EXECUTIVE SUMMARY
- FED’S GOOLSBEE PRAISES PROGRESS ON INFLATION, LABOR MARKET
- ISRAEL YET TO REACH IRAN DECISION AS IT STEPS UP BEIRUT STRIKES
- CHINA INVESTORS EXPECT $283 BILLION OF NEW STIMULUS THIS WEEKEND
- UK GDP DATA BROADLY IN LINE; NO IMPACT SEEN ON MONETARY POLICY
Figure 1: Banks take early focus in US earnings season
Source: MNI
NEWS
MNI US EARNINGS SCHEDULE: Banks Take Early Focus
Earnings season informally begins this week with Pepsi's midweek report, before BlackRock, Wells Fargo and JP Morgan on Friday. Unfortunately for net interest margins, the Fed's first rate cut since the pandemic will have come too late in the quarter to provide any material relief for banks - leaving initial focus on FICC revenues and general cost reduction. Just over half of the S&P 500 by market cap will have reported by the end of October – although significant releases still cross through November, with NVIDIA scheduled for 21st November.
FED (BBG): Fed’s Goolsbee Praises Progress on Inflation, Labor Market
Federal Reserve Bank of Chicago President Austan Goolsbee said he doesn’t see convincing evidence that the economy is overheating despite a gangbusters September jobs report. Speaking in an interview on Bloomberg’s Odd Lots podcast before Thursday’s consumer price index report, Goolsbee reiterated that inflation has cooled significantly and the labor market remains strong. Asked what keeps him up at night, the Chicago Fed chief said officials need to stay attuned to the risk that strong demand could reignite inflation.
US (WSJ): Iran Secretly Warns U.S. Allies: Don’t Help Israel, or You’re Next
Tehran is threatening in secret diplomatic backchannels to target the oil-rich Arab Gulf states and other American allies in the Middle East if their territories or airspace are used for an attack on Iran, said Arab officials. Israel has threatened Tehran with a severe reprisal after Iran fired about 180 ballistic missiles at Israel earlier this month, with some Israeli officials and commentators pushing for damaging strikes on Tehran’s nuclear facilities or oil infrastructure.
US (BBG): Harris Pressed on Prices, Immigration in Las Vegas Town Hall
Vice President Kamala Harris defended her record on immigration and health care in a town hall with Univision on Thursday, a bid to shore up her standing with Latino voters and counter Republican Donald Trump’s inroads with the crucial Democratic bloc. The town hall in Las Vegas in swing-state Nevada is part of a western tour intended in part to courting Hispanic voters, who boast sizable numbers in that state - and in Arizona, another key battleground - as well as blue-collar workers frustrated with President Joe Biden’s handling of the economy.
ISRAEL/MIDEAST (BBG): Israel Yet to Reach Iran Decision as It Steps Up Beirut Strikes
Israel’s government has yet to decide how to retaliate against Iran for a missile attack last week, according to an Israeli official familiar with the matter. A security cabinet meeting on Thursday night ended without a decision on what the response should be, the official said. It’s unclear if there are divisions within Prime Minister Benjamin Netanyahu’s government or if it is biding its time. Meanwhile, Israel stepped up strikes on Beirut on Thursday after two days of relative calm in the Lebanese capital.
GERMANY (BBG): German Finance Chief Has More Room to Lift Net Debt Next Year
German Finance Minister Christian Lindner will take full advantage of some extra wiggle room under the country’s debt rules and increase net new borrowing next year by about €5 billion ($5.5 billion), according to people familiar with the plans. A mechanism enshrined in Germany’s constitution allows for additional new debt in times of economic weakness. The government this week cut its forecast for gross domestic product next year and now expects a contraction of 0.2% instead of minimal growth, meaning Lindner can expand net borrowing by around 10% to €56.5 billion, said the people, who asked not to be identified discussing confidential information.
POLITICAL RISK (BBG): Lebanon House Speaker Says US Remains Obstacle to Truce Efforts
Lebanon’s Parliament Speaker Nabih Berri says France and the UK are trying to reach a cease-fire between Hezbollah and Israel but “the US rejection remains an obstacle to cease-fire efforts,” according to Al-Jadeed TV. US is in contact with Lebanon and they say they’re with a solution but “lots of talk and no action,” he says.
UK (CityAM): Fears Over Capital Gains Tax Hike Push Business Owners to Sell Up
The number of business owners who fast-tracked selling their companies over the past year has increased due to fears around a possible tax raid in the Budget. According to professional services firm Evelyn Partners, 29 per cent of business owners accelerated their plans in the past year, up from the 23 per cent who did so 18 months ago. The survey showed that 23 per cent of business owners who had fast-tracked their exits did so because they were worried about a capital gains hike.
UK/SWITZERLAND (BBG): UK Resumes Trade Talks With Switzerland in ‘Global Britain’ Push
British and Swiss trade negotiators will resume trade talks on Monday as they seek to broker deeper access to each other’s financial services markets as well as agreements on data sharing and worker visas. The meeting in London - the fifth round of talks between the two nations aimed at enhancing their existing free trade agreement - will be the first since Labour swept to power in the UK’s July 4 general election. The new government has committed to continue work toward a swath of deals initiated by its Conservative predecessor.
CHINA (BBG): China Investors Expect $283 Billion of New Stimulus This Weekend
Investors and analysts are expecting China to deploy as much as 2 trillion yuan ($283 billion) in fresh fiscal stimulus as Beijing seeks to shore up the world’s No. 2 economy and boost confidence. That’s what they hope the country’s finance minister will announce at a highly anticipated briefing on Saturday, according to a majority of 23 market participants surveyed by Bloomberg. Most of the respondents expect the funding to come in the form of government bonds. Beyond the amount of any fiscal package, the target of support will indicate where the government looks to steer its economy after years of debt-fueled expansion through investment, particularly in real estate and infrastructure.
CHINA/JAPAN (BBG): China’s Li Urges Japan PM to Keep Ties Steady Amid Tensions
Chinese Premier Li Qiang urged Japanese Prime Minister Shigeru Ishiba to keep bilateral relations “sound, steady” amid tensions, and for their countries to maintain the stability of global supply chains and free trade. Beijing and Tokyo’s relations are “at a critical stage of improvement and development,” the official Xinhua News Agency reported, citing Li as saying in his meeting with Japan’s new prime minister on Thursday on the sidelines of the Association of Southeast Asian Nations summit in Laos.
BOK (MNI): Governor Cautiously Mulls Further Cuts
Bank of Korea Governor Rhee Chang-yong on Friday flagged the potential for further, timely rate cuts, following the board's decision to cut the base rate 25 basis points to 3.25% on Friday, noting additional easing would occur cautiously with a focus on financial stability and high house prices. “The Board will determine the pace of further rate cuts in a careful and balanced manner, based on a thorough assessment of the trade-offs among policy variables such as inflation, growth, and financial stability,” Rhee told reporters..
PERU (BBG): Peru Surprises, Keeps Lowest Rate Among Big Regional Peers
Peru surprisingly held its benchmark interest rate unchanged Thursday as the economy grows above expectations and borrowing costs already rank as the lowest among Latin America’s major economies. The central bank held its benchmark rate at 5.25%, which last month marked a two-year low, as forecast by just two of 12 analysts surveyed by Bloomberg. Five of the bank’s last eight rate decision have been unexpected.
INDIA (MNI): USD/INR Hits Fresh Record High Amid Rising Equity Outflows, Dovish RBI Shift
USD/INR has finally breached 84.00 following ongoing RBI intervention over the past ~2 months to protect further rupee downside beyond this level. Rising crude prices and Middle East tensions have underpinned the rally in USD/INR from the September lows, while the RBI rate decision earlier this week – which is seen to have opened the door to the start of rate cuts later in the year – will have added to the pressure on the local currency. In addition, foreign outflows from local stocks and bonds have worsened the near-term outlook.
COMMODITIES (BBG): Iron Ore Rises After Jittery Week With China Policy in Focus
Iron ore futures ended the week on an upswing, after days of volatile trading fueled by uncertainty over Beijing’s next moves to support China’s flagging economy. Traders across financial markets are waiting for a briefing on Saturday by the country’s finance minister that’s widely expected to pave the way for more government spending. Investors and analysts surveyed by Bloomberg expect China to deploy as much as 2 trillion yuan ($283 billion) in fresh stimulus.
CORPORATE (BBG): Musk Unveils Tesla Cybercab, Sees Production as Soon as 2026
Elon Musk unveiled prototypes of a long-awaited Tesla Inc. robotaxi called Cybercab, saying production may start in 2026 and that the vehicle could cost less than $30,000. The chief executive officer hitched a ride in one of the two-door sedans on his way to the stage at the carmaker’s event late Thursday in Burbank, California. Musk also showcased a futuristic-looking Robovan concept that he said could transport as many as 20 people, plus updated versions of Tesla’s humanoid robot called Optimus.
DATA
UK DATA (MNI): GDP Data Broadly In Line; No Impact on Monetary Policy
- UK AUG GDP +0.2% M/M, +0.2% 3MM, +0.8% 3M Y/Y
- UK AUG IND PROD +0.5% M/M, -1.6% Y/Y
- UK AUG MANUF OUTPUT +1.1% M/M, -0.3% Y/Y
- UK AUG TRADE BALANCE GBP -0.95BN
Headline M/M GDP in line with consensus at +0.2% M/M in August with July data unrevised at flat (0.0% M/M). Services grew again at +0.1% M/M (a little softer than the +0.2% expected). "Professional scientific and technical activities" was the biggest contributor to service growth. Note that there were falls in wholesale trade (ex vehicles) of -1.6% M/M, wholesale trade of vehicles -1.5% M/M which offset the +1.0% M/M increase in retail trade excluding these factors (leaving the total category -0.3% M/M).
IP was a bit stronger-than-expected at +0.5% M/M with July revised up a tenth to -0.7% M/M. However, there was an interesting shift in manufacturing with a rebound seen in transport (in line with the risks we flagged in the preview after stronger transport manufacturing seen in Germany and France in August after the very soft July).
GERMANY SEP FINAL HICP -0.1% M/M; +1.8% Y/Y (MNI)
GERMAN SEP CPI +1.6 % Y/Y (MNI)
RATINGS: Fitch’s Reaction to French Budget Headlines Friday’s Scheduled Updates
Sovereign rating reviews of note scheduled for after hours on Friday include:
- Fitch on France (current rating: AA-; Outlook Stable) & Slovenia (current rating: A; Outlook Stable)
- Moody’s on Belgium (current rating: Aa3; Outlook Stable) & Slovenia (current rating: A3; Outlook Stable)
- S&P on the Czech Republic (current rating: AA-; Outlook Stable).
- Morningstar DBRS on Malta (current rating: A (high), Stable Trend)
- Scope Ratings on Austria (current rating: AA+; Outlook Stable), the Czech Republic (current rating: AA-; Outlook Stable), the Netherlands (current rating: AAA; Outlook Stable) & the United Kingdom (current rating: AA; Outlook Stable)
FOREX: USD/CAD Extends Winning Streak to Six Consecutive Sessions
- JPY sits very modestly weaker against most others in G10, keeping the bull trend posted off the 139.58 lows intact, and the Y150.00 handle a key psychological target. Gains are perhaps more notable in EUR/JPY, which sits just below the intersection of horizontal resistance layered between 163.49-61 and the 200-dma of 164.37.
- Newsflow and currency-relevant headlines have been few and far between early Friday, keeping focus on the digestion of yesterday's US data as well as the upcoming policy briefing from the Chinese Ministry of Finance over the weekend. As a result, risk sentiment is mixed, evident in equity futures markets sitting in modest negative territory while the US 10y yield holds firmer - albeit well off yesterday's extremes.
- The winning streak in USD/CAD continues, with Thursday trade confirming six consecutive sessions of higher highs and higher lows - keeping the bull trend intact and recovery highs of 1.3775 as the first target, before 1.3800 and 1.3846, the mid-April highs.
- The focus on US inflationary pressures are likely to remain the focus Friday, with PPI data set to cross as well as the prelim UMich sentiment survey. Canadian jobs data for September is also due, with the unemployment rate set to rise to 6.7% from 6.6% - a shift that should keep the BoC on a firm easing bias ahead.
EGBS: Softer Following Heavy Italian Supply, Broader FI Pullback
Bund futures are over 50 ticks off overnight highs at 133.04 (-25 ticks vs yesterday’s settlement), with heavy Italian supply weighing on EGBs this morning and broader FI markets extending lower at typing.
- Key support in Bunds remains at 132.65 (Sep 2 low), with initial resistance at 133.90 (50-day EMA).
- The 3/7/15/24-year BTP auctions saw acceptable results, but major EGB futures were already moving lower and the results did little to change the trend.
- The 10-year BTP/Bund spread is off intraday wides, but remains 1.5bps wider at 129bps.
- The OAT/Bund spread is little changed at ~76.5bps, with the 2025 OAT issuance guidelines falling broadly in line with expectations.
- Focus now turns to whether PM Barnier’s minority Government will be able to get the 2025 budget (presented yesterday) passed in the National Assembly.
- The US PPI report headlines Friday’s global macro calendar at 1330BST/1430CET.
GILTS: Early Rally Reverses
The early gilt rally has faded with wider core global FI markets pulling back from session highs.
- Futures now flat at 96.12 vs. early highs of 96.52, after failing to close yesterday’s opening gap lower.
- Bearish trend intact, bulls have to overcome the October 7 high (96.93) to start turning the technical tide. Initial support at yesterday’s low (95.83).
- Yields 1-2bp higher, curve a touch steeper.
- Light outperformance vs. Bunds after yesterday’s fresh cycle closing wides above 195bp.
- No impact from in line with expected GDP data.
- BoE-dated OIS prices 22bp of cuts for November, 35bp through year-end and 95bp through June. Little changed to 3bp more hawkish.
- SONIA futures flat to 1.0 higher on the day, fading alongside gilts.
- Fiscal speculation should continue to dominate ahead of the October 30 Budget, with markets particularly sensitive to headwinds for gilt demand (as seen following yesterday’s caveated warning from Citi).
- Further afield, U.S. PPI data headlines the macro calendar today.
EQUITIES: Next Resistance for Eurostoxx 50 Futures Remains Out of Reach for Now
Eurostoxx 50 futures finished Wednesday trade well, but next resistance remains out of reach for now at the September highs. Key short-term support to watch is 4934.85, 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 the latest shallow pullback still appears to be a correction. Price is trading closer to its recent highs. MA 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 5759.36, the 20-day EMA. It has been pierced. Key support lies at 5686.59 the 50-day EMA.
- Japan's NIKKEI closed higher by 224.91 pts or +0.57% at 39605.8 and the TOPIX ended 6.47 pts lower or -0.24% at 2706.2.
- Across Europe, Germany's DAX trades higher by 14.28 pts or +0.07% at 19225.18, FTSE 100 lower by 10.53 pts or -0.13% at 8227.21, CAC 40 up 6.35 pts or +0.08% at 7547.1 and Euro Stoxx 50 up 0.5 pts or +0.01% at 4970.45.
- Dow Jones mini down 34 pts or -0.08% at 42713, S&P 500 mini down 7.5 pts or -0.13% at 5821.5, NASDAQ mini down 48.5 pts or -0.24% at 20381.5.
Time: 09:55 BST
COMMODITIES: WTI Futures Holding Onto Bulk of Thursday's Gains
WTI futures traded higher Monday as the pair extended the rally that started Oct 1. Tuesday’s reversal 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 $71.99, the 20-day EMA. The latest 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 $2616.3, the 20-day EMA. It has been pierced, a clear break would signal scope for a deeper retracement.
- WTI Crude down $0.69 or -0.91% at $75.16
- Natural Gas up $0.01 or +0.34% at $2.684
- Gold spot up $10.28 or +0.39% at $2640.11
- Copper up $1.75 or +0.4% at $444.45
- Silver down $0.02 or -0.05% at $31.15
- Platinum up $2.72 or +0.28% at $974.65
Time: 09:55 BST
| Date | GMT/Local | Impact | Country | Event |
| 11/10/2024 | 1230/0830 | *** |  US | PPI |
| 11/10/2024 | 1230/0830 | * |  CA | Building Permits |
| 11/10/2024 | 1230/0830 | *** | CA | Labour Force Survey |
| 11/10/2024 | 1345/0945 | US | Chicago Fed's Austan Goolsbee | |
| 11/10/2024 | 1400/1000 | ** | US | U. Mich. Survey of Consumers |
| 11/10/2024 | 1430/1030 | ** | CA | BOC Business Outlook Survey |
| 11/10/2024 | 1445/1045 | US | Dallas Fed's Lorie Logan | |
| 11/10/2024 | 1600/1200 | *** | US | USDA Crop Estimates - WASDE |
| 11/10/2024 | 1710/1310 | US | Fed Governor Michelle Bowman | |
| 12/10/2024 | - | *** |  CN | Money Supply |
| 12/10/2024 | - | *** | CN | New Loans |
| 12/10/2024 | - | *** | CN | Social Financing |
| 13/10/2024 | 0130/0930 | *** | CN | CPI |
| 13/10/2024 | 0130/0930 | *** | CN | Producer Price Index |