EXECUTIVE SUMMARY
- HEZBOLLAH DRONE RAID KILLS FOUR AS ISRAEL DIGS DEEPER IN LEBANON
- CHINA PUTS INVESTOR PATIENCE TO TEST AS BRIEFING UNDERWHELMS
- ORBAN THREATENS TO MESS WITH UKRAINE AID TO HELP TRUMP
- CHINA SEP CPI SLOWS TO 0.4% Y/Y ON BASE EFFECTS
Figure 1: Figure 1: USD Index Rally Not Technically Overbought (Yet)
Source: MNI/Bloomberg
NEWS
ISRAEL/MIDEAST (BBG): Hezbollah Drone Raid Kills Four as Israel Digs Deeper in Lebanon
A Hezbollah drone strike killed four soldiers at a northern Israeli base, one of the deadliest attacks by the Iran-backed militia on the Jewish state in at least a year, as the army widens its offensive in southern Lebanon. More than 50 others were injured in the Hezbollah assault on the military encampment south of the Israeli port city of Haifa on Sunday. The incident followed a weekend of sustained rocket salvos against the area that showed the militant group can still strike at least 40 kilometers (25 miles) into Israel despite weeks of attacks on its commanders and missile caches.
US/UKRAINE (Politico): Orbán Threatens to Mess With Ukraine Aid to Help Trump
Hungarian Prime Minister Viktor Orbán is preparing to serve up a major policy gift for his best friend across the Atlantic, former United States President Donald Trump. He’s concocted a way to let Trump, if he successfully makes it to the White House for a second term come November, wriggle out of a $50 billion loan the U.S., the European Union and leaders of the G7 offered to Ukraine to back its fight for survival against Russia. That would let Trump off the hook, allowing him to tell Republican voters that, if elected, he won’t give Ukraine another cent.
US (WSJ): Economists Say Inflation, Deficits Will Be Higher Under Trump
Most economists think inflation, interest rates and deficits would be higher under the policies former President Donald Trump would pursue in a second administration than under those proposed by Vice President Kamala Harris, according to a quarterly survey by The Wall Street Journal. The results of the Oct. 4-8 survey echoed those of the Journal’s survey in July, when Trump was facing President Biden. Biden dropped out of the race on July 21, and Harris became the nominee shortly afterward.
US (NYT): Biden Calls for Bipartisan Effort to Help Areas Hit by Storms
The president surveyed damage in Florida and announced $612 million for projects to help the electric grid in areas affected by Hurricanes Helene and Milton. Standing in front of one of the many houses wrecked by Hurricane Milton in Florida, President Biden said on Sunday that the storm was devastating for those who lost homes, businesses or relatives, even as he expressed relief that the storm was not as destructive as anticipated.
UK (FT): Starmer Vows to ‘Rip Out Bureaucracy’ to Aid Growth at Investment Summit
Prime minister will target competition authority and other regulators he believes are stifling global appeal
UK (MNI): UK Budget Set to Be Fiscal Easing, Hamper Rate Cuts
The UK Budget, set to be unveiled on Oct 30, will be a net fiscal giveaway with policy looser than in the Spring Budget and it will entail that the Bank of England will not cut interest rates as quickly, according to analysis by the Resolution Foundation (RF) think-tank. RF said the Budget, the new Labour Government's first, would see fiscal easing because the previous plans set out by the former Conservative government for spending constraints were exceptionally tight and Labour would not achieve them.
FRANCE (BBG): French Fintech Fund Raising to Pick Up Early 2025, Villeroy Says
Bank of France Governor Francois Villeroy de Galhau said fund raising for financial technology firms in the country could pick up at the start of next year as lower European Central Bank borrowing costs have reduced financing costs. Investment into the sector was at €560 million ($612 million) in the first half of 2024, close the €568 million recorded in the same period last year, Villeroy said at the Forum Fintech conference in Paris.
CHINA (BBG): China Puts Investor Patience to Test as Briefing Underwhelms
China’s highly anticipated Finance Ministry briefing on Saturday lacked the firepower that equity investors had hoped for, indicating that the volatility that’s gripped the market following a world-beating rally will likely extend. While Finance Minister Lan Fo’an promised more support for the struggling property sector and hinted at greater government borrowing to shore up the economy, the briefing didn’t produce a headline dollar figure for fresh fiscal stimulus that the markets had sought. A lack of new incentives to boost consumption, which has been a weak link in the economy, is another reason why traders may feel disappointed.
CHINA (MNI): China Has Room for More Debt, Higher Deficit - MOF
MNI (Beijing) China's Finance Ministry will increase the debt limit substantially to support local governments to resolve off-balance sheet debts and issue special treasuries to replenish core tier-one capital of large state-owned commercial banks, Finance Minister Lan Foan told reporters on Saturday, noting more additional countercyclical measures are under consideration. He said the central government had substantial room for borrowing and raising its deficit-to-GDP ratio further, adding that the detailed amount of the stimulus package will be announced later after "legal procedures."
SINGAPORE (BBG): Singapore Retains Tight Policy Stance as Growth Accelerates
Singapore’s central bank kept its monetary settings unchanged, defying a global wave of policy easing as the city-state’s economy powered ahead in the third quarter. The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool rather than interest rates, maintained the slope, width, and center of the currency band, it said in a statement on Monday. That will keep the local dollar on an appreciating path to blunt imported price pressures.
BITCOIN (BBG): Bitcoin Jumps as Traders Weigh China Fiscal Stimulus, Trump Odds
Bitcoin climbed to the highest level in two weeks as a mixed reaction to China’s latest stimulus efforts emboldened wagers that speculators will chase after cryptocurrencies rather than the nation’s stocks. The largest digital asset rose as much as 2.8% on Monday before paring some of the increase to change hands at $63,890 as of 6:55 a.m. in London. Smaller tokens including second-ranked Ether and top-10 coin Solana advanced too.
DATA
CHINA YTD TRADE SURPLUS +$689.5 BLN VS JAN-AUG +$609 BLN (MNI)
CHINA SEP EXPORTS +2.4% Y/Y VS MEDIAN +6.0% Y/Y: CUSTOMS (MNI)
CHINA SEP IMPORTS +0.3% Y/Y VS MEDIAN +0.5% Y/Y: CUSTOMS (MNI)
CHINA DATA (MNI): China Sep CPI Slows to 0.4% Y/Y on Base Effects
MNI (Sydney) China's Consumer Price Index rose 0.4% y/y in September, decelerating from August's 0.6% and underperforming the 0.6% consensus, driven by the higher comparison base for the same period last year, data from the National Bureau of Statistics showed Sunday. Food prices rose 3.3% y/y led by a 22.9% and 16.2% increase in vegetable and pork prices due to holiday factors, driving up CPI by 0.61 percentage points. Non-food prices fell 0.2%, driving down the headline figure by 0.19 pp. On a monthly basis, CPI rose 0.0%, moderating from August's 0.4%.
CHINA JAN.-SEPT. AGGREGATE FINANCING CNY25.66T; EST. CNY25.475T (BBG)
CHINA SEPT. M2 MONEY SUPPLY RISES 6.8% Y/Y; EST. +6.4% (BBG)
CHINA SEPT. M1 MONEY SUPPLY FALLS 7.4% Y/Y (BBG)
CHINA SEPT. M0 MONEY SUPPLY RISES 11.5% Y/Y (BBG)
FOREX: USD Index Again Presses Resistance
- The greenback is among the strongest performers in G10 Monday, although the rally is shallow at these levels. That said, the strength is keeping the USD Index well within range of last week's highs of 103.178, and a break and close back above these levels will confirm a resumption of the primary uptrend drawn off the late September lows. 100-dma above at 103.241 provides the next level - a rally toward which would bring 149.55 in USD/JPY and 1.0900 in EUR/USD into play.
- Equity futures are mixed on both sides of the pond, with a softer open triggered by the negative reception of China's policy briefing proving short-lived, as buying interest in the e-mini S&P and Eurostoxx50 tipped both indices back in positive territory.
- Risk back-loaded, with UK inflation, US import/export price indices and Australian jobs data for September all set to follow in the second half of the week.
- There are no key data releases set for the rest of the Monday session, with US Columbus Day holidays likely to keep markets quieter than usual - although there are no major closes across US equity or fixed income markets. There are a number of central bank speakers due which could prove more market-sensitive, including Fed's Kashkari and Waller.
EGBS: Tight Ranges in the Absence of Notable Macro Drivers
Bunds have traded in a 24-tick range today in the absence of notable macro drivers. Futures are currently +15 at 133.30, with initial support around 132.93 (corresponding to the 2.30% 10-year yield level) shielding key support at 132.65 (Sep 2 low).
- The 10-year OAT/Bund spread is little changed at 77bps after Fitch downgraded France’s sovereign credit outlook to “Negative” from “Stable” on Friday.
- The OLO/Bund spread is 1bp wider at 61bps though, after Moody’s downgraded Belgium’s outlook to “Negative”.
- Peripheral spreads to Bunds are generally tighter, with BTPs outperforming (1.5bps narrower today at 128bps).
- Eurozone net issuance is expected to be negative for the next three weeks, which may provide some underlying support to EGBs in the absence of fundamental drivers.
- The US Colombus Day holiday may limit activity this afternoon.
- This week’s regional calendar is headlined by the ECB decision, where a 25bp cut is widely expected and essentially fully priced in OIS.
GILTS: Wider, Risk of Increased Issuance Continues to Weigh
Gilts continue to underperform core global peers as markets remain highly sensitive to the risk of increased issuance.
- While Chancellor Reeves didn’t mention anything ‘new’ to the Sunday Times, the article underscored the risk of increased public investment/higher gilt issuance.
- Futures -4 at 96.23 vs. lows of 96.20, late Friday rally unwound.
- Bearish technical cycle intact. Support at the Oct 10 low (95.83), resistance at the Oct 7 high (96.93).
- Yields 1bp lower to 2bp higher, curve twist steepens.
- 2s10s hits fresh multi-week highs, 5s30s ~7bp steeper than last Monday’s close,
- 10s widen by a little over 1bp vs. Bunds, back above 195bp. Last week’s cycle highs present the only point of meaningful interest ahead of 200bp.
- BoE-dated OIS a touch more hawkish vs. Friday’s closing levels, but little changed on the day/within recent ranges. 22bp of cuts priced through November, 35bp through Dec and 102bp through June.
- SONIA futures +4.0 to -1.0, off early highs, with the move in gilts limiting the early rally.
- No comments from BoE’s Dhingra seen.
- PM Starmer is set to roll out familiar rhetoric re: attracting investment at a summit.
- Elsewhere, the BoE will sell GBP800mln of short maturity gilts from its APF.
- This week’s UK calendar will be headlined by the CPI & labour market reports, covered in greater detail in our morning STIR bullet (full preview due later).
EQUITIES: Last Week's Gains Reinforce Bullish E-Mini S&P Set-Up
Eurostoxx 50 futures are holding on to their most recent gains. Key short-term support to watch is 4938.44, the 50-day EMA. A clear break of this EMA would signal scope for a deeper retracement. Recently, the contract breached resistance at 5024.00, the Sep 3 high. This confirmed a resumption of the bull leg that started Aug 5 and cancels a recent bearish theme. Key resistance and bull trigger is 5106.00, the Sep 30 high. A bull cycle in S&P E-Minis remains intact and last week’s gains reinforce this condition. Price has traded to fresh all-time highs, once again, confirming a resumption of the primary uptrend. Note that moving average studies are in a bull-mode setup, highlighting a dominant uptrend and positive market sentiment. Sights are on 5868.50, a Fibonacci projection, and 5900.00 further out. Initial support to watch is 5768.92, the 20-day EMA. It has been pierced. Key support lies at 5693.38 the 50-day EMA.
- In China the SHANGHAI closed higher by 66.585 pts or +2.07% at 3284.323 and the HANG SENG ended 159.11 pts lower or -0.75% at 21092.87.
- Across Europe, Germany's DAX trades higher by 22.44 pts or +0.12% at 19397.92, FTSE 100 lower by 9.48 pts or -0.11% at 8243.97, CAC 40 down 22.76 pts or -0.3% at 7555.27 and Euro Stoxx 50 down 3.43 pts or -0.07% at 5000.49.
- Dow Jones mini down 31 pts or -0.07% at 43112, S&P 500 mini up 4.5 pts or +0.08% at 5864.5, NASDAQ mini up 22 pts or +0.11% at 20472.75.
Time: 09:50 BST
COMMODITIES: Gold Extends Recovery From Last Week's Lows
WTI futures traded remain in a bull cycle and short-term weakness is - for now - considered corrective. Recent gains suggest potential for a continuation higher near-term. Attention is on $77.40, the 76.4% retracement of the Jul 5 - Sep 10 bear leg. This level has been pierced, a clear break of it would strengthen a bullish condition. On the downside, initial firm support to watch is $72.33, the 20-day EMA. The recent short-term retracement in Gold is considered corrective. The trend condition is unchanged and bulls remain in the driver’s seat. Moving average studies are in a bull-mode set-up too, highlighting a clear uptrend and positive market sentiment. A resumption of gains would refocus attention on $2690.2, a Fibonacci projection. Firm support lies at $2620.2, the 20-day EMA. It has been pierced, a clear break would signal scope for a deeper retracement.
- WTI Crude down $1.05 or -1.39% at $74.46
- Natural Gas down $0.05 or -1.79% at $2.585
- Gold spot up $2.98 or +0.11% at $2659.02
- Copper down $4.15 or -0.92% at $445.1
- Silver down $0.08 or -0.25% at $31.4549
- Platinum down $1.09 or -0.11% at $985.74
Time: 09:50 BST
| Date | GMT/Local | Impact | Country | Event |
| 14/10/2024 | 1300/0900 |  US | Minneapolis Fed's Neel Kashkari | |
| 14/10/2024 | 1900/1500 | US | Fed Governor Christopher Waller | |
| 14/10/2024 | 2100/1700 | US | Minneapolis Fed's Neel Kashkari | |
| 15/10/2024 | 0430/1330 | ** |  JP | Industrial Production |
| 15/10/2024 | 0600/0800 | *** |  SE | Inflation Report |
| 15/10/2024 | 0600/0700 | *** |  GB | Labour Market Survey |
| 15/10/2024 | 0645/0845 | *** |  FR | HICP (f) |
| 15/10/2024 | 0700/0900 | *** |  ES | HICP (f) |
| 15/10/2024 | 0800/1000 | ** |  EU | ECB Bank Lending Survey |
| 15/10/2024 | 0900/1100 | *** |  DE | ZEW Current Conditions Index |
| 15/10/2024 | 0900/1100 | *** | DE | ZEW Current Expectations Index |
| 15/10/2024 | 0900/1100 | ** | EU | Industrial Production |
| 15/10/2024 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 15/10/2024 | 1230/0830 | *** |  CA | CPI |
| 15/10/2024 | 1230/0830 | ** | CA | Wholesale Trade |
| 15/10/2024 | 1230/0830 | ** | US | Empire State Manufacturing Survey |
| 15/10/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 15/10/2024 | 1300/0900 | * | CA | CREA Existing Home Sales |
| 15/10/2024 | 1500/1100 | ** | US | NY Fed Survey of Consumer Expectations |
| 15/10/2024 | 1530/1130 | US | San Francisco Fed's Mary Daly | |
| 15/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 15/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 15/10/2024 | 1700/1300 | * | US | US Treasury Auction Result for Cash Management Bill |
| 15/10/2024 | 1700/1300 | US | Fed Governor Adriana Kugler | |
| 16/10/2024 | 2145/1045 | *** |  NZ | CPI inflation quarterly |