EXECUTIVE SUMMARY
- MNI UK BUDGET PREVIEW: IS THIS JUST THE BEGINNING?
- CHINA SAYS IT MAY RESPOND TO US’S TECH INVESTMENT CURBS
- ISRAEL EYES DEAL TO END LEBANON COMBAT AFTER WEAKENING HEZBOLLAH
- UPSIDE RISKS TO GERMAN NATIONAL CPI FROM STATE-LEVEL DATA
Figure 1: Prevailing GBP implied vols are notably lower for this Budget vs. prior UK fiscal events
Source: MNI/Bloomberg
NEWS
MNI UK BUDGET PREVIEW: Is This Just The Beginning?
Our overall expectation ahead of the Budget is that the impact on MPC policy will likely be more subdued than the market currently fears, given that we expect infrastructure spending to be ramped up more gradually. We look at the changes to fiscal rules and what they mean as well as the expected measures that will be announced. Furthermore we look at the implications for the financing situation and the gilt remit and potential market implications. On the political risk side, this will be the first major test of Labour's economic stance. We look at the wider political implications of the Budget.
UK (MNI): Chancellor to Deliver First Labour Budget for 14 Years at 1230GMT
Chancellor of the Exchequer Rachel Reeves is set to deliver the first Budget statement from a Labour gov't since March 2010 this afternoon at 1230GMT (0830ET, 1330CET). Reeves will speak in the House of Commons following prime minister's questions (the final session that former PM and current Leader of the Opposition Rishi Sunak will take part in). The significant time period between Labour's election win on 4 July and the Budget today - the longest gap between a new gov't and its first budget since 1970 - has allowed for rampant media speculation regarding the Budget's likely contents.
US (BBG): Harris Closing Pitch From Jan. 6 Site Casts Trump as Danger
Democratic presidential candidate Kamala Harris argued a second Donald Trump presidency would be steeped in chaos and division - but not focused on Americans’ needs - as she looked to rally voters from the National Mall one week before Election Day. The vice president sought to balance her closing argument between a dire admonition to rally against an opponent she’s labeled a fascist threat and an affirmative case for her own policy and economic agenda.
US (BBG): Trump Hits Harris on Border in Bid to Blunt Puerto Rico Fury
Former President Donald Trump sought to both move past the controversy over racist remarks made at his Madison Square Garden rally and nullify the major address Vice President Kamala Harris delivered Tuesday evening by focusing attention on one of her biggest political vulnerabilities. Trump at an event at his Mar-a-Lago home Tuesday unveiled a new campaign pledge, vowing to seize the assets of drug cartels and gangs to provide compensation to victims.
US/CHINA (BBG): China Says It May Respond to US’s Tech Investment Curbs
China has made representations to the US and reserves the right to take measures against Washington’s decision to curb investment tech industries, the Ministry of Commerce in Beijing said in a statement Wednesday. China hopes the US can respect market economy rules and stop politicizing trade issues.
ISRAEL/MIDEAST (BBG): Israel Eyes Deal to End Lebanon Combat After Weakening Hezbollah
Israel is considering a deal to end the conflict with Hezbollah in Lebanon that would see the militant group’s fighters move away from the Israeli border, after assessing its rocket arsenal has been mostly expended or destroyed. Prime Minister Benjamin Netanyahu met top aides late on Tuesday to discuss a US-shepherded cease-fire proposal, his spokesperson said. The White House is sending two of President Joe Biden’s most senior Middle East envoys, Brett McGurk and Amos Hochstein, to Israel on Thursday, another Israeli official said.
CHINA (BBG): China’s Mega Banks Post Profit Gains Even as Margins Deteriorate
China’s biggest state-controlled lenders delivered gains in profit in the third quarter even as already record-low net interest margins continued to deteriorate. Agricultural Bank of China Ltd. posted a 5.6% rise in profit, Bank of Communications Co. delivered a 1.2% increase, and Bank of China Ltd. said net income grew 4.4%, according to statements Wednesday. China’s $61 trillion banking industry has been battling record low margins, sinking profits and rising bad debt as they have been called on to backstop the sluggish economy.
JAPAN (BBG): Japan’s LDP, DPP to Hold High-Level Policy Talk Thursday
Japan’s Liberal Democratic Party and a small opposition party that holds the key for its fate will have high-level policy discussions on Thursday, raising speculation that Prime Minister Shigeru Ishiba is negotiating a deal to stay in power. Yuichiro Tamaki, head of the Democratic Party For the People, said on Wednesday that his focus is on how to achieve policies, especially a tax break for part-time workers, his party’s top policy item. DPP’s Secretary General Kazuya Shimba will meet with his LDP counterpart, Hiroshi Moriyama.
MNI BOJ PREVIEW - OCTOBER 2024: Wait & Watch Then Hike
The Bank of Japan (BoJ) Policy Board is meeting on October 30-31, with an anticipated unanimous decision to maintain its current policy rate at 0.25%. Since April, the BoJ’s guidance has indicated a gradual rate increase if economic activity and inflation trends align with the central bank’s projections, stating that the real policy rate is currently too low relative to neutral levels. However, an additional precondition for future rate hikes has emerged, emphasising stability in overseas economies and financial markets, especially the US.
CORPORATE (BBG): VW Posts Its Least-Profitable Quarter Since Pandemic Times
Volkswagen AG’s operating margin shrank to the lowest since the Covid-19 pandemic, underscoring the urgency of the automaker’s unprecedented efforts to restructure its German operations. Operating profit plunged 42% to €2.86 billion ($3.1 billion) in the third quarter, with revenue also slipping from a year ago, Volkswagen said Wednesday. Its operating margin dwindled to just 3.6%, the lowest in over four years.
CORPORATE (BBG): UBS Shares Hit Highest Since 2008 on Third-Quarter Profit Surge
UBS Group AG posted third quarter profit that almost doubled expectations, adding to evidence that the bank’s integration of Credit Suisse is on track. Shares in the Zurich-based bank rose to the highest since May 2008, just before the lender received a bailout from the Swiss government in the wake of the global financial crisis. Net income was $1.4 billion, aided by trading and progress on controlling costs.
DATA
GERMANY DATA (MNI): Upside Risks to German National CPI From State-Level Data
- BAVARIA OCT CPI +0.5% M/M, +2.4% Y/Y (MNI)
- NRW OCT CPI +0.3% M/M, +2% Y/Y (MNI)
- BADEN-WUERTTEMBERG OCT CPI +0.7% M/M, +2.1% Y/Y (RTRS)
State-level data currently suggests upside risks to the 0.2% M/M national consensus (due at 1300GMT/1400CET today). The three largest states all saw monthly inflation exceed 0.2%: NRW at 0.3% M/M, Bavaria at 0.5% and Baden Wuerttemberg at 0.7%. Hesse, Saxony, and Saxony Anhalt also saw strong monthly readings. Taken alongside the firmer than expected German Q3 flash GDP print, ECB-dated OIS now price 30bps of easing through the December meeting (vs 35bps pre-data), pulling back expectations for a 50bp cut.
GERMANY OCT UE RATE (SA) 6.1% (FCST 6.1%); SEP 6.1%R (MNI)
SPAIN DATA (MNI): Q3 Flash GDP Stronger Than Consensus
- SPAIN Q3 FLASH GDP +0.8% Q/Q, +3.4% Y/Y
Spain Q3 flash GDP was stronger than consensus at 0.8% Q/Q (vs 0.6% cons, 0.8% prior) and 3.4% Y/Y (vs 3.0% cons, 3.2% prior). Spanish outperformance versus other large Eurozone countries has been telegraphed in survey evidence throughout this year, with the October flash PMIs suggesting a similar development to begin Q4 (excluding France and Germany, the rest of the Eurozone "saw output increase at the fastest pace in four months"). Growth continued to be driven by domestic demand, which contributed 0.9pp to the Q/Q print (vs 0.7pp in Q2). Meanwhile, external demand pulled down growth by 0.1pp (vs a +0.1pp contribution in Q2).
SPAIN OCT FLASH CPI +0.6% M/M, +1.8% Y/Y (MNI)
SPAIN OCT FLASH CORE CPI +2.5% Y/Y (MNI)
SPAIN OCT FLASH HICP +0.4% M/M, +1.8% Y/Y (MNI)
FRANCE DATA (MNI): Q3 Flash GDP One Tenth Above Consensus Boosted by Olympics
- FRANCE Q3 FLASH GDP +0.4% Q/Q, +1.3% Y/Y
- FRANCE SEP CONSUMER MANUF SPENDING +0% M/M, -0.2% Y/Y
- FRANCE SEP CONSUMER SPENDING +0.1% M/M, -0.1% Y/Y
France Q3 Flash GDP was one tenth higher than expected at 0.4% Q/Q (vs 0.3% consensus, 0.2% in Q2), and 1.3% Y/Y (vs 1.2% consensus, 1.0% prior). The press release notes this is "stimulated by the Paris Olympics and Paralympic Games...whose ticket sales revenue and audiovisual broadcasting rights are recorded in national accounting at time of the sporting event". Foreign trade growth is estimated to have contributed 0.1% in the third quarter (vs 0.2% in Q2), with imports falling sharply by 0.7% Q/Q (vs growth of 0.1% in Q2), and exports falling to a lesser extent by 0.5% Q/Q (vs growth of 0.5% in Q2).
SWITZERLAND DATA (MNI): October KOF Drops on Production Side of Economy
- SWISS KOF OCT ECONOMIC BAROMETER 99.5
The Swiss KOF Economic Barometer dropped to 99.5 in October, significantly below consensus of 105.0 and following a downwardly revised 104.5 in September. This is the first time since January that the index moved below the longer-run average level of near 100. "The indicator bundles of all production-side categories included in the barometer decline in October: the indicators for manufacturing, financial and insurance services, other services, hospitality and construction."
AUSTRALIA DATA (MNI): Aussie Q3 Trimmed CPI Meets Expectations at 3.5%
Trimmed mean annual inflation rose 3.5% over the September quarter as expected, while headline inflation printed at 2.8% y/y, 10 basis points lower than anticipated, data from the Australian Bureau of Statistics showed Wednesday. The trimmed mean measure fell 40bp from Q2, while the headline result was down 100bp due in large part to government electricity subsidies and lower energy prices. The Reserve Bank of Australia is focused more on the underlying measure due to the distorting effect of government rebates.
FOREX: UK Budget in Focus, EUR Buoyed on Firm German Regional CPIs
- The UK Budget takes focus ahead, at which the UK Chancellor Reeves outlines the first Labour budget in over 15 years - and is expected to show a series of tax rises and a change in fiscal rules. While GBP vols have ticked higher headed into the release, the vol premium is comfortably below that seen across 3 of the past 4 UK fiscal events - supporting the theory that while infrastructure spending is to rise in the coming parliament, there will be little to deter the Bank of England's current easing trajectory toward neutral.
- GBP/USD trades back above the 1.3000 level, but gains at these levels are considered corrective as part of the bear leg off the September high. On the upside, initial firm resistance to watch is 1.3065, the 50-day EMA. A clear breach of this average is required to signal any reversal.
- EUR trades well, gaining against most others as regional German CPI prints point to upside risks for the national reading - with the three largest states all seeing monthly inflation top 0.2% - Baden-Wuettemberg was a particularly high reading at 0.7% M/M. The national print follows later today at 1300GMT.
- US data today includes the advance reading for Q3 GDP, with ADP employment change and pending home sales also on the docket. The Fed remain inside the pre-decision media blackout, leaving speaker focus on ECB's Schnabel, Villeroy and Nagel, with BoC's Macklem and Rogers to make a second appearance of the week.
EGBS: Bund Futures Weaker Post German Data, But Off Lows
Bund futures fell almost 50 ticks after German flash Q3 GDP and state-level October inflation data printed above consensus estimates. However, futures have moved off intraday lows, currently +7 at 132.58.
- The German data came after Spanish and French Q3 GDP had already exceeded consensus forecasts. Meanwhile, the Italian reading was a little weaker than expected.
- ECB-dated OIS price 31bps of easing through the December meeting, down from 35bps before the German data, but off the post-data dovish extreme of 30bps.
- As such, the German curve has twist flattened, with 2-year yields 3.5bps higher and 30-year yields 3.5bps lower.
- 10-year peripheral spreads to Bunds are generally wider, with European equity futures dragged lower by weakness in China/Hong Kong overnight.
- Eurozone Q3 flash GDP is due at 1000GMT/1100CET, while the UK budget and US GDP may also provide spillover potential this afternoon.
GILTS: Profit Taking & European Data Drive X-Market Outperformance Into Budget
Gilt outperformance extends further following firmer than-expected German regional level CPI data and a string of higher-than-expected GDP readings from the continent.
- Some of yesterday’s cross-market widening had already reversed in early trade, which, when coupled with some swap spread widening and cross-market outperformance, points to profit taking on gilt shorts ahead of today’s Budget.
- Futures +55 at 95.95, off session highs (96.05).
- Initial technical levels provided by range extremes seen over the past couple of sessions. Resistance at the Oct 28 high (96.51), support at the Oct 29 low (95.29).
- Yields 4-6bp lower on the day, curve flattens.
- 5- to 20-Year yields hit the highest level since May/June yesterday, as pre-Budget positioning dominated.
- 5s/30s curve threatens a clean break of August lows.
- Gilts 5bp narrower vs. Bunds, last ~192.5bp.
- BoE-dated OIS little changed on the day, showing 23bp of cuts for November, 38bp of cuts through year-end and 101bp of cuts through June.
- SONIA futures little changed to +5.0, flattening as gilts rally.
- Our Budget preview provides deeper colour on our thoughts surrounding spill over into monetary policy.
- Our expectation is that the Budget’s impact on BoE policy will ultimately be more subdued than the market currently fears, as we expect infrastructure spending to be increased in a fairly gradual manner.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference Vs. Current Effective SONIA Rate (bp) |
Nov-24 | 4.720 | -23.0 |
Dec-24 | 4.571 | -38.0 |
Feb-25 | 4.356 | -59.5 |
Mar-25 | 4.194 | -75.6 |
May-25 | 4.013 | -93.7 |
Jun-25 | 3.937 | -101.3 |
Aug-25 | 3.839 | -111.1 |
Sep-25 | 3.799 | -115.1 |
Nov-25 | 3.778 | -117.2 |
EQUITIES: E-Mini S&P Uptrend Intact, Contract Still Above 20-Day EMA
Eurostoxx 50 futures continue to trade within its recent range. For now, a bear threat still remains present. The contract traded sharply lower on Oct 15 and has pierced the 50-day EMA, at 4950.11. 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. S&P E-Minis continue to trade below their recent highs. However, recent S/T weakness is considered corrective and the uptrend remains intact. Price has recently traded through support at the 20-day EMA, at 5840.25, but is - for now - trading above this average once again. A clear bearish break of the EMA would open 5762.24, the 50-day EMA. For bulls, a stronger resumption of gains would refocus attention on 5961.00, a Fibonacci projection.
- Japan's NIKKEI closed higher by 373.71 pts or +0.96% at 39277.39 and the TOPIX ended 21.7 pts higher or +0.81% at 2703.72.
- Elsewhere, in China the SHANGHAI closed lower by 20.169 pts or -0.61% at 3266.238 and the HANG SENG ended 320.5 pts lower or -1.55% at 20380.64.
- Across Europe, Germany's DAX trades lower by 65.7 pts or -0.34% at 19412.35, FTSE 100 lower by 30.94 pts or -0.38% at 8188.61, CAC 40 down 64.72 pts or -0.86% at 7446.55 and Euro Stoxx 50 down 31.15 pts or -0.63% at 4918.97.
- Dow Jones mini up 29 pts or +0.07% at 42477, S&P 500 mini up 10 pts or +0.17% at 5881, NASDAQ mini up 29.5 pts or +0.14% at 20727.
Time: 09:10 GMT
COMMODITIES: WTI Futures Trading Just Ahead of Recent Lows
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 $2694.6, the 20-day EMA. A clear break of this EMA would highlight a short-term top.
- WTI Crude up $0.57 or +0.85% at $67.79
- Natural Gas up $0.02 or +0.7% at $2.879
- Gold spot up $8.16 or +0.29% at $2782.96
- Copper up $1.45 or +0.33% at $437.45
- Silver down $0.22 or -0.65% at $34.237
- Platinum down $13.62 or -1.3% at $1036.91
Time: 09:10 GMT
| Date | GMT/Local | Impact | Country | Event |
| 30/10/2024 | 1000/1100 | *** |  EU | EMU Preliminary Flash GDP Q/Q |
| 30/10/2024 | 1000/1100 | *** | EU | EMU Preliminary Flash GDP Y/Y |
| 30/10/2024 | 1000/1100 | ** | EU | EZ Economic Sentiment Indicator |
| 30/10/2024 | 1000/1100 | * | EU | Consumer Confidence, Industrial Sentiment |
| 30/10/2024 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 30/10/2024 | - |  GB | UK Budget | |
| 30/10/2024 | 1215/0815 | *** | US | ADP Employment Report |
| 30/10/2024 | 1230/0830 | *** | US | GDP |
| 30/10/2024 | 1230/0830 | ** | US | Advance Trade, Advance Business Inventories |
| 30/10/2024 | 1230/0830 | *** | US | Treasury Quarterly Refunding |
| 30/10/2024 | 1300/1400 | *** |  DE | HICP (p) |
| 30/10/2024 | 1400/1000 | ** | US | NAR Pending Home Sales |
| 30/10/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 30/10/2024 | 1500/1600 | EU | ECB's Schnabel speech at SAFE-CEPR conference | |
| 30/10/2024 | 1800/1400 | US | Fed Beige Book | |
| 30/10/2024 | 2015/1615 |  CA | BOC Governor Macklem at Senate banking committee | |
| 31/10/2024 | 2350/0850 | * |  JP | Retail Sales (p) |
| 31/10/2024 | 2350/0850 | ** | JP | Industrial Production |
| 31/10/2024 | 0030/1130 | *** |  AU | Retail trade quarterly |
| 31/10/2024 | 0030/1130 | ** | AU | Retail Trade |
| 31/10/2024 | 0030/1130 | ** | AU | Trade price indexes |
| 31/10/2024 | 0030/1130 | * | AU | Building Approvals |
| 31/10/2024 | 0130/0930 | *** |  CN | CFLP Manufacturing PMI |
| 31/10/2024 | 0130/0930 | ** | CN | CFLP Non-Manufacturing PMI |
| 31/10/2024 | 0300/1200 | *** | JP | BOJ Policy Rate Announcement |
| 31/10/2024 | 0700/0800 | ** | DE | Retail Sales |
| 31/10/2024 | 0700/0800 | ** | DE | Import/Export Prices |
| 31/10/2024 | 0745/0845 | *** |  FR | HICP (p) |
| 31/10/2024 | 0745/0845 | ** | FR | PPI |
| 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) |