Source: MNI - Market News/Bloomberg
UK
BOE (MNI BRIEF): Bank of England Governor Andrew Bailey made the case for central banks to create permanent liquidity facilties for non-banks to reduce financial stability risks but he argued that the central bank should have control over when to trigger them, differentiating them from the standing facilities offered to banks. Bailey, in a speech at a Bloomberg event in Washington, made no comment on monetary policy.
BOE (MNI BRIEF): Independent Bank of England Monetary Policy Committee member Megan Greene said that the neutral interest rate, 'r-star', has probably risen and that policy rates were unlikely to return to pre-pandemic levels,as she advocated a cautious approach to rate cutting.
US (BBC): “Donald Trump's campaign has filed a Federal Election Commission (FEC) complaint against the UK's Labour Party, accusing it of "blatant foreign interference" in the US election in aid of the Harris-Walz campaign.”
DEFENCE (BBC): “Britain and Germany will sign, what the UK government is calling a “landmark defence agreement” aimed at boosting security, investment and jobs. Under the agreement the German defence company, Rheinmetall will open a new factory in the UK to manufacture barrels for artillery guns – supporting 400 jobs.”
UKRAINE (BBC): “Prime Minister Sir Keir Starmer has warned that Russia is stepping up attacks on Ukrainian ports in the Black Sea – delaying the export of agricultural produce, including aid intended for Palestinians caught up in the conflict with Israel.”
EU
ECB (MNI BRIEF): Bank of France Governor Francoise Villeroy said Tuesday that ECB rates should not be restrictive next year if the growth outlook remains sluggish and inflation is sustainably at the bank's target of 2%.
ECB (BBG): “An increasingly dire euro-area economy might exacerbate slowing consumer-price growth, according to European Central Bank Governing Council member Olli Rehn.”
ECB (POLITICO): “As possible Trump return looms, EU’s Lagarde urges US to avoid trade wars.”
NATO (DW): “Speaking with DW, President Alexander Stubb highlighted the need for a strong NATO deterrent as a basis for European security. He also said Ukraine's entry into the alliance is a question of when, not if.”
FRANCE (POLITICO): “The French Ministry of Foreign Affairs is retooling an internal think tank to examine the different scenarios France might face during a second Trump presidency and come up with responses, a person familiar with preparations said.”
AUSTRIA (BBC): “Austria’s President, Alexander Van der Bellen, has asked the leader of the conservative People’s Party (OVP) and incumbent Chancellor Karl Nehammer to form a coalition government - despite the fact that the far-right Freedom Party won the general election last month.”
UKRAINE (POLITICO): “Ukrainian President Volodymyr Zelenskyy called on global allies not to "shy away" from responding to reports that Pyongyang is supplying troops to help Russia wage war on Ukraine, saying late Tuesday that intelligence suggests up to 12,000 North Korean soldiers are currently training for deployment.”
US
ELECTION (RTRS): “Democratic U.S. Vice President Kamala Harris held a marginal 46% to 43% lead over Republican former President Donald Trump, with a glum electorate saying the country is on the wrong track, a new Reuters/Ipsos poll found.”
CORP (BBG): “ A severe E. coli outbreak tied to McDonald’s Corp.’s Quarter Pounders sickened dozens of people in the US, mainly in Colorado and Nebraska, and killed one, the US Centers for Disease Control and Prevention said.”
OTHER
GEOPOLITICS (BBG): “Russia and Iran may seek to foment violent protests inside the US in the days and weeks after the Nov. 5 election as voting results are being tabulated and certified, US intelligence agencies warned on Tuesday.”
JAPAN (BBG): “The International Monetary Fund is gaining confidence over the sustainability of Japan’s inflation, and expects the Bank of Japan to stay on a gradual path of raising interest rates in coming years, according to its mission chief for the nation.”
JAPAN (MNI BRIEF): The International Monetary Fund on Tuesday lowered its forecast for Japan’s gross domestic product this year to 0.3% from the 0.7% made in July, but raised its 2025 growth forecast to 1.1% from July’s 1.0%, the IMF’s World Economic Outlook showed.
CHINA
MARKETS (BBG): “China should issue 2 trillion yuan ($281 billion) of special government bonds to help create a market stabilization fund, according to a top government-linked think tank.”
CONSUMPTION (YICAI): “Chinese sellers are branding this year’s Double-Eleven shopping festival, held each year on November 11, on the theme of national subsidies as merchants look to entice sales using the government’s trade-in scheme, Yicai has reported.”
STIMULUS (NDRC): “China’s top state planner will continue to launch additional policies such as expanding usage of local special bonds to the widest extent possible and raising student subsidies and loans, CCTV News reported. “
CHINA MARKETS
MNI: PBOC Net Injects CNY150.3 Bln via OMO Wednesday
The People's Bank of China (PBOC) conducted CNY792.7 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY150.3 billion after offsetting the maturity of CNY642.4 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5524% at 09:33 am local time from the close of 1.6362% on Tuesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 48 on Tuesday, compared with the close of 47 on Monday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Higher At 7.1245 Weds; +2.72% Y/Y
The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1245 on Wednesday, compared with 7.1223 set on Tuesday. The fixing was estimated at 7.1242 by Bloomberg survey today.
MARKET DATA
SOUTH KOREA OCT. CONSUMER CONFIDENCE 101.7; PRIOR 100.0
MARKETS
US TSYS: Tsys Futures Edge Lower, BofA's CEO See's 50bps Of Cuts This Year
- US Tsys futures have continued the move lower that occurred during the US session on Tuesday, with TU, FV & TY contracts trading below Tuesday's lows. TU is -01⅜ at 103-06⅜, while TY is -05+ at 111-05+ and now trades just above initial support at 111-00 (July 22 lows), moving average studies are in a bear-mode position, highlighting a dominant downtrend for now. Initial firm resistance has been defined at 112-22 (Oct 16 high).
- Volumes are well down on Tuesday's levels, while the only notable trade has been a SOFR strip block, DV01 $2.2m.
- It has been a relatively quiet session across Asia rates, although the 40yr JGB hit its highest levels since 2008.
- Cash tsys curve has seen a slight bear-flattening move, yields are 2-2.5bps higher. The 2yr is +2.2bps at 4.054% the highest since Aug 19th, while the 10yr is +2bps at 4.228%, the highest since July 25th.
- Earlier, BofA's Brian Moynihan urged the Fed to take a measured approach to cutting interest rates, warning of risks if the reductions are too rapid. He expects a further 50bps in cuts by year-end and four more in 2025, with inflation potentially dropping to 2.3% by 2026.
- Fed fund futures are pricing in 41bps of cuts by year-end, or about a 72% of 50bps of cuts.
- Today, we have MBA Mortgage Applications, followed by existing Home sales & the Federal Reserve Releases Beige Book
JGBS: Cash Bonds Cheaper With US Tsys, 20Y Supply Tomorrow
JGB futures are holding an uptick, +1 compared to settlement levels, after giving back earlier gains.
- The International Monetary Fund on Tuesday lowered its forecast for Japan’s gross domestic product this year to 0.3% from the 0.7% made in July but raised its 2025 growth forecast to 1.1% from July’s 1.0%, the IMF’s World Economic Outlook showed.
- Cash US tsys are 2-3bps cheaper in today’s Asia-Pac session after yesterday’s modest extension of Monday’s heavy session. Today’s US calendar will see MBA Mortgage Applications, followed by existing home sales & the Federal Reserve Beige Book.
- Cash 2- to 40-year JGBs are flat to 1bps cheaper. The benchmark 10-year yield is 0.5bp higher at 0.983% versus the cycle high of 1.108%.
- The 40-year JGB yield climbed to 2.542% today, its highest level in 16 years, amid growing speculation that the BoJ will push ahead with interest rate increases in the coming months. The yield is currently 0.9bp higher at 2.532%
- Swap rates are little changed.
- The local data calendar has been empty today. Tomorrow will see Oct preliminary PMIs and weekly investment flows alongside 20-year supply.
AUSSIE BONDS: Cheaper & Near Worst Levels But A Subdued Session
ACGBs (YM -3.0 & XM -3.0) are weaker, hovering near Sydney session lows. Despite the decline, today's trading ranges have remained relatively narrow, reflecting subdued market activity.
- Today's extension of the recent selloff for ACGBs, which brings the rise to 60-70bps over the past month, potentially leaves Aussie bonds vulnerable to a short squeeze into next week’s quarterly CPI data.
- With the domestic calendar light today, local participants have likely eyed US tsys for guidance. Cash US tsys are ~2bps cheaper in today’s Asia-Pac session after yesterday’s modest extension of Monday’s heavy session. Today's US calendar will see MBA Mortgage Applications, followed by existing home sales & the Federal Reserve Beige Book.
- According to the latest results of a Bloomberg News survey, the Australian economy will expand by 1.2% in 2024, 2.1% in 2025 and 2.5% in 2026. (See link)
- Cash ACGBs are 2-3bps cheaper with the AU-US 10-year yield differential at +23bps.
- Swap rates are 1bp higher, with EFPs tighter.
- The bills strip is slightly weaker, with pricing -1 to -3.
- RBA-dated OIS pricing is little changed. A cumulative 3bps of easing is priced by year-end.
- Tomorrow, the local calendar will see Judo Bank PMIs and the RBA Annual Report.
NZGBS: Cheaper But Off Worst Levels, RBNZ Gov. Speaks Tomorrow
NZGBs closed flat to 2bps following a subdued session with little news flow. Despite the subdued trading, the benchmarks ended 1-2bps above their session cheaps.
- Notably, the NZGB 10-year outperformed its Australian counterpart, with the NZ-AU yield spread narrowing by 2bps to +5bps. Meanwhile, the NZ-US 10-year yield differential remained unchanged at +28bps, sitting near the midpoint of the range it has traded within since March.
- Cash US tsys are ~2bps cheaper in today’s Asia-Pac session after yesterday’s modest extension of Monday’s heavy session. Today, we have MBA Mortgage Applications, followed by existing home sales & the Federal Reserve Beige Book.
- According to a survey conducted by Bloomberg News, the NZ economy will expand by 0.4% in 2024, 2.0% in 2025 and 2.6% in 2026. (See link)
- Swap rates closed flat to 3bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed mostly little changed but late 2025 meetings firmed 3-5bps. A cumulative 103bps of easing is priced by February, with 57bps by year-end.
- RBNZ Governor Adrian Orr will speak tomorrow at the Peterson Institute about monetary policy.
FOREX: Yen Weakness Continues, As US 10yr Yield Hits Multi Month Highs
Yen weakness remains the standout in G10 FX. USD/JPY is quickly closing on 152.00, having got to 151.95, just above the July 25 low. We are around 0.55% weaker in yen terms. The BBDXY USD index sits a little higher relative to end Tuesday levels in the US, last near 1258.8, largely thanks to yen weakness.
- Outside of yen weakness, we haven't seen large G10 FX shifts. The early trend was for broader USD based gains, but as the session has progressed, we have seen more of a risk on feel. CHF is also weaker, albeit off by a little under 0.20% at this stage (last near 0.8670).
- Helping stabilizing sentiment for the likes of AUD and NZD has been a stronger tone to HK and China equities. AUD/USD last just under 0.6680, while NZD/USD is at 0.6040. We are up from earlier session lows.
- US yields are firmer, around 2bps across the Tsy benchmarks. This has aided yen underperform, US-JP yield differentials, particularly for the 10yr tenor continuing to track higher. The 10yr Tsy hitting fresh highs back to late July.
- The AUD/JPY cross has hit fresh highs back to late July, getting close to 101.59. We sit slightly lower now.
- Looking ahead, the Fed’s Bowman and Barkin speak and the Beige Book is published and September existing home sales print. ECB’s Lagarde and Lane appear, as well as BoE’s Breeden and Bailey. The BoC decision is announced and a 50bp rate cut is expected.
ASIA STOCKS: Asian Equities Mixed, HK & China Outperform On Stimulus Hopes
Asian markets are mixed today, in what has been a very quiet session for economic data and headlines. Japan's transport sector has led gains following Tokyo Metro's strong IPO debut, which surged 36% with foreign demand for the stock strong, signaling possible renewed offshore interest in Japanese equities, although political uncertainties ahead of Japan's lower house elections, a strong USD and rising yields have weighed on the market. Elsewhere, Chinese & Hong Kong stocks advanced on hopes of further government stimulus, Korea's benchmark indices have been supported by strong performance from Samsung & SK Hynix.
- US equity futures are trading slightly lower, although remain within recent ranges. Dow -0.30%, S&P 500 -0.10% & Nasdaq 100 -0.15%.
- Intraday flows into South Korean equities, show foreign investors are buying local tech stocks, although flows are still relatively light, there could be a bit of a rotation out of TSMC after its strong rally post earnings, it is 1.40% lower today after falling 0.92% on Tuesday.
- Chinese & HK equities advanced, supported by a government-linked think tank calling for the issuance of 2 trillion yuan in special bonds to create a market stabilization fund, with investors are optimistic about further stimulus from Beijing.
- It is another quiet session globally for economic data, with focus turning to corporate earnings. Later today we have earnings from Coca-Cola, IBM, AT&T and Tesla to name a few.
Oil Prices Lower, US Inventory Data Out Later
Oil prices are down moderately today after a US crude stock build was reported but are off their intraday lows and have been trading in a narrow range. WTI is down 0.2% to $71.58/bbl after a high of $71.66 and Brent is 0.2% lower at $75.87 after approaching $76. The USD index is slightly higher.
- The US’ Blinken is in the Middle East for ceasefire talks while the conflict continues. The market continues to wait for Israel’s retaliation for Iran’s October 1 missile attack.
- Bloomberg reported that refined products in China fell compared to a year ago due to cutbacks driven by weak fuel demand, less profitable exports and the opening of a huge refining facility. State refiners have cut runs by 6.7% y/y in October, according to Mysteel OilChem. Oil markets have been worried about demand from China and are not yet convinced that recent stimulus measures will be effective in boosting growth.
- Bloomberg reported that US crude stocks rose 1.6mn barrels last week, according to people familiar with the API data. Products were lower though with gasoline down 2mn and distillate 1.5mn. The official EIA data is out later today.
- Later the Fed’s Bowman and Barkin speak and the Beige Book is published and September existing home sales print. ECB’s Lagarde and Lane appear, as well as BoE’s Breeden and Bailey. The BoC decision is announced and a 50bp rate cut is expected.
GOLD: Fed, US Election & Middle East Uncertainties = Another All-Time High
Gold is hovering just below its all-time high of 2749.03 in today’s Asia-Pac session. It closed 1.1% higher yesterday. Traders have been drawn to the market amid heightened uncertainty surrounding the tight U.S. presidential election and growing fears that escalating violence in the Middle East could lead to a broader conflict.
- Federal Reserve officials continue to opine on the path forward, with Fed Schmid favouring a slower pace of rate reductions and Fed Daly forecasting more cuts. Lower rates are typically positive for gold, which doesn’t pay interest.
- “Gold is one of this year’s strongest-performing commodities, with gains of more than 30 per cent so far supported by rate-cut optimism, strong central-bank buying and robust Asian purchases,” ING Bank NV wrote in a note. “Haven demand amid heightened geopolitical risks, as well as uncertainty ahead of the US election in November, have also supported gold’s record-breaking rally.” (per AFR)
- According to MNI’s technicals team, technicals for gold remain bullish, with sights on $2,767.1 and $2,785.3 next, Fibonacci projection points.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 23/10/2024 | 0900/1000 | ** |  GB | Gilt Outright Auction Result |
| 23/10/2024 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 23/10/2024 | - |  EU | ECB's Lagarde and Cipollone in G20 FMs and CB Governors meeting | |
| 23/10/2024 | 1300/1400 | GB | BOE's Breeden panellist at IIF meeting | |
| 23/10/2024 | 1300/0900 | US | Fed Governor Michelle Bowman | |
| 23/10/2024 | 1345/0945 |  CA | BOC Monetary Policy Report | |
| 23/10/2024 | 1345/0945 | *** | CA | Bank of Canada Policy Decision |
| 23/10/2024 | 1400/1600 | ** | EU | Consumer Confidence Indicator (p) |
| 23/10/2024 | 1400/1000 | *** | US | NAR existing home sales |
| 23/10/2024 | 1400/1600 | EU | ECB's Lane participates in growth talk at IIF Meeting | |
| 23/10/2024 | 1400/1600 | EU | ECB's Lagarde Speech at Atlantic Council event | |
| 23/10/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 23/10/2024 | 1430/1030 | CA | BOC Governor Press Conference | |
| 23/10/2024 | 1430/1630 | EU | ECB's Cipollone in panel by Bretton Woods Committee | |
| 23/10/2024 | 1600/1200 | US | Richmond Fed's Tom Barkin | |
| 23/10/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 23/10/2024 | 2030/2130 | GB | ECB's Bailey at IIF meeting | |
| 24/10/2024 | 2200/0900 | *** |  AU | Judo Bank Flash Australia PMI |
| 24/10/2024 | 0030/0930 | ** |  JP | Jibun Bank Flash Japan PMI |
| 24/10/2024 | 0645/0845 | ** |  FR | Manufacturing Sentiment |
| 24/10/2024 | 0715/0915 | ** | FR | S&P Global Services PMI (p) |
| 24/10/2024 | 0715/0915 | ** | FR | S&P Global Manufacturing PMI (p) |
| 24/10/2024 | 0730/0930 | ** |  DE | S&P Global Services PMI (p) |
| 24/10/2024 | 0730/0930 | ** | DE | S&P Global Manufacturing PMI (p) |
| 24/10/2024 | 0800/1000 | ** | EU | S&P Global Services PMI (p) |
| 24/10/2024 | 0800/1000 | ** | EU | S&P Global Manufacturing PMI (p) |
| 24/10/2024 | 0800/1000 | ** | EU | S&P Global Composite PMI (p) |
| 24/10/2024 | 0830/0930 | *** | GB | S&P Global Manufacturing PMI flash |
| 24/10/2024 | 0830/0930 | *** | GB | S&P Global Services PMI flash |
| 24/10/2024 | 0830/0930 | *** | GB | S&P Global Composite PMI flash |
| 24/10/2024 | 1000/1100 | ** | GB | CBI Industrial Trends |
| 24/10/2024 | - | EU | ECB's Lagarde and Cipollone in G20 FMs and CB governors meeting | |
| 24/10/2024 | 1230/0830 | *** | US | Jobless Claims |
| 24/10/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 24/10/2024 | 1245/0845 | US | Cleveland Fed's Beth Hammack |