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EUROPEAN MIDDAY/US MORNING REPORT: MONDAY – 5TH – NOVEMBER – 2018 November 05, 2018 at 11:30AM

EUROPEAN MIDDAY/US MORNING REPORT: MONDAY – 5TH – NOVEMBER – 2018

 

 EUROPEAN MIDDAY/US MORNING REPORT

MONDAY – 5TH – NOVEMBER – 2018

European cash equity markets are little changed ahead of the midway stage (FTSE +0.1%, DAX +0.1%, CAC +0.1%, FTSE MIB -0.4%). Bank stocks have seen a modest decline as investors took the opportunity to react to
Friday’s stress test results in which Lloyds and Barclays came out among the worst performers under the adverse scenario. Telecommunication names are among the best performers meanwhile, closely followed by the oil & gas and utility sectors. Core EU bonds
have kicked off the week with a modest drop and failed to derive much support from weaker-than-expected data including Euro Zone Sentix investor confidence and UK service PMI. The data was also ignored by the pound which has advanced to fresh sessions highs
in recent trade and is the best performer among the G10’s on renewed Brexit optimism. Reports in the Sunday Times suggested that PM May has secured a breakthough with the EU over the Irish border. Moves elsewhere in FX have been muted with the Dollar Index
inching up +0.1% to 96.5. In commodity space, oil prices are in the red with US crude futures down -0.4% while spot gold is flat. Looking ahead, futures are pointing to a relatively flat open on Wall Street with earnings due from Mylan and Sysco. On the data
front, we await Markit service PMI and ISM non-manufacturing plus possible comments from ECB Vice President De Guindos.

Key Headlines/Data:

* European Corporate News:

  • Barclays (-0.2%) | Lloyds (-0.8%): Among the lowest capital ratios under an adverse scenario in Friday’s EBS stress test results
  • Banco BPM (-3.4%): Worst performing Italian lender in Friday’s stress test results
  • WPP (-1.2%): Said to have frozen hiring until early 2018
  • Siemens Healthineers (+2.3%): Raised FY19 guidance
  • Telenet (-5.7%): Stock cut at Bank of America to underperform from outperform

*  Revealed: Theresa May’s secret Brexit deal (The Times):

  • Senior sources say the prime minister has secured private concessions from Brussels that will allow her to keep the whole of Britain in a customs union, avoiding a hard border in Northern Ireland. They expect this to placate remainer Tories and win over
    some Labour MPs.

*  Swedish Service PMI (Oct) 56.3, previous 56.6

*  Spanish Unemployment Change M/M (Oct) +52.2K, previous +20.4K

*  Simon Coveney (Irish Foreign Minister) @simoncoveney – The Irish position remains consistent and v clear⁩ that a “time-limited backstop” or a backstop that could be ended by UK unilaterally would never be agreed
to by IRE or EU. These ideas are not backstops at all + don’t deliver on previous UK commitments.

*  Swedish parliament speaker said they will propose centre-right leader Kristersson as PM with a vote to take place on November 12th.

*  EU’s Dombrovskis said the Italian budget plan needs substantial adjustments.

*  UK Service PMI (Oct) 52.2 versus 53.3 expected, previous 53.9 – Lowest since March:

  • Moderate rise in business activity during October
  • New work increases at slowest pace since July 2016
  • Strong input cost inflation continues

*  Euro Zone Sentix Investor Confidence (Oct) 8.8 versus 10.1 expected, previous 11.4

*  EU Commission spokesman said we are not there yet on Brexit negotiations.

 

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