MNI US OPEN - 3rd US Speaker Ballot Expected Today as Interim Plan Fails

NEWS

US (MNI): Conservative Backlash Sinks McHenry Plan, 3rd Speaker Ballot Expected Today

A bellicose response yesterday from conservative House Republicans appears to have torpedoed a plan to temporarily empower Speaker Pro Tempore Patrick McHenry (R-NC) to move legislation. The plan, which was floated by the moderate bloc of Republicans opposed to the speaker bid of Judiciary Chair Jim Jordan's (R-OH), would have given McHenry short-term powers to bring to the floor key legislation on government funding, Ukraine, Israel, and the US-Mexico border and allowed House Republicans additional time to elect a speaker.

US (BBG): Biden Casts Russia, Hamas as Parallel Threats to Democracy

President Joe Biden directly appealed to the American people to support funding for Israel and Ukraine’s war efforts, warning that Hamas and Russian President Vladimir Putin pose parallel threats to US democracy. The roughly 15 minute Oval Office address precedes a formal White House request that Congress provide approximately $100 billion in resources for Israel, Ukraine, Taiwan and the US southern border. Biden argued that supporting Ukraine and Israel in their fights against Russia and militant groups, respectively is “vital for America’s national security.”

US (BBG): Biden to Meet With Europe’s Michel, Von Der Leyen at 12PM ET

US President Joe Biden will meet with European Council President Charles Michel and European Commission President Ursula von der Leyen at 12pm ET, according to a statement by the White House. Meeting at the White House is for the second US-EU Summit since Biden took office.

UK (MNI): By-Elections Support Trending Support for Labour

Two by-election victories for the Labour Party have signalled a continued shift in support from the ruling Conservative Party to opposition Labour Party ahead of the UK general election. Both special elections, in Tamworth and Mid Bedfordshire, saw a swing of over 20% from the Conservatives to Labour, with the 23.9% swing in Tamworth cited as the second-highest in history. Unlike the by-elections in July when Conservatives defended the seat of former Prime Minister Boris Johnson, Conservatives have few positives to offset the losses, opting to downplay the results as driven by poor turnout and general protestation of government.

BOE (BBG): BOE Governor Signals UK’s Inflation Fight Has Further to Run

Bank of England Governor Andrew Bailey hinted policy makers can’t let up yet in their fight against inflation even as signs amassed that the UK economy is weakening. Wages are growing too quickly to be compatible with the central bank’s 2% inflation target, and declining pressure on food prices has “got quite a way to go yet,” Bailey said in an interview with the Belfast Telegraph published Friday.

ECB (BBG): ECB’s Peak Rates to Endure Despite Economic Perils, Survey Shows

The European Central Bank will next week hammer home the message that borrowing costs are set to stay high for an extended period — despite risks to economic growth swirling, according to a Bloomberg poll of analysts. Respondents don’t see any further interest-rate hikes and predict the Governing Council will confirm by January that a peak has been reached. They expect the first cut in September, following earlier moves to shrink the balance sheet more rapidly.

FRANCE (BBG): France to Enlarge Uranium Plant to Cut Reliance on Russian Fuel

Orano SA will spend €1.7 billion ($1.8 billion) to expand a uranium-enrichment plant in southern France as countries in the West seek to reduce their reliance on Russian nuclear fuel. The investment will boost production at the Georges Besse 2 facility by more than 30%, Orano said in a statement. The site will eventually process enough uranium to generate nuclear power for the equivalent of 120 million households a year, it said.

SWITZERLAND (BBG): Swiss Right-Wing Party Set to Cement Top Position in Election

Switzerland’s anti-immigrant People’s Party is set to consolidate its position as the nation’s strongest political force in an election on Sunday, the most recent example of right-wing gains across central Europe. The SVP — as the party is known by its German acronym — is set to win more than 28% of the vote, according to the most recent poll, its third-strongest result on record. That would put it almost 10 percentage points ahead of the Social Democrats and match the trend across the region, which has seen the far-right AfD grow in Germany and Giorgia Meloni take power in Italy.

CHINA (MNI): China’s Oct Loan Prime Rate Unchanged

MNI (Beijing) China's Loan Prime Rate remained unchanged on Friday, according to a People's Bank of China statement, in line with market expectation following the PBOC's decision to keep a key policy rate steady on October 16. The one-year LPR, based on the PBOC’s Medium-term Lending Facility rate and quotes submitted by 18 banks, was left at 3.45% and the five-year plus maturity was held at 4.2%.

CHINA (MNI): PBOC Seen Providing Liquidity for Bond Sales

MNI (Beijing) The People’s Bank of China will increase liquidity injections to support bond sales by local governments as they seek to swap off-balance sheet debt and is likely to further reduce reserve requirements this year, economists told MNI, after a benchmark rate was left unchanged.

CHINA (BBG): China Tightens Export Controls on Battery-Making Graphite

China strengthened export controls on some categories of graphite, a key material in electric vehicle batteries, in a move that would “safeguard national security and interests.” Some types of graphite deemed highly sensitive will be subject to so-called “dual-use item” export controls from Dec. 1, the Ministry of Commerce said in a statement on Friday. Dual-use refers to applications that include the military.

CHINA (MNI): New Sectors & Green Financing to Drive China Steel Future

MNI (Beijing) Steel production in China’s northeast will stabilise despite the recent dip in prices as future demand from advanced manufacturing and green technology – boosted by green bonds and loans – replaces consumption from property and construction, experts and policymakers told MNI. The northeast – which includes Liaoning, Jilin and Heilongjiang – is China’s third largest steelmaker, producing 58 million tonnes between January and August this year.

BOJ (BBG): BOJ’s Ueda Says Need for Risk Management of Rates is Increasing

Bank of Japan Governor Kazuo Ueda urged Japanese credit unions to undertake proper management of interest rate risks, citing the banking crisis that shook the US financial system earlier this year as well as high uncertainties related to the domestic economy. “The importance of risk management for interest rates is rising even more given extremely high uncertainties over the economy and inflation in our country,” Ueda said in a speech at a national credit union conference in Tokyo Friday. “I want you to continue with appropriate risk management.”

BOJ (MNI): Banks Must Be Vigilant Against Higher Rates - BOJ

Japanese commercial banks must be vigilant against tail risks from a prolonged period of higher rates from global central banks that could trigger a slowdown in the global economy, the Bank of Japan’s Financial System Report said on Friday, with the bank also noting similiar concerns over uncertainties in the financial markets. "Banks need to be prepared to appropriate manage a variety of risks associated with interest rate fluctuations. Banks are more resilient against the stress of inverted foreign yield curves,” the BOJ noted in

BOJ (MNI): BOJ to Offer 5-Year Liquidity Operation Tuesday

The Bank of Japan said on Friday it will offer a five-year fund-providing operation under pooled collateral on Tuesday and the duration of loans will start on Wednesday and end Oct. 25, 2028. The operation, the first since Oct. 4, is aimed at encouraging commercial banks to buy Japanese government bonds. The 10-year JGB bonds traded at 0.845% on Friday, up from Thursday’s close of 0.840% for the highest level since July 2013.

NEW ZEALAND (Fitch Ratings): Surplus Target Implies More Fiscal Consolidation

New Zealand’s fiscal space has narrowed following significantly higher debt and slippage of fiscal consolidation targets in recent years amid wider external deficits and weaker growth, says Fitch Ratings. Fitch expects the next government to remain committed to consolidation, but we believe achieving the stated target of fiscal surplus in the fiscal year ending June 2027 (FY27) could be challenging.

DATA

UK DATA (MNI): UK Retail Spending Slows as Cost of Living Bites

• UK SEP RETAIL SALES -0.9% M/M, -1% Y/Y
• UK SEP RETAIL SALES EX-FUEL -1% M/M, -1.2% Y/Y

UK retail sales fell sharply in September, declining by 0.9% m/m after a rise of 0.4% in August. The data excluding the sale of petrol fe;; 1.2% m/m, both releases exceeding analysts expectations of a decline around 0.5%. According to the Office for National Statistics, the latest data, combined with the outcomes seen in both July and August, means retail sales as a sector (4.9% of total GDP) will weigh on Q3 GDP to the tune of -0.04 percentage points.

UK DATA (MNI): Further UK Consumer Sentiment Dips Likely -GfK

• UK OCT GFK CONSUMER CONFIDENCE INDEX -30

UK consumer confidence slumped in October, falling to levels seen in the early summer as the cost-of-living crisis weighed on household finances, and further declines in sentiment are likely, the head of a leading survey told MNI. "After a summer of steady and perhaps surprising gains in sentiment, the index reversed course abruptly in October, as the worry of simply not having enough money to make ends meet is still exerting acute pressure for many consumers," said Joe Staton, Client Strategy Director, GfK

UK SEP PSNCR GBP-11.81 BN (MNI)
UK SEP CGNCR GBP15.21 BN (MNI)
UK SEP PSNB GBP+13.53 BN (MNI)
UK SEP PSNB-X GBP+14.35 BN (MNI)

GERMANY SEP PRODUCER PRICES -14.7% Y/Y (MNI)

SWEDEN DATA (MNI): Unemployment Unexpectedly Rises in September

• SWEDEN SEP UNEMPLOYMENT 7.7%

Consensus had predicted that the rise in the unemployment rate in August was largely temporary, and would partially reverse this month. Today's data shows that the loosening of the Swedish labour market may be a more persistent trend in response to a weakening economic outlook. The Riksbank's expectation for the SA unemployment rate was 7.28% in Q3 and 7.56% in Q4.

JAPAN DATA (MNI): Japan Sept Core CPI Rises 2.8% Vs. Aug 3.1%

• JAPAN SEPT CORE CPI +2.8% Y/Y; AUG +3.1%
• JAPAN SEPT CORE-CORE CPI +4.2% Y/Y; AUG +4.3%

The y/y rise of Japan's annual core consumer price inflation rate slowed to 2.8% in September from August's 3.1% but stayed above the Bank of Japan's 2% target for the 18th straight month, data released by the Ministry of Internal Affairs and Communications showed on Friday. September’s read is the first time in 13 months core CPI has fallen below 3%. The underlying inflation rate measured by the core-core CPI (excluding fresh food and energy) rose 4.2% y/y in September, slowing from August's 4.3%.

RATINGS: Friday's Sovereign Rating Slate

Potential sovereign credit rating reviews of note scheduled for after hours on Friday include:

• Fitch on Slovenia (current rating: A; Outlook Stable)
• Moody’s on France (current rating: Aa2; Outlook Stable), Ireland (current rating: Aa3; Outlook Stable) & the United Kingdom (current rating: Aa3; Outlook Negative)
• S&P on Greece (current rating: BB+; Outlook Positive), Italy (current rating: BBB; Outlook Stable), the Netherlands (current rating: AAA; Outlook Stable) & the United Kingdom (current rating: AA; Outlook Stable)

FOREX: USD/JPY Falters Again on Approach to Y150

• UK retail sales data came in soft relative to expectations, with headline Y/Y at -1.0% vs. Exp. -0.2%, helping GBP ease further off overnight highs and retain a bearish theme in the short-term. Thursday's lows provide initial support at 1.2090, and slippage through here would open the lowest levels since early October and the bear trigger of 1.2037.
• Elsewhere, USD/JPY made further progress toward Y150, printing a high at Y149.99 before aggressively retreating to touch daily lows of 149.69. The pullback proved short-lived as spot swiftly recovered to trade back above Y149.95 after a few minutes.
• The price action not driven by headline flow, more likely standing offers at the handle as markets remain cautious about potential Japanese intervention in the pair. The accompanying volume surge in JPY futures on the move (around 7,500 contracts changed hands inside 60 seconds, cash equivalent of approx $630mln) was considerably smaller relative to the move on Oct 3rd, which saw over twice the volume over the same period of time.
• CAD and USD trade toward the top-end of the G10 table early Friday, with AUD and NZD among the weakest. This reinforces the low growth, high inflation theme pervading across markets, as steepening global curves and the higher oil prices reinforce expectations of economic weakness ahead.
• Focus during US hours turns to Canadian retail sales and appearances from Fed's Harker and Mester - who make the last appearances for the FOMC before the Fed's media blackout period.

EGBS: Off Cheaps, BTPs Tighten vs. Bunds, Looming Ratings Updates Eyed

Bund futures have faded from best levels, although the contract remains in a tight range a little above yesterday’s low, last +15.

• A light bid in equities has helped capped the early morning rally.
• German cash benchmarks are 4bp lower to 1bp higher, twist steepening as the space assesses the global impulses flagged elsewhere.
• EGB spreads are generally little changed to a touch tighter vs. Bunds. BTP spreads briefly moved back below 200bp after the spread got close to 210bp yesterday.
• While there is no data of note and the ECB is in its pre-meeting quiet period, there is plenty of sovereign rating interest evident.
• There are some worries evident re: the Italian fiscal situation (which could trigger an outlook switch to negative at S&P later), but this seems to have pared back over the last 24 hours. Some will suggest that early comments from the ratings agency to the Italian government may have filtered out to some quarters.
• Elsewhere, Greece may receive its first IG status recognition at one of the ‘big 3’ ratings agencies (S&P this evening). Such a development won’t be a mover re: GGB inclusion in the major bond indices, but would no doubt be a welcome development for GGBs. Such a move would also trigger inflows from funds that require IG status at one of the big three agencies.

GILTS: Futures Reverse Early Gains, Curve Twist Steepens

Gilt futures continue to fade from best levels of the day to last trade -10.

• Bears remain focused on yesterday’s low, which protects the ‘22/LDI meltdown low from a technical standpoint.
• The early bid stemming from the latest domestic public finance data and softer than expected retail sales prints has faded, leaving cash yields 3bp lower to 4bp higher as the curve twist steepens.
• 2s10s have printed at the least inverted level seen since June.
• There was also a global feel to the early bid in futures, given the rally elsewhere (pre-weekend Israel-Hamas hedging, a weaker start for equities and Asia-Pac liquidity provisions highlighted), while participants have also had to assess the degree of justified spill over from Fed Chair Powell’s Thursday comments.
• Also note that BoE Governor Bailey’s early morning comments failed to meaningfully move the needle, although the fact that he noted that September’s CPI data failed to provide any meaningful surprises may have facilitated some modest dovish repricing in the front end.
• SONIA futures last show flat to +6.0 through the blues, with the reds outperforming.
• BoE-dated OIS contracts are 1.5-4.5bp softer on the day as that strip flattens.

EQUITIES: Move Lower in Eurostoxx 50 Futures This Week Reinforces Bearish Conditions

A bearish theme in Eurostoxx 50 futures remains in play and this week’s move lower reinforces bearish conditions. The contract has traded through support at 4082.00, the Oct 4 low and a bear trigger. This confirms a resumption of the downtrend and maintains the bearish price sequence of lower lows and lower highs. The focus is on 4055.40, a Fibonacci retracement. Initial resistance is at 4178.80, the 20-day EMA.S&P e-minis maintain a softer tone and the contract continues to trade below resistance at the 50-day EMA, at 4482.75. A clear breach of this average is required to strengthen bullish conditions and this would open 4486.12, trendline resistance drawn from the Jul 27 high. On the downside, a deeper pullback would open 4235.50, the Oct 4 low and bear trigger. A break of this support would confirm a resumption of the downtrend.

• Japan's NIKKEI closed lower by 171.26 pts or -0.54% at 31259.36 and the TOPIX ended 8.51 pts lower or -0.38% at 2255.65.
• Elsewhere, in China the SHANGHAI closed lower by 22.334 pts or -0.74% at 2983.059 and the HANG SENG ended 123.76 pts lower or -0.72% at 17172.13.
• Across Europe, Germany's DAX trades lower by 116.03 pts or -0.77% at 14929.82, FTSE 100 lower by 14.95 pts or -0.2% at 7485.38, CAC 40 down 45.35 pts or -0.66% at 6876.84 and Euro Stoxx 50 down 25.7 pts or -0.63% at 4065.09.
• Dow Jones mini down 19 pts or -0.06% at 33530, S&P 500 mini down 3 pts or -0.07% at 4300, NASDAQ mini down 22.5 pts or -0.15% at 14869.75.

COMMODITIES: WTI Futures Remain Firm After Trading Higher Thursday

WTI futures traded higher yesterday and the contract remains firm. The latest recovery has highlighted a key support at $80.20, the Oct 6 low. The medium-term trend condition remains bullish and an extension higher would expose the bull trigger at $92.48, the Sep 28 high. Clearance of this hurdle would confirm a resumption of the uptrend. For bears, a move through $80.20, would instead highlight a short-term top. Gold has traded higher this week, extending the reversal from $1810.5, the Oct 6 low. The yellow metal has breached key resistance at $1953.0, the Sep 1 high. The clear break of this level further strengthens a bullish theme and opens $1987.5, the Jul 20 high. Initial firm pivot support lies at $1904.7, the 50-day EMA. Clearance of this level is required to signal a short-term top and a potential reversal.

• WTI Crude up $1.33 or +1.49% at $90.7
• Natural Gas up $0 or +0.1% at $2.961
• Gold spot up $9.16 or +0.46% at $1983.62
• Copper down $2.7 or -0.75% at $357.45
• Silver up $0.19 or +0.81% at $23.2284
• Platinum up $6.37 or +0.71% at $901.57