- US stocks were ultimately pressured in the midst of earnings season and the NDX underperformed owing to the weakness in semis as AMD's earnings offset the strong results from Alphabet, and with Super Micro shares plummeting after its auditor Ernst & Young sent it a letter of resignation. Aside from a deluge of earnings, participants also digested mixed data releases as Q3 GDP disappointed but ADP jobs data surged, while the attention was also on the UK Budget announcement which saw Gilts tumble on the inflationary prospects of the Budget and heavy supply forecasts.
- USD mildly weakened but just about held on to the 104.00 status as participants digested mixed data releases in which Advanced GDP disappointed but the Core PCE component was firmer than expected and ADP National Employment surged, while the attention now turns to the Fed's preferred PCE inflation metric on Thursday and then on to Friday's NFP report.
- Looking ahead, highlights include South Korean & Japanese Industrial Production & Retail Sales, New Zealand Business Surveys, Australian Retail Sales, Building Approvals, Private Sector Credit & Export/Import Prices, Chinese Official PMIs, BoJ Policy Decision & Governor Ueda's Press Conference.
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LOOKING AHEAD
- Highlights include South Korean & Japanese Industrial Production & Retail Sales, New Zealand Business Surveys, Australian Retail Sales, Building Approvals, Private Sector Credit & Export/Import Prices, Chinese Official PMIs, BoJ Policy Decision & Governor Ueda's Press Conference.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were ultimately pressured in the midst of earnings season and the NDX underperformed owing to the weakness in semis as AMD's earnings offset the strong results from Alphabet, and with Super Micro shares plummeting after its auditor Ernst & Young sent it a letter of resignation. Aside from a deluge of earnings, participants also digested mixed data releases as Q3 GDP disappointed but ADP jobs data surged, while the attention was also on the UK Budget announcement which saw Gilts tumble on the inflationary prospects of the Budget and heavy supply forecasts.
- SPX -0.33% at 5,814, NDX -0.79% at 20,388, DJIA -0.22% at 42,142, RUT -0.23% at 2,233.
- Click here for a detailed summary.
NOTABLE HEADLINES
- White House official anticipates that payroll numbers will be lower this week due to disruptive hurricanes and strike action although it was noted that these numbers will not impact the underlying trend of several months that the labour market has been resilient.
- Quarterly Refunding announcement noted the US Treasury is offering USD 125bln (prev. 125bln) to raise new cash of around USD 8.6bln and maintained its language that the "Treasury does not anticipate needing to increase nominal coupon or FRN auction sizes for at least the next several quarters". US Treasury is to sell USD 58bln in 3-year notes, USD 42bln in 10-year notes and USD 25bln in 30-year bonds next week, as expected.
DATA RECAP
- US GDP Advance (Q3) 2.8% vs. Exp. 3.0% (Prev. 3.0%)
- US Core PCE Prices Advance (Q3) 2.2% vs. Exp. 2.1% (Prev. 2.8%)
- US Pending Home Sales Change MM (Sep) 7.4% vs. Exp. 1.0% (Prev. 0.6%)
- US ADP National Employment (Oct) 233.0k vs. Exp. 114.0k (Prev. 143.0k, Rev. 159k)
FX
- USD mildly weakened but just about held on to the 104.00 status as participants digested mixed data releases in which Advanced GDP disappointed but the Core PCE component was firmer than expected and ADP National Employment surged, while the attention now turns to the Fed's preferred PCE inflation metric on Thursday and then on to Friday's NFP report.
- EUR strengthened against the buck, following a series of hot data out of Europe including German and Spanish CPI figures, as well as Germany and EZ Flash GDP for Q3.
- GBP was pressured in the aftermath of the UK Budget as Gilts collapsed amid expectations of increased issuances and higher inflation as the OBR assessed the Budget will increase UK interest and gilt rates by 0.25% and that firms will be passing on 60% of the hefty NI costs via lower wages and higher prices.
- JPY was ultimately flat after oscillating through the 153.00 level amid a lack of conviction ahead of the BoJ decision.
- SNB Chairman Schlegel said the CHF is a safe haven which appreciates in times of uncertainty, while they are ready to react to pressure and intervene in FX markets.
FIXED INCOME
- T-notes finished slightly higher but with gains minimal after the curve flattened on mixed data and the quarterly refunding announcement, while a collapse in Gilts following the UK Budget also weighed.
COMMODITIES
- Oil prices were firmer amid a couple of bullish catalysts a report that OPEC+ sources noted the group could delay the planned oil output hike scheduled for December by one month or more, while the latest EIA inventory data showed a surprise draw in crude and gasoline stockpiles.
- US EIA Weekly Crude Stocks -0.515M vs. Exp. 2.3M (Prev. 5.474M)
- OPEC+ could delay a planned oil output hike scheduled for December by one month or more, according to Reuters citing OPEC+ sources.
GEOPOLITICAL
MIDDLE EAST
- Israeli officials said Israel and the US had reached preliminary understandings on the principles for a political settlement to end the war in Lebanon, according to Axios’s Ravid. A senior Israeli official said Israel and the US "see eye to eye" on the principle that an agreement will first be reached and only then will the ceasefire begin, while the official estimated that it would take several weeks to reach an agreement.
- US envoy Hochstein is working on drafting an agreement between Israel and Lebanon, while the army will withdraw from Lebanon within a week of an agreement and will resume its operations if the agreement is violated, according to Al Jazeera.
- Cypriot President said he is optimistic that a ceasefire in Lebanon could be reached in the next 1-2 weeks.
- Lebanon’s Prime Minister said they hope for a ceasefire with Israel in the coming hours or days.
- Lebanon's Hezbollah Chief Qassem said his agenda is to follow Nasrallah's agenda in all aspects and they will continue with their war plan.
- Israel’s army issued a bombing notice to the entire eastern city of Baalbeck and surrounding areas, according to Reuters citing an IDF spokesperson. It was later reported that the Israeli military said it attacked fuel reservoirs in Lebanon's Bekaa region located in military complexes of Hezbollah's logistical empowerment unit, while it added that Iran is behind supplying Hezbollah with fuel as part of its military support and it targeted oil depots belonging to Hezbollah's 4400 Logistics Armament Unit in the Bekaa.
- CNN cited a senior source familiar with Iran's intentions who stated that the Israeli attack would be met with a "decisive and painful response", while the source did not provide a date but said it would "likely take place before the US election", according to Kann.
- Iran's Defence Minister said there has been no disruption to missile production since the Israeli attack.
- White House said if Iran does respond the US will support Israel.
OTHER
- Russia's Kremlin dismissed an FT report that Russia and Ukraine are in early talks about stopping striking energy infrastructure.
- South Korean Defence Minister said Russia could aid North Korea with technology for tactical nuclear weapons and ICBMs in exchange for North Korean troops.
- China and India concluded a troop pullback from the Ladakh border face-off point, according to ANI citing an Indian army source.
ASIA-PAC
NOTABLE HEADLINES
- China told automakers to pause investing in EU countries that voted for additional EV tariffs and encouraged investment in EU member countries that opposed additional EV tariffs, while it advised automakers to be united and hold collective investment talks with European governments, according to Reuters citing sources.
- EU is set to send envoys to China to discuss an EV tariff alternative, according to Bloomberg.
- Taiwan's stock exchange will suspend trade on Thursday due to a typhoon.
EU/UK
NOTABLE HEADLINES
- UK Chancellor Reeves unveiled the Budget which she noted raises taxes by GBP 40bln and confirmed a national minimum wage increase. UK will increase employers' national insurance contributions by 1.2ppt points (was touted to be around 2ppt points and 1ppt is worth GBP 8.5bln) and will reduce the threshold for paying NI to GBP 5k (prev. GBP 9.1k) by employers which would raise GBP 25bln per year by end of the forecast period. UK will increase the lower rate of capital gains tax to 18% (prev. 10%) and the CGT higher rate will rise to 24% to raise GBP 2.5bln, while the UK will extend the inheritance tax threshold freeze to 2030 and will bring inherited pensions into inheritance tax from 2027 to raise over GBP 2bln.
- UK DMO said Gilt Remit for 2024/25 year is seen at GBP 296.9bln (exp. 294bln, prev. 277.7bln) and borrowing will increase by an average of GBP 32.3bln over the next five years, while the OBR assessed the budget will increase UK interest and Gilt rates by 0.25% and that firms will be passing on 60% of the hefty NI costs via lower wages and higher prices. Furthermore, UK OBR forecasts 2024 GDP growth of 1.1% (prev. forecast 0.8%), 2025 growth of 2.0% (prev. 1.9%), 2026 growth of 1.8% (prev. 2.0%) and 2027 growth of 1.5% (prev. 1.8%). UK's DMO CEO later said the Gilt market has reacted 'quite positively' to an increased issuance after the Budget and has a strong track record in absorbing higher prices.
- ECB's Nagel said price stability is not far off, but the last stretch of the road still has to be covered.
- ECB's Schnabel said no need to go below neutral and disinflation remains on track which allowed them to lower rates further in October, but the fight against inflation is not yet won and a gradual approach to removing restriction remains appropriate.
- ECB's Villeroy said the ECB does not have to react to short-term deviations from the inflation target under the medium-term orientation and victory against inflation is in sight.
DATA RECAP
- EU Economic Sentiment (Oct) 95.6 vs. Exp. 96.3 (Prev. 96.2, Rev. 96.3)
- EU Industrial Sentiment (Oct) -13.0 vs. Exp. -10.5 (Prev. -10.9, Rev. -11.0)
- EU Services Sentiment (Oct) 7.1 vs. Exp. 6.6 (Prev. 6.7, Rev. 7.1)
- EU Consumer Confidence (Oct) -12.5 vs. Exp. -12.5 (Prev. -12.5)
- EU GDP Flash Prelim QQ (Q3) 0.4% vs. Exp. 0.2% (Prev. 0.2%)
- EU GDP Flash Prelim YY (Q3) 0.9% vs. Exp. 0.8% (Prev. 0.6%)
- German GDP Flash QQ SA (Q3) 0.2% vs. Exp. -0.1% (Prev. -0.1%)
- German GDP Flash YY NSA (Q3) 0.2% vs. Exp. 0.1% (Prev. 0.3%)
- German CPI Prelim MM (Oct) 0.4% vs. Exp. 0.2% (prev. 0.0%)
- German CPI Prelim YY (Oct) 2.0% vs. Exp. 1.8% (Prev. 1.6%)
- Italian GDP Prelim QQ (Q3) 0.0% vs. Exp. 0.2% (Prev. 0.2%)
- Italian GDP Prelim YY (Q3) 0.4% vs. Exp. 0.7% (Prev. 0.9%, Rev. 0.6%)
