MNI US OPEN - AHE Seen Re-Accelerating in US Payrolls Report

NEWS

MNI US PAYROLLS PREVIEW: AHE Seen Re-Accelerating, Troubling Fed Target

Consensus looks for payrolls growth of 170k in September. While industry-specific blips may occur, headline aggregates are not expected to be impacted by either the actors’ strike, or the walk-out of UAW workers currently impacting Ford, GM and Stellantis. While headline change in nonfarm payrolls should not be impacted by the cross-sector strikes, hours worked across the manufacturing sector could come under marginal pressure. Wages are seen re-accelerating to 0.3% M/M, a level that remains inconsistent with the Fed hitting their inflation target in the near-term.

US/CHINA (BBG): Biden-Xi Meeting More Likely as Teams Scout San Francisco Venue

The US and China are moving closer to setting up a meeting between presidents Joe Biden and Xi Jinping at next month’s Asia-Pacific Economic Cooperation summit, according to people familiar with the matter, though officials in Beijing haven’t yet signed off. Advance teams for both countries have been scouting meeting sites in San Francisco before a likely encounter, according to people familiar with the matter.

US/CHINA (BBG): Yellen to Focus on World Bank and China at Global Meetings

Treasury Secretary Janet Yellen is expected to push her reform agenda for the World Bank, meet with senior Chinese officials and may discuss new ways to limit Russia’s revenue from oil sales on a nine-day international trip set to start Sunday. Yellen will spend five days in Marrakech, Morocco, where the International Monetary Fund and World Bank are holding their annual meetings. On Oct. 20 she’s scheduled to deliver a speech on World Bank reforms, according to a senior Treasury official who spoke on Thursday with reporters, and will hold a press conference on Oct. 11.

US/EU (BBG): EU, US Seek Interim Steel Deal to Avoid Return of Trump Tariffs

The leaders of the European Union and the US are seeking to announce an interim deal at an Oct. 20 summit on steel and aluminum trade that would avert the re-imposition of Trump-era tariffs on billions of dollars of transatlantic commerce. Top White House and European Commission officials are negotiating a provisional political agreement that would cover the two main planks of the so-called Global Steel and Aluminum Arrangement that the EU and US have been negotiating since 2021: tackling non-market excess capacity and carbon emissions, according to people familiar with the talks.

US (BBG): Trump Endorses Ohio’s Jim Jordan for House Speaker Over Scalise

Donald Trump endorsed Representative Jim Jordan as the next speaker of the US House of Representatives, giving the nine-term congressman from Ohio the former president’s coveted stamp of approval going into next week’s leadership elections. “Congressman Jim Jordan has been a STAR long before making his very successful journey to Washington, D.C., representing Ohio’s 4th Congressional District,” Trump said on his social media platform Thursday night.

ECB (MNI): Inflation Risks Mean ECB May Hike Again - Schnabel

The ECB may need to hike rates again, Executive Board member Isabel Schnabel said in an interview published Friday, citing rising oil prices as evidence that inflation can still increase despite recent “encouraging” news. Schnabel, who spoke to the paper on September 29, before the recent reversal in crude prices, said policymakers cannot afford to be “complacent,” or “declare victory over inflation prematurely” she said, making it impossible to say whether interest rates have reached a peak or for how long they will need to be kept at restrictive levels.

EUROPEAN COUNCIL (MNI): Leaders Meet to Discuss 5-Yr Strategic Plan

Following the meeting of the European Political Community in Granada, Spain on 5 Oct, European Union leaders hold discussions there today on the Union's five-year agenda. The Spanish presidency of the Council of the European Union has sought to present the idea of “open strategic autonomy” as a major theme. This 'strategic autonomy' has been raised in the past by France with regard to Europe's defence in the face of a US potentially less inclined to financially prop up NATO, but by Spain is referring largely to ensuring broad trade and investment links while reducing EU vulnerabilities.

UK (MNI): Labour Secure Strong By-Election Win; Could Signal Easier Path to No.10

The main opposition centre-left Labour party secured a sizeable win in the House of Commons by-election held on 5 October in the Scottish constituency of Rutherglen and Hamilton West. Labour secured the seat, previously held by the pro-independence Scottish National Party (SNP), with 58.6% of the vote compared to 27.6% for the second-placed SNP. This equated to a significant swing of 24.1% in Labour's favour.

BOJ (MNI): BOJ to Scrap Yield Curve Control in April - Momma

The Bank of Japan is likely to scrap its yield curve control and negative interest rate policies at its April meeting, perhaps in conjunction with a government declaration of victory over deflation, a former BOJ chief economist told MNI. The BOJ will have been able to form a view on the outlook for wage hikes by March, and would be able to explain its strategy for achieving its 2% inflation target over the medium term in its April Outlook Report, which will include projections until fiscal 2026, Kazuo Momma said.

RUSSIA (BBG): Russia Lifts Diesel-Export Ban That Roiled Global Markets

Russia allowed a return to seaborne exports of diesel just weeks after imposing a ban that roiled global markets, taking other steps instead to keep sufficient fuel supplies at home. Shipments can resume provided that the fuel is delivered to the nation’s ports by pipeline, according to a statement on the government’s Telegram account. Such flows to Russia’s western ports account for the bulk of exported volumes.

INDONESIA (BBG): Rupiah Intervention Shrinks Indonesia’s Reserves to 10-Month Low

Indonesia’s foreign reserves shrank by more than $2 billion as the central bank intervened to defend the weakening rupiah. The reserves fell to $134.9 billion in September, from $137.1 billion in August, as Bank Indonesia stepped into the market to stabilize the currency and the government repaid external debt, the monetary authority said on Friday. That’s the lowest level since November.

COMMODITIES (BBG): Unions Plan to Resume Industrial Action at Chevron LNG Sites

Offshore Alliance members at Chevron have voted to recommence industrial action, according to an emailed statement. European gas prices jump 5.1% on the news of the Australia strike. Offshore Alliance members on day shift met Thursday at 7 p.m. WA time and those on night shift met Friday at 3:30 p.m. and both meetings voted to recommence protected industrial action.

DATA

GERMANY AUG FACTORY ORDERS +3.9% M/M (MNI)

SWISS SEP UNEMPLOYMENT RATE +2.1% (MNI)

CHINA DATA (MNI): Domestic Holiday Revenue & Trip Numbers Released

MNI (London) China's CCTV publishes 7-day holiday domestic tourism revenue growth of +132.6% Y/Y, with domestic trips over the holiday period +78.9%. A quick reminder that China was under ZCS at this time last year, so the strong Y/Y growth isn't a shick. We await the longer run comparables (i.e. vs. pre-COVID times) for more meaningful measurements/comparison.

JAPAN DATA (MNI): Japan Aug Real Wages Fall 2.5% vs. July -2.7%

The y/y fall of inflation-adjusted real wages, a barometer of household purchasing power, narrowed to 2.5% in August from a 2.7% fall in July, as inflation slowed, data released by the Ministry of Health, Labour and Welfare showed on Friday. Real wages stayed in negative territory for the 17th straight month in August, illustrating that household income has failed to keep pace with rising prices, particularly impeding low-income household and elder spending.

JAPAN DATA (MNI): Solid Consumption Index Backs BOJ Spending View

The Bank of Japan's Consumption Activity Index posted its first m/m rise in two months, rising 0.7% in August compared to July's 0.0% read, supporting the bank's view that private consumption has increased at a moderate pace despite price rises, data released by the BOJ showed on Friday. Solid spending on nondurable goods drove the gain, however, spending on services edged lower. The BOJ's Consumption Activity Index is designed to forecast revised private consumption, not act as a preliminary estimate.

JAPAN AUG HOUSEHOLD SPENDING -2.5% Y/Y; JULY -5.0% (MNI)
JAPAN AUG HOUSEHOLD SPENDING +3.9% M/M; JULY -2.7% (MNI)

FOREX: Greenback Stabilises Ahead of Payrolls

• The greenback has stabilised close to yesterday's lows, with the USD Index within range of intraday support at 106.3214 - a break below which opens Monday's 106.0444 for direction. Macro data and headline flow has been few and far between early Friday, leaving markets to continue to absorb the run higher and steepening of the US curve across the week.
• JPY is the poorest performer in G10, reversing the bulk of the Thursday move lower in USD/JPY. This keeps prices at around the midpoint of the Wednesday pullback, but a rally would again test the Y150.00 level at which markets remain cautious about potential intervention from the Japanese authorities.
• GBP/USD is firmer for a third session, printing a third session of higher highs to recover above the $1.2200 handle. The bounce is considered corrective for now, with the broader trend condition remaining negative for now. Technical focus remains on the likely formation of a death cross in DMA space, with the 50-dma on course to break below the 200-dma in the coming week or so, which would mark the first formation of the pattern since late 2021.
• Focus Friday rests on the September NFP release, with markets expecting the US to have added around 170k jobs across the month, however the market whisper number and the primary dealer survey are more optimistic, looking for 190k and 180k respectively. Beyond the headline, markets are looking to gauge any rebalancing in the labour market - particularly via wages, which are expected to re-accelerate to 0.3% this month.

EGBS: Off Cheap, BTP/Bund Spread Eyes Widest Close Since Jan

Bunds have ticked away from session cheaps in recent trade, last -5, sticking comfortably within yesterday’s range thus far.

• German cash benchmarks are 0.5bp richer to 2bp cheaper, with light twist steepening seen.
• EGB spreads to Bunds are generally little changed to incrementally wider, with the BTP widening taking the spread to Bunds to the ~202bp area, on track for the widest close since early January.
• Pre-NFP European news flow has generally been centred on firmer than expected German factory orders data (which was boosted by a volatile component) and a RTRS source report suggesting that “Germany's government expects the economy to shrink by 0.4% this year in its draft autumn projections.” Such a move in the GDP projection would be in line with European Commission forecasts.
• ECB speak from Schnabel once again failed to firmly close the door on the potential for a further move higher in rates given upside risks to inflation. Meanwhile, Herodotou echoed his recent remarks.
• A quick reminder that the books of the latest BTP Valore issuance close at lunchtime. Order books have topped EUR16.5bn, The June issue saw E18.2bn total issuance (E17.2bn across the first four days and E1.12bn on day 5).

GILTS: A Little Softer on the Day, Global Moves Eyed

Gilts have been happy to look to the weakness in core global FI peers given the lack of meaningful domestic markets drivers.

• That leaves futures -15 or so, comfortably within the confines of yesterday’s range.
• Cash gilts are 1.5-3.5bp cheaper across the curve.
• A resounding victory in a Scottish by-election has tilted betting market odds re: the next general election even more in favour of a Labour victory but hasn’t been a meaningful market mover.
• Elsewhere, the Halifax house price index flagged continued pressure for the domestic housing market. Still, the details of the release focused on areas of well-documented risk/worry.
• SONIA futures are flat to -4.5, while BoE-dated OIS is little changed to 3bp firmer.
• A reminder that the local docket is now essentially empty ahead of the weekend, with more focus set to fall on offshore matters, namely the spill over surrounding the U.S. NFP report.

EQUITIES: Short-Term Gains in Eurostoxx 50 Futures Considered Technically Corrective

Eurostoxx 50 futures trend conditions remain bearish and short-term gains appear to be corrective. The contract has traded below 4128.00, the Sep 27 low. This confirms a resumption of the downtrend that started late July and signals scope for a move towards 4055.40, a Fibonacci retracement point. Initial firm resistance is at 4207.30, the 20-day EMA. A break of this average would signal a possible short-term base. A bear cycle in S&P E-minis remains in play. The contract traded lower Wednesday, confirming a resumption of the bear leg once again. This maintains the price sequence of lower lows and lower highs and signals scope for weakness towards 4194.75, the May 24 low. Pivot resistance is 4441.61, the 50-day EMA. Ahead of the 50-day average is resistance at 4381.68, the 20-day EMA.

• Japan's NIKKEI closed lower by 80.69 pts or -0.26% at 30994.67 and the TOPIX ended 0.32 pts higher or +0.01% at 2264.08.
• Across Europe, Germany's DAX trades higher by 77.34 pts or +0.51% at 15148, FTSE 100 higher by 16.4 pts or +0.22% at 7467.92, CAC 40 up 24.19 pts or +0.35% at 7022.44 and Euro Stoxx 50 up 21.23 pts or +0.52% at 4121.04.
• Dow Jones mini up 27 pts or +0.08% at 33335, S&P 500 mini up 2.25 pts or +0.05% at 4293.5, NASDAQ mini up 8.75 pts or +0.06% at 14872.

COMMODITIES: Recent WTI Price Action Signals Scope for Retracement to $80 Handle

WTI futures traded lower again yesterday. This week’s bearish price action has resulted in a break of support at $88.19, the Sep 26 low. The contract has also cleared support at the 50-day EMA, at $84.46. This signals scope for a deeper retracement towards the $80.00 handle and $79.57, a Fibonacci retracement point. Initial firm resistance is at $87.71, the 20-day EMA. A break would signal a possible reversal. A bearish theme in Gold remains intact and the metal is trading just above this week’s low. The recent sell-off resulted in a break of support at $1901.1 and this was followed by a breach of $1884.9, the Aug 21 low. This confirmed a resumption of the downtrend that started early May. The focus is on $1804.9, the Feb 28 low and a key support. On the upside, firm resistance is at $1878.2, the 20-day EMA.

• WTI Crude up $0.32 or +0.39% at $82.7
• Natural Gas up $0.05 or +1.48% at $3.217
• Gold spot up $0.88 or +0.05% at $1821.11
• Copper up $3.85 or +1.08% at $359.25
• Silver up $0.02 or +0.07% at $20.9902
• Platinum down $4.56 or -0.53% at $859.68