EXECUTIVE SUMMARY
- US PUSHES FOR CEASE-FIRE IN GAZA AFTER ISRAEL KILLS HAMAS LEADER
- CHINA Q3 GDP SLOWS TO 4.6%
- PBOC TO CURB CHALLENGES OF HOUSE AND EQUITY MARKETS
- JAPAN’S FX CHIEF WARNS ON SUDDEN MOVES AFTER YEN HITS 150
Figure 1: S&P 500, Eurostoxx 50 indexed year-to-date return
Source: MNI/Bloomberg
NEWS
US/ISRAEL (BBG): US Pushes for Cease-Fire in Gaza After Israel Kills Hamas Leader
The US said it would push toward a cease-fire in Gaza after Israel killed Yahya Sinwar, the leader of Hamas and the mastermind of the Oct. 7 attacks that ignited a yearlong war in the Palestinian enclave. Israel said it would keep fighting until all the hostages seized by Hamas are free. President Joe Biden said he’s sending Secretary of State Antony Blinken to Israel as part of efforts to end the war. “Now is the time to move on,” Biden told reporters after landing in Berlin, Germany. “Move on, move toward to a cease-fire in Gaza.” Israeli Prime Minister Benjamin Netanyahu said earlier that “the mission before us is yet to be completed.”
US (WSJ): A Mystery $30 Million Wave of Pro-Trump Bets Has Moved a Popular Prediction Market
Vice President Kamala Harris and former President Donald Trump are neck and neck in the polls. But in one popular betting market, the odds have skewed heavily in Trump’s favor, raising questions about a recent flurry of wagers and who is behind them. Over the past two weeks, the chances of a Trump victory in the November election have surged on Polymarket, a crypto-based prediction market. Its bettors were giving Trump a 62% chance of winning on Thursday, while Harris’s chances were 38%. The candidates were in a dead heat at the start of October.
US (BBG): Obamas to Join Harris on Campaign Trail in Key Swing States
Vice President Kamala Harris will hit the campaign trail next week with Barack and Michelle Obama, two of the most popular figures in Democratic politics, in a bid to turn out voters in two crucial swing states with the election less than 20 days away. Former President Obama will join the Democratic nominee on Oct. 24 in Georgia, while the former first lady will stump with Harris on Oct. 26 in Michigan, according to a senior campaign official who requested anonymity to discuss the upcoming events.
US (WSJ): Netflix’s Push to Boost Earnings Pays Off
Netflix reported its most profitable quarter ever despite slowing subscriber growth, a sign of the company’s success in giving priority to profitability over adding customers. The streaming giant continued to add new customers in the third quarter, although at a slower pace than a year earlier, when its password-sharing crackdown initially took hold. Netflix added 5.07 million subscribers in the third quarter, compared with 8.76 million net new subscribers during the same period a year earlier.
MNI US EARNINGS SCHEDULE: 8.8% of S&P 500 Due This Week
POLITICAL RISK (MNI): China Confirms Xi's Attendance at Upcoming BRICS Summit
MNI (London) State-run Xinhua has confirmed the widely expected news that President Xi Jinping will attend the BRICS summit in the Russian city of Kazan from 22-24 October. The summit is the pre-eminent meeting of leaders from the 'global south' formed of emerging markets that are either non-aligned or aligned with China. The fact that it is Russia hosting the 2024 summit displays an even starker sign of the BRICS status as a counterweight to the G7.
UKRAINE (MNI): North Korea to Send 12k Troops to Ukraine: Yonhap
South Korea's Yonhap News is reporting that according to the country's National Intelligence Service (NIS) North Korea is preparing to participate in the war in Ukraine with the potential dispatch of 12,000 troops from the country's special forces to fight on the frontlines on Russia's behalf. Such a deployment would exceed the 10,000 figure stated by Ukrainian President Volodymyr Zelenskyy in his press conference at NATO HQ on 17 Oct, a number that was viewed initially as somewhat hyperbolic but could now prove to be underestimating the situation.
ECB (BBG): ECB’s Villeroy Wants ‘Total Optionality’ as Rates Are Lowered
The European Central Bank should remain flexible as it cuts interest rates in response to cooling inflation and a weakening economy, according to Governing Council member Francois Villeroy de Galhau. Speaking less than a day after policymakers lowered borrowing costs for the third time this year, the Bank of France head cited the current unpredictable nature of geopolitics, as well as now equal risks of over- and under-shooting the 2% inflation goal.
ECB (BBG): ECB’s Muller Sees Inflation Retreat But Warns on Services
Inflation is heading for the European Central Bank’s 2% goal as the region’s economy weakens but upside dangers to prices persist, according to Governing Council Member Madis Muller. “There’s still a risk that the still rather rapid increase in the price of services and the related average-wage increase may keep inflation in the euro area faster than the ECB’s target,” the Estonian central-bank chief said Friday in a blog post.
ECB (MNI): Bank of Finland Opens Applications for New Governor
The Bank of Finland is beginning the application processes to appoint a new Governor. Current Governor Olli Rehn's term ends on July 12, 2025. Governor Rehn was previously considered a hawkish-leaning member of the Governing Council, but has adopted an more centrist stance over the last few months, as concerns around the Eurozone's growth outlook have increased.
CHINA (BBG): China Moves to Support Markets After Data Showing Economy Slowed
China’s central bank moved to support markets just as data showed the economy expanding the least in six quarters, signaling the government’s intent to continue a stimulus push to draw a line under the slowdown. The People’s Bank of China disclosed more details of its measures to boost capital markets minutes after authorities released figures showing China’s slowdown deepened in the third quarter. At a separate event in Beijing, PBOC Governor Pan Gongsheng flagged the real estate and stock markets as key challenges in the economy that require targeted policy support.
CHINA (MNI): China Sees 5% 2024 Growth in Reach - NBS
MNI (Beijing) Authorities are incresaingly confident China can reach the government's 5% GDP growth target in 2024, with September's improvements likely to continue into Q4, said Sheng Laiyun, deputy director of the National Bureau of Statistics, on Friday. Speaking with reporters, Sheng highlighted an uptick in September data showed incremental measures were taking effect, with authorities ready to accelerate existing support in Q4 to ensure the recovery was maintained. China's 4.8% GDP growth in the first three quarters provided a solid base for the nation to achieve this year's economic targets, Sheng added.
CHINA (MNI): PBOC Launches CNY300bln Stock Buy-Back Facility
MNI (Beijing) The People’s Bank of China launched its one-year CNY300 billion relending facility targeting stock buy-backs on Friday with an annual interest rate of 1.75%, according to a statement on its website. The facility, which the Bank can extend if necessary, will incentivise lenders to provide loans to eligible listed companies and major shareholders to support stock repurchases and increases holdings.The loans will be provided by 21 national banks with the interest rate capped at 2.25% in principle.
CHINA (MNI): PBOC to Curb Challenges of House and Equity Markets
MNI (Beijing) China is facing challenges from both real estate and capital markets, and the People's Bank of China could cut reserve requirement ratio by a further 25 to 50bps before the year-end depending on market liquidity conditions, Governor Pan Gongsheng told a forum on Friday. Strong measures are needed to address issues including insufficient demand, weak expectations, and low price levels, he said, noting the macroeconomic policy should balance consumption and investment, although with a greater emphasis on consumption, he said.
CHINA (BBG): iPhone 16 Sales Soar 20% in China Debut as Demand Returns
Sales of Apple Inc.’s newest iPhones in China are up 20% in their first three weeks compared with 2023’s model, a positive sign for a device that struggled this year to gain traction in the world’s largest smartphone market. The iPhone 16 debuted in September and has outperformed its predecessor so far, according to Counterpoint Research data provided to Bloomberg News. Consumers continue to shift to the pricier models, and sales of the top-end Pro and Pro Max models gained 44% compared with last year’s equivalents.
JAPAN (BBG): Japan’s FX Chief Warns on Sudden Moves After Yen Hits 150
Japan’s top currency official helped lift the yen a touch on Friday after he warned he was keeping a close eye on market movements following the yen’s slide into the 150 range against the dollar overnight. “At the moment we’re seeing slightly one-sided, sudden moves in the currency market,” said Atsushi Mimura, vice finance minister for international affairs. “We’ll keep monitoring the forex market with a high sense of urgency, including any speculative moves.”
JAPAN (MNI): Markets Unstable; Must Watch With Vigilance - BOJ's Ueda
Financial and capital markets remain unstable and the risk outlook for overseas economies, particularly the U.S., is high and the Bank of Japan will continue to watch their developments closely, Governor Kazuo Ueda said earlier Friday. “Uncertainties surrounding the Japanese economy and prices remain high and we have to carefully monitor how developments in financial and foreign exchange markets (impact) on the Japanese economy and prices,” Ueda said in a speech read by Deputy Governor Shinichi Uchida at the National credit union conference.
JAPAN (BBG): Japan Union Group Calls for Continued Wage Growth of 5% or More
Japan’s largest labor union federation aims to secure wage increases averaging at least 5% in next year’s pay negotiations, in a bid to maintain momentum after major gains this year. A year ago the annual process began with the same goal, with the final tally for 2024 ultimately showing gains of 5.1%, the biggest increase for the group’s workers in 33 years. “We believe that continuing wage hikes of at least 5% is extremely important,” said Rengo’s president Tomoko Yoshino in a press conference Friday. “We still can’t say that wage gains have properly taken root.”
COMMODITIES (BBG): Iron Ore Rebounds on China’s Stimulus After Slower-Growth Data
Iron ore and copper advanced after China - the top commodities consumer - moved to support markets following data that showed slower economic growth. The People’s Bank of China rolled out more measures to support markets, boosting optimism over Beijing’s commitment to economic stimulus and sending stocks higher. That followed figures that showed growth in the third quarter rose at the slowest pace since March 2023, despite tentative signs of improvement.
DATA
EUROZONE DATA (MNI): ECB Survey Sees Inflation Below Target in 2025,
Inflation expectations for the next two years remain firmly anchored at or just below 2%, the ECB's survey of professional forecasters' showed on Friday. Expectations were for inflation of 2.4% for the whole of 2024 and at a below-target 1.9% for both 2025 and 2026 -- unchanged except for a 0.1-percentage-point downward shift for 2025. Longer-term inflation expectations, for 2029, were unchanged at 2.0%, the survey showed. The survey was broadly in line with ECB expectations, which are for inflation sustainably back at the 2% target some time in 2025 and at 1.9% in 2026.
UK DATA (MNI): Higher Than Expected Retail Sales in September But Little MonPol Impact
- UK SEP RETAIL SALES +0.3% M/M, +3.9% Y/Y
- UK SEP RETAIL SALES EX-FUEL +0.3% M/M, +4% Y/Y
There was a big increase in sales from computer and telecommunications retailers which helped push the "other non-food stores" category 5.5%M/M higher which drove the surprise here. Looking at online sales from "other non-food stores" these rose 10.5%M/M. Anecdotally (but not stated in the release) there seemed to be a few iPhone sales ahead of the iPhone16 launch with discounts also seen across Samsung devices in response. Supermarket sales fell 2.4M/M which the ONS notes is the "largest month-on-month fall for food stores this year. Comments from retailers pointed to unseasonably poor weather and consumers continuing to cut back on luxury food items."
SWEDEN DATA (MNI): September LFS Data Probably Still Supports a 25bp Riksbank Cut in Nov
- SWEDEN SEP UNEMPLOYMENT 8.2%
The labour market evolved broadly in line with the Riksbank's September MPR forecasts in Q3, according to labour force survey (LFS) data. The unemployment rate averaged 8.50% (in line with Riksbank projections) while the employment rate averaged 68.9% (vs 69.0% projected). Taken alongside the September inflation and August activity data, we think the balance of risks still tilts towards a 25bp cut in November. However, the door remains open to a larger 50bp cut, as indicated by Governor Thedeen at this week's Parliamentary hearing.
CHINA DATA (MNI): China Q3 GDP Slows to 4.6%
- CHINA Q3 2024 REAL GDP +4.6% Y/Y VS MEDIAN +4.6% Y/Y
- CHINA Q3 2024 REAL GDP +0.9% Q/Q VS MEDIAN +0.9% Q/Q
- CHINA SEP RETAIL SALES +3.2% Y/Y VS MEDIAN +2.5% Y/Y
- CHINA SEP INDUSTRIAL OUTPUT +5.4% Y/Y VS MEDIAN +4.6% Y/Y
- CHINA SEP UNEMPLOYMENT RATE +5.1% VS AUG +5.3%
China's economy grew by 4.6% y/y in Q3, 10 basis points lower than the market estimate, and slowing from Q2's 4.7%, while consumption and production rebounded more than expected amid restored sentiment, data released by the National Bureau of Statistics on Friday showed. GDP grew 0.9% q/q, less than the 1.1% q/q market expectation. Retail sales rose 3.2% y/y in September to hit a four-month high, accelerating from August's 2.1% gain and beating the 2.5% forecast. Retail sales grew 3.3% y/y in Jan-Sep, lower than the 3.4% in Jan-Aug.
JAPAN DATA (MNI): Japan Sept Core CPI Rises 2.4% vs. Aug +2.8%
- JAPAN SEPT CORE CPI +2.4% Y/Y; AUG +2.8%
- JAPAN SEPT CORE-CORE CPI +2.1% Y/Y; AUG +2.0%
- JAPAN SEPT SERVICES PRICES +1.3% Y/Y; AUG +1.4%
The year-on-year rise of Japan's annual core consumer inflation rate slowed to 2.4% in September from August’s 2.8% due to lower energy and household durable goods prices, although foods excluding perishables rose, data released by the Ministry of Internal Affairs and Communications showed on Friday. September’s index stayed above the Bank of Japan’s 2% target for the 30th consecutive month. Lower energy prices (+6.0% vs. +12.0%) and household durable goods (+6.5% vs. +7.7%) drove the index lower, although prices of food excluding perishables rose (3.1% vs. 2.9%).
FOREX: GBP Trades Well on Solid Retail Sales
- GBP trades well on the back of a better-than-expected set of retail sales numbers this morning, with both metrics topping expectations on both an including- and excluding-auto fuels basis. EUR/GBP extended losses based on yesterday's ECB decision, touching new pullback lows of 0.8295 as a result. This marks a bearish break for the cross, opening support at 0.8250 and 0.8203 beyond.
- The UK retail sales data and persistent JPY underperformance has tipped GBP/JPY to briefly show above the late September highs and touch the best levels since end-July this morning. Further strength here would mark a bullish break and a range breakout for the cross - particularly notable given the more dovish backdrop for BoE OIS pricing since the inflation print this week.
- The USD is somewhat softer, helping the USD Index fade off yesterday's cycle highs. Nonetheless, markets remain in close proximity to key resistance at 103.874 - clearance of which would bring the strongest sollar since early August.
- More stable WTI and Brent crude oil markets are lending support to oil-tied currencies - helping NOK modestly outperform into the NY crossover.
- US housing starts and building permits numbers round off the data week, but more attention will likely be paid to commentary from Fed's Bostic, Kashkari and Waller - although none of their appearances appear to be directly addressing the US economy or monetary policy.
EGBS: Reuters Sources Drives Renewed Dovish Repricing in EUR STIRs and EGBs
A dovish Reuters ECB sources piece has helped EUR STIRs and major EGB futures extend the bounce of intraday lows. Bund futures are +22 ticks today at 134.06 (vs a low of 133.67 this morning).
- Reuters reported that some ECB policymakers wanted to drop guidance that rates would be "sufficiently restrictive for as long as necessary" at the October meeting, though the idea did not gain traction.
- The subsequent dovish repricing in EUR STIRs has helped EGB curves to bull steepen further, with German 2s10s printing a new YTD high of 8.5bps.
- ECB-dated OIS price 33bps of cuts through the December meeting (i.e. a ~30% implied probability of a 50bp cut), while the front of the Euribor strip outperforms intraday.
- This, alongside a bid in European equities and downtick in EUR swaption vol has helped 10-year EGB spreads to Bunds to tighten. BTPs lead, with the BTP/Bund spread now at 118bps (-2.5bps today).
- Earlier, the distribution of inflation expectations in the ECB’s Survey of Professional Forecasters suggested greater confidence in returning to the 2% target over the next few years.
GILTS: Recovering From Lows Alongside EGBs
Some of the early pressure that followed firmer-than-expected UK retail sales data fades, spill over from a recovery from session lows in EGBs helps limit losses.
- Futures last +1 at 97.50 vs. lows of 97.27.
- Wednesday’s opening gap higher still isn’t closed, initial support at the Oct 15 high (96.97).
- Bulls failed to take out key near-term resistance at the September 2 low (98.11) over the past couple of sessions, leaving the bearish technical theme intact.
- Yields 0.5-2.0bp higher across the curve, steepening. 2s10s and 5s30s within multi-week ranges.
- Gilts widen by nearly ~3bp vs. Bunds, spread above 190bp after the pullback from cycle highs above 195bp in recent sessions.
- Shallow early hawkish moves in GBP STIRs fade, dovish moves in ECB pricing factoring in.
- BoE-dated OIS now prices 24bp of cuts for November, 41bp through November and 114bp through June, flat to 1bp more dovish on the day.
- SONIA futures +2.0 to -0.5.
- A reminder that we don’t think the breakdown of today’s retail sales data (computer and telecommunications the main driver of the surprise) really signals any change in strength of the UK consumer and hence see little feedthrough for monetary policy.
- Little of note on the UK calendar ahead of the weekend, which should leave cross-market spill over and macro news front and centre.
EQUITIES: Eurostoxx 50 Futures Recover Above Support at 50-Day EMA
Eurostoxx 50 futures traded sharply lower Tuesday. The contract has pierced support around the 50-day EMA, at 4944.90. A clear break of this average would undermine a recent bullish theme and highlight a stronger reversal. This would open 4884.06, a Fibonacci retracement. Key resistance and the bull trigger is unchanged at 5106.00, the Sep 30 high. A break of this level would resume the uptrend. S&P E-Minis trend conditions are unchanged and bulls remain in the driver’s seat. Recent gains confirm a resumption of the primary uptrend and maintain the bullish price sequence of higher highs and higher lows. Note that moving average studies are in a bull-mode setup, highlighting a dominant uptrend. Sights are on 5961.00, a Fibonacci projection. Initial support to watch is 5807.48, the 20-day EMA.
- Japan's NIKKEI closed higher by 70.56 pts or +0.18% at 38981.75 and the TOPIX ended 1.15 pts higher or +0.04% at 2688.98.
- Elsewhere, in China the SHANGHAI closed higher by 92.179 pts or +2.91% at 3261.563 and the HANG SENG ended 725.01 pts higher or +3.61% at 20804.11.
- Across Europe, Germany's DAX trades higher by 40.13 pts or +0.2% at 19624.47, FTSE 100 lower by 15.92 pts or -0.19% at 8369.57, CAC 40 up 34.6 pts or +0.46% at 7618.33 and Euro Stoxx 50 up 29.15 pts or +0.59% at 4976.45.
- Dow Jones mini up 11 pts or +0.03% at 43522, S&P 500 mini up 9 pts or +0.15% at 5896, NASDAQ mini up 72 pts or +0.35% at 20440.
Time: 09:50 BST
COMMODITIES: WTI Futures Trading Just Above This Week's Lows
WTI futures gapped lower Tuesday and this resulted in a break of the Oct 9 low. A bearish extension would threaten the recent bullish theme and expose support at $66.33, the Oct 1 low, and $64.61, the Sep 10 low and a key support. For bulls, a resumption of gains would instead refocus attention on the key short-term resistance at $78.46, the Oct 8 high. Clearance of this level would resume to the recent uptrend. Gold is trading higher today. Thursday’s gains resulted in a break of $2685.6, the Sep 26 high, confirming a resumption of the primary bull trend. The yellow metal has also cleared $2700.0, reinforcing current trend conditions. This maintains the positive price sequence of higher highs and higher lows. Sights are on $2737.8, a Fibonacci projection. Firm support is $2637.0, the 20-day EMA. A clear break of the EMA would signal scope for a deeper retracement.
- WTI Crude up $0.3 or +0.42% at $70.94
- Natural Gas up $0.01 or +0.26% at $2.352
- Gold spot up $12.37 or +0.46% at $2705.06
- Copper up $5.25 or +1.21% at $437.95
- Silver up $0.29 or +0.9% at $31.9825
- Platinum up $14.96 or +1.5% at $1011.2
Time: 09:50 BST
| Date | GMT/Local | Impact | Country | Event |
| 18/10/2024 | 1230/0830 | ** |  US | WASDE Weekly Import/Export |
| 18/10/2024 | 1230/0830 | *** | US | Housing Starts |
| 18/10/2024 | 1330/0930 | US | Atlanta Fed's Raphael Bostic | |
| 18/10/2024 | 1400/1000 | US | Minneapolis Fed's Neel Kashkari | |
| 18/10/2024 | 1610/1210 | US | Fed Governor Christopher Waller | |
| 18/10/2024 | 1630/1230 | US | Atlanta Fed's Raphael Bostic | |
| 18/10/2024 | 1800/1400 | ** | US | Treasury Budget |