UKRAINE: Merz To 'Convince' De Wever On Russian Asset Plan At Emergency Meeting
German Chancellor Friedrich Merz is scheduled to hold emergency talks this evening with Belgian Prime Minister Bart De Wever and European Commission President Ursula von der Leyen aimed at addressing Belgian concerns over using frozen Russian sovereign assets to fund Ukraine’s government and war effort.
- Merz told reporters in Berlin yesterday, “I don’t want to persuade [De Wever], but rather convince him. If we take this path, we will do so to help Ukraine, possibly for the next two to three years.”
- The meeting comes a day after the European Commission unveiled a proposal to raise €90 billion (about $105 billion) for Ukraine, with some of it generated by frozen Russian assets, per DW.
- DW notes that Merz and his government strongly support the initiative. In an opinion piece published Wednesday in the Frankfurter Allgemeine Zeitung, he argued that the financial risks should be shared fairly among EU member states, proportionate to their economic strength.
- The Guardian notes that De Wever’s government has “repeatedly argued that should Russia decide to launch retaliatory legal action, or demand its money back because the sanctions against it have been lifted, it risks being left on the hook for billions, alone.”
- Bloomberg reports that US officials lobbied several EU countries to block the effort, arguing “that the assets are needed to help secure a peace deal between Kyiv and Moscow and should not be used to prolong the war.”
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ITALY DATA: Italy Retail Sales Continue Weaker, Food Sees Sustained Fall
Italian retail sales momentum remains weak. In September, real seasonally adjusted retail sales fell 0.5% M/M SA (vs -0.3% prior), and 1.4% Y/Y NSA (vs -1.2% prior). On a rolling quarterly basis, sales fell 0.4% (vs 0.2% prior), returning to negative territory for the first time since April. A reminder that Italian Q3 flash GDP was weaker-than-expected at 0.0% Q/Q (vs 0.1% cons, -0.1% prior). ISTAT noted at the time that domestic demand was a drag on growth, and today's retail sales data suggests consumption was a contributor to this dynamic.
- Both food and non-food sales contributed to the decline in real retail sales in September. Food sales fell 0.5% M/M SA (vs -0.4% prior), the third consecutive month of decline. On a 3m/3m SA basis, food sales fell 0.9% (vs a 0.2% increase prior). Non-food sales decreased 0.6% M/M SA (vs -0.1% prior), though remains relatively more stable on a 3m/3m basis (0.0% September vs 0.2% August). Looking at non-food Y/Y trends, the press release notes the largest increase was seen in "Cosmetic and toilet articles" (4.0% Y/Y), while the sharpest declines were observed in "Shoes, leather goods and travel items (-5.7%) and Clothing (-5.2%)".
- Looking ahead, ISTAT's retail confidence series rebounded in October. However, this indicator's correlation with actual retail sales momentum is relatively weak.
FOREX: USDCAD Extending Winning Streak, Testing Top of Bull Channel
- In line with the broader greenback advance since the FOMC, USDCAD is also on a 5-session winning streak, currently trading at the highest level since April 09. Yesterday, we highlighted that the pair had breached 1.4080, the Oct 16 high, to confirm a resumption of the uptrend.
- Topside momentum has gained traction, with domestic developments assisting the move above 1.41. Canada yesterday budgeted its biggest ever cash deficit this fiscal year, excluding the pandemic, on a fiscal push to revitalize sluggish growth in the country.
- This week’s extension for USDCAD highlights a clear reversal of the corrective bear leg between Oct 14 - 29. Spot is currently testing 1.4136, the top of a bull channel drawn from the Jul 23 low. 1.4167 is the next level of note, the 50.0% retracement of the Feb 3 - Jun 16 bear leg, and above here, attention will be on 1.4274, the April 09 high.
- Final services PMI data will be released later today, however, it’s the October employment data that will be the focus on the Canadian data calendar, set to be a cleaner release given the lack of accompanying US figures. Currently a -5k change in employment is expected, with the unemployment rate seen remaining steady - further increases from the current 7.1% could fuel dovish bets.
US TSY FUTURES: Long Setting In WN Dominates On Tuesday
OI data points to a mix of net long setting (TU, FV & WN) and short cover (TY, UXY & US) as Tsy futures ticked higher on Tuesday.
- There was a bias towards net long setting, with the movement in WN positioning providing the only real swing of note.
| 04-Nov-25 | 03-Nov-25 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,622,213 | 4,596,654 | +25,559 | +995,257 |
FV | 6,816,873 | 6,796,041 | +20,832 | +910,609 |
TY | 5,434,597 | 5,445,139 | -10,542 | -715,395 |
UXY | 2,470,454 | 2,472,105 | -1,651 | -150,249 |
US | 1,883,365 | 1,888,998 | -5,633 | -729,410 |
WN | 2,144,627 | 2,133,029 | +11,598 | +2,214,520 |
|
| Total | +40,163 | +2,525,333 |
