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Trading  | October 16, 2017

World stocks and commodities rose on Monday, boosted by upbeat Chinese data, while U.S. oil futures jumped to a near six-month high as escalating tensions between the Iraqi government and Kurdish forces threatened supply.  Global markets digested the large amount of weekend newsflow, and clearly liked what they saw as S&P futures were modestly in the green, as both European and Asian stocks are higher.

The USD is marginally stronger after Yellen’s comments suggest the Fed may look through weak inflation. Still, for those who missed this weekend financial elite extravaganza, Yellen stated that new normal will be lower interest rates than seen historically and that inflation has been largest surprise for the US economy this year. Yellen added that gradual hikes in fed funds rate are likely to be appropriate during next few years and that she will be paying attention to inflation data in the upcoming months, although she guesses that the soft reading will not persist. Meanwhile, Fed’s non-voting soft-hawk Rosengren said 3 to 4 rate hikes next year will probably be appropriate and that the Fed may need to overshoot on rates if unemployment is below 4% while inflation reaches target.

Looking at the big macro picture, via Bloomberg:

  • The dollar advanced against its major G10 peers and Treasury yields rose after Federal Reserve Chair Janet Yellen said on Sunday her “best guess” is consumer prices will soon accelerate after a period of surprising softness, a forecast echoed by European Central Bank President Mario Draghi and Bank of England Governor Mark Carney.
  • The Mexican peso hit a fresh five-month low as NAFTA talks revealed aggressive U.S. proposals;
  • Oil climbed as Iraqi troops moved to take over control of Kurdish fields.
  • The euro trades under pressure via crosses, EUR/JPY accelerates after breaking lower through 132.00,
  • JPY one-week calls also bid as they now capture domestic election date of Oct. 22;
  • EUR/GBP lower as GBP is supported by hawkish comments by Carney on Friday and on news U.K. PM making surprise visit to Brussels today for talks.
  • Gilts underperform from the open, gilt/bund spread wider by 3bps, short sterling strip bear steepens.
  • Bunds steadily grind higher; latest ECB sources report saying some ECB members see $3t QE is within market tapering expectations;
  • Little reaction seen in Spanish bonos to latest Catalonia rhetoric. However, Spanish IBEX underperforms other European equity markets as domestic banks sell off. Eurostoxx and Dax trade flat, miners rally strongly as copper forwards run upside stops through $7000/MT, new YTD high.
  • Crude futures higher after Iraq forces push into Kirkuk region.

Meanwhile, tension over North Korea continues to simmer. The U.S. and South Korean navies began a joint drill involving around 40 warships, amid signs North Korea is preparing for another provocation such as a missile launch. North Korea’s state-run media agency KCNA on Saturday criticized the exercise, calling it a “reckless act of war maniacs.”

Stocks in Europe nudged higher after their longest weekly rally since 2015, led by miners, as gains in oil and copper drove Bloomberg’s gauge of commodity prices to a six-month high.

The Spanish IBEX index lags against its counterparts, down -0.7%  on Catalan fears with Spanish banks leading the losses. As reported previously, the Catalan Leader suspended independence mandate to pursue dialogue with PM Rajoy, however the letter sent by Puigdemont failed to clarify whether he has declared independence or not, prompting the head of the People’s Party in Catalonia Xavier Garcia Albiol says Puigdemont’s answer shows he is irresponsible. CaixaBank falls 2.4%, BBVA down 1.4%, Bankia down 1.5%; the IBEX is down 2% since independence vote on Oct. 1, vs 1% gain for Stoxx 600 over same period. Elsewhere, Convatec shares fall some 14% after announcing a profit warning, while strength in material names are helping European bourses make slight gains this morning.

The MSIC Asia index was higher by 0.6%, its highest level since November 2007, led by Australia’s ASX 200 (+0.3%) underpinned by strength in commodity related stocks after crude approached $52/bbl and iron ore gained over 4%, while Nikkei 225 (+0.5%) extended on its best levels in over 2 decades. Elsewhere, Hang Seng (+0.8%) outperformed and posted its highest close since December 2007 following stronger than expected Chinese Aggregate Financing, New Yuan Loans and PPI data, although the Shanghai Composite (-0.4%) lagged after the PBoC kept its liquidity operations at a minimal. Meanwhile, China’s ChiNext Index of small-cap shares drops as much as 2.3%, the biggest intraday loss since July 17, amid expectations that liquidity could tighten and as investors turn more cautious ahead of the Communist Party congress this week. “Zhou Xiaochuan’s comments signal that China will move further to rein in financial leverage and is unlikely to maintain an easy liquidity environment,” says Shen Zhengyang, Shanghai-based analyst with Northeast Securities Co.

Overnight, as reported previously, China CPI printed at 1.6% Y/Y, in line with expectations, and down from, 1.8% in August largely due to high year-over-year base effects, but it was PPI to come in smoking hot, jumping from 6.3% last month to 6.9% Y/Y, slamming expectations of a 6.4% print and just shy of the highest forecast, driven by the recent surge in commodity costs and strong PMI surveys.


The stronger than expected PPI has pushed China’s 10Y yield to the highest in 30 months, or since April of 2015.


Japan’s torried rally continued as technology firms and banks bolstered the Japanese stock market, sending the Topix index to its sixth day of gains, up 0.6%, and its longest winning streak for this year. All but four industry groups in the Topix advanced, while the Nikkei 225 Stock Average rose for the 10th day, the longest stretch since June 2015. Technology shares mirrored gains in U.S. peers as chipmakers and internet giants bolstered the S&P 500 Index at the end of last week. Automakers underperformed after the yen strengthened against the dollar for a second day on Friday as data showed the core U.S. consumer price index rose 0.1 percent in September from a month earlier, below the estimate of 0.2 percent. “Risks of not buying into Japanese equities are rising,” said Masahiko Sato, an analyst at Nomura Holdings Inc. in Tokyo. “In the midst of a global economic expansion, local corporate earnings are improving and equities are looking cheap. Foreign investors are buying into this.”

The Bloomberg Dollar Spot Index rose 0.1 percent as the euro weakened and Spanish shares fell after Spain’s government gave Catalonia a new deadline to back down from its independence claim. The pound extended gains as British Prime Minister Theresa May headed for Brussels to intervene in deadlocked exit negotiations. The Japanese yen increased less than 0.05 percent to 111.81 per dollar.

The Bloomberg Commodity Index gained 0.4% to the highest in six months. West Texas Intermediate crude rose 1.3% to $52.12 a barrel, the highest in two weeks, due to the conflict in Kurdish Iraq. Gold increased 0.1 percent to $1,304.53 an ounce.  Copper climbed 2.3 percent to $3.21 a pound, hitting the highest in more than three years. Palladium traded above $1,000 an ounce for the first time since 2001.

Economic data include Empire Manufacturing Survey. Netflix, Schwab and CSX are among companies reporting earnings

Bulletin Headline Summary from RanSquawk

  • Catalonian uncertainty continues to shadow over markets
  • EUR marginally underperforms, as CAD benefits from bullish oil markets
  • Looking ahead, investors will await US NY Fed Manufacturing data

Top Overnight News

  • Kirkuk: Iraqi forces moved to take over oil fields from Kurdish forces
  • Fed’s Yellen: ongoing economic strength to warrant gradual rate hikes as soft inflation readings will not persist
  • ECB’s Draghi: no convincing signs of underlying inflation; would expect higher wage growth at this stage; sees V-shaped path of inflation due to oil prices
  • ECB QE: GC sees a limit of just over EU2.5t for the QE program based on current rules; enough bonds available to cut monthly purchases to EU30b in Jan. lasting until Sept, according to people familiar
  • Brexit: U.K. PM making surprise visit to Brussels today to meet EU’s Barnier and Juncker for talks; U.K. MPs holding cross-party talks in a bid to stop “No Deal” style Brexit
  • Catalonia: regional president does not give yes/no answer to Spanish govt. on independence declaration; defends claim to independence, asks for negotiations; Spanish Deputy PM says Thursday deadline is now activated
  • Italy: elections could be held March 4 after passage of 2018 budget law: Corriere
  • China Sept. CPI 1.6% vs 1.6% est; PPT 6.9% vs 6.4% est; M2 Money Supply: 9.2% vs 8.9% est; new Yuan Loans 1.27t vs 1.20t est; agg. Financing 1.82t vs 1.57t est.

Market Snapshot

  • S&P 500 futures little changed at 2,553.50
  • STOXX Europe 600 up 0.2% to 392.30
  • MSCI Asia up 0.6% to 167.66
  • MSCI Asia ex Japan up 0.5% to 552.89
  • Nikkei up 0.5% to 21,255.56
  • Topix up 0.6% to 1,719.18
  • Hang Seng Index up 0.8% to 28,692.80
  • Shanghai Composite down 0.4% to 3,378.47
  • Sensex up 0.5% to 32,603.26
  • Australia S&P/ASX 200 up 0.6% to 5,846.76
  • Kospi up 0.3% to 2,480.05
  • German 10Y yield unchanged at 0.403%
  • Euro down 0.3% to $1.18
  • Italian 10Y yield fell 3.3 bps to 1.815%
  • Spanish 10Y yield fell 1.1 bps to 1.6%
  • Brent futures up 1.4% to $57.98/bbl
  • Gold spot up 0.04% to $1,304.39
  • U.S. Dollar Index up 0.1% to 93.22

Asia equity markets began the week on the front-foot again after another record setting session last Friday on Wall Street, where softer than expected US CPI figures caused some to rethink the Fed’s hiking trajectory, while the region also digested encouraging Chinese lending and inflation data. ASX 200 (+0.3%) was underpinned by strength in commodity related stocks after crude approached USD 52/bbl and iron ore gained over 4%, while Nikkei 225 (+0.5%) extended on its best levels in over 2 decades. Elsewhere, Hang Seng (+0.8%) outperformed and posted its highest since December 2007 following stronger than expected Chinese Aggregate Financing, New Yuan Loans and PPI data, although the Shanghai Comp. (-0.4%) lagged after the PBoC kept its liquidity operations at a minimal. Finally, 10yr JGBs were initially mildly higher to track recent upside in T-notes and amid the BoJ’s presence in the market for an amount just shy of JPY 1tln in JGBs ranging from 1yr-10yr maturities, but then failed to sustain gains amid the positive risk tone.

For those who missed the main Chinese economic data over the weekend, here are the highlights:

  • China Sept fiscal revenues CNY 2.27tln +9.2% y/y, spending at CNY 2.02tln, +1.7% y/y.
  • Chinese New Yuan Loans (CNY)(Sep) 1270.0B vs. Exp. 1100.0B (Prev. 1090.0B).
  • Chinese Aggregate Financing (CNY)(Sep) 1820.0B vs. Exp. 1572.7B (Prev. 1480.0B)
  • Chinese Money Supply M2 (Sep) Y/Y 9.2% vs. Exp. 8.9% (Prev. 8.9%)
  • Chinese CPI YY (Sep) 1.6% vs. Exp. 1.6% (Prev. 1.8%).
  • Chinese PPI YY (Sep) 6.9% vs. Exp. 6.4% (Prev. 6.3%)
  • PBoC injected CNY 20bln via 7-day reverse repos; PBoC set CNY mid-point at 6.5839 (Prev. 6.5866)

PBoC Governor Zhou stated that total debt leverage in China is too high and that there is no clear fiscal discipline to restrict local governments; Zhou also stated that China’s economic growth is to hit 7% in H2.

Top Asian News

  • Japan Shares Rise, Topix Marks Longest Winning Streak This Year
  • Bad-Loan Recast Failures Portend More Pain for India Lenders
  • More Factories Go Dark as China’s Expansion Hangs in the Balance
  • Bitauto Car-Financing Arm Is Said to File for $800 Million IPO
  • H&M Supplier Crystal Sets Price Range for $574 Million IPO
  • Li’s H.K. Tower Sells for Record $5.15 Billion, Report Says
  • Wanda Golf Courses in Chinese Resort Shut Down by Authorities

In Europe, the IBEX lags against its counterparts on Catalan fears with Spanish banks leading the losses. As reported previously, the Catalan Leader suspended independence mandate to pursue dialogue with PM Rajoy, however the letter sent by Puigdemont failed to clarify whether he has declared independence or not. Convatec shares fall some 14% after announcing a profit warning, while strength in material names are helping European bourses make slight gains this morning. UK debt appears to have weathered an early storm, but like Short Sterling remains on the relative backfoot on near term BoE tightening prospects. This follows more policy guidance from Governor Carney at the World Bank/IMF, and precedes Tuesday’s potentially policy-defining inflation report. Consensus is for headline CPI to climb to 3% y/y, but the bias suggests an above forecast print that would see the mandate breached and by inference strengthen the MPC’s resolve to act sooner rather than later (ie in November). Bunds are steady in comparison, and rangebound amidst contrasting drivers (ECB underscoring tapering intentions, but ongoing Spanish/Catalan uncertainty underpinning the EZ safe-haven). Perhaps surprisingly, Bonos not too adversely affected by the latest regional-national Government impasse, and RAGBs also holding in despite an unexpectedly strong showing by the far right in the weekend Austrian election. US Treasuries have eased off Friday’s post-CPI highs, with Fed chair Yellen still predicting higher inflation ahead and repeating that the wage components in the latest jobs data are encouraging – inference that this is more important than the negative (and obviously hurricane distorted) headline payrolls number.

Top European News

  • Catalan Leader Defends Claim to Independence, Defying Spain
  • Spain’s OHL Studies Sale of Concessions Unit, EL Mundo Reports
  • Cyprus Rogue Borrowers Pose Threat to Sustained Growth
  • EDP Falls in Lisbon Following Regulator’s Proposal on Tariffs
  • European Miners Rise to 4-Yr High; Citi Still Bullish on Sector
  • U.K.’s Johnson Urges ‘Some Serious Negotiations’ in Brexit Talks
  • Serbia May Present Kosovo ‘Proposal’ in March, President Says

In currencies, morning reports from the Spanish/Catalonian saga, stating that Catalan leader, Puigdemont has suspended the independence mandate to pursue dialogue with PM Rajoy, led to no reprieve in the EUR, which saw a slow, downward grind through the Asian session, as EUR/USD came back to break through Friday’s pre-US inflation data levels. EUR/GBP has come back to trade in the 0.8900 – 0.8750 range, alongside EUR/USD breaking firmly down through 1.18, with participants showing little optimism towards positive Spanish developments. Focus now slowly moves toward the end of October, as EUR/USD volatility sellers suggest more rangebound trade as we approach the ECB meeting. Options continue to play a part in FX markets as the large expiries theme remains, with hedges evident – EUR/USD sees 2.5bln between 1.1760 and 1.1910, and EUR/GBP has 1.7bln rolling off between 0.8885 and 0.8900. The probability of a Fed move in December has declined (as low as 73.2%, according to some measures) , following Friday’s tame inflation report. Some concerns over the US economy continued over the weekend, with comments from Fed Chair Yellen, stating that the new normal will be lower interest rates, further saying that inflation has been the largest surprise for the US economy this year, yet did add that gradual hikes in the Fed Funds rate are likely to be appropriate during the next few years and will pay close attention to inflation in the coming months. DXY remains rangebound, struggling to break into the range seen prior to Friday’s Inflation report. A marginal inflow into the JPY has been seen in early European trade, however, USD/JPY continues to struggle to trade below 111.70, with rangebound price action clear. The day sees no standout economic data on the docket, with trade potentially likely to remain subdued, as investors focus on global concerns given that various geopolitical and political uncertainties remain.

In commodities, oil prices notably firmer with WTI and Brent making a breach above USD 52 and USD 58 respectively, largely as a result of the conflict between Iraqi and Iraqi-Kurdish forces, whereby Iraqi forces have moved into Kirkuk, consequently raising concerns over exports (Kirkuk exports account for roughly 600k). OPEC Secretary General Barkindo stated that OPEC and shale companies share responsibility to rebalance market, while there were also comments from Kuwait that producers need another month before deciding on deal extension and decision may be made in November. Iraqi forces capture Kirkuk’s K1 airbase from Kurdish forces, according to a military statement. Kurdish leaders have agreed to avoid fighting in Kirkuk’s Oil and Gas facilities, according to the Iraqi oil ministry.

US Event Calendar

  • Oct. 16-Oct. 20: Monthly Budget Statement, est. $6.0b, prior $33.4b
  • 8:30am: Empire Manufacturing, est. 20.5, prior 24.4

DB’s Jim Reid concludes the overnight wrap

There were few inflationary gusts on Friday after the much anticipated US CPI report. After nudging against 2.40% last Friday after a strong US average hourly earnings number, 7 days later the miss on CPI saw 10yr USTs close the week at 2.274% having traded just below 2.33% most of the session before hand. September core inflation rose only 0.13% mom (vs. 0.2% expected) and 1.7% yoy (vs. 1.8% expected). In the details, core services inflation was inline, but the main miss was on the core goods side, which fell 0.2% mom (-1% over past 12 months – the lowest reading since August 2004). Our US team believes some of this weakness should prove transitory (eg: medical care commodities), but there were also more broad based signs of weakness. The team still expects core CPI inflation to remain near recent levels in yoy terms through 2017, albeit with risks that it now rounds down to 1.6%.

This now makes it 6 out of 7 months of misses relative to expectations but a) remember that we’ve previously shown US inflation tends to lag growth by around 18 months and growth was weak at the end of ‘15/ early 16, b) that many at the Fed have recently suggested a bias to look through the ‘temporary’ weakness, and c) the Fed have also made it clear they’re looking more and more at (the very loose) financial conditions in their rate discussions.

So overall, Friday’s number should reduce the risk of a December Fed hike but not perhaps by much. Bloomberg’s calculator has it at 73.3% now, down 3.4ppt versus Thursday’s close. If the usual lag between growth and CPI holds, we still may have weak YoY CPI into Q1 but just as the market gives up on inflation ever rising again, we may get some higher than expected shocks as we move into Q2 2018. Staying with inflation, China’s September CPI was in line at 1.6% yoy, but lower than the prior month, driven by lower food prices. Elsewhere, PPI was notably higher than consensus at 6.9% yoy (vs. 6.4% expected).

Over the weekend, the main movers and shakers of global central banks spoke on inflation, tapering and risks at the annual IMF meeting. Firstly, Mrs Yellen said “my best guess is that these soft readings (inflation) will not persist” and that “with the ongoing strengthening of labour markets, I expect inflation to move higher next year”. On rates, she noted “we expect the neutral level of the federal fund rates to rise somewhat over time” and that “additional gradual rate hikes are likely to be appropriate over the next few years to sustain the economic expansion”. On fiscal policy changes, she said “it’s a source of uncertainty”, we have taken “a kind of wait and see attitude”.

ECB’s Draghi also reiterated that he is “confident” inflation will “gradually converge in a self-sustained manner”, but we should be patient, because “it’s going to take time”. On tapering, ECB’s Praet had noted the idea of a bigger reduction in monthly bond buying in exchange for longer duration of the program earlier. When asked by reporters, Draghi said that Praet “had said it very well”. Back on Friday, Bloomberg reported that ECB policy makers are considering reducing the pace of bond buying to €30bn/mth (from €60bn/mth), but for nine more months to September 2018. Elsewhere, Bundesbank President Weidmann noted he does not see the need to further expand monetary stimulus, while the ECB’s Italian governor Visco noted he would prefer not to have specific dates on the unwinding of QE as ECB needs “the flexibility that is in the program”. Given the difference in opinions, we shall find out more at the next ECB meeting next week on 26 October.

Elsewhere, BOE’s Carney reiterated he may need to raise rates in the “coming months” as the UK’s economy is running out of spare capacity. Japan’s BOJ Kuroda noted “achieving the 2% target is still a long way off and the BOJ  will persistently [maintain] aggressive monetary easing” and he does not “see risks mounting in the financial markets in the US, Europe and Japan”. This was also backed up by Draghi who saw little signs that “stocks and bonds are having valuations that are stretched when compared to historical averages”.

Finally, China’s PBC Governor Zhou noted that “6.9% economic growth may continue in the second half”. He also said “the main problem (in China) is that the corporate debt is too high” and that while debt servicing costs remain low, “we need to pay further efforts to deleveraging and strengthen the policy for financial stability”. Zhou flagged that some of China’s corporate debt includes borrowing from financing vehicles owned by the local  governments, so if redefined, corporate debt / GDP is closer to c125% than the official figure of 160%, while government debt would be 70% of GDP (vs. 36%). Elsewhere, he said the asset management business is “a relatively chaotic situation”, partly due to three different regulators with different sets of rules. For those who have missed it, our note “The next financial crisis” takes a closer look at this and other developing risks.

Overnight, South Korean military officials warned North Korea may be preparing for another round of missile launches, while US and SK navies have begun a joint drill involving 40 warships. Elsewhere, US Secretary of State  Tillerson said he will continue with diplomacy measures with NK “until the first bomb drops”. This morning in Asia, markets havefollowed the positive lead from the US and are trading higher. The Kospi (+0.12%), Nikkei (+0.68%), ASX 200 (+0.63%) and Hang Seng (+0.81%) are slightly higher as we type.

In Austria, the centre-right People’s Party (OVP) leader Sebastian Kurz is expected to become the world’s youngest government leader (aged 31). Of the votes counted (c85%), the Interior Minister Sobotka said the OVP received 31.4% (vs. c33% in late polls per The Independent), while the Social Democrats party has 26.7% (vs. 24.4%) and the Freedom Party (FPO) has 27.4% (vs. c26%). 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. This would mark the FPO’s first return to government since 2005. So it will be interesting to see what a potential OVP & FPO tie up would mean for Europe on issues such as immigration and deeper EU integration.

Over in Germany, Merkel’s CDU party has likely suffered the worst election result since 1959 in the northern state of Lower Saxony (home state of Volkswagen with 7.8m people). The Social Democrats Party (SPD) was the big winner, with official preliminary results putting the SPD as winning 36.9% (+4.1ppt from 2013) of the votes, while Merkel’s party came second, wining 33.6% (-2.6ppt). The loss is unlikely to shift the power mix at the state level as the Social democrats and the Green already govern the state, but the softer  sentiment for her party could have follow on implications ahead of Merkel’s talks with potential coalition partners (likely the Greens & FDP) this week, in order to form the next federal government.

Indeed UK PM May is expected to travel to Brussels and meet with EC Commission President Junker and Chief Brexit negotiator Barnier for Brexit talks today. According to her office, the trip has been in her diary for some time, but has only now been publicly announced. We wait and see whether her efforts will improve the chance of some resolution ahead of the EU Summit meeting later this week. Elsewhere tomorrow’s Euro and UK CPI will be a focal point as will the 57 S&P 500 companies reporting. Today, Spain and Catalonia will be back in the spotlight with Catalan President Puigdemont due to face a deadline to clarify to the Spanish Government Catalonia’s position on independence. For the full week ahead we’ve copied the text from “Next week, this week” at the end.

On the US fiscal front, optimism and pricing of a deal has again faded but the next key step is the adoption of a budget by the Senate (expected to be later this month), which should be followed by a House-Senate conference to agree on a common FY18 budget. As DB’s fixed income weekly explains, the base case is that the House will converge towards a plan consistent with the Senate’s USD1.5 trillion deficit target (relative to the CBO baseline) and assuage deficit hawks with the prospects of higher growth reducing the deficit relative to this target. The final tax reform is more likely to amount to a more modest tax cut with a relatively limited impact on GDP. However, the increase in deficits will still be relevant to bond markets from a flow perspective.

Quickly recapping the markets performance on Friday. Equities (S&P +0.09%, Stoxx 600 +0.29%) edged higher back towards their record highs. Within the S&P, HP rose 6.42% post results, while bank results were mixed with WFC down 2.75% following an unexpected $1bn legacy legal charge and softer revenue trends, while BofA gained 1.49%, partly due to improved cost discipline.

Bond markets were broadly firmer following the US CPI miss and stronger than expected retail sales. Core bond yields fell 4-5bp at the 10y part of the curve (UST: -4.5bp; Bunds -4.1bp; OATs -4.6bp), but Gilts underperformed (-1bp). The US dollar index was broadly flat (+0.04%) while Sterling gained 0.17% but the Euro dipped 0.08% versus the Greenback. In commodities, WTI oil rose 1.68% following reports of lower US crude stockpiles, and continues to edge higher this morning as fighting broke out between Iraqi and Kurdish forces near Kirkuk. Iron Ore rallied 4.06% to $62.53/ton following China trade figures that showed a three year high for monthly ore imports.

Before we take a look at today’s calendar, we wrap up with other data releases from Friday. Excluding the CPI miss, other US macro data were broadly stronger than expected. The September retail sales (ex-auto & gas) beat expectations at 0.5% mom (vs. 0.4% expected), while the University of Michigan’s October consumer confidence also beat at 101.1 (vs. 95 expected). Elsewhere, the August business inventories print was in line at 0.7% mom. In  Europe, the final readings of September CPI for Germany and Italy was unrevised, at 1.8% yoy (flat mom) and 1.3% yoy respectively.

Looking at the day ahead, in Europe the August trade balance reading for the Euro area is the sole release due while in the US the October empire manufacturing print is due. Away from the data Spain and Catalonia will be back in the spotlight with Catalan President Puigdemont due to face a deadline to clarify to the Spanish Government Catalonia’s position on independence. Earnings wise, Netflix results are likely to be the most significant.

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