MNI US OPEN - Dems in Damage Control as Midterms Kick Off

NEWS

US (MNI): Democrats in Damage Control as Inflation Powers GOP Surge

Midterm elections kick off for the Senate seats of 35 class-three Senators, all 435 seats in the House of Representatives, 39 governorships, and a plethora of state and local level offices. The Republican Party is favoured to take control of the House of Representatives and slightly favoured to win the Senate but, with the Senate map tilted towards Democrats, the GOP will need favourable results across the board to take control of the upper chamber.

MNI Political Risk Preview: https://roar-assets-auto.rbl.ms/documents/20069/MN...

Markets Preview: https://roar-assets-auto.rbl.ms/documents/20084/Mi...

US (MNI): Fed's Barkin - Inflation Will Take Time to Let Up

U.S. inflation will take a while to return to the Federal Reserve’s 2% target despite the central bank’s aggressive interest-rate hikes, Richmond President Thomas Barkin said Monday. “Inflation should come down but don’t expect its drop to be immediate or predictable,” he told an event sponsored by the regional central bank. “When I talk to business leaders, they still view their increased pricing power as temporary. They see it as an episode, not a regime change.”

US (MNI): Trump to Make "Big Announcement" On Nov 15 Amid Reports of Presidential Bid Plans

Former U.S. President Donald J. Trump says that he will make a "big announcement" on November 15 from his Mar-a-Lago residence. Trump speaks at a campaign rally in Ohio, noting that he will make the announcement next Tuesday, "not to detract from tomorrow's [midterm] elections." The Washington Post ran a source report noting that Trump was planning to announce his 2024 presidential bid at the rally but Republican leaders persuaded him to postpone it.

G20/RUSSIA (MNI): Putin Likely to Skip G20 Summit, Lavrov Expected to Stand In

Russian President Vladimir Putin will most probably skip the G20 summit in Bali this month, business daily Vedomosti reports citing a diplomatic source, with another contact close to the presidential administration adding that no preparations have been made for Putin's potential trip. Both sources told the newspaper that Foreign Minister Sergei Lavrov will likely represent Russia in Putin's stead.

GERMANY (MNI): Cabinet Set to Block Acquisition of Chipmaker by Chinese-Owned Firm

Bloomberg is reporting that the German gov't is set to block the acquisition of Elmos' Dortmund-based wafer facility, which makes semiconductors for the car industry, to Silex Microsystems AB, a Swedish firm which is a subsidiary of China's Sai MicroElectronics Inc.

JAPAN (MNI): Next BOJ Governor Won't Act Before Wages Data

There will be no immediate changes to the Bank of Japan's easy monetary policy stance after the new governor takes office in April as officials will wait for the release of small firm wage data to assess the broader pace of wage hikes, MNI understands. While the new governor may may instruct staff to examine the impacts of prolonged easy policy, including liquidity in the bond market, a change to the bank's easing policy in unlikely before June, when small firm wage data becomes available.

DATA

EUROZONE DATA (MNI): Modest Sep Retail Sales Set to Slow into Xmas Period

• EUROZONE SEP RETAIL SALES +0.4% M/M (= FCST); AUG 0.0%r M/M
• EUROZONE SEP RETAIL SALES -0.6% Y/Y (FCST -1.1%) AUG -1.4%r Y/Y

Following upside surprises in German and Italian data, eurozone retail sales saw modest growth of +0.4% m/m in September, after stalling in August. Sales were down -0.6% compared to Sep 2021. Non-food rose by +1.0% m/m and food by +0.4% m/m, implying that consumption remained relatively robust. Auto fuel sales contracted by -0.6% m/m.

With inflation reaching a fresh high of +10.7% y/y for the bloc in October, consumers are feeling the squeeze of soaring prices on disposable incomes, as highlighted in weak sentiment indicators. Heading into the holiday season, Xmas sales are anticipated to remain weak and not be brought forward as in 2021 (due to logistic issue concerns).

JAPAN SEP HOUSEHOLD SPENDING +2.3% Y/Y; AUG +5.1% (MNI)

UK BRC OCT BY VALUE SHOP SALES LFL +1.2% YY, TOTAL +1.6% YY (MNI)

FX SUMMARY: Solid Equities Headed into Midterms Keeps Lid on USD Recovery Rally

• Following a somewhat quiet and lacklustre start to the Tuesday session, risk appetite has picked up very modestly headed into the NY crossover with an uptick in equity futures (putting the e-mini S&P further above the 50-dma) helping put AUD toward the top of the G10 pile.
• Contrary to the bump higher in equity markets, JPY gains hold firm, with USD/JPY back below Y146.50 and eyeing support at 146.09. The pair is likely eyeing the beginning of vote counts in the US midterm elections, with results expected to filter through across the Wednesday Asia-Pac session.
• The USD Index is more stable at recent lows, holding the bulk of the decline posted since the Nonfarm payrolls report on Friday last week. Key parameters for the DXY going forward include support at the October lows of 109.535 and the 50-dma on any recovery rally at 111.2375.
• Another day absent any key US data or central bank speakers, keeping focus on the CPI release due Thursday - seen as key for short-term direction headed into the December FOMC meeting. Speeches from BoE's Pill (already spoken today) and ECB's Wunsch could draw some attention.

BOND SUMMARY: Core FI Sees a Small Bid Ahead of the US Midterms

• There is a small bid for core fixed income this morning, but moves are generally limited to a couple of basis points with curves also relatively steady.
• The market is continuing to look ahead to Thursday's US CPI print but there is also focus on today's US midterm elections. There is an 85-90% chance implied by bookmakers of Democrats losing full control with Republicans gaining one or both houses. Furthermore, there is little discernable pattern in post-midterm asset moves: equities tend to rise in the aftermath of midterms no matter the result (though that is their natural long-term direction anyway); USD and UST returns are more mixed. In this regard though, the more interesting take from a risk-reward perspective is for a strong bearish Treasuries, bullish dollar move in the event the Democrats do the unlikely and win both the Senate and the House. We look ahead to the midterms from a market perspective here and our Political Risk Team's preview is available here.
• TY1 futures are up 0-4 today at 109-24+ with 10y UST yields down -1.7bp at 4.199% and 2y yields down -1.9bp at 4.706%.
• Bund futures are down -0.09 today at 136.36 with 10y Bund yields down -1.2bp at 2.328% and Schatz yields down -0.8bp at 2.194%.
• Gilt futures are down -0.07 today at 100.68 with 10y yields down -0.2bp at 3.632% and 2y yields down -0.4bp at 3.170%.

EQUITIES: Eurostoxx Futures Record Fresh Month-High Tuesday Morning

A bullish EUROSTOXX 50 futures outlook remains intact and Friday’s rally reinforces this condition. The contract is holding on to its recent gains. The break to a fresh short-term trend high confirms a resumption of the bull cycle that started Oct 3. This paves the way for gains above the 3700.00 level. The next key resistance is at 3810.00, the Aug 17 high. Firm support is seen at the 50-day EMA. S&P E-Minis traded lower last week following the reversal from 3928.00, Nov 1 high. Despite the latest retracement, a bull cycle remains in play following the recovery from 3502.00, Oct 13 low. However, an extension lower would undermine this theme. Initial firm to watch lies at 3641.50, the Oct 21 low. A break would strengthen any developing bearish threat. For bulls, a strong resumption of gains would refocus attention on 3928.00, the bull trigger.

• Japan's NIKKEI closed higher by 344.47 pts or +1.25% at 27872.11 and the TOPIX ended 23.47 pts higher or +1.21% at 1957.56.
• Elsewhere, in China the SHANGHAI closed lower by 13.324 pts or -0.43% at 3064.493 and the HANG SENG ended 38.6 pts lower or -0.23% at 16557.31.
• Across Europe, Germany's DAX trades higher by 38.61 pts or +0.29% at 13564.65, FTSE 100 lower by 16.87 pts or -0.23% at 7279.9, CAC 40 down 13.75 pts or -0.21% at 6403.32 and Euro Stoxx 50 up 2.57 pts or +0.07% at 3710.73.
• Dow Jones mini up 52 pts or +0.16% at 32886, S&P 500 mini up 5.75 pts or +0.15% at 3820.75, NASDAQ mini up 34 pts or +0.31% at 11050.

COMMODITIES: WTI, Gold Dip Lower From Recent Highs

WTI futures traded higher again Monday before fading slightly through Tuesday morning. The outlook remains bullish and the contract yesterday pierced resistance at $92.34, the Oct 12 high. A clear break of this hurdle would strengthen a bullish theme and signal scope for a climb towards resistance at $95.55. Moving average studies are beginning to display a bull mode position, reinforcing the current positive outlook. Support lies at $85.30, the Oct 31 low. Gold found support Friday and finished last week’s session on a bullish note. The rally Friday resulted in a print above the 50-day EMA at $1679.1. A clear breach of this EMA would highlight a short-term reversal and suggests potential for further gains near-term. This would open $1714.8, the Oct 7 high. Key support is unchanged at $1615.0, the Sep 28 low.

• WTI Crude down $0.81 or -0.88% at $90.94
• Natural Gas down $0.42 or -6.08% at $6.528
• Gold spot down $4.92 or -0.29% at $1670.69
• Copper down $0.2 or -0.06% at $359.5
• Silver down $0.1 or -0.5% at $20.7056
• Platinum down $7.38 or -0.75% at $977.63