Source: MNI - Market News/Bloomberg
UK
FISCAL (MNI BRIEF): The UK Budget, set to be unveiled on Oct 30, will be a net fiscal giveaway with policy looser than in the Spring Budget and it will entail that the Bank of England will not cut interest rates as quickly, according to analysis by the Resolution Foundation (RF) think-tank.
BUSINESS (SKY): “The prime minister will pledge to get rid of regulation that "needlessly holds back investment" at a major business conference in London today.”
EU (FRANCE24): “UK Foreign Minister David Lammy will attend the Foreign Affairs Council in Luxembourg, joining EU counterparts for the first time in two years. Talks will focus on the Middle East and Ukraine, following an invitation from Josep Borrell. This move follows PM Keir Starmer’s pledge to reset relations after Brexit during a recent Brussels visit."
EU
RATINGS (POLITICO): “Ratings agency Fitch revised France's outlook from "stable" to "negative," citing French Prime Minister Michel Barnier's challenges in trying to bring down the country’s spiraling debt. At the same time, Moody's Ratings delivered a cut to its rating outlook for Belgium.”
TECH (BBG): “Taiwan Semiconductor Manufacturing Co. is planning more plants in Europe with a focus on the market for artificial intelligence chips, according to a senior Taiwanese official, as the chipmaker expands its global footprint.”
BUSINESS (EURONEWS): “German automaker Porsche has experienced dropping sales as competition in China continues to rise, with demand for some of its key electric models falling as well.”
BUSINESS (DW): “After airlines such as Eurowings and Ryanair have cut back their connections in Germany due to excessive fees and costs, Lufthansa CEO Carsten Spohr fears a negative impact on Germany as a place to do business.”
TRADE (DW): “Representatives from China and the European Union have failed to reach an agreement to cut EU tariffs on Chinese-made electric vehicles (EVs), Beijing said Saturday.”
GERMANY (RTRS): “U.S. President Joe Biden is due to visit Germany on Friday, having cancelled a visit last week because of Hurricane Milton striking the U.S., German government sources told Reuters on Sunday.”
FRANCE (POLITICO): “Paris is rapidly running out of both the time and political clout required to halt a European Union trade deal with South America, only adding to the woes of President Emmanuel Macron, who is likely to face a vitriolic backlash from France's all-powerful farmers.”
BELGIUM (POLITICO): “Belgium’s June election winners bolstered their positions in local elections on Sunday. Since the June election, new governments have been formed in Belgium’s French-speaking Wallonia region in the south and in Dutch-speaking Flanders in the north. But talks on a Brussels regional government and a new national government have stalled.”
GREECE (POLITICO): “Greece’s Syriza party is heading for another splintering and potentially the loss of its status as the country’s main opposition. Syriza’s Central Committee decided late Saturday that its recently deposed leader, Stefanos Kasselakis, cannot be a candidate in the party’s upcoming leadership battle.”
US
FED (MNI POLICY): Federal Reserve officials plan to scale back rate cuts to 25-basis-point increments and could even hold at some meetings as the U.S. economy continues to show surprising strength and after the latest employment report dissipated fears of a Fed-induced job market rut.
US/ISRAEL (BBG): “The US is sending an advanced missile defense system and associated troops to Israel to help shield its ally from attacks by Iran, the Pentagon announced.”
OTHER
JAPAN (BBG): “ Japanese Prime Minister Shigeru Ishiba said he is not considering a sales tax hike during his three-year term as president of the nation’s ruling party.”
CHINA/TAIWAN (BBG): “ China’s armed forces held more drills around Taiwan that it said were intended as a warning to the democratically run government to halt “separatist acts.”
NORTH KOREA (BBG): North Korea briefly ordered its troops along the South Korean border to stand ready to fire after accusing Seoul of sending drones into its capital Pyongyang in what it called a “war provocation.”
SINGAPORE (RTRS): Singapore's central bank on Monday left its monetary settings unchanged, as expected, as data showed the economy perked up in the third quarter though analysts are betting on a loosening in policy early next year to guard against external risks.
CHINA
FISCAL (MNI BRIEF): China's Finance Ministry will increase the debt limit substantially to support local governments to resolve off-balance sheet debts and issue special treasuries to replenish core tier-one capital of large state-owned commercial banks, Finance Minister Lan Foan told reporters on Saturday, noting more additional countercyclical measures are under consideration.
FISCAL (YICAI): “China is expected to issue over CNY2 trillion in government bonds to swap out local government off-balance sheet debt, Yicai.com reported, citing analysts following the Finance Ministry press conference on Saturday.”
HOUSING (MNI BRIEF): China will allow local authorities to fund their purchases of unsold homes for affordable housing with special-bond proceeds to help support the real-estate market, Vice Finance Minister Liao Min told reporters on Saturday.
LOCAL GOVERNMENT DEBT (MNI BRIEF): China’s debt resolution plan aimed at reducing the burden on local governments will be the largest in recent history, increasing the debt ceiling for a one-time replacement of existing hidden liabilities, Finance Minister Lan Foan told reporters Saturday.
INFLATION (MNI BRIEF): China's Consumer Price Index rose 0.4% y/y in September, decelerating from August's 0.6% and underperforming the 0.6% consensus, driven by the higher comparison base for the same period last year, data from the National Bureau of Statistics showed Sunday.
GROWTH (BBG): Goldman Sachs Group Inc. upgraded its forecasts for China’s economic growth in 2024 and 2025 after Beijing unveiled a series of measures to shore up growth, including plans for greater public spending announced over the weekend.
CHINA MARKETS
MNI: PBOC Net Injects CNY19.5 Bln via OMO Monday
The People's Bank of China (PBOC) conducted CNY19.5 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led no change to the liquidity as no repo matures today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.5000% at 09:32 am local time from the close of 1.4549% on Friday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 44 on Friday, compared with the close of 47 on Thursday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.0723 Mon; +3.26% Y/Y
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.0723 on Monday, compared with 7.0731 set on Friday. The fixing was estimated at 7.0722 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND SEPT. BNZ SERVICES PSI 45.7; PRIOR 45.7
NEW ZEALAND SEPT. TOTAL CARD SPENDING +0.3% M/M; PRIOR -0.2%
NEW ZEALAND SEPT. RETAIL CARD SPENDING UNCHANGED M/M; PRIOR +0.2%
MARKETS
US TSYS: Tsys futures Slightly Lower, Ranges Narrow On Low Volume
- It has been a very slow day in US tsys, with Japan out and no cash trading. Ranges have been narrow in tsys futures, although there has been some, although small weakness in the short-end over the past hour or so. TU is trading at 103-13⅝, while TY underperformed post the NY close on Friday and is trading unchanged during the APAC session at 112-01+. Volumes are less than 50% of recent averages.
- Focus in the region was on China with some disappointing headlines out over the weekend. Equities were initially slightly weaker on the open before recovering throughout China's business briefings today, with property & banking stocks outperforming.
- In the week leading up to Oct. 8, hedge funds significantly reduced their net long position in SOFR futures by $5.6m in DV01, though they still held nearly 500,000 contracts. They also covered $8.2m in DV01 of their 10yr short positions while adding to net longs in ultra 10yrand ultra-long bond futures. Asset managers were bullish on ultra 10yr futures, increasing net longs by $6m in DV01, while unwinding $5.9m in DV01 in long-bond and ultra-long bond futures according to CFTC data.
- Calendar is empty tonight with the US out for Columbus day, focus will turn to retail sales & jobless claims on Thursday.
ACGBs Cheaper As Curve Steepens, OIS Pricing Continues To Cool
- ACGBs (YM -5.0 & XM -5) are cheaper today and trade at session's worst. There was limited data out in the region today, while Japan was also out for a public holiday. Focus was largely on China where they held further business briefing surrounding measures to support the market, equities saw heightened volatility with markets swinging 1-3% both ways. Iron ore saw decent moves also and now trades 2.90% higher.
- US cash tsys trading has been closed today with Japan out, we also saw limited trading in Tsys futures with ranges narrow.
- Cash ACGBs are trading 4-6bps cheaper, with the curve beat-steepening. The 2yr is +3.2bps at 3.855%, while the 10yr is +4.1bps at 4.267% and now trades back at July 30 levels. The 2s10s made new highs earlier of 42.18, levels not seen since April 30th, we trade just off those levels at 40.10 now.
- Earlier there was decent demand for the 2051 at the auction, although bid/cover was slightly down on the July auction at 3.15x, with average yield of 4.8254%, we trade little changed at 4.8253% now.
- Swaps are trading 2-4bps higher
- The bills strip -1 to -4 across contracts
- RBA-dated OIS pricing has continued to cool with just 8.8bps of cuts priced in through to year-end now, down from 10bps this morning. There is 22bps of cuts priced for Feb, down 2bps. While pricing continues to cool further out the curve with 66bps, down 4bps priced through to Sept 2025.
- The local calendar is light on until Thursday when we have employment data due.
NZGBS: Closed Weaker, Belly Of Curve Underperforming, CPI On Wed
- NZGBs closed 3-6.5bps cheaper, with the belly of the curve underperforming. Bonds yields are trading off session highs with the 2yr +3.5bps at 3.969% vs session highs of 4.01%, while the 10yr is +5.1bps at 4.436% vs 4.469%
- New Zealand's consumer spending remained weak in Q3, with card purchases falling 0.7%, following a 2.8% decline in Q2. The economy contracted in Q2 with subdued spending adding to risks that the contraction will extend into the 3Q even as modest income tax cuts took effect at the end of July.
- Swaps rates closed 2-7bps higher
- RBNZ dated OIS was little changed today, the market expects 50bps of cuts at the next meeting, and 88bps of cut by Feb. Looking further out the curve there is 164bps priced to October, which would take it to 264bps of cuts through this easing cycle.
- Cross asset: The NZ50 closed 0.50% lower, after Fisher & Pykel and Infratil dropped over 1% each, offsetting gains in ANZ & WBC. The NZD fell 0.30% following disappointing headlines out of China.
- Looking ahead, tomorrow REINZ House Sales is due out, although this should have little impact on the market, with focus turning to CPI on Wednesday.
FOREX: Dollar Off Highs Amid Firmer Onshore China Equities
The USD BBDXY index sits higher in the first part of Monday trade. We were last near 1244.1, off earlier highs near 1245.05 though. Sentiment has largely focused on China stimulus plans following the weekend MOF briefing. There were lots of pledges from the briefing, but the market was arguably looking for more concrete details around fresh stimulus size. That may have to wait for the next China NPC meeting due later this month/early November.
- Both China and HK equity sentiment has been volatile, but at the break China onshore bourses are higher (CSI 300 up around 1.5%). HK markets are lower, but away from worst levels.
- This has helped AUD and NZD push away from session lows. AUD/USD was last 0.6740 (earlier lows were at 0.6722), while NZD/USD was tracking near 0.6090/95 (lows printed at 0.6083).
- Helping the A$ at the margins has been higher iron ore prices, as China real estate equity has outperformed. Less positive trends have been evident for gold and oil though.
- Elsewhere, trends are leaning towards USD gains, but shifts are fairly modest at this stage. Japan markets are out today reducing JPY liquidity. USD/JPY was slightly higher in latest dealings, last near 149.30/35.
- US TSY futures sit weaker but have largely tracked sideways since the open. US equity futures sit modestly in the red.
- Looking ahead, the Fed’s Kashkari and Waller appear but there are no US data due to a holiday. BoE’s Dhingra also speaks.
Asian Equities Edge Higher, Focus On China
- Equity markets are mostly higher today with Taiwan, South Korea & Australian benchmarks all trading higher, while NZ, China & Hong Kong equities struggle. Japan is out for a public holiday while China equities have seen increased volatility as China briefing kicks off.
- South Korean equities have seen mixed flows from foreign investors, there has been better buying seen in tech & banking stocks while healthcare, Services & Transport names seeing outflows. The large-cap KOSPI is trading +0.65%, while the small-cap KOSDAQ is down 0.65%.
- Australian equities are higher today with the ASX200 up 0.55%. Mining stocks led gains, with Fortescue up 2.3% and BHP adding 0.9%, while the big four banks also traded higher. Web travel group has plummeted 33% following weak guidance.
- New Zealand equities are lower today after Fisher & Pykel & Infratil both fell over 1%, offsetting gains in WBC & ANZ. The NZ50 is 0.60% lower.
- The local APAC calendar is light on today, with focus largely just on China. The US will be out today for Columbus day which is having an impact on trading ranges, investors also remain cautious surrounding escalations in the middle east.
CHINA: Weekend News Disappoints Global Investors.
- Over the weekend, China’s Ministry of Finance provided guidance as to areas of its focus in the coming months.
- The Finance Minister Lan Fo’An kept the government’s 5% growth target highlighting local government’s challenges in identifying, financing and executing on development projects that meeting specific criteria set by the Central Government.
- Local governments had budgeted significant amounts for these projects and official estimates are that only 50% of the budgeted amount has been utilized.
- Lan provided guidance on available budget headroom for further fiscal stimulus and that his ministry is considering new policies and new policy tools.
- Additionally, Lan indicated that the Central Government would allow a one-off rise in regional government debt limits to allow local governments to refinance existing debt, similar to the policy implemented in 2015 aimed at bringing on balance sheet the hidden debts so endemic in the system then.
- Although Lan did not announce new measures for the housing sector, he did reaffirm a desire and intention to continue to stabilize the sector. He discussed the potential for reducing mortgage costs and a focus on developers delivering pre-sold homes to buyers.
- Global markets have interpreted this as a disappointing ‘announcement’ from the MOF, with the Hang Seng down 0.41% at the break, whilst onshore equities are higher (CSI 300 +1.52% at the break).
- What it appears to be is simply a re-attestation of what has been announced thus far and likely points investors focus to the next party meeting.
OIL: China Weighs On Crude As Market Awaits Israeli Retaliation
Oil prices are down today following Saturday’s disappointing China MOF fiscal announcement, with commodities generally weaker. Crude is off its intraday lows though. Brent is down 1.1% to $78.20/bbl after a low of $77.50 and WTI is 1.1% lower at $74.76/bbl after falling to $74.08. The USD index is up 0.1%.
- Soft demand from China, the world’s largest crude importer, has worried markets for some time. Recent fiscal announcements have been sparse on details, including the size of the stimulus, and seem not to include support for consumption and so have resulted in drops in the oil price at times when the situation in the Middle East isn’t deteriorating further.
- Israel is yet to retaliate for Iran’s October 1 missile barrage. The US thinks that Israel looks likely to target military and energy sites in Iran, according to an NBC report. The timing of the response remains unknown. Iran has said that it will hit back forcefully.
- The Fed’s Kashkari and Waller appear but there are no US data due to a holiday. BoE’s Dhingra also speaks.
GOLD: Steady on a Slower Fed and Disappointment from China.
- Gold prices were steady in Asian trading time today given traders pricing in a slower Fed rate cutting cycle and China’s Ministry of Finance release failing to provide new stimulus measures.
- Having slipped to $2,645 in the morning session, gold firmed back to Friday’s close at $2,655.
- Typically benefiting from rate cuts, Gold has performed well this year up over 20%.
- Following the stronger than expected September jobs report, the number of rate cuts for the remainder of the year has been questioned, with markets now pricing in less than two.
- Any further stronger than expected data could further challenge this and put a cap on gold’s upside into year end.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 14/10/2024 | 0630/0730 |  GB | BoE Dhingra At Bank of India Conferece | |
| 14/10/2024 | - | *** |  CN | Trade |
| 14/10/2024 | - | *** | CN | Money Supply |
| 14/10/2024 | - | *** | CN | New Loans |
| 14/10/2024 | - | *** | CN | Social Financing |
| 14/10/2024 | - | GB | International Investment Summit | |
| 14/10/2024 | 1300/0900 |  US | Minneapolis Fed's Neel Kashkari | |
| 14/10/2024 | 1900/1500 | US | Fed Governor Christopher Waller | |
| 14/10/2024 | 2100/1700 | US | Minneapolis Fed's Neel Kashkari | |
| 15/10/2024 | 0430/1330 | ** |  JP | Industrial Production |
| 15/10/2024 | 0600/0800 | *** |  SE | Inflation Report |
| 15/10/2024 | 0600/0700 | *** | GB | Labour Market Survey |
| 15/10/2024 | 0645/0845 | *** |  FR | HICP (f) |
| 15/10/2024 | 0700/0900 | *** |  ES | HICP (f) |
| 15/10/2024 | 0800/1000 | ** |  EU | ECB Bank Lending Survey |
| 15/10/2024 | 0900/1100 | *** |  DE | ZEW Current Conditions Index |
| 15/10/2024 | 0900/1100 | *** | DE | ZEW Current Expectations Index |
| 15/10/2024 | 0900/1100 | ** | EU | Industrial Production |
| 15/10/2024 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 15/10/2024 | 1230/0830 | *** |  CA | CPI |
| 15/10/2024 | 1230/0830 | ** | CA | Wholesale Trade |
| 15/10/2024 | 1230/0830 | ** | US | Empire State Manufacturing Survey |
| 15/10/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 15/10/2024 | 1300/0900 | * | CA | CREA Existing Home Sales |