- US stocks closed in the red in which the major indices only suffered mild losses and the small-cap Russell 2000 underperformed, while bonds were pressured and the dollar was underpinned as participants digested a slew of data releases including ISM Services PMI which printed a massive beat as the headline topped all analyst forecasts and was led by a surge in New Orders and Business Activity, while the inflationary gauge of Prices Paid climbed and the Employment component slipped into contractionary territory. The other releases were mixed as Initial Jobless Claims were higher than expected but Continued Claims printed below estimates and Challenger Layoffs also declined, although the focus now turns to the all-important US NFP report.
- USD continued on this week's advances and tested the 102.00 level to the upside amid the ongoing tensions in the Middle East and after a slew of data releases including a much stronger-than-expected US ISM Services figure.
- Looking ahead, highlights include Hong Kong PMI, Philippines CPI, Australian Home Loans, Singapore Retail Sales, Supply from Australia, Holiday in China.
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LOOKING AHEAD
- Highlights include Hong Kong PMI, Philippines CPI, Australian Home Loans, Singapore Retail Sales, Supply from Australia, Holiday in China.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks closed in the red in which the major indices only suffered mild losses and the small-cap Russell 2000 underperformed, while bonds were pressured and the dollar was underpinned as participants digested a slew of data releases including ISM Services PMI which printed a massive beat as the headline topped all analysts forecasts and was led by a surge in New Orders and Business Activity, while the inflationary gauge of Prices Paid climbed and the Employment component slipped into contractionary territory. The other releases were mixed as Initial Jobless Claims were higher than expected but Continued Claims printed below estimates and Challenger Layoffs also declined, although the focus now turns to the all-important US NFP report.
- SPX -0.17% at 5,700, NDX -0.05% at 19,793, DJIA -0.44% at 42,011, RUT -0.68% at 2,180.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Bostic (2024 voter) said the natural unemployment rate has shifted and it could be lower.
- Fed's Goolsbee (2025 voter) said the dockworkers strike was predicted and retailers have been stockpiling, while they have about 2 weeks of stuff and after that, will forecast more of an effect. Furthermore, Goolsbee said new inflation numbers are at the Fed's target and the labour market is at full employment.
DATA RECAP
- US Factory Orders MM (Aug) -0.2% (Prev. 5.0%, Rev. 4.9%)
- US S&P Global Services PMI Final (Sep) 55.2 (Prev. 55.4)
- US S&P Global Comp Final PMI (Sep) 54.0 (Prev. 54.4)
- US ISM Non-Manufacturing PMI (Sep) 54.9 vs. Exp. 51.7 (Prev. 51.5)
- US ISM Non-Manufacturing PMI Price Paid Index (Sep) 59.4 (Prev. 57.3)
- US ISM N-Mfg New Orders Idx (Sep) 59.4 (Prev. 53.0)
- US ISM N-Mfg Employment Idx (Sep) 48.1 (Prev. 50.2)
- US Initial Jobless Claims 225k vs. Exp. 220k (Prev. 218k, Rev. 219k)
- US Continued Jobless Claims 1.826M vs. Exp. 1.832M (Prev. 1.834M, Rev. 1.827M)
- US Challenger Layoffs (Sep) 72.821k (Prev. 75.891k)
FX
- USD continued on this week's advances and tested the 102.00 level to the upside amid the ongoing tensions in the Middle East and after a slew of data releases including a much stronger-than-expected US ISM Services figure, while the attention now turns to the looming NFP report on Friday.
- EUR was mildly pressured but held on to the 1.1000 handle, while the Services and Composite PMI releases from the bloc were mixed.
- GBP underperformed with early pressure in the European morning after dovish comments from BoE Governor Bailey.
- JPY marginally weakened against the dollar but with price action in USD/JPY contained and with resistance seen at the 147.00 level.
FIXED INCOME
- T-notes sold off as oil prices rallied and ISM Services PMI topped all analyst forecasts.
COMMODITIES
- Oil prices continued their recent gains driven by escalating geopolitics in anticipation of Israel's response.
- Russian Deputy PM Novak said the OPEC+ deal will continue to play a decisive role in global oil market stabilisation and Russian pipeline gas exports may rise to 197bcm per year by 2036.
- Libya's Oil Minister announced to resume oil production today with the largest oil field resuming today and export operations are to also resume normally, while Libya's NOC was reportedly lifting the force majeure at all oilfields, according to a statement.
- Kazakhstan will provide the largest amount of compensation for the overproduction of oil under OPEC+ in October due to repairs at Kashagan, according to Ifax.
GEOPOLITICAL
MIDDLE EAST
- Israeli Chief of Staff said they will continue to fight on all fronts, according to Al Arabiya.
- Israeli Foreign Ministry said their response to Iran will take into account security and diplomatic considerations, while the response will not target civilian sites.
- Israel's ambassador to the UN said they have a lot of options when it comes to Iran and questioned how long should Western world wait when it is known that Iran is building nuclear capabilities, while the official said they have to consider all options if diplomacy fails.
- Israel’s response to the Iranian missile attack will be within a few days, according to Sky News Arabia citing Israeli media.
- Israel’s ground operation in Lebanon is expected to last no more than a few weeks, according to ABC citing Israeli security officials.
- IDF ordered another 25 villages evacuated in southern Lebanon, according to ELINT News.
- Israeli military said it assassinated Rawhi Mushtaha who is the head of the Hamas government in Gaza.
- Israeli military said it intercepted a drone in southern Israel with no injuries reported, while Islamic Resistance in Iraq said it attacked a target in southern Israel, according to a statement.
- US President Biden responded "We are discussing that" when asked if he would support Israel striking Iran's oil fields, according to Bloomberg. Biden also commented that he is not expecting an Israeli response to Iran’s attack today.
- US official said President Biden was clear that we do not support an Israeli strike on Iranian nuclear facilities, according to Al Jazeera.
- US does not believe Israel has decided how to respond to Iran, including whether to hit oil facilities, according to a Reuters source.
- Israeli preparations to target Iran will take time and US-Israeli coordination in this regard continues, according to the Pentagon cited by Sky News Arabia.
- G7 draft statement called for an immediate ceasefire in Gaza and restraint from Middle East players, while it warned of uncontrollable escalation in the region and condemned in the strongest terms Iran's direct military attack against Israel, which it said constitutes a serious threat to regional stability. Furthermore, it reiterated its call for an immediate ceasefire in Gaza and the unconditional release of all hostages.
- US State Department denied the validity of what the Lebanese Foreign Minister said that Nasrallah had agreed to a ceasefire before his assassination, according to Sky News Arabia.
- Ministers from Arab states and Iran have discussed de-escalation between Iran and Israel, while they sought to reassure Iran of their neutrality on the back of concerns as conflict would disrupt oil facilities.
- Houthis broadcasted images of targeting a British oil ship on October 1st in the Red Sea, according to Sky News Arabia.
- Ukraine President Zelenskiy said no decision yet on long-range strikes into Russia and urges allies not to delay.
OTHER
- Russian diplomat Ryankov said on the replacement of the new START treaty that as long as the US aims for the defeat of Russia, dialogue makes no sense for Moscow.
ASIA-PAC
NOTABLE HEADLINES
- Japanese PM Ishiba is to direct a compilation of an economic package on Friday, according to Kyodo.
- Japan's Economy Minister Akazawa said in broad terms, a policy rate of 0.25% is an accommodative state and they are moving towards monetary policy normalisation but existing deflation is a top priority, while he added they must not cool down the economy.
- Germany will reportedly vote against EU tariffs on Chinese EVs, according to sources via Reuters.
- Philippine Central Bank chief favours a quarter-point rate cut, according to Bloomberg.
EU/UK
NOTABLE HEADLINES
- Italy reportedly plans a windfall levy on firms to narrow the deficit and will require sacrifice from all in the budget law, while Italy is to ask firms including defence to contribute to the budget, according to Bloomberg.
DATA RECAP
- UK S&P Global Service PMI (Sep) 52.4 vs. Exp. 52.8 (Prev. 52.8)
- UK S&P Global Composite PMI (Sep) 52.6 vs. Exp. 52.9 (Prev. 52.9)
- German HCOB Services PMI (Sep) 50.6 vs. Exp. 50.6 (Prev. 50.6)
- German HCOB Composite PMI (Sep) 47.5 vs. Exp. 47.2 (Prev. 47.2)
- French HCOB Services PMI (Sep) 49.6 vs. Exp. 48.3 (Prev. 48.3)
- French HCOB Composite PMI (Sep) 48.6 vs. Exp. 47.4 (Prev. 47.4)
- Italian HCOB Services PMI (Sep) 50.5 vs. Exp. 51.0 (Prev. 51.4)
- Italian HCOB Composite PMI (Sep) 49.7 (Prev. 50.8)
- EU HCOB Services Final PMI (Sep) 51.4 vs. Exp. 50.5 (Prev. 50.5)
- EU HCOB Composite Final PMI (Sep) 49.6 vs. Exp. 48.9 (Prev. 48.9)
- EU Producer Prices MM (Aug) 0.6% vs. Exp. 0.3% (Prev. 0.8%, Rev. 0.7%)
- EU Producer Prices YY (Aug) -2.3% vs. Exp. -2.4% (Prev. -2.1%, Rev. -2.2%)
