MNI US OPEN - NFP Seen Showcasing Slowing, But Still Solid Jobs Market

NEWS

NFP PREVIEW (MNI): Sequentially Softer, But Still Solid

Consensus looks for a payrolls report that would imply only a marginal easing in labour market tightness in October, with supply struggling to recover to pre-pandemic levels and an u/e rate near record lows.

UK (MNI): More to Do to Control Domestic Inflation - BOE Pill

The Bank of England still has more to do to control the underlying domestic price pressures, Chief Economist Huw Pill said Friday, although adding that the bank expects headline inflation to slow in 2023 as the base effects of the sharp increases in energy prices over the previous 12 months begin to drop out.

Pill told CNBC that the BOE has a fine line to tread between setting policy at a rate to ensure slowing the economy enough to fight inflation but not overtighten to send the economy into a deeper downturn that necessary.

CHINA (MNI): Hong Kong Stocks Secure 10% Rally Off Monday Lows

A solid close for the Hang Seng Index in Hong Kong, with local stocks ending higher by 5.4% (albeit off the sessions highs) to mark a 10% rally off the Monday low. A few catalysts here:

• Continued speculation that China could ease their COVID policy approach, with reports that authorities are planning to end flight suspensions - a move that could materially increase international travel into/out of China. (Note: China's ForMin have denied any knowledge)
• Reports that US officials have completed audits of Chinese firms ahead of schedule, a move that could prevent the automatic de-listing of many Chinese firms from US exchanges.

RUSSIA (MNI): Putin Faces Prospect of Kherson Military Defeat

The Times report that President Putin is facing another humiliating defeat as Russian forces abandon their positions in the southern city of Kherson, according to western officials. Russian commanders have fled the city leaving “demoralised and leaderless” conscripts to face a Ukrainian advance. Analysts predict a Ukrainian victory by the end of the year. Officials said it would be “impossible” for Putin to maintain a military presence on the other side of the river if Kherson fell.

POLITICAL RISK (MNI): EU Diplo-Stalemate in Iran Talks; China, Russia Not at Same Level

EU High Representative for Foreign Affairs and Security Policy Joesp Borrell delivered comments on a number of key political issues earlier today. On the Iran nuclear deal, Borrell stated that talks are 'at a stalemate', and that the EU was insistent that Iran must cease its supply of drones to Russia for use in its invasion of Ukraine. Borrell also talked on EU-China relations. Said that Western countries 'need to reduce their dependencies on China' but that the west, 'cannot put the country at the same level with Russia'.

AUSTRALIA (MNI): RBA Ups Key Inflation Forecast as Energy Costs Soar

The Reserve Bank of Australia lifted its trimmed mean inflation forecast to 6.5% for 2022 and warned energy prices will add "significantly" to inflation pressures over coming years, according to the Statement on Monetary Policy released on Friday. The increase in the Bank's preferred inflation estimate from the 6% forecast in August's statement follows the Bank's warning on Tuesday that headline inflation would peak "around" 8% later this year after it lifted rates 25bp to 2.85% - the seventh consecutive hike.

AUSTRALIA (MNI): China Property Stress A 'Significant' Concern - RBA

The Reserve Bank of Australia has flagged the risk to the nation's iron ore industry from China's ailing property market, labelling it a "significant concern" in its Statement on Monetary Policy released on Friday.

The Bank's warning that weakness in China's residential property sector will weigh on demand for steel and, therefore, demand for Australian iron ore comes as the price of the steel-making raw material fell below USD80 a tonne last week, down from around USD150 a tonne earlier this year. The RBA estimates China's residential property sector accounts for around one-fifth of Chinese steel demand.

DATA

GERMAN DATA (MNI): Factory Orders Plunge Masks Strength in Consumer Goods

• GERMANY SEP FACTORY ORDERS -4.0% M/M (FCST -0.5%); AUG -2.0%r M/M
• GERMANY SEP FACTORY ORDERS -10.8% Y/Y (FCST -7.2%); AUG -3.8%r Y/Y
• GERMANY FINAL OCT SERVICES PMI 46.5 (FLSH 44.9); SEP 45.0

German factory orders again contracted in September, falling by 4.0% m/m as demand slows. The marked annualised decline of -10.8% y/y was in part due to base effects. Euro-area and foreign orders plunged by -8.0% m/m and -7.0% m/m. A notable divergence between product categories was evident: Capital goods orders plunged by -6.0% m/m, indicating pessimistic growth plans pushing a decline in business investment. Intermediate goods fell by -3.4% m/m as short to medium-term demand outlooks weaken ahead of a winter of high energy prices.

FRANCE DATA (MNI): Auto Boost Looks Short-Lived as French IP Contracts

• FRANCE SEP INDUSTRIAL PRODUCTION -0.8% M/M, +1.8% Y/Y; AUG +2.7% M/M, +1.5% Y/Y
• FRANCE FINAL OCT SERVICES PMI 51.7 (FLSH 51.3); SEP 52.9

French industrial production figures were largely in line with expectations in September, contracting by -0.8% m/m following robust August growth. The sharp drop in energy production is weighing on industrial production, down -3.2% m/m and -9.1% y/y as the country struggled with domestic energy supply issues. Production slowed markedly in automotive -5.5% m/m following a strong +16.4% m/m growth in August boosted by easing supply chains. As such, the growth effects of easing supply constraints appear to be short-lived, as slowing order books as flagged by PMIs takes its toll with production to slow into year-end.

EUROZONE FINAL OCT SERVICES PMI 48.6 (FLSH 48.2); SEP 48.8

ITALY OCT SERVICES PMI 46.4 (FCST 48.5); SEP 48.8 (MNI)

SPAIN OCT SERVICES PMI 49.7 (FCST 48.3); SEP 48.5 (MNI)

FX SUMMARY: Greenback Strength Fades, But Holds Bulk of Post-Fed Rally

• The greenback trades on the backfoot, with currency markets reversing a very small part of the week's post-Fed outperformance. EUR/USD remains below the $0.98 handle, but has recovered off the lows of $0.9730 printed yesterday.
• Price action in the pair resulted in a move below a key area of support around 0.9812, marking the top of the bear channel that was breached last week. The breach of this support undermines the recent bullish theme and signals scope for a deeper pullback, towards 0.9633 initially, the Oct 13 low. Firm resistance is seen at 0.9976, the Nov 2 high.
• The beneficiaries of the USD pullback have largely been AUD and NZD, which outperform alongside stronger China equity markets overnight. Moves follow continued speculation that China could ease their COVID policy approach, with reports that authorities are planning to end flight suspensions - a move that could materially increase international travel into/out of China. (Note: China's ForMin have denied any knowledge)
• Focus turns to the October payrolls release later today, with markets expecting job gains of 195k and a modest uptick in the unemployment rate to 3.6%, showcasing a labour market that remains solid, but is sequentially slowing in its expansion. The Canadian jobs data is also on the docket, with BoE's Pill and Fed's Collins also due to speak.

BOND SUMMARY: Focus remains on the US Employment data.

• EGBs and Bund remain close to yesterday's afternoon settlement levels, albeit so far underpinned with Equities.
• Price action has been more flow led, with short cover, squaring in Equities and Govies, which started during yesterday's afternoon European session.
• Bund trades within two gaps, up to 138.13 to the upside and down to 136.46/136.31 to the downside.
• BTP future outperforms somewhat, pushing the BTP/Bund spread 2.8bps tighter in early trade.
• Gilt underperforms Europe, and the contract is flat at the time of typing.
• Gilt/Bund spread is tighter, but still short of the 120.00bps support, now at 124.3bps.
• US Treasuries are lagging and pretty mixed, with the 5 and 10yr (TY, FV) trading around flat.
• Most notable flow for the US, has been a large call seller, especially ahead of the NFP.
• TYZ2 112.75c has been sold in 35k total this morning.
• Looking ahead, all the focus is on the US this afternoon, with range for NFP of 80k/300k, median 195k and whisper of 245k.
• Speakers, sees ECB Lagarde, BoE Pill and Fed Collins.

EQUITIES: Futures Maintain Bullish Theme Despite Recent Pullback

A bullish EUROSTOXX 50 futures outlook remains intact despite the pullback from Tuesday’s high of 3679.00. Recent gains have resulted in a print above resistance at 3678.00, the Sep 13 high. Clearance of this level would strengthen bullish conditions and pave the way for gains above the 3700.00 level. The next key resistance is at 3810.00, the Aug 17 high. Firm support is seen at the 50-day EMA.S&P E-Minis traded lower Thursday, extending the pullback from 3928.00, the Nov 1 high. Despite the latest retracement, a bull cycle remains in play following the recovery from 3502.00, Oct 13 low. A resumption of gains would refocus attention on 3928.00, where a break would confirm the bull theme and open 3981.25, Sep 14 high. Key short-term support to watch is 3641.50, the Oct 21 low. A break would strengthen any developing bearish threat.

• Japan's NIKKEI closed lower by 463.65 pts or -1.68% at 27199.74 and the TOPIX ended 25.06 pts lower or -1.29% at 1915.4.
• Elsewhere, in China the SHANGHAI closed higher by 72.99 pts or +2.43% at 3070.796 and the HANG SENG ended 821.65 pts higher or +5.36% at 16161.14.
• Across Europe, Germany's DAX trades higher by 87.19 pts or +0.66% at 13217.1, FTSE 100 higher by 49.5 pts or +0.69% at 7238.45, CAC 40 up 52.59 pts or +0.84% at 6295.66 and Euro Stoxx 50 up 24.75 pts or +0.69% at 3617.78.
• Dow Jones mini up 84 pts or +0.26% at 32101, S&P 500 mini up 13 pts or +0.35% at 3740.5, NASDAQ mini up 48 pts or +0.45% at 10776.25.

COMMODITIES: Gold Sees Support Ahead of Multi-Year Low

WTI futures are trading higher today. The outlook is bullish and the continued recovery from Monday’s low reinforces this theme. The contract has defined a key short-term support at $81.30, the Oct 18 low and has recently cleared resistance at $88.66, the Oct 12 high. The break of this hurdle signals scope for a climb towards $92.34, the Oct 10 high and a key resistance. On the downside, initial firm support lies at $85.30, the Oct 31 low. A downtrend in Gold remains intact. A bearish theme follows the reversal from $1729.5, Oct 4 high and the subsequent move lower signals the end of the Sep 28 - Oct 4 bull phase. A continuation lower would open key support and the bear trigger at $1615.0, Sep 28 low. A break of this level would resume the downtrend. On the upside, the next firm resistance is at $1679.1, the 50-day EMA.

• WTI Crude up $1.88 or +2.13% at $90.05
• Natural Gas up $0.18 or +3.03% at $6.158
• Gold spot up $18.35 or +1.13% at $1647.69
• Copper up $8.7 or +2.54% at $351.5
• Silver up $0.32 or +1.62% at $19.8102
• Platinum up $9.99 or +1.08% at $933.07