- US stocks ultimately finished with mild gains after reversing the early downside that was spurred by disappointing US Consumer Confidence data, while the sectors were mixed with outperformance in materials following China's recent stimulus efforts and financials lagged with Visa pressured as it faces a DoJ antitrust suit. The data release also saw Treasuries reverse their initial risk-on losses and triggered selling in the dollar.
- USD declined throughout the session after the DXY failed to sustain a brief return above the 101.00 level amid the positive risk environment and with further downside seen after the surprise decline in US Consumer Confidence.
- Looking ahead, highlights include Japanese Services PPI & BoJ Core CPI, Australian Monthly CPI, Supply from Australia.
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LOOKING AHEAD
- Highlights include Japanese Services PPI & BoJ Core CPI, Australian Monthly CPI, Supply from Australia.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks ultimately finished with mild gains after reversing the early downside that was spurred by disappointing US Consumer Confidence data, while the sectors were mixed with outperformance in materials following China's recent stimulus efforts and financials lagged with Visa pressured as it faces a DoJ antitrust suit. The data release also saw Treasuries reverse their initial risk-on losses and triggered selling in the dollar.
- SPX +0.25% at 5,733, NDX +0.47% at 19,945, DJIA +0.20% at 42,208, RUT +0.17% at 2,224
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed’s Bowman (voter) repeated that her dissent to a half-point cut was warranted by inflation still being above target and that a measured pace of cuts was more appropriate. Bowman said core inflation remains uncomfortably above the 2% target with upside risks given ongoing growth in spending and wages, while she added that recalibrating policy is appropriate given the progress on inflation but the Fed should not declare victory yet. Furthermore, she said her estimate of the neutral rate is “much higher” than before the pandemic and policy is not as restrictive as it may seem.
DATA RECAP
- US Consumer Confidence (Sep) 98.7 vs. Exp. 104.0 (Prev. 103.3, Rev. 105.6)
- US Richmond Fed Composite Index (Sep) -21.0 (Prev. -19.0)
- US Richmond Fed Mfg Shipments (Sep) -18.0 (Prev. -15.0)
- US Richmond Fed Services Index (Sep) -1.0 (Prev. -11.0)
- US Monthly Home Price MM (Jul) 0.1% (Prev. -0.1%)
- US Monthly Home Price YY (Jul) 4.5% (Prev. 5.1%, Rev. 5.3%)
- US CaseShiller 20 MM SA (Jul) 0.3% vs. Exp. 0.4% (Prev. 0.4%, Rev. 0.47%)
- US CaseShiller 20 YY NSA (Jul) 5.9% vs. Exp. 5.9% (Prev. 6.5%, Rev. 6.5%)
FX
- USD declined throughout the session after the DXY failed to sustain a brief return above the 101.00 level amid the positive risk environment and with further downside seen after the surprise decline in US Consumer Confidence.
- EUR shrugged off the early headwinds that were triggered by mostly disappointing German Ifo data with EUR/USD rebounding from support around the 1.1100 level, while the single currency continued to edge higher owing to the dollar's demise.
- GBP extended on its best levels in around two and a half years and reclaimed the 1.3400 status.
- JPY was mostly subdued against its peers but strengthened against the dollar owing to the weak US Consumer Confidence.
- BoC Governor Macklem said with the continued progress they have seen on inflation, it is reasonable to expect further rate cuts.
FIXED INCOME
- T-notes pared the overnight risk-on induced weakness after dismal US Consumer Confidence.
COMMODITIES
- Oil prices notched firm gains but settled off highs with early tailwinds from China's stimulus efforts and geopolitical tensions.
- OPEC's 2024 World Oil Outlook stated that global primary energy demand is to increase by 24% to 2050, driven by the non-OECD, with the numbers suggesting it will lift from 301 mboe/d in 2023 to 374 mboe/d in 2050.
- BSEE reported that 16% of oil production and 11% of gas production in the US Gulf of Mexico is shut in response to tropical storm Helene.
- Shell (SHEL LN) is monitoring tropical storm Helene for potential impacts to its assets and operations in the Gulf of Mexico and noted with a shift in the forecast tract of the storm, they are beginning the process of restoring production at their Stones platform. Co. added that production at Appomattox continues to be curtailed and a completed removal of non-essential personnel from Appomattox as well as assets in the Mars corridor, have safely paused some of their drilling operations, while there are currently no other impacts on their production across the Gulf of Mexico.
GEOPOLITICAL
MIDDLE EAST
- Israeli Defence Minister Gallant said they have more strikes ready against Hezbollah, while he added that they must continue until they achieve their goal and ensure the safe return of Israel's northern residents to their homes.
- Israeli Chief of Staff said they will increase the frequency of attacks on Hezbollah and must not give Hezbollah a break with attacks to be accelerated.
- Israel’s army reported the killing of Ibrahim Al-Qubaisi who is the commander of Hezbollah's rocket and missile system, according to Sky News Arabia.
- IDF Radio cited military sources who stated that they have a long way ahead and are still at the beginning, according to Al Arabiya.
- Israeli senior official said a ground operation in Lebanon could be considered if the political track does not lead to the return of the Israeli residents to the north.
- Hezbollah said it targeted Israel's Atlit navy base south of Haifa with drones.
- Hezbollah urged Iran in recent days to launch an attack against Israel as fighting between the Lebanese militant group and the Israeli military dramatically escalated, but Iran has so far refrained, according to Axios.
- Syrian air defences confronted suspected Israeli missiles that were launched towards targets in the port city of Tartous, according to Reuters sources citing the Syrian Army.
- White House's Sullivan said the US is determined to bring about a ceasefire and hostage deal, as well as avert war between Israel and Hezbollah. It was also reported that the US is negotiating on security developments between Lebanon and Israel at the sidelines of the UN General Assembly, according to Sky News Arabia citing sources.
- Iran is brokering secret talks to send Russian anti-ship missiles to Yemen's Houthis, according to Reuters citing sources. The report noted that experts said this would increase the Houthis to strike Red Sea commercial shipping and raise the threat to US and allied warships, while experts also stated that Houthis could use the missiles on land to threaten Saudi Arabia.
OTHER
- Russia’s Kremlin said they have no alternative but to achieve all of their aims in the military operation in Ukraine.
- North Korean leader Kim's sister Kim Yo Jong said the US nuclear submarine in Busan, South Korea is a show of US ambition.
ASIA-PAC
NOTABLE HEADLINES
- China's financial regulator said it will expand the pilot scope of equity investment by financial asset investment firms to 18 cities.
- China's Securities Regulator published guidance to encourage listed companies to conduct M&As, while it said it will encourage private equity funds to participate in M&A and restructuring of listed firms.
- BoJ Governor Ueda said he wants to scrutinise each month's service price data in gauging development in underlying inflation and noted that October is particularly a month when service prices are revised in Japan, so want to look closely at the data for that month.
EU/UK
**NOTABLE HEADLINES
- BoE Governor Bailey said inflation has come down a long way and they still have to get it sustainably to the target, while he noted there is an unbalanced mix of components currently and is encouraged the path for inflation is downward. Bailey added that he believes the path for rates will also be downward, but gradually, according to KentOnline.
- ECB President Lagarde said the ECB is almost at the 2% target, while he wants to make sure they reach the target and remain there, according to comments on The Daily Show.
- ECB's Knot said the ECB is likely to continue to gradually reduce interest rates at least through the first half of 2025 but noted that rates are unlikely to return to extremely low levels and will likely end up between 2-3%.
- ECB's Muller said it is reasonable to expect more cuts if the outlook holds. Muller also said it will be easier to decide on a cut in December and it is too early to have a strong view on the October meeting. However, he added an October cut isn't 'totally' excluded and that the latest data suggests a weaker near-term growth outlook.
- ECB's Nagel said they assume the German economy will slowly pick up some momentum again and what is certain is that some of these factors holding it back such as weakening growth in Germany, are only temporary. Nagel stated that the main factors behind Germany's weak growth in recent years were the energy crisis, weak foreign demand and high inflation, while he added that tight monetary policy is dampening the economy.
DATA RECAP
- German Ifo Expectations New (Sep) 86.3 vs. Exp. 86.3 (Prev. 86.8)
- German Ifo Business Climate New (Sep) 85.4 vs. Exp. 86.0 (Prev. 86.6)
- German Ifo Current Conditions New (Sep) 84.4 vs. Exp. 86.1 (Prev. 86.5, Rev. 86.4)
