- US stocks were predominantly higher after the recent selling pressure this week and with participants digesting earnings and several better-than-expected data releases. The advances in most major indices were led by outperformance in the Nasdaq as Tesla shares surged by around 22% post-earnings, while the Dow was the laggard which closed in the red after disappointing earnings results from IBM and Honeywell. Furthermore, the dollar pared its recent gains and T-notes were choppy with initial pressure seen in the aftermath of the fall in jobless claims and PMI beats, although the move in treasuries was ultimately reversed.
- USD pared some of its recent notable strength with the greenback pressured by falling Treasury yields in a week that has been devoid of tier-1 releases ahead of the major risk events in early November, while there was a slew of data releases including better-than-expected PMIs, New Home Sales and Initial Jobless Claims but failed to inspire the dollar.
- Looking ahead, highlights include Tokyo CPI & Japanese Services PPI, Singapore Industrial Production & CPI, Supply from Australia.
More Newsquawk in 2 steps:
1. Subscribe to the free premarket movers reports
2. Trial Newsquawk’s premium real-time audio news squawk box for 7 days
LOOKING AHEAD
- Highlights include Tokyo CPI & Japanese Services PPI, Singapore Industrial Production & CPI, Supply from Australia.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were predominantly higher after the recent selling pressure this week and with participants digesting earnings and several better-than-expected data releases. The advances in most major indices were led by outperformance in the Nasdaq as Tesla shares surged by around 22% post-earnings, while the Dow was the laggard which closed in the red after disappointing earnings results from IBM and Honeywell. Furthermore, the dollar pared its recent gains and T-notes were choppy with initial pressure seen in the aftermath of the fall in jobless claims and PMI beats, although the move in treasuries was ultimately reversed.
- SPX +0.21% at 5,910, NDX +0.83% at 20,233, DJIA -0.33% at 42,374, RUT +0.23% at 2,219.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Hammack (2024 Voter) said inflation eased notably but has not returned to the goal. Hammack also commented that inflation readings have improved in recent months and longer-run inflation expectations have been anchored.
DATA RECAP
- US S&P Global Manufacturing PMI Flash (Oct) 47.8 vs. Exp. 47.5 (Prev. 47.3)
- US S&P Global Services PMI Flash (Oct) 55.3 vs. Exp. 55.0 (Prev. 55.2)
- US S&P Global Composite Flash PMI (Oct) 54.3 (Prev. 54.0)
- US KC Fed Composite Index (Oct) -4.0 (Prev. -8.0)
- US Building Permits R. (Sep) 1.425M (Prev. 1.428M)
- US New Home Sales-Units (Sep) 0.738M vs. Exp. 0.72M (Prev. 0.716M, Rev. 0.709M)
- US Initial Jobless Claims w/e 227.0k vs. Exp. 242.0k (Prev. 241.0k, Rev. 242k)
- US Continued Jobless Claims w/e 1.897M vs. Exp. 1.875M (Prev. 1.867M, Rev. 1.869M)
FX
- USD pared some of its recent notable strength with the greenback pressured by falling Treasury yields in a week that has been devoid of tier-1 releases ahead of the major risk events in early November, while there was a slew of data releases including better-than-expected PMIs, New Home Sales and Initial Jobless Claims but failed to inspire the dollar.
- EUR benefitted from the weakness in the dollar and reclaimed the 1.0800 status, while there was another deluge of ECB rhetoric including a pushback against larger rate cuts.
- GBP was firmer amid a Reeves-induced jump in UK yields although a return to the 1.3000 level remained elusive following the softer-than-expected UK PMI data.
- JPY gradually strengthened throughout the day and was the G10 outperformer with USD/JPY back beneath the 152.00 handle, while the attention now shifts to Tokyo CPI data.
FIXED INCOME
- T-notes were choppy although ultimately bull flattened after recent weakness and despite strong US data, while prices were also unfazed by a weaker 5yr TIPS auction.
COMMODITIES
- Oil prices declined with pressure seen following a report in The Times that Israel delayed the response to Iran due to the need to change some strategies following the recent US intelligence leak, although this was later denied by an Israeli security official
- Iraq's September total oil exports at 99.3mln barrels (prev. 105.8mln in August).
- Oil loadings from Russia's western ports are set to fall 13% M/M to 1.95mln BPD in November, according to Reuters citing sources.
GEOPOLITICAL
MIDDLE EAST
- Israeli military's plans for an attack on Iran have passed the approval of the Chief of Staff and the Minister of Defence and are waiting for a "green light" from the political level, according to Kann News citing a security source.
- It was earlier reported that Israel delayed the response to Iran due to the need to change some strategies following the recent US intelligence leak, according to The Times citing intelligence sources. However, a senior Israeli security official quoted by army radio denied the report that Israel was forced to delay a potential retaliatory attack on Iran after details of the planning were leaked from the Pentagon, according to Times of Israel.
- Israeli Chief of Staff said a "definitive end" of the war in Lebanon is likely, according to Al Arabiya.
- Hamas delegation went to Cairo to listen to proposed ceasefire deal ideas but there is no change in the group's position, according to Hamas senior official.
- US Secretary of State Blinken anticipates that negotiators will be getting together on a ceasefire in the coming days and said renewed negotiations will concern the return of hostages and a ceasefire in Gaza. It was later reported that US and Israel are to hold Gaza peace talks in Doha with Washington to push for a ceasefire ahead of the Presidential Election, according to FT.
OTHER
- Russian President Putin said the cross-border payments issue is important and will develop cooperation within BRICS, while he added that BRICS does not pursue a separate common payment system and if the US is open to normal relations with Russia, they will do the same. Putin earlier said they will discuss peaceful settlements of conflict in the Middle East and that Ukraine is being used to create strategic threats to Russia.
- South Korea said it could consider sending arms to Ukraine, according to Yonhap.
ASIA-PAC
NOTABLE HEADLINES
- China is pressuring automakers to pause expansion in the EU due to the escalating trade conflict, according to Bloomberg. Beijing reportedly told manufacturers to put on hold active searches for production sites in the region and signing of new deals, and generally keep a low profile amid negotiations over EU tariffs on Chinese EVs.
- BoJ Governor Ueda said optimism over the US economic outlook seems to be broadening somewhat and need to scrutinise further whether optimism over the US outlook is sustained. Ueda said the BoJ still can afford to spend time scrutinising risks and recent yen falls are driven partly by optimism over the US economic outlook.
- Japanese Finance Minister Kato told the G20 that FX market volatility remains high, as well as noted they must be vigilant to spillovers from each member's macro-economic policy and excess volatility from speculative trading.
- It remains unclear whether Japan's ruling coalition can retain its majority in the lower house just days before the Sunday election with Nikkei polling showing a close race in nearly half of single-seat electoral districts.
EU/UK
NOTABLE HEADLINES
- UK Chancellor Reeves said they will be changing how they measure the debt in next week's budget and still get debt falling as a share of GDP during this parliament, while the changes to the debt definition will free money for investment.
- BoE's Mann said it would be premature to cut rates if there is a structural persistence in the relationship between wages and prices. Mann said shocks to the UK economy have been very large and will leave a residual impact, while she added there is no prospect of rates returning to pre-pandemic levels.
- ECB’s Lane said analysis of underlying inflation also indicates that the disinflation process is well on track and inflation is set to return to target in the course of 2025. Lane said interest rate decisions are based on their assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission. Furthermore, he said each of the underlying inflation indicators tracked by the ECB has declined significantly since the post-pandemic inflation surges, with the range narrowing towards its historical average, as well as noted that most other measures of underlying inflation that the ECB regularly monitor have also come down over the past year and showed signs of continued easing in September.
- ECB's Makhlouf said policy should remain prudent and cautious, while he added monetary policy cannot solve all economic issues and the ECB would need powerful data for large rate cuts.
- ECB's Muller said he is still confident they'll see a gradual recovery and is not worried about falling behind the curve, while the best policy choice is measured rate cuts.
- ECB's Nagel said they are confident of meeting the target by the middle of next year and warned that tariffs could come with severe consequences. Furthermore, he said they should not be too hasty in cutting rates.
- ECB's Wunsch said do not need a discussion on 50bps at this stage but noted Europe's economy is weaker than they thought and they are data-dependent. Wunsch added that risks are still relatively balanced and a few changes could impact inflation in both directions.
- ECB's Kazaks said they'll see what happens at the December meeting and that everything should be on the table and guided by data. Kazaks said economic weakness suggests the ECB could get to 2% inflation earlier than the end of 2025 and they should not remain in restrictive territory when the 2% target is reached, while Kazaks said rates do not need to go significantly below neutral now. Furthermore, ECB's Kazaks said they must avoid doing undue damage to the economy and should not hold rates at high levels for too long, while he also stated the economy is the single biggest concern and it makes sense to go step-by-step on ECB rates.
DATA RECAP
- UK Flash Manufacturing PMI (Oct) 50.3 vs. Exp. 51.4 (Prev. 51.5)
- UK Flash Services PMI (Oct) 51.8 vs. Exp. 52.4 (Prev. 52.4)
- UK Flash Composite PMI (Oct) 51.7 vs. Exp. 52.6 (Prev. 52.6)
- French HCOB Manufacturing Flash PMI (Oct) 44.5 vs. Exp. 44.9 (Prev. 44.6)
- French HCOB Services Flash PMI (Oct) 48.3 vs. Exp. 49.9 (Prev. 49.6)
- French HCOB Composite Flash PMI (Oct) 47.3 vs. Exp. 49.0 (Prev. 48.6)
- German HCOB Manufacturing Flash PMI (Oct) 42.6 vs. Exp. 40.8 (Prev. 40.6)
- German HCOB Services Flash PMI (Oct) 51.4 vs. Exp. 50.6 (Prev. 50.6)
- German HCOB Composite Flash PMI (Oct) 48.4 vs. Exp. 47.6 (Prev. 47.5)
- EU HCOB Manufacturing Flash PMI (Oct) 45.9 vs. Exp. 45.3 (Prev. 45.0)
- EU HCOB Services Flash PMI (Oct) 51.2 vs. Exp. 51.5 (Prev. 51.4)
- EU HCOB Composite Flash PMI (Oct) 49.7 vs. Exp. 49.8 (Prev. 49.6)
