- US stocks were bid throughout the US session with advances led by the Nasdaq as tech and other heavyweight sectors outperformed, while the small-cap Russell 2k lagged but still closed in the green. The majority of sectors gained although Energy was the notable laggard as crude prices pared some of the recent geopolitical-induced rally with prices not helped by the lack of fresh stimulus announcement from the Chinese state planner’s press conference which hit the demand side of the equation. Nonetheless, the focus remains on geopolitics and crude prices settled off worst levels after an NBC report suggested that Iranian energy facilities are still a target under consideration by Israel, although an Israeli official said they will respond in a way that will not lead to an all-out war with Iran.
- USD traded flat amid a lack of tier-1 data and as participants await the upcoming key releases stateside including FOMC Minutes on Wednesday, CPI on Thursday, and PPI, UoM preliminary and big bank earnings on Friday.
- Looking ahead, highlights include RBNZ & RBI Rate Decisions, Comments from Fed's Jefferson & RBA's Kent, Holiday Closure in South Korea.
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LOOKING AHEAD
- Highlights include RBNZ & RBI Rate Decisions, Comments from Fed's Jefferson and RBA's Kent, Holiday Closure in South Korea.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were bid throughout the US session with advances led by the Nasdaq as tech and other heavyweight sectors outperformed, while the small-cap Russell 2k lagged but still closed in the green. The majority of sectors gained although Energy was the notable laggard as crude prices pared some of the recent geopolitical-induced rally with prices not helped by the lack of fresh stimulus announcement from the Chinese state planner’s press conference which hit the demand side of the equation. Nonetheless, the focus remains on geopolitics and crude prices settled off worst levels after an NBC report suggested that Iranian energy facilities are still a target under consideration by Israel, although Israeli officials suggested that they will respond in a way that will not lead to an all-out war with Iran.
- SPX +0.97% at 5,751, NDX +1.55% at 20,108, DJIA +0.30% at 42,080, RUT +0.09% at 2,195.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Bostic (voter) said the labour market has slowed down but it is not slow or weak and monthly job creation is above what is needed to account for population growth. Bostic also said the economy is close to the Fed's targets and moving closer, while the inflation rate is still 'quite a ways' above 2%.
- Fed's Kugler (voter) said she will support additional rate cuts if progress on inflation continues as expected and policy will be data dependent. Kugler also commented that last Friday's job report was very welcome and showed a healthy level of jobs, while she added labour market cooling has started and the Fed is looking at trends, not single data.
- Fed's Collins (2025 voter) said further rate cuts are likely needed and future action is to be data-driven, while she added that September Fed forecasts predicted 50bps of cuts into year-end. Furthermore, Collins is more confident of inflation being on a durable path of ebbing and said core inflation has moderated but is still elevated.
DATA RECAP
- US International Trade (USD)(Aug) -70.4B vs. Exp. -70.6B (Prev. -78.8B, Rev. -78.9B)
- US Goods Trade Balance (R)(USD)(Aug) -94.22B (Prev. -94.26B)
FX
- USD traded flat amid a lack of tier-1 data and as participants await the upcoming key releases stateside including FOMC Minutes on Wednesday, CPI on Thursday, and PPI, UoM preliminary and big bank earnings on Friday.
- EUR was flat despite the slew of ECB rhetoric with the upside in EUR/USD capped by resistance near the 1.1000 handle.
- GBP edged marginal gains and reclaimed the 1.3100 status but with gains limited amid a lack of fresh catalysts.
- JPY ultimately returned to flat territory after a choppy performance in USD/JPY which traded on both sides of the 148.00 level.
FIXED INCOME
- T-notes were little changed and the curve steepened in a reversal of recent post-NFP flattening as attention turns to upcoming FOMC Minutes and US CPI data.
COMMODITIES
- Oil prices were notably lower and gave back some of the recent extensive gains as participants continued to await the Israeli response to Iran.
- US private inventory data (bbls): Crude +10.9mln (exp. +2.0mln), Distillate -2.6mln (exp. -1.9mln), Gasoline -0.6mln (exp. -1.1mln), Cushing +1.4mln.
- EIA STEO sees US oil production to average 13.32mln BPD in October (prev. 13.25mln BPD in September) and to average 13.51mln BPD in November, while US natural gas production is to average 113.3 BCF/day in October (prev. 113.2 BCF/day) and to average 113.7 BCF/day in November.
- Libya NOC said daily production reached 1.133mln BPD of crude oil and condensate in the last 24 hours with production rates expected to return to pre-closure levels within the next few days.
- Daily oil production in Kazakhstan reportedly decreased by 13% with the start of repairs at Kashagan, according to the energy ministry.
- Hurricane Milton is forecast to retain major hurricane status and expand in size as it approaches the west coast of Florida and today is the last full day for Florida residents to get ready and evacuate if told to do so.
GEOPOLITICAL
MIDDLE EAST
- Israeli PM Netanyahu confirmed that Israel took out Nasrallah's successor, while it was separately reported that PM Netanyahu summoned ministers for security consultations this evening.
- Israeli Defence Minister Gallant postponed his trip to Washington after PM Netanyahu's objection, while advanced talks are underway to hold a phone call between US President Biden and Israeli PM Netanyahu on Iran in the coming days, according to Axios citing sources.
- Israeli PM Netanyahu had set two conditions for Defence Minister Galant to travel to the US and refused to approve the trip to Washington that had been planned for Tuesday night until he receives a phone call with President Biden and until the Israeli cabinet approves the response to Iran's missile attack, according to Axios sources.
- Israel was reportedly considering striking energy facilities in Iran, according to Al Arabiya citing comments by US officials to NBC.
- Israel is not expected to attack Iran's nuclear programme, but is to focus on various kinds of military bases and intelligence sites, according to The Jerusalem Post.
- Israeli senior official said they are going to respond to the Iranian attack and there is no question about it but will not do it in a way that will start an all-out war with Iran, according to Axios.
- Israeli officials stated that Israel is capable of harming Iran but the possibility of its response requires coordination with the US, while Defence Minister Galant and security leaders push to strike Iran militarily and have already submitted the plans to the political leadership.
- White House said the US continues to have discussions with Israel on its response to the Iranian attack.
- US officials cited by NBC do not believe that Israel has made a final decision on the details of the response to Iran and discussions with Tel Aviv included Washington providing intelligence support or even launching air strikes. However, Washington has not decided on any action despite its intention to support Israel's right to defend itself and Israel did not inform Washington of plans to retaliate against Iran.
- US officials feared that Israel will implement its response to Iran during the planned Israeli Defence Minister Gallant's visit to Washington although the visit has since been postponed.
- Iran told Gulf states it would be unacceptable if they allowed their airspace to be used against Iran, according to Reuters.
- Hezbollah's deputy leader expressed openness to a deal with Israel, according to dpa citing an earlier televised interview.
OTHER
- UK Foreign Office said the UK sanctioned Russian troops deploying chemical weapons on the battlefield in Ukraine.
ASIA-PAC
NOTABLE HEADLINES
- Chinese Premier Li said they will strengthen policy coordination and that policy implementation should reflect good timing, strength and pace, while he added that all sides should actively roll out policy measures to stabilise growth.
- China's State Council held a special study session on economic policies on Thursday, according to state media.
- China's Commerce Ministry said China is studying measures such as raising tariffs on imported large displacement fuel vehicles while it is to make a fair and objective ruling based on the investigation results of EU pork and dairy.
- China’s Commerce Ministry expressed serious concerns about US semiconductor policies towards China and restrictions on Chinese connected vehicles, while it urged the US to address specific concerns of Chinese companies and lift sanctions on Chinese firms as soon as possible during a call with US Commerce Secretary Raimondo.
- China proposed a EUR 30k minimum price in EV import tariff spat with EU but Brussels rejected the proposal, while alternative agreements could include individually calculated import prices and import quotas, according to Reuters citing sources.
- EU is to robustly challenge at the WTO level the announced imposition of provisional anti-dumping measures by China on imports of Brandy from the EU. EU is to assess all possibilities to offer appropriate support to EU producers from situations of market disturbance, or threat thereof, while the Commission will always stand firmly and fearlessly on the side of EU producers, industry, open and fair trade, and a global level playing field.
- Mexico wants to curb Chinese imports with the help from US companies, according to WSJ.
- Japanese Economy Minister Akazawa said Japan is making progress towards achieving a cycle of rising wages and prices, while he noted that BoJ Governor Ueda said they will adjust the degree of monetary support if the economy moves in line with forecasts, but that they can afford to spend time making that decision.
- FTSE Russell added India to the EM bond index, according to Bloomberg.
EU/UK
NOTABLE HEADLINES
- ECB's Centeno said inflation in the Euro Area has converged towards its goal and the easing cycle will be faster than thought in June. Centeno said monetary policy must be predictable and ECB must be careful and maintain gradualism in decisions, while big steps are big surprises and the ECB should not do that.
- ECB's Kazaks said the data points to an October rate cut.
- ECB's Nagel said inflation is on the decline but must remain vigilant due to high core readings, while Nagel also commented that he is open to an October rate cut.
- ECB's Vasle said inflation risks are abating although there is still some uncertainty and a rate cut in October is an option but this cut does not mean another in December, while rates are likely to be neutral by 2025-end.
- Italy’s economy minister said the budget plan fully complies with requirements set under new EU stability pact rules.
