MNI US OPEN - Israel Denies Plan for Ceasefire

NEWS

US/CHINA (BBG): US to Tighten Curbs on China’s Access to Advanced Chip Tech

The US plans to tighten sweeping measures to restrict China’s access to advanced semiconductors and chipmaking gear, seeking to prevent its geopolitical rival from obtaining cutting-edge technologies that could give it a military edge. The latest rules aim to refine and close loopholes from curbs announced last October, according to people familiar with the matter.

US/ISRAEL (BBG): Biden Considers Israel Visit, Warns Against Gaza Occupation

US President Joe Biden weighed a trip to Israel while he cautioned against long-term Israeli occupation of the Gaza Strip on Sunday, as the White House sought to balance support for the country with fears that the regional crisis could escalate. No decision about whether to travel to Israel had yet been made, according to two people familiar with the internal discussions. A spokesperson for the National Security Council said the White House didn’t have a trip to announce.

ISRAEL (RTRS): Israel Denies Plan for Ceasefire in Southern Gaza to Allow Aid In

Israel said on Monday no ceasefire had been implemented in southern Gaza even though security sources in Egypt said a deal had been reached to allow foreigners out of the besieged Palestinian enclave and aid to be brought in. As a humanitarian crisis gripped Gaza, two Egyptian security sources said Israel had agreed to a halt its bombardment of southern Gaza. The Egyptian-controlled Rafah border crossing was expected to reopen to allow foreign passport holders to leave, they said.

POLAND (MNI): Exit Poll Shows Pro-EU Opposition on Track to Form Government

UK (BBG): BOE’s Pill Says ‘Persistent Response’ Needed on UK Inflation

Bank of England Chief Economist Huw Pill said sticky UK inflation may require a “persistent” monetary response, raising the possibility that the central bank has not yet reached a peak in its interest rate-hiking cycle. Speaking at an Official Monetary and Financial Institutions Forum event Monday, Pill said the BOE’s Monetary Policy Committee still had “some work to do” in order to get inflation back down to 2%, from its current level of 6.7%.

ITALY (BBG): Italy Unveils Spending Plans to Support Low-Income Earners

Italian Premier Giorgia Meloni’s cabinet approved the country’s new budget law worth €24 billion ($25.3 billion), simplifying taxes and supporting low-income earners. Speaking in Rome alongside Finance Minister Giancarlo Giorgetti, Meloni unveiled spending plans including tax cuts on wages and a reduction of tax brackets to three from four. Plans also feature a renewal of contracts for state employees, particularly health care workers, and measures for aimed at encouraging parenthood to combat Italy’s historically low birth rates, she said.

CHINA (BBG): China Tightens Rules on Short Selling in a Bid to Boost Stocks

China is tightening curbs on short-selling activities as authorities step up efforts to shore up a struggling stock market. The Securities Regulatory Commission said it’s increasing the margin ratio for ordinary securities borrowing to at least 80% from 50% and that for hedge funds to 100%, effective Oct. 30. Other rules that come into force Monday will restrict lending of shares by strategic investors and senior management and increase supervision of “various arbitrage activities,” it added in a statement on Saturday.

CHINA (BBG): PBOC Offers Most Cash Support Since 2020 as Debt Sales Surge

China’s central bank is making the biggest medium-term liquidity injection since 2020, stepping up efforts to support the nation’s economic recovery and debt sales. The People’s Bank of China added a net 289 billion yuan ($39.6 billion) into the financial system via a one-year policy loan on Monday, the most since Dec. 2020. At the same time, it drained a net 134 billion yuan of short-term liquidity through open-market operations.

AUSTRALIA (BBG): Australia LNG Unions Stick to Strike Plan as Talks Continue

Unions in Australia reiterated a plan to begin strikes Thursday at Chevron Corp.’s liquefied natural gas facilities, even as negotiations continue over ending a dispute that’s threatened to disrupt global supplies. About 91% of union members at the sites voted over the weekend to recommence industrial action, the Offshore Alliance, which represents two key labor groups, said in a post on Facebook.

RBA (MNI): RBA Shifts QE Thinking Following BOE Example

The Reserve Bank of Australia plans a fresh comprehensive review of its past use of additional monetary policy tools some time after mid-2024 and will weigh the Bank of England’s October 2022 market intervention as it assesses the suitability of future bond-buying operations aimed at financial stability, MNI understands.

NEW ZEALAND (MNI): Change of Government, Negotiations Begin

Elections on Saturday have resulted in a change of government. Voters turned from the incumbent Labour government of 6 years with its support almost halving and a National/ACT coalition will take over with National leader Luxon as the new PM. But he has 61 seats in a 121 seat parliament and with final results not until November 3, it won't be known until then if Luxon will need support from NZ First. But discussions are going to start before then with both ACT and NZ First.

FOREX: Greenback Off Highs, But Few Signs of Reversal in Muted Trade

• The greenback is moderately lower early Monday, reflecting the lack of any material escalation in tensions across the middle-east. Resultingly, haven currencies are offered and helping keep the likes of JPY and CHF well off recent highs. Both EUR/USD and GBP/USD are modestly correcting off last week's pullback lows, however there are few signs of any bullish breaks across the USD pairs at present.
• As such, there's a wait-and-see feel across G10 markets, however more action is noted across CEE, as the PLN rallies on the back of a surprising likely victory for the pro-EU opposition in the weekend's leadership elections. EUR/PLN has corrected lower, erasing the entirety of the rally that followed the central bank's surprise 75bps cut two months ago.
• SEK is benefiting from the calmer backdrop, rising against all others in G10, as US futures point to a positive open on Wall Street Monday. NZD is similarly firm, however NZD/USD remains well within range of the Friday lows at 0.5884 and below the 50-dma resistance of 0.5946.
• Focus Monday turns to the US empire manufacturing data for October, due alongside speeches from Fed's Harker and ECB's de Cos. Looking later in the week, UK and New Zealand inflation releases as well as the continuation of US quarterly earnings season should keep markets busy.

EGBS: Reversing Some of Friday’s Rally & Spread Widening

As mentioned elsewhere, the lack of meaningful escalation in the Israeli-Hamas conflict, coupled with U.S. efforts to prevent wider escalation across the Middle East, has allowed a chunk of Friday’s geopolitical risk premium to be unwound, pressuring core global FI markets early this week.

• That leaves Bund futures -45, a little above Friday’s worst levels, while German cash benchmarks run 1-6bp cheaper as the curve bear steepens.
• EGB spreads to Bunds are little changed to narrower on the day, generally unwinding some of Friday’s geopolitical hedging-centric widening.
• A raft of weekend ECB speak failed to move the needle, while recent budget-related headlines out of Italy have also failed to provide meaningful surprises (although the 10-Year BTP/Bund spread has moved off session tights).
• ECB speak and geopolitical headlines should receive most of the focus as the day rolls on.

GILTS: Cheaper And Steeper, Bears Push Futures Through Initial Technical Support

Gilts continue to be biased cheaper on the lack of meaningful, fresh escalation in the Israel-Hamas conflict (some of last week’s geopolitical risk premium has been removed), although a land invasion of Gaza seems relatively imminent, given weekend warnings from the IDF and delays that were seemingly only due to weather conditions in the region.

• Still, the lack of escalation (for now) leaves futures -50 or so, with bears pushing the contract through Wednesday’s session lows. Bears now look to 93.04, the Oct 10 low, as the next area of technical support.
• Cash gilts run 4.5-7.5bp cheaper as the broader curve steepens a little.
• SONIA futures are flat to -4.0 through the blues, bear steepening.
• Meanwhile, liquid BoE-dated OIS contracts run 0.5-4.5bp firmer, with that strip also steepening.
• BoE speak hasn’t moved the needle, with little new in weekend comments from BoE Governor Bailey and outgoing Deputy Governor Cunliffe. More recently, chief economist Pill reiterated his own recent lines of commentary.
• A quick reminder that well-trodden issues for the UK housing market and consumer headwinds stemming from inflation continued to do the rounds in weekend press reports.

EQUITIES: Bearish Theme in Eurostoxx 50 Futures Remains in Play

A bearish theme in Eurostoxx 50 futures remains in play and last week’s reversal from 4256.00, the Oct 12 high, signals the end of the recent corrective cycle. Note too that resistance at the 50-day EMA, at 4253.10, remains intact. A clear break of this average is required to signal scope for a stronger correction. The bear trigger lies at 4082.00, the Oct 4 low. Clearance of this level would confirm a resumption of the downtrend. S&P E-Minis found resistance last week at 4430.50 (Oct 12 high). The pullback means that - for now - resistance at the 50-day EMA, at 4427.45, remains intact. A clear breach of this average is required to strengthen bullish conditions and this would open 4496.25, trendline resistance drawn from the Jul 27 high. A deeper pullback would refocus attention on 4235.50, the Oct 4 low and bear trigger.

• Japan's NIKKEI closed lower by 656.96 pts or -2.03% at 31659.03 and the TOPIX ended 35.21 pts lower or -1.53% at 2273.54.
• Elsewhere, in China the SHANGHAI closed lower by 14.286 pts or -0.46% at 3073.813 and the HANG SENG ended 173.09 pts lower or -0.97% at 17640.36.
• Across Europe, Germany's DAX trades lower by 18.95 pts or -0.12% at 15167.53, FTSE 100 higher by 2.17 pts or +0.03% at 7601.75, CAC 40 down 13.36 pts or -0.19% at 6990.17 and Euro Stoxx 50 down 7.04 pts or -0.17% at 4129.08.
• Dow Jones mini up 87 pts or +0.26% at 33914, S&P 500 mini up 7.25 pts or +0.17% at 4364.5, NASDAQ mini up 11.25 pts or +0.07% at 15131.

COMMODITIES: Gold Trading Above 20- and 50-Day EMAs, Strengthening Recent Rally

WTI futures traded higher Friday and the contract is holding on to its recent gains. The latest recovery has highlighted a key support at $81.50, the Oct 6 low. The medium-term trend condition remains bullish and an extension higher would expose the bull trigger at $95.03, the Sep 28 high. Clearance of this hurdle would confirm a resumption of the uptrend. For bears, a move through $81.50, would instead highlight potential for a stronger bear cycle. Gold traded sharply higher Friday, clearing both the 20- and 50-day EMAs. The rally strengthens the recent reversal and exposes the next key resistance at $1953.0, the Sep 1 high. Clearance of this level would further strengthen a bullish theme. Note that moving average studies continue to highlight a broader bear trend condition, however, prices would need to trade below Friday's low of $1868.8 to signal a reversal.

• WTI Crude down $0.41 or -0.47% at $87.29
• Natural Gas down $0.08 or -2.38% at $3.158
• Gold spot down $20.4 or -1.06% at $1912.78
• Copper up $1.6 or +0.45% at $358.65
• Silver down $0.18 or -0.79% at $22.5438
• Platinum up $1.19 or +0.13% at $885.61