Source: MNI - Market News/Bloomberg
UK
POLITICS (BBG): “Former Home Secretary James Cleverly surged to first from third in the latest round of voting for the UK Conservative leadership contest, in a sign that Tory Members of Parliament are rallying behind his appeal to make the party “more normal.”
GEOPOLITICS (BBC): “Russia's intelligence agency has been on a mission to generate "sustained mayhem on British and European streets", the head of MI5 has said. MI5 had also responded to 20 plots backed by Iran since 2022, he said, although he added the majority of its work still mostly involved Islamist extremism followed by extreme right-wing terrorism.”
EU
ECB (FT/BBG): Highly restrictive’ ECB rates could drive inflation below target, warns governor.
ECB (BBG): “ Europe’s economy could face significantly less growth and more inflation, should Donald Trump win re-election as US president, European Central Bank Governing Council member Joachim Nagel warned.”
GERMANY (BBG): “The German economy is likely to experience another year of contraction with the US election posing an additional risk to Europe’s growth, according to Bundesbank President Joachim Nagel.”
GERMANY (ECONOMIST): “On Wednesday Robert Habeck, the vice-chancellor and economy minister, is set to announce that the government expects GDP to contract by 0.2% in 2024, a downgrade from an earlier forecast of modest growth.”
GERMANY (POLITICO): “German Chancellor Olaf Scholz’s Social Democratic Party (SPD) named a new top leader on Tuesday who will play a key role in the political campaign ahead of the country’s 2025 general election.”
GERMANY (DW): “VW is in dire straits having to cut costs at every corner amid dwindling sales. But now its workers are demanding higher wages and job security, and experts wonder how that is supposed to work.”
FRANCE (FRANCE24): “A vote of no-confidence aiming to bring down the nascent government of French Prime Minister Michel Barnier failed on Tuesday after the far-right National Rally party refused to back the motion. The motion was brought forward by the left-wing New Popular Front, who won the most seats in the snap legislative elections called by President Emmanuel Macron earlier this year.”
PORTUGAL (BBG): “ Portugal’s minority government said negotiations with the opposition Socialist Party about the 2025 budget have ended and that it expects the plan to pass in parliament.”
HUNGARY (ECONOMIST): “Hungary has held the EU’s six-month rotating presidency since July 1st. But its prime minister, Viktor Orban, has yet to deliver the traditional address to the European Parliament. On Wednesday he will get his chance, and things may get feisty.”
US
MIDEAST (RTRS): “ U.S. President Joe Biden is expected to hold a phone call on Wednesday with Israeli Prime Minister Benjamin Netanyahu about any plans to strike Iran, Axios reported late on Tuesday, citing three U.S. officials.”
FED (BBG): “Federal Reserve Vice Chair Philip Jefferson said risks to the central bank’s employment and inflation goals are now closer to equal. “The balance of risks to our two mandates has changed — as risks to inflation have diminished and risks to employment have risen, these risks have been brought roughly into balance,” Jefferson said Tuesday in prepared remarks for an event at Davidson College in North Carolina.
FED (MNI): Federal Reserve Bank of Boston President Susan Collins said Tuesday interest rates will need to fall further to keep the economy in the good place where it is now.
FED (MNI BRIEF): U.S. inflation is falling toward 2% and the labor market remains strong, meaning the Federal Reserve is "ever closer" to achieving its dual mandate goals, Atlanta Fed President Raphael Bostic said Tuesday.
FISCAL (MNI INTERVIEW): CBO's Swagel Sees Fiscal Headroom In Near Term
CORPORATE (BBG): “The US Justice Department told a federal judge it is considering recommending that Google be forced to sell off parts of its operations to alleviate the harm caused by its monopolization of the online search market, in what would be a historic antitrust breakup.”
OTHER
MIDEAST (RTRS): “Hezbollah officials are no longer demanding a truce in Gaza as at condition for reaching a ceasefire in Lebanon, rowing back from an oft-repeated promise to keep fighting until Israel halts its offensive against Hezbollah's Iran-backed ally Hamas.”
NEW ZEALAND (MNI BRIEF): The Reserve Bank of New Zealand monetary policy committee has eased the official cash rate 50 basis points to 4.75%, noting inflation has moved inside the 1-3% target and is converging on the 2% midpoint.
JAPAN (MNI BRIEF): Japanese Prime Minister Shigeru Ishiba will dissolve the lower house of parliament on Wednesday afternoon to hold a snap election on Oct. 27 before the Bank of Japan’s policy-setting meeting on Oct. 30-31.
AUSTRALIA (MNI POLICY): RBA Watches Data For Downside Inflation Risk
SOUTH KOREA (BBG): “South Korea will join FTSE Russell’s major global bond index next year, capping an overhaul of its financial market infrastructure in the hopes of attracting tens of billions of dollars of foreign investment.”
BRAZIL (BBC): “Brazil's Supreme Court has said it is lifting a ban on the social media platform X, formerly known as Twitter.”
CHINA
GROWTH (XINHUA): “Authorities must accelerate the implementation of additional policies to stabilise the economy, ensuring measures already announced take effect while introducing more specific measures as soon as possible, said Premier Li Qiang during a meeting with experts and entrepreneurs.”
FISCAL (BBG): "China will hold a briefing on fiscal policy on Saturday as investors look for additional measures to stimulate the world’s No. 2 economy."
CONSUMPTION (SECURITIES DAILY): “China’s consumption vouchers are boosting spending and may lift retail numbers in October and through 4Q, according to a report in the Securities Daily.”
MARKETS (21ST CENTURY BUSINESS): “China must avoid excessive stock market volatilty in the short term, which will require more precise supervision and expectation management, said 21st Century Business Herald in a commentary.”
CHINA MARKETS
MNI: PBOC Net Drains CNY135.5 Bln via OMO Wednesday
The People's Bank of China (PBOC) conducted CNY61 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY135.5 billion after offsetting maturities of CNY196.5 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6439% at 09:37 am local time from the close of 1.7530% on Tuesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 58 on Tuesday, compared with the close of 44 on the last trading day before National Day holiday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
PBOC Sets Yuan Parity Lower At 7.0568 Weds
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.0568 on Wednesday, compared with 7.0709 set on Tuesday. The fixing was estimated at 7.0572 by Bloomberg survey today.
MARKETS
US TSYS: Tsys Futures Off Earlier Highs, 10yr Holds Above 4% Ahead Of Auction
- Tsys futures are off earlier highs and now trade at session lows and back at NY closing levels, the moves look to have coincided with a bounce in equities following "CHINA MINISTRY OF FINANCE TO BRIEF ON FISCAL POLICY SATURDAY" - BBG. TU is trading +01⅛ at 103-14⅞, while TY is + 01+ at 112-16+.
- Volumes are roughly in line with recent averages, while earlier we did see a 2s10s steepener Blocked, DV01 $385k.
- Tsys curves have tbear-steepened, with yields +1.5bps to -0.5bps. The 2yr is -0.4bps at 3.955%, while the 10yr is +1.2bps at 4.024% and underperforms ahead of the 10yr auction later.
- The Fed's Jefferson spoke earlier, his comments were largely in line with recent Fed speaker. He explained the Fed's recent 50bp rate cut as a move to support the labor market while inflation continues to ease toward the 2% target. He noted that economic growth remains solid, inflation is now at 2.2%, and the labor market has cooled slightly, with unemployment rising to 4.1%. Jefferson emphasized a data-driven approach to future rate decisions.
- Traders are shifting their bets in the Tsys market, moving away from bullish positions as they expect a slower pace of Fed rate cuts following the strong September jobs report, long positions linked to the SOFR have sharply declined while new short positions are emerging ahead of key inflation data. The market is now pricing in 22bps of cuts at the November meeting, and 49bps by December, reflecting more cautious expectations for Fed policy easing.
- Focus will turn to trhe 10y Auction and Sep FOMC minutes due out later today.
JGBS: Sleepy Session Ahead Of FOMC Minutes, PPI & 5Y Supply Tomorrow
In afternoon dealings, JGB futures are weaker, -12 compared to the settlement levels.
- Today, the local calendar has been empty, with Machine Tool Orders due later. Tomorrow will see PPI data for September along with Weekly International Investment flows and Bank Lending data.
- Japanese Prime Minister Shigeru Ishiba will dissolve the lower house of parliament on Wednesday afternoon to hold a snap election on Oct. 27 before the Bank of Japan’s policy-setting meeting on Oct. 30-31.
- Cash US tsys are dealing +/-1bp, with a steepening bias, in today’s Asia-Pac session after yesterday’s modest gains. The market awaits today’s September FOMC minutes ahead of CPI/PPI data on Thursday and Friday respectively.
- The cash JGB curve is mildly cheaper, with yields flat to 2bps higher. The benchmark 10-year yield is 1bp higher at 0.937%.
- Swap rates are little changed.
- Tomorrow, the local calendar will see 5-year supply.
AUSSIE BONDS: Slightly Cheaper, Narrow Ranges, Focus On FOMC Minutes
ACGBs (YM -1.0 & XM -2.0) are slightly weaker after dealing in narrow ranges during the Sydney session. There was little positive spillover from NZGBs following the RBNZ’s 50bp cut.
- Cash ACGBs are flat to 2bps cheaper, with the AU-US 10-year yield differential at +17bps.
- Cash US tsys are dealing +/-1bp, with a steepening bias, in today’s Asia-Pac session after yesterday’s modest gains. The market awaits today’s September FOMC minutes ahead of CPI/PPI data on Thursday and Friday respectively.
- The latest round of ACGB Jun-39 supply saw the weighted average yield print 0.63bps through prevailing mids, extending the recent trend of firm pricing at ACGB auctions. A sale of A$1.0bn of the 2.75% 21 November 2028 bond is due on Friday.
- Assistant Governor Christopher Kent said the RBA spent AU$9bn on its term funding facility that was implemented at the height of the COVID-19 pandemic to lower borrowing costs.
- The bills strip has twist-flattened, with pricing -2 to +2.
- RBA-dated OIS year-end pricing is unchanged after today’s RBNZ decision, with a cumulative 8bps of easing priced by year-end.
- Tomorrow, the local calendar will see Consumer Inflation Expectation data and panel participation by Sarah Hunter, RBA Assistant Governor (Economic), at Macquarie University.
NZGBS: Rates Lower After RBNZ Goes By 50bps
NZGBs closed slightly off session bests, with benchmark bonds 1-2bps richer.
- The RBNZ increased its pace of easing by cutting the OCR 50bp to 4.75% today, as expected, after starting the easing cycle with 25bp in August. The MPC felt that “restraint” could be lessened as inflation is “within” the 1-3% target range and approaching the mid-point. It seemed to opt for an increase in the pace of easing to “avoid unnecessary instability” in the economy and markets. It noted that policy is still restrictive though.
- The discussion was around whether to cut rates 25bp or 50bp but the MPC unanimously decided on the latter as that was “most consistent” with its mandate to maintain “low and stable inflation”.
- RBNZ-dated OIS softened by 6-10bps following today's RBNZ policy decision.
- Before the decision, markets had priced in a 72% probability (43bps) of a 50bp rate cut, with 88bps of total easing expected by year-end and 127bps by February 2025. Those figures have shifted to 98bps by year-end and 137bps by February (including today’s 50bps).
- Tomorrow, the local calendar will see the NZ Government's 12-month Financial Statements alongside the NZ Treasury’s planned sale of NZ$200mn of the 0.25% May-28 bond, NZ$250mn of the 4.25% May-34 bond and NZ$50mn of the 1.75% May-41 bond.
FOREX: NZD Slumps On RBNZ 50bps Cut, With Similar Moves Expected Going Forward
NZD weakness has been the theme of the Wednesday so far in the G10 space. This follows the 50bps cut by the RBNZ earlier, while the commentary pointed to similar moves going forward. The BBDXY USD index is marginally higher, last near 1240. The USD is slightly stronger against other currencies in the G10 space.
- NZD/USD tracks near 0.6080/85 in latest dealings, off around 0.90% versus end Tuesday levels in NY. We were closer to 0.6130/35 prior to the RBNZ announcement.
- RBNZ-dated OIS softened by 6-10bps following today's RBNZ policy decision, with the central bank viewing policy as still restrictive. Our sense had been the market would react more if we saw a hawkish surprise today, but the RBNZ has arguably given the NZD bears fresh ammunition. Further weakness could see declines towards 0.6046 and 0.6000 (Aug 14 lows).
- AUD/USD is also weaker, but only off by 0.25%, last under 0.6730. Further retracement in China and Hong Kong equities is likely weighing on sentiment (as well as an additional NZD headwind). The AUD/NZD cross is at 1.1055, just off session highs of 1.1076.
- USD/JPY has been relatively range bound. The pair last near 148.30/35. Dips remain supported.
- US equity futures sit lower, while US yields are slightly down at the front end.
- Later the Fed’s Jefferson, Bostic, Logan, Goolsbee, Collins and Daly appear plus the September FOMC meeting minutes are published.
EQUITIES: Asian Equities Mixed, As China Equities Struggle
Asian markets experienced mixed trading on Wednesday, with Chinese equities leading losses as weak economic data and limited stimulus from Beijing weighed on sentiment. The CSI 300 Index dropped as much as 7.4%, its biggest fall since 2020, as concerns grew about the sustainability of China's recent market rally. In contrast, Japanese stocks rose, with the Nikkei 225 gaining 0.9%, led by technology and growth shares following a rebound in US equities. Meanwhile, New Zealand's /NZX 50 rose 1.5% after the central bank's 50bps rate cut, and Australia's S&P/ASX 200 gained 0.6%, lifted by banks and consumer discretionary stocks. However, Australian iron ore miners fell amid China's lack of new stimulus measures.
- It's a sea of red in China today as investors dump stocks following a lack of further stimulus measures. China onshore real estate names have been the worst hit, the CSI 300 Real Estate Index is down 9.60%, while Tech stocks are have been the top performing with teh CSI 300 Tech Index flat for the day. However there has been a late bounce in China equities following these headlines " *CHINA MINISTRY OF FINANCE TO BRIEF ON FISCAL POLICY SATURDAY" - BBG.
- South Korea has been out today, while Taiwan's TAIEX is trading 0.85% higher with TSMC up 2.50% largely benefitting from the rally in tech stocks during the US session overnight.
- Japanese equities are higher today, with the Nikkei outperforming and trading 0.75% higher although the market remains rangebound that with further upside limited unless we see further weakness in the Yen. The Topix is 0.15% higher.
- New Zealand equities have rallied following the 50bps rate cut, with the market pricing in another 50bps cut at the next meeting, the NZX50 closed +1.75%, while Australia's ASX200 closed up 0.13%.
OIL: Markets Watching Geopolitics, Currently Not Too Troubled By China Equities
Oil prices are moderately higher during APAC trading after Tuesday’s sharp sell off and despite the severe drop in China equities today. Geopolitical risks in the Middle East remain a concern for energy markets though. WTI is up 0.2% to $73.74/bbl off the intraday low of $73.53. It rose to $74.19 earlier in the session. Brent is 0.3% higher at $77.43/bbl after falling to $77.21. The USD index is slightly higher.
- Israel is yet to retaliate for Iran’s missile attack on October 1. A response was expected this week and US President Biden urged Israel to avoid Iran’s oil infrastructure, but the conflict has remained between Israel and Iran-backed Hezbollah and Hamas. Options remain skewed towards calls, according to Bloomberg.
- Morgan Stanley has revised up its Brent forecast by $5 to $80/bbl due to current geopolitical issues, according to Bloomberg. It still expects an increasing surplus in 2025 as OPEC looks set to increase output from December.
- Concerns over the strength of China’s economy persist though, especially following Tuesday’s disappointing NDRC press conference. It is the world’s largest crude importer.
- Bloomberg reported an 11mn barrel crude stock build in the US last week, according to people familiar with the API data. Product inventories fell with gasoline down 557k barrels and distillate 2.6mn. The official EIA data is released later today.
- Later the Fed’s Jefferson, Bostic, Logan, Goolsbee, Collins and Daly appear plus the September FOMC meeting minutes are published. There is little data with August US wholesale sales/inventories and German trade the highlights.
GOLD: Down For A Fifth Straight Day
Gold is steady in today’s Asia-Pac session, after closing 0.8% lower at $2621.83 on Tuesday.
- Tuesday’s move was the fifth consecutive daily loss, bringing the yellow metal to its lowest since Sept 20.
- Analysts at Saxo Bank said the move mostly reflected an unravelling of geopolitical risk premium following the lack of an escalation in Middle East tensions this week.
- That said, bullion has also likely been pressured by recent comments from Federal Reserve policymakers that suggest US rate cuts won’t be as aggressive as previously thought.
- Lower rates are typically positive for gold, which doesn’t pay interest.
- According to MNI’s technicals team, yesterday’s move in gold saw it pierce support at $2615.0, the 20-day EMA. A clear break of this would open $2,584.9, Sep 20 low.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 09/10/2024 | 0600/0800 | ** |  DE | Trade Balance |
| 09/10/2024 | 0830/1030 |  EU | ECB's Elderson in 'true cost of green...' session | |
| 09/10/2024 | 0900/1000 | ** |  GB | Gilt Outright Auction Result |
| 09/10/2024 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 09/10/2024 | 1200/0800 | US | Atlanta Fed's Raphael Bostic | |
| 09/10/2024 | 1315/0915 | US | Dallas Fed's Lorie Logan | |
| 09/10/2024 | 1400/1000 | ** | US | Wholesale Trade |
| 09/10/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 09/10/2024 | 1630/1230 | US | Fed Vice Chair Philip Jefferson | |
| 09/10/2024 | 1700/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 09/10/2024 | 1800/1400 | *** | US | FOMC Minutes |
| 09/10/2024 | 2100/1700 | US | Boston Fed's Susan Collins | |
| 09/10/2024 | 2200/1800 | US | San Francisco Fed's Mary Daly | |
| 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 | - | *** |  CN | Money Supply |
| 10/10/2024 | - | *** | CN | New Loans |
| 10/10/2024 | - | *** | CN | Social Financing |
| 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 |