EXECUTIVE SUMMARY
- FED’S JEFFERSON SAYS RISKS TO INFLATION, EMPLOYMENT NOW BALANCED
- BIDEN AND NETANYAHU EXPECTED TO HOLD CALL ON IRAN TODAY
- HURRICANE MILTON TRACKS TOWARD FLORIDA AS CATEGORY 5 STORM
- RBNZ CUTS OCR 50BP TO 4.75%
- CHINA FINANCE MINISTER PLANS BRIEFING AS INVESTORS SEEK STIMULUS
Figure 1: Hurricane Milton storm path
Source: National Hurricane Center, NBC News
NEWS
FED (BBG): Fed’s Jefferson Says Risks to Inflation, Employment Now Balanced
Federal Reserve Vice Chair Philip Jefferson said risks to the central bank’s employment and inflation goals are now closer to equal. “The balance of risks to our two mandates has changed - as risks to inflation have diminished and risks to employment have risen, these risks have been brought roughly into balance,” Jefferson said Tuesday in prepared remarks for an event at Davidson College in North Carolina. Jefferson, in his first public speech since May, said he’ll be assessing incoming economic data and the balance of risks “when considering additional adjustments to the federal funds target range.”
MNI FOMC MINUTES PREVIEW: September 2024
The minutes to the September FOMC meeting (released Wednesday at 1400ET) could shed further light on the decision to semi-surprise markets with a 50bp vs a 25bp cut to begin the easing cycle. While the vast majority of participants have since commented that they supported the half-point cut, the meeting decision brought the first dissent from a Fed governor (Bowman) since 2005, and it will be interesting to get a gauge of how many non-voting members also opposed the outsized rate reduction. It seems from comments since that meeting that the vast majority – including hawks – supported the 50bp cut.
SECURITY (MNI): Biden and Netanyahu Expected to Hold Call on Iran Today
US President Joe Biden and Israeli Prime Minister Benjamin Netanyahu are expected to hold a call this morning to discuss Israel's response to Iran's ballistic missile attack. The call, the first between the two since August, may be particularly tense after revelations about their strained relationship were reportedly in an upcoming book by Bob Woodward. Biden is expected to counsel Netanyahu against striking Iran's nuclear or energy infrastructure out of fears of sparking a broader Middle East conflict and driving up energy prices close to the US presidential election.
US (BBG): Hurricane Milton Tracks Toward Florida as Category 5 Storm
Hurricane Milton churned toward Florida’s west coast as a dangerous Category 5 storm, with flooding and high winds expected to inflict widespread damage and put lives at risk. Milton’s top winds have dipped slightly to 160 miles (260 kilometers) per hour, the US National Hurricane Center said in its advisory at 2 a.m. New York time. While wind speeds may fluctuate until landfall, the storm will still be capable of causing devastation across the Florida peninsula when it arrives Wednesday night, according to the hurricane center. The hurricane is about 360 miles southwest of the city of Tampa.
US (BBG): US Weighs Google Breakup as Remedy in Historic Antitrust Case
The US Justice Department is considering asking a federal judge to force Google to sell off parts of its business in what would be a historic breakup of one of the world’s biggest tech companies. Antitrust enforcers are weighing a breakup to mitigate the Alphabet Inc. business’s dominance in search, the agency said in a court filing on Tuesday, confirming an earlier Bloomberg News report. Judge Amit Mehta could also order Google to provide access to the underlying data it uses to build its search results and artificial intelligence products, it said.
US (WSJ): Healthcare Premiums are Soaring Even as Inflation Eases
The cost of employer health insurance rose 7% for a second straight year, maintaining a growth rate not seen in more than a decade, according to an annual survey by the healthcare nonprofit KFF. The back-to-back years of rapid increases have added more than $3,000 to the average family premium, which reached roughly $25,500 this year.
US (WSJ): The Yearlong Wait to Transfer Bonds Out of TreasuryDirect
TreasuryDirect users face delays of up to a year to transfer bonds to brokerages due to high demand and an antiquated system. The long wait times negate a key selling point of Treasurys, which are typically considered cash-like due to their ease of trading. Financial advisers recommend using TreasuryDirect only for purchasing savings bonds and Treasurys that will be held to maturity, as most brokerages offer faster transfer times and no waiting periods.
US (BBG): Walz Says Electoral College ‘Needs to Go’ But Unlikely to Happen
Democratic vice presidential nominee Tim Walz offered support for eliminating the Electoral College but acknowledged that appeared unlikely in the current political climate. “The Electoral College needs to go,” Walz said at a fundraiser on Tuesday in Sacramento, California, hosted by that state’s Democratic governor, Gavin Newsom, according to a pool report from the event. Walz, though, cast doubt that the process could be realistically changed now.
MNI US EARNINGS SCHEDULE: Banks Take Early Focus
Earnings season informally begins this week with Pepsi's midweek report, before BlackRock, Wells Fargo and JP Morgan on Friday. Full schedule for the quarter including timings, EPS & revenue expectations in link above.
US/RUSSIA (BBG): Kremlin Says Trump Sent Putin Covid Tests While President
The Kremlin confirmed that former US President Donald Trump while in office sent Russian President Vladimir Putin Covid-19 testing devices during the height of the pandemic, as recounted in a new book by journalist Bob Woodward. Kremlin spokesman Dmitry Peskov said on Wednesday that the tests had been sent, but denied the book’s claim that the two leaders had spoken by phone several times since Trump left office. “We also sent equipment at the beginning of the pandemic,” Peskov said in a written response when asked about the book. “But about the phone calls - it’s not true.”
RBNZ (MNI): RBNZ Cuts OCR 50bp to 4.75%
The Reserve Bank of New Zealand monetary policy committee has eased the official cash rate 50 basis points to 4.75%, noting inflation has moved inside the 1-3% target and is converging on the 2% midpoint. The RBNZ’s move was largely anticipated and follows August’s decision, which saw the Bank start its easing cycle with a 25bp cut.
“The New Zealand economy is now in a position of excess capacity, encouraging price- and wage-setting to adjust to a low-inflation economy,” the committee noted in a statement.
ECB (BBG): ECB’s Kazimir Not Convinced on October Cut Without Key Data
European Central Bank Governing Council member Peter Kazimir said he’s not as sure as some media reports that interest rates will be lowered next week — suggesting that the final meeting of the year may be a more appropriate time to cut again. The comments mark the first pushback by a member of the 26-strong Governing Council, with others either backing a third reduction of the year in the deposit rate next week or at least not opposing such a step. “It’s considered a done deal in the media that rates should be lowered,” Kazimir told reporters in Bratislava.
ECB (BBG): ECB’s Villeroy Says Rate Cut Next Week Very Probable, Isn’t Last
The European Central Bank will very probably lower interest rates next week and will loosen monetary policy again at future meetings depending on progress combating price rises, Governing Council member Francois Villeroy de Galhau said. “A cut is very probable, and furthermore it won’t be the last, but the following pace will simply depend on the evolution of the fight against inflation,” he said on Franceinfo radio on Wednesday.
ECB (FT): ‘Highly Restrictive’ ECB Rates Could Drive Inflation Below Target, Warns Governor
Yannis Stournaras said he backed two more quarter-point rate cuts this year, the first at the ECB’s meeting next week in Slovenia and another one at its final gathering of the year in December, after most recent data on economic activity and inflation was much softer than expected. “Even if we have one cut of 25 basis points now and another one in December, we will be back to just 3 per cent - still in highly restrictive territory,” Stournaras told the Financial Times, adding that there is a likely case for further easing of policy in 2025.
UK (BBG): Banks Push UK to Relax Rules on Deferred Bonuses and Clawbacks
Top banks are pushing the UK to soften its stance on deferred bonuses and clawbacks as regulators prepare to revise their post-financial crisis rulebook, according to people familiar with the discussions. Discussions between firms and watchdogs are intensifying over the UK’s rules, which were introduced to curb “excessive-risk taking” about a decade ago and are among the strictest in the world. Senior managers are obliged to defer part of their pay for as long as seven years, and face clawbacks for a decade if issues are uncovered.
CHINA (BBG): China Finance Minister Plans Briefing as Investors Seek Stimulus
China announced it would hold a briefing on fiscal policy on Saturday as investors look for additional measures to stimulate the world’s No. 2 economy. Finance Minister Lan Fo’an will introduce moves to strengthen fiscal policy to shore up growth, and answer questions from reporters, the State Council Information Office said in a statement on Wednesday. The briefing will start at 10 a.m. local time on Saturday.
CHINA (BBG): China Premier Vows to Listen to Market in Bid to Lift Confidence
Chinese Premier Li Qiang vowed to “listen to the voice of the market” when formulating economic policies, in a rare nod to the concerns of the private sector and investors as Beijing seeks to shore up confidence and stabilize growth. The No. 2 official made the remarks during a regular economic seminar with academics and entrepreneurs on Tuesday, the official Xinhua News Agency reported. He also pledged to respond to social concerns and lift sentiment in drafting policies in the meeting, attended also by Finance Minister Lan Fo’an and central bank Governor Pan Gongsheng.
CHINA (BBG): Leveraged Bets on China Stocks Surge as Risk Appetite Grows
Leveraged equity positions in China surged at the fastest pace in more than a decade as traders boosted risky wagers upon their return from the Golden Week holiday. The outstanding amount of margin debt in Shanghai and Shenzhen exchanges rose to 1.54 trillion yuan ($218 billion) on Tuesday, up 7.4% from the last trading session on Sept. 30, according to data compiled by Bloomberg. That’s the fastest pace since at least 2013, when data shows an abnormal spike.
JAPAN (MNI): Japan's Ishiba To Dissolve Lower House For Election
Japanese Prime Minister Shigeru Ishiba will dissolve the lower house of parliament on Wednesday afternoon to hold a snap election on Oct. 27 before the Bank of Japan’s policy-setting meeting on Oct. 30-31. The BOJ is expected to keep its policy interest rate steady at 0.25% as policymakers examin the impact of July's rate hike and volatile financial markets caused by high uncertainty over the U.S. economy. BOJ officials and market players are focused on the policy decisions by the Federal Reserve on Nov. 6-7, its communication with market players and the impact of the Nov. 5 U.S. presidential election on markets.
JAPAN (BBG): BOJ’s Next Hike Likely to Come in January, Former Official Says
New Prime Minister Shigeru Ishiba won’t impede the Bank of Japan’s path toward raising interest rates, with January the most likely timing for its next hike, according to a former executive director in charge of monetary policy. “My view at the moment is that January has the highest probability,” Eiji Maeda, the former executive, said in an interview Tuesday. “That would be about a half year since the July rate hike and that’s also when the bank releases its latest economic projections.”
RBA (MNI): RBA to Publish Framework on Additional Policy Tools
The Reserve Bank of Australia will publish a framework for additional monetary policy tools next year following a review of its actions during the pandemic and its use of the AUD188 billion Term-Funding Facility, according to Assistant Governor Chris Kent. In a presentation delivered at the RBA, Kent noted the board would likely consider using a tool such as the TFF again in extreme circumstances, “when the cash rate target had been lowered to the full extent possible.” “But it would do so only after consideration of a wide range of scenarios and the associated risks, and with a broader range of operational options than were available at the time of the pandemic,” he added.
INDIA (BBG): India Central Bank Opens Door to First Rate Cut in 4 Years
India’s central bank set the stage for its first interest rate cut in four years, growing more confident that inflation will ease in coming months. Bonds and stocks advanced. The new monetary policy committee voted five-to-one to keep the benchmark repurchase rate at 6.5% on Wednesday - in line with forecasts - but opted to change the policy stance to ‘neutral,’ signaling the next likely move may be a cut. One of the new external members, Nagesh Kumar, voted for a reduction at the meeting.
COMMODITIES (BBG): Iron Ore Spikes Briefly as China Plans Fresh Fiscal Briefing
Iron ore rebounded as China announced another briefing on policy support, rebooting speculation major fiscal measures will be rolled out after an address on Tuesday left investors disappointed. The steelmaking staple spiked more than 3%, before giving up most of that gain, after the State Council said Finance Minister Lan Fo’an would introduce moves “to strengthen counter-cyclical adjustment of fiscal policy” at a briefing on Saturday. Copper rose more than 1% on the London Metal Exchange before paring the advance.
CORPORATE (BBG): Couche-Tard Is Said to Boost Seven & I Offer to $47 Billion
Alimentation Couche-Tard Inc. sent Seven & i Holdings Co. a new potential acquisition price of ¥7 trillion ($47.2 billion), people with knowledge of the matter said, showing that the Canadian company is still seeking to enter takeover talks after its initial bid was rejected. The indicated offer of $18.19 per share was sent to Seven & i on Sept. 19, the people said, asking not to be identified because the information isn’t public. The figure represents a premium of around 20% from the prior offer and the company’s stock price from yesterday. Shares in Seven & i rose 4.7% on Wednesday following the news.
DATA
GERMANY AUG TRADE BALANCE EUR 22.5BLN (MNI)
GERMANY AUG EXPORTS +1.3% M/M; IMPORTS -3.4% M/M (MNI)
AUSTRALIA AUG BUILDING APPROVALS -6.1% M/M, +3.6% Y/Y (MNI)
FOREX: AUD/NZD North of Key Level on Dovish RBNZ
- NZD is comfortably the poorest performer across G10 following the RBNZ rate decision overnight. The 50bps OCR rate cut was largely as expected, but council's commitment to rolling back restrictive policy should the economy warrant action has raised the likelihood of further easing this year - with over 50bps now priced for the November decision.
- As such, AUD/NZD has been marked sharply higher breaking above the Monday highs to hit the best levels since late July. A close at current or higher levels would also confirm a break above the 76.4% retracement for the downleg off the mid-year high at 1.1066.
- The greenback trades firmer, with a wave of dollar demand coinciding with a soft European equity open. Concerns over Chinese stimulus should remain a key topic for the rest of the week - an announcement that the Chinese Ministry of Finance will hold a briefing on policy this Saturday failed to underpin sentiment. The CSI-300 closed lower by 7% after a late phase of selling pressure.
- The Fed minutes release later today could shed further light on the decision to semi-surprise markets with a 50bp vs a 25bp cut to begin the easing cycle. It's to be expected that the discussion over the future rate path will revolve around a data-dependent/meeting-bymeeting approach, but the characterization of the decision to cut 50bp will be of note.
- Speakers of note Wednesday include Fed's Bostic, Logan, Goolsbee & Jefferson, with Collins & Daly after the close - covering a variety of issues. ECB's Villeroy is also set to appear in Paris at the London close.
EGBS: Bunds Within Yesterday’s Range
Bund futures remain within yesterday’s range, currently +22 at 133.67. Core FI found light support from a downtick in equity futures at the European cash open, but the moves have faded.
- German cash yields are -0.5 to -1.5bps lower, with the curve lightly bull flattening.
- Bank of Slovakia Governor Kazimir said he could not rule out an October ECB cut, a somewhat less hawkish stance than when he last spoke on September 16.
- Stournaras and Villeroy also offered support for an October cut earlier this morning.
- The German August trade surplus was larger than expected but wasn’t a market mover.
- 10-year EGB spreads to Bunds are ~1bp wider, but OAT and BTP spreads remain within yesterday’s ranges.
- The remainder of today’s regional calendar is light.
GILTS: Auction-Related Weakness Fades, Futures to Fresh Session Highs
The width of the tail at the latest round of July-34 gilt supply pushed gilts away from session highs, although the cover ratio (which comfortably topped 3.00x) limited the pullback, before gilts recovered.
- Futures initially softened to 96.65 post-auction, before moving to fresh session highs of 96.89.
- Bulls need to breach the Oct 7 high & Sep 2 low (96.93/98.11) to start turning the tide in their favour, with the bearish technical picture remaining intact.
- Yields 1.5-3.5bp lower on the day, curve steepens.
- Initial worry surrounding the potential for increased investment spending (facilitated by a widely expected tweak to the fiscal rules) has been overcome.
- We have noted that the probability of more controversial Budget measures is receding (based on media reports). This likely factored into the early rally, after the OBR judged that the proposals in their initial form would not raise money/provide a lower tax take.
- GBP STIRs a little more dovish as gilts rally.
- BoE-dated OIS price 22bp of cuts for November, 37bp of cuts through year-end and 99bp of cuts through June.
- SONIA futures flat to +5.5.
EQUITIES: Bull Cycle in E-Mini S&P Intact Despite Recent Shallow Pullback
Eurostoxx 50 futures are unchanged. The latest pullback appears to be a correction. Key short-term support to watch is 4929.62, 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 5742.64, the 20-day EMA. It has been pierced. Key support lies at 5674.40 the 50-day EMA.
- Japan's NIKKEI closed higher by 340.42 pts or +0.87% at 39277.96 and the TOPIX ended 8.09 pts higher or +0.3% at 2707.24.
- Elsewhere, in China the SHANGHAI closed lower by 230.917 pts or -6.62% at 3258.858 and the HANG SENG ended 289.55 pts lower or -1.38% at 20637.24.
- Across Europe, Germany's DAX trades higher by 3.82 pts or +0.02% at 19069.87, FTSE 100 higher by 30.97 pts or +0.38% at 8221.66, CAC 40 up 11.61 pts or +0.15% at 7532.93 and Euro Stoxx 50 down 0.94 pts or -0.02% at 4948.06.
- Dow Jones mini down 95 pts or -0.22% at 42280, S&P 500 mini down 13 pts or -0.22% at 5787.75, NASDAQ mini down 60.75 pts or -0.3% at 20238.
Time: 09:55 BST
COMMODITIES: Tuesday's Reversal Lower in WTI Futures 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 $71.41, 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 $2615.7, the 20-day EMA. It has been pierced, a clear break would signal scope for a deeper retracement.
- WTI Crude up $0.34 or +0.46% at $73.98
- Natural Gas down $0.04 or -1.35% at $2.697
- Gold spot down $6.38 or -0.24% at $2614.86
- Copper down $1.05 or -0.24% at $444.6
- Silver down $0.07 or -0.23% at $30.5835
- Platinum down $3.67 or -0.38% at $954.19
Time: 09:55 BST
| Date | GMT/Local | Impact | Country | Event |
| 09/10/2024 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 09/10/2024 | 1200/0800 | US | Atlanta Fed's Raphael Bostic | |
| 09/10/2024 | 1315/0915 | US | Dallas Fed's Lorie Logan | |
| 09/10/2024 | 1400/1000 | ** | US | Wholesale Trade |
| 09/10/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 09/10/2024 | 1630/1230 | US | Fed Vice Chair Philip Jefferson | |
| 09/10/2024 | 1700/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 09/10/2024 | 1800/1400 | *** | US | FOMC Minutes |
| 09/10/2024 | 2100/1700 | US | Boston Fed's Susan Collins | |
| 09/10/2024 | 2200/1800 | US | San Francisco Fed's Mary Daly | |
| 10/10/2024 | 0600/0800 | *** |  NO | CPI Norway |
| 10/10/2024 | 0600/0800 | ** |  SE | Private Sector Production m/m |
| 10/10/2024 | 0600/0800 | ** |  DE | Retail Sales |
| 10/10/2024 | 0800/1000 | * |  IT | Industrial Production |
| 10/10/2024 | - | *** |  CN | Money Supply |
| 10/10/2024 | - | *** | CN | New Loans |
| 10/10/2024 | - | *** | CN | Social Financing |
| 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 |