Source: MNI - Market News/Bloomberg
UK
FISCAL (BBG): “Chancellor of the Exchequer Rachel Reeves faces growing Cabinet disquiet over the scale of spending cuts she wants to help raise £40 billion ($52.3 billion) to put Britain’s public finances on a stable footing.”
EU
ITALY (BBG): “ Prime Minister Giorgia Meloni’s cabinet is tapping Italy’s banks and insurers to help finance its budget, according to a new plan designed to deliver on giveaways pledged to voters.”
TECH (BBG): “ASML Holding NV’s shares plunged the most in 26 years after it booked only about half the orders analysts expected, a startling slowdown for one of the bellwethers of the semiconductor industry.”
EU/US (BBG): "The European Union has prepared a list of American goods it could target with tariffs if former President Donald Trump wins the US election and follows through on his threat to hit the bloc with punitive trade measures."
US
FED (MNI BRIEF): Federal Reserve Bank of Atlanta President Raphael Bostic Tuesday said he sees the need for one more interest rate cut this year but is remaining open to a cut in November.
POLITICS (BBG): “ Republican presidential candidate Donald Trump defended his plans to overhaul the US economy through dramatic tariff increases and more direct consultation with the Federal Reserve, arguing that his policies would result in substantial growth despite projections that his agenda would fuel inflation and spike the national debt.”
FED (MNI INTERVIEW): More Cuts Before Fed Fine-Tunes Neutral -Mester
NY FED (MNI): U.S. consumers' medium- and long-term inflation expectations increased slightly in September even as their near-term outlook for price pressures held steady, according to a Federal Reserve Bank of New York report Tuesday, also showing delinquency expectations at the highest level since April 2020.
FED (MNI BRIEF): San Francisco Fed President Mary Daly said Tuesday if inflation continues to gradually fall and the labor market remains broadly in place then it would be a "reasonable thing" for the central bank to cut one or two more times by the end of the year.
FED (MNI BRIEF): Recent experience with balance sheet policy suggests that the Fed may want to consider in its upcoming framework review how its policy rate, forward guidance, and quantitative easing are linked, San Francisco Fed President Mary Daly said Tuesday.
FED (MNI BRIEF): Federal Reserve Bank of San Francisco President Mary Daly said Tuesday monetary policy should aim to create conditions for a "durable and sustained expansion" that allows families and businesses to recoup their losses and rebuild incomes and wealth that raise their economic well-being.
OTHER
ISRAEL/US (RTRS): “The United States has told Israel it must take steps in the next month to improve the humanitarian situation in Gaza or face potential restrictions on U.S. military aid, U.S. officials said, in the strongest such warning since Israel's war with Hamas began a year ago.”
JAPAN (MNI BRIEF): Bank of Japan board member Seiji Adachi said on Wednesday conditions for policy normalisation had been satisfied, but the BOJ should avoid drastic monetary-policy adjustment.
RBA (MNI BRIEF): The Reserve Bank of Australia is confident inflation expectations remain well anchored, with short-term notions of price rises appearing to converge towards the long-term outlook.
NEW ZEALAND (MNI BRIEF): New Zealand September quarter CPI printed at 2.2% y/y, down from Q2's 3.3%, in line with market expectations and 10 basis points lower than the Reserve Bank of New Zealand’s most recent forecasts. Non-tradeable inflation printed at 1.3% q/q, in line with expectations, while tradeable price rises fell 0.2% - 10bp more than anticipated.
CANADA (MNI INTERVIEW): Trudeau Must Resist Bloc Budget Demand- Manley
CHINA
HOUSING (BBG): “China’s housing minister will hold a press briefing on Thursday, likely providing more details of measures to support the country’s slumping property sector and bolster economic growth.”
GDP (YICAI): “Chief economists expect China’s GDP to have grown 4.65% during Q3, down from Q2’s 4.7%, according to results from Yicai news agency’s Financial Chief Economist Confidence Index. The headline index reached 50.62 in October, higher than September’s 49.96, as economists expected incremental policies would boost investment and consumption confidence.”
YUAN (YICAI): “The yuan will likely fluctuate between 7-7.3 against the U.S. dollar amid decreasing expectations for Federal Reserve rate cuts this year and rising momentum of the so-called Trump trade, Yicai.com reported, citing analysts. China’s central bank is expected to increase the intensity of the countercyclical factor should the yuan face increased selling pressure, the newspaper said.”
EQUITIES (MNI INTERVIEW): PBOC Moves, Stimulus To Boost Stocks-BOC's Zong
CHINA MARKETS
MNI: PBOC Net Injects CNY581.4 Bln via OMO Wednesday
The People's Bank of China (PBOC) conducted CNY642.4 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY581.4 after offsetting the maturity of CNY61 billion today. There are CNY789 billion MLF mature today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5456% at 09:31 am local time from the close of 1.5736% on Tuesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 50 on Tuesday, compared with the close of 46 on Monday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Higher At 7.1191 Weds; +2.66% Y/Y
The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1191 on Wednesday, compared with 7.0830 set on Tuesday. The fixing was estimated at 7.1210 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND Q3 CPI Q/Q 0.6%; MEDIAN 0.7%; PRIOR 0.4%
NEW ZEALAND Q3 CPI Y/Y 2.2%; MEDIAN 2.2%; PRIOR 3.3%
NEW ZEALAND Q3 CPI TRADABLE Q/Q -0.2%; MEDIAN -0.1%; PRIOR -0.5%
NEW ZEALAND Q3 CPI NON-TRADABLE Q/Q 1.3%; MEDIAN 1.3%; PRIOR 0.9%
NEW ZEALAND SEP NON-RESIDENT BOND HOLDINGS 61.3%; PRIOR 60.0%
AUSTRALIA SEP WESTPAC LEADING INDEX m/M 0.03%; PRIOR -0.01%
JAPAN AUG CORE MACHINE ORDERS M/M -1.9%; MEDIAN 0.1%; PRIOR -0.1%
JAPAN AUG CORE MACHINE ORDERS Y/Y -3.4%; MEDIAN 3.8%; PRIOR 8.7%
SOUTH KOREA SEP UNEMPLOYMENT RATE 2.5%; MEDIAN 2.6%; PRIOR 2.4%
SOUTH KOREA AUG MONEY SUPPLY M2 M/M 0.2%; PRIOR 0.4%
MARKETS
US TSYS: Tsys Futures Steady With Ranges Narrow
- Tsys futures have traded in narrow ranges throughout the day, and now trade little changed for the session. TU is +00¼ at 103-14¾, while TY is -00+ at 112-13+.
- Looking at technicals the 10y contracts remains in a downtrend despite a small bounce. Initial support is 111-14 (50% retracement for the Apr - Sep bull leg), while initial resistance is at 112-21 (Oct 21 high).
- Cash tsys curves did steepen a touch earlier however we now trade little changed for the session. The 2yr is 3.950%, while the 10yr is 4.034%.
- Earlier today, the Fed's Bostic spoke where he mentioned he expects the US economy to slow this year but remain resilient, with GDP growth forecasted at around 2.6% in 2024 and 2% in 2025. He anticipates the Fed's benchmark interest rate to fall to 3%-3.5% in the long term, though the timing depends on labor market conditions and inflation, which he expects to remain volatile.
- Fed fund pricing has held steady throughout the session, the market is pricing in 24.3bps of cut in November, or about 97% chance of a cut while 45.4bps is priced in by the December meeting. Looking further out the curve, the market is pricing 144bps of cut by Oct 2025.
- Trump continues to firm as favorite for the upcoming Election with betting firm Polymarket now showing 58.1% vs 41.7% in his favor, while PredictIt has it a bit closer at a 54% change Trump will win, with both at the highest points post the last debate.
- later today we have September import/export prices - which feed into the Fed's preferred PCE inflation gauge - and a Fox interview of Vice President Harris.
JGBS: Subdued Session, BoJ Adachi’s Message In Line With Gov. & Dep. Gov.
JGB futures are holding overnight gains, +20 compared to settlement levels.
- Outside of the previously outlined core machine orders data, the market has had a speech from BoJ board member Adachi to digest. “It is appropriate for the BoJ to raise the policy rate gradually,” Adachi told business leaders in Takamatsu City. However, Adachi did not elaborate on when and how the Bank would raise the policy interest rate.
- His stance is similar to those of Governor Ueda and Deputy Governor Uchida, as the BoJ is still emphasising gradual rate hikes with a view to realising its economic outlook.
- Cash US tsys are little changed in today’s Asia-Pac session. Today’s US calendar includes September import/export prices - which feed into the Fed's preferred PCE inflation gauge - and a Fox interview with Vice President Harris.
- Cash JGBs are flat to 1.5bps richer across benchmarks beyond the 1-year (+3.7bps). The benchmark 10-year yield is 1.2bps lower at 0.962%.
- Swap rates are flat to 1bp lower.
- Tomorrow, the local calendar will see Trade Balance data and the Tertiary Industry Index alongside 1-year supply. The MoF will also conduct a Liquidity Enhancement Auction covering 15.5-39-year OTR JGBs.
AUSSIE BONDS: Richer With US Tsys, September’s Employment Report Tomorrow
ACGBs (YM +4.0 & XM +5.0) are richer and near highs on another data-light Sydney session.
- “Australia’s central bank is still running through the local implications of China’s stimulus measures as officials prepare the Reserve Bank’s latest update of forecasts for next month’s board meeting, Assistant Governor Sarah Hunter said.” (per BBG)
- The latest round of ACGB May-34 supply saw the weighted average yield print 0.52bps through prevailing mids, extending the recent trend of firm pricing at ACGB auctions.
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s bull-flattener. Today’s US calendar includes September import/export prices - which feed into the Fed's preferred PCE inflation gauge - and a Fox interview with Vice President Harris.
- Cash ACGBs are 5bps richer with the AU-US 10-year yield differential at +17bps.
- Swap rates are 4-5bps lower, with the 3s10s curve flatter.
- The bills strip has bull-flattened, with pricing +2 to +5.
- RBA-dated OIS pricing is 2-5bps softer for 2025 meetings. A cumulative 7bps of easing is priced by year-end.
- The local calendar will see the September Employment Report tomorrow. Consensus expects +25k jobs to be created with a steady unemployment rate of 4.2%.
NZGBS: Closed Richer & At Session Bests After Q3 CPI Miss
NZGBs closed 3-5bps richer across benchmarks on the day, 2-4bps richer than pre-CPI levels.
- Q3 NZ CPI came in slightly below forecasts at 0.6%q/q (mkt consensus was 0.7%, while the RBNZ projected a 0.8% rise). The Q2 outcome was 0.4%. In y/y terms inflation was 2.2%, in line with market expectations, while the RNZ projected a 2.3% rise.
- Annual headline inflation is back within the RBNZ's 1-3% target band for the first time since early 2021. Non-tradabables inflation, a measure of domestic price pressures is still quite elevated in y/y terms, back to 4.9% for Q3. This is comfortably above longer-term averages.
- Still, measures of core inflation like the trimmed mean eased to 2.5%y/y in Q3 from 3.7%, while the weighted median was at 2.8% y/y in Q3 from 3.5% prior.
- Swap rates closed 4-7bps lower, with the 2s10s curve steeper.
- RBNZ dated OIS pricing is 2-5bps softer after the CPI data and 5-9bps softer on the day across meetings. 58bps of easing is priced for the November meeting, with a cumulative 99bps by February.
- Tomorrow, the local calendar is empty apart from the NZ Treasury’s planned sale of NZ$175mn of the 1.50% May-31 bond, NZ$250mn of the 4.25% May-34 bond and NZ$75mn of the 1.75% May-41 bond.
FOREX: NZD Hits Multi Month Lows, Before Stabilizing with HK/China Stocks
The USD sits away from earlier highs, particularly against higher beta plays. Some rebound in HK/China equities ahead of a Housing Ministry/PBoC meeting tomorrow has aided sentiment. The USD BBDXY index was last 1248.8, after getting close to 1250 in early trade.
- NZD/USD weakness was an early focus point, after a slight downside miss for Q3 headline CPI in NZ. Implied rate cuts by the Feb meeting next year got close to 100bps post the print. RBNZ Assistant Governor Silk stated that the central bank has a lot of information to absorb before the Nov policy meeting. The headline inflation and core/non-tradable figures will be eyed closely.
- For NZD we got to lows of 0.6040 (levels last seen in mid August). We sit higher now last near 0.6060, but still off 0.35% for the session. Early equity sentiment was weighed down by tech concerns, but as HK and China rebounded broader sentiment stabilized somewhat.
- AUD/USD sits back at 0.6695, after getting to lows of 0.6668. RBA Assistant Governor Hunter stated that inflation expectations have not become de-anchored. Metal commodities are higher, but gains are less than 1% at this stage/
- USD/JPY got to lows of 148.88 as BoJ board member Adachi spoke. He noted conditions are there for policy normalizations, but rate hikes must gradual and that financial conditions need to remain easy until inflation sustainably hits the 2% target. USD/JPY is back to 149.15/20, little changed for the session.
- Equity trends outside of HK/China moves have mostly been negative. US futures do sit higher, but only up 0.10-0.20% at this stage. US yields sit close to unchanged.
- Looking ahead we have UK inflation out, along with US trade prices.
ASIA STOCKS: Asian Equities Mostly Lower As Tech Struggles Following ASML's Drop
Asian equities are lower today with benchmarks across the region tracking the US markets lower following a drop in the Nasdaq -1%, S&P -0.76% & the Dow -0.75% overnight.
- China & HK equities markets have seen decent volatility with investors still concerned over the lack of further stimulus measures, however it was announced that there would be a press briefing scheduled for Thursday from the housing minister which saw property stocks jump. The HSI is now +0.65%, CSI 300 -0.25%, while the Mainland Property Index is +4.90%.
- Tech stocks are underperforming in the region with Tokyo Electron the worst performer, dropping almost 10%, while the likes of Samsung -1.65%, TSMC -0.95%, SK Hynix -0.90% contributing to the move lower.
- The move lower in tech stocks comes after ASML shares plunged 16%, the most in 26 years, after reporting significantly lower-than-expected bookings of €2.6b in Q3 vs €5.39b expected. The company also cut its 2025 sales guidance, reflecting a slower recovery in the semiconductor industry amid customer caution and ongoing US-China trade tensions.
- Japan's Nikkei is 2.05% lower, while the TOPIX trades down 1.10%. Earlier BoJ's Adachi emphasized the need for a gradual approach to raising interest rates while maintaining accommodative financial conditions until inflation consistently reaches 2%. His comments suggest the BOJ is likely to keep rates unchanged at its upcoming October meeting, with further rate hikes possibly delayed until 2024.
- South Korean & Taiwan equity markets are both lower, influenced by weaker tech prices. The KOSPI trades -0.50%, while the TAIEX is -0.60%
- Australian equities are slightly lower today, very little in the way of headlines out of the region. BHP has led the declines, erasing the past two session's gains, with the ASX200 0.20% lower. New Zealand's CPI came in at the lowest levels since July 2021, rate cut pricing firmed with the market now pricing almost 100bps of cuts across the next two meetings, the NZX50 is down 1.10%.
OIL: Price Decline Steadies World Awaits Israel’s Next Move.
- Brent Crude declined on Tuesday following claims by Israel it is not intending to attach Iran’s Oil production infrastructure.
- Brent declined from Monday’s close of US$77.46 to close Tuesday at $74.25 and is training in Asia’s trading morning at $74.45.
- WTI followed a similar trend falling from Monday’s close of US$73.83 to below $70 briefly before closing at $70.58 yesterday; and is up slightly this morning at $70.80.
- Following the US’s warning to Israel about striking Iran’s oil production sites, Israel has stated that it will ‘act on its own assessments’ whilst it is claimed that Israeli Prime Minister Netanyahu has told President Biden he will confine any attacks to military targets.
- Tuesday saw a release from the International Energy Agency noting that excess capacity from the OPEC+ nations is reaching records levels and that forecasts for 2025 are that the supply of oil to international markets poses downward risks to prices.
- Positioning data in US Crude Futures has risen significantly in the recent period of volatility shows that oil producers have been effective in locking in prices at higher prices, to provide downside risk protection from falling prices.
GOLD: Risk-Off & US Easing Expectations Assist Gain
Gold is 0.2% higher in today’s Asia-Pac session, after closing 0.5% higher at $2662.58 on Tuesday.
- The US Treasury curve bull flattened in post-holiday cash trading on Tuesday, with futures extending the rebound from Monday's lows. A sharp drop in oil prices starting late Monday on an apparent de-escalation in Iran-Israel tensions helped underpin a solid rally in the front US Treasury futures contract. WTI front futures fell 3.8% on Tuesday.
- A risk-off tone in equities also helped support November Fed rate cut pricing, for which Fed Funds futures extended to a post-Oct 7 high (implying ~98% of a 25bp cut, vs ~88% Monday).
- On that note, SF Fed's Daly reiterated it was a "reasonable thing" to cut one or two more times by the end of the year - overall a relatively cautious tone, in keeping with Monday's appearance by Gov Waller.
- Lower rates are typically positive for gold, which doesn’t pay interest.
- According to MNI’s technicals team, the recent short-term retracement in gold appears to have been a correction. The trend condition is unchanged and remains bullish. A continuation of gains would refocus attention on $2,690.2, a Fibonacci projection. Firm support lies at $2,626.9, the 20-day EMA.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 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 |
| 16/10/2024 | 1840/2040 |  EU | ECB's Lagarde Speech at Banka Slovenije Dinner | |
| 17/10/2024 | - | EU | European Central Bank Meeting | |
| 17/10/2024 | 2350/0850 | ** |  JP | Trade |
| 17/10/2024 | 0030/1130 | *** |  AU | Labor Force Survey |
| 17/10/2024 | 0900/1100 | *** | EU | HICP (f) |
| 17/10/2024 | 0900/1100 | * | EU | Trade Balance |
| 17/10/2024 | 1100/0700 | *** |  TR | Turkey Benchmark Rate |
| 17/10/2024 | 1215/1415 | *** | EU | ECB Deposit Rate |
| 17/10/2024 | 1215/1415 | *** | EU | ECB Main Refi Rate |
| 17/10/2024 | 1215/1415 | *** | EU | ECB Marginal Lending Rate |
| 17/10/2024 | 1230/0830 | *** | US | Jobless Claims |
| 17/10/2024 | 1230/0830 | * | CA | International Canadian Transaction in Securities |
| 17/10/2024 | 1230/0830 | *** | US | Retail Sales |
| 17/10/2024 | 1230/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 17/10/2024 | 1245/1445 | EU | ECB Monetary Policy Press Conference | |
| 17/10/2024 | 1315/0915 | *** | US | Industrial Production |