- US stocks were pressured amid rising yields and higher oil prices with macro newsflow quiet and geopolitics in focus as participants await Israel's response to Iran which information cited by the US indicated to be imminent. All major indices finished in the red and underperformance was seen in the Nasdaq, while Utilities, Communication Services and Consumer Discretionary led the declines seen across nearly all sectors aside from Energy which was underpinned by the oil surge.
- USD traded flat to start the week amid quiet newsflow as participants await Israel's response to Iran and in the absence of tier-1 US data, while comments from Fed's Kashkari provided little to shift the dial in which he noted that balance sheet shrinking has a ways to go yet and that he pencilled in a neutral rate closer to 3% at the September SEP's, but added there is huge uncertainty about the neutral rate (Fed median 2.9%).
- Looking ahead, highlights include South Korean Current Account, Japanese Household Spending, Current Account & Eco Watchers Survey, Australian Consumer Sentiment and Business Surveys, RBA Minutes, NDRC Press Conference, Comments from Fed's Bostic & Musalem, Supply from Japan.
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LOOKING AHEAD
- Highlights include South Korean Current Account, Japanese Household Spending, Current Account & Eco Watchers Survey, Australian Consumer Sentiment and Business Surveys, RBA Minutes, NDRC Press Conference, Comments from Fed's Bostic & Musalem, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were pressured amid rising yields and higher oil prices with macro newsflow quiet and geopolitics in focus as participants await Israel's response to Iran which information cited by the US indicated to be imminent. All major indices finished in the red and underperformance was seen in the Nasdaq while Utilities, Communication Services and Consumer Discretionary sectors led the declines seen across nearly all sectors aside from Energy which was underpinned by the oil surge.
- SPX -0.96% at 5,969, NDX -1.17% at 19,801, DJIA -0.94% at 41,954, RUT -0.89% at 2,193.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Kashkari (non-voter) said the balance of risks has shifted away from higher inflation towards maybe higher unemployment and noted the US economy is resilient overall, while he also stated that balance sheet shrinking has a ways to go yet.
FX
- USD traded flat to start the week amid quiet newsflow as participants await Israel's response to Iran and in the absence of tier-1 US data, while comments from Fed's Kashkari provided little to shift the dial in which he noted that balance sheet shrinking has a ways to go yet and that he pencilled in a neutral rate closer to 3% at the September SEP's, but added there is huge uncertainty about the neutral rate (Fed median 2.9%).
- EUR was little changed with EUR/USD kept to within tight parameters beneath the 1.1000 handle and was unreactive to the latest ECB rhetoric.
- GBP retreated after failing to sustain the 1.3100 which also coincided with the pressure in other activity currencies.
- JPY outperformed alongside CHF as the weakness in stocks and geopolitical concerns underpinned haven currencies.
FIXED INCOME
- T-notes were pressured and the 10yr yield climbed back above 4.00% in a continuation of the bond sell-off after the recent hot NFP data and as oil prices surged.
COMMODITIES
- Oil prices extended on recent gains amid the heightened Middle Eastern tensions and another significant hurricane. Updates have been relatively thin on Monday although reports citing a US official noted that information indicated the Israeli response to Iran is imminent, while it was also reported that Iran has prepared 10 scenarios to respond to possible Israeli strikes and its response can be more intense than an Israeli attack.
- Ukrainian PM said Kyiv will not proceed with Russian gas transit after the current deal expires.
- US President Biden declared an emergency in Florida over Milton and NHC said Milton is rapidly intensifying into a category 5 hurricane.
GEOPOLITICAL
MIDDLE EAST
- Israel's Channel 12 reported that PM Netanyahu invited a number of his ministers to urgent consultations in his office, according to Sky News Arabia.
- Israel’s cabinet is in permanent session to discuss the response to Iran and choose the location, according to Al Jazeera citing an Israeli delegate to the UN.
- Information indicated that the Israeli response to Iran is imminent, according to Israel's Channel 13 citing a US security official. It was also reported that a US defence official told Sky News Arabia that they have information Israel's response to Iran is coming.
- US defence official said the Pentagon informed Israel of its assessment on the strike on Iranian nuclear facilities and that Israel has part of the capabilities to bomb Iranian nuclear facilities. Furthermore, the official added that bombing Iranian nuclear facilities requires air capabilities that Washington only possesses and the sites of Iran's nuclear facilities carry geographical complications, according to Sky News Arabia.
- Iran prepared 10 scenarios to respond to possible Israeli strikes and its response can be more intense than an Israeli attack, according to Tasnim News.
- IDF issued new evacuation orders for several areas in the southern Gaza Strip and southern Lebanon, while it was separately reported that the Israeli army called on residents of more than 25 towns in southern Lebanon to evacuate.
- Israel’s navy will soon begin to operate against Hezbollah from the sea, according to Kann news.
- Israeli army issues an urgent warning to beachgoers and boat users from Lebanon's Awali river southward and said it is easing some protective guidelines for residents in some areas of Galilee in northern Israel and Golan Heights.
- Israel’s military shut access to areas around several towns in northern Israel after a security assessment.
- A large rocket barrage was reported from southern Lebanon towards the Upper Galilee, according to Al Arabiya. It was also reported that explosions were heard in central Israel, according to Israel's Channel 12.
- US State Department said Israeli ground operations in Lebanon so far continue to be limited in the US’s assessment.
- Russian missile strike damaged a vessel with grains in the Ukrainian port of Pivdennyi on October 6th, according to Ukraine's infrastructure ministry, while Ukraine later reported that a person was killed onboard a grain ship that was hit with a Russian missile in Odesa.
OTHER
- US assesses that China is not seeking to influence the outcome of the US Presidential Election, according to a senior US intelligence official.
ASIA-PAC
NOTABLE HEADLINES
- The Hong Kong and Macao Affairs Office of the State Council of China announced that it will continue to introduce more policies and measures aimed at benefiting Hong Kong and Macao.
- BoJ Nagoya Branch manager said it is important for FX moves to reflect fundamentals, while excessive FX volatility heightens uncertainty on outlook and makes it difficult for firms to set business plans.
EU/UK
NOTABLE HEADLINES
- ECB’s Holzmann said the inflation fight isn't over, according to Sueddeutsche.
- ECB's Kazaks expects continued cuts of the same magnitude unless the economy does worse than expected and said there is no need to delay the decision in October, while he added that if the ECB sees in October that they can cut rates then they will, and he thinks they can.
- Italy is reportedly considering ways to increase revenues from its digital services tax as part of its 2025 budget, although the government is concerned about retaliation from the US, according to Reuters citing officials.
DATA RECAP
- EU Retail Sales MM (Aug) 0.2% vs. Exp. 0.2% (Prev. 0.1%)
- EU Retail Sales YY (Aug) 0.8% vs. Exp. 1.0% (Prev. -0.1%)
- EU Sentix Index (Oct) -13.8 vs. Exp. -15.9 (Prev. -15.4)
