Source: MNI - Market News/Bloomberg
UK
BUDGET (BBC): “Education Secretary Bridget Phillipson has said "working people" would not see higher taxes on their payslips following Wednesday's Budget. She avoided saying if she thought business owners could be considered working people.”
BUDGET (BBC): “The chancellor will not unveil new freeports in the Budget on Wednesday, despite a government announcement on Friday saying she would. Instead of announcing five new freeports as was widely reported, the chancellor Rachel Reeves will outline plans and funding for some existing designated freeport sites to become "operational".”
EU
ECB (MNI INTERVIEW): The European Central Bank’s September projections justified continuing restrictive monetary policy “for a while, maybe a quarter or two,” National Bank of Belgium Governor Pierre Wunsch told MNI on Saturday.
ECB (MNI INTERVIEW): A victory for Donald Trump in the U.S. elections would be likely to drive the dollar higher and send a stagflationary impulse into the euro area, making the European Central Bank’s job harder, National Bank of Belgium Governor Pierre Wunsch told MNI on Saturday.
FRANCE (MNI BRIEF): WASHINGTON, DC - Moody’s lowering of its outlook on France's debt to negative is being looked at very “carefully” by the country's government, but will not to trigger any new special actions because a fiscal consolidation plan was already seen as necessary, finance minister Antoine Armand said Friday.
EU/CHINA (21ST CENTURY BUSINESS HERALD): “Beijing and Brussels agreed to continue negotiating on EV anti-subsidy measures during a recent leadership call, 21st Century Business Herald reported. Industry experts said the EU showed positive sentiment by initiating the call, which also increased chances the European team will travel to China for the next round of talks.”
GERMANY (DW): “German Chancellor Olaf Scholz backed increased arms cooperation with India, as he concluded his visit to the South Asian country on Saturday.”
RUSSIA (POLITICO): “Leaders of the Group of Seven have finalized a deal to use the profits of frozen Russian assets for a $50 billion loan to Ukraine, the G7 said on Friday. "These loans will be serviced and repaid by future flows of extraordinary revenues stemming from the immobilization of Russian sovereign assets, in line with G7 respective legal systems and international law," the group said.”
RUSSIA (DW): “Russian President Putin has promised a "response" if Ukraine uses long-range weapons to strike within Russia. Ukraine has suffered another major overnight drone attack by Russian forces.”
GEORGIA (BBC): “Georgia's prime minister has hailed a "landslide" election result, rejecting allegations of vote-rigging and violence. Official preliminary results from Georgia's election commission gave the ruling Georgian Dream an outright majority of 54%, despite exit polls for opposition TV channels suggesting four opposition parties had won. Georgia's pro-Western president, Salome Zourabichvili, has condemned the "total falsification" of the vote.”
US
CORPORATE (BBG): “Boeing Co. is planning to launch a capital raise as early as Monday, according to people familiar with the matter, in an offering that would help the beleaguered airplane maker boost its liquidity.”
OTHER
OIL (BBG): “ Oil tumbled more than 5% at the start of the week after Israeli strikes against targets in Iran avoided the OPEC member’s crude facilities, raising the prospect for easing hostilities in the region.”
MIDDLE EAST (BBC): “Iran's Supreme Leader Ali Khamenei has given a measured response to Israeli strikes on the country, saying the attack should not be "exaggerated or downplayed" while refraining from pledging immediate retaliation.”
JAPAN (MNI BRIEF): Japan's Liberal Democratic Party and its ruling coalition partner, Komeito, lost their majority in the lower house of parliament on Sunday for the first time since 2009, casting uncertainty over Prime Minister Shigeru Ishiba's government less than a month after he took office, the Nikkei reported.
JAPAN (MNI BOJ WATCH): The Bank of Japan board will likely leave its policy interest rate at 0.25% when it concludes its two-day meeting on Thursday amid unstable financial markets and uncertainties over a U.S. soft-landing, with attention shifting to further wage data and Board communications that could offer insight into the chances of a December increase.
CANADA (MNI): Governor Tiff Macklem said Friday the Bank of Canada’s economic projections appear intact after the government announced a sharp reduction of immigration targets that ministers said would help tame a housing squeeze.
AUSTRALIA (MNI POLICY): Strong Jobs Growth Still Compatible With RBA Cuts
CHINA
LIQUIDITY (MNI BRIEF): The People’s Bank of China revealed Monday it would add outright reverse repo to its monetary policy toolkit to help maintain adequate liquidity in the banking system, targeting trades with primary dealers in its open market operations.
POLICY (MNI INTERVIEW): PBOC To Cut Rates Further, Target 2% CPI
PROFITS (YICAI): “Profits of industrial enterprises above a designated size declined by 27.1% y/y in September, due to high-base effects and following August's 17.8% drop, Yicai.com reported, citing National Bureau of Statistics data.”
CONSUMPTION (BBG): “ China’s recent rollout of stimulus is centered around lifting domestic demand and hitting the nation’s annual growth goal, said Vice Finance Minister Liao Min, as investors await a meeting of lawmakers expected to unveil details of Beijing’s crucial fiscal package.”
HOUSING (SECURITIES TIMES): “Sales of existing homes have risen in China’s biggest cities including Beijing, Shenzhen and Shanghai this month as supportive policies boosted sentiment in the country’s property market, Securities Times reported.”
CHINA MARKETS
MNI: PBOC Net Injects CNY32.7 Bln via OMO Monday
The People's Bank of China (PBOC) conducted CNY241.6 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY32.7 billion after offsetting the maturity of CNY208.9 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5890% at 09:34 am local time from the close of 1.7353% on Friday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 44 on Friday, compared with the close of 47 on Thursday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Higher At 7.1307 Mon; +2.71% Y/Y
The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1307 on Monday, compared with 7.1090 set on Friday. The fixing was estimated at 7.1309 by Bloomberg survey today.
MARKETS
US TSYS: Tsys Futures Off Earlier Lows, Curve Bear-Steepens
- Tsys futures have continued the sell-off from Friday. The Trump trade could be largely behind the move, with betting markets now showing he has he largest lead since the Sept debate against Harris. Polymarket sees the odds now 65.1% vs 34.9%, although they now have Michigan closer than last week. While RealClearPolitics Poll average, has Trump in front 48.5 vs 48.4 for the first time since Aug 4th.
- Outside of Trump pushing further ahead in betting markets, there hasn't been much in the way of headlines, oil has plunged following cooling tensions in the middle east, although this did little to support tsys.
- Volumes have surged today, TU is -02⅛ at 103-02, while TY is -09+ at 110-24+, we trade just off session lows.
- As noted earlier, late Friday traders were purchasing 10yr tsys options targeting a rise in yields to around 4.5% ahead of the Nov. 1 expiry.
- Tsys curve continues to bear-steepen, the 10yr is +3.6bps at 4.276%, while the 30yr yield is now testing the July 24 highs of 4.54%. The 2s30s curve has steepened 1.5bps to 40.50, although the curve is still about 20bps off its recent highs made late September.
- There is little on the data calendar for the day ahead.
JGBS: Cheaper, Looks Past Political Uncertainty, 2Y Supply Tomorrow
JGB futures are weaker but off session cheaps, -14 compared to settlement levels. Futures opened sharply higher after weekend lower house elections showed the LDP coalition had lost its majority. However, that move was quickly reversed. PM Ishiba is currently giving a press briefing.
- The move away from session bests had been assisted by cash US tsys, which are 2-3bps cheaper in today’s Asia-Pac session, extending Friday’s modest cheapening. Market participants will be looking for US inflation and payroll figures this week to guide on the pace of interest rate cuts by the Federal Reserve this year.
- Cash JGBs are flat to 5bps cheaper across benchmarks, with a steepening bias. The benchmark 2-year yield is unchanged at 0.454% ahead of tomorrow's supply.
- Swap rates are 1-6bps higher, with a steepening bias, for maturities beyond the 2-year. Swap spreads are wider.
- Tomorrow, the local calendar will see Jobless Rate and Job-To-Applicant Ratio data alongside 2-year supply.
- The BoJ Policy Meeting is on Wednesday and Thursday, with the board likely to leave its policy interest rate at 0.25% amid unstable financial markets and uncertainties over a US soft-landing. Attention shifting to further wage data and other board communications could offer insight into the chances of a December increase.
AUSSIE BONDS: Near Worst Levels, Pressured By US Tsys, Data Light Session
ACGBs (YM -6.0 & XM -6.0) are weaker and near Sydney session lows on a data/newsflow light day.
- The local market has been pressured by cash US tsys, which are 2-3bps cheaper in today’s Asia-Pac session, extending Friday’s modest cheapening. Market participants will be looking for US inflation and payroll figures this week to guide on the pace of interest rate cuts by the Federal Reserve this year.
- Cash ACGBs are 6bps cheaper, with the AU-US 10-year yield differential at +21bps.
- Swap rates are 6bps higher.
- The bills strip has bear-steepened, with pricing -1 to -7.
- RBA-dated OIS pricing is 1-6bps firmer for 2025 meetings, with the later meetings showing the greatest increase. The market is pricing in a modest cumulative 4bps of easing by the end of the year, positioning the expected cash rate at its highest level since late July.
- Tomorrow, the local calendar is empty ahead of Q3 CPI data on Wednesday.
- There is a 70% 3-year correlation between NZ and Australian underlying inflation down from 95% in H1 2022. NZ’s moderated to 3.4% from 3.6%, significantly less than the 1.1pp drop in annual headline inflation. Australia’s trimmed mean is forecast to moderate to 3.5% from 3.9% in Q3, which would still be higher than NZ’s.
FOREX: USD Surge Continues Ahead Of US Election
The USD bull run continues, as the US election comes into focus. The BBDXY index sits near 1264 in latest dealings, fresh highs back to early July of this year.
- Yen weakness dominated early, amid fallout from the LDP coalition losing its majority from Sunday's lower house elections. We are now in a period of uncertainty in terms of how the government and policy agenda will look. Some type of agreement between the LDP coalition with minor parties is likely to needed to pass legislation, if a formal alliance cannot be struck.
- Compounding yen losses was a further surge in UST yields. The US 2yr yield got to 4.14%, but sits back at 4.12% now, while the 10yr got above 4.28% but is now back under 4.27%. Focus continues to be on next week's US election, with betting markets still firmly in Trump's favor but latest polls point to a close race.
- USD/JPY got to highs of 153.88, but sits back at 153.45/50, still off by around 0.75% for the session. The tick down from US yields from session highs likely helping this move in yen.
- AUD and NZD have softened as the session has progressed. AUD/USD is at 0.6580, fresh lows back to August of this year, while NZD/USD is at 0.5960, also fresh lows back to the first half of August.
- Oil prices slumped as the market took some comfort from Israel striking military targets in Iran over the weekend (rather than oil or nuclear facilities). Still, this did little to impact UST yields in the first part of trade.
- Regional equity markets are mixed, with Japan seeing gains despite the weekend election result, while aggregate China/HK markets are down, despite signs of improving property sales in China.
- Looking ahead, there are few events or data today. The October US Dallas Fed manufacturing index and Spain’s September retail sales print. The ECB’s de Guindos speaks.
EQUITIES: APAC Equities Mixed, Japanese Equities Surge As Yen Hits New Lows
Asian equities are mixed today with political developments in Japan, economic data from China, and global energy prices contributing to market moves. The yen weakened to a three-month low, hitting 153.87, after Japan's ruling coalition failed to secure a parliamentary majority, raising speculation about political uncertainty and the BoJ maintaining its ultra-low interest rates for longer, the weakness in the yen has seen Japanese equities surge today.
- Despite the political turmoil in Japan, investors remain optimistic about Japan's outlook due to potential government spending, structural corporate reforms, and its key role in regional supply chains. Japanese exporters are the top performers today, with Tokyo Electron up 2.80%. The Nikkei is up 1.75%, while the TOPIX is 1.40% higher.
- China and Hong Kong markets are mixed today, the Shanghai A Shares Index held up well despite a continued decline in industrial profits, as investors were optimistic that corporate earnings could exceed low expectations, over 300 Chinese firms are set to announce earnings this week. However, concerns lingered over the lack of specifics on China’s stimulus measures, with Vice Finance Minister Liao Min reiterating that the focus remains on meeting GDP growth targets. Investors are awaiting next week's NPC meeting for potential sentiment-boosting announcements. The HSI was last 0.10% lower, while CSI 300 was 0.35% lower.
- Taiwan equities are lower today, with semiconductor prices lower. TSMC down 0.95% & Hon Hai down 0.70% have contributed the most to the losses in the TAIEX which was last 0.60% lower. South Korean equities are higher after Samsung surged 3.60%, the KOSPI is 1.10%, while the KOSDAQ has jumped 1.75%.
- Crude oil prices plunged by more than 5% after Israeli strikes on Iran avoided key oil facilities, easing concerns about supply disruptions. Energy shares across APAC has dropped today.
- Australia's ASX 200 is little changed today, gains in metals & miners have been offset by losses in financials. New Zealand is out today.
- US equity futures rose as investors brace for a key week of economic data, including growth reports from the US, Eurozone, and China, as well as the US payrolls report.
OIL: Crude Corrects Following Israel’s Restrained Attack On Iran
Oil prices have corrected sharply following comments from leaders in Iran and Israel that imply that neither side want an escalation in hostilities following Israel’s attack on Iranian military targets on the weekend. The crude market had been concerned that Iran’s oil infrastructure would be targeted and so the geopolitical risk premium is being unwound in relief. Gaza ceasefire talks have also restarted.
- WTI is down 4.6% to $68.50/bbl today after falling to around $67.80 on the open before rising to $68.84. It is holding above initial support at $68.17. The US dollar is also weighing on oil as the BBDXY index has risen another 0.2% today after 0.3% on Friday as US yields continue to rise.
- Brent is 4.4% lower at $72.67/bbl after sinking to $72.00, below initial support at $72.50, but the break was not sustained.
- Citigroup has cut its Brent forecast $12 to $60/bbl 12-months ahead due to the reduction in the Middle East geopolitical risk premium, according to Bloomberg. Its now to 3-months projection has been reduced $4 to $70/bbl. Citigroup has also decreased its estimate of a significant jump in prices to a 10% probability from 20%.
- Weak industrial profit data in China is also likely adding to pressure on oil. The market has been concerned for some time about the strength of demand in the world’s largest crude importer. With the risk of disruption to Iranian supply diminishing, the focus is likely to return to China.
- There are few events or data today. The October US Dallas Fed manufacturing index and Spain’s September retail sales print. The ECB’s de Guindos speaks.
GOLD: Gives Back Friday’s Gain
Gold is 0.5% lower in today’s Asia-Pac session, after closing 0.4% higher at $2747.56 on Friday.
- The yellow metal finished 0.9% higher on the week, albeit below Wednesday’s record high of $2,758. Nevertheless, it was the third weekly gain for gold as safe-haven demand remained high ahead of the US election and amid elevated geopolitical tensions.
- However, today’s weakness may reflect the fact that Israeli strikes on Iran over the weekend appeared to be more restrained than many expected.
- Market participants will be looking for US inflation and payrolls figures this week to guide on the pace of interest rate cuts by the Federal Reserve this year. Lower rates are typically positive for gold, which doesn’t pay interest.
- According to MNI’s technicals team, trend conditions for gold remain bullish, reinforced by last week’s extension. Sights are still on $2,767.1 next, a Fibonacci projection point, ahead of the $2,800.0 handle.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 28/10/2024 | 1100/1100 | ** |  GB | CBI Distributive Trades |
| 28/10/2024 | 1430/1030 | ** |  US | Dallas Fed manufacturing survey |
| 28/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 28/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for 2 Year Note |
| 28/10/2024 | 1700/1300 | * | US | US Treasury Auction Result for 5 Year Note |
| 28/10/2024 | 1700/1300 | * | US | US Treasury Auction Result for 13 Week Bill |
| 28/10/2024 | 1945/2045 |  EU | ECB's De Guindos speech and Q&A at Foros Reflexión | |
| 29/10/2024 | 2330/0830 | * |  JP | Labor Force Survey |
| 29/10/2024 | 0001/0001 | * | GB | BRC Monthly Shop Price Index |
| 29/10/2024 | 0700/0800 | * |  DE | GFK Consumer Climate |
| 29/10/2024 | 0700/0800 | *** |  SE | GDP |
| 29/10/2024 | 0700/0800 | ** | SE | Retail Sales |
| 29/10/2024 | 0930/0930 | ** | GB | BOE M4 |
| 29/10/2024 | 0930/0930 | ** | GB | BOE Lending to Individuals |
| 29/10/2024 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 29/10/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 29/10/2024 | 1300/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 29/10/2024 | 1300/0900 | ** | US | FHFA Home Price Index |
| 29/10/2024 | 1300/0900 | ** | US | FHFA Home Price Index |