- US stocks were pressured and the major indices all finished in the red with the tech-heavy Nasdaq 100 leading the declines amid weakness in mega-cap names Apple (-2.2%) and Nvidia (-2.8%) with the former weighed on by cautious analyst commentary and reports of Mac delays, while NVDA was hit after it announced a flaw in the Blackwell AI chip, although TSMC had fixed the issue. As such, sectors were largely in the red with Consumer Discretionary and Technology the laggards although Real Estate and Utilities showed some resilience and were the only industries to finish positively due to their haven nature in risk-off trade, while there was a deluge of earnings and stock specific headlines that added to recent woes with the highlights arguably the McDonald's (-5%) E.Coli outbreak and Boeing's (BA) (-1.8%) weak earnings report.
- USD extended on gains in which the DXY briefly climbed above 104.50 as it benefitted from JPY underperformance and higher US yields.
- Looking ahead, highlights include Australian & Japanese Flash PMIs, South Korean GDP, Malaysian CPI, Supply from Japan.
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LOOKING AHEAD
- Highlights include Australian & Japanese Flash PMIs, South Korean GDP, Malaysian CPI, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were pressured and the major indices all finished in the red with the tech-heavy Nasdaq 100 leading the declines amid weakness in mega-cap names Apple (-2.2%) and Nvidia (-2.8%) with the former weighed on by cautious analyst commentary and reports of Mac delays, while NVDA was hit after it announced a flaw in the Blackwell AI chip, although TSMC had fixed the issue. As such, sectors were largely in the red with Consumer Discretionary and Technology the laggards although Real Estate and Utilities showed some resilience and were the only industries to finish positively due to their haven nature in risk-off trade, while there was a deluge of earnings and stock specific headlines that added to recent woes with the highlights arguably the McDonald's (-5%) E.Coli outbreak and Boeing's (BA) (-1.8%) weak earnings report.
- SPX -0.92% at 5,797, NDX -1.55% at 20,067, DJIA -0.96% at 42,515, RUT -0.79% at 2,214.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Beige Book said on balance, economic activity was little changed in nearly all Districts since early September although two Districts reported modest growth. Furthermore, most Districts reported declining manufacturing activity but activity in the banking sector was generally steady to up slightly and loan demand was mixed, while some Districts noted an improvement in the outlook due to the decline in interest rates.
- Apple (AAPL) iPhone 16 orders were reportedly cut by around 10mln units for Q4 2024-Q2 2025 and there is no evidence yet that Apple Intelligence could boost iPhone shipments in the near term, according to TF International Securities analyst Ming-Chi Kuo. It was separately reported that Apple delayed its planned debut of Mac Studio until later in 2025 and is preparing to launch a new low-end iPad around spring 2025, as well as readies MacBook Air models with the M4 chip for early 2025.
DATA RECAP
- US Existing Home Sales (Sep) 3.84M vs. Exp. 3.86M (Prev. 3.86M, Rev. 3.88M)
FX
- USD extended on gains in which the DXY briefly climbed above 104.50 as it benefitted from JPY underperformance and higher US yields.
- EUR trundled beneath the 1.0800 against the firmer buck but was off today's worst levels, while there was a slew of ECB speakers including Centeno who said downside risks to growth are accumulating and 50bps is on the table, while Holzmann said some colleagues are likely to push for a big December cut but added that the current data does not justify a 50bps cut in December.
- GBP was pressured with GBP/USD steadily retreating after initially stalling near the 1.3000 level, while there were comments from BoE Governor Bailey who noted that disinflation has taken place faster than expected.
- JPY underperformed in which USD/JPY briefly climbed above the 153.00 level amid firmer US yields and heading closer to Japan's election, while there were late comments from BoJ Governor Ueda who said the central bank is still maintaining a "fairly easy" monetary stance and that it is very hard to pin down the appropriate size of rate hikes from here on.
- BoC Rate Decision 3.75% vs. Exp. 3.75% (Prev. 4.25%). BoC's Macklem said data and bank surveys suggest they are back to low inflation and their focus now is to maintain low, stable inflation, while they need to stick the landing. Furthermore, he said the rate decision should contribute to a pickup in demand and they can expect to continue to see some monthly fluctuations in inflation but added that overall, they view the risks around their inflation forecast as reasonably balanced.
FIXED INCOME
- T-notes were lower in a continuation of this week's downward bias with the curve bear-flattening, while the latest US 20yr bond auction was not as bad as the last auction but worse than the average.
COMMODITIES
- Oil prices declined with prices weighed on by dollar strength and bearish EIA inventory data.
- US EIA Weekly Crude Stocks 5.474M vs. Exp. 0.4M (Prev. -2.191M).
- Chinese imports of gold ore & concentrate dropped in September due to a proposed rule alteration which could spark a "substantial rise" in tax liabilities for purchasers, according to Reuters citing sources.
- Armed group was reported to take control of Myanmar's rare earths mining hub in Kachin state which is a major supplier of rare earths oxides to China and will likely disrupt shipments of the minerals, according to Reuters.
GEOPOLITICAL
MIDDLE EAST
- Israeli Defence Minister Gallant told troops in a base visit that after they attack Iran, everyone will understand their strength.
- US Secretary of State Blinken Blinken asked to reduce the intensity of attacks in Beirut during his visit to Israel, according to Al Jazeera. It was also reported that a rocket attack in Israel forced Blinken to briefly take shelter, according to NBC citing a senior US official.
- Hezbollah operations room said it used new drones and precision missiles for the first time in strikes against Israel.
- Hamas official was reported to visit Moscow, according to RIA citing a source.
- Sources for Sky News Arabia stated that Russia will help Iran to counter the planned Israeli strike in some form and will help Iran without risking harm to its relations with Israel. Furthermore, sources did not rule out the idea of Russia helping Iran in countering the Israeli strike but noted that Russian assistance may be by giving Iran early warning and instructions to protect potential targets and may include the detection of attacking aircraft and electronic jamming.
OTHER
- US President Biden said the US is announcing today that they will provide USD 20bln in loans to Ukraine.
- US Defense Secretary Austin said there is evidence that North Korean troops are in Russia.
- Russian Defence Minister said increasing involvement of Western countries in the conflict in Ukraine poses a risk of direct confrontation between nuclear powers, according to RIA.
- China will have more than 1,000 nuclear warheads by 2030 and far surpasses earlier nuclear weapon estimates, according to the US Defense Intelligence Agency.
ASIA-PAC
NOTABLE HEADLINES
- BoJ Governor Ueda said the BoJ is still maintaining a "fairly easy" monetary stance and underlying inflation has been rising slowly Ueda said when there is huge uncertainty, usually want to proceed cautiously and gradually, while he added that it is very hard to pin down the appropriate size of rate hikes from here on.
- RBI Minutes noted that Governor Das said the outlook for headline inflation towards the later part of the year and early next year points to further alignment with the 4% target, while he added they cannot risk another bout of inflation and the best approach now would be to remain flexible and wait for more evidence of inflation aligning durably with the target. Furthermore, MPC external member Kumar (dovish dissenter on rates) said a rate cut could help to revive demand and help boost private investment, while he believes that it is an opportune moment for RBI to start the process of normalising the monetary policy.
- RBNZ Governor Orr said low and stable inflation is again in sight and CPI is converging on the midpoint of the 1 to 3% target range, while he added that they must be cognisant of unanticipated risks ahead and must at times act swiftly to avoid perils. Furthermore, he said New Zealand's monetary policy is still at a restrictive level and it is encouraging that household and business inflation expectations have declined.
EU/UK
NOTABLE HEADLINES
- BoE Governor Bailey said disinflation has taken place faster than expected in the UK and elsewhere, while he added that a high UK savings rate reflects consumer caution and noted that UK inflation is below target but is pushed around by annual base effects.
- BoE's Breeden said need to watch the stigma of using central bank facilities.
- ECB's Lagarde reiterated that she is satisfied with inflation progress and said they need to be cautious.
- ECB's Lane said high conviction that disinflation is on track and some recent data raised questions about growth projections although a good recovery is still a plausible baseline. Lane said they do not have a dramatic weakening of the economy and are in the process of dialling back restrictiveness.
- ECB's Centeno said downside risks to growth are accumulating and 50bps is on the table with the data to determine the size of the cut.
- ECB's Holzmann said he sees a soft landing for Europe as guaranteed and is not sure too much has changed in recent data, while he added that some colleagues are likely to push for a big December cut but noted that the current data does not justify 50bps cut in December.
- ECB's Knot said they can take their "foot off the brake" if the base case holds and he is pretty confident inflation will hit 2% in 2025 although the consumer recovery will take a bit longer. Knot said the biggest slowdown in wages is still ahead of them and a large economic deterioration is needed for bigger cuts.
- ECB's Panetta said the ECB has clearly seen improvement in the inflation outlook and low inflation and weak growth are conducive to further cuts, while he added the EZ economy is weakening and can't exclude that the ECB must go below neutral. Furthermore, he said they are still far away from the neutral rate and would not take for granted that they will stop at the neutral rate.
- ECB's Nagel said he is convinced they are more or less on track to meet the 2% inflation goal, according to CNBC.
- ECB's Villeroy sees full optionality for the December rate meeting and does not see the ECB as being behind the curve.
- ECB's Escriva said the risk to inflation remains balanced.
- Slovenian President nominated Anton Rop to be the new central bank head and their representative to the ECB (replacing Vasle).
DATA RECAP
- EU Consumer Confidence Flash (Oct) -12.5 vs. Exp. -12.5 (Prev. -12.9)
