MNI BRIEF: China NPC Press Conference Set For Nov 8

MNI BRIEF: China Warehousing Index Down In October

RBA BOARD REPEATS "NOT RULING ANYTHING IN OR OUT"

MNI: PBOC Net Drains CNY364.5 Bln via OMO Tuesday

MNI: PBOC Sets Yuan Parity Lower At 7.1016 Tues; +3.12% Y/Y

CHINA PBOC CONDUCTS CNY18.3 BLN VIA 7-DAY REVERSE REPOS TUES

MNI: SWISS OCT UNEMPLOYMENT +2.8% M/M, +24.5% Y/Y

MNI: RBA LEAVES CASH RATE AT 4.35%

MNI: UK BRC OCT BY VALUE SHOP SALES LFL +0.3% YY, TOTAL +0.6% YY

EUROPEAN FISCAL: DE 2025 Budget Gap Grows; Political Risk Is Rising

CANADA: Politics Week: Trudeau Facing More Internal Dissent And Departures

CANADA: Politics Week: Trudeau Faces More Pressure To Resign

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MNI US MARKETS ANALYSIS - Equities See Little Relief From Funding Deal

Highlights:

  • Markets trade calmer as near-term risk of US government shutdown avoided
  • Equities see little relief, November 17th becomes new deadline for US funding
  • ISM Manufacturing eyed for payrolls clues

TSYS/STIR SUMMARY: US Govt Shutdown Averted, Tsys Weaker

  • Cash Tsys kicked off the Asia session lower after Congress passed a stopgap funding bill Saturday evening. The H.R. 5860 bill, "which provides fiscal year appropriations to Federal agencies through November 17, 2023, for continuing projects of the Federal Government and extends several expiring authorities". LINK
  • Tsy extended lows into the London session (TYZ3 marked 107-19 low) as Gilts weighed on EGBs. Tsy yields gaining (10YY +.0557 at 4.6268%) still off last Thu's high 16Y high of 4.6861%. Tsy curves are running mostly flatter, 3M10Y +4.612 at -83.910, 2Y10Y -.484 at -48.146.
  • The bear trend in Treasuries remains intact, maintaining the bearish price sequence of lowers and lower highs. Initial technical support at 107-05, 1.382 Fibonacci proj of the Jul 18 - Aug 4 - Aug 10 price swing.
  • Rate hike projections into early 2024 bouncing off Friday lows: November at 30.5% vs. 18.6% w/ implied rate change of +7.6bp to 5.405%, December cumulative of 12.6bp at 5.455%, January 2024 12.9bp at 5.458%. Fed terminal at 5.46% in Feb'24.
  • No lapse in economic data this week, today's focus on S&P Global US Mfg PMI at 0945ET, Construction Spending and ISMs at 1000ET. Main focus is on Friday's September employment data.
  • Scheduled Fed speakers kicks off with Fed Chair Powell, Philly Fed Harker at moderated roundtable at 1100ET. NY Fed Williams moderates climate risk discussion at 1330ET while Cleveland Fed Mester discusses her economic outlook at 1930ET, text and Q&A.

Markets Halve Size of GBP Net Long

  • Markets halved the size of the GBP net long position as per last week's CFTC positioning update, trimming the outright net position from +33,683 to +15,669, accounting for close to 11% of open interest.
  • The other notable change was the improvement in the NZD net position off a 52w low of -21,272 contracts (net short) to -15,181, or 29.9% of open interest.
  • Markets trimmed longs in EUR, GBP and MXN, while reducing shorts in AUD and NZD, in data accurate as of the Tues 26th close. Full details here:
Figure 1: CFTC Positioning as of Tues 26th Sept

FOREX: Markets Becalmed as Government Shutdown Can Kicked

  • Markets trade on a steadier footing following the avoidance of a fully fledged government shutdown, after a last minute deal was struck in the House and Senate over the weekend. Perhaps most importantly, the deal means the NFP release this Friday and the Oct 12 September CPI will go ahead as planned (as will the MNI previews), giving the Fed all planned data releases for the November 1st rate decision.
  • That said, the can-kicking element is very present, with November 17th the new crunch date that markets will narrow in on for the coming month or so. Should no funding deal be secured by then, it's likely markets go through another bout of short-term uncertainty leading in to that date.
  • EURCHF is rolling over to keep CHF the strongest performing currency in G10, with the moves following the failed test of the 0.97 handle last week. This marks a bearish development for the cross and longs are likely taking profit on the late September recovery. EUR/CHF eyes support at 0.9609 and 0.9589 - with both levels marking retracements off the September rally.
  • Focus Monday turns to Fedspeak, with Fed's Powell, Harker and Williams all set to make appearances. The Fed chair speaks at a roundtable alongside Harker to participate in discussions with workers, business owners and community leaders. ISM Manufacturing data also crosses, expected to improve very slightly to 47.9 from 47.6.
  • Markets remain on watch for any clues within the data for this Friday's Nonfarm Payrolls release, for which markets expect job gains of 165k and an lower unemployment rate at 3.7%.

FX OPTIONS: Expiries for Oct02 NY cut 1000ET (Source DTCC)

  • EUR/USD: Y149.00-05($1.1bln), Y150.00($729mln)
  • GBP/USD: $1.2300-10(Gbp570mln)
  • AUD/USD: $0.6500(A$668mln)

BONDS: Gilts Keep the Pressure on EGBs

  • Bund initially closed its opening gap up to 128.45 in early trade, printed a 128.50 high.
  • The contract has since fallen back towards 128.00, which at the time of typing has held, printed a 128.00 low. Gilt is leading Bond lower this morning, helping, the Gilt/Bund spread wider.
  • After testing its tightest level since May on the 22th September, Desks have favoured fading just ahead of the 150.00bps Psychological support, now back above 160.00bps.
  • Core and semi core spread are mixed against the German 10yr, Portugal is 0.6bp wider, while Greece is 1.6bps tighter.
  • US Treasuries have mostly traded in line with EGBs, albeit 1bp wider the US/German 10yr spread.
  • Focus in the Tnotes/Bund spread is at the 176.45bps resistance, the September high, and the widest print since November 2022, now trading at 174.3bps.
  • Looking ahead, US final Manufacturing PMI and US ISM are the notable data.
  • Speakers include, BoE Mann, Fed Powell, Harker, Williams.

EQUITIES: Short-Term Gains in E-Mini S&P Considered Technically Corrective

  • Eurostoxx 50 futures trend conditions remain bearish and the latest bounce is considered corrective. Last week’s extension lower reinforces the current trend condition and key support at 4210.00, the Sep 8 low, has been breached. The clear break confirmed a resumption of the downtrend that started late July and opens 4109.90, a Fibonacci projection. Initial firm resistance is at 4245.60, the 20-day EMA.
  • A bear cycle in S&P E-minis remains in play and short-term gains are considered corrective. The recent break of support at 4397.75, the Aug 18 low, reinforced bearish conditions and signals scope for a continuation lower. Sights are on 4242.15, a Fibonacci retracement point. Initial firm resistance is 4467.07, the 50-day EMA. Ahead of the 50-day average is resistance at 4399.00, the Sep 22 high, and 4425.05, the 20-day EMA.

COMMODITIES: Gold Starts the Week on a Bearish Note

  • The uptrend in WTI futures remains intact and last week’s climb confirmed a resumption of the trend - resistance at $92.43, Sep 19 high, was cleared. This maintains the bullish price sequence of higher highs and higher lows and note that MA studies are in a bull-mode position, reflecting the market's positive sentiment. Sights are on $97.08 next, a Fibonacci projection. Key support is $88.19, Sep 2 low. A break would highlight a possible S/T top.
  • Gold sold off sharply last week and the yellow metal is starting this week’s session on a bearish note. The recent move lower resulted in a break of support at $1901.10 and this was followed by a breach of $1884.9, the Aug 21 low. This confirmed a resumption of the downtrend that started off the early May high. Attention is $1839.0, a Fibonacci retracement point. On the upside, initial firm resistance is at $1905.5, the 20-day EMA.

DateGMT/LocalImpactFlagCountryEvent
02/10/20230900/1100**EUUnemployment
02/10/20231345/0945***USIHS Markit Manufacturing Index (final)
02/10/20231400/1000***USISM Manufacturing Index
02/10/20231400/1000*USConstruction Spending
02/10/20231500/1600UKBOE's Mann speaks at Redburn/Rothschild event
02/10/20231500/1100USFed Chair Jerome Powell
02/10/20231530/1130*USUS Treasury Auction Result for 13 Week Bill
02/10/20231530/1130*USUS Treasury Auction Result for 26 Week Bill
02/10/20231700/1300USFed Vice Chair Michael Barr
02/10/20231730/1330USNew York Fed's John Williams
03/10/20232301/0001*UKBRC Monthly Shop Price Index
02/10/20232330/1930USCleveland Fed's Loretta Mester
03/10/20230030/1130*AUBuilding Approvals
03/10/20230030/1130**AULending Finance Details
03/10/20230330/1430***AURBA Rate Decision
03/10/20230610/0810EUECB's Lane speaks at Annual Economics Conference
03/10/20230630/0830***CHCPI
03/10/20230700/0300*TRTurkey CPI
03/10/20230835/1035EUECB's Lane participates in panel at Annual Economics Conference
03/10/20231145/0745CABOC Deputy Nicolas Vincent speech in Montreal
03/10/20231200/0800USAtlanta Fed's Raphael Bostic
03/10/20231255/0855**USRedbook Retail Sales Index
03/10/20231400/1000**USIBD/TIPP Optimism Index
03/10/20231400/1000**USJOLTS jobs opening level
03/10/20231400/1000**USJOLTS quits Rate
03/10/2023-***USDomestic-Made Vehicle Sales
03/10/20231530/1130*USUS Treasury Auction Result for Cash Management Bill
03/10/20231530/1130**USUS Treasury Auction Result for 52 Week Bill
04/10/20232200/0900*AUIHS Markit Final Australia Services PMI

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