- US stocks ultimately closed mixed with most indices in the red amid a firmer dollar and higher yield environment although the Nasdaq outperformed thanks to strength in technology which was the only sector to finish higher and was primarily buoyed by gains in big tech names such as Nvidia (NVDA) and Apple (AAPL), while Communications closed relatively flat alongside gains in Google (GOOGL) and Netflix (NFLX). Elsewhere, T-notes sold off across the curve in little newsflow with the downside following on from weakness in EGBs after a flurry of supply while higher oil prices also weighed and some also cited the "Trump trade" with Trump showing no loss of momentum in the polls and the 538 averages showed Trump leading in four of seven swing states.
- USD climbed and the DXY briefly reclaimed the 104.00 level amid growing tensions in the Middle East (drone strike on the empty Israeli PM home) and the persistent Trump trade (no signs over the weekend of Trump paring recent momentum) supported the buck's move higher, which was further highlighted in higher yields across the curve and a firmer crude complex.
- Looking ahead, highlights include New Zealand Trade Data, BoJ Core CPI, Comments from Fed's Daly & RBNZ's Silk, Supply from Japan.
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LOOKING AHEAD
- Highlights include New Zealand Trade Data, BoJ Core CPI, Comments from Fed's Daly & RBNZ's Silk, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks ultimately closed mixed with most indices in the red amid a firmer dollar and higher yield environment although the Nasdaq outperformed thanks to strength in technology which was the only sector to finish higher and was primarily buoyed by gains in big tech names such as Nvidia (NVDA) and Apple (AAPL), while Communications closed relatively flat alongside gains in Google (GOOGL) and Netflix (NFLX). Elsewhere, T-notes sold off across the curve in little newsflow with the downside following on from weakness in EGBs after a flurry of supply while higher oil prices also weighed and some also cited the "Trump trade" with Trump showing no loss of momentum in the polls and the 538 averages showed Trump leading in four of seven swing states.
- SPX -0.18% at 5,854, NDX +0.18% at 20,361, DJIA -0.80% at 42,932, RUT -1.60% at 2,240.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Logan (2026 voter) expects gradual rate cuts if the economy meets forecasts and said the Fed will need to be nimble with monetary policy choices. Logan stated the economy is strong and stable, while she sees downside risk to the job market and ongoing risks to the inflation goal.
- Fed's Kashkari (2026 voter) said that a rise in the budget deficit would mean that on the margin interest rates would be higher and noted it was not the labour market that caused inflation. Kashkari said going forward, the Fed will look at all the data to decide on rate policy and evidence of a quick labour market weakening could lead to faster rate cuts but added that resilience makes him wonder if the neutral rate is higher and he currently sees modest cuts over the next quarters.
DATA RECAP
- US Leading Index Change MM (Sep) -0.5% vs. Exp. -0.3% (Prev. -0.2%, Rev. -0.3%)
FX
- USD climbed and the DXY briefly reclaimed the 104.00 level amid growing tensions in the Middle East (drone strike on the empty Israeli PM home) and the persistent Trump trade (no signs over the weekend of Trump paring recent momentum) supported the buck's move higher, which was further highlighted in higher yields across the curve and a firmer crude complex.
- EUR was pressured by the dollar strength with the single currency also not helped following softer-than-expected German PPI, while comments from ECB officials provided little to inspire a rebound and suggested the potential for further rate cuts ahead.
- GBP retreated owing to the firmer buck and wiped out the gains seen late last week with GBP/USD at a sub-1.3000 level.
- JPY weakened with USD/JPY gaining a firm footing above the 150.00 territory amid a rise in US yields.
FIXED INCOME
- T-notes tumbled throughout the session on little news amid European supply and higher oil prices, while some cited the "Trump Trade" with the former US President holding onto momentum in the polls.
COMMODITIES
- Oil prices were firmer in an attempt to retrace some of last week’s notable losses on what was a day of thin headline newsflow as participants continued to await Israel’s response to Iran.
- World refined copper markets were in a 54k metric tonnes surplus in August 2024, according to ICSG.
GEOPOLITICAL
MIDDLE EAST
- Israel passed a warning letter to Hezbollah in the event of repeated attempts to target Israeli officials, while it was also reported that Hezbollah tried to target two Israeli politicians other than Netanyahu, according to Al-Arabiya sources.
- Israeli army issued an evacuation warning to residents of buildings in the neighbourhoods of Al-Lilaki and the boat ramp in the southern suburbs, according to Sky News Arabia.
- Israeli military spokesman said an Israeli strike in Syria killed the head of Hezbollah's money transfers unit.
- Syrian Ministry of Defence said two civilians were killed and three others injured in an Israeli shelling of a car in the Mazzeh area of Damascus.
- Ministers of the Political-Security Council reported that a very large attack will be carried out soon on Iran, while estimates in Israel are that Iran will respond strongly to the Israeli attack, according to Al Jazeera citing Israel's Channel 13.
- Iran's UN Mission told the UN that US President Biden's remarks in Berlin on Israel's plan to attack Iran are "inflammatory" and the remarks indicate tacit US approval and explicit support for Israel's unlawful military aggression against Iran, while the US will bear full responsibility for its role in instigating, inciting and enabling any acts of aggression by Israel against Iran.
- Iranian army commander said if Israel makes any mistake, it will receive a decisive response, according to Sky News Arabia.
- Lebanese PM Berri said after a meeting with US Envoy Hochstein that Lebanon could elect a President in the first week of any truce and a return to the agreement on a three-week truce is possible, while Berri said to Hochstein that the president-elect would oversee the implementation of Resolution 1701 and reach a permanent ceasefire. However, it was also reported that any potential amendment to Resolution 1701 would require approval from China and Russia, while the US is not currently willing to "fight this battle", according to Sky News Arabia sources.
- Egyptian intelligence chief Hassan Rashad presented Shin Bet chief Ronen Bar during their meeting in Cairo on Monday with an outline for a "small" hostage deal with Hamas that would restart negotiations on a larger hostage deal, according to Axios' Ravid. Israeli officials noted that Shin Bet chief Bar presented the Egyptian outline during a cabinet meeting which involves a small deal that would be carried out as a first stage whereby a number of abductees would be released in exchange for a few days of ceasefire and then parties would move on to negotiations on a large hostage deal.
OTHER
- US DoJ proposed barring bulk sales of sensitive US data to China, Russia and Iran due to national security risks.
- US Commerce Department added 26 entities to the entity list for actions contrary to US national security interests and foreign policy under the destinations of China, Egypt, Pakistan and UAE. These additions are related to alleged violations of export controls and involvement in weapons programmes of concern, and evasion of US sanctions and export controls on Russia and Iran.
- Russia's Kremlin said an informal meeting between Russian President Putin and UAE’s President went on until midnight, while it stated that North Korea is Russia’s close neighbour and partner and that they are developing relations in all areas. Furthermore, it did not comment on claims that North Korea is sending troops to Russia and said ties with North Korea are not directed against other countries.
- China is to conduct live-fire drills in some areas along the Niushan Island coast on Tuesday, according to the local maritime bureau.
ASIA-PAC
NOTABLE HEADLINES
- PBoC conducted its first swap operation involving securities brokerages, funds and insurance companies worth CNY 50bln on Monday.
- RBI Bulletin stated the economic activity index forecasts Q2 2024-25 GDP growth of 6.8%, while food inflation could ease in H2 of the current fiscal year.
EU/UK
NOTABLE HEADLINES
- BoE's Greene said a cautious and gradual approach to monetary easing is appropriate given risks to consumption and associated inflation implications, according to FT.
- ECB's Kazaks said inflation is continuing to decline whilst the economy is weak and rates will continue to decline as inflation declines.
- ECB's Kazimir said if an accelerated pace in disinflation is confirmed, the ECB will be in a strong and comfortable position to continue the easing cycle, while he added the October cut leaves the December meeting wide open and they remain flexible and ready to act appropriately.
- ECB's Simkus said if disinflation becomes entrenched, rates could go below the natural level and noted the disinflation trend is on a stable track but services inflation remains high and risks to economic growth are skewed to the downside. Simkus added that policy will clearly become less restrictive and he can’t predict the outcome of December's meeting.
DATA RECAP
- German Producer Prices MM (Sep) -0.5% vs. Exp. -0.2% (Prev. 0.2%)
- German Producer Prices YY (Sep) -1.4% vs. Exp. -1.0% (Prev. -0.8%)
