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Hot Reuters Morning Benchmark \ Dow Jones Morning Briefing

Discussion in 'World Economy' started by Tadhg Gaelach, Oct 17, 2016.

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    Tadhg Gaelach

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    FRIDAY, OCTOBER 6, 2017


    German industrial orders jump on vibrant demand from abroad
    German industrial orders bounced back in August, rising more than expected on strong foreign demand, data showed, suggesting that factories will contribute to overall growth in Europe's largest economy in coming months. Factories registered a 3.6 percent increase in orders after contracts for 'Made in Germany' goods fell by an upwardly revised 0.4 percent in July, data from the Economy Ministry showed. The reading for August was the strongest monthly increase since December. It easily beat the Reuters forecast for a 0.7 percent rise, surpassing even the most optimistic estimate. A data breakdown showed domestic demand rose 2.7 percent while foreign orders jumped 4.3 percent, propelled by a 7.7 percent increase from customers outside the euro zone - despite the recent appreciation of the single currency.

    Hurricanes Harvey, Irma expected to dim U.S. jobs growth in short term
    U.S. job growth probably slowed further in September as Hurricanes Harvey and Irma left displaced workers temporarily unemployed and delayed hiring, the latest indication that the storms undercut economic activity in the third quarter. According to a Reuters survey of economists, the Labor Department's employment report will likely show that nonfarm payrolls increased by 90,000 jobs last month after rising by 156,000 in August. Separately, the Labor Department said on Thursday initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 260,000 for the week ended Sept. 30. In a separate report on Thursday, the Commerce Department said the U.S. trade gap declined 2.7 percent to $42.4 billion. In another report, the Commerce Department said orders for non-defense capital goods excluding aircraft jumped 1.1 percent in August instead of the 0.9 percent increase reported last month.

    Japanese workers' wages rise in a positive sign for consumer spending
    Wages of Japanese workers rose in August from a year earlier, reversing from the previous month's decline, in a sign of a gradual pick-up in workers' income amid a tightening labour market. Wage earners' nominal cash earnings rose an annual 0.9 percent in the year to August, reversing from the prior month's revised 0.6 percent decline and the fastest gain since July 2016, the data showed. Reflecting a 0.8 percent rise in consumer prices, however, inflation-adjusted real wages rose a meagre 0.1 percent, up for the first time in eight months. Special payments jumped 6.1 percent in August from a year ago, the biggest gain since March 2016. Regular pay rose 0.4 percent in the year to August, rising for a fifth straight month. Overtime pay rose 1.5 percent year-on-year in August, up two months in a row.

    EXCLUSIVE-Italy's central bank asks ECB to soften bad-loan plans –source
    Italy's central bank is calling on the European Central Bank to soften new requirements for banks to set aside more capital to cover newly classified bad loans, a source told Reuters. Italian banks hold nearly 30 percent of the euro zone's 915 billion euros of problematic debts and investors are concerned new ECB guidelines announced on Wednesday will lead to further writedowns of soured loans. The source, who is close to the Bank of Italy, said it wanted secured loans to be exempted from the new rules, challenging one of the main planks of the ECB guidelines, which are the subject of a public consultation until Dec. 8. The Bank of Italy also wants to make sure that existing bad loans are not affected by the new rules, the source said.

    Bank of England's McCafferty backs market bet on "late 2017" rate rise
    Financial markets are less at risk of "an unpleasant surprise" from the Bank of England, now that they expect an interest rate rise later this year, rather than in mid-2019, BoE policymaker Ian McCafferty said on Thursday. "This has had the effect of bringing forward expectations of the first rise in Bank Rate from mid-2019 to late 2017, reducing the risks of an unwelcome surprise," he said in a speech to a business audience in London. Brexit is likely to slow growth in Britons' incomes and weaken the rate at which the economy can sustainably expand, problems the BoE can do little about, McCafferty said. He added interest rates would need to rise "several times" before the BoE considered starting to sell its 435 billion pounds of quantitative easing gilt purchases, and that the effect of such sales might be limited.




    • US Treasury 10s indicated 2.348%, JGB 10s 0.048%
    • JGBs soften on weak BoJ JGB buy ops
    • Curve continues steepening, swaps paid in recent sessions
    • LCH/JSCC basis takes breather from recent rapid widening
    • JGB futures off 13 ticks at 150.40, range 150.54/150.39
    • Nikkei +0.3% to 20,690 holding by 2-yr highs
    • STI +0.3%, HSI +0.4%, TWI +0.1%, Kospi/SSEC closed, JKSE +0.2%, KLSE +0.2%
    • NZX50 +0.2% another day another record high, ASX200 +0.8
    • LME copper consolidated in Asia after c3% o/n bounce, gold +0.1%, light crude -0.2%

    Currency Summaries
    • Opened Asia at 112.83, little changed from day prior despite generalised USD gains
    • Since traded tight 112.76/112.89 range to be last quoted 112.85
    • Dual daily tops at 112.92/93 continue to cap as traders eye NFP's release
    • Breach opens to 113.26 27 Sep cycle top then 113.58 mid-July peak
    • 200-DMA currently at 111.93 emerges as trailing support into any pullback
    • Rising US yields & US tax reform likely set to keep USD/JPY better bid overall
    • Aug curr acct & mach orders for Aug, corp goods price for Sep main leads next wk

    • EUR/USD opened -0.4% at 1.1712 registering fresh post 27 Jul closing low
    • Quiet in Asia trading 1.1699/1.1714 range amid spectre of looming US NFP's
    • USD firmly in ascendancy regardless of outcome as GOP tax reform gets traction
    • Lowball consensus f/c risks topside jobs beat inturn sidelining EUR buyers
    • Catalan issue continues to simmer but on backburner for now
    • Techs lean bearish, 1.1662/78, Aug low & 23.6% Fib of 2017 rally tgts
    • Loss extends to critical sup at 1.1616, 2016 high and 20-WMA

    • Cable tracking over 2% lower on week at 1.3105 vs 1.3400 COB Fri
    • Narrow 1.3088/1.3121 range thus far in Asia, last at 1.3105
    • Political millstone increasingly being brought to bear on GBP as leadership disquiet breaks cover
    • Open calls for PM May to resign & likely set to escalate over w/e
    • 1.3018 100-DMA seemingly beckons, 5-DMA currently c1.32 as trailing overhead res
    • EUR/GBP holding 0.8926-43 in Asia, last at 0.89362

    • USD/CHF steady within 0.9782/0.9795 range with focus elsewhere, last 0.9788
    • EUR/CHF tight 1.1458-62 thus far in Asia

    • Closed NY at 0.7794, traded 0.7757/0.7795 range thus far in Asia last at 0.7760
    • Deadhand of weak Aust retail sales coupled with looming NFP's
    • Lower again as sell-off in GBP worked to bolster USD
    • Dip below 0.7784 100-DMA was first since 23 June
    • Offers flushed on RBA board member Harper's story CB not ruling out rate cut
    • 0.7725 14 July low as next tech sup then 0.7675 day prior base
    • AUD1.4bln 0.7800 strike set to expire other side of US jobs report
    • NAB bis conditions for Sep, Oct consumer sentiment, Aug hsg finance next week
    • Financial Stability Review due Fri of more interest given current RBA OCR focus

    • Opened Asia at 0.7117, since traded 0.7099/0.7117 range, last at 0.7108
    • Soggy GBP/USD amid worsening UK political situation
    • Primed already outsized USD gains steering NZD/USD sub-figure
    • Unconvincing kiwi bounce, last at 0.7109 c0.2% intraday, c-3.0% post election
    • Uncertainty of NZ politics set to resurface next week with final tally on Oct 7
    • NZ 1st negotiations intensify, mkt sees binary impact on NZD on coaltion outcome
    • Sep e-card retail sales and food price index scheduled releases for next week

    Market Briefs
    • U.S. Republicans move on tax reform; Fed officials see economic threats
    • Storms impact U.S. job market; trade expected to bolster economy
    • Divisions over UK PM May's future burst into open with plot to topple her
    • Spanish court suspends Catalan parliament session, throwing independence call in doubt
    • Japanese workers' wages rise in a positive sign for consumer spending
    • JP Aug Overtime Pay, 1.5% vs 0.1%; Total Cash Earnings 0.9%
    • Tokyo governor's new party vows to scrap over-reliance on fiscal, monetary steps
    • Influential Australian Senator Nick Xenophon resigns
    • U.S. taxable bond funds attract cash for 13th straight week -Lipper
    • Foreign CB US debt holdings -$5.714 bln to $3.366 trln Oct 4 week
    • Treasuries -$6.696 bln to $3.039 trln, agencies +$783 mln to $262.99 bln

    Looking Ahead - Economic Data (GMT)
    • 06:00 DE Aug Industrial Orders, 0.7% eyed, last -0.7%
    • 06:00 NO Aug Manufacturing Output, -0.5% eyed, last 1.9%
    • 07:00 ES Aug Ind Output Cal Adj, 0.9% eyed, last 1.9%
    • 07:30 GB Sep Halifax House Prices m/m, 0.1% eyed, last 1.1%
    • 07:30 GB Sep Halifax House Prices 3M/Y/Y, 3.6% eyed, last 2.6%

    Looking Ahead - Events, Auctions, Other Releases (GMT)
    • 08:00 BoE's Salmon speaks in London
    • 11:30 BoE'S Hauser speaks in Cambridge
    • 12:00 BoE's Haldane speaks in London
    • 13:30 ECB's Villeroy speaks in Vienna
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    Tadhg Gaelach

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    Dow Jones Symphony - Home
    Dow Jones Newswires, 09 Oct 2017 03:52 EDT
    Global Forex and Fixed Income Roundup: Market Talk

    0752 GMT - ING expects China to set a "more aggressive" GDP growth target to around 6.5% per year to 2025, after the country has achieved 90% of the growth target set for 2020 by 2016. It anticipates the upcoming 19th Congress to consolidate President Xi Jinping's power in the Communist Party, which means reforms and anti-corruption campaigns would continue. "This is positive for the sustainability of future economic growth," the bank says, adding the optimistic economic growth target gives a sturdy fundamental background for yuan appreciation. The bank now forecasts China's GDP growth at 6.8% for 2017, 6.7% each for 2018 and 2019, and 6.5% for 2020. (chester.yung@wsj.com; @chester_yung)

    0743 GMT - Fitch may have upgraded the bonds of Autoroute Paris-Rhin-Rhone to A- from BBB+, but UniCredit keeps its underweight recommendation on the French motorway operator's bonds. APRR's bonds trade broadly in line with Vinci's debt, despite a lower overall rating, UniCredit analyst Christian Aust says. Meanwhile, APRR will have to refinance EUR1 billion of bonds each year between 2018 and 2020. After the latest upgrade, APRR carries ratings of Baa2, A- and A- at S&P, Moody's and Fitch, respectively. (tasos.vossos@wsj.com; @tasosvos)

    0743 GMT - Basellandschaftliche Kantonalbank's recently issued 0% 2021 Swiss franc bond looks fairly priced versus bonds from similarly rated cantonal banks and is poised to perform in line with its peers, according to Vontobel. The bank initiates coverage on the bond with a market perform recommendation. And operating performance is unlikely to weigh on the bond, as 1H 2017 results showed that standalone credit quality should remain solid in a challenging environment, Vontobel adds.(tasos.vossos@wsj.com; @tasosvos)

    0738 GMT - Sterling rises on Monday after weekend news that U.K. Prime Minister Theresa May might demote Secretary of State Boris Johnson and that members of her governing Tory party are supporting her. "The tentative show of unanimity within the cabinet looks to have - at least for now - drawn a line under questions about the PM's leadership," ING says. "This might help to ease some of the downward pressure on GBP as fears of imminent chaos in Westminster have been thwarted," ING adds. GBP/USD is up 0.3% at 1.3115, recovering from a one-month low 1.3027. EUR/GBP is down 0.4% at 0.8940. ING says it expects GBP/USD to rise to between 1.3250 and 1.33. (olga.cotaga@wsj.com; @OlgaCotaga)

    0733 GMT - Catalonia's debt-to-GDP ratio stands at 35%, a modest level by international standards, but secession could boost it to more than 100%, RBC Capital Markets argues. This would happen if the Spanish government asks Catalonia to take on central Spanish government debt in line with the seceding state's share of Spanish GDP. Even at 35%, Catalonia is the third most indebted Spanish region per GDP, after Valencia and Castilla-La Mancha, according to RBC. The average debt-to-GDP ratio among Spanish regions is 25%. (tasos.vossos@wsj.com; @tasosvos)

    0727 GMT - Boparan's decision to temporarily suspend operations at a West Bromwich plant after non-compliance with quality standards is credit-negative for a number of reasons, according to Moody's. The U.K. food manufacturer will have to incur costs, such as employee wages, during the suspension and potentially adopt additional measures to strengthen quality control, according to analyst Eric Kang. Also, there is a risk of customers stopping buying poultry from the company. Still, even though some supermarket chains have announced they will stop buying chicken sourced from the West Bromwich plant, none of Boparan's customers plan to reduce - or stop - buying poultry from the company altogether. (tasos.vossos@wsj.com; @tasosvos)

    0713 GMT - Commerzbank sees the ball in Erdogan's court in the wake of the lira's slump after the US and Turkey on Sunday stopped issuing nonimmigrant visas to each others' citizens. If he "does not give in, the US government's step might constitute the start of an uncomfortable development for Turkey." As such, it sees storm clouds gathering for the lira. The dollar is up some 2.5% at around TRY3.70 after jumping toward TRY3.85 during Asian trading. (yeliz.candemir@wsj.com)

    0707 GMT - German 10-year bunds look attractive around the 0.50% yield level, Mizuho rates strategists say. They expect this week to be lighter than last week in event risks for EUR assets "thanks to the relatively small duration of the core bonds on offer and thanks to redemptions offsetting them." This week's issuers from the core of the eurozone include Germany, Finland and the Netherlands, with their supply concentrating on five- and seven-year maturities. Germany is scheduled to redeem a five-year bond on Friday and Italy pays back an old floating-rate note on Sunday. The 10-year bund is trading a yield of 0.45%, according to Tradeweb. (emese.bartha@wsj.com; @EmeseBartha)

    0650 GMT - Buoyant risk sentiment and signs that U.S. wage inflation is picking up - potentially prompting a rate rise by the Federal Reserve - should weigh on German government bonds and push yields back toward 0.5%. But Catalonia-related risks remain. Therefore, 10-year bund yield should eventually settle in a range below 0.5%, even though they could, at some point, rise above 0.5% thanks to buoyant risk sentiment, Commerzbank rates strategist Rainer Guntermann says. German 10-year yields stand at 0.465% early Monday, based on Tradeweb data. Yields move inversely to bond prices. (tasos.vossos@wsj.com; @tasosvos)

    0647 GMT - One factor to weigh on Indian drug firms' F2Q earnings will be the rupee's recent weakness, says Edelweiss Securities. It's predicting a 27% profit slide on flat revenue. That as the currency hit a 6-month low versus the dollar at the end of September; the US is the Indian sector's biggest market. Revenue from there is projected to have declined 11% from a year ago, the broker says. But domestically, drugmaker sales are seen rising 15%. (debiprasad.nayak@wsj.com)

    0638 GMT - Market watchers have been anticipating a new 30-year Spanish government bond, but given the political standoff over Catalonia's independence bid, the chances of such ultra-long debt being launched in 2017 are narrowing, says Alessandro Giongo, fixed-income strategist at UniCredit. "The situation in Catalonia has postponed and anyway decreased the likelihood of the issuance of the new 30-year Spanish government bond this year," Mr. Giongo says. Should the situation improve, there are some windows of opportunity--when the competing supply is expected to be low--in the second and fourth weeks of November, he says. Spain's October 2046-dated bond trades at 2.91%, down about 3 basis points, according to Tradeweb. (emese.bartha@wsj.com; @EmeseBartha)

    0630 GMT - French government bonds, or OATs, trade slightly firmer on Monday morning, after S&P on Friday affirmed the country's AA rating with a stable outlook. The ratings agency said it is expecting the new French government to pursue gradual budgetary consolidation and growth-enhancing reforms, such as in the labor market. The 10-year OAT trades at 0.74%, down 1 basis point, while the spread over 10-year bunds trades at 27 bps, also down 1 bp, according to Tradeweb. (emese.bartha@wsj.com; @EmeseBartha)

    (END) Dow Jones Newswires
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    Tadhg Gaelach

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    MONDAY, OCTOBER 9, 2017


    China services sector growth falls to 21-month low in September - Caixin PMI
    Business activity in China's services sector grew at its slowest pace in 21 months in September as the pace of new business cooled, a private survey showed. The survey was in sharp contrast to an official gauge of the non-manufacturing sector that showed the services sector expanded at the fastest clip since 2014 in September, blurring the picture on how a key part of the economy is performing. The Caixin/Markit services PMI fell to 50.6 in September, the lowest reading since December 2015 and one of the weakest since the survey began in 2005. The index had hit a three month high of 52.7 in August. Caixin's composite manufacturing and services PMI, also fell to 51.4 in September from 52.4 in August and was the lowest since June.

    UK consumer spending spikes up in Sept, but trend gloomy – Visa
    British consumer spending jumped in September, but not by enough to halt a year-on-year decline that reflects rising living costs, a survey by payments company Visa showed. Consumer spending - adjusted for inflation and seasonal effects - rose by 1.4 percent in September after falling 0.4 percent month on month in August, Visa said, based on its credit and debit card data. This was the biggest monthly rise since November, but still left overall spending in real terms 0.3 percent below its level a year ago. Spending has fallen year-on-year for four of the past five months, the longest series of such declines since April 2013.

    Fed must hike rates in face of hot U.S. labor market -Rosengren
    The Federal Reserve must respond to "very tight" U.S. labor markets by gradually raising interest rates or risk halting the economic recovery, a hawkish Fed official said on Saturday. In prepared remarks that largely restated his views, Boston Fed President Eric Rosengren said he expects the labor market to improve further after U.S. unemployment dropped to 4.2 percent last month, its lowest level since 2001. Separately, chocking up employment losses last month to the temporary hit of a severe hurricane season and reiterating expectations that inflation will strengthen, Federal Reserve policymakers on Friday signaled they continue to see gradual U.S. interest-rate hikes ahead.

    U.S. Treasury outlines sweeping reform of capital markets
    The U.S. Treasury on Friday unveiled a blueprint for sweeping reforms of the U.S. capital markets as it looks to implement Republican President Donald Trump’s agenda to promote economic growth by slashing red tape. The report recommends a raft of measures to encourage companies to seek public listings, to promote company access to capital, and to give investors a wider array of investment opportunities, in what is likely to be a boon for small business, banks, brokers and crowd-funding platforms. It also called for regulators to put U.S. interests first when engaging in international regulatory forums.



    Message from the IMF bridge: full speed ahead, mind the inequality
    When Christine Lagarde, the International Monetary Fund's no-nonsense boss, spoke to Harvard University this past week, she had some good news: nearly 75 percent of the world is experiencing an economic upswing.
    Why, then, was her speech given the somewhat bearish title "A Time to Repair the Roof"?
    One reason is that the IMF has to worry about everyone, not just those who are doing well. If nearly 75 percent of world economies are growing, more than 25 percent are not.
    Some of the strugglers - not for the first time - can be found in Africa, where the two biggest economies, Nigeria and South Africa have only just crawled out of recession and could still be teetering.
    The IMF's last outlook for the sub-Sahara region suggests 2017 growth of 2.6 percent - around a full percentage below that for the world as a whole and less than half the 1999-2008 average of 5.6 percent.
    "The recovery is not complete," Lagarde told the Harvard audience. "Some countries are growing too slowly, and last year 47 countries experienced negative GDP growth per capita."
    This brings up a second reason for Lagarde's tempered celebration of recovery - inequality.
    There is no question that the gap between countries has been narrowing, as Lagarde told the Harvard glitterati. China, Brazil and India, for example, are now major economic players. But within economies themselves there are many left behind.
    Most of these are the "bottom billion" described by economist Paul Collier in his 2007 book of the same name - people completely untethered to the global economy and any wealth it might bring.
    But others in advanced economies - though relatively less poor - are now railing against being left behind. They range from Britain's public servants to primary school teachers in the Netherlands and nurses in parts of Australia.
    The election of Donald Trump as U.S. president, Britain's vote to leave the European Union, and the rise -- albeit modest -- of the far right in Germany are all widely viewed as reflecting disaffection brought on by the unequal share of the global economy's spoils.
    Hence, Lagarde's focus on what needs to be done right now: rich countries should spend more, central banks should communicate more clearly and public debt needs to be brought under control.
    It also explains the title of her address, a riff on John F. Kennedy's comment: "Pleasant as it may be to bask in the warmth of recovery... the time to repair the roof is when the sun is shining."

    It is not unrelated that the euro zone - barrelling along a surprisingly smooth growth path - finds itself facing two potentially destructive threats.
    The first is the possibility in the coming week that Catalonian separatists will declare unilateral independence from Spain.
    Setting aside the politics, such a move could strip nearly 20 percent off Spanish GDP - a bit like California and Florida together cutting loose from the United States.
    How the European Union would handle such a things would simply add to its Brexit headache. Rump Spain would retain its place in the top four of euro zone economies, but much diminished.
    The second hit would come if eurosceptics - some of who want to leave the euro zone -- gain power in Italy at an election that must take place next year.
    Germany's economy is steaming ahead - latest data: industrial orders soaring in August - and in France, the official statistics agency has raised its 2017 growth outlook to the highest since 2011.
    But they cannot carry the load alone, one reason, perhaps for the European Central Bank's softly-slowly approach to pulling back stimulus.
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    Dow Jones Newswires, 10 Oct 2017 04:48 EDT
    Global Forex and Fixed Income Roundup: Market Talk

    0848 GMT - The U.K.'s trade deficit widened in August, suggesting trade was still a drag on growth in the third quarter despite a weak pound. The deficit in goods trade widened to GBP14.2 billion in August, compared with a revised GBP12.8 billion in July, the Office for National Statistics says. That was the widest deficit on record. Including services, the deficit for August was GBP5.6 billion, compared with GBP4.2 billion the previous month. Import volumes rose 4.2% on the month, as the U.K. sucked in chemicals and machinery, while exports rose only 0.7%. The figures underscore how a hoped-for rebalancing of the U.K. economy towards exports and investment and away from consumption remains elusive. (jason.douglas@wsj.com)

    0843 GMT - If Catalonia declares independence and Spanish government triggers Article 155 of the constitution, the end result could be higher market volatility, according to Barclays economists. After Article 155 is invoked, pro-independence groups could "paralyze activity" in major Catalan cities, the economists add. They also don't rule out clashes with the police. Spanish and Catalan bonds have already suffered losses: bid yields on the June 2018-maturing bond of the Region of Catalonia have ballooned to 3.97% from 1.12% in July, while the gap between 10-year Spanish and German government bonds has widened 25 basis points to 125 bps in recent weeks. (tasos.vossos@wsj.com; @tasosvos)

    0816 GMT - Germany's April 2026-dated inflation-linked Bund is trading rich versus surrounding 2023- and 2030-dated linkers but still offers value versus conventional Bunds, says ING rates strategist Martin van Vliet ahead of a EUR1 billion tap auction on Tuesday. With eurozone core inflation projected to gradually move higher over the next six to 12 months, he expects German breakeven inflation rates to remain supported. (emese.bartha@wsj.com; @EmeseBartha)

    0815 GMT - Sterling trades higher against the euro and the dolllar, with EUR/GBP down 0.1% at 0.8930 and GBP/USD up 0.3% at 1.3183, before a string of U.K. economic data at 0830 GMT, including industrial and manufacturing production, trade and construction output. ING expects EUR/GBP to trade "well within" Monday's 0.8905-0.8985 range. U.K. industrial and manufacturing production are expected to rise by 0.7% and 1.8% year-on-year, respectively, in August, according to a WSJ poll. (olga.cotaga@wsj.com; @OlgaCotaga)

    0804 GMT - Yields on the 4.75% bond issued by the Region of Catalonia in 2008 that matures in 2018 have been surging before and after the independence referendum, but this is not the first sell-off this issue suffers. Only last year, yields more than doubled to 5% from 2.45% in the second half of March 2016, when then recently elected Catalan President Carles Puidgemont put the issue of independence on the table. And in the summer of 2012, yields rocketed to 13.5% at the height of the eurozone debt crisis, based on Factset data. But what's especially interesting about the latest sell-off is that when a bond which has less than a year left to maturity its price would typically be expected to return toward par, or face value. This sell-off highlights the exceptional circumstances facing Catalonia.(tasos.vossos@wsj.com; @tasosvos)

    0751 GMT - Spanish bond trade marginally weaker after a slight underperformance within the eurozone this morning, as markets await the Catalan parliament's discussion later in the day, with a potential uniletaral declaration of independence. The 10-year Spanish bond is trading at a yield of 1.68%, up about 1.5 basis points, according to Tradeweb. The 10-year Spanish-German spread is trading at 124 bps, up about 1.3 bps. Barclays economists Apolline Menut and Antonio Garcia Pascual say that "it seems that the most likely path forward is one of escalation by the separatists with a declaration of independence this week most likely on Tuesday." (emese.bartha@wsj.com; @EmeseBartha)

    0750 GMT - The euro rises in a sign of confidence that for now the risk of Catalonian independence is just a Spanish problem, says Thu Lan Nguyen at Commerzbank. Euro gains are small but still EUR/CHF reaches a two-week high 1.1526, according to Factset, and EUR/USD its highest in nearly a week at 1.1789. "We have seen so far that the euro has reacted very little to the political events in Spain," says Ms. Nguyen. However, it could be vulerable if risks of Catalonia separating become more imminent, with Catalan President Carles Puidgemont due to speak to the regional parliament later Tuesday. A weaker dollar also helps EUR/USD as investors remain skeptical of U.S. rates rising much beyond the expected December rise, Ms. Nguyen says. (olga.cotaga@wsj.com; @OlgaCotaga)
    0733 GMT - Use debt and cash from the operating company to finance the acquisition of Multimedia Polska and you will be downgraded. That could be what Moody's is trying to tell UPC Holding as it cuts its outlook on the Liberty Global subsidiary's Ba3 rating to negative from stable, according to UniCredit analyst Jonathan Schroer.Moody's cites the "weaker operating momentum" in Switzerland, but UniCredit is "a bit surprised" as weaker trends in Switzerland have been evident for a while. (tasos.vossos@wsj.com; @tasosvos)

    0728 GMT - Sterling trades mixed before a batch of U.K. data for August at 0830 GMT, including industrial and manufacturing output data, trade and construction output. GBP/USD is up 0.2% at 1.3172 as the dollar weakens, but EUR/GBP is up 0.1% at 0.8941. Industrial output is expected to rise by 0.6% month-on-month and manufacturing by 0.3% from July, according to the consensus in a WSJ poll. The trade deficit is expected to narrow slightly. This could be enough to lift the pound, although a weak construction output number could offset better news elsewhere. "The [construction] sector seems to have been hardest hit by Brexit-related uncertainty," says Unicredit, while RBC notes construction is "set to be a small drag" on 3Q GDP. (jessica.fleetham@wsj.com)

    0727 GMT - The People's Bank of China will try keeping the yuan stable in the run up to and throughout the 19th Party Congress that starts next week, say ANZ's Irene Cheung. That could prove difficult given global markets moving to price in a Fed hike in December, she says. On Tuesday, the PBOC fixed the yuan stronger by the biggest margin in over a month. The offshore yuan closely tracks its onshore counterpart, taking cues from the daily fixing. The USD/CNH pair Tuesday dropped to its lowest level since Sep. 22 and is now down 0.5% at CNY6.5821. Influenced by the PBOC's daily fixes, the USD/CNH gains to likely be capped at below CNY6.70 in the near term, says Cheung, at an about 50% Fibonacci retracement between the high for the pair in December 2016 and its low in September 2017. (kenan.machado@wsj.com)

    0706 GMT - Mizuho is bullish on rates of eurozone core issuers--such as Germany or Finland--and feeling positive about the belly of the yield curve "in particular." This approach bodes well for the Finnish and German five-year debt auctions on Tuesday and Wednesday, respectively. Mizuho says Finland's April 2022-dated bond has widened versus its German peer in the past month, but not enough to justify buying it instead of the longer 2023 and 2024-dated issues. Accordingly, when it comes down to a choice between Finland's April 2022 or Germany's October 2022 bond, Mizuho prefers the German one. (emese.bartha@wsj.com; @EmeseBartha)

    0658 GMT - Givaudan's positive 3Q sales data, combined with the Swiss fragrance firm's room for credit deterioration without sacrificing its rating, support Vontobel's decision to maintain its A- shadow rating. Sales accelerated more than expected in 3Q, while the management confirmed its 2016-20 targets of 4-5% annual organic growth and 12-17% free cash flow margin. Vontobel expects Givaudan's Swiss franc bonds to perform in line with similarly rated peers. (tasos.vossos@wsj.com; @tasosvos)

    (END) Dow Jones Newswires
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    TUESDAY, OCTOBER 10, 2017


    [size=2][font=arial][size=2][font=arial][size=2][font=arial]Euro zone debates bailout fund future, sees backstop, crisis prevention role[/font][/size][/font][/size][/font][/size]
    Euro zone finance ministers discussed on Monday the role of their bailout fund in euro zone integration, with support for the fund to stay owned by governments, play a role in crisis prevention and become a backstop for a bank resolution fund. The ministers are the governors of the fund, the European Stability Mechanism (ESM), which was created at the height of the sovereign debt crisis as a lender of last resort to governments. It has a lending capacity of 500 billion euros. "Everyone agreed that the ESM has a very strong role to play not only the crisis management but also in the prevention of future crises," the chairman of the talks Jeroen Dijsselbloem told a news conference.

    China says will have no problem meeting 2017 growth target, may beat it
    China will have no problem meeting its economic growth target of around 6.5 percent this year, and may even beat it, the head of the Statistics Bureau said, confirming widespread market expectations. Steps taken by the government to rein in the overheated property market have also been effective and will remain in place, Ning Jizhe told reporters in a briefing in Beijing. Analysts have expected that full-year growth would meet or exceed the government's target after the economy expanded by a stronger-than-expected 6.9 percent in the first half, fueled by heavy government infrastructure spending and a property boom. If growth does beat last year's 6.7 percent - the lowest in 26 years - it would mark the first acceleration in the growth rate in seven years.

    Bill Gross of Janus blames U.S. Fed for 'fake markets'
    Influential bond investor Bill Gross of Janus Henderson Investors said on Monday that financial markets are artificially compressed and capitalism distorted because of the U.S. Federal Reserve's loose monetary policy. "I think we have fake markets," Gross said at a Janus Henderson event. Investors should brace for higher Treasury bond yields as the Fed begins to unwind its quantitative easing program but yields will edge up "only gradually," he said. Gross said the Fed's loose monetary policy had resulted in investors chasing yield and thus producing tight corporate spreads everywhere around the globe. Gross reiterated his warning that Fed Chair Janet Yellen and other global policy makers should not rely on historical models such as the Taylor Rule and the Phillips curve "in an era of extraordinary monetary policy."

    ECB policy hawk calls for winding down asset buys
    The European Central Bank should reduce its asset buys from next year with the aim of ending them altogether, ECB Executive Board member Sabine Lautenschlaeger said on Monday, just weeks before policymakers decide whether to curb stimulus. Advocating one of the most hawkish positions among rate setters, Lautenschlaeger argued that the factors holding down inflation are temporary so even if patience and stimulus were still needed, swelling the ECB's balance sheet any further is not needed. "I think we should begin reducing our bond purchases next year," Lautenschlaeger,who has frequently opposed past stimulus measures, said in Stuttgart. "This should be done gradually, until we are no longer purchasing additional bonds." "From my point of view, it is important that we really move towards the exit – step by step, but steadily and in a clear direction," she said.

    Fifty-one euro zone banks vulnerable to rate shocks, ECB says
    Fifty-one large euro zone banks are leaving themselves exposed to a sudden change in interest rates and may need to aside more capital against that risk, the European Central Bank said on Monday. "What we need to do is have intense discussions and check with the banks if they're aware of the... risk and if they have enough capital if things go wrong," Korbinian Ibel, a senior supervisor at the ECB, said. Results of the test, which started in February, are incorporated into the ECB's guidance on how much capital each lender on its watch should hold. Ibel said the 51 banks may, in principle, see their capital demands rise by up to 25 basis points, although any decision would depend on the individual circumstances of each firm. Similarly, the remaining 60 banks could see their guidance reduced by the same amount.



    Hedge funds stick to their misfiring FX guns
    By Jamie McGeever

    Struggling to make money amid ultra-low market volatility, misfiring hedge funds are sticking to their guns with their currency and bond bets on a weaker dollar, stronger UK pound and rising U.S. interest rates.
    The latest futures market positioning data from the Chicago Mercantile Exchange, however, suggests the two foreign exchange trades of that trio will be giving fund managers some sleepless nights.
    Hedge funds and other speculators are at their most bullish in over three years on sterling, just as the currency has registered its biggest weekly fall in a year.
    Their bets on a weaker dollar - the largest net short dollar position since January, 2013 - were largely unchanged in the latest week. But the greenback is on the up, and has appreciated four weeks in a row, or almost 4 percent from its Sept. 8 low.
    Their short-term U.S. bond market bets appear to be more fruitful. Just as another U.S. rate hike this year seems a nailed on certainty, the short position on two-year Treasuries is the largest since late July, and has been larger in only seven other weeks since comparable records began in 1995.

    The most eye-catching of these three trades' positioning last week was sterling. According to the Chicago Futures Trading Commission, hedge funds and other speculators were net long sterling to the tune of 19,949 contracts in the week to Oct. 3.
    That's the most bullish bet on the pound since September, 2014, just before the Scottish independence referendum. Political instability, the Brexit vote and latterly a slump in UK growth has ensured a virtually unbroken short position since.
    The question now is whether hedge funds stick with their new-found enthusiasm for the pound, or revert to their default bearish stance.
    Prime Minister Theresa May is under intense pressure following a disastrous showing at her party's annual conference last week, and the Bank of England appears set on raising rates just as the economy has gone down another gear.
    That's the backdrop to the pound's worst week in exactly a year. It fell 2.5 percent against the dollar last week and more than 2 percent on a trade-weighted basis.
    Hedge funds' dollar bets haven't gone well recently either. Their net CFTC short dollar position against a wide range of currencies was worth an estimated $21.01 billion in the latest week, virtually unchanged from $21.13 billion the week before.
    That was the biggest net short position since January, 2013, according to Reuters calculations. Yet the dollar has risen for four straight weeks as Fed chair Janet Yellen and her colleagues have put another rate hike this year firmly back on the table.
    Money markets now put an 80 percent likelihood on a rate rise in December. Hedge funds haven't changed their FX bets accordingly, even though they are betting fully on short-term U.S. bond yields going up.
    The net short two-year Treasuries position - a bet that short-term yields will go up - was increased in the latest week to 226,840 contracts, the biggest since late-July. It's only been bigger seven weeks in the CFTC's 22 years of tracking this data - four in July this year and three in May 2007.
    The two-year yield last week hit a nine-year high of 1.528 percent. Some immediate interest rate relief for hedge funds' FX ills.
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    Dow Jones Newswires, 11 Oct 2017 02:49 EDT
    Global Forex and Fixed Income Roundup: Market Talk

    0648 GMT - Investors should remain cautious toward Spanish assets despite government bonds opening firmer on Wednesday because the Catalonia independence issue is still on the table, KBC analysts say. "Uncertainty remains high at this stage and continues to warrant some cautiousness vis-a-vis Spanish assets, while it might even support some safe haven flows in the Bund," especially if the Spanish government gives a strong verbal response to the regional Catalan government's independence efforts. (emese.bartha@wsj.com; @EmeseBartha)

    0646 GMT - Portuguese government bonds enjoy a solid backdrop ahead of Wednesday's debt auction. Hopes of further ratings upgrades after S&P Global Ratings' move to upgrade Portugal to investment grade in mid-September, and the associated reinclusion in benchmark indices, has meant that Portuguese government bonds have been largely shielded from the recent widening of Spanish and Italian government bonds, say ING rates strategists. Portugal's debt office will offer a total of EUR1 billion to EUR1.25 billion in October 2022 and April 2027 bonds. (emese.bartha@wsj.com; @EmeseBartha)

    0639 GMT - Frankfurt stocks are expected to open firmer amid some relief, even if temporary, over Catalonia's deferred independence. Lang & Schwarz forecasts the DAX to open about 0.1% firmer at 12,967. Analysts at Helaba say the psychological mark of 13,000 points for the DAX does not currently look conquerable, partly due to the lack of fresh purchase stimulus. The upcoming earnings season, however, might provide this impetus. On Wednesday, multi-assets investors are likely to look at Germany's EUR3 billion tap auction of October 2022-dated Bobl as well as debt sales by eurozone peers Portugal and the Netherlands. (emese.bartha@wsj.com; @EmeseBartha)

    0631 GMT - Bond markets' main focus Wednesday should be on Spanish Prime Minister Mariano Rajoy's address in parliament, where he could announce the triggering of Article 155 of the constitution, ING strategists say. Invoking this article would allow the central government to run an autonomous region. On Tuesday, Catalan President Carles Puigdemont stopped short of declaring independence immediately. As "confusion is still prevailing" in Spain, Commerzbank recommends buying into bund dips. German 10-year bonds slip early Wednesday, with yields rising 2 basis points to 0.46%. (tasos.vossos@wsj.com; @tasosvos)

    0621 GMT - Spanish government bonds are firming Wednesday morning, with yields falling and yield spreads over bunds tightening, in response to the Catalonia region's suspended independence bid. The 10-year Spanish bond yield trades at 1.64%, down about 5 basis points, while the spread over bunds narrows 7 bps to 118 bps, according to Tradeweb. Yet headlines on the region's independence efforts will continue impacting bond markets. "Spain will continue dominating spread sentiment with [Spanish Prime Minister Mariano] Rajoy set to provide his rebuttal to [Catalan President Carles] Puigdemont's 'forward declaration of independence' today [Wednesday]," says Christoph Rieger, head of rates and credit research at Commerzbank. Commerzbank sticks to its recommendation to buy spreads and duration into dips. (emese.bartha@wsj.com; @EmeseBartha)

    0609 GMT - Helping fuel further gains in Indian inflation for September was likely food prices, says Morgan Stanley. As it predicts CPI climbed to 3.8% from August's 3.4%, the investment bank estimates that food inflation quickened to 2.2% from 1.5%. Also impacting overall inflation is further GST-related price revisions and the impact of a higher home-rent allowance for government employees. The data are due Thursday. (debiprasad.nayak@wsj.com)

    0506 GMT - Hong Kong Chief Executive Carrie Lam gave an upbeat view on the city's economy during her inaugural policy speech this morning, saying 2017 GDP likely to grow faster than 3.5%, the midpoint of the government's raised August forecast and above the 2.9% annual average of the past decade. That as 1H's growth was 4% amid a tight labor market. (chester.yung@wsj.com; @chester_yung)

    (END) Dow Jones Newswires
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    Japan Aug core machinery orders rise in signs of pick-up in capex
    Japan's core machinery orders rose for a second straight month in August, handily beating market expectations, signaling a pickup in capital expenditure that should encourage Prime Minister Shinzo Abe ahead of a general election this month. Cabinet Office data showed that core orders rose 3.4 percent on-month in August. That beat the median estimate of a 1.1 percent increase seen in a Reuters poll of economists, following an 8.0 percent gain in July. The value of core orders stood at 882.4 billion yen, the highest since July 2016. Orders from manufacturers jumped 16.1 percent month-on-month in August, while service-sector orders grew 3.1 percent, led by orders for boilers and turbines.

    Global investors raise China bond holdings the most in a year in Sept despite yuan drop
    Offshore institutions increased their holdings of Chinese bonds for a seventh consecutive month in September, indicating resilient overseas demand for the securities despite a weakening yuan. Holdings of all forms of Chinese bonds held by offshore investors and cleared by China Central Depository and Clearing Co rose by 38.7 billion yuan in September, to 896 billion yuan, according to Reuters calculations based data from the clearing house. It was the largest increase in holdings by offshore investors since September 2016, and contrasted with a 1.7 trillion yuan decrease in overall Chinese bond holdings by all investors.

    Fed's Kaplan says low 10-year yield an 'ominous' sign
    Dallas Federal Reserve Bank President Robert Kaplan said on Tuesday he wants to see more signs of upward inflation before raising interest rates again, but that low long-term borrowing costs may limit how far and fast rates can be raised. The Fed has raised rates twice this year, and is widely expected to do so again in December. But even as the short-term interest rate targeted by the Fed has climbed, the yield on the benchmark 10-year Treasury has fallen, a reversal of what usually happens and a development that Kaplan said he sees as "a little ominous." "I view that as a comment on future economic growth," Kaplan said at the Stanford Institute for Economic Policy Research. "And what I don’t want to see us do is raise rates so fast that we get an inverted yield curve because history has shown an inverted yield curve has tended to be a precursor to a recession."

    Germany to raise economic growth forecast for 2017 to 2 pct - source
    The German government will raise its 2017 growth forecast for Europe's biggest economy to 2.0 percent, a sharp increase from its earlier estimate of 1.5 percent and the strongest rate since 2011, a source told Reuters on Tuesday. Berlin also plans to lift its 2018 forecast for GDP to expand 1.9 percent, up from its earlier forecast of 1.6 percent, the person familiar with the projections said. Economy Minister Brigitte Zypries will present the government's updated forecasts today. The International Monetary Fund on Tuesday raised its growth forecast for the German economy to a calendar-adjusted 2.0 percent in 2017 and 1.8 percent in 2018.

    EXCLUSIVE-Global regulators close to final deal on bank capital - sources
    Global banking regulators are close to a final deal on capital rules that aim to ensure banks can withstand financial shocks, with Europe and the United States set to compromise on a major sticking point, banking and regulatory sources said on Tuesday. Completion of these regulations, known as Basel III, would mark a pause in a near decade long effort by global regulators to put banks on a sounder footing after many were bailed out by taxpayers in the 2007-2009 financial crisis. The Basel Committee met last week to try to finalise this final part of the regulatory package, which has faced some resistance. Europe and the United States have disagreed over the extent to which banks can use their own risk models to calculate their capital requirements. Europe has wanted a floor set at 70 percent, while the United States has called for 75 percent. A deal at 72.5 percent now looks on the cards, the sources said.



    COLUMN-Is the Fed wary of sub-2 percent Treasury yields?
    By Jamie McGeever
    As the Bank of Japan explicitly targets zero percent 10-year government bond yields, a case could be made that U.S. Federal Reserve is more quietly nudging long-term Treasury yields up from 2 percent.
    It's clearly not official policy and policymakers would be quick to dismiss any targeting outside of the Fed's constitutional mandates. But timing of Fed guidance and market behaviour this year indicates a distinct reluctance at the central bank to seeing 10-year Treasury yields slip back below prevailing inflation rates.
    The 10-year yield, the U.S. and global benchmark, has not dipped below 2 percent this year - although it came very close last month - and every time a slide towards or a break below that threshold has looked on the cards it has snapped back some 20 basis points or more.
    Curiously, each one of those spikes has coincided with a welter of hawkish commentary in some form or other from Fed officials talking up the outlook for U.S. growth and inflation, or downplaying asset bubbles and financial instability risks.
    It goes without saying that there has been no direct or even indirect Fed intervention in the bond market to steer the 10-year yield higher. But it's safe to say Fed officials are more comfortable with it moving up, further away from 2 percent than falling back towards 2 percent.
    "I don't think they have an explicit target but they probably believe that 2 percent is very low given how tight the labor market is," said Torsten Slok, managing director and chief international economist at Deutsche Bank in New York.
    "Financial markets are overheating and gradually increasing long rates would be a good tool to try to slowly tighten financial conditions and thereby prolong the current economic expansion," he said.
    The Fed has raised rates a quarter of a percentage point four times since December 2015. Almost a decade on from the onslaught of the financial crisis, it will begin reducing its QE-inflated balance sheet later this year.
    To say the Fed is proceeding cautiously is an understatement. Rate rises have been moderate in size and gradual in pace, and the balance sheet unwind is coming after a full three years of being kept steady at a record $4.2 trillion.
    Yet the Fed is still tightening. Its vision of policy "normalization" won't include a depressed or falling 10-year yield. Policymakers have downplayed the persistently flat yield curve, arguing that it doesn't have the predictive powers of economic slowdown or recession it once had.
    It's in this light that the ebb and flow of the 10-year yield this year set against Fed commentary is illuminating.

    On Jan 18, with the yield down more than 30 basis points over the preceding month at 2.31 percent, Fed chair Janet Yellen gave a speech to the Commonwealth Club of California in San Francisco.
    "Waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road - either too much inflation, financial instability, or both," she said.
    Less than a week later, the 10-year yield was up at 2.55 percent.
    The next month the yield was on the slide again, revisiting 2.31 percent on Feb. 24 before bouncing all the way up to 2.62 percent over the following three weeks.
    No fewer than four Fed officials delivered upbeat comments on the U.S. economy between Feb. 20-22, suggesting that rates would soon go up again. They were duly raised on March 15.
    On April 18, the 10-year yield was at its lowest point of the year around 2.17 percent. Between April 18-20 four Fed officials, including deputy governor Stanley Fischer, talked of the need to unwind the Fed's balance sheet, the benefits of raising rates and the dangers of waiting too long to do so.
    Barely two months later the yield was even lower, bottoming out at 2.10 percent on June 14. That very day the Fed raised rates, citing continued economic and labour market strength, and announced it would begin cutting its holdings of bonds and other securities this year.
    In her news conference, Yellen struck an upbeat note on the economy, said the recent weakness in inflation was transitory and noted that the QE unwind could start "relatively soon". The yield rose 30 basis points over the next month.
    Most recently, on Sept. 8, the benchmark Treasury yield was 2.02 percent and the yield curve close to its flattest in a decade. A break below 2 percent seemed likely.
    That same day New York Fed President William Dudley, one of the most influentialFed officials, said the yield curve wasn't too flat and that inflation and wage growth were poised to rise. Lags in policy means the Fed should still act even with inflation below its 2 percent target, he added.
    It may be coincidence, but the 10-year yield then rose nearly 40 basis points, hitting a five-month high of 2.40 percent last Friday.
    Another rate hike this year is a nailed on certainty, if market pricing is to be believed, and the Fed will soon begin shrinking its balance sheet. The two-year yield is its highest in nine years, meaning the yield curve remains extremely flat.
    This is not good for banks, who make money by borrowing at lower, short-dated rates and lending at higher, longer-term rates. Should the 10-year yield lurch lower again towards 2 percent, don't be surprised if Fed officials start talking up the economy and rates again.
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    Dow Jones Newswires, 13 Oct 2017 03:41 EDT
    Global Forex and Fixed Income Roundup: Market Talk

    0741 GMT - The rise in China's consumer price index likely eased to 1.6% in September from a year earlier, compared with a 1.8% rise in August, according to a poll of economists by The Wall Street Journal. The slowdown in consumer inflation was mainly due to lower food prices and a higher comparison base, economists say. China's producer price index likely increased 6.4% on year in September, up from a 6.3% rise in August, according to the poll. Preliminary data from the National Bureau of Statistics suggest higher prices for energy and chemical products during the month. The recovery of PPI inflation has led to a sharp recovery in China's industrial profits. (grace.zhu@wsj.com)

    0734 GMT - The market environment remains supportive for risky assets as macro data are strong and surprise positively, while the absence of inflation gives central bankers the luxury of being able to adopt a very gradual tightening path, says NN Investment Partners. This backdrop will continue to spur investors' search for yield, despite historically tight valuations in the fixed income spread categories, it says. (emese.bartha@wsj.com; @EmeseBartha)

    0733 GMT - Initial troubles notwithstanding, BMI economists remains optimistic about the longer-term benefits of GST in India. Relief measures for small businesses announced earlier this month "demonstrate the government's commitment to resolving tax issues and fine-tuning the tax framework to better facilitate economic activity," they adds. (anant.kala@wsj.com)

    0730 GMT - The yen has climbed to session highs as Asian trading wraps, with market participants likely bracing for a possible weekend missile launch by North Korea, says Osao Iizuka, head of FX trading at Sumitomo Mitsui Trust Bank. There's no headlines fueling the move since the end of local stock trading, he adds. The dollar fell to Y111.90 after having held above Y112 during the day and versus Y112.29 late Thursday in New York. Meanwhile, the euro has eased to Y132.25 from late New York's Y132.82. (kosaku.narioka@wsj.com)

    0728 GMT - Indonesia likely booked a smaller trade surplus in September, as a long holiday in July boosted exports in August by a larger extent. The median forecast of 10 economists polled by The Wall Street Journal is for a $1.52 billion trade surplus, down from a 5-year high surplus of $1.72 billion in August. Still, analysts expect exports to stay buoyant through December, due to improving global demand. The September data will be released at 0400 GMT Monday. (i-made.sentana@wsj.com)

    0727 GMT - The U.K. government's proposed cap on energy tariffs could prompt rating companies to cut their outlook on utilities Centrica and SSE to negative, but they should stop short of downgrading them, according to CreditSights. The big question is what happens to Centrica's rating at S&P, as the rating company already has a negative outlook. CreditSights sees the two utilities as the most exposed to a price cap. It has an underperform view on Centrica and SSE bonds as price cap uncertainty should constrain their performance. (tasos.vossos@wsj.com; @tasosvos)

    0724 GMT - Mizuho is bullish on bund futures prior to the European Central Bank's policy meeting on Oct. 26, reflecting a benign outlook on monetary policy. The ECB is expected to tighten policy only gradually not only due to the downside inflation risks posed by the euro's rally, but also to avoid rocking financial markets and harming its policy's transmission mechanism. Mizuho rates strategist also base their bullishness on technical factors, in particular redemptions from France, Spain and Italy at month's end, which favor long positions. Mizuho's fair-value estimate puts 10-year bund yields at 0.20% by year's end. They currently trade at 0.42%, according to Tradeweb. (emese.bartha@wsj.com; @EmeseBartha)

    0719 GMT - China's record trade surplus with the US could worsen the already tense trade relations between the countries, after the Trump administration launched an investigation over Chinese intellectual property theft in August. This also comes ahead of President Donald Trump's visit to China in November. China's trade surplus with the US hit a monthly record high of $28.08 billion in September, up from $26.23 billion in August, according to data released by the customs bureau on Friday. The surplus with the US accounts for nearly all the $28.47 billion in trade surplus Beijing made with all its trading partners. (grace.zhu@wsj.com)

    0714 GMT - Japanese stocks have appeared near-bulletproof of late, including the current 9-session winning streak for the Nikkei. The yen may be set to put at least a momentary end to the bulls' party. The yen has climbed to session highs versus the dollar as trading shifts from Asia to Europe, with the greenback falling below Y111.90 and hitting 3-week lows. With September US retail sales and CPI on the docket later Friday, the greenback could easily rebound by the time Japanese stock traders return on Monday. But after shrugging off modest yen gains during Asian trading, the currency remaining at current levels--or rising further--are liable to be too much for the Nikkei notching a 10th-straight gain. It hasn't done that since May 2015. (kevin.kingsbury@wsj.com; @kevinkingsbury)

    0706 GMT - Indian Finance Minister Arun Jaitley exudes optimism that the country's economic growth will rebound as impacts from demonetization and GST's implementation start to ease. The "economy is poised for strong, sustainable and balanced growth backed by the government's strong focus on implementing structural reforms," he tells a conference in the US. The Indian government has come under sharp criticism after growth slowed to a 3-year low of 5.7% in 2Q amid weak consumer demand and private investments. (rajesh.roy@wsj.com)

    0701 GMT - Danske Bank expects sterling to rise as the prospect of the Bank of England raising interest rates next month relegates Brexit concerns to the background. It sees EUR/GBP falling toward 0.87, from 0.8913 currently. EUR/GBP rose to a four-week high above 0.90 Thursday after EU chief negotiator Michel Barnier said talks on the U.K.'s EU exit were deadlocked. The pound then rebounded on a report that the EU may agree to a two-year transition period. "We see value in selling EUR/GBP above 0.8950 via a bearish seagull, for move towards 0.87 going into the BoE meeting on 2 November," Danske says. GBP/USD last up 0.2% at 1.3292. (jessica.fleetham@wsj.com)

    0700 GMT - BASF's EUR5.9 billion purchase of Bayer seed and herbicide businesses may be manageable in terms of credit quality, but rating companies could still cut their outlooks to negative, UniCredit analysts say. The deal will increase debt leverage, but the acquired assets are highly cash-generative and should boost earnings per share from year one. And while this is BASF's largest acquisition in recent history, it is not transformational but complementary, the analysts add. UniCredit keeps its marketweight recommendation on BASF bonds. BASF's ratings at Moody's, S&P and Fitch currently carry a stable outlook. (tasos.vossos@wsj.com; @tasosvos)

    (END) Dow Jones Newswires
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    FRIDAY, OCTOBER 13, 2017


    China Sept imports blow past expectations as economy remains in high gear
    China's import and export growth accelerated in September, suggesting the world's second-biggest economy is still expanding at a healthy pace despite widespread forecasts of an eventual slowdown. Imports grew 18.7 percent in September from a year earlier, beating analysts' forecasts for a 13.5 percent expansion and accelerating from 13.3 percent in August, customs data showed. The gain was stronger than the most optimistic forecast in a Reuters analysts poll. Exports rose 8.1 percent, below forecasts of 8.8 percent but the most in three months and handily beating August's 5.5 percent. That left the country with a trade surplus of $28.47 billion, less than the near $40 billion expected and down from around $42 billion in August.

    ECB's Draghi pledges rock-bottom rates as Germany calls for change
    The head of the European Central Bank defended a pledge to keep interest rates at rock bottom on Thursday, batting back German calls for a speedy exit from years of easy money in the euro zone. With two weeks to go before the ECB decides on the future of its stimulus policy, its president, Mario Draghi, said the promise to maintain rates at their current level "well past" the end of its bond-buying programme was very important for keeping borrowing costs at bay. "The 'well past' is very, very important in anchoring rate expectations," Draghi said at an event in Washington, where he is due to attend the G20 meeting.

    Kuroda says BOJ to keep easy policy, tread different path from Fed, ECB
    Bank of Japan Governor Haruhiko Kuroda on Thursday stressed the central bank's resolve to maintain its ultra-loose monetary policy, even as its U.S. and European counterparts begin to dial back their massive, crisis-mode monetary stimulus. Kuroda offered an upbeat view of Japan's economy, saying it was expanding moderately with rising incomes leading to higher corporate and household spending. But he said inflation and wage growth were disappointingly low, despite such improvements in the economy. "Inflation remains around 0.5 percent, still below our target," Kuroda told reporters upon arrival for the Group of 20 finance leaders' gathering. "I would like to explain to the G20 that we will continue our ultra-loose monetary policy to achieve 2 percent inflation at the earliest date possible," he said.

    INTERVIEW-Fed 'should defend' inflation target or risk losing credibility -Bullard
    The Fed needs to mount a clear defense of its 2 percent inflation target and stop raising rates until the pace of price increases strengthens, St. Louis Fed President James Bullard said on Thursday. The central bank risks losing credibility, and perhaps triggering a recession, if it continues to insist on "normalization" and higher interest rates without better evidence that prices are firming, he said in an interview with Reuters. "If you are going to have an inflation target you should defend it. If you say you are going to hit the inflation target then you should try to hit it and maintain credibility," Bullard said.

    U.S. producer inflation, labor market strengthening
    U.S. producer prices rose in September as the price of gasoline recorded its biggest gain in more than two years amid hurricane-related production disruptions at oil refineries in Texas. The Labor Department said its producer price index for final demand rose 0.4 percent also lifted by an increase in the cost of services. Wholesale prices advanced 0.2 percent in August. In the 12 months through September, the PPI jumped 2.6 percent. That was the biggest gain since February 2012 and followed a 2.4 percent increase in August. In a second report, the Labor Department said initial claims for state unemployment benefits decreased 15,000 to a seasonally adjusted 243,000 for the week ended Oct. 7, the lowest level since late August.



    Brexit talks deadlock on cash, Barnier eyes move by December
    Brexit talks are deadlocked over money, the EU's Michel Barnier said on Thursday as he ruled out discussions on future trade being launched by EU leaders next week but spoke of possible progress by December.
    Barnier and his British counterpart, Brexit Secretary David Davis, told reporters there had been some progress this week on the other two issues around Britain's March 2019 withdrawal from the bloc on which the EU demands "sufficient progress" before it will agree to discuss a transition and future relationship.
    With concern mounting about the possibility they might run out of time for any deal, Davis renewed his call for EU leaders to give a green light to trade talks after they meet Prime Minister Theresa May at a summit in Brussels next Thursday.
    Barnier made clear, however, that despite new momentum from concessions given by May in a speech at Florence last month, British proposals on expatriate citizens' rights and the Irish border still failed the EU test, while London's refusal to spell out a detailed cash offer was "very worrying" for business.
    May said then that the other 27 countries would not lose out financially from Brexit in the current EU budget period to 2020 and that Britain would honour commitments -- but Barnier said London was failing to say exactly what it was ready to pay.
    "Regarding that question, we are at an impasse, which is very worrying for thousands of projects everywhere in Europe and also worrying for those who contribute," he said.
    Nonetheless, he offered hope: "I am still convinced that, with political will, decisive progress is within reach in the coming two months. With David Davis, we will organise several negotiating meetings between now and the end of the year."
    With signs that nerves are fraying on both sides as less than 18-month remnains before the deadline, some hardline Brexit supporters want May to just walk out of talks. Both negotiators repeated that they were ready for any eventuality including a collapse. But, Barnier warned, "no deal would be a very bad deal".
    May herself said there had been "good progress" and welcomed Barnier's talk of further progress "over the coming weeks".

    Davis announced a "streamlined" new system for the 3 million EU citizens in Britain to claim residence rights, answering EU concerns, and said he expected good further progress on other issues. Barnier repeated that Brussels stills wants them to have recourse to EU judges to safeguard their rights and said there were still differences on rights for future family members.
    A British demand for its million or so citizens on the continent to have lifetime rights to move to any of the bloc's 27 countries after Brexit is held up by doubts among the member states. Barnier said those are rights to do with post-Brexit decisions and should be dealt with in the next phase of talks.
    "I make no secret of the fact that to provide certainty we must talk about the future," Davis said, stressing his demand for trade talks. "I hope the leaders of the 27 will provide Michel with the means to explore ways forward with us on that."
    "As we look to the October Council next week, I hope the member states will recognise the progress we've made and take a step forward in the spirit of the prime minister's Florence speech."
    Barnier was pressed to say in public whether he would ask EU leaders' permission to make some preliminary exploration of what a transition after March 2019 would look like. EU officials and diplomats say he has raised that issue with governments.
    He told the news conference that he would follow a mandate ruling out any discussion of the future before issues arising from Britain's past membership are settled and said it was important to respect the "sequencing".
    Diplomats have said that German and French envoys quashed a suggestion by Barnier last week that he start looking transition issues. On Thursday, German Chancellor Angela Merkel, whose scope to change policy is limited by ongoing coalition talks, stressed Berlin would negotiate to minimise damage to Germany.
    With the talks poised at a delicate stage, EU officials say it is unclear what leaders will tell May next week. They all rule out a clear move to trade talks but many expect "positive language" to try to defuse British accusations of Brussels intransigence and to help May stand up to her own party critics.
    Officials see the early part of next year as a virtual deadline for agreeing to move on to discuss the future relationship. Failure to do so would raise the risk of there being no smooth transition and even of no deal at all.

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    Tadhg Gaelach

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    Dow Jones Newswires, 16 Oct 2017 02:59 EDT
    Global Forex and Fixed Income Roundup: Market Talk

    0659 GMT - KBC Bank continues to keep away from Spanish assets as political risks remain due to uncertainties regarding the outcome of the Catalan independence dispute. "We still shun Spanish assets because of the binary risk," KBC Bank analysts say. Catalan president Carles Puigdemont is expected to clarify Monday whether or not Catalonia declared independence last week. (emese.bartha@wsj.com; @EmeseBartha)

    0651 GMT - Yields on 10-year German government bonds, or bunds, look set to establish a new range of 0.4-0.45%, down from the recent 0.45-0.5%, according to Commerzbank. An anonymous sources-based story by Reuters suggested that a longer-than-expected extension of 12 months for the European Central Bank's quantitative easing program "cannot be ruled out." This caused yields to tumble Friday. Yields drop as bond prices rise. Bund yields trade at 0.4% early Monday - their lowest level since late September. (tasos.vossos@wsj.com; @tasosvos)

    0633 GMT - Euro-denominated corporate bonds should benefit from a benign form of tapering by the European Central Bank, says Sebastian Sachs, fixed income and forex analyst at Metzler Capital Markets. "Unless the situation in Spain deteriorates, nothing should pose a hurdle for the positive developments in corporates," he adds. Market expectations point to a nine-month tapering of asset purchases by the ECB, starting from January. The ECB is expected to announce some details about the anticipated tapering at its meeting later in October. (emese.bartha@wsj.com ; @EmeseBartha)

    0627 GMT - A 26% jump last month for India's exports was the latest figure pointing to an economic rebound there, with Morgan Stanley noting it was a 2nd-straight beat for that particular metric. Besides, recent government measures to ease exporters' problems and supportive global demand should strengthen the economy. It's all signs of solid 3Q GDP, the investment bank adds. (anant.kala@wsj.com)

    0626 GMT - There is broad understanding in the markets that the European Central Bank's tapering will be very gradual to mitigate its potential impact. "The last thing the ECB wants is to cause a sharp tightening of financial conditions either through the exchange rate or rising borrowing costs," says Han de Jong, chief economist at ABN Amro. Bond markets seem to have grown to the idea that the ECB will start withdrawing asset purchases, most likely in January. Market participants expect the ECB to announce some details of the anticipated tapering at its October meeting. (emese.bartha@wsj.com; @EmeseBartha)

    0618 GMT - Japanese stocks continue to find no reason to drop, with the Nikkei logging its first 10-session winning streak since a 12-day run which ended June 1, 2015. Still-relative inexpensiveness for the country's equities, combined with prospects of an Abe election win, continue to attract buyers. As the Nikkei rose 0.5% to 21255.56, financials led the way. Tokio Marine and Resona each rose 3%. That as the dollar was around Y111.85 as local stock trading ended, steady with late-Friday levels in New York. Meanwhile, 10-year JGB yields remain at 0.06%. (kosaku.narioka@wsj.com)

    0556 GMT - Might China be able to export inflation globally? It's possible, says Marshall Gittler, chief strategist at forex advisory firm ACLS Global. After 5 years of falling producer prices, they've been rising the past year, hitting a higher-than-expected 6.9% last month. "That's the one that's relevant for global inflation since it gauges the price of goods that China exports," Gittler notes. That "should confirm central bankers' confidence in the recrudescence of inflation." (kenan.machado@wsj.com)

    0511 GMT - Indonesia's trade surplus hit a fresh 5-year high of $1.76 billion last month, but it may not be a good thing. "This is not something positive to the domestic economic activities as imports fell faster than exports," said Maybank Indonesia economist Juniman. Imports fell 5.4% from August, mainly due to lower imports of machinery and mechanical appliances, which usually indicate a slowdown of plant construction there. (i-made.sentana@wsj.com)

    (END) Dow Jones Newswires
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    Tadhg Gaelach

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    MONDAY, OCTOBER 16, 2017

    Fed's Yellen says watching inflation closely but economy is strong
    The U.S economy remains strong and the strength of the labor market calls for continued gradual increases in interest rates despite subdued inflation, Federal Reserve Chair Janet Yellen said on Sunday. Yellen also said she expected the U.S. economy to exceed its long-term trend during the second half of the year and repeated the impact of recent hurricanes on the economy should be temporary. Meanwhile, Boston Fed President Eric Rosengren said the Federal Reserve will probably need to raise interest rates in December and then three of four times "over the course of next year," assuming the U.S. unemployment rate continues to fall and inflation rises.

    China Sept producer prices jump most in 6 months in boost for global inflation
    China's producer price inflation unexpectedly accelerated to a six-month high in September as a construction boom shows no signs of abating and a government crackdown on air pollution triggers fears of winter shortages and frenzied jumps in commodity prices. The producer price index rose 6.9 percent in September from a year earlier, from 6.3 percent in August, the National Bureau of Statistics said. China's consumer price index rose 1.6 percent as expected in September, versus 1.8 percent in August and well within Beijing's 2017 target of 3 percent.

    BOJ's Kuroda warns markets may be complacent of geopolitical risks
    Bank of Japan Governor Haruhiko Kuroda warned on Sunday that investors may be complacent about geopolitical risks that could trigger financial market turbulence and disrupt an otherwise broadening global economic recovery. Kuroda said the global economic recovery was becoming more broad-based with rising trade and factory output spurring capital spending and private consumption. But he said policymakers had to be mindful of factors that could cloud the outlook such as falling productivity, weak inflation in many advanced economies and geopolitical risks.

    ECB sees inflation pick up despite weak wages: Constancio
    Euro zone inflation will pick up as the economic recovery continues, despite a puzzling disconnect between strong growth and weak wages, European Central Bank Vice President Vitor Constancio said on Sunday. "We remain confident that the continued closing of the output gap will lead inflation to return to our medium-term objective, yet this return remains conditional on a very substantial degree of monetary accommodation," Constancio said in Washington. "The apparent disconnect between strong economic activity, on the one hand, and low inflation and wages on the other is one of the stand-out characteristics of the ongoing recovery," he added.

    China's PBOC chief sees 7 pct GDP growth in H2, stronger than economist forecasts
    China's economy is expected to grow 7 percent in the second half of this year, the central bank governor said, accelerating from the first six months and defying widespread expectations for a slowdown. But the driving force behind growth has been mainly rising household consumption, Governor Zhou Xiaochuan said in remarks published on the People's Bank of China's website. While China produced forecast-beating growth of 6.9 percent in the first half, many economists and investors had expected its momentum would start to fade in the latter part of the year. The government had set a 2017 GDP growth target of around 6.5 percent. Zhou's estimate implies a full-year expansion of about 6.95 percent, topping the annual growth rates in 2015-2016.





    • US Treasury 10s indicated 2.288%, JGB 10s 0.060%, Bund 10s 0.406%
    • US-Japan-Germany respective 2s indicated 1.507%, -0.143%, -0.727%
    • JGBs trim earlier gains after BoJ ops see relatively high bid-to-cover ratios
    • Higher BTC ratios at BoJ ops mean participants more willing to sell
    • Long-end cash unable to advance ahead of tomorrow's 20yr auction
    • 30yr JGB yield up 0.5bp at 0.875%
    • At 150.40, futures up 3 ticks on day, range 150.37/150.48
    • Nikkei at fresh 21-year highs, from 21,187 to 21,347, bias still up
    • At 21,285, index up 130 points or 0.6% on day
    • AXJ mostly up - HSI 0.8%, KOSPI 0.1%, STI 0.2%, TWI 0.2%, ASX 0.6%
    • NZX50 just above par but Shanghai off 0.1%, outlier
    • Dalian iron ore +2.1%, Kobe Steel scandal effect?

    Currency Summaries


    • USD/JPY heavy after US CPI miss Friday, lower US yields, Tsy 10s @2.292%
    • US Treasury bouncing from lows but still soggy, helps cap USD/JPY
    • USD/JPY 111.71-112.08, USD600 mln option expiries 112.00, 1.3 bln 112.40-50
    • Option expiries helping to cap market, 112.00s help tether it down
    • 111.69 low Friday, bids tipped here and @111.50, offers 112.10+
    • Little to glean from techs - 200-DMA 111.79, 200-WMA 111.88, 55-WMA 111.42
    • EUR/JPY 132.01-37, holding own, in USD/JPY and EUR/USD cross-hairs
    • GBP/JPY 148.48-149.01, AUD/JPY 88.13-28, NZD/JPY 80.18-44, all better bid


    • EUR/USD gapped to 1.1795 at the open from the Friday close at 1.1824
    • Dovish comments from Draghi & hawkish Yellen comments behind the move
    • Option related bids contained and EUR/USD drifted back to 1.1819
    • Light USD demand continued through Asian morning and EUR/USD remained offered
    • It dipped to 1.1798 before settling around 1.1805 into the afternoon
    • Merkel's party election defeat in Lower Saxony might weigh on sentiment
    • Support for EUR/USD at 10-day MA at 1.1781 & 61.8 of 1.1669/1.1880 at 1.1750
    • Resistance at 1.1880 and break would likely signal S/T trend higher


    • Cable more buoyant than not on BoE Gov Carney possible hike reiteration
    • Asia 1.3275-1.3309, market still heavy 1.3300+, high Friday 1.3337
    • 1.3343 50% retr4acement of 1.3659-1.3027 move, Fibo 61.8% at 1.3417
    • Tech resistance now flat Ichi daily kijun at 1.3343, 55-HMA 1.3264 below
    • EUR/GBP still soggy, Asia 0.8878-91, holding just above 0.8877 low Friday


    • USD/CHF quiet in Asia, range 0.9747-65, pivoting around 200-HMA at 0.9759
    • EUR/CHF 1.1511-25 in Asia, few if any flows, uptrend still intact

    Market Briefs

    • Deadline nears for Catalan leader to clarify independence stance
    • CN Sep PPI, 6.9% vs 6.3%, f'cast 6.3%, at six-month high
    • CN Sep CPI, 0.5% m/m, 1.6% y/y vs 0.4%, 1.8%; f'cast 0.4% m/m, 1.6% y/y
    • China cbank gov sees 7 pct growth in H2, stronger than expected
    • May heads for Brussels after Brexit talks deadlock
    • Germany's Merkel suffers state vote setback as coalition talks loom
    • Austria shifts to the right as conservative star steals election win
    • Japan ruling bloc heads for big election win despite voter distaste for PM Abe-poll
    • BoJ Gov Kuroda - No excesses in markets, will continue easy policy
    • MoF off'ls - G20 didn't discuss trade, FX, Japan not fx manipulator
    • IMF Brekk - Sales tax hike obvious choice for Japan debt woes
    • New Zealand likely to announce new government by end of week
    • Fed's Yellen says watching inflation closely but economy is strong
    • Fed's Rosengren sees three to four rate hikes next year
    • U.S., South Korea conduct joint Navy drills to counter N.Korea threat
    • Specs trim bearish USD bets, JPY shorts largest since early Aug - CFTC

    Looking Ahead - Economic Data (GMT)

    • No major economic data scheduled for the day

    Looking Ahead - Events, Auctions, Other Releases (GMT)

    • 07:00 Riksbank Deputy Gov Ohlsson speaks in Stockholm
    • 07:30 EU Foreign Affairs Council meeting in Luxumbourg
    • 13:00 ECB's Angeloni speaks in Cambridge
    • 18:00 ECB's Lautenschlager speaks in Washinton DC
    See North American Open for a detailed listing of US/NorAm releases, events.

    USD exposed to DC disappointment, dovish Fed pick

    Investors remain in a happy place despite a number of geo-political factors that could ramp up volatility, as solid/moderate global growth, low inflation and cautious major central banks drive demand for riskier assets. The bullish USD view that emerged a few weeks ago is starting to falter amid doubts over the White House's ability to deliver credible, timely tax reform or significant infrastructure spending through Congress. The divisions within the Republican Party seem to be growing while hopes of bipartisan cooperation are fading as key Democrats indicate displeasure with Trump's latest moves on Obamacare and the Iran nuclear deal. Without such legislation passing in the foreseeable future, the strong-USD view would lose some critical support. The markets are also betting that Trump won't take the risk of picking a hawk to head the Fed when Yellen's term expires in February. The favourite is still Jerome Powell who would bring continuity and predictability. While the Fed will likely hike rates at the December meeting, stubbornly low inflation, as reflected in Friday's CPI, will likely allow the Fed to be very cautious in the next phase of the tightening cycle. A gridlocked Washington DC and a dovish turn in Fed expectations could result in the USD trending lower into year-end.

    Week Ahead-US IP, EZ & UK inflation, China data

    It will be a quiet week for key US data with only Empire State manufacturing out on Mon, IP Tues, housing starts Weds, and Philly Fed along with the weekly jobless claims Thurs. EZ data includes key inflation data and the German ZEW Tues, followed by the EZ current account Fri. UK inflation data is due Tues, when CPI, PPI & RPI will be released. UK employment data is out Weds and retail sales Thurs. China will be in focus, with the release of retail sales, IP and urban investment Thurs, as well as Q3 GDP, which is forecast at 6.8% y/y, down from 6.9% in Q2. Japan is due to release trade data on Thurs. New Zealand Q3 CPI is due Tues, Canada CPI Fri, and Australian Sept employment data is due Thurs, with the market expecting around +15k jobs after August's much bigger-than-expected +54.2k. The unemployment rate is expected to remain unchanged at 5.6%.

    Week Ahead-Central banks, geopolitics & China's CPC

    It will be a quiet week for US data so the market will focus on whether Friday's soft US CPI will temper Fed tightening expectations. There are a number of Fed speakers in the week ahead including Chair Yellen Fri, and the NY Fed's Dudley Weds. The RBA's Oct meeting minutes on Tues are likely to show an upbeat view of the Australian economy, balanced by concerns over household debt, house prices and the AUD/USD. Chinese President Xi Jinping opens the 19th National Congress of the Communist Party of China Weds, where he will be confirmed as party chief for a second five-year term. The usually week-long meeting will reveal the party's plan for the next five years, which is likely to show a balance between economic growth and reforms. US earnings season continues after a solid start last week. Geo-politics continue to threaten market calm. While Catalonia has faded from focus, weekend reports suggest the separatist movement is divided between hardliners who want to declare independence from Spain immediately and moderates who seek a negotiated settlement. New Zealand politics remain hostage to NZ First leader Peters who could announce which major party NZ First will back to form a govt after a board meeting Mon. Hardly a day goes by without some news from the Trump White House that has the capacity to move the markets and there is no reason to believe the coming week will be different. The fate of UK PM May and Brexit talks also remain in the spotlight with weekend reports that the UK was "dangerously close" to walking away from the EU with no deal.

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    Tadhg Gaelach

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    Dow Jones Newswires, 18 Oct 2017 04:29 EDT
    Global Forex and Fixed Income Roundup: Market Talk

    0829 GMT - The euro-denominated bonds of tech giant IBM Corp. trade at "materially wider" spreads compared to tech peers and some defensive telecom and media names, prompting CreditSights to upgrade them to outperform. IBM's 1.75% 2028 issue trades at option-adjusted spreads of 76 basis points, but CreditSights expects them to converge to Microsoft Corp.'s 3.125% 2028, which trades at 52 bps, and Mastercard Inc.'s 2.1% 2027, currently at 66 bps. Asset swap spreads on IBM's euro bond are little changed after its 3Q results. (tasos.vossos@wsj.com; @tassovos)

    0822 GMT - Holders of some existing euro and U.S. dollar-denominated bonds by Italian telecom Wind can sell them back to the issuer. If not, the issuer will call them in, as it is going for a bulky debt replacement. Wind is looking to print new senior secured bonds in euros and U.S. dollars and set up a new credit facility while retiring some of its existing bonds. The CK Hutchison-VimpelCom joint venture is looking to buy back all of its 2019 floating-rate notes, 6.5% 2020, 7.375% 2021 and 7% 2021 bonds, which amount to the equivalent of $5.6 billion. Any remaining notes will be redeemed.(tasos.vossos@wsj.com; @tasosvos)

    0801 GMT - China will likely set moderately high growth targets for the coming few years, ANZ economists say. President Xi Jinping's goal of building a modern country by 2035 means the country's economy needs to expand an average of 6.6% a year from 2017 onwards, ANZ says. To become a leading global power by 2050, China needs to maintain a minimum average growth rate of 4.9%, the bank says. (lin.zhu@wsj.com)

    0757 GMT [Dow Jones] The December Gilt futures contract, currently trading at 124.85, stands above a strong horizontal support at 124.30 and remains on the upside, supported by its rising 50-period moving average at 124.27 on a 30-minute chart. Moreover, the intraday RSI stands within its buying area between 50 and 70 and confirms the bullish bias. A first target to the upside is therefore set at the horizontal resistance and overlap at 125.21. A break above this threshold would open the way to further rise towards 125.77 and towards the horizontal resistance at 126.05 in extension. Only a break below the horizontal support at 124.30 would turn the intraday outlook to bearish with a first alternative target set at the horizontal support and overlap at 124.02 and a second one set at the horizontal support at 123.75 in extension. (analysts-europe@tradingcentral.com)

    0754 GMT - The euro trades flat versus the U.S. dollar at 1.1765 as investors don't expect anything surprising from European Central Bank President Mario Draghi's speech in Frankfurt, due at 0810 GMT. "President Draghi...will make no effort to obstruct the market dynamics and the bias to liquidate long positions," says Societe Generale. "The ECB has the single currency and rates where it wants them," SocGen says. The ECB meets next on October 26 and all eyes until then will be on ECB members' speeches, starting with Mr. Draghi's, and continuing with Benoit Coeure, Peter Praet, and others. (olga.cotaga@wsj.com; @OlgaCotaga)

    0750 GMT [Dow Jones] Currently trading at JPY148.03, the British pound remains under pressure below the strong horizontal resistance at JPY148.30 and is capped by its declining 50-period moving average at JPY148.16 on a 30-minute chart. Moreover, the intraday RSI stands within its selling area between 50 and 30 and confirms the bearish bias. A first target to the downside is therefore set at the strong horizontal support at JPY147.75. A break below this threshold would open the way towards the horizontal support at JPY147.50 and towards October 12 bottom at JPY147.25 in extension. Only a rebound above the horizontal resistance at JPY 148.30 would turn the outlook to bullish with a first alternative target set at the horizontal resistance at JPY 148.80 and a second one set at the strong horizontal resistance at JPY 149.05 in extension. (analysts-europe@tradingcentral.com)

    0733 GMT - Danske Bank changes its call regarding how the European Central Bank will proceed with the extension of its asset purchase program in 2018. Danske now expects the ECB to announce a nine-month QE extension at a purchasing pace of EUR30 billion per month, when it likely reveals some details at the October 26 meeting. Thereafter, Danske expects the ECB to end its asset purchases in the fourth quarter of 2018. Danske doesn't expect the ECB to make any changes to its forward guidance at the upcoming meeting. (emese.bartha@wsj.com; @EmeseBartha)

    0728 GMT - Sterling continues to fall Wednesday and drops to a six-day low versus the U.S. dollar as investors digest Tuesday's testimonies from Bank of England members. GBP/USD is down 0.2% at 1.3167. EUR/GBP is up marginally at 0.8928. The pound "has been licking its wounds after dovish comments from the MPC's newer members," says RBC. U.K. labor data is due at 0830 GMT, and according to a WSJ poll, average three-month earnings should show 2% growth and the unemployment three-month rate should stand at 4.3%. RBC says: "After falling from 4.6% to 4.3% in the last three months, we expect the unemployment rate will be stable at 4.3%, but with another reasonably healthy gain in the level of employment." (olga.cotaga@wsj.com; @OlgaCotaga)

    0718 GMT - SEB recommends investors to buy Sweden's 0.75% May 2028 government bond versus Germany's 4.75% July 2028 bund on the potential of spread tightening. The 10-year spread versus Germany has widened by about 20 basis points on the back of strong Swedish macro data, says SEB's fixed income strategist Lina Fransson. In the near term, however, SEB sees potential for the spread to tighten again, supported by an anticipated downward revision in Sweden's government bond supply for 2018 by the Swedish National Debt Office when it publishes its next borrowing review on Oct. 25. (emese.bartha@wsj.com; @EmeseBartha)

    0714 GMT - Akzo Nobel N.V.'s second change to earnings guidance within a few weeks could weigh on its bonds Wednesday, but the fact that they already trade at wider spreads versus debt from similarly rated companies allows UniCredit to keep its market-weight recommendation. Nevertheless, early activity in the secondary bond market shows broadly unchanged asset swap spreads in the Dutch chemical group's bonds. Akzo Nobel now expects 2017 pretax earnings before interest to be the same as in 2016. It previously guided for higher ebit year-on-year, itself a chance from a former target of a EUR100 million rise. (tasos.vossos@wsj.com; @tasosvos)

    0709 GMT - Assuming the European Central Bank keeps buying corporate bonds at the same pace until September 2018 and perhaps more slowly for three months thereafter, its total stock of credit quantitative easing may end up at around EUR195 billion, Deutsche Bank says. This would represent 10% of the euro investment-grade bond market, including both banks and non-financials. The ECB is currently buying around EUR6 billion of corporate bonds on a net basis -- excluding re-investments -- each month until December. It is expected to lay out its 2018 plans at its Oct. 26 meeting.(tasos.vossos@wsj.com; @tasosvos)

    0708 GMT - Bank Indonesia will likely keep the benchmark 7-day reverse repo rate unchanged at 4.25% Thursday. All of the 13 economists surveyed by The Wall Street Journal expect Bank Indonesia to turn cautious as the European Central Bank is expected to change its quantitative easing plans soon while the US Federal Reserve is seen raising rates in December. While Indonesia's stagnant economy needs further stimulus, economists expect Bank Indonesia to resort to other policy measures rather than a rate cut. Most economists expect Bank Indonesia to stay on hold for the rest of the year, but ANZ expects another quarter-point cut next month. (i-made.sentana@wsj.com)

    (END) Dow Jones Newswires
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    Tadhg Gaelach

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    New Bank of England deputy says not ready to vote for rate hike
    The Bank of England's new deputy governor distanced himself from the central bank's majority view that interest rates probably need to rise soon, and another newcomer said her support for that position was "very contingent on the data". Sterling and government bond yields fell as investors took the comments from Deputy Governor Dave Ramsden and policymaker Silvana Tenreyro as a sign that even if the BoE raises rates in November, further increases are unlikely to happen quickly.

    U.S. industrial output rises slightly as hurricanes impact lingers
    U.S. industrial production rebounded modestly in September as the lingering effects of Hurricanes Harvey and Irma hobbled activity at factories, but the outlook for the industrial sector remains bullish amid a strengthening global economy and weakening dollar. The Federal Reserve said industrial production increased 0.3 percent last month after a 0.7 percent drop in August that was smaller than initially reported. Industrial output fell at an annual rate of 1.5 percent in the third quarter. Manufacturing output edged up 0.1 percent in September after dropping 0.2 percent August.

    BOJ's Sakurai says need to stick with current easing framework
    Bank of Japan board member Makoto Sakurai said the central bank needs to stick with its current framework for monetary easing as the effects of stimulus become stronger as economic growth picks up. Sakurai's comments are a sharp contrast to those of another board member at the BOJ's September meeting, which called for stronger measures to help consumer prices reach the central bank's 2 percent target. The BOJ has had to push back the timing for reaching its price target six times since it deployed its massive stimulus programme in 2013.

    UK firms freeze marketing spend as economic uncertainty rises –survey
    British companies froze their marketing budgets during the third quarter amid rising uncertainties about the economy as the UK looks to exit the European Union, a survey showed. The IPA Bellwether report showed that near 70 percent of its survey panel recorded no change in marketing budget since the second quarter. The survey conducted by IHS Markit showed that about 21 percent of the survey panel recorded an upward revision to marketing budgets from the second quarter while 11 percent of companies recorded a trim.

    NAFTA negotiators trade barbs, indicate wide differences
    The top U.S. and Canadian and trade officials on Tuesday accused each other of sabotaging efforts to renegotiate the North American Free Trade Agreement, even as they and Mexico agreed to extend talks into the first quarter of 2018. A seven-day round of talks in suburban Washington ended in acrimony over aggressive U.S. demands on autos, a five-year sunset clause on the pact itself and Canada's dairy regulations, among other key issues. Canada's foreign minister, Chrystia Freeland, accused Washington of pursuing a "winner take all" approach.




    • US Treasury 10s indicated 2.299%, JGB 10s 0.066%, Bund 10s 0.360%
    • US-Japan-Germany respective 2s indicated 1.549%, -0.132%, -0.738%
    • JGB futures move sideways around yesterday's closing level
    • At 150.35, futures unch on day, range 150.41/150.31
    • Long-end bonds initially solid after good 20yr sale, ahead of BoJ ops
    • But long-end bonds erase earlier gains in afternoon on Nikkei rally
    • Nikkei up modestly to fresh 21-year high of 21,400, low 21,317
    • At 21,361, index up 24 points or 0.1% on day at writing
    • AXJ mixed but moves limited with eyes on China Party Congress
    • Dalian iron ore +1.4%, Tokyo rubber in bounce from 3 1/2-mo low

    Currency Summaries
    • USD/JPY, JPY crosses quiet, Singapore holiday, subtracts from liquidity
    • Option expiries and gamma again tether, bracket USD/JPY
    • Large USD1.75 bln expiries 112.25-40, 1.1 bln alone at 112.30 strike
    • More below and above though smaller – 111.40-50, 112.00, 112.50, 113.25
    • Japanese players mostly quiet, importers from @112.00, exporters 112.35+
    • Asia range 112.14-26, flows few and far between
    • Crosses mostly buoyant with USD/JPY, maybe slightly better bid
    • EUR/JPY 132.00-16, little bounce after trade down to 131.68 Monday
    • GBP/JPY 147.84-148.09, steady after push from 149.06 to 147.70 post-CPI
    • Data as eyed, post-fact long liquidation, especially on wishy-washy BoE
    • AUD/JPY 87.95-88.12, NZD/JPY 80.31-53, steady to better bid

    • EUR/USD opened 0.25% lower at 1.1767 after choppy US session
    • Singapore holiday meant flows were lighter than usual and EUR/USD was steady
    • It traded in a 1.1764/81 range and was 1.1772 into the afternoon session
    • EUR/USD likely to remain heavy within range due to USD favorable yield spreads
    • A break back above the 21-day MA at 1.1802 would ease downward pressure
    • There isn't any key data out of Europe so DE and US yields will be the focus

    • Cable steady in Asia after post-CPI, wishy-washy BoE overnight
    • Range 1.3185-97, quiet, despite post-CPI long liquidation, bias up
    • Most see Nov hike still on despite dovish Ramsden, Tenreyro fence-sitting
    • GBP/USD support from 55-DMA at 1.3144, capped at 1.3343 daily Ichi kijun
    • 1.3343 50% retracement of 1.3659-1.3027 move Sept 20-Oct 6. 61.8% 1.3417
    • EUR/GBP does nothing in Asia, 0.8924-26., 100-DMA 0.8927

    • USD/CHF quiet in Asia with Singapore on holiday, range 0.9776-82
    • Descending 200-DMA above at 0.9819 - key resistance
    • EUR/CHF unmoving, Asia 1.1511-15, low yesterday 1.1486, 55-DMA 1.1447

    Market Briefs
    • New Zealand's kingmaker party to make announcement on govt formation Thursday
    • Xi says China will let the market play decisive role in resource allocation
    • Trump administration again declines to name China currency manipulator
    • Catalonia refuses to renounce independence, separatist protesters rally
    • UK firms freeze marketing spend as economic uncertainty rises -survey
    • BoJ Policy Board Sakurai - Need to stick to current policy
    • Underdog centre-left party may outperform expectations in Japan snap poll
    • Japan Inc wants Abe election win albeit with fewer seats – Reuters poll
    • Trump tax plan hits bump in Senate as Rand Paul weighs 'no' vote
    • U.S. senators reach bipartisan deal on Obamacare, Trump indicates support
    • CN Aug U.S. Treasury securities holding, $1.201 trln vs $1.166 trln in July (Prev $1.166 trln)
    • JP Aug U.S. Treasury holding $1.102 trln vs $1.113 trln in July (Prev $1.113 trln)

    Looking Ahead - Economic Data (GMT)
    • 08:30 GB Aug ILO Unemployment Rate, 4.3% eyed, last 4.3%
    • 08:30 GB Aug Avg Wk Earnings 3M, 2.1% eyed, last 2.1%
    • 08:30 GB Aug Avg Earnings (Ex-Bonus), 2.0% eyed, last 2.1%

    Looking Ahead - Events, Auctions, Other Releases (GMT)
    • N/A Singapore Markets closed today
    • 08:10 ECB's Draghi speaks in Frankfurt
    • 10:30 DE 1.000 bln for 30 year auction
    • 11:30 ECB's Angeloni speaks in Berlin
    • 12:00 ECB's Nouy speaks in Basel
    • 11:45 ECB's Praet speaks in Frankfurt
    • 14:15 ECB's Coeure speaks in Frankfurt
  17. OP
    Tadhg Gaelach

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    Dow Jones Newswires, 19 Oct 2017 04:00 EDT
    Global Forex and Fixed Income Roundup: Market Talk

    0800 GMT [Dow Jones] Currently trading at $1.1815, the Euro remains on the upside above the strong horizontal support at $1.1775, supported by its rising 30-min moving average at $1.1783. The intraday RSI which stands within its buying area between 50 and 70, confirms the bullish bias. Further advance is therefore expected towards the horizontal resistance at $1.1835. A break above this threshold would open the way to further up move towards the horizontal resistance at $1.1860 and towards Oct. 12 top at $1.1880 in extension. Only a break below the horizontal support at $1.1775 would turn the intraday outlook to bearish with a first alternative target set at the horizontal support at $1.1755 and a second one set at the strong horizontal support and yesterday's bottom at $1.1735 in extension. [This piece contains the opinions of Trading Central and does not constitute personalized investment advice or form part of any invitation or inducement to buy or sell any security. The author has been prohibited by Trading Central from purchasing or otherwise directly or indirectly acquiring any direct or indirect beneficial ownership of any instruments or markets for which Trading Central or its affiliates issues recommendations. To read more, visit bit.ly/1MehCU9.] (analysts-europe@tradingcentral.com)

    0759 GMT - If Atlantia is to exceed ACS/Hochtief's latest strong counterbid for Abertis, its ratings could come under pressure, unless offset by additional disposals, UniCredit says. But given the strategic rationale of a deal for Atlantia, it would be ready to accept temporary one-notch downgrades to succeed, the bank adds. UniCredit keeps its marketweight recommendation on Atlantia bonds, as there is no risk to high yield, while a successful ACS/Hochtief bid would still leave them trading at attractive levels. Atlantia stands at least two notches above speculative-grade on all rating companies. (tasos.vossos@wsj.com; @tasosvos)

    0755 GMT - The Federal Reserve's plans to raise interest rates and reduce its balance sheet won't impact China's capital flows, with outflow pressures easing, says China's foreign-exchange regulator. The regulator says the shrinking of the Fed's balance sheet will be a gradual process and China is now more adapted to the changing external environment. China's stronger economic growth and the opening of the domestic stock and bond markets will help reduce the outflows. (grace.zhu@wsj.com)

    0749 GMT - Bank of America Merrill Lynch raises China 2017 and 2018 GDP growth forecast to 6.8% and 6.6%, from 6.6% and 6.4% respectively, after the country posted 3Q GDP growth of 6.8%. Still, the bank expects growth to moderate as the impact of tighter financial conditions start to emerge. It notes investment momentum has shown signs of weakness since July, especially in the manufacturing and infrastructure sectors, expecting growth deceleration to become more visible in 1H 2018. "We believe the government's GDP growth target for 2018 will likely remain unchanged at "around 6.5%" given the solid growth performance this year and the objective of doubling China's 2010 real GDP by 2020," it adds. (chester.yung@wsj.com; @chester_yung)

    0748 GMT - Strategists are divided on whether the U.K. retail sales due at 0830 GMT will surprise on the upside or not. Sterling trades marginally down against the U.S. dollar at 1.3193. RBC says "September is expected to see part of the strength in August reverse" and highlights that "the trend in sales volume growth has slowed from an around 5% a year ago to around 2% now." Societe Generale, on the other hand, says "retail sales in the U.K. should make modest further gains." A WSJ poll suggests retail sales will come in flat for September compared with the previous month, after a 1% monthly increase in August. EUR/GBP rises 0.3% to 0.8952 as the European Union summit gets underway, with Brexit on the agenda. (olga.cotaga@wsj.com; @OlgaCotaga)

    0744 GMT - The euro edges up on Thursday as the European Union summit begins, where issues such as EU integration and Brexit will be discussed. EUR/USD is last up by 0.15% at 1.1805. But Commerzbank says "EUR/USD is likely to tend sideways and not to distance itself too far from 1.18" during the summit. German Chancellor Angela Merkel can't talk yet officially for her country since she hasn't formed a coalition yet, Commerzbank says. Catalonia has to say by 0800 GMT whether it declares independence or not, but as previously seen, this is hardly any driver for the euro. The euro is also up against sterling by 0.3% at 0.8954, before U.K. retail sales data. (olga.cotaga@wsj.com; @OlgaCotaga)

    0742 GMT - Spanish government bond spreads have been "remarkably steady", given the ongoing political developments in Spain, says Rabobank's rates strategists. The 10-year Spanish-German bond yield spread trades at 122 basis points, down 1 bp, according to Tradeweb. This is "roughly in the middle of the 110-130 bps range that has held since mid-August," say the bank's strategists. Catalan President Carles Puigdemont has a 1000 CET/0800 GMT deadline to declare independence or to retract. (emese.bartha@wsj.com; @EmeseBartha)

    0732 GMT - Madrid's deadline for Catalonia to clarify whether it has declared independence expires Thursday, but even a lack of a definitive solution to the Catalan question is unlikely to spook bond investors. After all, the market "has become used to blurry messages and today could be another instance of this," according to Danske Bank. Meanwhile, even though the situation remains fluid, markets should soon be keen to move on, Commerzbank Rainer Guntermann says in a note.(tasos.vossos@wsj.com; @tasosvos)

    0729 GMT - The bad news is that the recent profit warning of aerospace and automotive engineer GKN PLC means its gross debt-to-Ebitda ratio should end 2017 at 2.8 times, up from previous expectations of 2.6 times, Moody's says. The good news is that even the increased leverage will match Moody's expectation of a 2.5-3 times leverage for GKN's Baa3 rating. But even though the rating is not at risk, at least not because of the rising leverage, the profit warning is credit negative, according to Moody's. (tasos.vossos@wsj.com; @tasosvos)

    0728 GMT - The German state of North Rhine-Westphalia, which intends to extend its yield curve with the launch of an October 2057-dated new 40-year bond, aims to raise EUR500 million via the issue, says one of the lead managers in the transaction. Guidance on the bond is in the mid-swaps plus 23 basis points area. The 40-year mid-swap is trading at 1.56%, according to VWD data. Lead managers are Deutsche Bank, Goldman Sachs International, JPMorgan and UniCredit. (emese.bartha@wsj.com; @EmeseBartha)

    0725 GMT - German government bonds could extend losses Thursday as valuations on 10-year bunds are still stretched, ING strategists say in a note. Bunds reversed some of their recent rally Wednesday, with yields -- which move inversely to prices - rising from 0.364% to around 0.4%. ING keeps its "mild bearish bias" going into the European Central Bank meeting, scheduled for Oct. 26. Analysts generally expect the ECB to announce its plans on asset purchases beyond December at the meeting. (tasos.vossos@wsj.com; @tasosvos)

    0724 GMT - China's stable economic growth in the third quarter doesn't remove a slight depreciation bias, says Zhou Hao, an economist with Commerzbank. That bias will continue as long as the nation's debt issue persists, he says. Investment faces strong headwinds as both property and infrastructure spending cools, he adds. Zhou sees USD-CNY at 6.76 at year-end but cautions that the yuan's exchange rate could become more volatile if Beijing widens the currency's trading band. (grace.zhu@wsj.com)

    (END) Dow Jones Newswires
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    Tadhg Gaelach

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    THURSDAY, OCTOBER 19, 2017

    China's Q3 economic growth slows as expected, property measures bite
    China's economic growth slowed slightly in the third quarter, as expected, as the government's efforts to rein in property market and debt risks tempered activity in the world's second-largest economy. The economy grew 6.8 percent in the third quarter from a year earlier, the National Bureau of Statistics said. Retail sales rose 10.3 percent in September from a year earlier, compared with analysts' expectations for a 10.2 percent rise. Meanwhile, China’s industrial output rose 6.6 percent in September from a year earlier, beating expectations for 6.2 percent growth and up from 6 percent in August.

    Japan Sept export growth slows slightly, growth trend intact
    Japan's export growth slowed in September for the first time in three months, official data showed, in a sign overseas demand for goods from the world's third-largest economy may be taking a breather. The 14.1 percent year-on-year increase in exports was less than the median estimate for a 14.9 percent increase and was less than an 18.1 percent rise in August, which was the fastest expansion in almost four years. In volume terms, Japan's exports rose 4.8 percent in September from a year ago, following a 10.4 percent annual increase in August.

    U.S. economy hums along, still few signs of pickup in inflation –Fed
    The U.S. economy expanded at a modest to moderate pace in September through early October despite the impact of hurricanes on some regions, the Federal Reserve said in its latest snapshot of the U.S. economy released on Wednesday, but there were still few signs of an acceleration in inflation. Hurricanes Harvey and Irma hit during the survey period and will have a negative effect on third-quarter economic growth, the Fed has said, although it expects the impact to be temporary. Shortages were particularly acute in construction, transportation, skilled manufacturing, and some healthcare and service positions.

    Banks say EU's grab for London's financial sector could backfire
    A push by European Union countries to grab a slice of London's financial sector ahead of Brexit could backfire by raising costs for consumers and companies on the continent, the UK's main banking industry body said on Wednesday. Frankfurt, Paris, Dublin and Luxembourg want to attract banks, insurers and asset managers in Britain who need an EU base by March 2019 to maintain links with European customers. Some lawmakers have said Brexit is an opportunity to scrap EU rules which they see as crimping London's global competitiveness in finance. Financial sector officials worry that too much divergence with EU rules would mean no market access to the bloc after Brexit.





    • US Treasury 10s indicated 2.342%, JGB 10s 0.062%, Bund 10s 0.395%
    • US-Japan-Germany respective 2s indicated 1.565%, -0.137%, -0.723%
    • JGBs initially under pressure, 20yr yields above 0.60%
    • But dips bought, 20s below 0.60% again at 0.595%
    • 5yr auction goes well with no tail, stop @0.082%, BTC 4.24, last 4.07
    • JGB futures bounce from 150.26 early to 150.45
    • At 150.43, futures up 7 ticks on day
    • Nikkei to fresh 21-year high after gap up open, 21,422 to 21,503
    • At 21,445 index up 82 points or 0.4% on day
    • AXJ mixed - SSEC -0.4%, HSI -0.1%, KOSPI -0.4%, ASX sub-par
    • STI +0.4% after yesterday's holiday, TWI +0.5%, NZX50 +0.1%
    • Dalian iron ore -4%, both Shanghai and Tokyo rubber futures up

    Currency Summaries
    • USD/JPY, JPY crosses buoyant on higher US yields, fresh moves into carries
    • Fresh Wall St highs help, Nikkei to fresh 21-year highs, ccy hedges put on
    • Offshore investors buying into Nikkei rally invariably put on ccy hedges
    • Option expiries again tether USD/JPY at highs, USD1.17 bln 112.85-113.10
    • Some Japanese exporters from @113.00 too, interest trails up
    • Asia so far 112.88-113.08, some stops mixed in 113.10+, more 113.50+
    • Crosses buoyant on fresh moves into JPY-funded carries
    • EUR/JPY 133.18-43, stops eyed 133.50+/134.50+, above double/triple tops
    • GBP/JPY 148.98-149.40, BoE MPC rate hike almost done deal? Wage data good
    • AUD/JPY 88.56-85, NZD/JPY 80.48-95, GBP-AUD-NZD off early highs though

    • EUR/USD opened 0.17% higher (1.1786) despite widening DE/US yield spread
    • EUR/USD continued to strengthen in Asia as frustrated shorts pared back
    • Small stops were triggered above 1.1805 to high @ 1.1816 before sellers capped
    • Heading into the afternoon the EUR/USD was trading just below 1.1800
    • Resistance at 61.8 of the 1.1880/1.1730 move at 1.1823 & 55-day MA at 1.1840
    • Support formed at 1.1730/35 with buyers tipped between 1.1720/35
    • No significant data out of Europe today

    • Cable 1.3200 to 1.3228 early in Asia before falling back to 1.3202
    • Some caution ahead of retail sales data tonight, wage data o/n good
    • BoE MPC expected to hike in November, reason for buoyancy
    • Support from @1.3200, 1.3204 55-HMA, underlying support at 1.3145 55-DMA
    • Some option expiries in vicinity - 1.3170 GBP469 mln, 1.3250 264 mln
    • EUR/GBP 0.8926-36 in Asia, treading water, 100-DMA at 0.8930 pivot

    • USD/CHF buoyant with USD/JPY, Asia 0.9790-0.9817, 200-DMA 0.9817
    • 200-DMA descending, some heaviness ahead, also at 0.9835-40 double top
    • 0.9840 high October 6, 0.9838 high yesterday
    • EUR/CHF buoyant, Asia 1.1562-73, just below 1.1577 high o/n
    • Bias up, talk of some interest in fresh CHF-funded carries a la JPY

    Market Briefs
    • CN Q3 GDP, 6.8% vs 6.9%, f'cast 6.8%
    • CN Sep Industrial Output, 6.6% vs 6.0%, f'cast 6.2%
    • CN Sep Retail Sales, 10.3% vs 10.1%, f'cast 10.2%
    • China cbank governor says yuan band not key issue at the moment
    • New Zealand kingmaker set to announce which party it will back for govt
    • Catalonia to press ahead with independence if Madrid suspends autonomy
    • Trying to unlock Brexit, Britain's May to make offer on EU citizens
    • Trump to announce Fed chair decision in "coming days" -White House
    • BoJ DepGov Nakaso - Will adjust yield curve as need to achieve 2% CPI
    • JP Sep trade surplus Y670.2 bln, Y559.8 bln eyed, exp +14.1% y/y, imp +12.0%
    • JP Sep Exports to US +11.1%, China +29.3%, Asia +18.7%, crude imp vol -5.3%
    • MoF flow data wk-ended Oct 14 - Japanese buy net Y153.7 bln foreign stocks
    • Y269.7 bln foreign bonds bought too, foreign investors buy Y840.7 bln JPN stks
    • AU annual jobs growth zoomed to 3.1 %, fastest since April 2008
    • AU Sep Employment, 19.8k vs 54.2k, rvsd 53.0k, f'cast 15.0k
    • AU Sep Unemployment Rate, 5.5% vs 5.6%, f'cast 5.6%

    Looking Ahead - Economic Data (GMT)
    • 07:30 SE Sep Unemployment Rate, 6.0% eyed, last 6.0%
    • 08:30 GB Sep Retail Sales, -0.1% m/m, 2.1% y/y eyed; last 1.0%, 2.4%
    • 08:30 GB Sep Retail Sales Ex-Fuel MM, 0.1% eyed, last 1.0%

    Looking Ahead - Events, Auctions, Other Releases (GMT)
    • 07:00 Riksbank executive board meeting
    • 09:30 ES E1.500/E1.000/E1.000/E0.500 bln for 3/7/10/29 year auctions
    • 09:50 FR E1.750/E3.750/E1.500 bln for 4/6/7 year auctions
    • 10:30 UK 2.500 bln 10 year auction
    • 10:50 FR E0.500/E0.750/E0.500 bln for 8/10/15 year auctions
  19. OP
    Tadhg Gaelach

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    Dow Jones Newswires, 20 Oct 2017 04:19 EDT
    Global Forex and Fixed Income Roundup: Market Talk

    0819 GMT - A British interest rate rise "now seems inevitable", says Berenberg, though it questions whether the U.K. economy is strong enough to warrant more than one or two rate rises. Rates must rise, given the U.K.'s growing indebtedness and lack of policy headroom, the German investment bank says, following this week's rise in CPI inflation to 3%. Still, it says the context for rate hikes isn't one of strength. "While consensus expects wider margins and benign credit conditions, we believe household indebtedness impedes the durability of rate rises," Berenberg says in a note. "Rates may rise by just 50 basis points, in our view, before reversals are necessary." (philip.waller@wsj.com)

    0807 GMT - Singapore's CPI is projected to have remained steady in September, rising 0.4% from a year earlier, according to the median estimate of 8 people polled by WSJ. Meanwhile, the Monetary Authority of Singapore's core inflation measure, which strips out private road transport and accommodation costs, is seen having gained 1.4%. That also would match August's figure. The data are due Monday. (gaurav.raghuvanshi@wsj.com)

    0733 GMT [Dow Jones] Currently trading at 156.35, the French December OAT contract is under pressure below the strong horizontal resistance and overlap at 156.90 and is capped by its declining 50-period moving average at 156.72 on a 30-minute chart. Furthermore, the intraday RSI stands within its selling area between 50 and 30 and confirms the bearish bias. As a consequence, further weakness is expected with a first target set at the horizontal support and overlap at 156.25. The downside breakout of this threshold will open the way to further down move towards the strong horizontal support at 155.85 and at 155.55 in extension. Only a rebound above the strong horizontal resistance at 156.90 would invalidate this bearish scenario. In this case, a bullish acceleration towards the strong horizontal resistance and Oct. 18 top at 157.21 and towards 157.55 in extension would be in the cards. (analysts-europe@tradingcentral.com)

    0731 GMT [Dow Jones] Currently trading at GBP0.8989, the euro remains on the upside, supported by the rising 50-period moving average at GBP0.8987 on a 30-min chart. Furthermore, the intraday RSI remains within its buying area between 50 and 70 and confirms the bullish bias. Thus, as long as GBP0.8970 holds as a support, further advance is likely towards Oct. 12 top at GBP0.9030. A break above this threshold would open the way to further rise towards the horizontal resistances at GBP0.9065 and at GBP0.9100 in extension. Only a break below the strong horizontal support and overlap at GBP0.8970 would turn the outlook to bearish with a first alternative target set at the strong horizontal support at GBP0.8945 and a second one set at the horizontal support at GBP0.8925. (analysts-europe@tradingcentral.com)

    0714 GMT - Consumption is now the most-important driver of China's economy, overtaking financial investment, says JPMorgan Asia-Pacific Vice Chairman Jing Ulrich, adding that indicates economic rebalancing is underway. After a slight downtick in 3Q GDP, she sees further modest slowdowns to come as infrastructure spending decelerates, the housing market moderates and financial deleveraging continues. The slowdown suggests structural reforms are working, adds Ulrich. (ese.erheriene@wsj.com; @Ese_Journo)

    0712 GMT - The solid traffic growth in 3Q that Autoroutes Paris-Rhin-Rhone reported is not enough to make UniCredit change its under-weight recommendation on the French motorway operator's bonds. Analyst Christian Aust highlights the lack of relative value, as APRR bonds still trade broadly in line with those of rival Vinci, despite the lower composite rating and slightly weaker business profile. APRR will also have to issue new debt as it has around EUR1 billion to re-finance each year between 2018 and 2020, the analyst adds. (tasos.vossos@wsj.com; @tasosvos)

    0709 GMT - Investors should refrain from adopting a sell-on-upticks strategy in 10-year German government bond futures ahead of the European Central Bank's meeting on Oct. 26, according to KBC Bank analysts. Bund futures rallied on expectations that the ECB would choose a steep cut in monthly asset purchases but extend the quantitative easing program. This rally has partly reversed in recent days. December-expiring bund futures trade at 161.85 early Friday, according to Factset, down from 162.62 Tuesday, according to Factset. (tasos.vossos@wsj.com; @tasosvos)

    0707 GMT - The most important question when it comes to Bank of England policy is what happens after the possible rate rise in November, according to Societe Generale. Sterling Overnight Index Average, or Sonia, forwards price in a 35-basis-point rise in the 12 months following the November 2017 meeting - practically, one more rate rise. But SocGen says it's unlikely that the BOE will tighten its policy in 2018, as the effects of such a move would felt around the time the U.K. is due to leave the EU. Sonia already prices in a high chance of the BOE raising its policy rate by 25 bps to 0.5% in November.(tasos.vossos@wsj.com; @tasosvos)

    0705 GMT - Kuroda has repeatedly said it would take long time to sweep away Japan's deflationary mindset. The BoJ chief now sees things starting to change. Some restaurants and logistics companies have passed on higher labor costs in their pricing, he notes, adding that consumers are gradually becoming more tolerant to price increases on the back of favorable income conditions. The BoJ currently expects inflation to reach 2% by March 2020 and is set to review its forecasts at month's end. (megumi.fujikawa@wsj.com)

    0702 GMT - A potential takeover of Abertis by ACS subsidiary Hochtief could prompt a bond recommendation change, says CreditSights, which has a market perform recommendation on the Spanish toll-road operator's paper. The research firm is not concerned by the leverage of the enlarged entity, whether it is ACS/Hochtief or Italy's Atlantia who acquire the firm. Instead, it is concerned about questions such as whether Abertis would channel more funds to its parent in the form of dividends and how Hochtief would behave in the combined entity. On Thursday, UniCredit downgraded Abertis bonds to underweight from market-weight after the ACS/Hochtief bid. (tasos.vossos@wsj.com; @tasosvos)

    0656 GMT - European rate analysts' focus Friday seems to be the key 0.4% yield level in 10-year German government bonds. Commerzbank strategist Rainer Guntermann recommends buying into bund dips with yields above 0.4%. Meanwhile, ING insists that the 0.4% level is in general too low. Bund yields are quoted at 0.42% early Friday, according to Tradeweb. German bonds rallied between last Friday and Tuesday on expectations the European Central Bank would carry out dovish low-for-longer quantitative easing tapering, but have retreated since. Yields move inversely to bond prices. (tasos.vossos@wsj.com; @tasosvos)

    0651 GMT - Kuroda repeats his pledge to continue with powerful easing in Japan while showing confidence in country's economic strength. "Recent growth of the Japanese economy has been led by both external and domestic demand in a balanced manner, and I believe the sustainability of economic expansion is high." The central-bank chief also sounds comfortable with the current policy framework, saying the yield curve is moving consistently with the bank's short- and long-term rate targets. (megumi.fujikawa@wsj.com)

    (END) Dow Jones Newswires
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    Tadhg Gaelach

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    FRIDAY, OCTOBER 20, 2017

    U.S. jobless claims hit 44-1/2-year low; mid-Atlantic factories humming
    The number of Americans filing for unemployment benefits dropped to its lowest level in more than 44-1/2 years last week, pointing to a rebound in job growth after a hurricane-related decline in employment in September. Initial claims for state unemployment benefits fell 22,000 to a seasonally adjusted 222,000 for the week ended Oct. 14, the lowest level since March 1973, the Labor Department said. Meanwhile, President Donald Trump's drive to overhaul the U.S. tax code cleared a critical hurdle when the Senate approved a budget blueprint for the 2018 fiscal year that will pave the way for Republicans to pursue a tax-cut package without Democratic support.

    Japan gov't says needs to spur firms to spend cash pile on capex, wages
    Finance Minister Taro Aso criticised Japanese companies for sitting on too much cash, and said the government needed to take steps to encourage them to increase spending on wages and business investment. Internal reserves, or retained earnings including cash, at Japanese firms have increased by 101 trillion yen over the past four years to some 400 trillion yen, while many firms are wary of boosting business expenditures, Aso said. However, Aso said it would be difficult to tax internal reserves, which has been proposed by Tokyo Governor Yuriko Koike's new Party of Hope, as that causes "double taxation" on companies that pay the corporate tax.

    Surging wages lead to monetary tightening in Central Europe
    Mounting labour shortages and surging wages across Central Europe are nudging inflation higher, prompting some central banks in the fast-growing region to tighten policy after years of monetary easing. The Czech central bank already delivered a first small rate hike in August and markets expect a further increase next month, with unemployment at an all-time low of 3.8 percent and inflation the fastest in five years. The Polish and Romanian central banks are also forecast to start raising interest rates next year, especially if the European Central Bank soon scales back its bond purchase programme and starts tightening policy as expected.

    Greek banks plan record sale of bad loans as pressure mounts
    Three of Greece's largest lenders plan to sell up to 5.5 billion euros in bad loans by early next year, sources said, as the country's central bank chief called on the creaking banking sector to act faster to tackle its bad-debt problem. Greek banks are saddled with 103 billion euros in bad loans, equal to almost 60 percent of the economy, after years of financial crisis and crippling recession. The European Central Bank wants that reduced by 38 billion euros by the end of 2019. Greece's largest lender, Piraeus Bank, as well as peers National Bank and Alpha Bank plan to take a major step toward that goal with a record series of sales to be completed by the end of March, the banking sources said.

    Euro zone must seek convergence of living standards –Commission
    Wealthier and poorer euro zone countries must equalise their living standards if the single currency is to retain political support, the European Commission's top economic official said. Bailouts to five countries that lost market access during the crisis, financed by those better off, have added to a wave of anti-EU populism, fuelled by voter uncertainty over the effects of globalisation. Italy's public debt was twice as high as the Netherlands', Spain's unemployment rate was three times that of Austria and Germany's current account surplus was ten percentage points larger than that of France. Moscovici said that to help the economies and living standards in euro zone countries converge, the Commission was pushing for the creation of a euro zone budget.




    • US Treasury 10s indicated 2.353%, JGB 10s 0.066%, Bund 10s 0.408%
    • US-Japan-Germany respective 2s indicated 1.558%, -0.137%, -0.733%
    • JGBs initially firm, then tumble on news of passage of GOP budget
    • At 150.31, JGB futures off 7 ticks on day, range 150.46/150.27
    • Nikkei initially in red, turns to black on same news
    • 21,363 early to 21,489, high yesterday 21,503, at 21,443 @par on day
    • AXJ mostly in black - HSI 1%, KOSPI 0.4%, STI 0.2%, ASX 0.2%
    • Shanghai and NZX50 just above par, TWI outlier, -0.1%
    • Dalian iron ore +2.5%

    Currency Summaries
    • USD/JPY, JPY crosses buoyant in Asia, risk-on, Gotobi, some caught short
    • USD/JPY 112.52 to 113.31, big leg up on news of US budget draft passage
    • Higher US yields help, back to around Wednesday highs
    • Some stops 113.15-20 tripped, more eyed 113.50+, above 113.44 high 10/6
    • Test of 114.00, 114.50 eyed, latter 7/11 spike high, stops above both lvls
    • Option expiries supportive - 112.50-63 total USD1.5 bln, 112.00-02 1.8 bln
    • Some Japanese exporter offers on way up, interest trails up
    • Some crosses more buoyant than USD/JPY, EUR/JPY 133.30 to 133.85, 134 test?
    • EUR/JPY stops eyed 134.00+/134.50+, latter 9/21-25 triple top
    • GBP/JPY steady after fall yesterday, Asia 147.96-148.57, low o/n 147.86
    • AUD/JPY bid, 88.63-82, NZD/JPY not on NZ First-Labor govt, 78.82-79.22

    • EUR/USD from 1.1858 to 1.1807 on new US GOP budget blueprint passed
    • Outlook for more Wall Street gains tonight, US yields up too on news
    • Support ahead of 1.1800, ascending 200-HMA at 1.1809, 55-HMA 1.1799 below
    • Option expiries supportive too, 1.1800 E1.47 bln
    • Some expiries above too near session high, 1.1850-55 E1.38 bln
    • Options again working to tether, bracket market
    • EUR/GBP holds bid in Asia, 0.9004-18, bullish on break above 0.9050, stops?
    • EUR/CHF still bid, Asia 1.1564 to 1.1626, thin conditions cited
    • Cross highest since January ’15

    • Cable soggy in Asia after sales yesterday post-retail sales miss
    • More losses on news of US GOP budget blueprint passage
    • Low yesterday 1.3126, retracement to 1.3208 in NY, Asia down to 1.3099
    • Early Asia high 1.3160
    • Data and Brexit concerns for now trumping BoE MPC hike possibility
    • 55-DMA at 1.3146 pierced, gradually ascending 100-DMA 1.3047 below

    • USD/CHF bid again after news of US GOP budget draft passage
    • Asia 0.9759 to 0.9849, low o/n 0.9737, good bounce since
    • Pair toying with global weekly close above 0.9816 descending 200-WMA
    • Resistance ahead of 0.9860 - 0.9858 high May 17, high May 16 0.9964

    Market Briefs
    • U.S. Senate passes budget blueprint key to Trump tax effort
    • Merkel sends positive signal to May on Brexit talks
    • Spain to suspend Catalonia's autonomy in response to independence threat
    • NZ Prime Minister-elect Ardern focuses on final touches in coalition deal, NZ dlr sinks
    • Japan FinMin Aso - Japan Inc piling up of reserves has gone too far
    • EconMin Motegi - Voters appreciate government’s economic policies
    • Nikkei from red to black following news of GOP draft passage
    • Trump concludes Fed chair interviews, could decide next week -source
    • White House says rollback of Obamacare must be part of short-term fix
    • U.S. muni bond funds post $536.2 mln in inflows -Lipper
    • Foreign CB US debt holdings +$4.623 bln to $3.365 trln Oct 18 week
    • Treasuries +$4.092 bln to $3.037 trln, agencies +$302 mln to $263.35 bln

    Looking Ahead - Economic Data (GMT)
    • 06:00 DE Sep Producer Prices, 0.1% m/m, 2.9% y/y eyed; last 0.2%, 2.6%
    • 08:30 GB Sep PSNB Ex Banks GBP, 6.50 bln eyed; last 5.67 bln

    Looking Ahead - Events, Auctions, Other Releases (GMT)
    • 06:35 BOJ's Kuroda speaks in Tokyo
    • 23:30 Fed's Yellen speaks in Washington
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