EXECUTIVE SUMMARY
- MNI US CPI PREVIEW: MAJOR SURPRISE REQUIRED FOR A FED SKIP
- HURRICANE MILTON TRACKS ACROSS FLORIDA, BRINGING HEAVY RAINS
- PBOC STARTS $71 BILLION LIQUIDITY TOOL FOR STOCK INVESTORS
- DEPUTY GOVERNOR HIMINO SAYS BOJ CAN AFFORD CAUTION
Figure 1: Recent US inflation developments
NEWS
MNI US CPI PREVIEW: Major Surprise Required for a Fed Skip
US President Joe Biden’s first call in over a month with Benjamin Netanyahu threw into focus his limited ability to influence Israel’s prime minister over what could be an imminent strike against Iran. “Our attack on Iran will be deadly, precise and above all surprising,” Israeli Defense Minister Yoav Gallant said on Wednesday. “They will not understand what happened and how it happened. They will see the results.” In a sign of the tensions between Israel and the US, its major ally, the Israeli side by the next morning had released no readout of the call.
US (BBG): Hurricane Milton Tracks Across Florida, Bringing Heavy Rains
Hurricane Milton is moving across central Florida after making landfall near Tampa with tree-snapping winds and heavy rain, raising the threat of widespread flooding and knocking out power for millions. Milton came ashore near Siesta Key as a Category 3 hurricane on Wednesday evening and is now packing winds of 85 miles (140 kilometers) per hour, the US National Hurricane Center said in its latest advisory. Damaging winds are lashing central Florida and flash flood emergencies are in effect.
US (BBG): Trump Vows to Eliminate Income Taxes on Americans Living Abroad
Donald Trump said he would end US income taxes on Americans living in other countries, the latest in a string of tax proposals in the final stretch of the 2024 campaign. His pledge could simplify the tax obligations for US citizens who live overseas. Americans, regardless of where they live in the world, have to file tax information with the Internal Revenue Service and some expatriates are required to pay US taxes, in addition to levies in the country where they reside.
UK (The Times): Rachel Reeves Needs £25bn Tax Rise to Avoid Austerity, Says IFS
Rachel Reeves will need to raise taxes in this month’s budget by about £25 billion to honour Labour’s pledge not to return Britain to austerity. The chancellor must raise taxes by twice as much as George Osborne’s austerity budget in 2010 to ensure that public spending can rise across the board, even with looser fiscal rules, the Institute for Fiscal Studies (IFS) estimates.
CHINA (BBG): PBOC Starts $71 Billion Liquidity Tool for Stock Investors
China’s central bank has set up a swap facility to provide liquidity to institutional investors to buy stocks, part of a broad stimulus package announced earlier that ignited a rally in equities. The People’s Bank of China will accept applications from eligible securities firms, funds and insurers starting Thursday to obtain highly liquid assets such as government bonds and central bank bills if they provide certain collateral. The size of the tool is 500 billion yuan ($70.6 billion) and can be expanded in the future, the monetary authority said in a statement.
CHINA (BBG): Xi’s Graft Crackdown Ensnares Record Number of Senior Officials
Chinese President Xi Jinping’s sweeping anti-corruption campaign has implicated a record number of senior officials for two straight years, highlighting the risks for bureaucrats and threatening to unsettle investors already anxious about the economy. Chen Xiaobo, deputy chief of the provincial graft watchdog in Hainan, is being investigated for suspected “serious violations,” the Central Commission for Discipline Inspection said Thursday.
BOJ (MNI): BOJ Can Afford Caution - Dep Gov Himino
Bank of Japan Deputy Governor Ryozo Himino said on Thursday the BOJ has sufficient time to examine evolving economic and price conditions, despite the bank's vow to adjust the degree of easy policy. “The timing of policy adjustments depends on economic, price and financial market conditions,” Himino added at the event sponsored by Bloomberg News. BOJ policymakers will decide on monetary policy meeting by meeting, while carefully monitoring the evolving economy, prices and financial markets at home and abroad, he continued, adding the Bank does not set monetary policy courses in advance.
BOJ (BBG): BOJ’s Deputy Chief Says Will Raise Rate If Forecasts Realized
Japan’s central bank will continue to raise its benchmark rate, unwinding easy policy settings, if the economy performs in line with its projections, Bank of Japan Deputy Governor Ryozo Himino said. While it will depend on economic activity and prices, given that real interest rates are at significantly low levels, the BOJ will continue to raise the policy rate and adjust the degree of easing if its projections are realized, Himino said in a speech Thursday at a Bloomberg conference in Tokyo.
JAPAN/S.KOREA (BBG): Japan’s Ishiba, Yoon Set to Meet on Sidelines of Summit in Laos
Japanese Prime Minister Shigeru Ishiba is set to meet with South Korean President Yoon Suk Yeol on the margins of a summit in Laos on Thursday as the two sides look to deepen ties, Yoon’s office said. Japan and South Korea are as closely aligned politically as they have been in decades after Yoon sought to reduce the impact on ties from claims made by Koreans seeking reparations related to Japan’s 35-year colonization of the Korean peninsula through 1945.
DATA
GERMAN DATA (MNI): Retail Sales Stronger Towards End of Summer; Food/Non-Food Both Up
- GERMANY AUGUST RETAIL SALES +2.1% Y/Y
- GERMANY AUGUST RETAIL SALES +1.6% M/M
German August Retail Sales came in at +1.6% M/M (real, seasonally-adjusted) and +2.1% Y/Y in August. That follows July's +1.5% M//M - and means retail sales ended the summer on a more positive note after deteriorating in May (-1.4%) and June (-1.1%). Taking into account continued subdued consumer confidence and retail sentiment in the country, it remains questionable if the print is a signal for a sustainable recovery in domestic demand - or rather just a partial reversal of the previous weakness which might overall prevail for some more time.
GERMANY DATA (MNI): German Insolvency Rates Hit 14-Yr High - IWH
The number of German firms going bust rose 2% month-on-month in September to reach its highest level since 2010, according to the latest IWH Insolvency Trend, with around 23,000 jobs lost at the largest 10% of companies affected. Some 3,990 partnerships and corporations were declared insolvent in Q3 2024, the most in a single quarter in the last 14 years. The number of employees affected was more than 50% August’s figure, 75% higher than in September 2023 and nearly four times above the September average between 2016 to 2019.
ITALY DATA (MNI): Manufacturing Activity Still Subdued, But 3m/3m IP Highest in a Year
Italian manufacturing activity remains subdued, but 3m/3m industrial production growth nonetheless printed its highest since September 2023 at -0.14% in August. August IP was a little weaker than expected at 0.1% M/M (vs 0.2% cons).
July's reading was also revised a tenth lower to -1.0%. The modest recovery in IP has not yet been reflected in manufacturing surveys though. ISTAT manufacturing confidence fell to 86.7 (vs 87.0 prior) in September, still below the 2000-2019 average of 91.0. Meanwhile, the manufacturing PMI has been in contractionary territory for 18th consecutive months.
NORWAY DATA (MNI): Inflation Momentum Eases, But Services Uptick May Keep Norges Cautious
- NORWAY SEP CPI +0.3% M/M, +3% Y/Y
- NORWAY SEP CORE CPI +0.3% M/M, +3.1% Y/Y
Norwegian September inflation momentum eased to its lowest since November 2021, based on Statistics Norway's seasonally adjusted series. 3m/3m SAAR inflation was 1.86% (vs 2.93% prior). A handful of analysts (e.g. Goldman Sachs and Morgan Stanley) still look for a Norges Bank cut in December, partly based on a weaker inflation outlook than forecast by the central bank. The September inflation momentum dynamics offer further support to this view. However, we think that if the Committee wants to seriously consider a December cut, it will want to signal as such at the upcoming November 7 decision.
UK DATA (BBG): UK Demand for Mortgages Expected to Increase in 4Q, BOE Says
Bank of England publishes quarterly Credit Conditions Survey. Lenders reported that demand for secured lending for house purchase was unchanged in 3Q and was expected to increase in 4Q. Demand for unsecured lending expected to fall in 4Q, driven by credit card lending. Supply of secured credit to households rose in the latest three months and was expected to remain unchanged in the next three.
JAPAN DATA (MNI): Japan Sept CGPI Rises 2.8% Y/Y; Import Prices Drop
- JAPAN SEPT CORP GOODS PRICE INDEX +2.8% Y/Y; AUG REV
- JAPAN SEPT CORP GOODS PRICE INDEX 0.0% M/M; AUG UNREV -0.2%
Japan's corporate goods price index rose 2.8% y/y in September, accelerating from August’s revised 2.6% and higher than the 2.3% market estimate, but import prices posted their first drop in eight months, falling 2.6% from the prior month's 2.5% increase, data released by the Bank of Japan showed on Thursday. The results indicated that the drop of import prices caused by the correction of the yen’s fall will ease pressure on firms to raise prices. The CGPI remained unchanged m/m in September after falling 0.2% in August.
JAPAN DATA (MNI): BOJ Survey Notes Steady Inflation Expectations
Bank of Japan’s closely watched five-year median household inflation forecast stood unchanged at 5% over Q3, while the number of households that expect prices to rise increased to 83.6% from 82.0%, the BOJ’s quarterly consumer survey showed on Thursday. The household median inflation view a year ahead stood at 8%, down from Q2's 10%. The survey showed that the number of households that experienced improved circumstances in Q3 rose to 41.3% from 39.8% in June due to the rise in profits and income.
FOREX: USD/CAD Extends Winning Streak
- USD/JPY is softer off overnight highs headed into the NY crossover, as markets pare a small part of yesterday's solid rally. The pair touched 149.55 in Tokyo trade - a level that could be revisited on any further upside for US yields today.
- The single currency is among the poorest performers, keeping EUR within range of recent lows. EUR/GBP's printed lower lows for a third session, narrowing the gap in the cross with the bear trigger and range low at 0.8311. CAD trades similarly poorly, undermined by the roll off highs for oil markets this week. USD/CAD's winning streak has now extended to six sessions of higher highs and higher lows - cracking the 50% retracement for the downleg off the August high, and nearing resistance at 1.3745.
- Today's CPI print could define price action into the close, with last week's bumper NFP print squashing the likelihood of another 50bps rate cut step at the Fed's November meeting. As a result, the bar for a market-moving surprise upon release is certainly higher relative to the rest of this year's releases. Nonetheless, a particularly strong print could raise outside expectations that the Fed could skip a cut entirely at their next meeting.
- Weekly jobless claims data is also set for release, as well as speeches from Fed's Cook, Barkin and Williams.
EGBS: Tight Ranges as Markets Await US CPI
Bund futures have traded in a tight 17 tick range today, as markets await this afternoon’s US CPI report at 1330BST/1430CET.
- Today’s regional data data/issuance calendar has been limited (Italian August IP was a little weaker than expected).
- Bunds are -18 ticks at 133.23. A continuation lower would strengthen a developing bearish threat, with key support at 132.65 (Sep 2 low).
- German cash yields are 1-2bps higher today.
- 10-year peripheral spreads to Bunds are biased tighter despite a pullback in European equities, with SPGBs outperforming. Spanish paper trades further through French counterparts as a result, with the 10-year SPGB/OAT spread 1bp tighter at -3.5bps.
- The ECB’s September meeting accounts are released at 1230BST/1330CET. However, they will be even more stale than usual given the shift in consensus towards an October cut over the past 2/3 weeks, following the weak September flash PMI and inflation data.
GILTS: Wider as Citi Provide Fiscal Warning, Technical Levels Probed
Gilts widen vs. core global FI peers after Citi’s (caveated) warning surrounding market spill over from funding a potential increase in public investment.
- Futures probed initial support at Tuesday’s low (96.20), but only manage a modest breach, basing at 96.19. Last 96.28.
- An extension lower would allow the bearish impulse to strengthen further, targeting round number support at 96.00.
- Cash 10s topped out at 4.225% vs. Tuesday’s high of 4.221%.
- An extension would target the July 1 high (4.286%).
- 10s widen by a little over 2bp vs. Bunds, back towards 195bp. This week’s closing cycle high (195.24bp) is less than 1bp away.
- GBP STIRs see hawkish adjustments alongside the weakness in gilts.
- 21bp of cuts priced for November, 34bp of cuts priced through December and 91bp of cuts priced through June.
- That compares to 22bp, 35bp and 94bp late Wednesday.
- SONIA futures 1.0-4.0 lower.
- Most contracts through SFIH6 register fresh multi-week/month lows.
- Fiscal speculation will continue to dominate today, with no tier 1 UK releases scheduled.
EQUITIES: E-Mini S&P Trading Above September Highs
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 4935.12, 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 5752.03, the 20-day EMA. It has been pierced. Key support lies at 5680.78 the 50-day EMA.
- Japan's NIKKEI closed higher by 102.93 pts or +0.26% at 39380.89 and the TOPIX ended 5.43 pts higher or +0.2% at 2712.67.
- Elsewhere, in China the SHANGHAI closed higher by 43.068 pts or +1.32% at 3301.926 and the HANG SENG ended 614.74 pts higher or +2.98% at 21251.98.
- Across Europe, Germany's DAX trades lower by 53.23 pts or -0.28% at 19210.75, FTSE 100 lower by 4.57 pts or -0.06% at 8234.34, CAC 40 down 14.62 pts or -0.19% at 7548.38 and Euro Stoxx 50 down 16.78 pts or -0.34% at 4969.95.
- Dow Jones mini down 54 pts or -0.13% at 42751, S&P 500 mini down 9.25 pts or -0.16% at 5830.75, NASDAQ mini down 41 pts or -0.2% at 20416.
Time: 09:50 BST
COMMODITIES: Short-Term Retracement in Gold Considered Corrective
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 $71.58, 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 $2614.9, the 20-day EMA. It has been pierced, a clear break would signal scope for a deeper retracement.
- WTI Crude up $0.62 or +0.85% at $73.98
- Natural Gas down $0.02 or -0.71% at $2.639
- Gold spot up $7.61 or +0.29% at $2616.26
- Copper down $0.45 or -0.1% at $438.8
- Silver up $0.03 or +0.09% at $30.549
- Platinum up $4.1 or +0.43% at $957.13
Time: 09:50 BST
| Date | GMT/Local | Impact | Country | Event |
| 10/10/2024 | 1230/0830 | *** |  US | Jobless Claims |
| 10/10/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 10/10/2024 | 1230/0830 | *** | US | CPI |
| 10/10/2024 | 1315/0915 | US | Fed Governor Lisa Cook | |
| 10/10/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
| 10/10/2024 | 1430/1030 | US | Richmond Fed's Tom Barkin | |
| 10/10/2024 | 1500/1100 | US | New York Fed's John Williams | |
| 10/10/2024 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 10/10/2024 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 10/10/2024 | 1700/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |
| 10/10/2024 | 1800/1400 | ** | US | Treasury Budget |
| 11/10/2024 | 0600/0700 | ** |  GB | UK Monthly GDP |
| 11/10/2024 | 0600/0700 | ** | GB | Trade Balance |
| 11/10/2024 | 0600/0700 | ** | GB | Index of Services |
| 11/10/2024 | 0600/0700 | *** | GB | Index of Production |
| 11/10/2024 | 0600/0700 | ** | GB | Output in the Construction Industry |
| 11/10/2024 | 0600/0800 | *** |  DE | HICP (f) |
| 11/10/2024 | - | *** |  CN | Money Supply |
| 11/10/2024 | - | *** | CN | New Loans |
| 11/10/2024 | - | *** | CN | Social Financing |
| 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 |