Source: MNI - Market News/Bloomberg
UK
HOUSE PRICES (BBG): “A closely watched gauge of UK house prices has turned positive for the first time in almost two years amid hopes that the Bank of England will further ease borrowing costs.
EU
DEBT (MNI): The European Commission would be able to roll over some of the debt used to provide more than EUR338 billion in grants under its NextGenerationEU pandemic recovery programme from 2028 but no decision to do so has yet been taken and the EU remains committed to repaying all its NGEU borrowings by 2058, EU officials told MNI.
ECB (MNI INTERVIEW): Core inflation remains key to determining the European Central Bank’s interest rate path, National Bank of Croatia governor Boris Vujcic told MNI ahead of a widely-anticipated cut next week, adding that inflation looks unlikely to dip below the 2% target next year.
COMPANIES (BBG): “Credit stress among European industrial companies rose during the third quarter to the most since the depths of the pandemic as weaker demand and investment pressures weigh on the sector.”
US
WEATHER (RTRS): “Hurricane Milton made landfall on Florida's west coast on Wednesday, striking a little sooner and further south than forecast, offering the state a glimmer of hope it might be spared the worst of the anticipated catastrophe.”
FED (MNI BRIEF): The Federal Reserve is likely to cut interest rates once or twice more this year, and the aggressive nature of the central bank's 50 basis point rate cut last month does not signal anything about the future path of cuts, San Francisco Fed President Mary Daly said Wednesday.
FED (MNI BRIEF): Federal Reserve Bank of Boston President Susan Collins said Wednesday she sees a series of interest-rate decreases ahead as the central bank eases off of restrictive monetary policy, adding she would like to keep the U.S. economy and labor market roughly where they are today.
FED (MNI): Federal Reserve officials were divided on how much to cut interest rates last month, with some participants preferring to cut by a more modest quarter point rather than the 50 basis points that was ultimately delivered, minutes of the September meeting showed Wednesday.
FED (MNI BRIEF): Risks to the Federal Reserve's employment and inflation goals are now roughly in balance, Fed Vice Chair Philip Jefferson repeated Wednesday, adding that decisions about interest rates will be made meeting-by-meeting.
POLITICS (BBG): “Donald Trump said he would end US income taxes on Americans living in other countries, the latest in a string of tax proposals in the final stretch of the 2024 campaign.”
OTHER
MIDEAST (BBG): “President Joe Biden has warned Israel against attacking Iran’s nuclear sites, and US officials worry a strike on its energy infrastructure could roil energy markets. But with Israeli retaliation against Iran expected at any time, the US is finding it has few assurances against further escalation.”
JAPAN (MNI BRIEF): Japan's corporate goods price index rose 2.8% y/y in September, accelerating from August’s revised 2.6% and higher than the 2.3% market estimate, but import prices posted their first drop in eight months, falling 2.6% from the prior month's 2.5% increase, data released by the Bank of Japan showed on Thursday.
JAPAN (MNI BRIEF): Bank of Japan’s closely watched five-year median household inflation forecast stood unchanged at 5% over Q3, while the number of households that expect prices to rise increased to 83.6% from 82.0%, the BOJ’s quarterly consumer survey showed on Thursday.
JAPAN (BBG): “ Warren Buffett’s Berkshire Hathaway Inc. sold a ¥281.8 billion ($1.89 billion) multi-tranche bond on Thursday in a deal that’s fueling speculation the legendary investor will increase his exposure to Japanese assets.”
NEW ZEALAND (BBG): “New Zealand’s annual budget deficit widened more than forecast as high inflation increased the cost of government services and welfare support.”
CHINA
PBOC (BBG): “ China’s central bank has set up a swap facility to provide liquidity to institutional investors to buy stocks, part of a broad stimulus package announced earlier that ignited a rally in stocks.”
FISCAL (YICAI): “Market investors should manage their expectations for additional fiscal stimulus, as the current priority is to make good use of existing proactive fiscal policies, while any additional issuance of treasury bonds or special treasuries will need to wait until late October to be passed by the Standing Committee of the National People's Congress, Yicai.com reported citing analysts.”
DEPOSIT RATES (CSJ): “Banks will likely further lower deposit rates to ease pressure on their shrinking net interest margin following the recent cut to existing housing mortgage rates, China Securities Journal reported citing analysts.”
MARKETS (21st CENTURY BUSINESS HERALD): The total size of stock ETFs has exceeded CNY3 trillion to set a new high, as various funds seek to enter the stock market through the funds amid improved investor confidence, 21st Century Business Herald reported.
CHINA MARKETS
MNI: PBOC Net Drains CNY142 Bln via OMO Thursday
The People's Bank of China (PBOC) conducted CNY150 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY142 billion after offsetting maturities of CNY292 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6396% at 09:30 am local time from the close of 1.8222% on Wednesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 44 on Wednesday, compared with the close of 58 on Tuesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Higher At 7.0742 Thurs
The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.0742 on Thursday, compared with 7.0568 set on Wednesday. The fixing was estimated at 7.0756 by Bloomberg survey today.
MARKET DATA
AUSTRALIA OCT CONSUMER INFLATION EXPECTATION Y/Y 4.0%; PRIOR 4.4%
JAPAN SEP PPI Y/Y 2.8%; MEDIAN 2.3%; PRIOR 2.5%
JAPAN SEP PPI M/M 0.0%; MEDIAN -0.3%; PRIOR -0.2%
JAPAN SEP BANK LENDING EX TRUSTS Y/Y 3.1%; PRIOR 3.3%
JAPAN SEP TOKYO AVG OFFICE VACANCIES 4.61%; PRIOR 4.76%
MARKETS
US TSYS: Tsys Futures Slightly Weaker, Curve Steepens Ahead Of CPI & 30y Auction
- Tsys futures are slightly weaker today although have traded in tight ranges, the long-end has underperformed ahead of the 30y auction and CPI later today. TU is unch at 103-11⅛, while TY is trading -02+ at 112-04 just off session lows.
- Volumes are down on prior sessions, while only trade of note has been a TU/FV Block steepener $190k DV01.
- A bear threat in tsys remains present with Dec'24 10y trading at its recent lows. The latest sell-off has resulted in a break of the 100-day EMA and now trades just above key support & 200-day EMA at 112-00, while a move back above 113-12 (Sep 3 lows) is key resistance.
- Cash tsys curve has twist-steepened throughout the session, with yields +0.5bps to -1bps. The 2yr is trading -1bps at 4.012%, while the 10yr is +0.2bps at 4.075% with the 2s10s rising 1.181bps to 5.865.
- The Fed's Daly earlier highlighted that the aggressive 50bp rate cut in September was a necessary "recalibration" rather than an indication of future cuts. She mentioned that the Fed could make one or two more rate cuts by the end of the year, depending on economic conditions. Daly emphasized that the September cut was designed to align policy rates with the economy's needs, avoiding overtightening, which could harm the labor market. She expressed confidence in achieving the Fed’s 2% inflation target
- Fed funds futures are little changed today, with 21.4bps for November, and 46.6bps of cuts priced by the December meeting. The market has a total of 135bps of cuts priced in through to October 2025
- Looking ahead focus will turn to CPI which is expected to ease modestly in September from the 0.33% in August, with seven analysts eyeing an average 0.27% M/M from a range of 0.20-0.34. We also have Jobless claims, 30y Bond Auction and more fed speakers to come.
JGBS: Cheaper Ahead Of US CPI Data
JGB futures are holding weaker, -10 compared to settlement levels, after dealing in a relatively narrow range in today’s Tokyo session.
- Outside of the previously outlined PPI and International Investment Flows data, there hasn't been much by way of domestic drivers to flag.
- Today's 5-year bond auction presented mixed demand metrics. The auction price exceeded dealer expectations but the cover ratio was relatively stable and the auction tail was marginally longer than last month.
- Cash US tsys are flat to 2bps richer across benchmarks, with a steepening bias, in today’s Asia-Pac session after yesterday’s heavy session. The market’s focus is on today’s US CPI data. Weekly Jobless claims, a few more Fed speakers (Cook, Barkin, and Williams), and the re-opening of the 30Y Bond auction are also on tap.
- Cash JGBs are mostly cheaper across benchmarks, with yields flat (2-3-year) to 3bps higher (1-year). The benchmark 5-year yield is 0.4bp higher at 0.553% after today’s supply.
- Swap rates are flat to 1bp higher out to the 30-year and 5bps higher beyond. Swap spreads are generally tighter apart from the 40-year.
- Tomorrow, the local calendar will see M2 & M3 Money Stock data alongside BoJ Rinban Operations covering 1-3-year and 5-25-year JGBs.
AUSSIE BONDS: Narrow Ranges But Cheaper Ahead Of US CPI Data
ACGBs (YM -5.0 & XM -3.0) are holding cheaper after dealing in narrow ranges in today’s Sydney session.
- Outside of the previously outlined Melbourne Institute Inflation Gauge, there hasn't been much by way of domestic drivers to flag.
- Cash US tsys are flat to 2bps richer across benchmarks, with a steepening bias, in today’s Asia-Pac session after yesterday’s heavy session. The market’s focus is on today’s US CPI data. Core non-housing service CPI inflation is expected to ease modestly in September from the 0.33% in August, with seven analysts eyeing an average 0.27% M/M from a range of 0.20-0.34.
- Weekly Jobless claims, a few more Fed speakers (Cook, Barkin, and Williams), and the re-opening of the 30Y Bond auction are also on tap.
- Cash ACGBs are 3-4bps cheaper with the AU-US 10-year yield differential at +15bps.
- Swap rates are 3-4bps higher.
- The bills strip has bear-steepened, with pricing -1 to -5.
- RBA-dated OIS pricing is 1-4bps firmer for 2025 meetings. A cumulative 7bps of easing is priced by year-end.
- Tomorrow, the local calendar is empty apart from the AOFM’s planned sale of A$1.0bn of the 2.75% 21 November 2028 bond.
NZGBS: Sharply Cheaper, US Tsys & NZ Budget Deficit Weigh
NZGBs closed sharply cheaper although off worst levels, with benchmark yields 5-8bps higher.
- NZGBs 2bps opened cheaper following a negative lead in from US tsys yesterday. However, the release of the NZ Government’s annual budget extended the selling.
- The deficit widened by more than forecast as high inflation increased the cost of government services and welfare support. The deficit was NZ$12.85 billion in the year ended June 30, compared to the NZ$11.07 billion projected in the May budget. The deficit grew from NZ$9.45 billion in 2023.
- Today’s weekly auctions showed mixed results, with cover ratios across the lines ranging from 1.74x (May-34) to 3.10x (May-41).
- Swap rates closed 2-6bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed mixed today but remained 5-15bps softer across meetings out to May-25 than pre-RBNZ levels. 53bps of easing is priced for November (4.22%), with a cumulative 93bps of easing priced for Feb-25 (3.82%) and 152bp by July-25 (3.23%).
- It is also worth noting that the NZ official rate is now anticipated to be 10bps below Australia’s (4.32%) in November.
- Tomorrow, the local calendar will see BusinessNZ Manufacturing PMI, Food Prices and Net Migration data.
FOREX: Firmer China Equities Help NZD & A$, Yen Back near Early Aug Lows
The USD BBDXY index sits off its recent highs, albeit marginally. The index last near 1243.75. Intra-session highs from Wednesday trade came close to 1244.5, which was fresh highs back to mid August and a test above the 200-day EMA.
- A slight USD pull back today has been aided by the better China/HK equity tone. The PBoC announced it has opened applications for a swap facility that is aimed at supporting local equity markets. The scheme was originally announced on Sep 24. However, it could be expanded beyond the initial size of CNY 500bn and broadened in terms of acceptable collateral as well (per onshore media).
- The CSI 300 is up 2.85%, while the HSI in HK is up over 4% at this stage.
- NZD/USD is outperforming in the G10 space, up around 0.40%, putting the pair last near 0.6085/90. We are still sub pre RBNZ levels from yesterday of 0.6135.
- AUD/USD is also higher, but lagging NZD at the margins, the pair last near 0.6735. Inflation expectations fell to a multi year low of 4.0%y/y earlier.
- Yen has faltered modestly. USD/JPY unable to breach 149.00 on the downside, the pair is tracking just under session highs (149.55), last near 149.45.Upside targets will now rest above 150.00 (150.76 50.0% retracement of the Jul 3 - Sep 16 bear leg).
- Earlier data showed firmer than expected PPI for Sep in Japan but this did not give a lasting boost to JPY sentiment.
- Coming up we will hear from a BoJ official in Tokyo at a BBG function. Also the RBA's Assistant Governor Hunter will appear on a panel session. Later on we have the US CPI print and more Fed speak in focus.
ASIA STOCKS: China & HK Equities Find Support Ahead Of MOF Meeting
- Chinese equities continue to rally following earlier headlines and hopes that the country’s finance ministry will announce fresh stimulus during a briefing Saturday.
- Utilities, Consumer Staples & Discretionary stocks are the top performing mainland equity sectors today. Hong Kong listed equities have outperformed mainland peers ahead of a public holiday on Friday, with the HSTech Index +4.15%, Mainland Property Index +5.10%.
- The Beijing Stock Exchange 50 Index is the top performing major benchmark up 5.86%
- Stock specific moves have seen Alibaba jumped 4.5% following price targets from some Investment banks, citing higher forecast revenues, Guotai Junan and Haitong Securities rallied after the two brokers disclosed the terms of their proposed merger,
OIL: Recouping Wednesday's Losses, Better China Sentiment Helping
Brent crude has pushed back above $77/bbl in the first part of Thursday dealings. We are up close to 0.80%, which is completely offsetting Wednesday's drop at this stage. WTI was last near $73.80/bbl, up by the same amount, although we haven't been able to test above $74/bbl so far.
- Better China related asset sentiment has likely helped oil at the margins today. Onshore China equities (and in HK) are up firmly. Today the PBoC opened applications for a swap facility that is aimed at supporting local equity markets. This comes ahead of Saturday's fiscal briefing from the MoF.
- Crude was under pressure through Wednesday US trade, as a report showed US stockpiles rose nearly 6mln barrels last week. The firmer USD/US yield backdrop was also a headwind.
- The other watch point for markets remains Middle East tensions, with Israel's retaliation against Iran still awaited.
- For Brent, intra-session lows from Wednesday came near $75/bbl. This was right on the 20-day EMA. Recent highs remain intact just above $81/bbl.
- Upcoming macro focus will rest on the US CPI print later.
GOLD: Down For A Sixth Straight Session
Gold is 0.3% in today’s Asia-Pac session, after closing 0.5% lower at $2607.77 on Wednesday.
- Yesterday’s move was the sixth consecutive daily loss, bringing the yellow metal to its lowest since Sept 20.
- Bullion was pressured by the FOMC minutes, which showed "some" voting members failed to sway the 50bp cut majority at the September policy meeting.
- "Noting that inflation was still somewhat elevated while economic growth remained solid and unemployment remained low, some participants observed that they would have preferred a 25 basis point reduction of the target range at this meeting, and a few others indicated that they could have supported such a decision," the report said.
- US yields rose across benchmarks ahead of today’s US CPI data. Lower rates are typically positive for gold, which doesn’t pay interest. Weekly US Jobless claims and a few more Fed speakers (Cook, Barkin and Williams) are also on tap.
- According to MNI’s technicals team, the latest short-term retracement in gold is considered corrective. The trend condition is unchanged, and bulls remain in the driver’s seat.
- A resumption of gains would refocus attention on $2,690.2, a Fibonacci projection. Firm support at $2,615.7, the 20-day EMA, has been pierced. A clear break would signal the scope for a deeper retracement to $2,584.9, the Sep 20 low.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 10/10/2024 | 0600/0800 | *** |  NO | CPI Norway |
| 10/10/2024 | 0600/0800 | ** |  SE | Private Sector Production m/m |
| 10/10/2024 | 0600/0800 | ** |  DE | Retail Sales |
| 10/10/2024 | 0800/1000 | * |  IT | Industrial Production |
| 10/10/2024 | 1230/0830 | *** |  US | Jobless Claims |
| 10/10/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 10/10/2024 | 1230/0830 | *** | US | CPI |
| 10/10/2024 | 1315/0915 | US | Fed Governor Lisa Cook | |
| 10/10/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
| 10/10/2024 | 1430/1030 | US | Richmond Fed's Tom Barkin | |
| 10/10/2024 | 1500/1100 | US | New York Fed's John Williams | |
| 10/10/2024 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 10/10/2024 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 10/10/2024 | 1700/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |
| 10/10/2024 | 1800/1400 | ** | US | Treasury Budget |
| 11/10/2024 | 0600/0700 | ** |  GB | UK Monthly GDP |
| 11/10/2024 | 0600/0700 | ** | GB | Trade Balance |
| 11/10/2024 | 0600/0700 | ** | GB | Index of Services |
| 11/10/2024 | 0600/0700 | *** | GB | Index of Production |
| 11/10/2024 | 0600/0700 | ** | GB | Output in the Construction Industry |
| 11/10/2024 | 0600/0800 | *** | DE | HICP (f) |
| 11/10/2024 | - | *** |  CN | Money Supply |
| 11/10/2024 | - | *** | CN | New Loans |
| 11/10/2024 | - | *** | CN | Social Financing |
| 11/10/2024 | 1230/0830 | *** | US | PPI |
| 11/10/2024 | 1230/0830 | * |  CA | Building Permits |
| 11/10/2024 | 1230/0830 | *** | CA | Labour Force Survey |
| 11/10/2024 | 1345/0945 | US | Chicago Fed's Austan Goolsbee |