German coalition talks could take until Christmas to form government

Remarks / Observations

  • The German federal election results sparked what could be months of complex coalition talks (Note: no prospect of a far-left coalition).
  • House Speaker Pelosi fixes Thursday’s vote on the infrastructure vote.

Asia

  • The PBOC again injected CNY 100 billion of net liquidity into the market via a 14-day reverse repurchase agreement.
  • Two local governments in China have taken control of income from sales of Evergrande properties so that buyers’ interests can be protected and construction on the project can continue.
  • The election of Japan’s next prime minister is likely to take place in the second round, as neither of the two main candidates (Kono and Kishida) appear to be able to secure an absolute majority in the first round of voting (which will take place on Wednesday).

Coronavirus

  • The Japanese government announced its intention to lift emergency measures in all areas at the end of the month.

Europe

  • The final election results in Germany saw the Social Democrats (SPD) narrowly beat the Merkel CDU / CSU coalition (25.7% vs. 24.1%); The Green Party records its best results at 14.8%; Coalition talks will take time (maybe until Christmas).
  • BP provided updates on the shortage of delivery drivers in the UK: 30% of service stations in the UK are almost out of gas to supply, 1.2K locations were missing the 2 main types of fuel.
  • The British military was to provide personnel to drive tankers to the forecourt within days of an estimate that between 50 and 90% of British service stations were out of fuel.
  • The UK government has approved the issuance of temporary visas to 5,000 foreign truck drivers, has also temporarily suspended competition rules to allow companies to coordinate fuel supplies to the worst affected areas.

Americas

  • House Speaker Pelosi sets the vote on the $ 1.0 million infrastructure bill Thursday, September 30. Noted that President Biden’s $ 3.5T reconciliation bill may be lower than expected.

SPEAKERS / FIXED INCOME / FX / RAW MATERIALS / ERRATUM

Actions

  • Indices [Stoxx600 +0.32% at 464.78, FTSE +0.32% at 7,074.06, DAX +0.90% at 15,671.85, CAC-40 +0.62% at 6,679.37, IBEX-35 +1.00% at 8,961.50, FTSE MIB +0.45% at 26,086.00, SMI -0.18% at 11,796.14, S&P 500 Futures +0.33%].
  • Market Focal Points / Key Themes: European indices are opening higher in all areas and have remained in the green as the session progressed; the sectors among those leading to the increase are real estate and industries; underperforming sectors include telecommunications; German housing companies supported following non-binding German referendum; Faurecia confirms the acquisition of Hella; Hikma acquires Custopharm; EQT launches takeover of zooplus; no major profit is expected during the next US session.

Actions

  • Consumer discretionary: zooplus [ZO1.DE] + 4% (new offer), International Workplace Group [IWG.UK] + 6% (speculation on the dissolution of the company), Plastic Omnium [POM.FR] -1% (perspective down).
  • Basic consumption: La Doria [LD.IT] -13% (participation offer).
  • Finance: Bank of Ireland [BIRG.IE] -2% (the financial director resigns).
  • Industrial products: Rolls-Royce Holdings [RR.UK] + 6% (selected for the CERP program).

Loudspeakers

  • Leader of the German Social Democrats (SPD) Scholz said his SPD party had the mandate to lead the German government. Saw a possible coalition between the SPD, the Greens and the FDP (** Note: called the traffic light coalition). He added that the vote suggested that the Merkel CDU / CSU coalition should go into opposition.
  • Head of the Hungarian Debt Agency (AKK): Kurali expected a soft landing for the local bond market following the central bank’s cut back on its asset purchase program.
  • A UK Road Haulage Association official said the UK government’s driver visa scheme was designed to fail (** Note: refers to UK government approved to issue temporary visas to 5,000 foreign truck drivers).
  • BOJ Gov Kuroda reiterated his position that he would not hesitate to add relaxation if necessary; closely monitor the impact of the coronavirus. Needed to continue to soften persistently. Reiterated that inflation would gradually increase towards the end of the current projection period in FY23, but would fall short of the 2% price stability target.
  • The Chinese government has stated that Li Bo is no longer a PBoC Dep Gov.

Currency / Fixed Income

  • The USD started the week on favorable terms as the Fed noted that the tapping process could begin soon.
  • EUR / USD was peering below the 1.1700 level following election results in Germany. The dealers noted that the next German government coalition was in limbo, but a three-party coalition was expected. Possible changes in Germany’s fiscal position and its approach to EU / foreign policy and climate action are at stake.
  • GBP / USD had returned above 1.37 by mid-session, as more analysts advanced their calls for a BOE rate hike by February 2022.

Economic data

  • (FI) Finland Seven Consumer Confidence: 6.0 v 4.0 before; Confidence in business: 21 v 22 before.
  • (DK) Denmark August Retail sales M / M: -0.4% vs. -0.1% previously; Y / Y: 4.0% against 4.98% previously.
  • (ES) Spain August PPI M / M: 1.9% vs. 2.0% previously; Y / Y: 18.0% against 15.6% previously.
  • (SE) Sweden August Loans to households Y / Y: 6.4% against 6.3% previously.
  • (EU) Euro zone August M3 Money supply Y / Y: 7.9% against 7.7% e.
  • (CH) Total Swiss weekly sight deposits (CHF): 714.5B against 714.7B previously; National sight deposits: 636.0 billion against 636.0 billion previously.
  • (TW) Industrial production of Taiwan in August Y / Y: 13.7% vs. 12.7% e.
  • (TW) Taiwan’s August watch indicator: 39 vs. 38 before.

Issue of fixed income securities

  • (NO) Norway sold NOK against NOK2.0B indicated in the 3 month invoices; Average return: 0.18% against 0.07% previously; Bid-to-cover: 2.44xv 2.55x front.

Look ahead

  • (EU) The European Union will sell € 2.0-2.5 billion of NextGeneration (INGEU) 2026 bonds.
  • 5:25 am (EU) Daily liquidity statistics from the ECB.
  • 5:30 a.m. ((DE) Germany will sell 4.0 billion euros in 12-month BuBills.
  • 05:30 (ZA) South Africa announces details of upcoming I / L bond sale (held on Friday).
  • 06:00 (BE) Belgium Debt Agency (BDA) will sell 3.0 to 3.5 billion euros in OLO bonds 2031, 2037 and 2050.
  • 06:00 (IL) Israel will sell bonds.
  • 06:00 (RO) Romania will sell 400M RON in 2.5% bonds from October 2027.
  • 6:45 am (US) Daily Libor correction.
  • 07:00 (MX) Mexico August Trade balance: -1.1 $ vs. -4.1 $ before.
  • 07:00 (MX) Mexico July Economic activity index IGAE (monthly GDP) M / M: + 0.8% ev -0.9% before; Y / Y: 8.5% ev 13.3% before.
  • 07h00 (BR) Brazil Seven FGV M / M construction costs: 0.4% ev 0.6% before.
  • 07:00 (BR) Brazil Sept FGV Consumer Confidence: No is v 81.8 before.
  • 07:25 (BR) Weekly survey of economists at the Central Bank of Brazil.
  • 08:00 (UK) Daily Baltic Dry Bulk Index.
  • 8:00 a.m. (US) Fed Evans at the NABE Conference.
  • 08:00 (IN) India announces details of upcoming bond sale (held on Friday).
  • 8:30 am (United States) August Preliminary durable goods orders: + 0.6% ev -0.1% previously; Durable goods (excluding transport): 0.5% ev 0.8% before; Capital goods orders (excluding defense / excluding aircraft): 0.4% ev 0.1% previously; Shipments of capital goods (excluding defense / excluding aircraft): 0.5% ev 0.9% before.
  • 8:30 am (BR) Brazil August Total outstanding loans (BRL): 4,302Te against 4.266T before; M / M: 1.2% ev 1.2% before; Default rate for personal loans: none is v 4.1% before.
  • 9:00 a.m. (FR) The French Debt Agency (AFT) will sell € 5.7 billion to € 6.9 billion in 3-month, 6-month and 12-month bonds.
  • 9.45am (UK) BOE purchases £ 1.147bn as part of Gilt APF (3-7 year) deal.
  • 10:30 am (US) Dallas Fed manufacturing activity index in September: 11.0 ev 9.0 before.
  • 12:15 p.m. (US) Fed Brainard at NABE Conference
  • 3:00 p.m. (AR) Argentina Supermarket sales in July Y / Y: No est v 1.0% before; Shop Center Sales Y / Y: No is v 241.5% before ..
  • 4:00 p.m. (US) Weekly crop progress report.
  • 5:00 p.m. (KR) South Korea in September Consumer confidence: no est v 102.5 before.
  • 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: is not v 103.3 before.
  • 9:30 p.m. (CN) China August Industrial profits Y / Y: None is against 16.4% before.
  • 9:30 p.m. (AU) Australia End August retail sales M / M: -2.2% v -2.7% prelim.
  • 10:30 p.m. (KR) South Korea sells KRW 500 billion in 20-year bonds.
  • 11:00 p.m. (TH) The Central Bank of Thailand will sell THB 55 billion in 3-month notes.
  • 11:30 p.m. (HK) Hong Kong to sell 3-month, 6-month and 12-month coupons.
  • 11:35 p.m. (JP) Japan will sell 40-year JGB bonds.
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