Retail Sales Eyed
FX markets remained in relatively tight ranges on Monday, though there were some interesting data prints in Asia, with data out of China pointing to further stabilisation in the economy. Chinese trade data released on Saturday showed that exports grew by 9.9% in September (consensus: 5.5%, prior: 2.7%) while imports were up by 2.4% y/y, in line with expectations. Weaker domestic inflation numbers (at 1.9%) may encourage stimulus expectations, though this certainly has not been reflected in Shanghai equity markets overnight. As upcoming data out of emerging markets in general is the first major round of releases since Q3, governments within this bloc will be looking for signs of capital flows leakage post QE3 and OMT, and markets should expect complaints of complications to monetary policy. However, out of the many macro headwinds the world faces at this stage, some easing in fears of a fresh emerging market growth slowdown will give policymakers globally more time to tackle individual issues with individual policy, though the underlying structural issues are never far from the surface. The Eurozone will need to tackle them head on this week with the latest Eurozone and EU leaders’ summit on October 18th-19th, with hopes of an imminent request of aid by Spain (and consequent OMT activation) becoming increasingly remote. Given how expectations had been plentiful heading into this event, the fact that some form of resolution for any individual periphery country in question is unlikely is highly disappointing. The only major data print of note was the September trade balance in Norway, which was relatively soft at NOK23.6 bn vs NOK33.8 bn in August. The decline was driven by falling exports, which themselves were driven by declines in crude oil. In the current environment, the saving grace for the euro remains one of indifference by most investor communities, an significant movement will only be triggered in the wake of any structural movement, likely to come from a political trigger. As such, regional elections later this week in Spain may prove one such factor, but whether it is the only domestic event Rajoy is seeking to navigate prior to a request remains to be seen. Ahead on Monday, advance retail sales will be out of the US, and CPI for Q3 will be out in New Zealand.
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UBS Investment Bank