- US stocks were ultimately flat with only marginal gains seen in the major indices and slight outperformance in the Nasdaq after tech was supported by the upside in NVDA which rebounded from the prior day's losses and was helped by positive commentary from JPM. The energy sector was the biggest gainer on the account of higher crude prices as geopolitical tensions remained high with participants eyeing the Israeli response to Iran, although most sectors finished in the red, while the dollar was bid and treasuries pressured following stronger-than-expected ADP jobs data.
- USD strength persisted with the momentum mainly stemming from the stronger-than-expected ADP Jobs data which rebounded off a five-month slowdown, while the report showed jobs added by US private businesses exceeded the forecast range and coincided with a slight upward revision to the prior month.
- Looking ahead, highlights include Australian Final Services/Composite PMIs & Trade Data, New Zealand ANZ Commodity Prices, Japanese Services/Composite PMIs, Comments from BoJ's Noguchi, Supply from Japan, Market Closures in China, South Korea & Taiwan.
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LOOKING AHEAD
- Highlights include Australian Final Services/Composite PMIs & Trade Data, New Zealand ANZ Commodity Prices, Japanese Services/Composite PMIs, Comments from BoJ's Noguchi, Supply from Japan, Market Closures in China, South Korea & Taiwan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were ultimately flat with only marginal gains seen in the major indices and slight outperformance in the Nasdaq after tech was supported by the upside in NVDA which rebounded from the prior day's losses and was helped by positive commentary from JPM. The energy sector was the biggest gainer on the account of higher crude prices as geopolitical tensions remained high with participants eyeing the Israeli response to Iran, although most sectors finished in the red, while the dollar was bid and treasuries were pressured following stronger-than-expected ADP jobs data.
- SPX +0.01% at 5,710, NDX +0.15% at 19,803, DJIA +0.09% at 41,197, RUT -0.09% at 2,195
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Barkin (2024 voter) said a 50bp cut in September was warranted because rates were out of sync with the decline in inflation and the unemployment rate near its sustainable level. Barkin said the Fed cannot declare the inflation battle is over and expects a little further drop in core PCE until next year, as well as noted that 50bps of cuts shown as the median Fed policy projection for the rest of 2024 would also take a little bit of the edge off rates. Furthermore, Barkin commented that the "last mile" of inflation may still take longer than expected and is worried price pressures could get "stuck" next year, while he sees two 25bps cuts this year as "a reasonable path" if the economy evolves as expected.
DATA RECAP
- US ADP National Employment (Sep) 143k vs. Exp. 120k (Prev. 99k, Rev. 103k)
FX
- USD strength persisted with the momentum mainly stemming from the stronger-than-expected ADP Jobs data which rebounded off a five-month slowdown, while the report showed jobs added by US private businesses exceeded the forecast range and coincided with a slight upward revision to the prior month.
- EUR was mildly lower and was largely unresponsive to the slew of ECB commentary, while the EZ Unemployment Rate was unchanged at 6.4% as expected.
- GBP marginally softened on the day with a pullback in GBP/USD after hitting resistance around the 1.3300 level.
- JPY underperformed with the currency pressured after comments from Japanese PM Ishiba who seemingly put to bed for now, the growing hawkish sentiment surrounding himself, as he stated that they are not in the environment for an additional rate hike.
FIXED INCOME
- T-notes pared some of the prior day's geopolitical-fuelled rally after hot ADP jobs data ahead of the NFP report on Friday.
COMMODITIES
- Oil prices were firmer for the duration of the session amid geopolitical risk premium, but settled at lows after surprise EIA builds.
- US EIA Weekly Crude Stocks w/e 3.889M vs. Exp. -1.25M (Prev. -4.471M).
- Iraq, Kazakhstan, and Russia have confirmed they had achieved full conformity and compensation, according to schedules submitted for September and the JMMC is next to meet on December 1st.
- Saudi Energy Minister reportedly warned of USD 50/bbl oil as OPEC+ members flout production curbs, which was interpreted as a threat Saudi is willing to launch a price war to keep market share if other countries do not abide, while Saudi reportedly singled out Iraq which overproduced by 400k BPD in August, according to WSJ sources. However, OPEC later commented regarding the WSJ report about Saudi saying oil may drop to USD 50/bbl if OPEC+ flouts output curbs, in which it refuted the story's claims as "wholly inaccurate and misleading".
GEOPOLITICAL
MIDDLE EAST
- Israeli security cabinet decided to implement a harsh response to the Iranian attack and the response to Iran will be cruel but it will not lead to a regional war. It was also reported that a senior Israeli official said Israel is going to respond independently to the Iranian attack and wants to coordinate its plans with the US because of the strategic implications of the situation, according to Axios' Ravid.
- Israel’s response to Iran’s missile attack will aim to cause significant financial damage, while the feeling is that the response must be significant and must come soon which seems to point toward oil facilities and/or ports, according to a source.
- Tel Aviv has not yet made a decision on how to respond to the Iranian attack and does not currently plan to strike Iranian nuclear facilities, according to Al Jazeera citing NYT on Israeli officials.
- Iran’s President vowed a stronger response if Israel retaliates.
- Iran announced that airports in the western half of the country, including Tehran and Mehrabad, are closed until Thursday except for emergency and certain other flights, according to aviation security specialist Osprey Flight Solutions via WSJ. It was later reported that a spokesperson for Iran's Civil Aviation Organization said that airlines will be permitted to resume flight operations starting at 05:00 AM on Thursday (02:30BST/21:30EDT).
- Iran's UN Envoy told the Security Council that Israel is pushing the region to the edge of an unprecedented catastrophe.
- US President Biden said there are going to be some sanctions imposed on Iran and that he does not support an attack on Iran's nuclear sites.
- US Deputy Secretary of State Kurt Campbell said it is not just Israel that is thinking about response options to the Iran attack and that the US is too.
- Hezbollah said it targeted areas north of Haifa City in Israel with a large missile salvo. Furthermore, Hezbollah media noted an official said they are only in the first round following clashes with Israeli troops, while it was added that the group has enough fighters, weapons and ammunition to push back Israel.
- Lebanese army said an Israeli force crossed the Blue Line inside its territory in Khirbet Yaroun and the Adaisseh Gate but then withdrew, according to Al Jazeera.
- Israel reportedly conducted a strike on a residential building in Syria's Damascus resulting in injuries, according to state TV. It was also reported that Nasrallah's son-in-law Hassan Jaafar Qasir was killed in the Israeli raid on Mezzeh neighbourhood in Damascus, according to Sky News Arabia.
ASIA-PAC
NOTABLE HEADLINES
- Japanese PM Ishiba said they are not in an environment for an additional rate hike and he confirmed close cooperation between the government and BoJ while closely monitoring the market with a sense of urgency and calmness. Ishiba also confirmed with BoJ Governor Ueda to have thorough communication with the market.
- BoJ Governor Ueda told PM Ishiba that Japan's economy is in an extraordinarily easy environment and they agreed on close coordination between the BoJ and the government, while he told the PM that the BoJ will adjust the degree of monetary easing if the outlook is realised, but will take careful steps to determine that as it takes time.
- BoJ Governor Ueda said Japan's economy is recovering moderately albeit with some weak signs, while trend inflation is likely below 2% and likely to accelerate. Furthermore, he said markets remain unstable and uncertainty surrounding Japan's economy prices remain high.
- France, Greece, Italy, and Poland are reportedly poised to work in favour of EU's proposed tariffs on Chinese-made EV imports on Friday which is enough to get the proposal passed, according to Reuters sources.
- Taiwanese markets will remain closed on Thursday amid a typhoon.
EU/UK
NOTABLE HEADLINES
- BoE Financial Policy Committee Record for Q3 2024 maintained the counter-cyclical capital buffer at 2%, while it noted that risks to the UK financial system are broadly unchanged since Q2 and global risks remain high including geopolitical risks.
- ECB's Centeno said inflation has converged closely to the ECB's target and Euro-area inflation has been well anchored.
- ECB's de Guindos said the fight against inflation "is not totally over" and need to watch services inflation, while he added that services could be the main barrier to lower inflation and all options are open for the October rate decision.
- ECB's Schnabel said the ECB cannot ignore headwinds to growth, but at the same time, monetary policy cannot resolve structural issues, while she added that a return to the 2% target in a timely manner is becoming more likely.
- ECB's Vasle said they cannot exclude or commit to a rate cut in October and there will be more cuts but will depend on the data, while he added that inflation's downward trend is sustainable and will continue.
- ECB's Elderson said there is no room for inflation complacency.
- German Economy Minister Habeck said further interest rate cuts are coming too slowly for him.
- French government intends to reduce the budget deficit by EUR 60bln in 2025, to reach the new 5% GDP target, while the budget is scheduled for October 10th.
DATA RECAP
- EU Unemployment Rate (Aug) 6.4% vs. Exp. 6.4% (Prev. 6.4%).
