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Banks, Brexit, manufacturing and Tesla kick off October

October is off to a positive start for world markets. Overnight, the Hang Seng rose 1.2% while the Nikkei gained 0.9%. This morning in Europe, the FTSE is rallying 1.2% while the CAC is up 0.3%. US index futures are up slightly digesting Friday's gains. Germany and mainland China markets are closed for holidays.

The biggest action so far has been in UK markets. GBP has come under pressure again after PM May announced over the weekend that the UK government plans to trigger Article 50 and start formal Brexit negotiations by the end of March 2017. This news sent GBP lower to start the week.

UK stocks, on the other hand as the benefits of a lower pound for UK manufacturers and exporters became crystal clear. While manufacturing PMI reports for China and Europe were steady, UK manufacturing surged in September with PMI of 55.4 up from 53.3 last month and way above. The street was wrong about Brexit again, having expected a decline to 52.2. The positive impact of the lower pound for the earnings prospects of UK companies has sparked an upward surge in the FTSE as well.

In other developments, financial stocks, particularly banks have picked up the rally from Friday on speculation Deutsche Bank may be able to talk down the big fine its currently negotiating with the US government reducing risk to the sector. This would make sense. While the US wants to make a fine big enough that at sends a message, going too big and crashing the banking system doesn't make sense for anyone. This is especially the case during an election campaign which continues tonight with the Vice-Presidential debate.

Tesla Motors is also attracting attention this morning after the company announced it delivered 24,500 electric vehicles in Q3 while ramping production up as well. Reports suggest the company is on track to reach at least the low end of its 80-90K delivery guidance for this year as production of electric vehicles continues to ramp up.

Crude oil continues to trend upward with Brent and WTI both up over 1%, and Brent regaining the big $50 level. CAD and other oil sensitive currencies are climbing as well. The Loonie could be active around today's Canadian manufacturing PMI report. July GDP reported Friday was not as bad as expected and traders may look to PMI for signs of whether or not the Canadian economy has rebounded into the fall as hoped by the Bank of Canada.

US manufacturing PMI and construction may also spark trading action around their release mid-morning. Traders are likely looking for confirmation of Friday's improved Chicago PMI. Signs of improvement to the US economy would add to the case for a December interest rate increase, while a miss could favour the dovish side.

Corporate News

Tesla Motors    Q3 deliveries 24.5K vs street 22.2K, plus 5.5K vehicles in transit to customers, Q3 production 25.1K vehicles up 37% from Q2  

Economic News

Japan Tankan Large manufacturing Index    6 vs street 7 
Japan Tankan Large manufacturing outlook    6 vs street 8 

Australia Melbourne Institute inflation        1.3% vs previous 1.2%

Manufacturing PMI reports:

China official            50.4 vs vs street 50.5
China official non-manuf        53.7 vs previous 53.5

Australia            49.8 vs previous 46.9
Japan Nikkei            50.4vs previous 50.3

India Nikkei            52.1 vs previous 52.6

UK Markit            55.4 vs street 52.1
Germany Markit            54.3 vs street 54.3
France                49.7 vs street 49.5
Italy                51.0 vs street 50.3 and previous 49.8
Spain                52.3 vs street 51.5
Sweden            54.9 vs street 52.0 and previous 50.7
Norway                 52.6 vs street 52.3
Poland                52.2 vs street 52.1
Greece                49.2 vs street 50.8

Upcoming significant economic announcements include:

10:00 am EDT        US construction spending    street 0.3%

Manufacturing PMI Reports:

9:30 am EDT        Canada            previous 51.1

9:45 am EDT        US Markit        street 51.4
10:00 am EDT        US ISM PMI        street 50.3 vs previous 49.4
10:00 am EDT        US ISM new orders    previous 49.1
10:30 am EDT        Mexico Markit        previous 50.9

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