- US stocks were choppy and the major indices eked mild gains to notch fresh record closes for the S&P 500 and the DJIA, although the small-cap Russell 2000 lagged as attention today centred on a slew of weak PMI data releases from Europe, while the US figures were mixed and accompanied by inflationary commentary within the report. As such, the US release spurred two-way price action in T-Notes which ultimately settled flat ahead of supply this week, as well as a plethora of Fed speak on Thursday and key US PCE data on Friday.
- USD edged slight gains but was off earlier highs after paring its initial advances and as focus centred on Fed speakers and flash PMI data with Fed's Goolsbee noting that many additional rate cuts are likely needed over the next year and rates need to be lowered "significantly", while Bostic said that the economy is normalising more quickly than previously thought, so monetary policy needs to as well.
- Looking ahead, highlights include Japanese Flash PMIs, Thailand Trade Data, RBA Rate Decision & Press Conference, Comments from BoJ Governor Ueda, Supply from Japan.
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LOOKING AHEAD
- Highlights include Japanese Flash PMIs, Thailand Trade Data, RBA Rate Decision & Press Conference, Comments from BoJ Governor Ueda, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were choppy and the major indices eked mild gains to notch fresh record closes for the S&P 500 and the DJIA, although the small-cap Russell 2000 lagged as attention centred on a slew of weak PMI data releases from Europe, while the US figures were mixed and accompanied by inflationary commentary within the report. As such, the US release spurred two-way price action in T-Notes which ultimately settled flat ahead of supply this week, as well as a plethora of Fed speak on Thursday and key US PCE data on Friday.
- SPX +0.29% at 5,718, NDX +0.31% at 19,852, DJIA +0.15% at 42,125, RUT -0.34% at 2,220.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Bostic (2024 Voter) said the economy is normalising more quickly than previously thought and monetary policy needs to do so as well, while he supported a 50bps cut as a compromise between remaining uncertainty around inflation and risks to the job market. Bostic also stated that recent dots show a fair amount of dispersion in opinion at the Fed, while he added the Fed is not in a mad dash to neutral and he is in favour of not rushing to judgement or assuming the job is done on inflation. Furthermore, Bostic expects choppiness on inflation going forward and will wait and see what is needed on rates, as well as noted that if the labour market deteriorates that is a reason for a faster pace to neutral, but that is not the baseline.
- Fed's Goolsbee (2025 Voter) said many additional rate cuts are likely needed over the next year and rates need to be lowered "significantly", while he is comfortable with the 50bps rate cut which shows the Fed is focused on risks to employment and not just inflation.
- Fed's Kashkari (2026 voter) said risks have shifted and the labour market is strong which he wants to keep that way. Kashkari expects smaller steps going forward for the Fed and thinks 50bps was a judgement call, while he added that Fed policy is still in a net tight position and will not declare the mission is accomplished on inflation.
- White House Economic Adviser Brainard vowed to prevent 'flood of under-priced autos' from undercutting the ability of the US auto sector to compete on the global stage.
DATA RECAP
- US S&P Global Manufacturing PMI Flash (Sep) 47.0 (Prev. 47.9)
- US S&P Global Services PMI Flash (Sep) 55.4 (Prev. 55.7)
- US S&P Global Composite Flash PMI (Sep) 54.4 (Prev. 54.6)
FX
- USD eked slight gains but was off earlier highs after paring its initial advances and as focus centred on Fed speakers and flash PMI data with Fed's Goolsbee noting that many additional rate cuts are likely needed over the next year and rates need to be lowered "significantly", while Bostic said that the economy is normalising more quickly than previously thought, so monetary policy needs to as well.
- EUR was the laggard and briefly dipped below the 1.1100 handle against the dollar on a slew of disappointing PMI data from the bloc.
- GBP shrugged off early weakness and GBP/USD reverted to 1.3300 territory alongside momentum across activity currencies.
- JPY was marginally firmer after a choppy performance in which USD/JPY oscillated around the 144.00 level before pulling back, while participants await the reopening of markets in Tokyo from the extended weekend and looming comments from BoJ Governor Ueda.
FIXED INCOME
- T-notes whipsawed amid the somewhat mixed signals from PMI data including dismal releases from Europe and weaker US Manufacturing PMI, although the report from the US noted that prices charged for goods and services were accelerating at their fastest rates for six months.
COMMODITIES
- Oil prices were choppy to start the week and eventually settled lower with disappointing global manufacturing PMI data offsetting the heightened geopolitical risk.
- Chevron (CVX) said non-essential personnel are being transported from Gulf of Mexico facilities but noted there was no impact on production due to tropical weather. Chevron later announced it was evacuating non-essential personnel from all Gulf of Mexico platforms including Anchor, Big Foot, Blind Faith, Jack/St. Malo, Petronius and Tahiti.
- Shell (SHEL LN) is monitoring tropical disturbance 35 for potential impacts to its assets and operations in the Gulf of Mexico where it has shut in production at its Stones asset and curtailed output at Appomattox.
- Russia sees oil and gas revenue shrinking for the next three years and is considering lifting an extra output tax on Gazprom in 2025, according to Bloomberg.
- China is to revamp tax rebates for fuel oil imports with the change likely effective from October which would raise import costs for independent refiners and curb fuel oil imports, according to Reuters citing sources.
GEOPOLITICAL
MIDDLE EAST
- Israeli military spokesman said they are going to attack Hezbollah's strategic weapons in the Bekaa Valley area and civilians there should evacuate, while the spokesman responded that Israel has begun a widescale aerial offensive in Lebanon when asked about the possibility of a ground invasion.
- Israeli army chief said they launched a proactive offensive targeting combat infrastructure and are striking targets and preparing for next phases.
- It was reported that senior Hezbollah Leader Ali Karaki was reportedly killed in the latest raid in southern Beirut suburbs. However, a report later stated that Ali Karaki was injured during the targeting in Beirut but did not die, according to Al-Arabiya citing sources. Hezbollah also confirmed that its senior leader Ali Karaki was safe after the targeted Israeli strike on him in Beirut.
- Senior IDF commanders said they are ready for ground manoeuvres in Lebanon, according to Al Jazeera.
- US will reportedly send additional troops to the Middle East amid escalation, according to AP.
- Iran’s President said US policies support and encourage Israel in its open war and Washington's actions contradict its words, while Iran reaffirms that an open regional war will not be in the interest of anyone in the region and the world. Furthermore, he said Iran has sufficient capacity to strike Israel and their response will be at the right time and in the appropriate way, while he added that Israel's assassination of Haniyeh will not be without a response and their reply is coming.
- Iran’s Foreign Minister reiterated that Tehran is ready to start nuclear talks in New York if other parties are willing.
OTHER
- Russian Deputy Foreign Minister said Russia will not conduct nuclear tests if the US refrains from such steps, according to TASS.
- China reportedly told Japan to be cautious in Taiwan and the South China Sea.
- Japan’s Defence Minister said a Russian patrol aircraft violated territorial airspace over Hokkaido's Rebun island, while Japan's self-defence force aircraft fired flares to warn the Russian aircraft.
ASIA-PAC
NOTABLE HEADLINES
- China's Commerce Ministry said regarding the EU challenging China's dairy product probe at WTO that China has received a request for consultations from the European side and regrets the EU submitted a case to the WTO dispute settlement mechanism. Furthermore, it said it will handle the matter in accordance with relevant WTO rules.
- German Economy Minister said a big part of the auto market problem lies in demand from China and it does not seem that this problem will be solved soon.
EU/UK
NOTABLE HEADLINES
- UK Chancellor Reeves is considering changing how the government’s fiscal rules are calculated to allow billions of pounds more in capital spending, according to The Guardian citing government sources.
- UK Chancellor Reeves said the October budget will enact a VAT sales tax on private schools.
- France reportedly asked the European Commission for a further delay in submitting its budgetary plans for the next few years in which it asked for a two-week delay until October 31st, according to FT.
DATA RECAP
- UK Flash Manufacturing PMI (Sep) 51.5 vs. Exp. 52.5 (Prev. 52.5)
- UK Flash Services PMI (Sep) 52.8 vs. Exp. 53.5 (Prev. 53.7)
- UK Flash Composite PMI (Sep) 52.9 vs. Exp. 53.5 (Prev. 53.8)
- German HCOB Manufacturing Flash PMI (Sep) 40.3 vs. Exp. 42.3 (Prev. 42.4)
- German HCOB Services Flash PMI (Sep) 50.6 vs. Exp. 51.0 (Prev. 51.2)
- German HCOB Composite Flash PMI (Sep) 47.2 vs. Exp. 48.2 (Prev. 48.4)
- French HCOB Manufacturing Flash PMI (Sep) 44.0 vs. Exp. 44.3 (Prev. 43.9)
- French HCOB Services Flash PMI (Sep) 48.3 vs. Exp. 52.5 (Prev. 55)
- French HCOB Composite Flash PMI (Sep) 47.4 vs. Exp. 50.6 (Prev. 53.1)
- EU HCOB Manufacturing Flash PMI (Sep) 44.8 vs. Exp. 45.5 (Prev. 45.8)
- EU HCOB Services Flash PMI (Sep) 50.5 vs. Exp. 52.3 (Prev. 52.9)
- EU HCOB Composite Flash PMI (Sep) 48.9 vs. Exp. 50.5 (Prev. 51.0)
