EXECUTIVE SUMMARY
- OPEC+ DELAYS SUPPLY RESTART AGAIN AS CRUDE PRICES STRUGGLE
- PRO-EU MOLDOVAN PRESIDENT RE-ELECTED FOR SECOND TERM
- IRAN TELLS REGION ITS COUNTERATTACK WILL BE SEVERE
- WEAK INTERNATIONAL DEMAND CITED IN EUROZONE MANUF PMI
Figure 1: EUR/USD 1w implied vols at multi-month high pre-election
Source: MNI/Bloomberg
NEWS
On November 5 the United States will hold elections for the country’s presidency, 34 seats in the United States Senate, the entirety of the House of Representatives, and a plethora of state and local-level offices. As polling falls within the margin of error in the key swing states, a polling miss could result in a comfortable win for either candidate, depending on the direction of the miss.
MNI FED PREVIEW - NOVEMBER 2024: Cutting Through The Storms
The FOMC is on course to cut the Fed funds rate by 25bp on Nov 7, as it takes another step in paring back restraint. Stronger-than-expected activity and labor market data have removed a second consecutive 50bp cut from the conversation, but a soft if distorted October payrolls report cemented that November would see a cut and not a "skip". Given that Powell has previously endorsed the September Dot Plot as the best guide to policy, we would expect him to have to address whether it’s still current as of November 7. A hawkish reply would involve him setting up a “skip” in December, whereas a simple reiteration that the SEP still states the base case would be taken dovishly.
US (BBG): Harris, Trump Hit Battlegrounds as Polls Signal Tight Finish
A flurry of polls released Sunday show Vice President Kamala Harris and former President Donald Trump remain poised for a photo finish in this week’s presidential election, with voters narrowly split both nationally and across the pivotal swing states that will decide the election.
MIDEAST (WSJ): Iran Tells Region Its Counterattack Will Be Severe
Amid U.S. warnings against a counterattack on Israel, Iran is sending a defiant diplomatic message: It is planning a complex response involving even more powerful warheads and other weapons, said Iranian and Arab officials briefed on the plans. It remains to be seen whether the Iranian threats are real or just tough talk. Israel's punishing airstrike against Iran on Oct. 26 shredded the country's strategic air defenses, leaving it badly exposed and sharply raising the risks to Iran if it follows through.
EUROPE/MOLDOVA (MNI): Pro-EU President Sandu Re-Elected for Second Term
The Moldovan Election Commission confirmed that pro-Western President Maia Sandu was projected to secure another term after garnering 55% of the vote despite allegations of large-scale interference sponsored by the Kremlin through its proxies. The first round of the vote was a warning shot for Sandu and her political allies. Although the incumbent emerged as the front-runner after the first round, the combined support for her pro-Russian rivals exceeded her score.
CHINA (BBG): China’s Top Lawmakers Review Local Govt Debt Swap Proposal
China’s Standing Committee of the National People’s Congress reviews proposal on raising ceilings on local government debt to replace existing hidden debt, state-run Xinhua news agency reports.
MNI RBA PREVIEW - NOVEMBER 2024: On Hold But Still “Vigilant”?
The RBA is unanimously expected to leave rates unchanged at 4.35% at its meeting on November 5, which will include updated staff forecasts. With an unchanged outcome widely projected, the statement will be scrutinised for any changes in thinking. We expect the Board to reiterate that it isn't “ruling anything in or out” but it may tone down or even remove that it is “vigilant to upside risks to inflation”.
OIL (BBG): OPEC+ Delays Supply Restart Again as Crude Prices Struggle
OPEC+ agreed to push back its December production increase by one month, the second delay to its plans to revive supply as prices continue to struggle amid a fragile economic outlook. The group led by Saudi Arabia and Russia had intended to begin a series of monthly production increases by adding 180,000 barrels a day from December, but they will now keep supply restrained through that month, according to a statement posted on OPEC’s website on Sunday.
DATA
EUROZONE DATA (MNI): Weak International Demand Cited in Oct Manuf PMI
- EUROZONE OCT FINAL MANUF PMI 46.0 (FLASH 45.9); SEP 45.0
- GERMANY OCT FINAL MANUF PMI 43.0 (FLASH 42.6); SEP 40.6
- FRANCE OCT FINAL MANUF PMI 44.5 (FLASH 44.5); SEP 44.6
The Eurozone October final manufacturing PMI saw a small upward revision to 46.0 (vs 45.9 flash) following a four tenth upward revision in Germany to 43.0. This was the 28th consecutive month in contractionary territory. The broad strokes of the report were similar to last week's flash readings, though we note the following excerpts on international demand across the four major Eurozone economies, where Spain stands out as a positive outlier.
SPAIN DATA (MNI): Highest Manufacturing PMI Since Feb '22
- SPAIN OCT MANUF PMI 54.5 (FCST 53.2); SEP 53.0
The Spanish October manufacturing PMI reached its highest since February 2022 at 54.5, above the 53.2 consensus (and 53.0 prior). The print supports the theme of Spanish economic outperformance that has been prevalent through this year. The stronger-than-expected print has helped Bund futures extend intraday lows.
ITALY DATA (MNI): Manufacturing PMI Signals Weak Start for Industry in Q4
- ITALY OCT FINAL MANUF PMI 46.9 (FCST 48.5); SEP 48.3
The Italian manufacturing PMI reached its weakest since June at 46.9 in October, below the 48.5 consensus and last month's 48.3. This signals a weak start to Q4 industrial activity, after the sector dragged on growth in the third quarter. It also underscores Spain as the only major driver of economic growth across the Eurozone.
CHINA DATA (MNI): Key China Steel Province's PMI Up Sharply in Oct
MNI (Beijing) China’s largest steel producing province Hebei saw its steel industry PMI reach 50.7 in October, up from September’s 45.7 and above the 50 mark for the first time in four months, the Hebei Metallurgical Industry Association said on Monday. Boosted by favorable policies, the steel market has become more active with a marginal improvement in terminal demand, the Association said, while noting the market still lacked an effective upward driving force overall.
TURKEY DATA (MNI): Monthly Inflation Eases Marginally to +2.88% in October
- TURKEY OCT CPI +2.88% M/M
Turkey’s consumer prices rose 48.58% y/y (Est: +48.30%) in October versus +49.38% in September, according to the Turkish Statistical Institute. The month-on-month figure – the central bank’s preferred gauge – rose 2.88% (Est: +2.66%) compared to +2.97% in September. The CBRT’s communication has consistently pointed to an easing in both the underlying inflation trend and inflation expectations as prerequisites for the beginning of the easing cycle. Broadly, analysts are expecting the first rate cut to come in Q1-2025 when the scale of administered price adjustments at the start of the year and the size of the minimum wage hike will be realised.
RATINGS: Affirmations for EU Supras at Moody’s, Turkey Upgraded at S&P
Ratings reviews of note from after hours on Friday include:
- Moody's affirmed the EFSF at Aaa, outlook stable
- Moody's affirmed the ESM at Aaa, outlook stable
- Moody's affirmed the European Union at Aaa, outlook stable
- S&P upgraded Turkey to BB-; Outlook Stable
FOREX: Haven FX Making Minor Inroads Ahead of Busy Week
- The greenback is modestly weaker in early Monday trade, helping press the USD Index to a new multi-week low, however conviction remains narrow, with markets seemingly unwilling to wade into markets at these levels. There remains a modest risk-off feel, with CHF and JPY the strongest performers of the day.
- Equity markets are trading better, with the e-mini S&P in minor positive territory, however prices are yet to make any material reversal of last week's losses.
- EUR/GBP made a notable break higher last week, with the cross breaking 0.8434 a potential reversal point and another indication of the strength of longer-term range-defining support at ~0.8300. Last week's strength will be tested by rates markets in the very near-term - as conviction for persistent sequential ECB cuts runs against a more contained BoE easing cycle in light of last week's Budget. But further progress in the cross exposes 0.8464 - the next major resistance.
- Factory orders numbers come alongside the final durable goods orders print for September later today, but market moves are likely to be contained as markets look ahead to not only the particularly consequential US election results, but the Fed and BoE decisions also. Speakers due Monday include ECB's Holzmann and Nagel - although neither of which are expected to result in major moves for rates.
EGBS: Bund Futures Pressured by Crude Rally, Germany Fiscal/Political Concerns
Bund futures are just off intraday lows, with a rally in crude oil benchmarks and renewed fiscal/political uncertainty from Germany weighing.
- Futures are -20 at 131.44. First support is the Oct 31 low at 131.15, shielding round-number support at 131.00.
- Finance Minister Lindner’s latest economic proposals have led to renewed tension amongst Germany’s traffic-light coalition, while BBG sources confirmed that the government could see as much as EUR75bln of tax income removed if the Federal Constitutional Court rules against the solidarity surcharge.
- A small upward revision to the Germany October manufacturing PMI will have kept pressure on the space. Overall, the data further cemented Spain’s position as the main engine of growth in a weak Eurozone economy.
- The implied probability of a 50bp ECB cut in December has fallen below 15%, down from around 40% at the start of last week. The continued hawkish repricing sees the German cash curve twist flatten, with 2-year yields around 3bps higher today and 30-year yields 1.5bps lower
- 10-year EGB spreads to Bunds have tightened as a result of the Germany-specific drivers flagged above, with the BTP/Bund spread almost 3bps tighter at 125bps.
- 5/10-year EU-bond results are due shortly.
- ECB’s Holzmann is scheduled to speak at 1300GMT/1400CET, though broader macro focus remains on the US election and Fed/BoE decisions later this week.
GILTS: Early Rally Fades, Long End Swap Spreads Tighten
Early gains more than reversed, with spill over from weakness in Bunds applying pressure.
- A U.S. Tsy rally following the narrowing of U.S. election odds provided support at the open.
- That was before signs of German political/fiscal uncertainty weighed on Bunds.
- Uptick in crude oil futures provides another headwind.
- Futures last -19 at 93.75, just above session lows of 93.70.
- Contract sticks comfortably within Friday’s range.
- Bearish technicals remain intact. First support at Thursday’s low (93.18).
- Yields now 1.5-3.5bp higher on the day, curve steeper.
- Swap spreads flat to ~1bp tighter to start the week, with the supply outlook limiting any rallies.
- 5-, 10- & 30-Year swap spreads on track to set fresh closing cycle lows at current levels.
- The DMO will outline its agenda for the FQ4 (Jan-Mar) investor/GEMM consultation at 15:30. We set out our expectations for the gilts on offer on pages 5-7 of our Budget Review.
- Focus also on cross-market flows into the U.S. election and any further fiscal-related headlines.
- BoE-dated OIS flat to 4bp more hawkish on the day.
- 22bp of cuts priced for next week, 29.5bp showing through year-end, 57bp through March and 76bp through June.
- SONIA futures flat to -2.0.
- BoE decision due Thursday, all 54 surveyed by BBG look for a 25bp cut. BMO the only name looking for no change (that we have seen).
EQUITIES: E-Mini S&P Still Trading Below 20- and 50-Day EMAs
Eurostoxx 50 futures traded lower last week. The move down resulted in a breach of support at 4914.00, the Oct 16 low. Note that 4884.06, 38.2% of the Aug 5 - Sep 30 bull cycle, has also been cleared. This exposes 4815.50 next, the 50.0% retracement point. Initial firm resistance has been defined at 5015.00, the Oct 29 high, where a break is required to highlight a reversal. Initial resistance is at 4943.50, the 20-day EMA. S&P E-Minis traded sharply lower last Thursday but the contract has found some support for now. Price has cleared both the 20- and 50-day EMAs - an important short-term bearish development. The break lower signals scope for an extension and has exposed the next support at 5724.00, the Oct 2 low. Clearance of this level would open 5637.60, a Fibonacci retracement. Initial firm resistance is 5824.59, the 20-day EMA.
- In China the SHANGHAI closed higher by 38.193 pts or +1.17% at 3310.207 and the HANG SENG ended 61.09 pts higher or +0.3% at 20567.52.
- Across Europe, Germany's DAX trades lower by 10.09 pts or -0.05% at 19243.88, FTSE 100 higher by 41.53 pts or +0.51% at 8219.35, CAC 40 up 14.94 pts or +0.2% at 7424.06 and Euro Stoxx 50 up 0.95 pts or +0.02% at 4878.79.
- Dow Jones mini down 25 pts or -0.06% at 42185, S&P 500 mini up 2.5 pts or +0.04% at 5761.25, NASDAQ mini down 5.75 pts or -0.03% at 20149.75.
Time: 09:50 GMT
COMMODITIES: Recovery in WTI Futures Still Appears to Be a Short-Term Correction
A bearish theme in WTI futures remains intact and the latest recovery appears to be a short-term correction. A resumption of weakness 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. The trend condition in Gold is unchanged and the latest pullback is - for now - considered corrective. Recent gains resulted in a breach of $2685.6, the Sep 26 high, confirming a resumption of the primary uptrend and maintaining the price sequence of higher highs and higher lows. Sights are on the $2800.0 handle next. Firm support is $2710.1, the 20-day EMA. A clear break of this EMA would highlight a short-term top.
- WTI Crude up $1.99 or +2.86% at $71.47
- Natural Gas down $0.04 or -1.43% at $2.623
- Gold spot up $6.91 or +0.25% at $2742.66
- Copper up $3.9 or +0.89% at $441.15
- Silver up $0.32 or +0.99% at $32.799
- Platinum up $4.79 or +0.48% at $1000.61
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 04/11/2024 | - |  EU | ECB's Lagarde and Cipollone in Eurogroup meeting | |
| 04/11/2024 | 1330/1430 | EU | ECB's Elderson speech at '10 years of SSM' conference | |
| 04/11/2024 | 1400/1500 | EU | ECB's Elderson in panel 'Achievement...and the outlook' | |
| 04/11/2024 | 1500/1000 | ** |  US | Factory New Orders |
| 04/11/2024 | 1530/1030 |  CA | BOC market participants survey | |
| 04/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 04/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 04/11/2024 | 1800/1300 | *** | US | US Note 03 Year Treasury Auction Result |
| 05/11/2024 | 0330/1430 | *** |  AU | RBA Rate Decision |
| 05/11/2024 | 0645/0745 | ** |  CH | Unemployment |
| 05/11/2024 | 0745/0845 | * |  FR | Industrial Production |
| 05/11/2024 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 05/11/2024 | - | EU | ECB's De Guindos participate in ECOFIN Meeting | |
| 05/11/2024 | - | US | US Presidential Election | |
| 05/11/2024 | 1330/0830 | ** | US | Trade Balance |
| 05/11/2024 | 1330/0830 | ** | CA | International Merchandise Trade (Trade Balance) |
| 05/11/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 05/11/2024 | 1430/1530 | EU | ECB's Lagarde speech at French Competition Authority's event | |
| 05/11/2024 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 05/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 05/11/2024 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 05/11/2024 | 1830/1330 | CA | BOC Minutes (Summary of Deliberations) | |
| 05/11/2024 | 1830/1930 | EU | ECB's Schnabel speech on Macroeconomic Policy |