EUR 100.00 For Business Accounts Only

IBERIAN DAILY 07 OCTOBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ELECTRICITY & GAS SECTOR, TELEFÓNICA.

MARKETS YESTERDAY AND TODAY


Awaiting trade talks
Stock markets reacted with gains (>0.5%) to the US employment data, with the expectation that the absence of wage pressures gives the Fed leeway to continue cutting rates. Thus, within the Euro STOXX, almost all sectors posted gains, with Pharma and Technology standing out vs. the drops in Autos and the smaller gains in Banks. On the macro side, in the Euro zone, Germany’s minister of Foreign Affairs, H. Maas, spoke in favour of imposing punitive tariffs on US imports, although Secretary of State M. Pompeo lowered tensions, unveiling that preliminary talks with the EU will begin shortly. In the UK, official documents produced to the Court of Session in Edinburgh confirmed that B. Johnson’s government will request an extension to Brexit (deadline on 31 Oct) if an agreement has not been reached by Saturday 19 October. In this regard, European leaders raised their scepticism on reaching an agreement following the failed negotiations during the weekend. In Portugal, the socialist party won the elections (with high abstention of 49.9%) and even though it did not obtain the majority it managed to increase its support (36.6% of the votes and 116 Parliament seats out of 230), and thus it will only need a left-wing partner (Bloco or the communist party) to form government. In the US, September’s employment data was slightly disappointing. Non-farm employment creation was disappointing but 100,000 jobs were created and the previous data was raised sharply. However, the quarterly average stands at 119,000 jobs, the lowest since 2012. The unemployment rate fell unexpectedly to 3.5% (1969 lows) due to the lower dynamism of the working population. Meanwhile, wage earnings stagnated, which will maintain inflation low in the short-term. Lastly, the trade balance saw its deficit increase slightly above expectations in August with weak exports. In China, international reserves fell in September more than expected. On another note, the Chinese government cut expectations of reaching a wide trade agreement this week with the US where the most delicate issues have yet to be agreed.
What we expect for today
Stock markets would see a flat opening, where sell-offs should prevail throughout the session due to less upbeat news regarding the US-China trade talks, with a particularly significant impact on Basic Resources and cyclical segments in general.
Currently, S&P futures are down -0.37% (the S&P 500 was up +0.51% vs. its price at the closing bell in Europe). Volatility in the US dropped (VIX 17.04%). The Asian markets that are open are falling (Japan -0.18%).
Today we will learn in Germany August’s factory orders, in the Euro zone October’s Sentix index, in Mexico July’s fixed investment. In debt auctions: Netherlands (€ 2 Bn in 6M T-bills).