- US stocks finished higher in which the S&P 500 notched another record close with early momentum seen following China's continued stimulus efforts and with tailwinds from recent encouraging data releases, although the major indices were off their intraday highs amid lingering geopolitical concerns after Israel rejected the 21-day ceasefire proposal and continued its strikes on Lebanon.
- USD reversed a large part of Wednesday's gains that were attributed to a mixture of amplified geopolitics and possible quarterly rebalancing kicking in, with the DXY pressured after stalling just shy of the 101.00 level. Furthermore, the greenback also failed to benefit from the data releases including the in-line Q2 Final GDP, 4-month low Initial Jobless Claims and better-than-expected Durable Goods data, while the slew of scheduled Fed rhetoric proved to be anticlimactic as many refrained from commenting on monetary policy and the economy.
- Looking ahead, highlights include Tokyo CPI, Chinese Industrial Profits, Japanese LDP Leadership Election, Comments from Fed's Cook, Supply from Australia.
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LOOKING AHEAD
- Highlights include Tokyo CPI, Chinese Industrial Profits, Japanese LDP Leadership Election, Comments from Fed's Cook, Supply from Australia.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks finished higher in which the S&P 500 notched another record close with early momentum seen following China's continued stimulus efforts and with tailwinds from recent encouraging data releases, although the major indices were off their intraday highs amid lingering geopolitical concerns after Israel rejected the 21-day ceasefire proposal and continued its strikes on Lebanon.
- SPX +0.4% at 5,745, NDX +0.7% at 20,115, DJIA +0.6% at 42,175, RUT +0.6% at 2,210.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed Chair Powell did not discuss monetary policy or economic outlook in brief opening remarks.
- Fed Vice Chair of Supervision Barr said the Fed is exploring large-bank requirements on minimum liquidity, while Barr also said the Fed views the discount window as a source of normal funding and believes the discount window should be used when it makes sense for banks.
- Fed's Bowman (2024 voter) made near identical remarks on monetary policy and economic outlook to those made on September 24th, while she would like the Fed's balance sheet to be as small as possible.
- Fed's Kugler (voter) said access to credit is critical for the employment mandate.
- US Treasury Secretary Yellen said the labour market and inflation suggest the US is on a path to a soft landing, according to CNBC. Yellen also said there is a bit more slack in the labour market than previously and the last mile on inflation is housing.
DATA RECAP
- US GDP Final (Q2) 3.0% vs. Exp. 3.0% (Prev. 3.0%)
- US Core PCE Prices Final (Q2) 2.8% vs. Exp. 2.8% (Prev. 2.8%)
- US Durable Goods (Aug) 0.0% vs. Exp. -2.6% (Prev. 9.8%)
- US Durables Ex-Transport (Aug) 0.5% vs. Exp. 0.1% (Prev. -0.2%, Rev. -0.1%)
- US Pending Sales Change MM (Aug) 0.6% vs. Exp. 1.0% (Prev. -5.5%)
- US Initial Jobless Claims w/e 218.0k vs. Exp. 225.0k (Prev. 219.0k, Rev. 222k)
- US Continued Jobless Claims w/e 1.834M vs. Exp. 1.838M (Prev. 1.829M, Rev. 1.821M)
- US KC Fed Manufacturing (Sep) -18.0 (Prev. 6.0)
- US KC Fed Composite Index (Sep) -8.0 (Prev. -3.0)
FX
- USD reversed a large part of Wednesday's gains that were attributed to a mixture of amplified geopolitics and possible quarterly rebalancing kicking in, with the DXY pressured after stalling just shy of the 101.00 level. Furthermore, the greenback also failed to benefit from the data releases including the in-line Q2 Final GDP, a 4-month low Initial Jobless Claims and better-than-expected Durable Goods data, while the slew of scheduled Fed rhetoric proved to be anticlimactic as many refrained from commenting on monetary policy and the economy.
- EUR was firmer on the day after having shrugged off the early weakness that was triggered by Reuters sources that noted the ECB rate decision in October is "wide-open" and that doves were fighting for a cut following weak data.
- GBP notably strengthened alongside the outperformance seen in some of its cyclical peers amid continued China stimulus efforts.
- JPY ultimately weakened on what was a choppy session ahead of Tokyo CPI data and the LDP leadership race.
- SNB cut its policy rate by 25bps as expected to 1.00%, while it is prepared to intervene in the FX market as necessary and further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term. SNB outgoing Chairman Jordan said he sees no risk of deflation and further rate cuts "might" be necessary to ensure price stability (post-meeting press conference).
- Mexican Central Bank cut its interest rate by 25bps to 10.50% vs. Exp. 10.50% (Prev. 10.75%) through a 4-1 vote in favour of the 25bps cut (prev. 3-2), while it stated that looking ahead, the Board expects the inflationary environment will allow further reference rate adjustments (prev. said may allow).
FIXED INCOME
- T-notes flattened after strong economic data and as front-end issuance from Oracle weighed, while a strong 7-year auction lifted prices off lows.
COMMODITIES
- Oil prices were lower following mixed reports surrounding an Israel-Lebanon ceasefire with early pressure in the European morning were reports suggesting that senior US officials anticipate a ceasefire deal along the Israel-Lebanon border "in the coming hours", although Israel later denied this.
- BSEE reported that 25% (prev. 29%) of oil production and 20% (prev. 17%) of natgas production in the Gulf of Mexico is shut (prev. 17%) in response to Hurricane Helene (prev. 29%).
- NHC said Helene is almost a major hurricane with additional strengthening forecast before landfall in the Florida Big Bend.
- Russian Deputy PM Novak said Russia does not see oil and gas demand peaking in the next decade.
- Libya's rival legislative bodies' delegates in UN talks sign agreement to end the central bank crisis.
- Multiple OPEC+ sources told Argus that neither Saudi Arabia nor the wider OPEC+ group have any specific target for oil prices and no member of the producers' alliance is about to abandon output discipline in favour of chasing market share.
GEOPOLITICAL
MIDDLE EAST
- Israeli PM Netanyahu said he instructed the military to keep "fighting at full power" and said fighting in Gaza will continue until all war goals have been achieved. It was also reported that the Israeli PM’s office said reports about a ceasefire are incorrect and it is an American-French proposal, to which the PM did not even respond.
- Israeli PM Netanyahu’s aide told reporters during the flight to New York that Israel's direction right now is not a ceasefire but further military action against Hezbollah, according to Axios's Ravid.
- Israeli Foreign Minister Katz said there will not be a ceasefire in the north and they will be continuing the fight against Hezbollah.
- Lebanese PM denied signing ceasefire agreement after meeting with Blinken and Hochstein, according to Al Arabiya.
- Israel and Lebanon privately gave mediators their support for a 21-day ceasefire before it was announced in a joint statement led by the US and France last night, a senior Western diplomat told The Times of Israel. It was also noted that PM Netanyahu quickly distanced himself from the proposal after it was announced, saying Israel has yet to respond and the IDF would continue striking Hezbollah with full force.
- US Defense Secretary Austin said a diplomatic solution between Israel and Lebanon is still viable.
- US and Israeli officials are holding talks on Lebanon in New York on Thursday and discussions continue for a 21-day ceasefire, according to the White House.
- Israeli Air Force Chief said they will stop any arms transfer by Iran to Hezbollah and are preparing to assist troops in ground operations against Hezbollah.
- Iran's Foreign Ministry spokesperson said accusing Iran of targeting former US officials is baseless.
OTHER
- US President Biden said he will strengthen Ukraine's position in future negotiations by expediting funding during his term and will deal with Ukraine's future defence needs.
- US and EU are reportedly nearing a deal on USD 50bln of Ukrainian aid utilising Russian assets, according to Bloomberg.
- Russia's Kremlin said changes to Russian nuclear policy in the document on state nuclear deterrence have now been formulated and the changes should be considered a signal to "unfriendly" countries, while the signal to the West is that there are consequences if Western countries participate in an attack on Russia with various means.
- China's Defence Ministry said regarding drills near Taiwan that it is legitimate to have exercises in airspace and maritime areas around Taiwan and it will continue to strengthen combat readiness and organic military exercises.
- China’s newest nuclear-powered attack submarine reportedly sank in the spring which is a major setback for one of the country’s priority weapons programs, according to WSJ citing a US official.
ASIA-PAC
NOTABLE HEADLINES
- PBoC vowed quick action and a special team to help boost the economy, while it also vowed to accelerate the adoption of financial boost policies, according to Bloomberg.
- China is to issue USD 284bln of sovereign debt as part of fresh fiscal stimulus in which some of the fiscal support measures could be unveiled as early as this week, according to Reuters sources. Half of the stimulus package was said to be designed to stimulate consumption and the other half is to help local governments tackle local debt problems, while funds are to provide a monthly allowance of around CNY 800 per child to all households with two or more children, excluding the first child.
- China's securities regulator said public funds will have access to a wider variety of investible asset categories and it will continuously increase the scale and proportion of equity funds.
EU/UK
NOTABLE HEADLINES
- ECB’s rate decision is said to be "wide-open" with doves pointing towards recent soft business survey data and weak German sentiment metrics, while hawks are arguing for a pause.
- ECB's Buch said in addition to the 2025 EU-wide stress test, the European banking supervision will conduct an exploratory counterparty credit risk scenario analysis.
