Source: MNI - Market News/Bloomberg
UK
FISCAL (BBC): “The chancellor has given the clearest signal yet that businesses will face an increase in National Insurance on the day the government announced billions of pounds in overseas investment had been secured.”
TRADE (POLITICO): “Britain “needs more engagement with China,” the country’s new trade chief argued Monday.”
EU
ECB (MNI ECB WATCH): The European Central Bank is widely expected to lower its deposit rate by 25 basis points to 3.25% on Thursday, in a second consecutive cut following weaker-than-expected inflation figures and disappointing September PMI data.
FRANCE (BBC): “French politician Marine Le Pen has hit back against charges of illegal party funding by European Parliament deputies from her far-right National Rally (RN) party.”
MIDDLE EAST (POLITICO): “The EU is struggling to get Gulf countries on board with a series of pro-Ukraine commitments ahead of a leaders’ summit on Wednesday in Brussels, according to a draft statement seen by POLITICO.”
RUSSIA (DW): “Russia could be in a position to attack NATO "by the end of the decade," according to German intelligence. Having noted an increase in espionage and sabotage, spy chiefs are demanding greater powers and flexibility.”
US
FED (MNI): Federal Reserve Governor Chris Waller said Monday recent strong economic data mean the central bank can proceed more cautiously after kicking off the easing cycle with a 50 basis point rate cut in September.
FED (MNI BRIEF): U.S. monetary policy remains tight despite the Federal Reserve’s rate cut last month and inflation is likely to keep falling as the labor market cools, Minneapolis Fed President Neel Kashkari said Monday.
CORP (BBG): “ Biden administration officials have discussed capping sales of advanced AI chips from Nvidia Corp. and other American companies on a country-specific basis, people familiar with the matter said, a move that would limit some nations’ artificial intelligence capabilities.”
OTHER
ISRAEL (WASHINGTON POST): “Israeli Prime Minister Benjamin Netanyahu has told the Biden administration he is willing to strike military rather than oil or nuclear facilities in Iran, according to two officials familiar with the matter, suggesting a more limited counterstrike aimed at preventing a full-scale war.”
TAIWAN/CHINA (BBG): “Taiwan reported that China flew a record 111 warplanes across a US-drawn boundary in the strait separating the sides, underscoring the intensity of military pressure Beijing is placing on the democratically run government.”
SOUTH KOREA/NORTH KOREA (RTRS): “North Korea has blown up sections of an inter-Korean road on its side of the heavily militarised border between the two Koreas, South Korea's Joint Chiefs of Staff said on Tuesday.”
CHINA
DEPOSIT RATES (BBG): “Chinese banks are set to trim rates on 300 trillion yuan ($42.3 trillion) of deposits as soon as this week after the latest barrage of stimulus policies further squeeze their profitability, according to people familiar with the matter.”
FISCAL (21ST CENTURY BUSINESS HERALD): “Analysts remain unclear whether China will address the budget gap caused by lower-than-expected revenue by issuing additional treasuries in Q4, or alternatively tapping unused local debt limits, revitalising state-owned assets and using a budget stabilisation fund, 21st Century Business Herald reported.”
DEFICIT (YICAI): China needs to maintain a deficit rate of around 4% and issue ultra-long-term special government bonds of CNY10 trillion over five years to address deflationary pressure, according to Lian Ping, chairman at the China Chief Economist Forum.
TAX (BBG): “China has begun enforcing a long-overlooked tax on overseas investment gains by the country’s ultra-rich, according to people familiar with the matter.”
CHINA MARKETS
MNI: PBOC Net Injects CNY26.2 Bln via OMO Tuesday
The People's Bank of China (PBOC) conducted CNY68.3 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY26.6 after offsetting the maturity of CNY41.7 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5082% at 09:50 am local time from the close of 1.6141% on Monday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 46 on Monday, compared with the close of 44 on Friday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Higher At 7.0830 Tues; +3.03% Y/Y
The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.0830 on Tuesday, compared with 7.0723 set on Monday. The fixing was estimated at 7.0830 by Bloomberg survey today.
MARKET DATA
AUSTRALIA SEPT. CBA HOUSEHOLD SPENDING -0.7% M/M +2.1% Y/Y; PRIOR +1.6%M/M +3.7% Y/Y
NEW ZEALAND REINZ HOUSE SALES -1.1% Y/Y; PRIOR +5.1%
SOUTH KOREA IMPORT PRICES -3.3% Y/Y; PRIOR +1.8%
SOUTH KOREA EXPORT PRICES +1.2% Y/Y; PRIOR +5.5%
MARKETS
US TSYS: Tsys Futures Edge Higher, Curve Flattens, Fed Speak Later
- Tsys futures are off earlier highs, the long-end is outperforming as the curve twist-flattening throughout the session. TU is trading +02 at 103-13+, while TY is +06+ at 112-02.
- It's been a rather slow session, US equity futures are slightly higher, there was a brief dip following news the US may look to limit Chip sales to certain regions, while focus will turn to corporate earnings which are about to kick off over the next few days, while eyes will also be on China where investors are eagerly waiting for further news on more stimulus. Oil continues to tick lower after Netanyahu told US officials that Israel will strike Iranian military targets and not nuclear or oil locations.
- Earlier there was a seller of SFRZ4 95.500/95.375/95.250 put ladder, trading at 1.75 in x4140
- Cash tsys curve is flatter, yields are +1bp to -2.5bps. The 2yr is +0.7bps at 3.962%, while the 10yr is -1bps at 4.090%
- Fed funds are pricing 21.7bps or an 86% chance of a 25bps cut in November, and 44.3bps of cuts through to years end down slightly from 46.3bps of cuts late last week. Further out to October next year, the market sees 142bps of total cuts.
- There will be more fed speakers later today with SF's Daly, Gov Kugler, and Atlanta's Bostic.
- It will be another slow data session with just Oct Empire Manufacturing and NY Fed inflation expectations.
JGBS: Futures At Session Lows, BoJ Adachi Speech Tomorrow
JGB futures are weaker and at session lows, -21 compared to settlement levels.
- The final estimate of Japan’s Aug. industrial production was unchanged at -3.3%. Japan’s operating ratio fell to 97.6 in Aug. compared to 103.1 in the previous month.
- There is also a Liquidity Enhancement Auction for 5-15.5-year OTR JGBs later today.
- Cash US tsys are flat to 2bps richer, with a flattening bias, in today’s Asia-Pac session after being closed yesterday for Columbus Day. There will be more fed speakers later today with SF's Daly, Gov Kugler, and Atlanta's Bostic on tap. It will be another slow data session with just Oct Empire Manufacturing and NY Fed inflation expectations.
- The cash JGBs curve has bear-flattened, with yields 4bps higher (1-year) to flat (40-year). The benchmark 10-year yield is 2.0bps higher at 0.972% versus the cycle high of 1.108%.
- Swap rates are 1-5bps higher, with a steeper curve. Swap spreads are generally wider beyond the 1-year.
- Tomorrow, the local calendar will see Core Machine Orders data alongside a speech by BoJ Board Adachi in Kagawa.
AUSSIE BONDS: Slightly Richer With Cash US Tsys, May-34 Supply Tomorrow
ACGBs (YM flat & XM +2.5) are stronger but off Sydney session highs.
- With the domestic calendar empty today, the local market’s strength has been driven by cash US tsys, which are flat to 3bps richer, with a flattening bias, in today’s Asia-Pac session after yesterday’s Columbus Day holiday.
- There will be more fed speakers later today with SF's Daly, Gov Kugler, and Atlanta's Bostic on tap. It will be another slow data session with just Oct Empire Manufacturing and NY Fed inflation expectations.
- Cash ACGBs are 1-2bps richer with the AU-US 10-year yield differential at +16bps.
- The bills strip has bull-flattened, with pricing +1 to +2 across contracts.
- RBA-dated OIS pricing is little changed across meetings. A cumulative 7bps of easing is priced by year-end.
- Today’s auction of A$100mn of the 0.25% 21 November 2032 Index-Linked bond cleared at 1.8566%, 0.5bp through the prevailing mids, with a cover ratio of 4.61x.
- Tomorrow, the local calendar will see the Westpac Leading Index and a speech by RBA Hunter at the Citi Australia & New Zealand Investment Conference.
- The AOFM plans to sell A$700mn of the 3.75% 21 May 2034 bond tomorrow.
NZGBS: Closed On A Strong Note, Tracking US Tsys
NZGBs closed on a strong note, with benchmark yields 3-7bps lower. The 2/10 curve steepened.
- RBNZ Deputy Governor Christian Hawkesby commented at the INFINZ conference that the OCR “is headed more toward neutral”. Adding that the pace of decline “is really around how things evolve from here” in terms of what information and data come up.
- Regarding the banking system, he added that RBNZ doesn’t have much control over competition but can have an influence and can help improve competition with current legislation.
- “Lower interest rates mean families get to keep more of their money and they increase the opportunities for businesses to invest, innovate and expand,” Finance Minister Nicola Willis told a finance sector conference Tuesday in Auckland. (per BBG)
- However, with the NZ-US and NZ-AU 10-year yield differentials little changed, today’s NZGB strength reflects global market developments. Cash US tsys are flat to 2bps richer, with a flattening bias, in today’s Asia-Pac session after being closed yesterday for Columbus Day.
- Swap rates closed 5-6bps lower.
- RBNZ dated OIS pricing is little changed. 53bps of easing is priced for the November meeting, with a cumulative 91bps by February.
FOREX: CNH Weakness Weighs on A$, NZD, JPY Unchanged
The USD has remained on the front foot for the first part of Tuesday trade, although overall moves are very modest at this stage. The USD BBDXY index sits around fresh highs back to mid August, last near 1248.1.
- Yuan weakness has been a focus point, with USD/CNH pushing back above 7.1250, weaker by around 0.45% in CNH terms. Onshore equities (along with the HK HSI) are down at the lunchtime break (CSI 300 off 0.47%). Onshore speculation continues around stimulus size and needs.
- This has likely weighed on AUD and NZD at the margins. AUD/USD last near 0.6710/15, off close to 0.20%, while NZD is down by a similar amount to 0.6080/85. RBNZ Deputy Governor Christian Hawkesby commented that the OCR “is headed more toward neutral”. Adding that the pace of decline “is really around how things evolve from here” in terms of what information and data come up.
- Recent lows in AUD are close to 0.6700, for NZD is it at 0.6053.
- Oil is weaker as Israel will reportedly not strike Iran nuclear or energy facilities (WTI down 3%).
- US equity futures sit slightly higher. We saw an earlier dip on headlines the US authorities may curb Nvidia overseas sales more. US yields have returned from yesterday's holiday, with back end yields slightly lower, while the front end is steady.
- USD/JPY has been quite steady, the pair little changed, last near 149.70.
- Looking ahead, The Fed’s Daly and Kugler appear and US October Empire manufacturing and September NY Fed inflation expectations as well as UK employment/wages, ECB bank lending survey, euro area October ZEW & August IP, and September Canadian CPI print.
EQUITIES: Asian Equities Track US Markets Higher Led By Tech
Asian markets are higher today, driven by gains in the technology sector, following record highs on Wall Street. The MSCI Asia Pacific Index climbed 0.7%, led by contributions from major chipmakers like TSMC, Tokyo Electron & SoftBank Group. Japan’s Nikkei 225 reached its highest level since July, bolstered by optimism in its undervalued stocks, while Australian shares also hit a new record high.
- China and Hong Kong stocks slipped as investors await more substantial stimulus measures. Concerns about the strength of China’s economic recovery were heightened by mixed export growth data, although we saw record exports in cars and ships for September, however overall export growth slowed to just 2.4% y/y adding to concerns about the broader economic recovery. China A shares continue to performing better than H shares with the CSI 300 is -0.50%, while the HSI is -1.35%.
- Japanese stocks surged today, with the Nikkei 225 reaching its highest level since July, driven by gains in the technology and chip sectors. Optimism over the undervaluation of Japanese stocks helped lift sentiment, as key contributors like SoftBank Group and other major players in tech led the advance. Tokyo Metro’s successful IPO, which raised ¥348.6bi ($2.3b), also reflected robust demand, adding to market confidence. A weaker yen continues to provide support for exporters, although investors are closely watching for possible intervention as the yen hovers near the key 150 level against the dollar. The Nikkei +1.35%, while the Topix is +1.05%.
- South Korean semiconductor-related exports showed signs of slowing, which could be an early warning for the broader global chip market, with the country's economy remaining heavily linked to its strong memory-chip sector. The KOSPI is little changed today.
- Taiwan's TAIEX is 1.45%, with TSMC +2.40% & Hon Hai +3.50% contributing most to the index gains.
- The Australian share market hit a record high today, with the benchmark ASX200 climbing above 8,300 for the first time. The rise was led by strength in the financial and mining sectors, with major banks such as Westpac and CBA posting significant gains, alongside miners like BHP and Fortescue. However, the energy sector lagged behind as oil prices dropped to a 12-day low, weighed down by easing concerns over potential disruptions from Israel-Iran tensions.
OIL: Crude Holds Losses Post Israel News
Oil prices have held onto the majority of the losses that eventuated after the release of news that Israel told the US that it would not target Iran’s oil and nuclear infrastructure but would focus on military sites (Washington Post). Crude markets had built in a geopolitical risk premium on worries that Iran’s oil production could be impacted by an Israeli retaliation. Iran is the third largest producer in OPEC.
- WTI is down 2.9% to $71.66/bbl today, a clear break below support at $72.33 20-day EMA. The benchmark is off its intraday low of $71.37 reached early in the session. The USD index is 0.1% higher.
- Brent is 3.0% lower at $75.17/bbl after a low of $74.99. It has also spent the session trading below the 20-day EMA of $75.81.
- With geopolitical worries easing, the focus is likely to centre on the supply/demand outlook, especially for China. Disappointing fiscal announcements and trade data have weighed on commodities. OPEC’s downward revision to the 2024 and 2025 demand outlook for the third straight month also pressured oil prices.
- The Fed’s Daly and Kugler appear and US October Empire manufacturing and September NY Fed inflation expectations as well as UK employment/wages, ECB bank lending survey, euro area October ZEW & August IP, and September Canadian CPI print.
GOLD: Hovering Just Below All-Time Highs
Gold is steady in today’s Asia-Pac session, after closing 0.3% lower at $2648.54 on Monday.
- Monday's gains, building on strong advances from Thursday and Friday, have brought bullion close to its all-time closing high of $2,672.38.
- With US data light and the US bond market closed for the Columbus Day holiday yesterday, Fed speakers took centre stage. Minneapolis's Kashkari added little new to previous comments, Fed Gov Waller triggered an initial hawkish reaction with his call for "more caution" on the pace of rate cuts in contrast to his relative dovishness last month.
- There will be more fed speakers later today with SF's Daly, Gov Kugler, and Atlanta's Bostic on tap. It will be another slow data session with just Oct Empire Manufacturing and NY Fed inflation expectations.
- Lower rates are typically positive for gold, which doesn’t pay interest.
- “Gold purchases from central banks have been a key driver in bullion’s record-smashing rally this year. But officials rarely signal ahead of time when buying is top of mind. In a break to that form, reserve managers from the central banks of Mexico, Mongolia and the Czech Republic on Monday sang the praises of bigger holdings.” (Per BBG)
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 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 |
| 15/10/2024 | 1500/1100 | ** | US | NY Fed Survey of Consumer Expectations |
| 15/10/2024 | 1530/1130 | US | San Francisco Fed's Mary Daly | |
| 15/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 15/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 15/10/2024 | 1700/1300 | * | US | US Treasury Auction Result for Cash Management Bill |
| 15/10/2024 | 1700/1300 | US | Fed Governor Adriana Kugler | |
| 16/10/2024 | 2145/1045 | *** |  NZ | CPI inflation quarterly |
| 15/10/2024 | 2300/1900 | US | Atlanta Fed's Raphael Bostic | |
| 16/10/2024 | 2350/0850 | * | JP | Machinery orders |
| 16/10/2024 | 0600/0700 | *** | GB | Consumer inflation report |
| 16/10/2024 | 0600/0700 | *** | GB | Producer Prices |
| 16/10/2024 | 0800/1000 | ** |  IT | Italy Final HICP |
| 16/10/2024 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 16/10/2024 | 1100/0700 | ** | US | MBA Weekly Applications Index |
| 16/10/2024 | 1215/0815 | ** | CA | CMHC Housing Starts |
| 16/10/2024 | 1230/0830 | ** | US | Import/Export Price Index |
| 16/10/2024 | 1230/0830 | ** | CA | Monthly Survey of Manufacturing |