- US stocks were pressured with risk-appetite spooked after a significant escalation of Middle Eastern tensions in which Iran launched an attack on Israel in what was 'double the size' of the April attack and said they targeted three Israeli military bases. The moves on Tuesday began alongside the cash equity open after Axios' Ravid reported that "US has indications that Iran intends to carry out a ballistic missile attack against Israel in the immediate future", and then extended to extremes once the attack was carried out, although some of the declines were pared after Israel lifted restrictions on their population and signalled the end of the Iranian attack.
- USD extended on the prior day's Powell-spurred gains amid a flight to safety following Iran's attack on Israel.
- Looking ahead, highlights include Australian AIG Manufacturing & Construction Indices, South Korean CPI, Japanese Household Confidence, Comments from Fed's Barkin, Bostic and Collins, Supply from Australia, Market Closures in China, Taiwan & India.
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LOOKING AHEAD
- Highlights include Australian AIG Manufacturing & Construction Indices, South Korean CPI, Japanese Household Confidence, Comments from Fed's Barkin, Bostic and Collins, Supply from Australia, Market Closures in China, Taiwan & India.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were pressured with risk-appetite spooked after a significant escalation of Middle Eastern tensions in which Iran launched an attack on Israel in what was 'double the size' of the April attack and said they targeted three Israeli military bases. The moves on Tuesday began alongside the cash equity open after Axios' Ravid reported that "US has indications that Iran intends to carry out a ballistic missile attack against Israel in the immediate future", and then extended to extremes once the attack was carried out, although some of the declines were pared after Israel lifted restrictions on their population and signalled the end of the Iranian attack.
- SPX -0.93% at 5,709, NDX -1.43% at 19,773, DJIA -0.41% at 42,157, RUT -1.48% at 2,197.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed Governor Cook noted AI fuelled productivity gains and hopes they will serve as a counterweight to inflation, while she added that productivity improvements from AI will come with long and variable lags. Furthermore, Cook said inflation is not at the target but has come down substantially and AI is likely to be disinflationary in the long run, but its impact on inflation will be mixed in the short run.
- Atlanta Fed GDPNow (Q3 24): 2.5% (prev. 3.1%)
DATA RECAP
- US S&P Global Manufacturing PMI Final (Sep) 47.3 (Prev. 47)
- US ISM Manufacturing PMI (Sep) 47.2 vs. Exp. 47.5 (Prev. 47.2)
- US ISM Mfg Prices Paid (Sep) 48.3 vs. Exp. 53.5 (Prev. 54.0)
- US JOLTS Job Openings (Aug) 8.04M vs. Exp. 7.66M (Prev. 7.673M, Rev. 7.711M)
- US Construction Spending MM (Aug) -0.1% vs. Exp. 0.1% (Prev. -0.3%, Rev. -0.5%)
FX
- USD extended on the prior day's Powell-spurred gains amid a flight to safety following Iran's attack on Israel.
- EUR fell for a third consecutive day against the dollar and slipped beneath 1.1100 despite better-than-expected EZ PMIs, while EZ Flash CPI printed in line.
- GBP was pressured alongside its activity peers owing to the escalating geopolitical situation in the Middle East.
- JPY strengthened against most major counterparts amid a haven bid which also underpinned the CHF.
- SNB's Chairman Schlegel said Swiss inflation was only driven by services and the reason for last week's interest rate cut was reduced inflationary pressure. Schlegel said without an interest rate cut, inflation forecasts would have been slower, while he added that they cannot rule out negative rates at the moment and that the SNB ruling nothing out.
FIXED INCOME
- T-notes rallied across the curve as Iran struck Israel, while above-forecast JOLTS were offset by soft ISM Prices Paid and geopolitical tensions.
COMMODITIES
- Oil prices saw a significant bid on escalating Middle Eastern tensions after Iran launched an attack on Israel.
- US Private inventory data (bbls): Crude -1.5mln (exp. -1.3mln), Distillate -2.7mln (exp. -1.5mln), Gasoline +0.9mln (exp. -0.1mln) Cushing +0.7mln.
- OPEC's September crude output fell sharply on Libyan disruption with a decline of 480k BPD to 26.61mln BPD in September.
- Oil loadings from Russia's western ports are to increase 3% M/M to 2.2mln BPD in October, according to Reuters citing sources.
GEOPOLITICAL
MIDDLE EAST
- IRGC announced they launched missiles towards Israel and warned that Israel will be targeted once more if it retaliates, while the missile launches are in retaliation for the killing of Hamas Chief Haniyeh, Hezbollah Chief Nasrallah and IRGC Commander Nilforousha. Iran's Revolutionary Guards also said they targeted three Israeli military bases in a missile attack and used hypersonic 'Fattah' missiles in Israeli attack, according to state TV.
- Israel Army Radio reported nearly 200 missiles were launched into Israel from Iran and the Israeli military said approximately 10mln civilians were targets of Iranian projectiles. However, the Israeli Red Cross cited by Kann News said no one was reportedly injured in today's Iranian missile strike against Israel.
- Iranian news agency Fars said 80% of the rockets hit their targets in Israel, while IRGC said 90% of its missiles successfully hit targets in Israel. Furthermore, separate reports noted that Iranian missiles were intercepted as they flew over Jordanian airspace towards Jerusalem and that Israeli air defences downed dozens of Iranian missiles that flew over Southern Syria.
- Iran's President said on X that Iran does not seek war but will face any threat firmly.
- Iran's armed forces said if Israel responds to the Iranian attack it will be met with vast destruction of its infrastructure and if Israel's backers directly intervene against Tehran, their interests and bases in the region will face Iran's strong attack.
- Iran's UN mission described the attack on Israel as legal, rational, and a legitimate response, while it warned if Israel 'dare to respond or commit further acts of malevolence, a subsequent and crushing response will ensue'. Iran's UN mission also said that no prior notice was given to the US of Iran's attack on Israel but a serious warning was issued afterwards.
- Iranian order to launch missiles at Israel was made by supreme leader Khamenei, according to a senior Iranian official via Reuters.
- Iran's Foreign Minister commented on X that Iran exercised self-defence under Article 51 of the UN Charter and Iran's action is concluded unless the Israeli regime decides to invite further retaliation, while he said Israel's enablers now have a heightened responsibility to rein in the warmongers in Tel Aviv.
- Israel’s Home Front Command lifted restrictions on Israelis after the end of Iranian missile attacks and said it will defend the citizens of Israel and respond to Iranian missiles at the right time and place, according to Sky News Arabia.
- Israeli PM Netanyahu said Iran made a big mistake tonight and they will pay for it, while he added that the Iranian missile attack on Israel failed.
- Israel's UN envoy said Israel will act and Iran will soon feel the consequences of their actions with the response to be painful.
- Israeli official said the response towards Iran "will be harsh", according to Kann News' Amichai Stein.
- Israeli Finance Minister said Iran will regret this moment as it regretted Gaza, Hezbollah and the State of Lebanon, according to Sky News Arabia. It was earlier reported that a warning of the impending Iranian attack reached Israel this afternoon, while the US had indications that Iran intended to carry out a ballistic missile attack against Israel, according to a senior White House official cited by Axios' Ravid.
- Israel warned Iran before today's attack that they would respond to any hit on Israeli territory, according to WSJ.
- IDF spokesman told reporters that the Israeli Air Force "continues to operate at full capacity, and tonight will also continue to strike powerfully in the Middle East, as has been the case for the past year", according to Times of Israel.
- Israeli military sources said their air force will be operating in various places in the Middle East tonight, according to Sky News Arabia. Furthermore, the Israeli military called on residents to evacuate new areas in southern suburbs of Lebanon's Beirut.
- Israeli military announced the assassination of Muhammad Jaafar Qasir who is the commander in charge of weapons transfer from Iran and its affiliates to Hezbollah.
- White House said President Biden directed the US military to aid Israel's defence against Iranian attacks and shoot down missiles targeting Israel.
- US National Security Adviser Sullivan said Iran launched nearly 200 missiles towards targets in Israel and the Iranian attack was not effective as a result of Israeli air defences and US cooperation, while he added this is a significant escalation by Iran.
- US Navy destroyers fired about a dozen interceptors against Iranian missiles headed to Israel, according to the Pentagon.
- Israeli Defence Minister Gallant spoke with US Defence Secretary Austin in which they discussed a joint preparation to repel the Iranian attack. Furthermore, Austin said they discussed 'severe consequences' for Iran in the event Iran chooses to launch a direct military attack against Israel.
- Israeli army reportedly plans an incursion into Lebanon of 1 to 2 km in the first phase, according to Al Arabiya. Furthermore, an Israeli military spokesperson said operations in Lebanon will continue tonight, while the military is calling up four additional reserves brigades for operational missions in the northern arena.
- Israeli security official said an Israeli ground operation is limited and a wider operation targeting Beirut is "not on the table", while the official said there were no clashes with Hezbollah reported yet on the ground.
- Israeli army estimates that the Israeli ground operation in South Lebanon will last a few weeks and they are not going to Beirut or the cities in southern Lebanon. However, it was later reported that Israel's military said it is now targeting Lebanon's capital Beirut.
- Lebanon's Hezbollah said it launched missiles towards military posts in the outskirts of Tel Aviv, according to Reuters citing a statement.
- Israel targeted at least three anti-aircraft radar stations in Southern Syria, according to two military sources cited by Reuters
- Explosions were reported near the Ain al-Assad base in Anbar, Iraq, according to Sky News Arabia citing sources.
- Iraqi resistance group said US bases in Iraq will be a target if the US joins in the response to Iran or uses Iraqi airspace.
- Yemeni Houthi spokesperson said the group targeted Israeli military posts in Tel Aviv and Eilat with drones.
OTHER
- Russia's Deputy Foreign Minister said Russia is ready for a long confrontation with the US and they are sending all the necessary warnings.
- A Chinese national was arrested in Germany on suspicion of foreign agent activities.
ASIA-PAC
NOTABLE HEADLINES
- Japanese PM Ishiba said they will consider delivering a payout to low-income households impacted by rising living costs and noted that Japan is on the cusp of making a complete exit from deflation. Ishiba said they will pursue fiscal policy which places the highest priority on ending deflation and will order at an early date the compilation of a fresh package of measures to ease the pain on households from rising prices, as well as carry over and steadily push through growth strategy of former PM Kishida to achieve growth driven by higher wages and investment. Furthermore, Ishiba hopes the BoJ maintains easy policy as a trend but will not comment on specific rate policy which is up to the BoJ to decide although he is watching its decisions carefully.
- Japan's newly appointed Finance Minister Kato said he has been instructed to promote a growth-orientated economy driven by wage increases and investment.
- Japan's newly appointed Economy Minister Akazawa said he wants the BoJ to decide on future rate hikes carefully, while he added that taking Japan completely out of deflation is the top priority.
- Taiwanese markets will be closed on Wednesday amid a typhoon, according to the Taipei City government.
- India’s government appointed Ram Singh, Saugata Bhattaharya and Nagesh Kumar as the new RBI MPC external members.
EU/UK
NOTABLE HEADLINES
- ECB's de Guindos said expectations surveys are an important part of the toolkit available to central banks for their policy analysis.
- ECB's Kazaks said he very much agrees with market pricing on the ECB's October interest rate decision and said the ECB has a clear-cut case for cutting rates at the October meeting as the EZ economy may face a tipping point.
- ECB's Nagel said future purchases of government bonds by the European Central Bank should be reserved for special cases, according to Bloomberg.
- ECB's Rehn sees EZ inflation stabilising at 2% during 2025, while he said the direction of monetary policy is clear and rate cuts have begun. Rehn said the stance is becoming less restrictive and the pace and scale of cuts will be decided meeting-by-meeting. Furthermore, Rehn said in his view, there are now more reasons to justify a rate cut in October and the recent weakening of EZ growth outlook also tips the scale in the direction of an October cut.
- French PM Barnier said reducing the deficit is one of their policy priorities and the debt burden will weigh in the future unless action is taken now. Barnier also said the minimum wage is to be increased by 2% on 1st November, ahead of the planned 1st January increase, while he added that the budget situation also requires targeted measures on tax policy and will ask large companies and the richest sections of the population to contribute to the effort to turn around finances.
DATA RECAP
- UK S&P Global Manufacturing PMI (Sep) 51.5 vs. Exp. 51.5 (Prev. 51.5)
- German HCOB Manufacturing PMI (Sep) 40.6 vs. Exp. 40.3 (Prev. 40.3)
- French HCOB Manufacturing PMI (Sep) 44.6 vs. Exp. 44.0 (Prev. 44)
- EU HCOB Manufacturing Final PMI (Sep) 45.0 vs. Exp. 44.8 (Prev. 44.8)
- EU HICP Flash YY (Sep) 1.8% vs. Exp. 1.8% (Prev. 2.2%)
- EU HICP-X F&E Flash YY (Sep) 2.7% vs. Exp. 2.7% (Prev. 2.8%)
- EU HICP-X F,E,A&T Flash YY (Sep) 2.70% vs. Exp. 2.80% (Prev. 2.80%)
