After being solidly ignored for weeks, suddenly the Scottish independence referendum is all anyone can talk about, manifesting itself in a plunge in the GBPUSD which ha slide over 100 pips in the past 24 hours, adding to the slide over the past week, and is now just above 1.61, the lowest since November 2013. In fact, the collapse of the unionist momentum has managed to push back overnight news from Ukraine, major Russian sanction escalations, Japan GDP as well as global trade data on the back burner. Speaking of global trade, with both China and Germany reporting a record trade surplus overnight, with the US trade deficit declining recently, and with not a single country in the past several month reporting of an increase in imports, one wonders just which planet in the solar system (or beyond) the world, which once again finds itself in a magical global trade surplus position, is exporting to?
There is a fairly quiet session overnight with most of North Asia out on Mid-Autumn Festival. Markets are closed in China and Korea overnight with the latter only reopening on Thursday. In Hong Kong, the Hang Seng is down about 0.2%. China’s trade data and the second revision to Japan’s GDP are the main data releases overnight. On China, the trade surplus widened to a record $49.84bn in August (expectations of US$40bn). This was helped by a 9.4% yoy rise in exports (expectations +9.0% yoy) although imports surprisingly contracted by -2.4% yoy (consensus +3.0% yoy). In Japan, its second quarter GDP contraction was revised down further to -7.1% from its preliminary estimates of -6.8% on the back of the sales tax hike in April. Away from equities, Asian credit spreads are modestly tighter with the 10yr Treasury yield a basis point lower at just shy of 2.44%. Asian stocks little changed with the ASX underperforming. MSCI Asia Pacific up 0% to 148.5. Nikkei 225 up 0.2%, Hang Seng down 0.2%, Kospi closed, Shanghai Composite closed, ASX down 0.4%, Sensex up 1.1%. 6 out of 10 sectors rise with telcos, industrials outperforming and consumer, health care underperforming.
European shares fall, close to intraday lows, with oil & gas and travel & leisure sectors underperforming and tech, autos outperforming. The U.K. and Spanish markets are the worst-performing larger bourses, the Swedish the best. The euro is little changed against the dollar. 1 out of 19 Stoxx Europe 600 sectors rise; tech, autos outperform, oil & gas, travel & leisure underperform. 27% of Stoxx 600 members gain, 71.2% decline. Eurostoxx 50 -0.3%, FTSE 100 -0.9%, CAC 40 -0.3%, DAX -0%, IBEX -0.5%, FTSEMIB -0.2%, SMI -0%.
Sterling weakens after a poll showed a majority of voters in favor of Scottish independence. Spanish 10yr bond yields rise; Japanese yields decline. Commodities decline, with Brent crude, WTI crude underperforming and nickel outperforming. Brent fell below $100 a barrel for first time since June 2013. U.S. consumer credit due later.
Among the key events on this week’s docket, the long-awaited release of Apple’s new iPhone will certainly grab some attention tomorrow. On that note, our equity desk conducted a poll last week and of the 124 respondents surveyed, 66% of those have noted that they are going to buy the new iPhone and of those planning to buy 75% of those will be replacing their iPhone 5/5s. Let’s see what will be unveiled tomorrow but on the data front JOLTS report and UK Industrial Production are the main releases of the day. On Wednesday, we will get China’s credit growth stats for August which will be interesting after a sharp decline in July. US wholesale inventories and French IP are also due on Wednesday. This then brings us to Thursday where Draghi is expected to give a keynote speech at a eurofi forum in Milan. We will also get inflation readings from China, France and Germany on Thursday. On Friday, the latest US retail sales data as well as U of Michigan consumer sentiment for September are due. We will also get IP data from the euro area and Italy but given deepening concerns around growth we suspect some focus will be on the EU finance ministers and central bankers meeting. We will also get the usual monthly data dump from China on Saturday with the release of retail sales, fixed asset investment and industrial production all due.
Market Wrap
- S&P 500 futures down 0.2% to 2002.4
- Stoxx 600 down 0.8% to 344.8
- US 10Yr yield down 3bps to 2.43%
- German 10Yr yield down 0bps to 0.92%
- MSCI Asia Pacific at 148.5
- Gold spot down 0.2% to $1266.7/oz
