- Mixed APAC trade after hawkish Fed commentary and with the region awaiting the weekend's Chinese MOF update.
- European futures point to a slightly firmer open, US futures were bid but have since faded.
- DXY flat with peers mixed but rangebound, NZD outperforms while havens lag.
- Fixed benchmarks underpinned by the strong US 30yr tap; Crude pulled back from Thursday's gains.
- Israeli Security Cabinet is yet to make a decision on the nature of the response to Iran.
- Highlights include German CPI (Final), UK GDP Estimate, Services, Manufacturing Output, US PPI, Canadian Unemployment, UoM Inflation Prelim., BoC SCE & Outlook Survey, Fitch Credit Review on France, Speakers including Fed’s Goolsbee, Logan & Bowman, Supply from Italy, Earnings from JPMorgan, BlackRock, Wells Fargo, Bank of New York Mellon & Fastenal.
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US TRADE
EQUITIES
- US stocks ultimately closed in the red following a choppy session with underperformance seen in the Russell 2k as participants digested the latest data releases including firmer-than-expected consumer inflation and an increase in jobless claims. As such, the majority of sectors were on the back foot although energy outperformed as oil prices gained alongside the backdrop of the ongoing geopolitical tensions as participants await Israel's response to Iran.
- SPX -0.21% at 5,780, NDX -0.13% at 20,242, DJIA -0.14% at 42,512, RUT -0.55% at 2,188.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Bostic (2024 voter) said he is totally comfortable with skipping a meeting if the data suggests that’s appropriate, while he commented regarding the US CPI data that the choppiness is along the lines of maybe they should take a pause in November which he is definitely open to. Furthermore, he thinks they have the ability to be patient and wait and let things play out a little longer, according to an interview with WSJ.
APAC TRADE
EQUITIES
- APAC stocks traded mixed following the choppy price action stateside where markets reflected on disappointing data and hawkish-leaning comments from Fed's Bostic, while regional participants await the Chinese Ministry of Finance's press briefing.
- ASX 200 price action was lacklustre with the index contained by weakness in real estate, utilities and financials.
- Nikkei 225 eked marginal gains with index heavyweight Fast Retailing leading the advances post-earnings, while Seven & I was at the other end of the spectrum after it cut its guidance and announced a restructuring plan to fend off a takeover.
- KOSPI sits with marginal gains following the BoK's 25bps rate cut which Governor Rhee framed as a hawkish cut.
- Shanghai Comp was pressured in the absence of Hong Kong participants and stock connect flows, while participants await tomorrow's Ministry of Finance press conference and whether China will unveil large fiscal stimulus.
- US equity futures were marginally higher with only brief tailwinds seen in the Emini Nasdaq 100 amid the unveiling of Tesla's Robotaxi, Robovan and driverless Model Y, while the focus now shifts to the start of earnings season. Since, that modest upside has faded with futures essentially unchanged.
- European equity futures are indicative of a positive cash open with the Euro Stoxx 50 future +0.2% after the cash market closed lower by 0.3% on Thursday.
FX
- DXY remained flat after yesterday's indecision as participants digested the latest US data and remarks from Fed officials including Bostic who said he is comfortable with skipping a meeting and suggested pausing in November following the CPI data.
- EUR/USD traded rangebound after clawing back the prior day's initial losses with the help of support at the 1.0900 level.
- GBP/USD conformed to the uneventful picture across the FX space ahead of a deluge of UK data including monthly GDP.
- USD/JPY struggled for direction amid a lack of tier-1 data and after its recent pullback to beneath the 149.00 territory.
- Antipodeans nursed some of their recent losses but with the rebound contained in the absence of any major catalysts and as participants second guess if China will announce large fiscal stimulus at the Ministry of Finance's press briefing on Saturday.
- SNB vice-chairman said price stability is the key thing they do at the SNB and stated that the primary tool of the SNB is the interest rate and FX transactions are a secondary tool.
- Peru Central Bank maintained its reference rate at 5.25% (exp. 25bps cut) and stated that future rate cuts will depend on inflation data and its determinants, while core inflation is expected to stay within the target range on the projected horizon.
FIXED INCOME
- 10yr UST futures were mildly underpinned after a strong 30yr US auction provided the determining factor following yesterday's data-induced price swings, while participants now await more data releases and Fed speakers.
- Bund futures gradually edged higher after withstanding the recent brief tests of the 133.00 level to the downside.
- 10yr JGB futures tracked the recovery across global peers but with prices capped just above the 144.00 level amid a lack of pertinent catalysts and data releases from Japan.
COMMODITIES
- Crude futures marginally pulled back after rallying throughout the prior day amid the ongoing geopolitical situation with the Israeli security cabinet expected to approve Israel's response plan to Iran, while there were mild headwinds following a report that US President Biden and Israeli PM Netanyahu narrowed the gaps regarding the nature of Israel's response against Iran.
- Spot gold extended on gains after gradually edging higher as the dust settled from the firmer-than-expected US CPI data.
- Copper futures were kept afloat after yesterday's intraday rebound but with gains capped amid the mixed risk tone.
- Chile's Codelco copper production rose 10.1% Y/Y in August to 125.3k tons, Escondida output rose 15.5% Y/Y to 105.3k tons and Collahuasi output fell 11.3% Y/Y to 48.8k tons.
CRYPTO
- Bitcoin was firmer following a recovery from yesterday's brief dip beneath the USD 60,000 level.
NOTABLE ASIA-PAC HEADLINES
- China's Infrastructure Ministry, Ministry of Industry and Information Technology, and State Administration for Market Regulation are to hold a briefing on Monday at 10:00 local time (03:00BST/22:00EDT).
- Republican Presidential candidate Trump said he will bar all Chinese autonomous vehicles from travelling on US roads.
- BoK cut its base rate by 25bps to 3.25%, as expected, with the decision not unanimous as board member Chang Yong-Sung dissented and the central bank also voted to lower policy interest rate in special loan programmes. BoK said it will thoroughly assess trade-offs among inflation, growth, and financial stability, as well as noted that South Korea's economy is to continue moderate growth and the BoK will carefully determine the pace of further cuts to the base rate. Governor Rhee stated that five board members said keeping the policy rate at 3.25% is appropriate for the next three months and one board member was open to a further cut in the three months ahead, while Rhee added that today's policy decision could be viewed as a hawkish cut. Furthermore, he said they will look at property prices, Q3 growth figures and the pace of household debt growth for the rate review in November, while he added that they will look at financial stability risks for any further rate reduction decisions and the pace of rate cuts will be slower in South Korea compared with the US.
GEOPOLITICS
MIDDLE EAST
- Israeli security cabinet is expected to approve Israel's response plan to Iran, according to NYT. Thereafter, Israeli Broadcasting Authority says the Security Cabinet has not yet made a decision on the nature of the response to Iran, according to Sky News Arabia.
- US President Biden and Israeli PM Netanyahu narrowed the gaps regarding the nature of Israel's response against Iran, according to Walla News' Ravid citing three US officials. The officials noted that Netanyahu and Biden made significant progress during their phone call in achieving an understanding of the scope of Israel's retaliation against Iran, while the administration was "a little less worried" after the call, and another official said "We are moving in the right direction".
- US President Biden realised that Israel is interested in a greater response to Iran than he expected, while it was also reported that the call between Biden and Netanyahu on Wednesday was difficult on several issues and Biden expressed opposition to an attack on oil and nuclear facilities, according to Al Arabiya citing Israel Broadcasting Corp.
- Iranian delegate to the UN said they do not seek war but are ready to defend their sovereignty against any aggression against their security and interests, while they will the exercise natural right to self-defence in accordance with international law against any attack. Furthermore, the delegate said Israel is a threat to international peace and its aggressive actions lead the region to all-out war.
- Lebanon's delegate to the UN said Lebanon is ready for a diplomatic solution and to facilitate the task of mediators.
- Israeli army said a local leader of the Islamic Jihad movement was killed in a raid on the Nour Shams camp in Tulkarm in the West Bank, according to Al Jazeera.
- Senior Hezbollah figure Wafiq Safa reportedly survived an Israeli assassination attempt in Beirut, according to Reuters citing sources.
OTHER
- US Secretary of State Blinken denounces China's naval manoeuvres at ASEAN summit and said they are "increasingly dangerous".
EU/UK
NOTABLE HEADLINES
- France's Budget is to cut spending and raise taxes to hit a 5% deficit in 2025, while the Budget bill is to raise EUR 2bln from the temporary tax increase on wealthy households and is to raise EUR 8bln with a surtax on the 440 largest firms.
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