MNI US OPEN - Steady Inflation Shouldn't Move BoE Needle

NEWS

US/ISRAEL (MNI): Biden - We Will Make Sure Israel Has What it Needs to Defend Itself

US President Joe Biden has just finished speaking on his visit to Israel. States that "Hamas slaughtered more than 1,300 people, including 31 Americans...Hamas committed atrocities that make ISIS look more rational....US will make sure Israel has what it needs to defend itself." Says that he is "...Saddened and outraged by Gaza hospital explosion", and that from what he has seen it was caused "by the other side." Biden: Courage and bravery of Israeli people is "truly stunning".

UK (The Times): Ministers Could Override Pension Triple Lock as Pay Beats Inflation

Ministers are to review next year’s increase in the basic state pension, which could result in the Treasury saving up to £2 billion a year. Under the government’s triple lock mechanism the latest earning figures should be used to calculate next year’s increase in the state pension, which is supposed to rise in line with whichever is highest out of average wage growth, inflation or 2.5 per cent.

CHINA (MNI): China's Xi Plans High-Quality BRI Expansion

MNI (Beijing) China will further open up its domestic market, improve connection with its counterparts and pursue a win-win international cooperation in a process of building up a high-quality Belt and Road Initiative for the next decade, China's president Xi Jinping said in a keynote speech at the opening ceremony of the third Belt and Road Forum for International Cooperation on Wednesday in Beijing.

CHINA (MNI): China Confident 5% GDP Target On Track - NBS

MNI (Beijing) Chinese officials believe the country's economy can achieve the 5% GDP growth target, given the strong foundation established in the first three quarters of the year, according to Sheng Laiyun, spokesperson for the National Bureau of Statistics (NBS). The Chinese economy grew by 4.9% y/y in Q3, beating market expectations of 4.5%, as production and consumption rebounded more than expected, despite weakness in real estate continuing to drag down investment.

CHINA (MNI): China Should Negotiate With EU Over Potential EV Tariffs

MNI (Beijing) China should deepen cooperation with European countries on electric vehicles (EV) and negotiate should the E.U. escalate its investigation into cheaper Chinese EV imports and impose additional tariffs, policy advisors told MNI. The European Commission launched an anti-subsidy probe in early October into Chinese battery-powered cars and advisors believe it could impose temporary punitive tariffs during the investigation, which could last up to 13 months.

CHINA (BBG): Country Garden Default Looms After Builder Says Unlikely to Pay

Distressed Chinese builder Country Garden Holdings Co. signaled it’s set for a first-ever default as a grace period ends for dollar-bond interest, in the latest sign of a deepening crisis that’s shaken the nation’s financial markets. “The company expects that it won’t be able to meet all of its offshore payment obligations on time, due to a deep correction in China’s home market and its subdued sales,” the developer said in a statement to Bloomberg News in response to questions about its plans for the $15.4 million of interest due. A holder of the note said they had yet to receive money.

CHINA (MNI): Yuan Stability Has Solid Foundation - PBOC Newspaper

MNI (Beijing) Continuous economic recovery fueled by the People’s Bank of China’s counter-cyclical measures and better leveraged aggregate and structural monetary tools will further support yuan stability, according to a commentary published on the PBOC-run newspaper Financial News on Wednesday.

CHINA/AUSTRALIA (BBG): China Says ‘Positive Outcomes’ on Australia Wine Levies Are Near

China signaled possible progress on resolving a dispute with Australia on punitive wine tariffs as relations between the trading partners continues to thaw. Penfolds-maker Treasury Wine Estates Ltd. surged. Beijing and Canberra have agreed to engage with each other over the tariffs, Chinese Ambassador Xiao Qian told reporters after an event on Wednesday. The levies, some as high as 200%, were imposed in 2020 and Australia has taken China to the World Trade Organization over the measures.

RBA (BBG): RBA’s Bullock Highlights Difficulties in Cooling Inflation

Australia’s central bank Governor Michele Bullock pointed to a series of obstacles to bringing inflation back to target that range from sticky services prices to repeated global shocks including the Israel-Hamas war. “There are a few things that are suggestive that it’s going to be difficult to get inflation down,” the Reserve Bank chief said during a fireside chat in Sydney on Wednesday, pointing to price pressures in everything from takeaway shops to hairdressers, as well as ultra-low unemployment.

BOJ (BBG): BOJ Could End Negative Rates by Year-End, Ex-Board Member Says

The Bank of Japan may scrap negative interest rates by the end of this year to adjust the currently excessive level of monetary easing, according to a former BOJ board member. “They could do it at any time and it won’t be a surprise, given the current economic recovery,” ex-board member Makoto Sakurai said in an interview Wednesday, explaining that real interest rates have fallen significantly. Under Governor Kazuo Ueda “the BOJ has appeared cautious, but they have steadily taken policy actions at a faster pace than expected,” Sakurai said.

JAPAN (BBG): Japan’s Kishida Reported to Mull Tax Cuts as Support Sags

Struggling with his lowest approval ratings since taking office, Japanese Prime Minister Fumio Kishida is considering temporary tax reductions, the Nikkei newspaper reported, days ahead of two special elections. The premier is set to announce in a policy speech to parliament on Monday that he’s ordering his ruling Liberal Democratic Party’s tax panel to discuss the idea, the paper said, citing a draft of the address. Income tax is likely to be among the targets considered, the paper said.

JAPAN (MNI): BOJ Offers Extraordinary JGB Buying Operations

The Bank of Japan on Wednesday conducted extraordinary bond buying operations to address the rise in Japanese government bond yields as the 10-year JGB yield rose to 0.815% for the highest level in 10 years and two months. The BOJ offered to buy JPY300 billion of JGBs with a remaining life of five-10 years and JPY100 billion of JGBs with a remaining life of 10-25 years. The extraordinary JGB buying operation is the first since Sept. 29. The BOJ announced it would conduct additional bond buying on Oct. 2.

INDIA (BBG): India Extends Sugar Export Curbs in Risk to Global Supply

India, the world’s second-biggest sugar producer, extended its export restrictions in a renewed bid to protect domestic supplies, a move that’s likely to tighten the global market and raise costs for the food industry. The government will continue its curbs on overseas shipments of the sweetener beyond Oct. 31, according to a notice from the Directorate General of Foreign Trade on Wednesday, confirming a Bloomberg News report last week.

DATA

UK DATA (MNI): No Scares for BOE as UK Inflation Holds Steady

• UK SEP CPI +0.5% M/M, +6.7% Y/Y
• UK SEP CORE CPI +0.5% M/M, +6.1% Y/Y
• UK SEP INPUT PPI +0.4% M/M, -2.6% Y/Y
• UK SEP OUTPUT PPI +0.4% M/M, -0.1% Y/Y

UK annual inflation was unchanged in September at 6.7%, the Office for National Statistics said Wednesday, just a touch above analyst expectations, as higher fuel and hotel costs weighed against falling food and drink costs. “After last month’s fall, annual inflation was unchanged in September. Food and non-alcoholic drinks prices eased again across a range of items with the cost of household appliances and airfares also falling this month. These were offset by rising prices for motor fuels and the cost of hotel stays," ONS Chief Economist Grant Fitzner said.

UK JUL-SEP MEDIAN PAY AWARDS +5.4%: XpertHR (MNI)

EUROZONE DATA (MNI): Final HICP Confirms Flash; September Disinflation Broad-Based

Eurozone final HICP inflation for September confirmed flash estimates at 4.3% Y/Y (vs 5.2% prior) and 0.3% M/M (vs. 0.3% prior). Core inflation printed in line with the flash at 4.5% Y/Y (vs 5.3% prior) and 0.2% M/M (vs. 0.3% prior). All major components contributed less to the headline inflation rate than in August, indicating September's disinflation was more broad-based than just due to the German transport ticket and other statistical /base effects.

EUROZONE AUG CONSTRUCTION OUTPUT -1.1% M/M, -0.1% Y/Y (MNI)

CHINA DATA (MNI): China Q3 GDP Beats Expectation to Rise 4.9%

• CHINA Q3 2023 REAL GDP +4.9% Y/Y VS MEDIAN +4.5% Y/Y
• CHINA Q3 2023 REAL GDP +1.3% Q/Q VS MEDIAN +1.0% Q/Q
• CHINA JAN-SEP RETAIL SALES +6.8% Y/Y VS JAN-AUG +7.0% Y/Y
• CHINA JAN-SEP INDUSTRIAL OUTPUT +4.0% Y/Y VS JAN-AUG +3.9% Y/Y
• CHINA SEP UNEMPLOYMENT RATE +5.0% VS AUG +5.2%
• CHINA JAN-SEP PROPERTY INVESTMENT -9.1% Y/Y VS JAN-AUG -8.8% Y/Y

MNI (Beijing) The Chinese economy grew by 4.9% y/y in Q3, beating market expectations of 4.5%, as production and consumption rebounded more than expected, despite weakness in real estate continuing to drag down investment, data released by the National Bureau of Statistics on Wednesday showed. The NBS data shows GDP has risen 5.2% as of September. Industrial production rose 4.5% y/y in Sept, flat from the previous month, while outperforming the 4.3% forecast. Retail sales increased 5.5% y/y, outshining expectations for 4.7% and accelerating from Aug's 4.6%.

AUSTRALIA DATA (MNI): Westpac Lead Indicator Suggests Growth Stabilising Below Trend

The Westpac leading index for September rose 0.07% after falling -0.04% resulting in the 6-month annualised growth rate improving to -0.3% from -0.5%,the best result since August 2022 when the series turned negative. It continues to indicate that growth will be below trend through the first half of 2024.

FOREX: GBP Fails to Materially Benefit From Firmer CPI

• GBP is among the strongest performers early Wednesday, rising on the back of a higher-than-expected CPI release. GBP/USD tested, but failed to break, Tuesday NY highs of 1.2212 as markets shrug off transient factors as being behind the stubbornness of CPI across September. OIS-implied market pricing further suggests that an unchanged decision from the BoE at their November meeting is the most likely outcome.
• AUD and NZD populate the top-end of the G10 table, however short-term gains are considered corrective and the trend outlook remains bearish. Attention is on 0.6286, the Oct 3 / 13 low. A clear break of this support, would confirm a resumption of the trend and open 0.6215, a Fibonacci projection.
• The USD Index trades lower for a third consecutive session, however pullbacks are limited at present at the shaky geopolitical backdrop and inconsistent equity performance prevents any more protracted weakness.
• JPY is mid-table after volatility earlier in the week, with USD/JPY still running into cluster resistance layered between 149.83-85. Clearance here would be a bullish development, opening levels last seen on Oct3. This makes US/JN yield differentials and any BoJ communications the focus going forward.
• US housing data is in focus going forward, with housing starts and building permits top of the docket. Canadian housing data also crosses as well as speeches from Fed's Waller, Williams, Bowman, Barkin, Harker and Cook. Their appearances should be more informative relative to the Fed's Beige Book.

EGBS: Curves Steeper, BTPS Widen

Slightly stronger than expected CPI data out of the UK and ongoing EGB supply provide sources of pressure during the early rounds of Wednesday trade.

• That leaves various 10-Year EGB metrics near key resistance levels in yield terms, although Bunds remain away from cycle extremes.
• Bund futures last show -35. Initial technical support (127.46) is some ~25 ticks below session lows and 30 ticks below prevailing levels.
• German cash benchmarks are 0.5-4.5bp higher, bear steepening.
• Spreads to Bunds are generally little changed to wider, with BTPs coming under the most pressure given their beta to the outright sell off, well-documented Italian fiscal worry and proximity to sovereign credit rating announcements for Italy.
• ECB speak didn’t move the needle, with Holzmann and Stournaras sticking to their respective norms. The latter underscored PEPP’s status as the first line of defence for bonds.

CHINA STOCKS: Softer Despite China GDP & Retail Sales Beat

Mainland China equity benchmarks were lower overnight, even with Q3 GDP coming in firmer than expected (triggering some full-year GDP growth projection upgrades from the sell-side).

• The CSI 300 was 0.8% lower, while the Hang Seng lost a shallower 0.2%.
• Elsewhere, monthly Chinese economic activity saw firmer than expected retail sales data, while industrial production was loosely in line with exp. FAI & property investment data was a touch softer than exp.
• This data adds to the economic bottoming out narrative and perhaps points to an incrementally lower need for policy support (although continued easing is generally expected in the months ahead), which may have provided some headwinds.
• Also, continued worry re: well-documented areas of China-specific risk remained evident post-data.
• A further uptick in geopolitical angst wouldn’t haven aided broader sentiment.
• A seemingly impending potential USD bond coupon payment default from Country Garden also weighed on broader property-related sentiment. The CSI 300 real estate index was 1.3% softer, outpacing losses seen at the headline index level.
• Northbound HK-China Stock Connect flows remained in net selling territory re: mainland shares, although the pace moderated to ~CNY1.2bn.

EQUITIES: Bearish Theme in Eurostoxx 50 Futures In Play Following Last Week's Reversal

A bearish theme in Eurostoxx 50 futures remains in play and last week’s reversal from 4256.00, the Oct 12 high, signals the end of the recent corrective cycle. Note too that resistance at the 50-day EMA, at 4246.50, remains intact. A clear break of this average is required to signal scope for a stronger correction. The bear trigger lies at 4082.00, the Oct 4 low. Clearance of this level would confirm a resumption of the downtrend. S&P e-minis found resistance last week at 4430.50 (Oct 12 high). The pullback means that - for now - resistance at the 50-day EMA, at 4425.45, remains intact, and this reinforces a bearish theme. A clear breach of the average is required to strengthen bullish conditions and this would open 4489.50, trendline resistance drawn from the Jul 27 high. On the downside, a deeper pullback would open 4235.50, the Oct 4 low and bear trigger.

• Japan's NIKKEI closed higher by 1.96 pts or +0.01% at 32042.25 and the TOPIX ended 3.26 pts higher or +0.14% at 2295.34.
• Elsewhere, in China the SHANGHAI closed lower by 24.786 pts or -0.8% at 3058.71 and the HANG SENG ended 40.82 pts lower or -0.23% at 17732.52.
• Across Europe, Germany's DAX trades lower by 0.81 pts or -0.01% at 15232.5, FTSE 100 lower by 3.2 pts or -0.04% at 7665.63, CAC 40 up 4.76 pts or +0.07% at 7027.74 and Euro Stoxx 50 up 1.35 pts or +0.03% at 4148.86.
• Dow Jones mini down 23 pts or -0.07% at 34125, S&P 500 mini down 8.5 pts or -0.19% at 4393.75, NASDAQ mini down 43.5 pts or -0.29% at 15198.75.

COMMODITIES: WTI Futures Extend Latest Recovery

WTI futures traded higher Friday and the contract has moved higher this week. The latest recovery has highlighted a key support at $81.50, the Oct 6 low. The medium-term trend condition remains bullish and an extension higher would expose the bull trigger at $95.03, the Sep 28 high. Clearance of this hurdle would confirm a resumption of the uptrend. For bears, a move through $81.50, would instead highlight potential for a stronger bear cycle. Gold traded sharply higher last Friday, clearing the 20- and 50-day EMAs. The yellow metal is firmer today. The rally strengthens the recent reversal and exposes the next key resistance at $1953.0, the Sep 1 high. Clearance of this level would further strengthen a bullish theme. Note that moving average studies still highlight a broader bear trend condition, however, prices would need to trade below Friday's low of $1868.8 to signal a reversal.

• WTI Crude up $2.09 or +2.41% at $88.75
• Natural Gas down $0.03 or -0.97% at $3.052
• Gold spot up $16.58 or +0.86% at $1939.63
• Copper up $3.8 or +1.06% at $361.6
• Silver up $0.37 or +1.6% at $23.175
• Platinum up $9.19 or +1.02% at $909.02