey said no deal would be thrown into the policy mix from next year, along with the ongoing fallout from Covid-19. He said it was possible that further information as to how future trading arrangements would pan out would be available by the time of the December meeting.
.U.K. DATA: The recovery of the UK economy continued in Sep but clearly lost momentum and economic growth remains below the pre-pandemic level. M/M GDP ticked up 1.1% in Sep, marking the fifth consecutive increase and coming in slightly stronger than markets expected (BBG: 1.0%). All main sectors showed m/m gains with industrial production rising by 0.5%, while manufacturing output grew 0.2%. Construction increased as well, rising by 2.9% m/m, slightly stronger than markets expected. The index of services rose by 1.0%, revealing the third successive uptick. However, all indicators remain below Feb's pre-crisis level in Sep. Education showed the largest monthly growth rate among services, up 4.8% and boosted by the return of children to school. However, the hospitality sector saw a renewed decline as the 'eat out help out' scheme did not continue into Sep. Moreover, the total trade surplus decreased in Sep as imports increased and exports remained flat.
EUROZONE DATA: The EZ industrial sector saw the first monthly decline since Apr in Sep, in contrast to markets looking for an uptick by 0.7%. Annual production deteriorated marginally in Sep to -6.8% following Aug's reading of -6.7%.
GLOBAL: IHS Markit publish a COVID-19 recovery survey, with key findings including: China expected to lead the recovery of output lost, with US close behind- Indian firms have slowest recovery prospects, followed by Japan, Spain, Italy, UK All countries surveyed have become more upbeat since their last update in June with the exception of Indian, Spain, France. Brazil has seen the largest optimistic swing.
GERMANY: The Ifo institute is concerned about long-term damage of the German economy as business investment will likely to remain on a weak level until 2022, leading to insufficient new jobs growth over the next 18 months or so. The loss of revenues and profits due to the pandemic has weighed heavily on investment in real capital, the Ifo Institute said.
JAPAN (BBG): Japan found a record 1,634 new cases of coronavirus Nov. 11, national broadcaster NHK reports in a flash headline.
DATA:
FIXED INCOME: Central bank speakers drive the market
After a positive start for core fixed income, most gains have been reversed this morning.
- The big talking point of the morning has been a speech by BOE Governor Bailey who hinted that although the Bank still cares about the flow aspect of QE, it is more focused on the stock again now. This is further clarification of the Bank's thinking on the topic. There has also been some focus on UK politics with media reports of infighting within Number 10 amid the resignation of Lee Cain, the Director of Communications. UK GDP and its constituents for Septembers were generally a little softer than expected. Gilts have generally outperformed a little today.
- Peripheral spreads are all a bit tighter on the day too, although semi-core spreads have barely moved.
- Focus for the rest of the day will be on central bank speakers and the ECB's replacement Sintra Forum. Lagarde, Powell and Bailey are all due up.
- TY1 futures are up 0-4 today at 137-23+ with 10y UST yields down -3.7bp at 0.941% and 2y yields down -0.1bp at 0.182%.
- Bund futures are up 0.06 today at 174.36 with 10y Bund yields down -0.2bp at -0.510% and Schatz yields up 0.1bp at -0.720%.
- Gilt futures are up 0.13 today at 134.02 with 10y yields down -1.0bp at 0.402% and 2y yields down -0.5bp at -0.12%.
FOREX: Single Currency Strong
EUR outperforms early Thursday, with the single currency stronger against most others in G10. EUR/USD is testing the Wednesday high in early trade on little newsflow, although volumes are picking up as the US markets return from partial closes yesterday. Scandi currencies slightly outperform, but upside looks contained for now. First resistance in EUR/GBP rests at 0.8982, the Nov 10 high.
Meanwhile, UK growth data was mixed, leading GBP to be the weakest currency among DMFX. The GDP bounceback in Q3 hit record levels, but stopped short of expectations. Comments from BoE's Bailey raised some interest, with the BoE governor commenting that more Brexit information could make the December MPC more 'live'.
US inflation data and weekly jobless claims are the calendar highlight, with central bank speak also a focus. The ECB's central banking forum continues, with appearances due from Lagarde, BoE's Bailey, Fed's Powell and BoC's Wilkins.
EQUITIES: Tech Outperforming Post-Pandemic Plays
It's been a weak start for European equities, with energy/financials (i.e. the post-pandemic trade that had benefited post-Monday's Pfizer vaccine announcement) leading losses. Accordingly, the NASDAQ (pandemic tech trade) is one of the few indices in the green, with the S&P lagging.
- Japan's NIKKEI up 171.28 pts or +0.68% at 25520.88 and the TOPIX down 2.84 pts or -0.16% at 1726.23. China's SHANGHAI closed down 3.523 pts or -0.11% at 3338.679 and the HANG SENG ended 57.6 pts lower or -0.22% at 26169.38.
- European stocks are weaker, with the German Dax down 73.49 pts or -0.56% at 13080.45, FTSE 100 down 31.23 pts or -0.49% at 6334.57, CAC 40 down 33.39 pts or -0.61% at 5406.14 and Euro Stoxx 50 down 16.82 pts or -0.49% at 3437.05.
- U.S. futures are mixed, with the Dow Jones mini down 152 pts or -0.52% at 29159, S&P 500 mini down 6.25 pts or -0.18% at 3561.75, NASDAQ mini up 55 pts or +0.46% at 11940.75.
COMMODITIES: Precious Metals Bounce As USD Slips
Precious metals have come strongly off early lows with the US dollar coming off overnight highs. Gold's trading between support at $1850.5 and resistance at $1902.3.
- WTI Crude down $0.02 or -0.05% at $41.32
- Natural Gas down $0.01 or -0.07% at $3.019
- Gold spot up $5.16 or +0.28% at $1867.63
- Copper up $1.45 or +0.46% at $314
- Silver up $0.01 or +0.05% at $24.1708
- Platinum up $5.24 or +0.6% at $869.74
LOOK AHEAD:
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.