Source: MNI - Market News/Bloomberg
UK
POLITICS (BBC): “Robert Jenrick has accepted the job of shadow justice secretary in Kemi Badenoch's senior team, the BBC understands. The new Tory leader is also expected to name Dame Priti Patel as her shadow foreign secretary and Mel Stride as her shadow chancellor.”
FISCAL (MNI BRIEF): The Bank of England looks set to factor in elements of the new Labour government's Oct 30 Budget into its projections out on Nov 7, with fiscal easing substantially pushing up the outlook for near-term growth and inflation.
RETAIL SALES (BBG): "The British Retail Consortium, KPMG in London publish the Oct. retail sales monitor showing total retail sales +0.6% y/y vs Sept. +2% y/y."
EU
INFLATION (EU BRIEF): The European Commission sees "modest economic growth across the euro zone" and inflation at a level consistent with the ECB's 2% target, EU Commission Executive Vice President Valdis Dombrovskis said Monday, speaing just ten days ahead of The Commission's autumn economic forecasts.
GERMANY (POLITICO): “Scholz is set to meet Economy Minister Robert Habeck from the Greens and Finance Minister Christian Lindner from the fiscally conservative Free Democratic Party (FDP) for crisis talks Tuesday and Wednesday aimed at heading off a budget conflict that has aggravated tensions in the fractious three-party governing coalition.”
GERMANY (DW): “Chancellor Olaf Scholz is trying to hold his coalition government together. But the three partners, his own SPD, the Greens and the FDP, seem unable to stop fighting although they depend on each other to stay in power.”
RUSSIA (POLITICO): “Multiple Russian disinformation campaigns targeting the U.S. elections have ramped up their efforts to sow discord about the electoral process and hot-button domestic issues, according to exclusive findings shared with POLITICO by a Russian disinformation research group.”
RUSSIA (POLITICO): “Russia is staging hybrid attacks on other countries as part of its all-out war on Ukraine, NATO Secretary-General Mark Rutte said on a visit to the German capital Monday.”
UKRAINE (DW): “Germany's foreign minister is in Ukraine ahead of the winter as allies grow concerned by the presence of North Korean troops in the region. She pledged additional assistance for the coming winter.”
US
POLITICS (RTRS): “Donald Trump and Kamala Harris both predicted victory as they campaigned across Pennsylvania on Monday in the final, frantic day of an exceptionally close U.S. presidential election.”
FED (MNI INTERVIEW): The resilience of the U.S. economy may prompt the Federal Reserve to pause rate cuts early next year amid considerable uncertainty on the fiscal outlook, former Atlanta Fed President Dennis Lockhart told MNI.
OTHER
MIDDLE EAST (BBG): “Israeli fighter jets struck infrastructure and assets that belong to the intelligence headquarters of Hezbollah in Damascus, the Israel Defense Forces says.”
AUSTRALIA (MNI BRIEF): The Reserve Bank of Australia Board kept the cash rate steady at 4.35% Tuesday, repeating it would not rule anything “in or out” due to continued high underlying inflation.
CHINA
SERVICES (MNI BRIEF): China’s Caixin General Services PMI reached 52.0 in October, up from 50.3 in September, marking the fastest rate of growth in three months, Caixin said on Tuesday.
LOCAL DEBT (21st CENTURY HERALD): “China is likely to issue new local government bonds to swap out local debt rather than special treasury bonds, according to Mingming, chief economist at CITIC Securities. According to Xinhua, a state media outlet, China’s Standing Committee of the 14th National People's Congress had recently deliberated on the State Council's proposal to increase the local government debt limit to replace the implicit debt, Ming noted.”
HOUSE PRICES (CHINA BUSINESS JOURNAL): “House prices are expected to stabilise in Q4 after October saw the release of suppressed home buying demand going back three years, China Business Journal has reported. However, property prices have little chance of increasing in the short term despite market declines significantly narrowing, the newspaper said, citing the E-house China Research and Development Institution.”
LOANS (SECURITIES DAILY): “China’s new yuan loans could fall in October from September due to seasonal factors, but recent policy stimulus measures, especially for the housing market, would enhance banking credit supply capacity, Securities Daily reported, citing analysts.”
CHINA MARKETS
MNI: PBOC Net Drains CNY364.5 Bln via OMO Tuesday
The People's Bank of China (PBOC) conducted CNY18.3 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY364.5 billion after offsetting the maturity of CNY382.8 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4941% at 09:31 am local time from the close of 1.5411% on Monday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 45 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 Lower At 7.1016 Tues; +3.12% Y/Y
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1016 on Tuesday, compared with 7.1203 set on Monday. The fixing was estimated at 7.1014 by Bloomberg survey today.
MARKET DATA
UK OCT. BRC LIKE-FOR-LIKE RETAIL SALES +0.3% Y/Y; EST. +1.4%; PRIOR +1.7%
AUSTRALIA JUDO BANK OCT. F COMPOSITE PMI 50.2; PRE 49.8; SEP 49.6
AUSTRALIA JUDO BANK OCT. F SERVICES PMI 51.0; PRE 50.6; SEP 50.5
NEW ZEALAND OCT. ANZ COMMODITY EXPORT PRICES +1.4% M/M; PRIOR +1.8%
JAPAN OCT. MONETARY BASE -0.3% Y/Y; PRIOR -0.1%
JAPAN END-OCT. MONETARY BASE OUTSTANDING Y672.7T; PRIOR Y673.5T
S. KOREA CPI OCT. +1.3% Y/Y; EST. +1.4%; PRIOR +1.6%
S. KOREA CORE CPI OCT. +1.8% Y/Y; EST. +1.9%; PRIOR +2.0%
CHINA CAIXIN COMPOSITE PMI OCT. 51.9; SEP. 50.3
CHINA CAIXIN SERVICES PMI OCT. 52.0; EST. 50.5; SEP. 50.3
MARKETS
US TSYS: Cash Yields Up as Futures Steady in Asia Trading.
- With the election drawing closer and the uncertainty over the result greater, the move lower in yield stalled in Asian trading with yields across the curve higher.
- Cash markets were weaker throughout the Asia trading day with the 2YR +0.4bp to 4.168, 10YR +1bp to 4.295 and the 30yr +1bp to 4.479.
- The Dec’24 10Y futures traded in a very tight range, oscillating around 110-14 with little movement and low volumes.
- Tonight’s data sees the release of the S&P Global US Services PMI, ISM Services Index / Prices Paid / Employment and New Orders and Mortgage Applications.
JGBS: Subdued Session Ahead Of US Presidential Election
In Tokyo morning trade, JGB futures are flat compared to settlement levels on Friday. The local market was closed yesterday for a holiday.
- The local calendar has been light today with monetary base as the sole release.
- Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session, with a flattening bias. Yesterday, the so-called “Trump trade” (bear steepener) was unwound after a poll in Iowa, a typically reliable red state, gave Harris a 3-point lead over Trump. A late swing to Harris was also evident in other weekend polls. However, Polymarket still shows odds that favour Trump to win in today’s US Presidential Election. Political polling in key swing states remains within the margin of error, leaving the race finely balanced.
- Cash JGB swings are +/- 1bp across benchmarks beyond the 1-year. The benchmark 10-year yield is 0.5bp lower at 0.946% versus the cycle high of 1.108%.
- Swap rates are flat to 1bp lower. Swap spreads are tighter.
AUSSIE BONDS: Slightly Cheaper After RBA Delivers Expected ‘No-Change’ Decision
ACGBs (YM -5.0 & XM -1.0) are 1-2bps cheaper after the RBA delivered the widely expected ‘no change’ decision. To summarise the accompanying statement:
- The latest forecasts mirror those from August, highlighting persistent underlying inflation due to strong demand and tight labour markets. Growth is weak, wage pressures have eased, and global uncertainties remain high.
- The RBA Board prioritises returning inflation to target, emphasising vigilance against upside risks. Despite lower headline inflation, underlying inflation remains high. Policy will stay restrictive until inflation trends sustainably toward the target, with decisions guided by evolving economic data and risks.
- Cash ACGBs are flat to 4bps cheaper, with a flattening bias. The AU-US 10-year yield differential at +27bps, near the upper limit of the +/-30bps range maintained since November 2022.
- Cash US tsys are flat to 1bp cheaper in today’s Asia-Pac session, with a steepening bias, ahead of today’s US Presidential Election.
- Swap rates are 1bp higher to 1bp lower, with EFPs ~1bp tighter and the 3s10s curve flatter.
- The bills strip has bear-steepened, with pricing flat to -6.
- RBA-dated OIS pricing is 1-5bps firmer after the RBA decision and 1-9bps firmer than last Wednesday’s pre-CPI levels. The market had assigned an 8% probability to a 25bp rate cut at today’s meeting.
NZGBS: Subdued Session Ahead Of Key Events, Q3 Jobs Tomorrow
NZGBs closed 1bp cheaper after a very subdued local session ahead of the RBA Policy Decision, (after-market) and the US Presidential Election later today.
- Earlier today the RBNZ released its Financial Stability Report. The report said the country is experiencing a pronounced economic downturn that could get worse.
- Swap rates closed 1bp lower to 1bp higher, with a flattening bias.
- RBNZ dated OIS pricing closed flat to 2bps firmer across meetings. A cumulative 97bps of easing is priced by February, with 56bps by year-end.
- Q3 labour market data including wages are released tomorrow. They are expected to show a contraction in employment with the unemployment rate rising to 5% driven by lower growth and job shedding.
- This softening in labour demand should help to ease wages growth, as well as no new public sector agreements, which drove the Q2 increase. The RBNZ meets on November 27 and is likely to cut rates again but the size of the move is currently uncertain.
- On Thursday, the NZ Treasury plans to sell NZ$200mn of the 0.25% May-28 bond, NZ$250mn of the 4.50% May-35 bond and NZ$50mn of the 5.0% May-54 bond.
FOREX: A$ Up On Hawkish RBA Hold, But Moves Modest Ahead of US Election
The USD is mixed against the majors in the first part of Tuesday trade. The BBDXY index is little changed, last near 1258.65. Yen has weakened a touch, while AUD is up modestly (as the RBA left rates on hold, but kept hawkish language). NZD is also up a touch.
- AUD/USD is tracking back towards 0.6600, so up around 0.15% in latest dealings. As expected the RBA kept rates on hold, although with hawkish rhetoric. The central bank needs to vigilant to upside inflation risks and is not ruling anything in or out.
- OIS is slightly firmer for Australia and this is likely helping the A$, although outperformance is modest. RBA Governor Bullock noted that the current policy settings are correct and that the path back lower for inflation will be slow.
- NZD/USD is up a touch to 0.5980. We had a better Caixin services PMI print in China, aiding to recent positive China economic momentum. This has helped China and HK equities, a likely positive for the antipodean currencies.
- Still, aggregate moves are modest, with overnight vols very elevated ahead of US election outcomes tomorrow.
- USD/JPY is drifting higher, last near 152.45/50, off around 0.20% in yen terms. US yields are up a touch, but gains are less than 1bps at this stage.
- The above equity moves may be weighing on yen crosses at the margin. AUD/JPY is back to 100.55/60, still within recent ranges.
- Later US October services ISM/PMI and September trade print, as well as UK October services/composite PMIs. The eurogroup meeting continues and the ECB’s Lagarde and Schnabel speak.
ASIA STOCKS: China Markets Up, Others Mixed Before the US Election.
- Following stronger than expected CAIXIN PMI Services data, China led the way with the CSI 300 up almost 2%, whilst Shanghai Comp was up +1.80%, Hang Seng up +1.20% and Shenzhen Comp up +2.6%.
- In Korea a weaker than expected CPI print potentially makes the next BOK meeting live. Despite this, stocks retreated with the KOSPI down -0.25%.
- In Malaysia, the currency had a less volatile day relative to previous days bringing a reprieve to markets. The FTSE Malay KLCI posted moderate gains at +0.15%.
- In Indonesia, the GDP print for 3Q was moderately behind expectations. The markets have endured the volatility of the currency, which has seen more pronounced in recent sessions. The Jakarta Composite was down today off -0.20%.
- In India, the NIFTY 50 was opening weaker down -020% with data showing that the period of foreign inflows into the stock market has taken a pause.
OIL: Crude Holds Onto Monday’s Gains With Material Event Risks Ahead
Oil prices have been range trading following Monday’s jump as market moves have been limited ahead of this week’s US election result and Fed meeting. WTI is up 0.1% to $71.52/bbl after falling to around $71.30. Brent is 0.1% higher at $75.18/bbl, close to the intraday high. Yesterday’s weaker greenback supported the rally in crude but today the USD index is flat.
- While risks of an escalation of the conflict in the Middle East persist, this week oil markets are watching the outcome of the US election, which will hopefully be known on Wednesday, the FOMC meeting on Thursday and US inventories with industry-based data on Tuesday and the official EIA on Wednesday. In China, there is October trade data on Thursday and the legislature standing committee is meeting this week, which may result in further stimulus.
- On the supply side, near-term there are risks to Gulf of Mexico production from Tropical Storm Rafael, and further out, another Iranian attack on Israel could result in its oil infrastructure being targeted.
- Later US October services ISM/PMI and September trade print, as well as UK October services/composite PMIs. The eurogroup meeting continues and the ECB’s Lagarde and Schnabel speak.
GOLD: Awaiting US Election Today & FOMC On Thursday
Gold is 0.4% lower in today’s Asia-Pac session, after closing broadly unchanged at 2736.78 on Monday.
- With the US Presidential Election held later today and the FOMC’s next policy decision on Thursday, market participants appeared content to sit on the sidelines.
- Yesterday, US treasuries rallied, led by the long-end, as the so-called “Trump trade” (bear steepener) was unwound after a poll in Iowa, a typically reliable red state, gave Harris a 3-point lead over Trump. A late swing to Harris was also evident in other weekend polls. However, Polymarket still shows odds that favour Trump to win in today’s US Presidential Election. Political polling in key swing states remains within the margin of error, leaving the race finely balanced.
- According to MNI’s technicals team, the pullback from last week’s record high at $2,790 is considered corrective for now. Last week’s gains resulted in a breach of $2,685.6, the Sep 26 high, confirming a resumption of the primary uptrend. Sights are on the $2,800.0 handle next. Firm support is $2,712.8, the 20-day EMA.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 05/11/2024 | 0645/0745 | ** |  CH | Unemployment |
| 05/11/2024 | 0745/0845 | * |  FR | Industrial Production |
| 05/11/2024 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 05/11/2024 | - |  EU | ECB's De Guindos participate in ECOFIN Meeting | |
| 05/11/2024 | - |  US | US Presidential Election | |
| 05/11/2024 | 1330/0830 | ** | US | Trade Balance |
| 05/11/2024 | 1330/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 05/11/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 05/11/2024 | 1430/1530 | EU | ECB's Lagarde speech at French Competition Authority's event | |
| 05/11/2024 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 05/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 05/11/2024 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 05/11/2024 | 1830/1330 | CA | BOC Minutes (Summary of Deliberations) | |
| 05/11/2024 | 1830/1930 | EU | ECB's Schnabel speech on Macroeconomic Policy | |
| 06/11/2024 | - |  SE | Riksbank Meeting | |
| 06/11/2024 | 0700/0800 | ** |  DE | Manufacturing Orders |
| 06/11/2024 | - | US | FOMC Meeting / S.E.P. | |
| 06/11/2024 | 0930/0930 | ** | GB | S&P Global/CIPS Construction PMI |
| 06/11/2024 | 1000/1100 | ** | EU | PPI |
| 06/11/2024 | 1200/0700 | ** | US | MBA Weekly Applications Index |