- US stocks were underpinned from the open and both the S&P 500 and DJIA printed fresh record highs amid a tech rally which also saw Nvidia shares notch a record closing high, while nearly all sectors gained aside from energy due to recent declines in oil prices owing to China data and stimulus-related disappointment. Furthermore, the sell-off in oil was later exacerbated after it was reported that Israeli PM Netanyahu told the US that Israel will strike Iranian military, not nuclear or oil, targets.
- USD was firmer on Columbus Day as the perceived chances of a Trump win in the November election continued to grow after election polls over the weekend unveiled Trump was closing the gap between himself and Harris. However, gains were capped as participants also digested comments from Fed officials including Kashkari who noted that further modest cuts appear appropriate, while Waller stated if the economy proceeds as expected, the Fed can move policy to a neutral stance at a "deliberate pace".
- Looking ahead, highlights include South Korean & Indonesian Trade Data, Japanese Industrial Production Final Reading for August, Supply from Japan.
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LOOKING AHEAD
- Highlights include South Korean & Indonesian Trade Data, Japanese Industrial Production Final Reading for August, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were underpinned from the open and both the S&P 500 and DJIA printed fresh record highs amid a tech rally which also saw Nvidia shares notch a record closing high, while nearly all sectors gained aside from energy due to recent declines in oil prices owing to China data and stimulus-related disappointment. Furthermore, the sell-off in oil was later exacerbated after it was reported that Israeli PM Netanyahu told the US that Israel will strike Iranian military, not nuclear or oil, targets.
- SPX +0.77% at 5,860, NDX +0.82% at 20,439, DJIA +0.47% at 40,065, RUT +0.64% at 2,249.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Waller (Voter) said the Fed should proceed with more caution on rate cuts than was needed at the September meeting and the baseline calls for reducing the policy rate gradually over the next year with the policy rate currently restrictive. Waller said if the economy proceeds as expected, they can move policy to a neutral stance at a deliberate pace and if in a less likely case, inflation falls below 2% or the labour market deteriorates, the Fed can front-load rate cuts, while he added that if inflation unexpectedly climbs, the Fed could pause rate cuts and noted the latest inflation data was disappointing.
- Fed's Kashkari (2026 Voter) said the economy is in the final stages of returning inflation to 2% and policy is in a restrictive stance but it is unclear how restrictive, while he added the job market remains strong and further modest cuts appear appropriate with the future path of policy to be data-driven. Kashkari said the neutral rate is likely to be higher than pre-COVID and if US debt continues to increase, then the neutral rate will also increase.
FX
- USD was firmer on Columbus Day as the perceived chances of a Trump win in the November election continued to grow after election polls over the weekend unveiled Trump was closing the gap between himself and Harris. However, gains were capped as participants also digested comments from Fed officials including Kashkari who noted that further modest cuts appear appropriate, while Waller stated if the economy proceeds as expected, the Fed can move policy to a neutral stance at a "deliberate pace".
- EUR began the week softer and printed its lowest in 2 months against the buck ahead of the ECB rate decision later this week.
- GBP was rangebound with the 1.3050 level providing a focal point for the session amid light pertinent macro catalysts.
- JPY continued its gradual weakenening which saw USD/JPY approach just shy of the 150.00 handle before fading some of the gains.
FIXED INCOME
- T-note futures were sold in risk-on trade with cash bonds closed for Columbus Day but settled off lows, supported by Fed's Waller.
COMMODITIES
- Oil prices were pressured after cooler Chinese inflation and trade data, as well as the lack of specifics from China's MoF briefing.
- OPEC MOMR (October) stated that October 2024 global oil demand growth revised down by 106k BPD to 1.9mln BPD.
GEOPOLITICAL
MIDDLE EAST
- Israeli PM Netanyahu told the US that Israel will strike Iranian military, not nuclear or oil, targets, according to officials cited by Washington Post.
- Israeli PM Netanyahu, Defence Secretary Galant and Chief of General Staff Halevi will decide on the form of response to Iran without the participation of the cabinet, according to Israeli media cited by Al Arabiya.
- Israeli PM Netanyahu said they will continue to strike Hezbollah mercilessly throughout Lebanon, including in Beirut.
- Israeli Defence Minister Gallant told US officials that Israel will not impose a "starvation plan" in Gaza, according to Axios's Ravid.
- Israel is preparing for a large-scale attack in Lebanon including Beirut in response to the targeting of the Golani camp, according to Israeli Broadcasting Authority cited by Al Jazeera.
- Senior Israeli security official said the response to the Iranian attack will be strong and Israel must be prepared for the Iranian reaction, while they "must prepare for the exchange of blows, which may drag Washington into war, which it does not want".
- Iran's Foreign Minister said they do not want war even though they are fully prepared for it and currently see no basis for resuming talks with the US, while a regional major crisis must be prevented through diplomacy, according to Al Arabiya.
- Iran recently sent a message to the US administration through a third country that if Israel's response to the missile attack is limited, Iran will consider this round closed, according to sources familiar with the details cited by Kann News.
- Hezbollah said it is to gradually increase targeting of Israeli military sites.
- There will be an international conference on Lebanon in France where over 20 countries agree to participate and they will discuss increasing pressure on Israel to avoid expanding its war on Lebanon, according to Sky News Arabia.
- International coalition forces targeted some Iranian militia sites near Deir Ezzor airport in eastern Syria, according to Sky News Arabia.
OTHER
- NATO Secretary General Rutte in his first visit to Ukraine mission, welcomed plans for temporary deployment of US long-range missiles to Germany from 2026, while he said NATO will not be cowed by Russian threats and will keep its strong support of Kyiv.
- China's Defence Ministry said the PLA's actions will be pushed further with each provocation of Taiwan independence until the issue is entirely resolved. It was also reported that the Pentagon called China’s military operation near Taiwan "irresponsible, disproportionate, and destabilising".
ASIA-PAC
NOTABLE HEADLINES
- China could issue CNY 6tln of treasury bonds over three years with funds that will be partially used to help local governments resolve their off-the-book debts, according to Caixin citing sources.
- EU official said they have received EV price undertaking offers from the Chinese Chamber of Commerce and individual exporters, while the official added it seems difficult to come to an agreement by end-October and a single minimum price as an alternative would not work.
EU/UK
NOTABLE HEADLINES
- UK PM Starmer refused to comment on reports that Capital Gains tax could get as high as 39% and said speculation on the budget is getting "wide of the mark", while he avoided answering the question around a National Insurance increase, according to Bloomberg.
- UK Chancellor Reeves announced over GBP 60bln of investments into the UK today and said they will stick to manifesto commitments not to raise taxes on working people when asked about national insurance paid by companies.
