EXECUTIVE SUMMARY
- ISRAEL PM, DEFENCE MINISTER REACH AGREEMENT ON IRAN RESPONSE
- US WEIGHS CAPPING NVIDIA, AMD AI CHIP SALES TO SOME COUNTRIES
- FED’S KASHKARI SAYS PRIVATE CREDIT MAY LESSEN SYSTEMIC RISK
- UK REGULAR PAY MODERATES, BUT QUANTITY SIDE OF LABOUR DATA HOLDING UP
Figure 1: Contributions to Eurozone M/M industrial production
NEWS
US (BBG): US Weighs Capping Nvidia, AMD AI Chip Sales to Some Countries
Biden administration officials have discussed capping sales of advanced AI chips from Nvidia Corp. and other American companies on a country-specific basis, people familiar with the matter said, a move that would limit some nations’ artificial intelligence capabilities. The new approach would set a ceiling on export licenses for certain countries in the interest of national security, according to the people, who described the private discussions on condition of anonymity. Officials are focused on Persian Gulf countries that have a growing appetite for AI data centers and the deep pockets to fund them, the people said.
US (WSJ): Harris Fights to Counter Trump’s Appeal With Black Male Voters
Vice President Kamala Harris and her Democratic allies are rolling out a blizzard of policies, events, and outreach in an attempt to shore up her standing with Black men with just three weeks to go until Election Day. Harris on Monday night stopped by a Black-owned business in Erie, Pa., to discuss her new economic plan for Black entrepreneurs ahead of a rally there. At the same time, actor Don Cheadle and NFL defensive tackle Thomas Booker headlined a “Monday Night Football” watch party in Detroit in an attempt to use celebrity surrogates to connect with voters.
FED (BBG): Fed’s Kashkari Says Private Credit May Lessen Systemic Risk
The rise of the private credit market may lead to less systemic risk in the US financial system despite a lack of political appetite for increasing bank capital requirements, Federal Reserve Bank of Minneapolis President Neel Kashkari said. “It’s scary at some level, because it’s exploded to a trillion dollar plus market fairly quickly,” Kashkari said in Buenos Aires on Monday. “But as I’ve examined it, a bank in the US today - a big bank - is levered roughly 10 to one, 10 times as much assets for their equity. These private credit vehicles are typically levered one to one, so it’s much less leverage.”
MNI US EARNINGS SCHEDULE: 8.8% of S&P 500 Due This Week
Financials remain the focus, with BofA, Goldman Sachs, Morgan Stanley and Citigroup all due this week. Biggest name to report is UnitedHealth (just over 1% of the S&P500) on Tuesday. Bank reports so far highlight better Markets revenues, but mixed performance for net interest income.
ISRAEL (MNI): PM & Def Min Reach Agreement on Iran Response
Israeli broadcaster KAN reporting that PM Benjamin Netanyahu and Defence Minister Yoav Gallant have agreed on a response to the 1 October Iranian missile strikes on Israel. The article claims that "full agreements were reached on the course of action against Iran, the apparent timing and the strength of the response", with full security cabinet approval the final step required before any retaliation takes place. A more limited strike on the Iranian military would likely lean in a less escalatory direction than one on oil or nuclear sites (the latter being particularly sensitive for Tehran).
ITALY (BBG): Italy Targets €4 Billion From Firms Via Tax Rate, Deductions
Italy’s government is targeting €4 billion ($4.4 billion) from companies by adjusting some tax thresholds and eliminating certain tax deductions, according to people familiar with its budget plans. Finance Minister Giancarlo Giorgetti’s team is working on ways to raise money to help fill a €9 billion shortfall in a last-minute tweak to the country’s financial plan, said the people, who declined to be identified because discussions on the matter are confidential.
CHINA (BBG): China Banks Mull Cutting Deposit Rates as Early as This Week
Chinese banks are set to trim rates on 300 trillion yuan ($42.3 trillion) of deposits as soon as this week after the latest barrage of stimulus policies further squeeze their profitability, according to people familiar with the matter. Major banks including Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. will be guided by the central bank’s interest rate self-disciplinary mechanism to lower the rates on a number of deposit products, said the people, who asked not to be identified discussing a private matter.
CHINA (BBG): China Moves to Tax the Ultra-Rich for Overseas Investment Gains
China has begun enforcing a long-overlooked tax on overseas investment gains by the country’s ultra-rich, according to people familiar with the matter. Some wealthy individuals in major Chinese cities were told in recent months to conduct self-assessments or summoned by tax authorities for meetings to evaluate potential payments, including those in arrears from past years, said the people, asking not to be identified discussing a private matter.
CHINA (BBG): China May Raise $846 Billion to Boost Growth, Caixin Reports
China may raise 6 trillion yuan ($846 billion) from ultra-long special government bonds over three years as part of its efforts to boost the sputtering economy, Chinese media outlet Caixin reported. The funds will be partly used to help local governments relieve their burden from off-balance-sheet debt, according to the report late on Monday, citing unidentified people.
N.KOREA/S.KOREA (BBG): North Korea Blows Up Roads, Prompting South to Fire in Warning
North Korea blew up sections of roads in its own territory that are part of a network of links once used to connect the southern part of the peninsula with the north, in a show of defiance after it accused Seoul of flying drones over Pyongyang. North Korea detonated bombs north of its eastern and western borders at around noon on Tuesday, South Korea’s Joint Chiefs of Staff said. South Korea’s military later fired off warning shots within its border, in the area south of the Military Demarcation Line, according to the JCS, which also confirmed there were no reports of damage in South Korea from the detonations.
INDIA (BBG): India Unveils $109 Billion Transmission Plan for Green Energy
India’s power ministry unveiled a plan to revamp its power grid to accommodate a large renewable expansion through 2032. The project, estimated to cost 9.15 trillion rupees ($109 billion), will help integrate 500 gigawatts of renewable power by the end of the decade, a more than two-fold increase from now, the ministry said in a statement on Monday. Transmission constraints have emerged as a key obstacle for the growth of renewable energy the world over, with a spurt in demand causing delayed deliveries and surging prices of grid equipment.
COMMODITIES (BBG): Copper Slides to Three-Week Low on Fresh Jitters Over China
Base metals joined a selloff across Chinese risk assets on doubts over how much impact the government’s pro-growth push will have on demand. Copper, aluminum and zinc all fell by more 1% on the London Metal Exchange, as sentiment across China’s financial markets turned sour again. Copper is heading for its lowest close since Sept. 23, before Beijing unveiled a flurry of measures aimed at boosting the economy.
DATA
UK DATA (MNI): Regular Pay Moderates, But Quantity Side of Labour Data Holding Up
- UK AUG AVE WEEKLY EARNINGS +3.8% YY
- UK AUG AVE WEEKLY EARNINGS EX-BONUS +4.9% YY
- UK SEP CLAIMANT RATE +4.7%
Private sector regular pay inched up a little on the single month metric to GBP643/week. However, the 4.51% Y/Y increase in the single month rate is the lowest since 2021 (and notably lower than the 4.94% seen in July and the 4.98% seen in both May and June). There were only minimal revisions to the series. This is broadly in line with expectations but a notable softening given the lack of prior revisions. We still question the validity of the employment data (and LFS data in general) and note that the unemployment rate has been in a 3.8-4.4% range for 24 consecutive months now. We think on balance we don't think this data will be strong enough to change any MPC member's view.
EUROZONE DATA (MNI): Industrial Production In-Line With Consensus
- EUROZONE AUG IP +1.8% M/M, +0.1% Y/Y
Eurozone industrial production was in-line with consensus and MNI tracking at 1.8% M/M in August (vs -0.5% revised prior from -0.3%). The annual reading was higher than expected at 0.1% Y/Y (vs -1.0% consensus, -2.1% revised prior from -2.2%). The reading is largely driven by Germany and Ireland. The former reversed most of last month's losses, rising 3.3% M/M after -3.3% in July for its strongest monthly increase since October 2021 and contributing ~1.1pps to Eurozone-wide industrial production in August. Meanwhile, Ireland saw a increase of 4.5% M/M after 7.6% in July as the series continues to see large swings.
EUROZONE DATA (MNI): Bank Lending Standards Unchanged in Q3 - ECB
Euro area bank lending standards were unchanged for firms in Q3, the latest ECB survey shows, although demand for loans picked up modestly despite remaining "weak overall". While credit standards remained unchanged in net terms, risk perceptions were again "reported as having a small tightening impact," according to the survey. A small net easing was reported in Germany. Banks also reported a further net easing of credit standards for loans to households for house purchase, of -3%, whereas a further 6% net tightening was reported for consumer credit.
FRANCE DATA (MNI): Final CPI Compounds Soft Inflation Message
- FRANCE SEP HICP -1.3% M/M, +1.4% Y/Y
- FRANCE SEP CPI -1.2% M/M, +1.1% Y/Y
France Final HICP data for September was a touch softer than the flash reading at 1.44% (vs 1.52% flash, 2.19% in August), and -1.30% M/M (vs -1.23% flash, 0.60% prior). Recall, flash HICP Y/Y came in 0.4pp below consensus. France national CPI came in marginally softer than flash at 1.10% Y/Y (vs 1.17% flash, 1.83% prior), -1.24% M/M (vs -1.17% flash, 0.53% prior) - the largest monthly decline since the start of the series in 1990. Seasonally adjusted national CPI softened to -0.62% M/M in September from
0.22% in August. Core CPI softened to 1.42% Y/Y from 1.74% in August.
SWEDEN DATA (MNI): Inflation Momentum Steady in September, Breadth Metrics Improve
- SWEDEN SEP CPIF +1.1% Y/Y
The Swedish final September inflation reading confirmed flash estimates, with CPIF ex-energy at 2.01% Y/Y (above the Riksbank's September MPR projection of 1.85%) and 0.35% M/M. Trends in inflation momentum and inflation breadth underscore the Riksbank's view that upside inflation risks have diminished, and underlying inflation is broadly consistent with the 2% target. MNI's calculations indicate that CPIF ex-energy inflation rose 0.24% M/M on a seasonally adjusted basis. While this led to an uptick in 1/3/6-month annualised SA inflation, overall inflation momentum on a 3m/3m SA annualised basis was steady at 2.3%.
NORWAY DATA (MNI): Smallest Goods Trade Surplus in 3 Years in September
The Norwegian September goods trade balance fell to NOK42.8bln from NOK63.4bln prior, driven by continental shelf maintenance and lower oil prices. This was the lowest monthly trade surplus since June 2021. Oil price volatility has picked up in October on the back of Chinese stimulus and heightened geopolitical tensions. This volatility will likely spillover into upcoming trade figures. The offshore economy has supported overall GDP for several years now, so a renewed slump in oil prices - particularly if driven by global demand concerns - may force the Norges Bank into a faster pace of easing next year than currently assumed.
SPAIN SEP HICP -0.1% M/M, +1.7% Y/Y (MNI)
FOREX: JPY Gains on Soft Asia-Pac Equities, Oil-Tied FX Fades Further
- JPY strength gathered pace overnight on the mixed performance for Asia-Pac equities, as Hong Kong names are headed for a particularly weak close. Hang Seng is lower by over 4% just ahead of the local close, and a close at current or lower levels would reverse the rally posted since end-September, with concerns over the potential minimal impacts of stimulus, geopolitical risk and soft China data out yesterday and over the weekend continuing to weigh on sentiment.
- USD/JPY now targets the week's low at 148.98 initially, but support is seen stronger into 147.53, the 23.6% retracement for the recovery off the mid-September low.
- GBP/USD building well off the overnight pullback lows of 1.3036, with volumes picking up across both the jobs data this morning as well as the European open. Cumulative futures activity now sits just over 30% ahead of average for this time of day. The 20- and 50-day EMAs are converging to form layered resistance between 1.3104-51 - clearance here is needed to firm any recovery - which could be triggered by an upside surprise in tomorrow's inflation print and the read-through for year-end BoE pricing (currently ~35bps of cuts showing in OIS by Dec-31).
- Oil-tied FX is suffering from the broad pullback in crude oil prices, keeping NOK and CAD offered. Source reports this morning suggested that Israel would not target Iran’s oil and nuclear infrastructure but would focus on military sites in any future strikes.
- Canadian inflation data for September crosses later today, with markets expecting the Y/Y headline to fade to 1.8% from 2.0% although the BoC's preferred core inflation measure is seen unchanged at 2.4% - any variance here could help drive market conviction for the BoC's October decision, with pricing keenly split between a 25 or a 50bp rate cut.
EGBS: Bunds Off Intraday Highs Despite Equity, Oil Selloff
Bund futures are off intraday highs despite the continued selloff in crude oil prices and the more recent pullback in European equities.
- After reaching an intraday high of 133.72 this morning, Bunds now trade at 133.62 (+48 ticks today).
- The contract continues to trade below the 20- and 50-day EMAs, keeping a bearish theme intact.
- French final September HICP was revised down a tenth on a M/M and Y/Y basis (adding to a four tenth downward surprise to the flash estimate), while Spanish final HICP confirmed flash estimates.
- The German ZEW survey saw the expectations component a little better than expected but the current situation a little worse.
- The ECB's Q3 Bank Lending Survey pointed to unchanged lending standards for firms in Q3, although demand for loans picked up modestly despite remaining "weak overall".
- German cash yields are 3.5 to 4bps lower today, while major EGB spreads to Bunds have moved away from intraday tights as equities weaken.
- Canadian CPI headlines this afternoon’s global macro calendar.
GILTS: Oil Weakness & Long End Auction Demand Drive Rally
Solid demand and pricing at the latest long end gilt auction has pushed futures to fresh session highs, last +62 at 96.65.
- Last Wednesday’s opening gap lower has been closed, next resistance located at the October 7 high (96.93), although a bearish technical backdrop remains in play after the recent sell off.
- Yields 3-5bp lower, curve flattens.
- Weakness in crude oil (mostly on signs that Israel will avoid attacking Iranian oil & nuclear sites) and Chinese equities provided support in early London trade, with a fresh extension lower in crude oil and weakness in European equities providing the latest cross-market tailwinds.
- BoE-dated OIS prices 22bp of cuts for November, 35bp of cuts through December and 102bp of cuts through June, little changed to 3bp more dovish on the day.
- SONIA futures -0.5 to +5.5.
- We don’t think that this morning’s labour market data will change the votes of any MPC members, particularly given continued questions surrounding the accuracy of the quantity-based figures.
- Tomorrow’s CPI data will be far more consequential for monetary policy: https://media.marketnews.com/UK_Data_Preview_2024_10_Release_6df920518b.pdf
EQUITIES: E-Mini S&P Trading Close to Record Highs, Focus on $5961.00
Eurostoxx 50 futures are trading higher this week. Key short-term support to watch is 4943.25, 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 unchanged 5106.00, the Sep 30 high. A break resumes the uptrend. A bull cycle in S&P E-Minis remains intact and Monday’s gains reinforce the current trend condition. The move higher confirms a resumption of the primary uptrend and maintains 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 5782.19, the 20-day EMA.
- Japan's NIKKEI closed higher by 304.75 pts or +0.77% at 39910.55 and the TOPIX ended 17.37 pts higher or +0.64% at 2723.57.
- Elsewhere, in China the SHANGHAI closed lower by 83.031 pts or -2.53% at 3201.292 and the HANG SENG ended 774.08 pts lower or -3.67% at 20318.79.
- Across Europe, Germany's DAX trades higher by 45 pts or +0.23% at 19553.33, FTSE 100 lower by 31.08 pts or -0.37% at 8261.31, CAC 40 down 61.81 pts or -0.81% at 7540.25 and Euro Stoxx 50 down 20.65 pts or -0.41% at 5021.24.
- Dow Jones mini up 58 pts or +0.13% at 43422, S&P 500 mini down 5.5 pts or -0.09% at 5902.75, NASDAQ mini down 51.75 pts or -0.25% at 20567.5.
Time: 09:55 BST
COMMODITIES: Extension Lower in WTI Futures Would Threaten Recent Bullish Theme
WTI futures have gapped lower today and this has resulted in a break of the Oct 9 low. An extension lower 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 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. The recent short-term retracement in Gold appears to have been a correction. The trend condition is unchanged and remains bullish. MA 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 $2622.9, the 20-day EMA. It has been pierced, a clear break would signal scope for a deeper retracement.
- WTI Crude down $3.14 or -4.25% at $70.67
- Natural Gas down $0.03 or -1.04% at $2.469
- Gold spot up $4.67 or +0.18% at $2653.57
- Copper down $5.9 or -1.34% at $434.55
- Silver down $0.02 or -0.05% at $31.1905
- Platinum down $12.38 or -1.24% at $984.23
Time: 09:55 BST
| Date | GMT/Local | Impact | Country | Event |
| 15/10/2024 | 1230/0830 | *** |  CA | CPI |
| 15/10/2024 | 1230/0830 | ** | CA | Wholesale Trade |
| 15/10/2024 | 1230/0830 | ** |  US | Empire State Manufacturing Survey |
| 15/10/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 15/10/2024 | 1300/0900 | * | CA | CREA Existing Home Sales |
| 15/10/2024 | 1500/1100 | ** | US | NY Fed Survey of Consumer Expectations |
| 15/10/2024 | 1530/1130 | US | San Francisco Fed's Mary Daly | |
| 15/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 15/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 15/10/2024 | 1700/1300 | * | US | US Treasury Auction Result for Cash Management Bill |
| 15/10/2024 | 1700/1300 | US | Fed Governor Adriana Kugler | |
| 16/10/2024 | 2145/1045 | *** |  NZ | CPI inflation quarterly |
| 15/10/2024 | 2300/1900 | US | Atlanta Fed's Raphael Bostic | |
| 16/10/2024 | 2350/0850 | * |  JP | Machinery orders |
| 16/10/2024 | 0600/0700 | *** |  GB | Consumer inflation report |
| 16/10/2024 | 0600/0700 | *** | GB | Producer Prices |
| 16/10/2024 | 0800/1000 | ** |  IT | Italy Final HICP |
| 16/10/2024 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 16/10/2024 | 1100/0700 | ** | US | MBA Weekly Applications Index |
| 16/10/2024 | 1215/0815 | ** | CA | CMHC Housing Starts |
| 16/10/2024 | 1230/0830 | ** | US | Import/Export Price Index |
| 16/10/2024 | 1230/0830 | ** | CA | Monthly Survey of Manufacturing |
| 16/10/2024 | 1840/2040 |  EU | ECB's Lagarde Speech at Banka Slovenije Dinner |