EXECUTIVE SUMMARY
- ISHIBA VOWS TO STAY ON AFTER ELECTION DISASTER, BUT PM ON THIN ICE
- ISRAEL’S LIMITED ATTACK ON IRAN MAY HELP SPUR REGIONAL DEAL
- TRUMP’S HIGH-PROFILE NYC RALLY SHROUDED BY INCENDIARY RHETORIC
- ECB'S WUNSCH SEES RESTRICTION A WHILE LONGER
Figure 1: Japan's lower house, number of seats by party
Source: Nikkei research
NEWS
JAPAN (MNI): Ishiba Vows to Stay on After Election Disaster, But PM on Thin Ice
Japan entered an unfamiliar period of political instability following the 27 October general election that delivered a stinging rebuke to PM Shigeru Ishiba and his governing conservative Liberal Democratic Party (LDP). The vote marks the first time since the 2009 general election that the party has lost its majority in the House of Representatives. Arguably, this time around the situation is more prone to instability. In 2009, the Democratic Party of Japan won an outright majority. However, this
time the LDP remains the largest party and with its Komeito allies holds 215 seats, 18 short of the 233 required for a majority.
As such, the next gov't will either be a minority LDP-Komeito administration reliant on outside support on a vote-by-vote basis, or a tripartite coalition with either the right-wing libertarian Ishin or the centrist Democratic Party for the People. Bringing either of these parties into gov't will need policy concessions from the LDP and there is no guarantee such an untested agreement would prove durable. Ishiba has claimed that he intends to remain in office, saying "In light of the severe criticism we have received from the public, we will endeavour to ensure that the national government remains stable."
ISRAEL/IRAN (BBG): Israel’s Limited Attack on Iran May Help Spur Regional Deal
Israel’s assault on Iran early Saturday, coordinated with Washington and limited to missile and air defense sites, was more restrained than many expected and may help diplomatic efforts to return hostages and limit the combat in both Lebanon and Gaza. Israel held off until US Secretary of State Antony Blinken returned to Washington from four days of consultations with Israeli and Arab allies.
US (BBG): Trump’s High-Profile NYC Rally Shrouded by Incendiary Rhetoric
Donald Trump turned to the home stretch of his campaign with a marathon rally in the heart of Manhattan, flanked by Elon Musk and other allies aiming to frame voters’ decision around who can fix America’s woes. Trump’s event at the fabled Madison Square Garden, which lasted for nearly six hours Sunday, featured criticisms of Vice President Kamala Harris over the border, crime and the economy. Trump mused about safely Democratic New York flipping to his column, painting a view of an America gripped in crisis.
US (Telegraph): JD Vance Pours Cold Water on Trump’s Talk of Abolishing Income Tax
Donald Trump’s suggestion that he may abolish income tax is not a campaign policy but an “aspirational goal”, his running mate has suggested. The Republican presidential candidate has hinted several times at the idea of ending federal income tax as he competes with Kamala Harris for middle-class voters in the White House race’s final stretch. Trump first floated the idea in June and has been more forceful in his endorsement of the idea in the last week, suggesting hefty tariffs on imports could generate trillions of dollars in revenue and replace income tax.
US (WSJ): Economists Warn of New Inflation Hazards After Election
A punishing 2½-year fight to bring inflation down appears to be succeeding. The election could change that. Inflation has fallen thanks to higher interest rates and big assists from healed supply chains and an influx of workers. But whether borrowing costs and price growth continue to ease next year could turn heavily on policy choices by Donald Trump or Kamala Harris.
ECB (MNI EXCLUSIVE): ECB's Wunsch Sees Restriction A While Longer
National Bank of Belgium Governor Pierre Wunsch speaks to MNI in Washington. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
ECB (RTRS): No Urgency for ECB to Speed Up Policy Easing, Wunsch Says
There is no urgency for the European Central Bank to cut interest rates quicker and it could even live with a small, temporary undershoot of its inflation target, Belgian central bank chief Pierre Wunsch said, joining colleagues in pushing back on more dovish views. ECB policymakers have expressed widely different views on prices and policy in recent days, with some worried about inflation falling below 2% and forcing the ECB to act quickly, even as others said risks were more balanced, so the bank should keep moving with extreme care.
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 he 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 (BBG): Starmer Pledges to Embrace ‘Fiscal Reality’ in Key Budget
Keir Starmer said his UK government would “embrace the harsh light of fiscal reality,” as his Chancellor of the Exchequer Rachel Reeves prepares to reveal a historic package of tax hikes and extra borrowing in a make-or-break budget on Wednesday. “It’s time we ran toward the tough decisions, because ignoring them set us on the path to decline,” the prime minister is due to say in a speech Monday, according to remarks pre-briefed by his office. “This is an economic plan that will change the long-term trajectory on British growth for the better.”
UK (BBG): London Jobs Are Settling Below Pre-Covid Levels, Indeed Says
London vacancies are set to remain below pre-Covid levels, lagging behind the rest of the UK, after hybrid working trimmed demand for shop assistants and baristas near offices. Job postings in the capital are stuck at 25% below where they were just before the beginning of the pandemic, after a deterioration that began last year, according to data from the recruitment site Indeed. Outside of southeast England, all other UK regions are seeing new jobs at or even surpassing pre-Covid numbers.
CHINA (MNI): PBOC Launches Outright Reverse Repo For Liquidity
MNI (Beijing) The People’s Bank of China revealed Monday it would add outright reverse repo to its monetary policy toolkit to help maintain adequate liquidity in the banking system, targeting trades with primary dealers in its open market operations. The PBOC will conduct the trades once a month with a maturity period not exceeding one year, a statement on the PBOC's website said, noting the outright reverse repo will use a fixed amount, rate bidding and multiple-price bidding, with treasury, local government, financial, and corporate bonds used as collateral.
CHINA (MNI EXCLUSIVE): PBOC to Cut Rates Further, Target 2% CPI
A prominent advisor shares his outlook for China fiscal stimulus. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
RBA (MNI EXCLUSIVE): Strong Jobs Growth Still Compatible With RBA Cuts
MNI looks at the impact of recent jobs data on the RBA's policy calculations. On MNI Policy MainWire now, for more details please contact sales@marketnews.com.
CORPORATE (BBG): Philips Cuts Annual Sales Outlook on Weak Demand From China
Royal Philips NV fell the most in 26 years after the medical technology firm slashed its annual sales-growth forecast on tepid demand in China. Philips expects comparable sales to grow as much as 1.5% in 2024, down from a previous forecast of as much as 5%. Order intake decreased 2% in the third quarter due to the China slump, it said Monday. The Amsterdam-based manufacturer has been affected by an anti-corruption campaign across China’s health-care sector after the Asian nation began to scrutinize local medical-technology procurement.
FOREX: JPY Slips Again as Election Implications Weigh
- USD/JPY gapped higher on the resumption of trade after the weekend, and remains the weakest performer in G10 - touching 153.88 and a new multi-month high overnight, marking a >10% rally off the mid-Sept lows. This opens 155.27 as the next major resistance. Moves triggered by the surprise weekend election results, in which Ishiba's LDP-led coalition lost their majority in parliament for the first time in 15 years - a result that's brought considerable uncertainty to Japanese politics.
- Markets now anticipate a greater likelihood of a near-term additional budget to shore up local confidence, and partly because it raises questions over Ishiba's future role, raising the risk of another leadership contest after
the Ishiba - Takaichi run in September prompted further market volatility. - The EUR trades well, firmer against most others in G10 as the single currency reverses a very small part of recent losses. EUR/USD remains below the Friday highs, but has opened a ~50 pip buffer with the recent pullback low.
- Focus for GBP rests on the Budget due on Wednesday. UK PM Starmer continues to prep for tax raises targeting those with "broader shoulders", while looking to avoid raising the tax burden on working people.
- The Monday schedule is typically light, with no notable data releases and the Fed inside their pre-meeting media blackout - which should reduce headline risk. ECB's de Guindos is set to speak, however not until after the European market close.
BONDS: Bunds and Gilts Recover From Intraday Lows
Bund futures have closed the opening gap lower, but remain -21 ticks at 132.89 today. Gilt futures have similarly bounced from intraday lows, now -32 at 95.98.
- Overnight weakness (also seen in crude oil/gas futures) was seemingly a function of unwinding geopolitical risk premium after Israel’s restrained weekend attack on Iranian military targets.
- There was no obvious headline driver for the recovery from lows, which may reflect lower inflation expectations stemming from the energy pullback.
- Bund and Gilt yields are up to 1bp higher at typing.
- The 10-year OAT/Bund spread is 1.5bps tighter at 73.5bps, after the worst-case scenario of a rating downgrade from Moody’s was avoided on Friday (rating was affirmed at Aa2). The agency opted to place the country’s outlook on Negative, which was in line with consensus expectations.
- Meanwhile, broader 10-year peripheral spreads to Bunds are tighter with European equity futures 0.4% higher.
- This week’s Eurozone calendar is headlined by the flash October inflation and Q3 GDP rounds, beginning on Wednesday.
- In the UK, focus remains on Wednesday’s budget. MNI’s preview is here: https://mni.marketnews.com/3YBr39n
EQUITIES: Short-Term Weakness in E-Mini S&P Considered Corrective
Eurostoxx 50 futures are in consolidation mode and continue to trade closer to their recent lows. For now, a bear threat is present. The contract traded sharply lower on Oct 15 and pierced the 50-day EMA, at 4948.02. 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 5106.00, the Sep 30 high. S&P E-Minis continues to trade below its recent highs. Short-term weakness is considered corrective and the uptrend remains intact. Price has recently traded through support at the 20-day EMA, at 5854.44, but is - for now - trading above this average. A clear bearish break of the EMA would open 5753.57, the 50-day EMA. A stronger resumption of gains would refocus attention on 5961.00, a Fibonacci projection.
- Japan's NIKKEI closed higher by 691.61 pts or +1.82% at 38605.53 and the TOPIX ended 39.46 pts higher or +1.51% at 2657.78.
- Elsewhere, in China the SHANGHAI closed higher by 22.498 pts or +0.68% at 3322.198 and the HANG SENG ended 9.21 pts higher or +0.04% at 20599.36.
- Across Europe, Germany's DAX trades higher by 64.62 pts or +0.33% at 19527.72, FTSE 100 higher by 8.23 pts or +0.1% at 8257.53, CAC 40 up 66.68 pts or +0.89% at 7563.26 and Euro Stoxx 50 up 31.47 pts or +0.64% at 4974.04.
- Dow Jones mini up 213 pts or +0.5% at 42530, S&P 500 mini up 35.75 pts or +0.61% at 5882, NASDAQ mini up 161.5 pts or +0.79% at 20661.
Time: 09:50 GMT
COMMODITIES: Gap Lower in WTI Futures Reinforces Bearish Theme
A bearish theme in WTI futures remains intact and today’s gap 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 instead 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. Gold bulls remain in the driver’s seat and price continues to trade closer to its recent highs. The latest climb has resulted in a break of $2685.6, the Sep 26 high, confirming a resumption of the primary uptrend. Sights are on $2767.1 next, a Fibonacci projection point, ahead of the $2800.0 handle. Firm support is $2680.3 the 20-day EMA. A clear break of this EMA would signal scope for a deeper retracement.
- WTI Crude down $3.43 or -4.78% at $68.4
- Natural Gas down $0.11 or -4.18% at $2.453
- Gold spot down $13.94 or -0.51% at $2733.24
- Copper down $0.95 or -0.22% at $436.05
- Silver down $0.21 or -0.62% at $33.507
- Platinum down $1.62 or -0.16% at $1023.46
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 28/10/2024 | 1100/1100 | ** |  GB | CBI Distributive Trades |
| 28/10/2024 | 1430/1030 | ** |  US | Dallas Fed manufacturing survey |
| 28/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 28/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for 2 Year Note |
| 28/10/2024 | 1700/1300 | * | US | US Treasury Auction Result for 5 Year Note |
| 28/10/2024 | 1700/1300 | * | US | US Treasury Auction Result for 13 Week Bill |
| 28/10/2024 | 1945/2045 |  EU | ECB's De Guindos speech and Q&A at Foros Reflexión | |
| 29/10/2024 | 2330/0830 | * |  JP | Labor Force Survey |
| 29/10/2024 | 0001/0001 | * | GB | BRC Monthly Shop Price Index |
| 29/10/2024 | 0700/0800 | * |  DE | GFK Consumer Climate |
| 29/10/2024 | 0700/0800 | *** |  SE | GDP |
| 29/10/2024 | 0700/0800 | ** | SE | Retail Sales |
| 29/10/2024 | 0930/0930 | ** | GB | BOE M4 |
| 29/10/2024 | 0930/0930 | ** | GB | BOE Lending to Individuals |
| 29/10/2024 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 29/10/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 29/10/2024 | 1300/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 29/10/2024 | 1300/0900 | ** | US | FHFA Home Price Index |
| 29/10/2024 | 1300/0900 | ** | US | FHFA Home Price Index |
| 29/10/2024 | 1400/1000 | *** | US | Conference Board Consumer Confidence |
| 29/10/2024 | 1400/1000 | ** | US | housing vacancies |
| 29/10/2024 | 1400/1000 | *** | US | JOLTS jobs opening level |
| 29/10/2024 | 1400/1000 | *** | US | JOLTS quits Rate |
| 29/10/2024 | 1430/1030 | ** | US | Dallas Fed Services Survey |
| 29/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 29/10/2024 | 1530/1130 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 29/10/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 7 Year Note |
| 29/10/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note |
| 29/10/2024 | 1930/1530 |  CA | BOC Governor Macklem at House finance committee |