MNI US OPEN - Red Wave Turns to Red Trickle

NEWS

US (MNI): Red Wave Turns into Trickle in US Midterms

The US midterm elections look set to deliver a split Congress following a disappointing night for Republicans. While the count continues in states across the country it appears increasingly likely that the Democrats will retain control of the Senate, while the Republicans are favoured to gain a majority in the House of Representatives.

US (MNI): DeSantis Overtakes Trump in 2024 Presidential Betting Stakes

Latest data from Smarkets shows re-elected Republican Florida Governor Ron DeSantis overtaking former President Donald Trump in the political betting market for who will be elected president in 2024.

A major shift in betting sentiment sees DeSantis assigned a 25.0% implied probability of winning in 2024, compared to 24.4% for Trump. Incumbent Democratic President Joe Biden has a 11.9% implied probability of winning a second term in office, with VP Kamala Harris on 5.6% and re-elected Democratic California Governor Gavin Newsom on 5.7%.

US (MNI): Fed’s Williams - Long-Run Inflation Expectations Anchored

Longer-run U.S. inflation expectations haven't reacted strongly to the spike in inflation to near 40-year highs although uncertainty about the future track of prices has risen significantly, New York Fed President John Williams said. “The news is mostly good-longer-run inflation expectations in the United States have remained remarkably stable at levels broadly consistent with the FOMC’s longer-run goal,” he said in prepared remarks to a BIS conference on Wednesday.

EU (MNI): Eurozone Pay Gains May Have Peaked - Irish NCB

Wages in six euro area countries rose sharply in October, new data published by the Central Bank of Ireland shows, although continued uncertainty and a worsening economic outlook mean pay packet increases may have peaked despite tight labour market conditions. The figures, based on 24 million job ads posted between 1 January 2018 and 31 October 2022, suggest recent wage growth was highest in Germany -- which boosted the minimum wage from EUR 9.82 to EUR 12.00 on October 1 this year -- at 7.1%.

CHINA (BBG): China’s Guangzhou Locks Down Third District on Covid

China’s Guangzhou city locks down Panyu district from Wednesday to Sunday for Covid control, the local government says in a WeChat statement. Residents are ordered not to go out unless necessary. Note this is the third district in the city under lockdown, following the Haizhu and Liwan districts.

CHINA (MNI): China Must Lift Growth to Curb Capital Outflow

Striking the right balance between pro-growth policies and Beijing’s Covid-Zero strategy will be crucial in delivering a recovery to restore confidence in China’s economy, curb capital outflows and support the yuan, former People’s Bank of China monetary policy committee member Yu Yongding told MNI. Despite the yuan’s slide to a 15-year low against the U.S. dollar amid concerns about China’s outlook, the government still should allow the currency to be as flexible as possible and focus its efforts on reviving growth that will fall short of Beijing’s target of around 5.5% in 2022, said Yu.

AUSTRALIA (MNI): RBA's Bullock Says Inflation Peak Near; More Hikes Coming

Reserve Bank of Australia Deputy Governor Michele Bullock said there are good reasons to believe Australia is "approaching the peak of inflation this cycle" but signalled further interest rate increases were likely, in a speech on Wednesday night. Bullock noted the number of items in the CPI basket rising above 3% y/y was the highest in decades and that last time a similar pattern was seen "inflation was well above target and the Bank was increasing the policy rate."

AUSTRALIA (MNI): Aussie Business Sales Falter in September

The Reserve Bank of Australia has received another sign growth may be slowing, with more than half of the major industry groups reporting a fall in sales turnover in September, according to the Australian Bureau of Statistics.

JAPAN (MNI): Japan's Oct Economic Sentiment Rises, Outlook Falls

The Japanese government's sentiment index posted the third straight rise in October but the outlook index for two to three months ahead posted the second consecutive drop, prompting the government to tweak its assessment from the previous month, the Economy Watchers released by the Cabinet Office on Wednesday showed. The Economy Watchers sentiment index for the current economic climate rose a seasonally adjusted 1.5 points to 49.9 in October from 48.4 in September.

DATA

SWEDEN SEP INDUSTRIAL ORDERS +2.3% M/M; AUG -4.0%r M/M (MNI)
SWEDEN AUG INDUSTRIAL ORDERS NSA +4.8% Y/Y; AUG -0.4%r Y/Y (MNI)

CHINA (MNI): China's Oct CPI Falls To 5 Month Low; PPI Declines

• CHINA OCT CPI +2.1% Y/Y VS +2.8% Y/Y SEP
• CHINA OCT CPI +0.1% M/M VS +0.3% M/M SEP
• CHINA OCT FOOD PRICES +7.0% Y/Y VS +8.8% Y/Y SEP
• CHINA OCT NON-FOOD CPI +0.1% Y/Y VS +1.5% Y/Y SEP
• CHINA OCT PPI -1.3% Y/Y VS +0.9% Y/Y SEP
• CHINA OCT PPI +0.2% M/M VS -0.1% M/M SEP

China's October Consumer Price Index fell to a five-month low of 2.1% y/y, slowing sharply from September's 2.8% y/y pace as consumer demand declined after the Golden Week holiday, data from the National Bureau of Statistics released on Wednesday showed. The October CPI fell short of the median forecast for a 2.4% y/y rate, as a high base effect also helped steer down the pace of inflation more than expected.

Pork prices, the main CPI driver, rose 15.8 percentage points to a 51.8% y/y pace, but this was partly offset by lower vegetable and fruit prices amid sufficient supply as well as an easing in fuel costs.

FX SUMMARY: USD Favoured as Results Point to Split Congress

• Markets continue to digest the outcomes and results of the US Midterm elections, with the reaction favouring the USD, which is among the best performers in G10 ahead of the NY crossover. The results continue to lean toward an outcome in which Congress will be split between the GOP and the Democrats after a disappointing showing from Republican support.
• Trendline support in the USD Index is holding, and may have helped the rebound in the greenback so far Wednesday, with tomorrow's inflation print likely critical for the short-term direction. Support crosses at 109.310.
• GBP underperforms after a bout of selling pressure put EUR/GBP through the early November highs to print the best levels since mid-October. 0.8829 marks the next resistance for the cross, the 38.2% retracement for the September - November downleg.
• GBP and NZD are the session's poorest performers, while USD and CHF strength completes the risk-off backdrop.
• US and Canadian data releases are few and far between Wednesday, with focus resting on tomorrow's US CPI release, at which most see inflation slowing to below 8.0% on the year. The speaker slate could be more interesting, with BoE's Haskel & Cunliffe due as well as Fed's Barkin on the docket.

Source: MNI/BBG

BOND SUMMARY: USTs (Very) Briefly Hit Post-FOMC Highs

• In early European trading, Treasury futures spiked to their highest levels since last week's FOMC meeting while Bund futures moved to their highest level of the week. However, the majority of this move has since been reversed. There was no major headline driver, although Treasuries had been moving a little higher as it looks increasingly likely that the Republicans would not win overall control of both the House and the Senate. A Republican House and Democrat Senate was seen as the most likely outcome by the MNI Political Risk team (they assigned it a 55% probability) but Republican control of both was expected by many in the market.
• There has been some divergence in curve moves, however, with the German curve steepening, the UST curve seeing parallel moves and the gilt curve flattening.
• The market is still looking ahead to tomorrow's US CPI release with wholesale inventories the only data due today.
• TY1 futures are down -0-3+ today at 110-05+ with 10y UST yields up 1.9bp at 4.146% and 2y yields up 2.0bp at 4.673%.
• Bund futures are up 0.08 today at 137.17 with 10y Bund yields down -1.6bp at 2.262% and Schatz yields down -3.2bp at 2.152%.
• Gilt futures are up 0.11 today at 101.82 with 10y yields up 2.4bp at 3.570% and 2y yields up 4.5bp at 3.258%.

EQUITIES: Bullish Outlook Remains Intact

A bullish EUROSTOXX 50 futures outlook remains intact and the contract traded higher once again yesterday. The break to a fresh short-term trend high confirms a resumption of the bull cycle that started Oct 3. This paves the way for continued 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 have recovered from last week’s low of 3704.25 (Nov 3). A breach of this level would expose the key short-term support at 3641.50, the Oct 21 low, where a break would signal scope for a continuation lower. For bulls, a stronger reversal higher and more importantly a breach of 3928.00, the Nov 1 high, is required to confirm a resumption of the recent bull theme. This would open 3981.25, the Sep 14 high.

• Japan's NIKKEI closed lower by 155.68 pts or -0.56% at 27716.43 and the TOPIX ended 8.07 pts lower or -0.41% at 1949.49.
• Elsewhere, in China the SHANGHAI closed lower by 16.326 pts or -0.53% at 3048.167 and the HANG SENG ended 198.79 pts lower or -1.2% at 16358.52.
• Across Europe, Germany's DAX trades lower by 36.5 pts or -0.27% at 13649.91, FTSE 100 lower by 25.45 pts or -0.35% at 7281.93, CAC 40 down 0.67 pts or -0.01% at 6439.49 and Euro Stoxx 50 down 4.33 pts or -0.12% at 3734.28.
• Dow Jones mini down 12 pts or -0.04% at 33167, S&P 500 mini up 2 pts or +0.05% at 3837.75, NASDAQ mini up 29 pts or +0.26% at 11125.75.

COMMODITIES: Gold at Monthly High After 2.5% Rally Tuesday, Targets Oct 4 Bull Trigger

The latest pullback in WTI futures is considered corrective - for now. The outlook is bullish and the contract has recently pierced resistance at $92.34, the Oct 12 high. A clear break of this hurdle would strengthen a bullish theme and signal scope for a climb towards resistance at $95.55. Moving average studies are beginning to display a bull mode set-up, reinforcing the current positive outlook. Support to watch, lies at $85.30, the Oct 31 low. Gold found support Tuesday and rallied sharply higher. This confirms an extension of the rally from $1616.7, the Nov 3 low. The yellow metal is trading above both the 20- and 50-day EMAs and attention turns to resistance at $1729.5, the Oct 4 high and a bull trigger. A break of this hurdle would strengthen bullish conditions. On the downside, support is at $1662.8, the 20-day EMA.

• WTI Crude down $0.61 or -0.69% at $88.26
• Natural Gas up $0.04 or +0.6% at $6.178
• Gold spot up $2.18 or +0.13% at $1714.11
• Copper down $1.7 or -0.46% at $366.5
• Silver up $0.19 or +0.88% at $21.5422
• Platinum up $8.79 or +0.88% at $1009.13