Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY
- BOJ KEEPS RATE AT 0.25%; RATE HIKE MODE INTACT
- TRUMP HITS BIDEN ON ‘GARBAGE’ REMARK AS HARRIS DISTANCES HERSELF
- BIDEN ENVOYS SET TO HEAD TO ISRAEL TO DISCUSS LEBANON TRUCE PLAN
- MICROSOFT SHARES DROP ON DISAPPOINTING AZURE GROWTH FORECAST
Figure 1: UK 2y yield surges to multi-month high following Labour budget
Source: MNI/Bloomberg
NEWS
BOJ (MNI): BOJ Keeps Rate At 0.25%; Rate Hike Mode Intact
The Bank of Japan board on Thursday left its policy interest rate at 0.25% as the outlook for the economy and prices, as well as financial markets, remained uncertain, and despite economic activity and prices continuing as expected. Heightened uncertainties over the domestic political situation after Sunday’s election and potentially volatile financial markets after the U.S. presidential election on Nov. 5 drove the decision, which was largely anticipated.
The Bank of Japan board maintained its prediction for the core-core inflation rate in fiscal 2025 and 2026 at 1.9% and 2.1%, unchanged from July’s forecasts, but revised up its outlook for this fiscal year 2.0% from July’s 1.9%. The BOJ board’s forecast for core CPI this fiscal year was unrevised at 2.5%, but the price view in fiscal 2025 was lowered to 1.9% from July’s 2.1%. The board left the FY2026 view at 1.9%.
BOJ (MNI): U.S. Risk Falling, Uncertainty Remains - BOJ’s Ueda
Bank of Japan Governor Kazuo Ueda on Thursday said the degree of risk surrounding the Japanese economy, such as that driven by the U.S., had fallen slightly, but uncertainty remained high. “The fog of downside risk to the U.S. economy is slightly clearing more than before,” he said, voicing concern fresh risks could emerge after the U.S. presidential election on Nov. 5.
US (BBG): Trump Hits Biden on ‘Garbage’ Remark as Harris Distances Herself
Vice President Kamala Harris said she “strongly” disagreed with comments made by President Joe Biden that have been seized on by Republicans as insulting to Donald Trump’s supporters, seeking to distance herself from a brewing controversy that threatens to undercut her momentum in the final week of campaigning. “First of all, he clarified his comments. But let me be clear, I strongly disagree with any criticism of people based on who they vote for,” Harris told reporters on Wednesday before leaving on a campaign swing through three battleground states.
US (BBG): Biden Envoys Set to Head to Israel to Discuss Lebanon Truce Plan
Israel is considering a US-led proposal to end the conflict in Lebanon and keep Hezbollah fighters away from the countries’ frontier. It is set to host White House mediators in what appears to be a push by Washington to make progress before the American presidential election on Tuesday. Six weeks after launching a campaign of sabotage, air barrages and ground incursions against Hezbollah, Israel says it has driven back and cut down the Iranian-backed faction, whose cross-border rocket and drone launches persist but at a reduced rate.
US/S.KOREA (BBG): US, South Korea Conduct Air Drills After North Korea ICBM Launch
The US and South Korea conducted joint air drills in a show of force after North Korea fired an intercontinental ballistic missile that flew longer than any previous one tested by Kim Jong Un’s regime amid tensions over its dispatch of troops to Russia. Hours after North Korea’s missile launch, South Korea’s defense ministry said it conducted joint air drills with the US that involved some 110 military planes, including American fighter jets such as the F-35B, and the MQ-9 military drone.
N.KOREA (WaPo): North Korea Launches Its Most Powerful Ballistic Missile Yet
North Korea on Thursday launched a new and more powerful ballistic missile, with leader Kim Jong Un signaling his regime wanted to show the United States and South Korea that it would resist the "dangerous tightening of their nuclear alliance." Japan's defense minister confirmed that North Korea had fired a new type of ballistic weapon, adding that it reached an altitude of 4,350 miles, significantly higher than previous launches and 17 times higher than the International Space Station.
ECB (BBG): ECB Inflation Goal in Sight, But Fight Not Over, Lagarde Says
Euro-area consumer-price growth is headed toward the European Central Bank’s 2% goal, but the fight hasn’t yet been won, according to President Christine Lagarde. “The objective is in sight, but I am not going to tell you that inflation is under control,” she said in an interview with Le Monde published Thursday. “We also know that inflation will rise in the coming months, simply because of base effects.” Sticking with the ECB’s standard line, Lagarde said that “the size and sequence of interest rate cuts will be determined by economic data in the coming weeks and months.”
MNI UK BUDGET REVIEW - OCTOBER 2024: More Inflationary Than Expected
We look at the main takeaways from the Budget and what they mean for inflation, monetary policy, the remit and from a political standpoint. Larger-than-expected minimum wage increases and employer NI contributions are likely to be inflationary in our view, making it more difficult for the BOE to deliver sequential cuts. We look at how much more the two policies combined could cost some businesses.
GLOBAL (MNI): Trade Fragmentation Could Cut Global GDP 9% - Lagarde
Increased fragmentation of world trade as a result of the U.S. elections could cut global GDP by 9% in an extreme scenario, European Central Bank President Christine Lagarde said in an interview with Le Monde published on Thursday. Lagarde said she did not want to give an opinion on the candidates in the election but noted that U.S. international trade policy will have an impact on economic activity in the rest of the world, and primarily on China.
JAPAN (BBG): Japan’s Tamaki Digs In Over Tax Demand to Support Ailing LDP
The leader of the small Japanese political party that could become a useful ally for a weakened government dug in his heels over a demand for income tax breaks in return for support for the ruling Liberal Democratic Party. Yuichiro Tamaki has been thrust into the spotlight as kingmaker after his Democratic Party for the People quadrupled its seat count in the lower house of parliament to 28 in Sunday’s national election.
CORPORATE (BBG): Microsoft Shares Drop on Disappointing Azure Growth Forecast
Microsoft Corp. shares tumbled more than 4% in late trading after the software maker gave disappointing second-quarter forecasts, telling investors that cloud revenue growth will slow, margins will shrink and expenses will rise. Sales from the closely watched Azure cloud-computing business will rise 31% to 32% in the current period, Microsoft executives said Wednesday on a conference call following its first-quarter earnings report.
CORPORATE (BBG): Meta Warns of Worsening AI Losses After Sales Narrowly Beat
Meta Platforms Inc. CEO Mark Zuckerberg will ramp up heavy investments in AI and other futuristic technologies, continuing a years-long tug-of-war between the company’s long-term bets and the core advertising business that provides the vast majority of Meta’s revenue. Zuckerberg warned investors Wednesday that Meta will continue to spend significantly on infrastructure and other projects like the metaverse and AI-powered glasses, efforts he believes are core to the company’s future.
DATA
FRANCE DATA (MNI): Flash HICP Y/Y In-Line, CPI Touch Above Consensus
- FRANCE OCT HICP +0.3% M/M, +1.5% Y/Y
- FRANCE OCT CPI +0.2% M/M, +1.2% Y/Y
- FRANCE SEP PPI -0.1% M/M, -7% Y/Y
France Flash HICP for October on an annual basis was in-line with expectations at 1.54 %Y/Y (vs 1.5% consensus, 1.44% prior), and 0.27% M/M (vs 0.2% consensus, -1.30% prior). Whilst the national CPI came above Y/Y consensus at 1.17% Y/Y (vs 1.1% consensus, 1.10% prior) though in-line on a monthly basis at 0.22% M/M (vs 0.2% consensus, -1.24% prior). Looking at the details for the French national CPI (non-HICP): Services CPI (which makes up 51.6% of the national CPI index) softened to 2.22% Y/Y (vs 2.41% in September), the lowest reading since February 2022.
GERMANY SEP RETAIL SALES +1.2% M/M (-0.6% F'CAST, +1.2% AUG) (MNI)
GERMANY SEP IMPORT PRICE INDEX -0.4% M/M; -1.3% Y/Y (MNI)
CHINA DATA (MNI): China October PMI Rises to 6-Month High
- CHINA OCT MANUFACTURING PMI 50.1 VS 49.8 IN SEP
China's Manufacturing Purchasing Managers Index rose by 0.3 points to 50.1 in October, rising above the 50 mark for the first time in six months, as additional pro-growth policies kicked in, data from the National Bureau of Statistics showed Thursday.
JAPAN DATA (MNI): Japan Sept Factory Output Rises 1.4% M/M
- JAPAN SEPT INDUSTRIAL OUTPUT +1.4% M/M; AUG -3.3%
Japan's industrial output rose 1.4% m/m in September for the first rise in two months following August's 3.3% drop, thanks to higher production of motor vehicles and electric machinery and electronics, data released by the Ministry of Economy, Trade and Industry showed on Thursday. Production of automobiles rose 7.1% m/m in September, the first rise in two months following August's 10.7% decline, while production of electric machinery, and information and communication electronics increased 2.2% from a 6.2% fall the prior month.
JAPAN SEPT RETAIL SALES +0.5% Y/Y; AUG +3.1% (MNI)
JAPAN SEPT RETAIL SALES -2.3% M/M; AUG +1.0% (MNI)
AUSTRALIA DATA (MNI): Aussie Retail Trade Growth Slows to 0.1% M/M
- AUSTRALIA SEP RETAIL SALES +0.1% M/M
Australian retail sales rose 0.1% m/m over September, 20 basis points lower than expected, and 60bp down from August, data from the Australian Bureau of Statistics showed Thursday. The seasonally adjusted estimate rose 0.5% in the September quarter in volume terms, the ABS noted. Household goods retailing (0.5%) had the largest rise, having been the only industry to fall last month (-0.4%). Cafes, restaurants and takeaway food services, up 0.4%, was the only other industry to rise this month. Department stores fell 0.5%, while clothing, footwear and personal accessory retailing and food retailing dropped 0.1%.
AUSTRALIA SEP DWELLING APPROVALS +6.8% Y/Y (MNI)
AUSTRALIA SEP DWELLING APPROVALS +4.4% M/M (MNI)
FOREX: GBP Looking Through Rates Vol, Downtrend Intact
- Meanwhile, GBP is proving resilient to further volatility for UK rates - as the fallout from yesterday's UK Budget continues to press UK short- and medium-term yields higher. While markets are pricing in a far shallower easing cycle for the BoE next year - GBP is showing little signs of strength, keeping the over-arching bear trend in GBP/USD intact. 1.2909 remains the key downside level here.
- JPY trades well, markedly stronger vs all others in G10 on the back of the BoJ decision overnight. USD/JPY came under pressure after BoJ Governor Ueda inferred that one headwind to further tightening has eased, with markets “slowly regaining stability”. This allowed Bank to remove the reference to having “time to consider” its next steps, with data-dependence front & centre. As a result, markets have brought forward pricing for a December rate hike in Japan.
- Lastly, NOK saw some modest demand as Norges Bank trimmed FX purchases to NOK150mln/day in November, after NOK400mln the four months prior. This was lower than the three analysts forecast we had seen coming into the announcement and reflects a more expansionary-than-expected 2025 budget (-ve for FX purchases) and a one-off NOK82bln transfer from the Government’s account at the Norges Bank to the Sovereign Wealth Fund (+ve for FX purchases).
- Focus shifts to prelim Eurozone CPI stats for October, ahead of weekly US jobless claims stats later today. This comes alongside September PCE numbers and the MNI Chicago PMI, which is expected to improve slightly to 47.0 from 46.6. Speakers due today include ECB's Escriva and ECB's Knot - who speaks in his capacity at the Financial Stability Board.
EGBS: Bund Futures Close to Intraday Lows Ahead of EZ-wide Flash HICP
Bund futures trade close to intraday lows, currently -61 at 131.36, with continued post-budget weakness in Gilts spilling over into EGBs.
- An upside surprise to Italian flash October inflation could see the Eurozone-wide release (due at 1000GMT/1100CET) print a tenth above consensus on a rounded basis at 2.0% Y/Y.
- This morning, French flash HICP was in line with consensus at 1.5% Y/Y.
- ECB-dated OIS have held onto yesterday’s hawkish repricing, with 30bps of easing priced through December. This morning, ECB President Lagarde added little new to the policy debate in an interview published by LeMonde.
- German cash yields are just over 4bp higher across the curve.
- Further weakness in European equities and another uptick in EUR 3m10y swaption vol sees 10-year peripheral spreads to Bunds skewed wider.
GILTS: Continued Hawkish Repricing Weighs, Front End Leads Move
Pressure from continued hawkish repricing in the GBP short end limits any recoveries in gilts, with fresh selling seen in recent trade. Digestion of the Budget remains front and centre.
- Futures to fresh session lows of 94.09.
- Yields 7-10.5bp higher, curve flattens.
- 5- to 30-Year yields register fresh ’24 highs, 5s30s hits lowest level since June.
- 10-Year yields hit ~4.44%, with the 10-Year gilt/Bund spread pinned to 200bp.
- 4.43% in 10s represented the 76.4% retracement of the move from October ’23 high to the December ’23 low. That equates to 94.18 in futures, which has been pierced.
- A more meaningful break would probably shift focus to the round numbers of 4.45% & 4.50%, which equate to 93.97 & 93.46 in futures today, respectively.
- BoE-dated OIS show 21.5bp of cuts for November, 28bp through year-end and 78bp of easing through June.
- That compares to 22.5bp, 38bp and 101bp late Tuesday.
- SONIA futures now flat to -13.0.
- The first post-Budget supply test comes shortly, as the DMO looks to sell GBP2.25bln of the 1.50% Jul-53 green gilt.
- DMO chief Pulay told us that increases to the UK’s issuance plans to fund the government’s 2024-25 budget were influenced by investor appetite for longer-term debt.
EQUITIES: Short-Term Weakness in E-Mini S&P Considered Corrective
Eurostoxx 50 futures have traded lower this week. Yesterday’s sell-off resulted in a breach of support at 4914.00, the Oct 16 low. Note that 4884.06, 38.2% of the Aug 5 - Sep 30 bull cycle, has been pierced. A clear break of it would signal scope for an extension towards 4815.50, the 50.0% retracement point. Initial firm resistance has been defined at 5015.00, the Oct 29 high, where a break is required to highlight a reversal. S&P E-Minis continue to trade below their recent highs. Short-term weakness is - for now - considered corrective and the uptrend remains intact. Price has again traded through support at the 20-day EMA, at 5841.37. A clear breach of this EMA would open 5765.76, the 50-day EMA. For bulls, a stronger resumption of gains would refocus attention on 5961.00, a Fibonacci projection. The bull trigger is at 5927.25, the Oct 17 high.
- Japan's NIKKEI closed lower by 196.14 pts or -0.5% at 39081.25 and the TOPIX ended 8.21 pts lower or -0.3% at 2695.51.
- Elsewhere, in China the SHANGHAI closed higher by 13.586 pts or +0.42% at 3279.824 and the HANG SENG ended 63.31 pts lower or -0.31% at 20317.33.
- Across Europe, Germany's DAX trades lower by 114.26 pts or -0.59% at 19142.26, FTSE 100 lower by 51.52 pts or -0.63% at 8108.52, CAC 40 down 51.83 pts or -0.7% at 7376.53 and Euro Stoxx 50 down 38.28 pts or -0.78% at 4847.47.
- Dow Jones mini down 196 pts or -0.46% at 42167, S&P 500 mini down 44.5 pts or -0.76% at 5807.5, NASDAQ mini down 212.5 pts or -1.03% at 20323.75.
Time: 09:00 GMT
COMMODITIES: Move Lower in WTI Futures This Week Reinforces Bearish Theme
A bearish theme in WTI futures remains intact and this week’s move lower reinforces this theme. A continuation down would expose $65.99, the Oct 1 low, and $64.16, the Sep 10 low and a key support. For bulls, a clear reversal would refocus attention on the key short-term resistance at $77.70, the Oct 8 high. Clearance of this level would resume to the recent uptrend. Initial resistance is at $72.34, the Oct 24 high. The trend condition in Gold is unchanged and bulls remain in the driver’s seat. The latest climb has resulted in a breach of $2685.6, the Sep 26 high, confirming a resumption of the primary uptrend and maintaining the price sequence of higher highs and higher lows. Sights are on the $2800.0 handle next as the yellow metal appreciates. Firm support is $2703.5, the 20-day EMA. A clear break of this EMA would highlight a short-term top.
- WTI Crude down $0.04 or -0.06% at $68.53
- Natural Gas down $0.04 or -1.3% at $2.807
- Gold spot down $9.22 or -0.33% at $2779.05
- Copper down $0 or 0% at $435.2
- Silver down $0.29 or -0.85% at $33.5251
- Platinum down $13.24 or -1.3% at $1003.76
Time: 09:00 GMT
| Date | GMT/Local | Impact | Country | Event |
| 31/10/2024 | 1000/1100 | *** |  EU | HICP (p) |
| 31/10/2024 | 1000/1100 | ** | EU | Unemployment |
| 31/10/2024 | 1000/1100 | *** |  IT | HICP (p) |
| 31/10/2024 | 1000/1000 |  GB | BOE's Breeden speech on emerging technologies | |
| 31/10/2024 | 1230/0830 | *** |  US | Jobless Claims |
| 31/10/2024 | 1230/0830 | *** | US | Personal Income and Consumption |
| 31/10/2024 | 1230/0830 | *** | US | Employment Cost Index |
| 31/10/2024 | 1230/0830 | *** |  CA | Gross Domestic Product by Industry |
| 31/10/2024 | 1230/0830 | * | CA | Payroll employment |
| 31/10/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 31/10/2024 | 1230/0830 | *** | CA | Gross Domestic Product by Industry |
| 31/10/2024 | 1345/0945 | *** | US | MNI Chicago PMI |
| 31/10/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
| 31/10/2024 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 31/10/2024 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 01/11/2024 | 2200/0900 | ** |  AU | S&P Global Manufacturing PMI (f) |
| 01/11/2024 | 0030/1130 | * | AU | Producer price index q/q |
| 01/11/2024 | 0030/1130 | ** | AU | Lending Finance Details |
| 01/11/2024 | 0030/0930 | ** |  JP | S&P Global Final Japan Manufacturing PMI |
| 01/11/2024 | 0145/0945 | ** |  CN | S&P Global Final China Manufacturing PMI |
| 01/11/2024 | 0730/0830 | *** |  CH | CPI |
| 01/11/2024 | 0730/0830 | ** | CH | Retail Sales |
| 01/11/2024 | 0930/0930 | ** | GB | S&P Global Manufacturing PMI (Final) |
| 01/11/2024 | - | *** | US | Domestic-Made Vehicle Sales |
| 01/11/2024 | 1230/0830 | *** | US | Employment Report |
| 01/11/2024 | 1345/0945 | *** | US | S&P Global Manufacturing Index (final) |
| 01/11/2024 | 1400/1000 | *** | US | ISM Manufacturing Index |
| 01/11/2024 | 1400/1000 | * | US | Construction Spending |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.