MNI ASIA OPEN - Harker Believes Fed Can Hold Rates

NEWS:

FED (MNI): Fed’s Harker Sees Rates On Hold, Can’t Say How Long
The Federal Reserve should stop raising interest rates and hold them at their current 22-year highs for as long as it takes to ensure inflation is sustainably on a path back to its 2% target, Philadelphia Fed President Patrick Harker said Monday. “I believe that we are at the point where we can hold rates where they are,” Harker said in prepared remarks to the Mortgage Bankers Association. “My expectation is that rates will need to stay high for a while.”

ECB (MNI): Lane Expects ‘Pretty Stagnant’ Economy For Rest Of This Year
ECB member Philip Lane has been speaking in an interview with Het Financieele Dagblad where he emphasised the data dependent nature of the ECB and highlighted the global uncertainties currently present. Lane described the economy as being ‘pretty stagnant’ for the rest of this year and stated the ECB will remain on guard for an extended period.

US/ISRAEL (MNI): WSJ: US Prepares 2000 Non-Combat Troops For Deployment To Israel
The Wall Street Journal has reported that, according to Pentagon officials, the US has selected roughly 2,000 troops, drawn from service people stationed inside and outside the Middle East, to prepare for a potential deployment to support Israel. According to the Journal, "The troops are tasked with missions like advising and medical support, the officials said, and they are from across the U.S. armed services. They aren't intended to serve in a combat role, the officials said. No infantry have been put on prepare-to-deploy order."

ISRAEL (MNI): Netanyahu: Victory In Gaza Will Take Time
Wires carrying comments from Israel Prime Minister Benjamin Netanyahu stating that, "victory in Gaza will take time." According to Reuters, Netanyahu also warned Iran and Hezbollah, "not to test us on Israel's northern border." Netanyahu's comments come as US President Joe Biden is reportedly considering a visit to Israel as soon as this week. Biden said in an interview with CBS, which was released on Sunday, that he doesn’t think US troops will be required in Israel and warned against the occupation of Gaza by Israeli forces. Biden told CBS, on a potential occupation of Gaza: “I think it'd be a big mistake... It would be a mistake to...for Israel to occupy...Gaza again. We...but going in but taking out the extremists the Hezbollah is up north but Hamas down south. Is a necessary requirement.”

US (MNI): Jordan: Speaker Vote Set For 12:00 ET Tuesday
Republican Rep Jim Jordan (R-OH), the GOP nominee for Speaker of the House of Representatives, has told CNN's Manu Raju that the House will hold a vote for Speaker on Tuesday at 12:00 ET 17:00 BST.

US (MNI): Jordan Picks Up Key Endorsements Ahead Of Speaker Vote
House Judiciary Committee Chair Jim Jordan (R-OH) has picked up the key endorsement of House Armed Services Committee Chair Mike Rogers (R-AL) ahead of a potential speaker vote tomorrow. Rogers wrote on X a short time ago: "[Jordan] and I have had two cordial, thoughtful, and productive conversations over the past two days. We agreed on the need for Congress to pass a strong NDAA, appropriations to fund our government's vital functions, and other important legislation like the Farm Bill."

US/EU/CHINA (MNI): Yellen To EU Fin Mins-Decoupling From China Not An Option For US Or EU
(MNI) London - Wires reporting comments from US Treasury Secretary Janet Yellen, who is in Luxembourg for a Eurogroup meeting of eurozone and EU finance ministers. states that "Decoupling from China is not an option for the EU or the US." The US and EU's stances on China are likely to feature prominently in the upcoming US-EU summit taking place on Friday in Washington, D.C. There, President Joe Biden is set to discuss with European Commission President Ursula von der Leyen and Council President Charles Michel the potential for a mirroring of tariffs on Chinese steel and aluminium, while also avoiding the re-imposition of Trump-era tariffs by the US on the same metals.

CANADA (MNI): Bank of Canada Surveys Point To Signs of Stagflation
Bank of Canada surveys Monday showed business leaders and households see the central bank needing at least two or three years to restore price stability even with the economy seen at risk of falling into a recession. About a third of firms in the Business Outlook Survey said the Bank needs more than three years to restore 2% inflation, and the Consumer Expectations survey showed on balance inflation will be 5% in a year and 4% in two years. When it comes to a recession, the share of firms planning for one was little changed at about a third, while for consumers the share predicting one climbed to 55% from 50%.

GERMANY (MNI): MNI BRIEF: Germany’s Lindner Holds Firm On Fiscal Safeguards
German Finance Minister Christian Lindner doubled down on demands for strict safeguards to ensure EU states reduce their debt and deficits over coming years as talks on EU fiscal rules reform get underway in Luxembourg today and continue Tuesday. “We need numerical benchmarks and safeguards,” Lindner told reporters on his arrival at the meeting of EU finance ministers, adding thet there needed to be a decline in deficits and debt GDP ratios. He noted that the IMF had given EU finance ministers “strong advice at the IMF-World Bank meeting in Marrakesh “to build fiscal buffers again.”

BOE (MNI): Pill Says Wage Growth Easing Key For Policy
The key policy question for the Bank of England was whether to react to early signs of easing labour market pressures, including the flatlining broader economy and softer private sector pay survey data, or whether to wait for official data to show earnings growth declining, Chief Economist Huw Pill said Monday. Speaking at an OMFIF event, Pill tilted against early easing saying that the upside inflation shock from high energy prices had fed through to more enduring price pressures and "If we have persistentcomponentsofinflationitseemsnaturalthatwe'dhaveapersistentresponse".

ECB (BBG): ECB Is Watching Oil for Inflation Risks, Lagarde Tells Ministers
The European Central Bank is watching the oil price for any inflationary impact from the Israel-Hamas conflict, President Christine Lagarde told euro-area finance ministers, according to people familiar with the matter. Lagarde spoke at a closed-door meeting of the bloc’s officials on Monday in Luxembourg, said the people, speaking on condition of anonymity. An ECB spokesman declined to comment.

DATA:

• US NY FED EMPIRE MFG EMPLOYMENT INDEX 3.1 OCT
• US NY FED EMPIRE MFG PRICES PAID INDEX 25.5 OCT
• US NY FED EMPIRE MFG NEW ORDERS -4.2 OCT

INVITATION: MNI Webcast with Fed's Tom Barkin On Nov 9

You are invited to listen to a speech and Q&A in real-time by Thomas Barkin, President & CEO of the Federal Reserve Bank of Richmond.

• Tom Barkin joins us to discuss the Outlook for the US Economy & Fed Policy.
• Date: Thursday, 9 Nov 2023
• Time: 16:00 - 17:15 GMT
• This event is on the record and will run as a Zoom Webinar

To register please go to: MNI Webcast Registration

US TSYS: Treasuries Revert Back To Post-CPI Levels As Volumes Fizzle Out

• Treasuries have recently touched new lows on the day for 2s and 5s, but it doesn't materially alter a large bear steepening on the day, between 4.5-11.5bp cheaper as the long end of the curve shifts back to post-US CPI levels. It’s attributed at least in part to little new news out of the Israel-Hamas conflict, which has helped see a notable pullback from Friday’s highs, although geopolitical tensions continue with Iran’s minister of foreign affairs warning the probability of the conflict spreading to other fronts is approaching the avoidable stage.
• Limited data has helped support some of this steepening, with a small beat for the Empire manufacturing survey for October and more notably another month with its six-month ahead metric at pre-pandemic level to support a softer landing thesis.
• TYZ3 has broadly traded sideways in recent hours, currently at 107-06 (-16+) off the low of 107-04 that stopped just short of support at 107-02+ (Oct 10 low) with firmer focus on 106-03+ (Oct 4 low). Having started off with decent relative volumes heading into the NY crossover, volumes have since been more lackluster, only just ticking over 1M for the day.
• Tomorrow sees a more notable docket, with retail sales for Sep, Fedspeak from Williams, Bowman, Barkin and Kashkari and a picking up of earnings releases including Johnson & Johnson, BofA and GS before the cash equity open.

FOREX: Antipodean FX Grinds Higher Amid Bolstered Equities

• Positive sentiment across major equity benchmarks have weighed on the greenback to start the week, with the USD index declining around 0.35% as we approach the APAC crossover. The more positive mood has boosted the more risk sensitive currencies in G10 such as AUD, NZD and GBP, with emerging market currencies also being favoured.
• AUDUSD is registering gains of 0.75% on Monday and it is worth noting the RBA minutes will be released overnight. Overall, AUDUSD remains bearish following the recent breach of support at 0.6331, the Sep 27 low. A clear break of 0.6286, the Oct 3 / 13 low, would confirm a resumption of the downtrend and this would open 0.6215, a Fibonacci projection.
• GBP has also started the week on a firmer note as we approach Tuesday’s partial release of labour market data and Wednesday’s CPI. In similar vein to Aussie, GBPUSD trend conditions remain bearish, and the recent recovery is considered corrective. A continuation lower would refocus attention on support and the bear trigger, at 1.2037, the Oct 4 low.
• In emerging markets, the Polish Zloty is the best performer (EURPLN down 2%) following the weekend election and the firmer equities have underpinned a strong bid for the likes of MXN, HUF and ZAR, all rising around 1% versus the dollar. Despite no major developments regarding the Israel-Hamas conflict, Israeli assets continue to suffer, seeing USD/ILS rise 0.9%, topping 4.00 for the first time in 8 years.
• Other than aforementioned data releases, Canadian CPI and US retail sales figures will highlight Tuesday’s economic calendar.

US STOCKS: Equities Retrace Large Part Of CPI Hit

• The S&P e-mini holds onto sizeable gains today at 4410 (+1.2%), sitting close to earlier highs of 4414.25 whilst more than unwinding Friday’s decline and going some way to retracing the hit from Thursday’s US CPI. Resistance is seen at 4427.45 (50-day EMA).
• ESZ3 swiftly reversed an earlier move lower that followed a few large sell programs rolling through including the largest of the day with 1044 names at 1319ET before some large buy programs helped limit the move.
• Gains have been helped by softer oil prices as well as limited new news from the Israel-Hamas conflict, coming despite a sizeable shift higher in real yields on the day (10Y real +6bps). Some larger individual movers have included Charles Schwab (post-earnings) and Pfizer (cutting Paxlovid cost base).
• There are some key earnings later this week: BofA, J&J, Goldman Sachs, Procter & Gamble, Tesla, Netflix among others (with the first three all tomorrow).
• The Russell outperforms (+1.6%), followed by Nasdaq (+1.4%), SPX (+1.2%) and Dow (+1.1%).

COMMODITIES: Crude Eases Back on Venezuela Sanction Talks

• WTI has fallen during US hours and has sunk below $87/b, amid hopes that the US could relax sanctions on Venezuela oil in exchange for competitive and international monitored presidential elections next year.
• Separately, the US has been holding back-channel talks with Iranian officials to warn them against escalating the conflict in Israel according to White House National Security Advisor Jake Sullivan.
• The amount of crude oil held around the world on tankers that have been stationary for at least 7 days fell by 389,000 bbl to 74.1m bbl as of 13 October, the lowest since December, Vortexa data show.
• WTI is -1.0% at $86.79 but only chips away at Friday’s strong push higher to remain easily off support at $81.50 (Oct 6 low)
• Brent is -1.1% at $89.85 but remains easily off support at $87.40 (50-day EMA).
• Gold is -0.65% at $1920.04 with relatively little boost from a softer US dollar. It’s particularly strong circa $60 increase on Friday leaves spot prices elevated compared to support at $1898.3 (50-day EMA).