MNI US OPEN - Regional German CPIs Support Slowdown in National Print

NEWS

US (BBG): Biden Targets Artificial Intelligence in Broad Regulation Order

President Joe Biden is directing the US government to take a sweeping approach to artificial intelligence regulation, his most significant action yet to rein in an emerging technology that has sparked both concern and acclaim. The lengthy executive order, released on Monday, sets new standards on security and privacy protections for AI, with far-reaching impacts on companies. Developers such as Microsoft Corp., Amazon.com Inc and Alphabet Inc.’s Google will be directed to put powerful AI models through safety tests and submit results to the government before their public release.

US (WaPo): Mike Pence Suspends His Struggling 2024 Campaign

Former vice president Mike Pence suspended his campaign for the GOP presidential nomination Saturday, facing the reality that there was little appetite for his candidacy among the legions of Republican voters who remain loyal to his former running mate Donald Trump and viewed Pence as a traitor because he refused to follow Trump's demands to overturn the 2020 election results.

US/CHINA/N.KOREA (BBG): US Raises North Korea’s ‘Destabilizing’ Acts in Talks With China

The US special representative for North Korea and his Chinese counterpart held talks over Washington’s concerns that Pyongyang is supplying arms to Russia and Beijing may be forcibly returning North Koreans in its territory. Sung Kim held a video conference Monday with China’s Liu Xiaoming to discuss North Korea’s “increasingly destabilizing and escalatory behavior,” the State Department said in a statement. Kim added that Pyongyang’s weapons transfers to help Russia “threaten to undermine global non-proliferation and violate numerous UN Security Council resolutions.”

ECB (BBG): ECB’s Simkus Sees Current Rate Level Likely Enough in December

The European Central Bank probably won’t need to lift interest rates in its final meeting of the year, according to Governing Council member Gediminas Simkus. “In my view, if there’s no new staggering data, current restrictive levels are sufficient,” the Lithuanian official said Monday. “There is and there was no need to raise rates at this point,” Simkus told reporters in Vilnius. “Will we need this in the future? We still have to wait and see. I’m hopeful this won’t be needed.”

ECB (BBG): ECB’s Kazimir Says Rate-Cut Bets for First Half 2024 Misplaced

European Central Bank Governing Council member Peter Kazimir said investor wagers on reductions in borrowing costs before mid-2024 are unrealistic. “Bets on rate cuts happening already in the first half of next year are entirely misplaced,” the Slovak official said Monday in a statement. “We will have to stay at the peak for the next few quarters.” Kazimir said inflation risks persist and it won’t be possible to say hikes are over until at least March.

EU/AUSTRALIA (BBG): Australia Walks Away From EU Trade Talks Over Agriculture

Australia has walked away for the second time in three months from talks with the European Union toward a free trade deal, almost certainly pushing any agreement into next year or beyond. “We’ve not been able to make progress” in the talks with Europe, Australia’s Trade Minister Don Farrell said in a statement on Sunday from Osaka, where he met European representatives on the sidelines of a Group of Seven meeting. “Negotiations will continue, and I’m hopeful that one day we will sign a deal that benefits both Australia and our European friends.”

UK (BBG): Finance Jobs in City of London Are Drying Up as Gloom Sets In

The City of London has fewer finance jobs to offer after a post-pandemic hiring boom left companies overstaffed while economic uncertainty caused a sense of gloom among workers and businesses alike. Financial services job postings in the Square Mile dropped almost a third in the quarter through September from a year earlier, according to a report published by recruitment consultancy Morgan McKinley. The decline extends a downward trend in vacancies seen since the end to the hiring frenzy of 2021 and early 2022, when financial firms were desperate to bolster their workforce.

SNB (MNI): SNB Tweaks Sight Deposit Remuneration to Cut Costs

The Swiss National Bank is adjusting remuneration on sight deposits, lowering the threshold factor applied in the tiered remuneration of sight deposits and no longer paying interest on SDs that meet minimum reserve requirements. Adjustments will both ensure that monetary policy implementation remains effective and will reduce interest costs for the SNB, a statement published Monday said, although noting the changes have no impact on the current monetary policy stance.

CHINA (BBG): China’s Economic Czar He Lifeng Assumes Key Policy Leader Role

China’s Vice Premier He Lifeng has assumed a leadership role at a top economic decision-making body, further cementing his position as the successor to US-China trade war-era policy aide Liu He. He — a close confidante of President Xi Jinping — was described in a Chinese state media report as the office director of the Communist Party’s Central Financial and Economic Affairs Commission, the first public record of that appointment since the government finished reshuffling its key leaders in March.

CHINA/RUSSIA (MNI): CMC VC-Ready to Work w/Russia to 'Actively Respond' to Sec Threats

MNI (London) Chinese state media carrying comments from the Vice Chairman of china's Central Military Commission after holding talks with Russian Defence Minister Sergei Shoigu. General Zhang Youxia held talks with Shoigu on the sidelines of the Xiangshan Forum in Beijing, a high-level military-focused event. Reports state that Zhang told Shoigu, "China is ready to work with Russia to actively respond to various security threats and challenges", and that "China is willing to work together to maintain global strategic balance and stability."

JAPAN (MNI): PM Kishida's Approval Rating Hits New Low - Press

Support for Japan's Prime Minister Fumio Kishida has fallen further, a weekend poll by Nikkei and TV Tokyo finds, after the leader floated a tax cut to ease the pain of high prices, the Nikkei reported on Monday. The approval rating for Kishida's cabinet dropped 9 percentage points from September to 33%, the poll found, the lowest since he took office in October 2021. His cabinet's disapproval rating rose 8 points to 59%. The top reason for not supporting the cabinet was "poor policies" at 52%, followed by "poor leadership" at 34%.

JAPAN (MNI): Japan Govt Keeps Overall Economy; Ups Corp Conditions

Japan's government kept its main economic assessment from the previous month in October for the sixth straight month but upgraded its assessment on business conditions for the first time since July, the Cabinet Office said on Monday. The assessment on public investment was lowered for the first time since November 2022. The government repeated, “The Japanese economy is recovering at a moderate pace.”

MNI BOJ PREVIEW - OCTOBER 2023: BOJ to Maintain Its Existing Policies, YCC the Focus

Our analysis aligns with the prevailing consensus, which foresees the BOJ maintaining its existing policies in the upcoming announcement. This would involve keeping the short-term interest rate at -0.1%. Regarding the BOJ's YCC policy, most market participants do not foresee any changes this week, although many hesitate to completely rule out the possibility.

DATA

GERMANY Q3 GDP -0.1% Q/Q, -0.3% Y/Y (MNI)

GERMANY BAVARIA OCT CPI +0% M/M, +3.7% Y/Y (MNI)
GERMANY RHINELAND-PALATINATE OCT CPI -0.2% M/M, +3.7% Y/Y (BBG)
GERMANY LOWER SAXONY OCT CPI -0.1% M/M, +3.6% Y/Y (BBG)
GERMANY HESSE OCT CPI -0.1% M/M , +3.6% Y/Y (BBG)
GERMANY BADEN-WUERTTEMBERG OCT CPI +0% M/M, +4.4% Y/Y (BBG)

SPAIN DATA (MNI): Downside Surprise in Core CPI

• SPAIN OCT FLASH HICP +0.3% M/M, +3.5% Y/Y
• SPAIN OCT FLASH CORE CPI +5.2% Y/Y

Spanish October flash HICP came in below consensus estimates at at 3.5% Y/Y (vs 3.8% cons; 3.3% prior) and 0.3% M/M (vs 0.5% cons; 0.6% prior). The national CPI also below consensus at 3.5% Y/Y (vs 3.9% cons; 3.5% prior). On monthly basis, CPI was 0.3% M/M (vs 0.7% cons; 0.2% prior). Most important however was the six-tenths deceleration in core CPI to 5.2% (vs 5.6% cons; 5/8% prior). Downside drivers to the headline rate came from fuel and food/non-alcoholic beverage prices, while electricity contributed to the upside.

SWEDEN (MNI): Q3 Flash GDP Shows Stagnation

Swedish flash Q3 GDP printed at 0.0% Q/Q and -1.2% Y/Y, below consensus expectations of +0.3% and -0.8% respectively. The print came in slightly above the Riksbank's September forecasts of -0.2% Q/Q and -1.4% Y/Y. The September monthly indicator showed a -0.5% M/M (vs a downwardly revised -0.5% prior) and -3.0% Y/Y (vs +0.1% prior). The monthly indicator has been a little firmer across Q3 compared to Q2, but remains volatile month-to-month. Despite this, it is still consistent with the weakening economy displayed by the quarterly print.

UK SEP M4 MONEY SUPPLY -1.1% M/M, -3.9% Y/Y (MNI)
UK BOE SEP MORTGAGE APPROVALS 43,328 (MNI)

SWISS KOF OCT ECONOMIC BAROMETER 95.8 (MNI)

AUSTRALIA DATA (MNI): Special Factors Boost Sales, Q3 Strengthens Though

• AUSTRALIA SEP RETAIL SALES +0.9% M/M

Retail sales grew a stronger-than-expected 0.9% m/m in September after 0.3% to be up 2% y/y. The strength was due to a number of special factors and so is unlikely to be repeated in October. The Q3 average rose a 3-month annualised rate of 3.4% up from 1.7% in Q2. Sales were positive in every month in Q3 signalling resilience in consumption. Q3 sales volume data are released on Friday but with nominal sales up 0.8% q/q another contraction in volumes is likely.

FOREX: AUD Sits Firmer as Retail Sales Tops Estimates

• Regional German CPI numbers are all posting a step lower from the previous for the month of October, supporting expectations for a slowdown in the national print later today. Backing up the disinflationary pressure was the Spanish inflation print, which came in below expectations as the core print missed consensus by 0.4ppts.
• Nonetheless, EUR/USD sits higher to tip the USD Index into negative territory, however support at the Friday low holds at the beginning of the week. CHF and SEK are the poorest performers, with GBP and JPY more mixed.
• AUD, NZD are among the session's best performers, market moves follow Australia's September retail sales, which topped expectations at 0.9% vs. Exp. 0.3%. Resultingly, AUD/USD trades back above 0.6350 and is narrowing in on the 50-dma resistance of 0.6395. Clearance here could be one of the first signs of a bullish reversal off the 0.6270 bottom, however the medium-term downtrend remains intact.
• Focus for the session ahead turns to the national print of German CPI, at which markets expect Y/Y inflation to slow to 4.0% from 4.5%. Dallas Fed Manufacturing also crosses, although US focus rests on the Fed decision later this week and the Quarterly Refunding Announcement from the US Treasury. Central bank speakers include ECB's de Guindos, BoC's Macklem & Rogers as well as RBA's Jones.

BONDS: EGBs Lead Core FI as Inflation Softens, With USTs Underperforming

Softer than expected inflation prints out of Spain and German states allow EGBs to firm in Monday trade, though Bunds are seen off highest levels at typing.

• Bund futures are up 0.41 today at 129.06 with 10y Bund yields down -3.1bp at 2.799% and Schatz yields down -2.4bp at 3.007%.
• With a light domestic data calendar, Gilts follow EGBs and are up 0.11 today at 93.00 with 10y yields down -0.5bp at 4.537% and 2y yields down -2.1bp at 4.725%.
• Spanish October flash headline and core CPI undershot consensus, reflecting a more broad-based disinflation than expected, while the three German states (most importantly NRW, which is 21% of the basket) that have released data so far also undershot the national consensus.
• Peripheries outperform on the back of the soft inflation data, with the 10-Yr BTP/Bund spread 4bps tighter at 193.2bps on the day. On Friday, DBRS Morningstar maintained Italy's credit rating at BBB (stable trend), which will have also helped BTPs on the margin.
• Developments in the Middle East this weekend have been seen as more cautious than expected r.e. Israel's ground invasion of Gaza, which helped cheapen core FI overnight and likely aided spread tightening this morning.
• ECB-speak over the weekend from Vujcic signalled his view that rates have been hiked sufficiently, while comments from the more hawkish Kazimir on wires recently note that further rate hikes are possible and H1 2024 rate cut bets are "entirely misplaced".
• USTs underperform European counterparts, with TY1 futures are down -0-3 today at 106-10+ and 10y UST yields up 2.0bp at 4.857%. The impending Q4 refunding announcement this week appears to be weighing on USTs thus far.

EQUITIES: E-Mini S&P Maintains Softer Tone Having Traded to Fresh Cycle Low Friday

A bearish theme in Eurostoxx 50 futures remains in play and price is trading just above its recent lows. The recent breach of support at 4082.00, the Oct 4 low and a bear trigger, confirmed a resumption of the downtrend and maintains the bearish price sequence of lower lows and lower highs. The focus is on the 4000.00 handle. Initial firm resistance is at 4125.00, the 20-day EMA.S&P e-minis maintain a softer tone. The contract traded to a fresh cycle low Friday and bears remain in the driver’s seat. Last week’s breach of support at 4235.50, Oct 4 low and bear trigger, confirms a resumption of the downtrend and maintains the bearish price sequence of lower lows and lower highs. Moving average studies are in a bear-mode position too. The focus is on 4100.00. Initial firm resistance is at 4295.88, the 20-day EMA.

• Japan's NIKKEI closed lower by 294.73 pts or -0.95% at 30696.96 and the TOPIX ended 23.41 pts lower or -1.04% at 2231.24.
• Elsewhere, in China the SHANGHAI closed higher by 3.769 pts or +0.12% at 3021.553 and the HANG SENG ended 7.63 pts higher or +0.04% at 17406.36.
• Across Europe, Germany's DAX trades higher by 59.02 pts or +0.4% at 14746.55, FTSE 100 higher by 56.84 pts or +0.78% at 7347.93, CAC 40 up 27.18 pts or +0.4% at 6822.56 and Euro Stoxx 50 up 16.86 pts or +0.42% at 4031.22.
• Dow Jones mini up 107 pts or +0.33% at 32612, S&P 500 mini up 18.75 pts or +0.45% at 4156.5, NASDAQ mini up 88.25 pts or +0.62% at 14352.5.

COMMODITIES: WTI Futures Extend Pullback From Oct 20 High

WTI futures traded lower this week as the pullback from $89.85, the Oct 20 high, extends. The medium-term trend condition is unchanged and remains bullish plus the recent move lower appears to be a correction. A resumption of gains would expose the bull trigger at $92.48, the Sep 28 high. Clearance of this hurdle would confirm a resumption of the uptrend. For bears, a move through $80.20, the Oct 6 low, would instead highlight a short-term top. Gold conditions are unchanged - the metal remains firm and traded to a fresh cycle high on Friday. Price has recently breached key resistance at $1953.0, the Sep 1 high, and $1987.5, the Jul 20 high. The continuation higher strengthens a bullish theme and opens $2022.20 next, the May 15 high. Initial firm pivot support lies at $1921.5, the 50-day EMA. Clearance of this level is required to signal a short-term top and a potential reversal.

• WTI Crude down $1.41 or -1.65% at $84.17
• Natural Gas down $0.14 or -3.9% at $3.348
• Gold spot down $12.79 or -0.64% at $1993.37
• Copper up $1.35 or +0.37% at $365.95
• Silver down $0.03 or -0.12% at $23.0915
• Platinum up $2.86 or +0.32% at $910.3