Source: MNI - Market News/Bloomberg
UK
FISCAL (BBG): “When Prime Minister Keir Starmer and Chancellor of the Exchequer Rachel Reeves plotted Labour’s path to power in the UK, they banked on eye-catching moves to hike taxes on private equity and ultra-rich “non-dom” residents to fund key spending plans. Now, those promises are meeting reality.”
EU
EU (MNI BRIEF): Spain has proposed that a subset of European countries form a "competitiveness lab" which would move ahead faster in order to create an EU Capital Markets Union.
FISCAL (MNI BRIEF): Europe’s Economy Commissioner Paolo Gentiloni said on Monday that there is a limit to flexibility as Spain admitted it would not be able to deliver its draft 2025 budget plan by the October 15 EU deadline.
GERMANY (POLITICO): “Problems continued to pile up for German Chancellor Olaf Scholz’s Social Democratic Party (SPD) on Monday as one of its top politicians announced he is stepping down due to health problems.”
ITALY (BBG): The Bank of Italy signaled concern about the country’s growth, saying the economy will likely expand less than previously expected this year, making it more difficult for the government to reach its targets.”
US
FED (MNI BRIEF): The Federal Reserve will likely need to keep cutting interest rates gradually toward a neutral level barring unexpected surprises on employment or inflation, St. Louis Fed President Alberto Musalem said Monday.
FED (MNI): A strong rebound in U.S. employment suggests the Federal Reserve can cut interest rates more gradually after an aggressive start to the easing cycle and could even lead to a pause in rate reductions if it proves persistent, former Fed staffers told MNI.
WEATHER (BBG): “Milton exploded into the Atlantic’s strongest hurricane this year, bearing down as a catastrophic Category 5 storm on a Florida region still struggling to recover from Helene’s devastation.”
OTHER
JAPAN (MNI BRIEF): Inflation-adjusted real wages, a barometer of household purchasing power, turned negative in August for the first time in three months, down 0.6% compared to July's 0.3% growth and June's 1.1% rise, preliminary data released by the Ministry of Health, Labour and Welfare on Tuesday showed.
AUSTRALIA (MNI BRIEF): The Reserve Bank of Australia board noted inflation could prove less persistent, even without weaker-than-expected activity, should rent inflation or petrol prices fall faster than expected, leading to less restrictive financial conditions, the minutes of September’s meeting showed.
SOUTH KOREA (BBG): “Samsung Electronics Co. issued an apology to investors for disappointing results, admitting that the once-dominant memory chip giant is grappling with a potential crisis after losing its way.”
CHINA
INVESTMENT (MNI BRIEF): China will bring forward next year’s central government budget investment of CNY100 billion to accelerate infrastructure spending and continue to issue ultra long-term special treasury bonds in 2025 to support major projects, Zheng Shanjie, director of National Development and Reform Commission told reporters Tuesday.
FISCAL (MNI BRIEF): China will push local governments to speed up fiscal spending in a bid to support the economy while helping them carry out debt swaps and resolve debt risks, officials at the National Development and Reform Commission told reporters on Tuesday.
CAPITAL MARKET (SECURITIES TIMES): “The People's Bank of China’s latest facilities to support the capital market will not lead to an injection of base currency or balance-sheet expansion, while investors should consider their risk tolerance, wrote Xu Zhong, vice president at the National Association of Financial Market Institutional Investors.
HOUSING (SHANGHAI SECURITIES NEWS): “Local housing markets heated up during the Golden Week holiday with the number of inquiries for home purchases rising, as over 130 cities launched sales promotions, Shanghai Securities News reported.”
FX (SECURITIES TIMES): “China’s foreign exchange reserves were USD3.32 trillion at the end of September, rising above the USD3.3 trillion mark again for the first time since December 2015, Securities Times reported citing data by the State Administration of Foreign Exchange.”
CHINA MARKETS
MNI: PBOC Net Drains CNY886.9 Bln via OMO Tuesday
The People's Bank of China (PBOC) conducted The Bank of Italy signaled concern about the country’s growth, saying the economy will likely expand less than previously expected this year, making it more difficult for the government to reach its targets.” CNY41.7 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY886.9 billion after offsetting maturities of CNY928.6 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.6376% at 10:01 am local time from the close of 1.5552% before National Day holiday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 44 on last trading day before golden week holiday, compared with the close of 52 on the previous day. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
PBOC Sets Yuan Parity Higher At 7.0709 Tues
The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.0709 on Tuesday, compared with 7.0074 set before National Day holiday. The fixing was estimated at 7.0811 by Bloomberg survey today.
MARKET DATA
UK SEPT. BRC LIKE-FOR-LIKE RETAIL SALES +1.7% Y/Y; EST. +0.8%; PRIOR +0.8%
AUSTRALIA OCT. WESTPAC CONSUMER CONFIDENCE +6.2% M/M; PRIOR -0.5%
AUSTRALIA OCT. WESTPAC CONSUMER CONFIDENCE 89.8; PRIOR 84.6
AUSTRALIA SEPT. NAB BUSINESS CONFIDENCE -2; PRIOR -5
AUSTRALIA SEPT. NAB BUSINESS CONDITIONS +7; PRIOR +4
AUSTRALIA SEPT. ANZ-INDEED JOB ADS +1.6% M/M; PRIOR -1.8%
JAPAN AUG. CASH WAGES FROM SAME SAMPLE +3.1% Y/Y; EST. +3.2%; PRIOR +4.7%
JAPAN AUG. LABOR CASH EARNINGS +3.0% Y/Y; EST. +2.9%; PRIOR +3.4%
JAPAN AUG. REAL CASH EARNINGS -0.6% Y/Y; EST. -0.5%; PRIOR +0.3%
JAPAN AUG. SAME BASE REGULAR FULL-TIME PAY +2.9% Y/Y; EST. 3.0%; PRIOR +3.0%
JAPAN AUG. HOUSEHOLD SPENDING -1.9% Y/Y; EST. -2.6%; PRIOR +0.1%
JAPAN AUG. TRADE DEFICIT Y377.9B; EST. -Y532.4B; PRIOR –Y482.7B
JAPAN AUG. ADJUSTED CURRENT ACCOUNT SURPLUS Y3.017T; EST. +Y2.419T; PRIOR +Y2.803T
JAPAN AUG. CURRENT ACCOUNT SURPLUS Y3.804T; EST. +Y2.956T; PRIOR +Y3.193T
SOUTH KOREA AUG. CURRENT ACCOUNT SURPLUS $6.595B; PRIOR +$8.329B
SOUTH KOREA AUG. GOODS TRADE SURPLUS $6.594B; PRIOR +$8.966B
MARKETS
US TSYS: Tsys Futures Edge Higher, Curve Steepens, Fed Speakers
- Tsys futures have ticked higher throughout the session with the front-end outperforming. There has been multiple Fed speakers through the session, while multiple block steepener trades have also occurred throughout the day which has supported the move. TU is +03⅛ at 103-15⅝, while TY is trading +06+ at 112-22
- The cash tsys curve has bull-steepened with the 2yr yield -4.3bps at 3.952%, while the 10yr is -2.3bps at 4.002%. The 2s10s has crept slightly off session highs of 5.856 to trade +2.040 at 4.869 now
- In August, Japanese investors made a record purchase of ¥5.59t in US tsys, as shown by the latest balance-of-payments data from Japan's Ministry of Finance.
- The Fed's Musalem supported the decision last month to cut interest rates by 50bps but prefers future reductions to be gradual. He emphasized the need for caution, noting that easing too much too soon carries more risk than easing too little. Musalem expects inflation to converge to the Fed’s 2% target over the next few quarters and supports further gradual rate cuts.
- The Fed's Williams expressed confidence that the US central bank is "well positioned" to achieve a soft landing for the economy. He believes current monetary policy supports both economic and labor market strength while guiding inflation toward the 2% target.
- Fed funds futures are steady this morning, with Nov futures pricing in 22bps of cuts, and 50.4bps of cuts now priced in by the December meeting.
- Today we have Trade Balance while focus will turn to Wednesday's minutes for the September FOMC, CPI on Thursday and PPI Friday
JGBS: Muted Session, Solid 30Y Auction, Heavy US Calendar Later In Week
In Tokyo morning trade, JGB futures are holding a downtick, -2 compared to settlement levels, after initial post-30Y-supply strength was reversed.
- Today’s 30-year supply was well absorbed, with the low price beating dealer expectations, the cover ratio steady and the auction tail shortening.
- Outside of the previously outlined labour cash earnings and current account balance data, there hasn't been much by way of domestic drivers to flag.
- Cash US tsys are 2-4bps richer, with a steepening bias, in today’s Asia-Pac session after Fed's Musalem stated that the current monetary policy path remains appropriate despite recent jobs data.
- We have limited US data today, with the focus on the minutes for the September FOMC tomorrow, CPI on Thursday and PPI on Friday.
- Cash JGBs are mixed across benchmarks beyond the 1-year (+1.9bps), with yield swings bounded by +/- 1bp. The belly of the curve has outperformed with the benchmark 7-year yield ~1bp lower at 0.656%. The 30-year yield is unchanged at 2.126% versus a pre-auction high of 2.1430%.
- The swaps curve has twist-steepened, with rates 1bp lower to 1bp higher.
- Tomorrow, the local calendar will see Machine Tool Orders.
AUSSIE BONDS: Cheaper But Richer After Minutes Despite RBA Firmly On Hold
ACGBs (YM +5.0 & XM +3.0) are stronger after today’s release of the RBA Minutes for the September meeting.
- RBA Governor Bullock said in September that the discussion format had changed to reflect that the Board isn’t ruling “anything in or out” and so it focussed on scenarios that could shift rates in either direction.
- “Not enough had changed” since the last meeting to warrant altering the level of restrictiveness. Policy “would need to be sufficiently restrictive” until the Board was “confident” that “inflation was moving sustainably” towards target.
- Cash US tsys are 2-5bps richer, with a steepening bias, in today’s Asia-Pac session after Fed's Musalem stated that the current monetary policy path remains appropriate despite recent jobs data.
- Cash ACGBs are 2-3bps richer after today’s releases but remain sharply cheaper versus Friday’s close.
- Swap rates are 10-15bps higher than Friday’s closing levels.
- The bills strip is richer, with pricing flat to +5.
- RBA-dated OIS pricing is 2-3bps softer after the Minutes but remain 10-21bps firmer than Friday’s closing levels for 2025 meetings.
- Tomorrow, the local calendar will see a speech from RBA's Kent alongside the AOFM’s planned sale of A$500mn of the 3.25% 21 June 2039 bond.
NZGBS: Slightly Richer, RBNZ Decision On Wed
NZGBs closed flat to 2bps richer across benchmarks after dealing in narrow ranges in today’s local session. With the domestic calendar empty today, local participants largely sat on the sideline ahead of Wednesday’s RBNZ Policy Decision.
- However, swap rates closed 1-5bps higher with a flatter 2s10s curve.
- RBNZ dated OIS pricing closed 4-20bps firmer across 2025 meetings.
- For Wednesday's RBNZ Policy Decision, the market is pricing in a 74% chance (44bps) of a 50bp cut, with 88bps of easing by year-end.
- Tomorrow, the local calendar is empty.
- We have limited US data today, with the focus on the minutes for the September FOMC tomorrow, CPI on Thursday and PPI on Friday. Note, that Friday also sees the start of the latest earnings cycle with Bank of NY Mellon, Wells Fargo, JP Morgan and Blackrock announcing.
- Cash US tsys are 2-5bps richer, with a steepening bias, in today’s Asia-Pac session after Fed's Musalem stated that the current monetary policy path remains appropriate despite recent jobs data.
- On Thursday, the NZ Treasury plans to sell NZ$200mn of the 0.25% May-28 bond, NZ$250mn of the 4.25% May-34 bond and NZ$50mn of the 1.75% May-41 bond.
FOREX: A$ Falters Amid China/HK Equity Pullback, Lower Metals
Outside of modest yen gains and a further pullback in AUD, G10 FX moves have been fairly muted so far in Tuesday trade. The BBDXY USD index is little changed, last near 1238.15.
- There was some early USD weakness, as front end US yields fell. We had comments from the Fed's Musalem that Friday's jobs report doesn't alter the Fed outlook. This coupled with some flows helped push yields lower. At this stage, the 2yr yield is down 4.5bps to 3.95%.
- USD/JPY sits back under 148.00, around 0.15% stronger in yen terms. There hasn't been much follow through to the downside though. Earlier data showed August labour earnings and household spending close to expectations. Both real wages and household spending are back in negative territory in y/y terms.
- AUD/USD has faltered to 0.6730/35, off a further 0.35%. Disappointment around lack of further stimulus details from the NDRC onshore in China (as these markets have returned) has weighed on sentiment. Metal prices are lower, iron ore and copper down by 3% and 2% respectively. Survey data showed improving consumer and business sentiment while the RBA minutes were fairly neutral relative to expectations.
- AUD/USD is back under its 50-day EMA, with the 100-day near 0.6700 the next potential downside target. AUD/JPY is back to 99.55, back sub its simple 200-day MA.
- Looking ahead, we have more central bank speak from the Fed and the ECB. On the data front, the US NFIB small business survey prints.
EQUITIES: Asian Equities Head Lower As China Equites Lose Momentum
- Asian equities are broadly lower today as Chinese shares lost momentum after a strong open. The market downturn was driven by disappointment over the lack of fresh stimulus from China’s National Development and Reform Commission. Investors had expected more action to support China’s growth, but officials reiterated existing policies without introducing new measures. Chinese officials stressed their confidence in meeting economic targets but acknowledged increasing downward pressures. Market participants remain cautious, awaiting further policy follow-through to solidify China's recovery.
- The MSCI Asia Pacific Index fell by up to 2.7%, led by declines in Chinese tech companies like Tencent and Alibaba.
- Japanese stocks slipped as the yen strengthened to 147.82, reversing its recent weakening trend however this weighed on exporters, particularly automakers and tech companies. The Topix fell 1.5%, with Toyota leading losses, while the Nikkei 225 is trading down 1.1%. Concerns over escalating tensions in the Middle East also dampened sentiment, particularly regarding potential Israeli retaliation against Iran.
- Major benchmarks in Taiwan & South Korea are trading 0.60%-0.80% lower, tech stocks are underperforming with Samsung now on trading back at March 2023 lows. Elsewhere most other regional markets trade +/-0.50%.
OIL: Disappointing China Fiscal Outlook Weighs On Crude, Iran Still Market Focus
Oil prices have fallen today after rallying close to 4% on Monday driven by concern over a possible Israeli attack on Iranian oil infrastructure. Today commodities weakened as comments from China’s NDRC disappointed as they were short on details, although it will quicken fiscal spending. WTI is down 1.6% to $75.93/bbl, off the intraday low of $75.36, while Brent is back below $80 at $79.71/bbl (-1.5%) after a low of $79.18. The USD index is down slightly.
- The situation in the Middle East could easily reverse today’s losses though. There were no signs of a reduction in fighting yesterday with rocket attacks on Israel from Iran-backed Hamas, Hizbullah and Yemen’s Houthis, while Israel struck southern Lebanon and Gaza.
- Markets are concerned that following Iran’s attack on Israel last week, that the OPEC member will become more involved in the conflict thus risking supplies. A third of global oil output comes from the Middle East.
- Later the Fed’s Kugler, Bostic and Collins and ECB’s de Guindos, Schnabel and McCaul speak. In terms of data, US August trade and German August IP print. There is also industry-based US oil inventory data.
GOLD: Consolidating As Fed Cut Expectations Pared
Gold has extended Monday’s weakness in today’s Asia-Pac session.
- Bullion closed 0.4% lower on Monday as market participants continued to adjust to Friday's strong September jobs report and price out aggressive rate cut expectations.
- Fed funds futures have not only taken out risks for a 50bp cut next month but now reflect the chance of no action. The implied November contract shows -19bps in easing, with December at -44bps.
- Lower rates are typically positive for gold, which doesn’t pay interest.
- There was limited reaction to Fed speakers yesterday. MN Fed President Kashkari said risks of higher inflation are waning as he defended his 50bp rate cut decision, seeing a neutral rate at around 3%.
- We have limited US data today, with the focus on the minutes for the September FOMC tomorrow, CPI on Thursday and PPI on Friday.
- According to MNI’s technicals team, gold remains in consolidation mode, although the trend condition is also unchanged, and bulls are still in the driver’s seat. The focus remains on $2,690.2 next, a Fibonacci projection. Firm support lies at $2,615.4, the 20-day EMA.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 08/10/2024 | 0600/0800 | ** |  DE | Industrial Production |
| 08/10/2024 | 0600/0800 |  SE | Flash CPI | |
| 08/10/2024 | 0645/0845 | * |  FR | Foreign Trade |
| 08/10/2024 | 0700/0900 |  EU | ECB's Schnabel chairing ECB MonPol session | |
| 08/10/2024 | 0700/0300 |  US | Fed Governor Adriana Kugler | |
| 08/10/2024 | 0900/1000 | * |  GB | Index Linked Gilt Outright Auction Result |
| 08/10/2024 | 1000/0600 | ** | US | NFIB Small Business Optimism Index |
| 08/10/2024 | - | EU | ECB's de Guindos at ECOFIN meeting | |
| 08/10/2024 | 1230/0830 | ** | US | Trade Balance |
| 08/10/2024 | 1230/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 08/10/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 08/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 08/10/2024 | 1645/1245 | US | Atlanta Fed's Raphael Bostic | |
| 08/10/2024 | 1700/1300 | *** | US | US Note 03 Year Treasury Auction Result |
| 08/10/2024 | 2000/1600 | US | Boston Fed's Susan Collins | |
| 09/10/2024 | - |  NZ | Reserve Bank of New Zealand Meeting | |
| 08/10/2024 | 2330/1930 | US | Fed Vice Chair Philip Jefferson | |
| 09/10/2024 | 0030/1130 | * |  AU | Building Approvals |
| 09/10/2024 | 0100/1400 | *** | NZ | RBNZ official cash rate decision |
| 09/10/2024 | 0600/0800 | ** | DE | Trade Balance |
| 09/10/2024 | 0830/1030 | EU | ECB's Elderson in 'true cost of green...' session | |
| 09/10/2024 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 09/10/2024 | 1100/0700 | ** | US | MBA Weekly Applications Index |
| 09/10/2024 | 1200/0800 | US | Atlanta Fed's Raphael Bostic | |
| 09/10/2024 | 1315/0915 | US | Dallas Fed's Lorie Logan |