- APAC stocks followed suit to the mixed performance stateside as the region digested further support measures from the PBoC and a slew of Chinese data including mixed Q3 GDP, better-than-expected activity data, and a further decline in House Prices.
- Chinese sentiment was eventually lifted after comments from PBoC Governor Pan who reiterated that they could cut RRR further this year and noted expectations for a 20bps-25bps reduction in the Loan Prime Rates on Monday.
- ECB officials reportedly see a December cut very likely with the 2% goal nearer, according to Bloomberg; Reuters sources added policymakers expect a rate cut in December barring a major rise in data such as core and services inflation or in indicators of economic growth.
- Israeli PM Netanyahu confirmed the Hamas leader’s death and said Israel’s task is not complete and the war is not over, while Israel is to continue full force until its hostages are returned.
- European equity futures are indicative of a subdued cash open with the Euro Stoxx 50 future -0.2% after the cash market closed higher by 0.8% on Thursday.
- Looking ahead, highlights include UK Retail Sales, US Building Permits, ECB Survey of Professional Forecasters, Comments from Fed’s Bostic, Kashkari & Waller, Earnings from Regions Financial, Fifth Third Bancorp, Procter & Gamble, American Express, SLB, Ally Financial & Volvo AB.
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US TRADE
EQUITIES
- US stocks ultimately closed mixed with outperformance in the DJIA and weakness in the small-cap Russell 2000 as participants digested earnings releases and the latest data including better-than-expected Retail Sales, Initial Jobless Claims and Philly Fed Index which lifted the dollar and yields. Most sectors were subdued although Tech, Energy and Financials gained as semiconductors were underpinned by TSMC earnings and with NVIDIA at fresh record highs, while Financials benefitted from Blackstone's strong results. Netflix rose 5% after earnings and subscriber growth topped estimates.
- SPX -0.02% at 5,841, NDX +0.08% at 20,190, DJI +0.37% at 43,239, RUT -0.25% at 2,281.
- Click here for a detailed summary.
APAC TRADE
EQUITIES
- APAC stocks followed suit to the mixed performance stateside as the region digested further support measures from the PBoC and a slew of Chinese data including mixed Q3 GDP, better-than-expected activity data and a further decline in House Prices.
- ASX 200 pulled back from recent record highs with Utilities, Consumer Discretionary and Tech leading the downturn seen across nearly all sectors.
- Nikkei 225 was indecisive around the 39,000 level with the upside capped following firmer-than-expected inflation.
- Hang Seng and Shanghai Comp outperformed but with gyrations seen as participants reflected on the slew of key data from China and with the large banks reducing interest rates on deposits by 25bps. However, sentiment was eventually lifted after comments from PBoC Governor Pan who reiterated that they could cut RRR further this year and noted expectations for a 20bps-25bps reduction in the Loan Prime Rates on Monday. Furthermore, it was initially reported that Pan announced the 7-day reverse repo rates would be lowered by 20bps and the interest rate on the Medium-term Lending Facility could be reduced by 30bps depending on market liquidity, although a major newswire later corrected this headline to state that Pan actually commented that the 7-day reverse repo rates and medium-term lending rates had already been lowered by 20bps and 30bps, respectively.
- US equity futures lacked direction after recent indecision and ignored the China-related developments.
- European equity futures are indicative of a subdued cash open with the Euro Stoxx 50 future -0.2% after the cash market closed higher by 0.8% on Thursday.
FX
- DXY took a breather after strengthening on the back of data releases including US Retail Sales, Initial Jobless Claims and Philly Fed Business Index, while the focus for the dollar now turns to Housing Starts and Building Permits, as well as Fed speakers.
- EUR/USD regained some composure after recently giving way to the dollar strength but with the rebound constrained after the recent ECB rate cut and as source reports also noted that officials see another cut in December as very likely.
- GBP/USD remained afloat after oscillating around the 1.3000 level ahead of incoming UK Retail Sales data.
- USD/JPY trickled beneath the 150.00 focal point after the latest CPI data printed firmer than expected but mostly slowed from the previous month, while there were brief headwinds on jawboning by Japan's top currency diplomat.
- Antipodeans struggled for direction alongside the uneventful picture across the FX space and with only slight support seen following the latest Chinese GDP and activity data, while the tailwind from the PBoC's latest announcement was only brief.
- PBoC set USD/CNY mid-point at 7.1274 vs exp. 7.1267 (prev. 7.1220).
FIXED INCOME
- 10yr UST futures lacked demand after the prior day's bear steepening in which selling pressure was triggered by stronger-than-expected Retail Sales and a fall in Initial Jobless Claims but with prices off their lows after support held at the 112.00 level.
- Bund futures were marginally positive and briefly reclaimed the 134.00 status but remained confined within yesterday's range.
- 10yr JGB futures followed suit to the recent declines in US counterparts with prices also not helped by the firmer-than-expected Japanese CPI data.
COMMODITIES
- Crude futures eked marginal gains with some mild volatility seen after Israeli PM Netanyahu confirmed the death of Hamas leader Sinwar which renewed some hopes for a ceasefire, although the initial dip in oil was then reversed as Netanyahu added that the war is not over and vowed to continue with full force until hostages are returned.
- Spot gold extended its recent rally to breach the USD 2700/oz level and print a fresh all-time high.
- Copper futures gained as participants digested the latest developments in China including large banks reducing their interest rates by 25bps on CNY fixed-rate deposits and an erroneous report of the PBoC conducting fresh short-term funding rate cuts.
CRYPTO
- Bitcoin gained overnight but was off intraday highs after failing to sustain a brief foray above the USD 68,000 level.
NOTABLE ASIA-PAC HEADLINES
- PBoC Governor Pan reiterated that they may further lower RRR this year by 25bps-50bps based on market liquidity and the LPR is expected to drop by 20bps-25bps on Monday, while it was initially reported that Pan said the 7-day reverse repo rates will be lowered by 20bps and the interest rate on Medium-term Lending Facility could be reduced by 30bps depending on market liquidity, although this was later corrected by a major newswire to state that Pan said the 7-day reverse repo rates and medium-term lending rates had already been lowered by 20bps and 30bps, respectively. Furthermore, the PBoC launched its Securities, Funds and Insurance Companies Swap Facility operation in which the First batch of SFISF quotas exceeded CNY 200bln.
- PBoC, NFRA and CSRC held a meeting with major financial institutions on the implementation of incremental financial policies on October 16th, while the PBoC emphasised increasing support for financing small firms and implementing the swap facility. It was also reported that large Chinese banks lowered interest rates on CNY fixed-rate deposits by 25bps.
- China's financial regulator said financial institutions will be guided to continue increasing financial supply and fully support the economic recovery, while banks will be guided to cooperate in the extension, restructuring, and replacement of hidden debts, actively supporting efforts to resolve local government debt risks. There were also comments from the CSRC chairman that China is cracking down on illegal share reductions by shareholders and the CSRC has forced them to take responsibility and buy back shares, while they will further deepen reforms in capital market investment and financing.
- China Stats Bureau deputy chief says September economic indicators showed positive changes and China's foreign trade situation this year is better than expected but added that the foundation for the economic recovery is not solid yet. The official stated the implementation of a basket of policy measures will be sped up and optimism about the prospects of the property sector has increased after recent policy measures.
- US Treasury Secretary Yellen said China doesn't need one-off checks to boost spending and consensus urges China to boost the consumer share of income, while White House Economic Adviser Singh said data shows China is using its market power to gain economic and geopolitical leverage and the US sees an unrivalled level and rate of growth in China's subsidies.
- IMF's Georgieva said China’s stimulus measures are in the right direction, but structural reforms are needed to drive domestic consumption, while she added that China should not rely on some miracle that would allow exports to keep driving growth given its massive size. Furthermore, she said China faces trouble if it tries to stick to an export-led growth model, with more trade tensions and slower growth, as well as warned that a failure to shift the economic model toward consumption risks medium-term annual growth falling below 4%.
- Japanese top currency diplomat Mimura said closely watching FX moves with a high sense of urgency and recent yen moves are somewhat rapid and one-sided, while excess volatility in the FX market is undesirable.
DATA RECAP
- Chinese GDP QQ (Q3) 0.9% vs. Exp. 1.0% (Prev. 0.7%)
- Chinese GDP YY (Q3) 4.6% vs. Exp. 4.5% (Prev. 4.7%)
- Chinese Industrial Output YY (Sep) 5.4% vs. Exp. 4.5% (Prev. 4.5%)
- Chinese Retail Sales YY (Sep) 3.2% vs. Exp. 2.5% (Prev. 2.1%)
- Chinese China House Prices YY (Sep) -5.8% (Prev. -5.3%)
- Japanese National CPI YY (Sep) 2.5% vs. Exp. 2.4% (Prev. 3.0%)
- Japanese National CPI Ex. Fresh Food YY (Sep) 2.4% vs. Exp. 2.3% (Prev. 2.8%)
- Japanese National CPI Ex. Fresh Food & Energy YY (Sep) 2.1% vs. Exp. 2.0% (Prev. 2.0%)
GEOPOLITICS
MIDDLE EAST
- Israeli PM Netanyahu met with his security team at the PM office and later confirmed the death of Hamas leader Sinwar, while he added that Israel’s task is not complete and the war is not over, and Israel is to continue full force until its hostages are returned.
- White House said US President Biden and Israeli PM Netanyahu discussed how to exploit the Hamas leader Sinwar's death to bring hostages home and end the war, while they agreed to stay in close contact over the coming days.
- US Defense Secretary Austin said the death of Hamas head Sinwar provides an extraordinary opportunity to achieve a lasting ceasefire, while it also provides an opportunity to end the war, rush in more humanitarian assistance in Gaza, as well as bring relief and hope to Palestinians.
- US is to try and push a Gaza ceasefire proposal forward, while there have been no negotiations for a Gaza ceasefire for the past few weeks.
- US Secretary of State Blinken told Israeli President Herzog he is expected to arrive in the coming days in the region to discuss a ceasefire deal, according to Kann News.
- White House's Sullivan said they had constructive communications with Israel on the potential response to Iran.
- US sources cited by CNN noted that Washington still believes that the Israeli response to Iran may happen within days.
- Israel told mediators that it is open to ideas that could be put forward for a Gaza deal, according to Al Arabiya.
- Hamas will not show any flexibility in the negotiations in the short term but after a replacement for Sinwar is appointed, there may be changes in tone, according to Kann News citing sources.
- Hezbollah said it is moving to a new and escalating phase in the confrontation with Israel.
- Speaker of the Iranian parliament told French newspaper Le Figaro that Tehran is ready to negotiate with Paris for a ceasefire in Lebanon, according to Sky News Arabia.
OTHER
- Russia is to test the combat readiness of one of its strategic nuclear missile units, according to RIA.
- North Korean leader Kim said South Korea is an apparent hostile country, while he added that the changed nature of the South Korean-US alliance and different military manoeuvres highlight the importance of a stronger North Korean nuclear deterrent, according to KCNA.
EU/UK
NOTABLE HEADLINES
- ECB officials reportedly see a December cut very likely with the 2% goal nearer, according to Bloomberg. It was also reported that sources cited by Reuters noted that ECB policymakers do expect a rate cut in December barring a major rise in data such as core and services inflation or in indicators of economic growth, while US elections and threat of a fresh trade tariff if Trump is elected were seen as a major source of uncertainty.
- BoE's Woods proposed allowing bonus vesting on a pro-rata basis after year one moving to a five-year bonus deferral period for senior bank managers, while he said proposals will support growth without undermining financial stability.
- Some large UK-based pension funds warned that being forced to invest in the UK would be ‘huge mistake’ which could reduce payouts to pensioners, according to FT.
