MNI ASIA OPEN - Beige Book Notes Modest Price Increases Since Sep

NEWS

FED (MNI): Waller - Resilient Economy Could Require More Hikes
The Federal Reserve has made enough progress on inflation to remain patient on monetary policy, although a stalling of disinflation or a reacceleration of economic growth could warrant additional interest rate increases, Fed Governor Christopher Waller said Wednesday.

US/ISRAEL (MNI): Biden Delivers Remarks On Tel Aviv Visit

• US President Joe Biden has just finished delivering public remarks following his talks with PM Benjamin Netanyahu in Tel Aviv. Biden: "I came to Israel with a single message: you are not alone." Biden: 'There is no higher priority than release of hostages.'
• Biden states that he will ask Congress for an "unprecedented support package" for Israel later this week.
• Biden says that other nations, hostile actors should not think of attacking Israel.
• Biden: "Justice must be done, but don't be consumed by it...The vast majority of Palestinians are not Hamas, Hamas do not represent the Palestinian people....Palestinian people are suffering greatly as well."

US (MNI): Price Increases 'Modest' Since Sept - Fed Beige Book
Prices increased at a modest pace since the September FOMC meeting and economic activity was little changed around the country, the Federal Reserve's Beige Book said Wednesday. Labor market tightness also continued to ease across the country.

US (MNI): Median US Net Worth Sees Huge Jump During Covid - Fed
U.S. families saw the largest jump in median net worth between since 1989 during the covid pandemic and its aftermath as rising house and stock prices strongly outpaced rising inflation, according to the Federal Reserve's triennial Survey of Consumer Finances published Wednesday.

ENERGY (MNI): US To Ease Some Oil-Related Sanctions On Venezuela
Reuters carrying comments from a senior US State Department official stating that the US will ease some oil-related sanctions on Venezuela, "beginning almost immediately" in response to "Tuesday's election deal between the Venezuela government and the opposition."

ITALY (MNI): EU To Allow Italy Some NGEU Spending After 2026-Officials
The European Commission is set to allow Italy to spend a portion of its EUR191.5 billion in funds under the NextGenerationEU programme beyond the 2026 time limit an Italian source close to the governing coalition told MNI, adding that the exception would only be made for some projects managed by publicly-owned companies. Around EUR37 billion of Italy’s NextGenEU allocations are being managed by public companies including railway company Rete Ferroviaria Italiana, telecommunications company Infratel and energy group Enel, with hundreds of projects in danger of dragging on beyond 2026.

ECB (MNI): ECB Takes Digital Euro To Preparation Phase
The European Central Bank (ECB) is moving to the next phase of the digital euro project, what it is now calling the preparation phase, as reported by MNI earlier this week (MNI BRIEF: ECB Add Non-MonPol Meeting To Discuss Digital Euro). The ECB underlined Wednesday that the launch of the preparation phase is not a formal decision on whether to issue a digital euro -- that will only be formally considered by the Governing Council once the European Union’s legislative process has been completed.

SWEDEN (MNI): Riksbank's Floden - Hard To See Krona Fall Further
Riksbank Deputy Governor Martin Floden said that while he agreed that typically the Swedish krona has weakened in times of heightened international uncertainty, he doubted that it would fall much more at present. "Given that the krona is currently so weak I find it difficult to see that it will depreciate much more," he said in response to a question from MNI at a briefing.

UK (MNI): MNI UK Inflation and Wage Insight: https://roar-assets-auto.rbl.ms/files/56257/MNI%20...

Inflation data for September came in a tenth above market expectations (across headline, core and services) but both headline and services CPI were below the Bank of England's August MPR forecasts (coming in two tenths and one tenth lower respectively). The inflation data follows yesterday's partial labour market report (covering the 3-months to August) where headline average weekly earnings (AWE) fell from 8.5%3m/YoY to 8.1%3m/YoY (2 tenths lower than consensus expectations) while total regular pay was in line with consensus expectations at 7.8%3m/YoY (down a tenth from last month's revised print).

CHINA (MNI): China To Focus On High Quality Connectivity-Wang Yi
China's belt and road initiative (BRI) will focus on green investment to build up trans-Eurasian connectivity platforms, with a focus on railways, green infrastructure and digital platforms, according to Wang Yi, China's Foreign Minister.

DATA

US DATA: Building Permits Fall By Less Than Expected, Single- And Multi-Unit Divergence Extends

• Housing starts increased by less than expected in September to 1358k (cons 1383k) after a downward revised 1269k. That translates to a 7.0% bounce after a heavy -12.5% slide.
• From a surprise perspective it was offset by a smaller than expected decline in the less noisy building permits, to 1473k (cons 1453k) after a marginally downward revised 1541k. That marks a -4.4% drop after a 6.8% increase. Focusing on permits for a better sense of trend, they remain above the level seen ahead of the pandemic, in line with the recovery in new home sales over the past year and in contrast to existing home sales which have continued to slide along with mortgage applications.
• The noisy multi-unit segment continues to swing (-14.3% M/M after +15.6%) whilst the single-family segment continues to grow at a robust pace (1.8% M/M after +1.9%), extending unusual divergence between the two.

CANADA DATA: September Housing Starts +270K Units Vs +240K Consensus

• Seasonally adjusted starts +8% to 270.5K units after -1% in August. 6M moving average +3.9% to 254K units from +0.8% in August.* Increase led by +10% multi-unit starts.
• "It seems the current higher interest rate environment has not yet had the expected negative impact on multi-unit construction activity so far in 2023," CMHC chief economist Bob Dugan says in report. Homebuilding remains well short of pace agency says is needed to restore affordability over next decade.

Mortgage Applications New Lows Since 1995 On Renewed Rate Pressure

• MBA mortgage applications slipped -7% last week (refis -10%, purchases -6%).
• It came as the 30Y contract rate pushed 3bps higher to 7.70%, after a sharp 14bp increase the week before, for a new cycle high and highs since late 2000. The recent increase has been along with the significant push higher in long-term Treasury yields.
• It saw purchase applications fall to fresh lows since 1995.

30Y mortgage rate (white), 10Y Treasury yield (pink), spread (red) and level of purchase applications (green)Source: Bloomberg

US TSYS: Bear Steepening With TY Futures Firmly Clearing Latest Support

• Cash Tsys are off lows but have nevertheless seen a sizeable bear steepening today, with the front end currently little changed on the day but the longer end some 6-6.5bps cheaper. Gaza aid headlines appear to have helped the steepening.
• 20s have led, despite the 20Y auction trading through by 1.2bp to break a 4-auction streak of tailing offerings across tenors in late Sept-early Oct. That auction did however elicit a quick 3bp rally on the results that has ultimately held after some gyrations.
• TYZ3 has firmly cleared prior support at 106-03+ (Oct 4 low) with a low of 105-24, currently at 105-29 (-10) to next open 105-05+ (2% 10-dma envelope).
• You can see a round-up of Fedspeak from today’s US session in the previous STIR bullet, with Harker (’23 voter) currently speaking but no headlines as of yet after earlier telling the WSJ the Fed should extend its pause on rate hikes.
• Powell is clearly the main focus tomorrow at 1200ET, whilst data could provide some interest with initially jobless claims for a payrolls reference week along with existing homes sales and the Philly Fed manufacturing survey.

FOREX: NZDUSD Trades To Fresh 2023 Lows, Pressure On EMFX

• The greenback traded with a consistent upward bias throughout Wednesday’s session, with waning equities prompting haven demand, however, gains for the USD index have been limited to 0.25% as we approach the APAC crossover.
• Losses for G10 majors were broad based but particular weakness was seen for the likes of the Australian dollar and specifically NZD, which extended Tuesday’s downward momentum following the lower-than-expected inflation data in New Zealand.
• This prompted NZDUSD to register losses of 0.60% and in the process, the pair has traded to fresh 2023 lows of 0.5851, with not much in the way of short-term meaningful technical support.
• GBP also shrugged off some post-CPI demand to trade in negative territory as we approach the close. As previously noted, GBPUSD trend conditions remain bearish, and bounces continue to be considered corrective. A continuation lower would refocus attention on support and the bear trigger, at 1.2037, the Oct 4 low.
• A quick mention for USDJPY, which despite remaining void of any notable volatility, continues to tick higher and narrow the gap once more with 150.00. Market participants have been unable to brush off the rising yields, however, remain wary of both looming verbal and actual intervention from the MOF.
• Elsewhere the higher long-end US yields and wilting equities induced some substantial weakness for some emerging market currencies. In particular, the Mexican peso declined 1.3% with the likes of PLN and ZAR also declining 1%.
• Australian employment figures for September headline the overnight docket on Thursday, which will be followed by US jobless claims, Philly Fed and potential comments from Fed Chair Powell, due to speak at the Economic Club of New York Luncheon.

FX Expiries for Oct19 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0560(E823mln), $1.0600(E515mln)
• USD/JPY: Y147.90-00($564mln), Y149.45-50($724mln), Y150.00($753mln), Y150.50($769mln)
• GBP/USD: $1.2142-60(Gbp1.1bln), $1.2200-15(Gbp2.8bln)
• EUR/GBP: Gbp0.8600-15(E1.1bln), Gbp0.8700(E618mln)
• NZD/USD: $0.5920-40(N$980mln)
• USD/CNY: Cny7.2500($1.1bln), Cny7.2825($1.2bln), Cny7.3500($1.4bln)

US STOCKS: Higher Yields And Geopolitical Risk Weigh Heavily

• Equities have been increasingly under pressure today, hit by a combination of a small further trimming of Fed rate cut expectations, a more notably push higher in long-term yields (~7bps cheaper) and geopolitical tensions which saw gold earlier clear a key resistance level and with spot currently +1.6% on the day.
• A reasonable bounce after the 20Y Tsy auction traded through proved short-lived, with the S&P e-mini since extending to a new low of 4343.75, currently only a few points higher for -1.2% on the day. Support is still some way off though, at 4299.5 (Oct 10 low).
• Moves lower have come with multiple large sell programs with collections of greater than 1000 name clips in the TICK index.
• The Nasdaq 100 e-mini trades in line at -1.3% as it pulls back from yesterday’s underperformance, whilst the Russell 2000 slips -2.0% for stark underperformance after strong relative gains yesterday.
• Earnings: Some large names still to come with or after the close, including Netflix (~0.4% SPX weighting, 1600ET) and Tesla (2%, after). Tomorrow includes Philip Morris, Union Pacific and AT&T (cumulatively almost 1%) ahead of the open.

COMMODITIES: Gold Clears Key Resistance And Crude Takes Step Closer To Bull Trigger

• WTI rallied off earlier lows during US trading amid a large crude draw for decade low stock levels. Tight market and concerns over escalation in the Middle East add further support.
• The US plans some oil-related sanctions relief for Venezuela beginning almost immediately in response to Tuesday’s election deal between Venezuela govt and opposition, according to a senior state dept official. The US is issuing licenses to broadly ease sanctions on Venezuela’s oil and gas sector, including its business with Caribbean nations.
• The Iranian Foreign Minister Hossein Amirabdollahian calls for a “full and immediate boycott” of Israel by Muslim countries, the expulsion of Israeli ambassadors and an oil embargo against Israel, according to statement by ministry on Telegram.
• OPEC is not planning to hold an extraordinary meeting or to take immediate action following calls by Iran for Muslim countries to impose an oil embargo on Israel, according to Reuters’ sources.
• WTI is +2.0% at $88.42, off an earlier high of $89.88 which pushed through $89.59 (Oct 4 high) to open a bull trigger at $95.03 (Sep 28 high).
• Brent is +1.7% at $91.46, off a high of $93.00 which took a step closer to a bull trigger at $95.35 (Sep 28 high).
• Gold is +1.5% at $1951.00 as geopolitical risk dominates a further climb for US Treasury yields and renewed USD strength. It cleared a key resistance at $1953.0 (Sep 1 high) to open $1965.5 (61.8% retrace of May 4 – Oct 6 bear leg), coming close with a high of $1962.64 before it was helped lower by headlines of Gaza humanitarian aid being allowed to pass from Egypt.