TOWARDS A FRAGMENTATION OF EUROPE?

From 15 October, the “ Strategic daily  and “Credit Zoom” daily publications will be replaced by the “ Natixis Morning Line ” , a new daily publication bringing together all the expertise of our teams Macroeconomic environment Germany : trade surplus reached €17.2bn in August, the current account surplus € 15.3bn . UK : retail sales recorded a like-for-like decrease of 0.2% yoy in September according to BRC. Equities European equity indices in the green, with an outperformance by the FTSE MIB after the BTP-Bund spread subsided sharply and EZ govies underwent a bea r steepening. At sector level for the Stoxx  600, energy, real estate and technology outperformed, whereas industrials, healthcare and communication services closed in the red. The V2X pulled back just below 17%, while the VIX held around 15.5%. Bond markets / Derivatives Another eventful session for EZ sovereigns, with interventions by G Conte and, especially, G Tria that harked back to the days of Super Mario. The selloff of peripherals ceased, with futures trading accounting for much of the movements by BTP (which rebounded after hitting 118.5 intraday, their lowest since Q1 2014). Swap spreads narrowed slightly in a still globally risk-off environment. As regards volatility, € gamma continued to perform in the wake of realized volatility, with an outperformance by intermediate tenors (5 to 7 years). Money markets / Central banks Bor futures underwent a consolidation just about everywhere, with limited movements along the various strips. SOFR fixed at 2.16%, while the spread between the EFFR and IOER remained scotched at 2bp. FX Rather calm session in the foreign exchange market. Nonetheless, the euro did set a 7-week low against the US dollar at 1.1432 given the persistent uncertainties over Italy. Sterling continued to appreciate, the E UR/GBP nearing 0.87. The Australian and New Zealand dollar s , two commodity currencies, took advantage of the US dollar’s consolidation. As regards emerging currencies, the only big gains Tuesday were recorded by the Brazilian real (+1.29%), buoyed by Jair Bolsonaro ’s victory in the 1 st round of the presidential election, and the South African rand (+1.21%). Commodities Brent brushing up against $85/ bbl once again, lifted notably by prospect of a further cutback in Iranian oil exports.