MNI US OPEN - Brazil's Lula Claims Victory in Closest Race in Recent History

NEWS

BRAZIL (MNI): Lula Elected Brazil’s President

Left-wing challenger Lula has won Brazil's Presidential election race in the tightest election in modern history: Lula won 50.9% of the popular vote vs. Bolsonaro's 49.1%. Analysts see the tight outcome as limiting Lula's agenda considerably, but the results should be market-positive, with little sign of domestic unrest just yet. Brazilian ETFs have surged ahead of the open later today, suggesting some Brazilian outperformance later Monday.

Incumbent Bolsonaro will not contest the outcome, according to Antagonista. However, Bolsonaro will not call Lula to congratulate him either. Globo reported that lawmakers and ministers who wanted to speak with Bolsonaro after the result was announced were told that the President would not be meeting anyone, including his closest aides.

RUSSIA (MNI): UN Says Ships With Ukrainian Food Will Set Sail Monday Even As Russia Pulls Out Of Grain Deal

The envoys of Ukraine, Turkey and the United Nations agreed to update Monday's schedule for the movement of vessels along the Black Sea "grain corridor" to 16 from 14 vessels and confirmed the ships will set sail, in defiance of Russia decision to pull out of the Black Sea Grain Initiative over the weekend.

Moscow indefinitely suspended its participation in the deal brokered by the UN and Turkey that allowed for partial resumption of Ukrainian grain exports from the seaports of Odesa, Chornomorsk and Yuzhny. Since the first vessel moved on August 1, almost 400 ships departed the three licensed ports, carrying 9mn tons of grain, with Spain being the top importer (1.8mn tons).

CHINA (MNI): PBOC To Retain Normal Policy Stance - Yi Gang

The People’s Bank of China will enhance efforts to stabilise credit expansion and push lenders to lower real interest rates in a bid to support the economy, Governor Yi Gang said in a report submitted to the National People’s Congress.

The central bank will keep liquidity ample and strengthen credit support to the real economy, while it will further reduce the cost of financing for companies and assist household consumption, according to the report released on the PBOC’s website on Sunday.

JAPAN (MNI): Japan's Kishida's Approval Falls To 42% - Press

The approval rating for Prime Minister Fumio Kishida's cabinet fell to a new low of 42% in the latest Nikkei/TV Tokyo poll, as Japan's public remains dissatisfied over the Unification Church's ties with officials in the government and ruling Liberal Democratic Party, the Nikkei reported on Monday. The focus is how the economic stimulus measures unveiled by Prime Minister Kishida on Friday will contribute to boosting his approval rating.

NEW ZEALAND (MNI): NZ Banks Well Placed for Stagflation Risk - RBNZ

The Reserve Bank of New Zealand said the nation's banks would remain above their minimum regulatory capital buffers in a stagflation environment, according to results of the 2022 Bank Solvency Stress Test released on Monday.

The stress test, built on a global slowdown as rates rise amid inflation, showed the banks' Common Equity Tier 1 ratio would fall 3.3 percentage points to a minimum 8.9%, well above the 4.5% regulatory requirement. The scenario, which starts on April 1 2022, sees GDP contract 5%, unemployment rise to 9.3% and house prices decline 42%.

FED PREVIEW (MNI): The November FOMC meeting is mainly about the message the Fed wants to send about its plans for December. A 4th consecutive 75bp hike is assured this time. A step-down to a 50bp hike at the following meeting looks like the path of least resistance for now – the question is, how strongly does the FOMC seek to express that view. In a close call, we expect only limited changes to the Statement – but anticipate that Chair Powell will signal that the Committee is currently eyeing either 50bp or 75bp in December, with the decision to be data-dependent.

RBA PREVIEW (MNI): While inflation showed no signs of slowing in Q3, recent RBA commentary gives many reasons why it is likely to stick to 25bp in November rather than return to a 50bp move. As a result, the MNI Markets team expect rates to rise to 2.85% at the meeting overnight tonight from 2.60%. There is a risk though that the RBA hikes 50bp on November 1, on the back of CPI inflation rising to its highest since mid-1990 in Q3 and a clear pick-up in domestically-driven price pressures.

ECB REVIEW (MNI): As widely expected, the ECB delivered a second 75bp policy rate hike at the October meeting, despite some previous protestations from more dovish GC members who argued that such ‘jumbo’ hikes should not be considered a new normal. The ECB also adjusted the TLTRO terms in a bid to encourage early repayment, with President Lagarde stressing that this was needed to reinforce the transmission of monetary policy. In line with our thinking that it was too premature to unveil a roadmap for quantitative tightening at the October meeting, Lagarde indicated that a decision would instead be taken in December.

DATA

ITALY Q3 FLASH GDP +0.5% Q/Q, +2.6% Y/Y (MNI)

GERMANY AUG RETAIL SALES +0.9% M/M, -0.9% Y/Y (MNI)

UK SEP M4 MONEY SUPPLY +2.1% M/M, +5.4% Y/Y (MNI)
UK BOE SEP MORTGAGE APPROVALS 66,789 (MNI)

SWISS SEP RETAIL SALES +0.9% M/M, +3.2% Y/Y (MNI)

JAPAN SEP RETAIL SALES +4.5% Y/Y; AUG +4.1% (MNI)
JAPAN SEP INDUSTRIAL OUTPUT -1.6% M/M; AUG +3.4% (MNI)
JAPAN Q3 FACTORY OUTPUT +5.9% Q/Q VS. -2.7% IN Q2 (MNI)

AUSTRALIA DATA (MNI): Robust September Retail Sales but Volumes May Have Been Flat

• AUSTRALIA SEP RETAIL SALES +0.6% M/M

Retail sales in September were stronger than expected rising a solid 0.6% m/m and 17.9% y/y, despite depressed consumer confidence. The pace of monthly sales was in line with August and the annual rate only slowed slightly to 17.9% y/y due to the start of post-lockdown spending boosting September 2021.

AUSTRALIA DATA (MNI): Business Credit Still Strong, Signs Personal Credit Rising Again

The RBA credit aggregates for September show that while total credit continues to grow at a solid 0.7% m/m, that monthly rate has been gradually slowing over the year. The annual rate continues to rise though and is now at 9.4%, the highest in 14 years.

FX SUMMARY: Greenback Makes Modest Gains, But Markets Lack Conviction

• The greenback is making modest gains early Monday, with markets gearing a positioning for the Fed rate decision on Wednesday. GBP is at the other end of the table, falling against all others to further unwind some of the recent outperformance to put GBP/USD either side of 1.1550.
• All-in-all, currencies lack conviction or direction ahead of a particularly busy week, with rate decisions due from the Australia, US, UK and Norwegian central banks - all of which are seen tightening policy further.
• Weakness across both onshore and offshore Chinese currencies persists, with the latest wave of pressure following overnight reports from BBG, who cite sources in reporting that the US has raised the idea of export control regimes for China with their European partners - mimicking the patterns and techniques used with Russia. More detail could follow in December, as EU and US officials look to draw up a roadmap for their high-level trade forum.
• Focus turns to the MNI Chicago PMI for October, seen rising to 47.0 from 45.7 previously. The prelim Eurozone CPI estimate is also due as well as speeches from ECB's Visco and Lane. The Fed remain in their pre-decision media blackout period.

BOND SUMMARY: Modest moves downwards - respecting recent technical support

• Core fixed income has moved lower this morning, albeit respecting recent ranges. Bund futures remain above Friday's lows, gilt futures are a little below Friday's lows while Treasury futures are challenging (but have yet to break below) Wednesday's lows.
• The main event of the day will be the release of Eurozone flash October HICP at 10:00BST / 6:00ET. This follows on from some volatile national prints at the back end of last week.
• This week will also see focus on central banks with the Fed headlining on Wednesday. 75bp is expected but more importantly for markets will be what steer the Fed puts on future moves.
• The Bank of England announcement on Thursday is widely expected to also see a 75bp hike (the first from the BoE). The Bank is also expected to show weak inflation at the 2/3-year policy relevant horizons in its MPR and to maintain its previous guidance.
• TY1 futures are down -0-12+ today at 110-19+ with 10y UST yields up 4.8bp at 4.064% and 2y yields up 7.3bp at 4.492%.
• Bund futures are down -0.78 today at 138.55 with 10y Bund yields up 4.1bp at 2.140% and Schatz yields up 2.3bp at 1.948%.
• Gilt futures are down -0.62 today at 102.69 with 10y yields up 1.8bp at 3.490% and 2y yields up 1.0bp at 3.209%.

EQUITIES: Equity Futures Dip From Friday's Highs

S&P E-Minis maintains a bullish tone and Friday’s resumption of the short-term uptrend reinforces current conditions. Last week’s climb resulted in a break of the 3820.00 hurdle, Oct 5 high. Furthermore, price has traded above the 50-day EMA, at 3834.42. On the downside, key short-term support has been defined at 3641.50, the Oct 21 low. Initial firm support to watch is at 3757.50, the Oct 27 low. EUROSTOXX 50 futures maintain a firmer tone. The contract is holding on to its recent gains following the recent breach of trendline resistance drawn from the Aug 17 high and the break of the 50-day EMA. Scope is seen for an extension higher near-term and sights are on 3678.00, the Sep 13 high and a key short-term resistance. Firm support is seen at the 50-day EMA. The average intersects at 3493.20.

• Japan's NIKKEI closed higher by 482.26 pts or +1.78% at 27587.46 and the TOPIX ended 30.38 pts higher or +1.6% at 1929.43.
• Elsewhere, in China the SHANGHAI closed lower by 22.443 pts or -0.77% at 2893.483 and the HANG SENG ended 176.04 pts lower or -1.18% at 14687.02.
• Across Europe, Germany's DAX trades lower by 16.85 pts or -0.13% at 13222.65, FTSE 100 lower by 12.61 pts or -0.18% at 7035.05, CAC 40 down 25.38 pts or -0.4% at 6246.98 and Euro Stoxx 50 down 4.59 pts or -0.13% at 3607.76.
• Dow Jones mini down 149 pts or -0.45% at 32747, S&P 500 mini down 23.75 pts or -0.61% at 3887, NASDAQ mini down 93 pts or -0.8% at 11492.5.

COMMODITIES: Gold, WTI Below Recent 7-Day Highs

The WTI futures outlook improved for bulls last week. The contract has defined a key short-term support at $81.30, the Oct 18 low. Note that resistance at $88.66, the Oct 12 high, has been breached. The break of this hurdle signals scope for gains towards $92.34, the Oct 10 high and a key resistance. On the downside, a move through support at $81.30 is required to undermine the current bull theme. Gold traded lower Friday. A downtrend remains intact and recent gains are considered corrective. A bearish theme follows the reversal from $1729.5, Oct 4 high. The move lower signals the end of the Sep 28 - Oct 4 bull phase. A resumption of weakness would open key support at $1615.0, Sep 28 low. On the upside, the next firm resistance is at $1686.5, the 50-day EMA. A break of the average would signal scope for a stronger correction.

• WTI Crude down $0.9 or -1.02% at $86.99
• Natural Gas up $0.44 or +7.67% at $6.137
• Gold spot down $8.81 or -0.54% at $1636.21
• Copper down $4.4 or -1.28% at $338.1
• Silver down $0.27 or -1.39% at $18.9968
• Platinum down $17.05 or -1.8% at $931.1