MNI US OPEN - BOE's Bailey Sees More Tight MonPol Decisions

NEWS

US (MNI): Scalise Withdraws Speaker Bid, House Braces For Protracted Paralysis

House Majority Leader Steve Scalise (R-LA) yesterday withdrew his candidacy for speaker of the House of Representatives after a short campaign which failed to garner sufficient support. House Judiciary Committee Chair Jim Jordan (R-OH) now becomes the presumptive frontrunner but his historical position as a leader of the anti-establishment conservative wing of the GOP increases the prospect of a extended period of paralysis in the House and the likelihood of a government shutdown on November 17.

US/NORTH KOREA (BBG): North Korea Threatens US for Sending Aircraft Carrier to South

North Korea warned it’s ready to use its most powerful weapons in a strike after the US deployed an aircraft carrier group to South Korea, signaling a provocation while the Biden administration is occupied with the Middle East conflict. “The US should realize that its huge strategic assets have entered the extremely dangerous waters,” the state’s official Korean Central News Agency said in a commentary Friday, adding the country was ready to use nuclear weapons if it felt an attack was imminent.

MNI US QUARTERLY EARNINGS SCHEDULE - Big Banks Take Early Focus

Quarterly earnings season begins this week, with notable reports including JPMorgan Chase, Wells Fargo, UnitedHealth, Citigroup and BlackRock. Markets continue to look to gauge any further signs of an economic slowdown, or evidence of the effectiveness of the Fed’s tightening cycle so far. Commercial real estate dynamics will also take early focus, with a number of Fed speakers touching on the turbulent market and the potential impacts for monetary policy over the past quarter.

ECB (MNI): Knot Pushes Back Against Market Pricing of Rate Cuts

ECB Governing Council member Klaas Knot told ANP that officials are likely to keep interest rates at their current high level for at least a year, sticking to his typically hawkish stance. Furthermore, Knot did not rule out a further rate hike if conditions mean that such a move is required to curb inflation. He went on to stress that "the market is pricing in another rate cut for the middle of next year. But I think that is still too early."

ECB (BBG): Visco Says No Signs Italy Spreads to Reach Level for ECB Action

Italy’s widening bond spread levels aren’t worrying and won’t require intervention from the European Central Bank, Governing Council member Ignazio Visco said. “There are no signs really,” the Italian central bank chief told Bloomberg TV. If central bank intervention were needed, “I think we can” do so, he said Friday in Marrakech. Italian spreads over Germany have been widening since the government presented a budget showing the deficit only falling within European Union limits in 2026 — a year later than previously planned.

EU (MNI): "Need Credible New EU Fiscal Rules", "Must Come By End-Year" - German Fin Min

Wires carrying comments from German Finance Minister Christian Lindner, speaking at the IMF/World Bank meeting in Marrakesh, Morocco. States that "We need credible European fiscal rules, [the] old rules were not precise or realistic enough." Adds that the "Deficit target must be significantly below3%.", and that Germany is "insisting that new rules must be decided by the end of the year."

EU/CHINA (BBG): EU’s Top Diplomat Says Trust With China ‘Eroded’ Over Ukraine

The European Union’s top diplomat said trust with China had “eroded” over Beijing’s stance on the war in Ukraine and warned that more trade imbalances with the world’s second-biggest economy would lead to expanded protectionism. Europeans feel that China “maybe has not been using its strong influence to persuade Russia to halt this aggression,” Josep Borrell said in a speech Friday to university students in Beijing.

UK (MNI): BOE Bailey Foresees More Tight Policy Decisions

Bank of England Governor Andrew Bailey, at an IIF event, said that following the 5-4 Monetary Policy Committee vote to leave policy unchanged at 5.25% forthcoming decisions would also be tight with uncertainty over how policy is being transmitted a key factor. The BOE head said that in the last few months there was evidence of "solidprogress" being made in tackling inflation but that there was "anawfullotstilltodo" and that the popularity of fixed rate mortgages in the UK had put uncertainty over policy transmission at the heart of the debate.

UK (MNI): Chancellor-Financial Pic Worse Now Than in Spring '23

Comments from Chancellor of the Exchequer Jeremy Hunt emerging as he speaks to broadcasters at the World Bank/IMF meetings in Marrakesh, Morocco. States that the "Financial picture now is worse than in the spring of 2023". Hunt says the22 November Autumn Statement will be "balanced with auction about the international situation".

RIKSBANK (MNI): USD390m and EUR0m of FX Sales in First Week

The Riksbank have announced that in the first week of its FX hedging programme (w/c 25th Sept), it sold USD390m and EUR0 (zero). Using our simple measure of how much the Riksbank would need to sell each day to finish its hedging programme in 4, 5, or 6 months, the USD figure falls between the 5-6 month point. EURSEK is currently down ~0.5% on the day and lies above the 200-day EMA at 11.5047. The move is a combination of the strong CPI print and the zero EUR sold by the Riksbank - implying more "ammunition" can be used in future weeks.

ISRAEL (BBG): UN Calls Israel Army’s Evacuation Order in Gaza ‘Impossible’

The United Nations said Israel called for the evacuation of 1.1 million people living in northern Gaza within the next 24 hours, describing the order as “impossible” and appealing for a reversal ahead of what increasingly looks like an imminent ground invasion. “The United Nations considers it impossible for such a movement to take place without devastating humanitarian consequences,” it said in a statement. “The United Nations strongly appeals for any such order, if confirmed, to be rescinded avoiding what could transform what is already a tragedy into a calamitous situation.”

ISRAEL/IRAN (BBG): Iran Says New Front Possible as Top Diplomat Meets Hezbollah

Tehran-backed militants could open a new front in Israel’s war against Hamas if the blockade of Gaza and attacks on civilians there continue, Iran’s Foreign Minister said, signaling a potential expansion of the conflict ahead of a meeting with Lebanon’s Hezbollah. “Of course in the case of the continuation of war crimes and the humanitarian blockade of Gaza and Palestine every possibility and decision by the other currents of the resistance is possible,” Hossein Amirabdollahian told reporters in Beirut when asked about the possibility of a second front.

FRANCE (BBG): French Lawmakers Seek to Extend Windfall Taxes on Oil and Power

French lawmakers are seeking to extend windfall taxes on the profits of oil refiners and utilities into next year. The National Assembly’s finance committee has proposed amendments to the 2024 budget bill, Jean-Rene Cazeneuve, a lawmaker in President Emmanuel Macron’s Renaissance party, said in posts on social media platform X. The extension of the levies would help fund relief measures for consumers hard-hit by surging gasoline, diesel and electricity costs.

CHINA (BBG): China Weighs New Stabilization Fund to Prop Up Stock Market

China is considering forming a state-backed stabilization fund to shore up confidence in its $9.5 trillion stock market, according to people familiar with the matter. After at least two rounds of consultation with industry participants over a period of months, financial regulators including the China Securities Regulatory Commission recently submitted a preliminary plan to the nation’s top leadership, said the people, who asked not be identified discussing a private matter.

CHINA (BBG): PBOC Sees Easing in External Pressure on Yuan Weakening

Yuan exchange rate has not deviated from fundamentals and external pressure on yuan weakening is easing, the central bank’s head of the monetary policy department Zou Lan says at a briefing. Yuan has remained stable and appreciated slightly against a basket of currencies. PBOC will firmly prevent excess movements in yuan exchange rate and crackdown on market disruptive practice.

CHINA (MNI): China Can Avoid Japan-Style Slump - Advisor

MNI (Beijing) China has sufficient monetary and fiscal firepower to avoid a 1990’s Japan-style decline and recession, which it can deploy to stabilise the property sector gradually without triggering a sharp house-price correction, a senior policy advisor told MNI.

JAPAN (MNI): Price Rises Hold Household 5-Yr Inflation At 5%

Japan's five-year household median inflation forecast stood unchanged at 5%, while the number of households expecting prices to rise rose to 80.7% from 79%, according to the Bank of Japan's quarterly consumer survey on Friday. The one-year household median inflation view stood at 10%, also unchanged from three months ago, but the number of households expecting prices to rise increased to 86.8% from 86.3% in June.

DATA

EUROZONE DATA (MNI): Industry Bounce in August Less Impressive Ex-Ireland

• EUROZONE AUG IP +0.6% M/M, -5.1% Y/Y

Eurozone industrial production in August saw its biggest rise in M/M seasonally adjusted terms since April (+0.6% vs -1.3% prior), with rises in durable consumer goods (+1.2% vs -1.3% Jul) and non-durables (+0.5%, same as Jul) outweighing declines in energy (-0.9% vs +1.2% Jul) and intermediate goods(-0.3% vs +0.2%). Capital goods production came in at 0.3% (-3.1% Jul). On an annual basis though, total industry slumped -5.1% Y/Y, with all categories in contraction (capital goods and durable goods each shrinking more than 7%).

FRANCE SEP HICP -0.6% M/M, +5.7% Y/Y (MNI)
FRANCE SEP CPI -0.5% M/M, +4.9% Y/Y (MNI)

SPAIN SEP HICP +0.6% M/M, +3.3% Y/Y (MNI)

SWEDEN DATA (MNI): September CPI Above Expectations

• SWEDEN SEP CPIF +4% Y/Y

Sweden September CPIF printed at an unrounded +3.95% Y/Y (vs +3.7% Y/Y cons;+4.7% prior) and +0.39% M/M (vs +0.2% cons; -0.1% prior). CPIF ex-energy was +6.92% Y/Y (vs +6.7% cons; +7.2% prior) and +0.51% M/M (vs +0.3% cons; -0.3% prior).The stronger than consensus print was also above the Riksbank forecast, who saw CPIF at +3.75% Y/Y and CPIF ex-energy at +6.57% Y/Y. Overall, the strong print seems to be broad based with continued pressure in the services sector, which will concern the Riksbank.

CHINA DATA (MNI): China CPI Flat in September, Lower Than Expected

• CHINA SEP CPI +0.0% Y/Y VS MEDIAN +0.2%; AUG +0.1% Y/Y
• CHINA SEP CPI +0.2% M/M VS +0.3% M/M AUG
• CHINA SEP PPI -2.5% Y/Y VS MEDIAN -2.4% Y/Y; AUG -3.0% Y/Y
• CHINA SEP PPI +0.4% M/M VS +0.2% M/M AUG

MNI (Beijing) China's Consumer Price Index was flat in September, while the Producer Price Index measuring factory-gate inflation saw annual declines slow for a third month, data from the National Bureau of Statistics showed Friday. CPI was 0.0% in September, compared with a 0.2% market consensus and down from August's 0.1% print. Food costs fell by 3.2% in September, further declining from August's 1.7% fall, due to the higher comparison base for the same period last year.

CHINA DATA (MNI): China Trade Shows Positive Signs in Sep - Customs

• CHINA SEP TRADE SURPLUS +$77.71 BLN; MEDIAN +$70.6 BLN
• CHINA SEP EXPORTS -6.2% Y/Y VS MEDIAN -7.5% Y/Y
• CHINA SEP IMPORTS -6.2% Y/Y VS MEDIAN -6.0% Y/Y

MNI (Beijing) China foreign trade jumped to its highest level this year in September, expanding 5.5% m/m in yuan term , the second consecutive monthly gain, Lv Daliang, spokesman at General Administration of Customs, told reporters on Friday in a brief. Meanwhile, sentiment among importers and exporters improved as the proportion of enterprises with increased or stable m/m orders increased by 0.8% and 1.7% respectively.

CHINA DATA (MNI): China Sep Aggregate Finance Jumps, M2 Slows Further

• CHINA END-SEP M2 +10.3% Y/Y VS MEDIAN +10.6%; END-AUG +10.6%
• CHINA SEP TSF CNY4.12 TRLN VS MEDIAN CNY3.75 TRLN
• CHINA SEP NEW LOANS CNY2.31 TRLN VS MEDIAN CNY2.5 TRLN

MNI (Beijing) China’s aggregate finance jumped to a three-month high in September as new loans and government bonds sales rose, with M2 continuing to decelerate, the People's Bank of China data showed Friday. New loans grew by CNY2.31 trillion from CNY1.36 trillion, though underperforming the CNY2.5 trillion expectation. Total social financing soared by CNY4.12 trillion, compared with CNY3.12 trillion in August, beating the market consensus of CNY3.75 trillion. The outstanding TSF rose by 9% in September, flat from the August reading.

RATINGS: Friday’s Slate

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

• Moody’s on the European Union (current rating: Aaa; Outlook Stable)
• S&P on the Czech Republic (current rating: AA-; Outlook Stable)
• DBRS Morningstar on Malta (current rating: A (high), Stable Trend)

FOREX: Stubborn USD/JPY Sellers Keep Lid on USD Index

• Following the USD's corrective bounce into the Thursday close, the greenback is holding the bulk of gains, however EUR/USD and GBP/USD have drifted off lows. The USD/JPY rate has found persistent resistance layered just above Y149.80, with selling pressure preventing a broader break higher in the pair. The longer this holds, the more likely a further recovery in USD pairs ahead of the NY crossover.
• Elsewhere the SEK trades firmly, higher against all others in G10 as the Riksbank disclose the details of the first week of their FX hedging programme. The bank sold $390mln, but declined to sell any EUR across the period, helping pressure EUR/SEK and USD/SEK to pullback lows ahead of the NY crossover. EUR/SEK touched pullback lows of 11.5244 before stabilising. EUR/SEK support undercuts at 11.5172 ahead of the 200-dma of 11.4914.
• Chinese inflation data overnight came in below expected, at 0.0% Y/Y for CPI and -2.5% for PPI, a release that's been followed by further communications from the PBOC, who stressed that they expect the external pressure on the currency to ease going forward as the US-China yield differential normalizes.
• Focus ahead turns to the UMich sentiment survey, at which markets expect inflation expectations to stick at 3.2% over the 1-year, and 2.8% for the 5-10y horizon.

EGBS: Bunds Flatter, Spreads Generally Wider

Bund futures print a little shy of best levels of the day after the previously alluded to headline mix, Asia-Pac equity weakness & geopolitical worry allowed the space to firm early on.

• The contract last shows +35, with German cash benchmarks 2-4bp richer as the curve flattens.
• EGB spreads to Bunds are generally wider on the day, with the geopolitical jitters playing a large part there.
• Greek paper is the exception to that rule, narrowing by ~2bp vs. Bunds.
• Headline flow out of Italy has been seen. Firstly, outgoing BoI Governor Visco played down the likelihood of BTP spreads reaching levels that would trigger ECB action, while pointing to the need for fiscal prudence. Meanwhile, the country’s Finance Minister noted that he cannot rule anything out re: ratings agency action after discussions with those bodies, although he noted that he does not fear a ratings downgrade.
• ECB speak saw Governing Council member Kazaks reaffirm that he is happy with current interest rate settings, while he left the door open to further hikes, if required.

GILTS: Off Best Levels, Light Bull Steepening Seen

Gilt futures are shy of best levels of the day, last showing +15.

• Cash gilts are 1-3bp richer, bull steepening.
• The early bid followed a similar move in wider core global FI markets, with a negative lead from Asia-Pac equities, perceptions re: Israeli-Palestinian tensions and softer than expected Chinese inflation data supporting.
• Comments from BoE Governor Bailey and UK Chancellor Hunt have been inconsequential for markets.
• The former pointed to more work to do re: inflation, while noting progress has been made. He also noted that policy settings are restrictive, which is a requirement at present.
• Hunt played down the likelihood of near-term tax cuts once again, while pointing to higher interest costs which have resulted in a deterioration in the UK’s financial position. As a result, he stressed that the Autumn Budget will be balanced, with caution re: the international situation set to be a factor.
• SONIA futures last show flat to 5.5bp richer through the blues, with the strip flattening.
• BoE-dated OIS is little changed to 2bp softer across the liquid contracts, with that strip also flattening.

EQUITIES: Eurostoxx Futures Continue to Push Back Against Bearish Trend

Eurostoxx 50 futures continue to push back against the recent bearish trend condition. Friday’s rally and the follow through early this week is, for now, deemed corrective in nature. Signs of further strength and a bottoming of prices would follow a break back above the 50-day EMA - a key level on Thursday at 4257.70. A break of this average would signal a possible short-term base, opening levels last seen in mid-September. The E-Mini S&P printed a higher high for a fifth consecutive session on Thursday before fading into the close. The index has narrowed in on the cluster of resistance at the 50/100-dmas for the Dec contract. Overall, a bear cycle remains in play, however downside momentum has paused in favour of a corrective rally. Pivot resistance remains above at the 50-day EMA at 4431.80, with the medium-term outlook remaining bearish the longer price holds below this level.

• Japan's NIKKEI closed lower by 178.67 pts or -0.55% at 32315.99 and the TOPIX ended 33.74 pts lower or -1.44% at 2308.75.
• Elsewhere, in China the SHANGHAI closed lower by 19.802 pts or -0.64% at 3088.099 and the HANG SENG ended 424.76 pts lower or -2.33% at 17813.45.
• Across Europe, Germany's DAX trades lower by 55.18 pts or -0.36% at 15368.12, FTSE 100 lower by 5.73 pts or -0.08% at 7638.69, CAC 40 down 22.46 pts or -0.32% at 7082.11 and Euro Stoxx 50 down 14.97 pts or -0.36% at 4183.38.
• Dow Jones mini up 52 pts or +0.15% at 33848, S&P 500 mini up 3.75 pts or +0.09% at 4384.25, NASDAQ mini down 7 pts or -0.05% at 15306.75.

COMMODITIES: Bearish Theme in Gold Reverses Further

The stronger start to the week for WTI futures faded through the Wednesday close, although dips were put across the Thursday session. Recent bearish price action 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 $86.52, the 20-day EMA. A break would signal a possible reversal. The previously bearish theme in Gold reversed further Thursday, putting prices at the highest level since late September and printing five consecutive sessions of higher highs. The 50-day EMA sits above as key resistance at 1897.0, a break above would add to the evidence of a bullish reversal. To the downside, the focus is on $1804.9, the Feb 28 low and a key support.

• WTI Crude up $2.27 or +2.74% at $85.12
• Natural Gas down $0.05 or -1.53% at $3.289
• Gold spot up $15.44 or +0.83% at $1884.24
• Copper up $1.9 or +0.53% at $360.8
• Silver up $0.3 or +1.39% at $22.1311
• Platinum up $2.25 or +0.26% at $873.49