EXECUTIVE SUMMARY
* XI HAILS FUTURE OF CHINA-HONG KONG BOND ON TENSE NATIONAL DAY
* NY FED CUTS SIZE OF OVERNIGHT REPO OPS BACK TO $75BN
* BLOCK BREXIT DELAY, BORIS JOHNSON URGES EU (THE TIMES)
* LATEST RUMOURS RE: UK BREXIT PLANS NOT WELL RECEIVED IN IRELAND
* ITALY LIFTS DEFICIT GOALS, BUT SEEKS TO AVOID EU FIGHT (RTRS)
* WEAK 10-YEAR JGB AUCTION SEEN – WILL PRESSURE TY IF HONG KONG REMAINS STABLE
*RBA CUTS CASH RATE TARGET QUARTER POINT TO 0.75%
*RBA: REASONABLE TO EXPECT EXTENDED PERIOD OF LOW RATES
JGBs provided the most interest on the back of latest tweaks to the BoJ’s Rinban ops & adjustments to its October Rinban outline which pressured the space early on, as bear steepening came to the fore for a 2nd consecutive session. The move extended in early afternoon trade, with a very weak 10-Year auction seen; widest 10-Year tail since ’15, avg. price was below exp. of low price (proxied by the BBG dealer poll) & the cover ratio edged lower, printing at levels not seen since ’16. Futures last 74 ticks lower on the day.
RBA: Australia’s central bank lowered interest rates for the third time this year as it tries to shield the economy from a slew of offshore risks, and signaled it could ease even further.
Reserve Bank chief Philip Lowe reduced the cash rate by 25 basis points to 0.75%, as predicted by money markets and most economists, bringing the lower bound of policy into view and raising the prospect of unconventional measures. The RBA’s move is also designed to prevent a rebound in the depreciating currency that might have been triggered if it stood pat while global counterparts eased.
HONG KONG: Hong Kong went into lockdown on Tuesday, with barricades in the city centre, shuttered stores and a heavy riot police presence, as authorities scrambled to ensure anti-government protests do not overshadow China’s anniversary festivities in Beijing.
BREXIT: Boris Johnson will this week launch his bid to secure a Brexit agreement, with allies admitting they could know “by the weekend” whether the EU is willing to engage with a detailed proposal to resolve the vexed Irish border issue or if Britain is heading for a no-deal departure. Mr Johnson’s allies say they expect Britain to submit its formal proposals for a Brexit deal — in legal text — after the prime minister closes the Conservative party conference in Manchester. “By the end of the week everyone will know whether a deal is possible,” said one ally. One cabinet minister said: “If the EU starts to leak and brief against us, that would be a very bad sign.”
FED: The New York Fed has set the size of its overnight repurchase agreement operation, according to its website. The aggregate limit for the overnight repo operation for Tuesday will be $75b. The most recent such operations on Monday, Friday and Thursday had limits of $100b. While Monday’s operation was less than fully subscribed at $63.5b, the take-up was greater than at a similar action on Friday, when the central bank took $22.7b of securities. (BBG)
POLITICS: The number of Americans who believe President Donald Trump should be impeached rose by 8 percentage points over the past week as more people learned about allegations that Trump pressured Ukraine to smear his top Democratic political rival Joe Biden
POLITICS: President Trump pushed the Australian prime minister during a recent telephone call to help Attorney General William P. Barr gather information for a Justice Department inquiry that Mr. Trump hopes will discredit the Mueller investigation, according to two American officials with knowledge of the call. The White House curbed access to a transcript of the call — which the president made at Mr. Barr’s request — to a small group of aides, one of the officials said
ECB: The euro area economy will keep expanding, though more slowly, as it’s held back in large measure by global trade uncertainty, according to the European Central Bank’s chief economist, Philip Lane. “For several quarters now, we have been facing a slowdown that can, in part, be ascribed to external factors,” Lane said in a speech in Los Angeles on Monday evening. “While uncertainty about the future of the international trading system is doubtless a key contributor, other factors are also contributing to weak international trade.” He cited the rebalancing of China’s economy from exports to domestic demand, and “a maturing technology cycle which has affected key Asian economies through closely integrated supply chains.”
GERMANY: Uncertainty and the bureaucratic fall-out from the trade war between China and the United States is set to cost the export-oriented German economy 30 billion euros in growth this year, newspaper Die Welt reported.
OVERNIGHT DATA
JAPAN Q3 TANKAN LARGE M’FING INDEX 5; MNI MEDIAN 2; Q2 7
JAPAN Q3 TANKAN LARGE M’FING OUTLOOK 2; MEDIAN 0; Q2 7
JAPAN Q3 TANKAN LARGE NON-M’FING INDEX 21; MNI MEDIAN 21; Q2 23
JAPAN Q3 TANKAN LARGE NON-M’FING OUTLOOK 15; MEDIAN 16; Q2 17
JAPAN Q3 TANKAN LARGE ALL INDUSTRY CAPEX +6.6% Y/Y; MNI MEDIAN +6.9%; Q2 +7.4%
JAPAN Q3 TANKAN SMALL M’FING INDEX -4; MNI MEDIAN -6; Q2 -1
JAPAN Q3 TANKAN SMALL M’FING OUTLOOK -9; MEDIAN -8; Q2 -5
JAPAN Q3 TANKAN SMALL NON-M’FING INDEX 10; MNI MEDIAN 8; Q2 10
JAPAN Q3 TANKAN SMALL NON-M’FING OUTLOOK 1; MEDIAN 1; Q2 3
- The Times: The UK economy performed better than initially thought at the start of the year as businesses stockpiled goods before the planned Brexit.
- The Times: Boris Johnson has urged the European Union to rule out a further extension to Article 50 as part of a new Brexit deal.
- Financial Times: Saudi Aramco has announced an annual dividend of $75 billion while scaling back global expansion plans at the oil company to increase cash flow.
- The Daily Telegraph: Neil Woodford’s troubled Patient Capital Trust is locked in talks with its lender US bank Northern Trust over extending a loan agreement after plunging to a £232 million loss.
- The Times: Boeing faced more heat over its troubled 737 Max airliners yesterday after reports that it failed to protect them from nosedives despite equipping previous jets with better safeguards.
Focus Events, Tuesday 1st October (Times quoted BST)
EU session:
05:30 – RBA RBA RBA RBA – CUTS 25bp
08:15- US: Fed’s Evans (voter, Dove) at Bundesbank event
08:45- IT: Manufacturing PMI
08:50- FR: Manufacturing PMI
09:00- EZ: Manufacturing PMI
09:30- UK: Manufacturing PMI
10:00- EZ: CPI
10:20- AUS: RBA’s Lowe speaks following rates decision
European supply:
10:30- UK: £2.25bn 20-year Gilts
US session:
13:50- US: Fed’s Clarida (voter, Dove) at AI conference
14:30- US: Fed’s Bowman (voter, Neutral) at community event
14:45- US: Manufacturing PMI
15:00- US: Manufacturing ISM
17:45- EZ: ECB’s Draghi (Dove) at Greek research event
18:30- EZ: ECB’s Weidmann (Hawk) at Austria National Bank event
No US supply
