EXECUTIVE SUMMARY
- MNI US PAYROLLS PREVIEW - STORMS AND STRIKE UNCERTAINTY
- ISRAEL AT 'HIGH LEVEL OF READINESS' FOR IRAN RETALIATION
- INTEL SURGES AFTER RESULTS SPARK OPTIMISM OVER TURNAROUND
- SWISS OCT CPI DROP APPEARS BROAD-BASED
Figure 1: Recent US labour market developments
NEWS
MNI US PAYROLLS PREVIEW: Storms and Strike Uncertainty
Nonfarm payrolls growth is expected to slow materially to circa 100k in October after a booming 254k in September, with significant disruption from strikes and potential hurricane fallout. The Fed’s Waller has previously estimated this could drag 100k from payrolls this month although that appears right at the top end of analyst expectations. Quantifying the storm impact is going to be difficult and will no doubt continue to see question marks in next month’s November report as any effect is theoretically reversed.
US (BBG): Harris Hits Trump’s Rhetoric as GOP Allies Seek to Calm Tone
Vice President Kamala Harris seized on a remark from Donald Trump that he would “protect” women if elected - whether they “like it or not” - to assail her Republican rival’s stance on reproductive rights and other freedoms in an appeal to suburban and independent women. “It actually is, I think, very offensive to women in terms of not understanding their agency, their authority, their right and their ability to make decisions about their own lives, including their own bodies,” Harris told reporters on Thursday in Madison, Wisconsin, ahead of a western-state campaign swing.
MIDEAST (MNI): Israel at 'High Level of Readiness' for Iran Retaliation - CNN
CNN reported overnight that according to a military source, Israel is at a 'high level of readiness' for an Iranian retaliation to the strikes on military targets over the weekend. Adds that the Israeli military is “still assessing the decision-making process in Iran” to determine if and when a retaliation will take place." The strike on military targets, that hit missile factories and air defence capabilities, has both degraded Iran's ability to strike back and to defend itself from future attacks. As such, it is unclear what the nature of any retaliation could be.
EU/RUSSIA (MNI): Kremlin Confirms Lavrov Malta Trip In Dec, 1st To EU Since Invasion
Russian media reports that Foreign Minister Sergey Lavrov intends to travel to Malta from 5-6 Dec for the Organisation for Security and Cooperation in Europe (OSCE)'s Council of Foreign Ministers meeting. This would be Lavrov's first visit to the EU since the launching of Russia's invasion of Ukraine in Feb 2022. The Russian foreign minister is subject to EU sanctions, but unlike other senior Russian officials has not been subjected to a travel ban, with Brussels still allowing for the potential of talks to take place.
UK (BBG): UK Business Minister Acknowledges Budget May Squeeze Hiring
UK Business Secretary Jonathan Reynolds accepted that tax hikes announced in the government’s budget this week might hinder companies’ ability to hire workers and raise salaries. Reynolds, speaking to Bloomberg Television, said the rise in employer national insurance contributions and an uplift in the minimum wage would “be something which affects how that business operates, what they can do in terms of recruitment and pay.”
CHINA (BBG): Xi Highlights Employment Woes in Speech Published Before US Vote
President Xi Jinping highlighted pressures facing China’s employment market in a newly-published speech that painted a turbulent time for the world’s No. 2 economy, as officials try to arrest a growth slowdown. “China is entering a period where strategic opportunities as well as risks and challenges coexist, and unexpected factors are rising,” Xi said in the speech published Thursday, making a veiled reference to tensions with the US and his nation’s transition away from property-driven growth.
BOJ (MNI): BOJ Sees Positive Wage Shocks Pushing Up Prices
The Bank of Japan expects wage hikes to increase upward pressure on prices as recent data showed firms' positive wage-setting behaviour is increasing inflation, the BOJ’s October Outlook Report’s full text showed on Friday. “Wage shocks will serve as a more significant catalyst for price increases than the average relationship observed during low inflation period and will push up prices,” the report said. While the rise in import prices, such as energy and food, drove inflation after the pandemic, it could not explain recent pressure and supply, and demand conditions, the report stated.
COMMODITIES (BBG): Oil Rallies on Report Iran Is Planning Israel Attack Via Proxies
Oil jumped after a report that Iran could be preparing to attack Israel from Iraqi territory in the coming days, jolting the market’s attention back to a potential flare-up of Middle East hostilities. Brent surged as much as 2.1% to trade above $74 a barrel on Friday, while West Texas Intermediate rallied toward $71. Iran is planning a strike through militias it backs in Iraq, which is expected to be carried out with drones and ballistic missiles, Axios reported, citing two Israeli sources it didn’t name.
COMMODITIES (BBG): Iron Ore Set for Weekly Gain on Signs China Stimulus Is Working
Iron ore was on track for its first weekly gain in four, buoyed by signs that China’s slew of of stimulus measures is finally creating economic momentum in the biggest consumer of the steel-making material. Data this week showed China’s residential property sales rose in October in the first year-on-year increase of 2024. Meanwhile, manufacturing activity unexpectedly picked up last month despite a week-long holiday, according to a private survey, a further sign of stabilization in the world’s second-biggest economy.
CORPORATE (BBG): Intel Surges After Results Spark Optimism Over Turnaround
Intel Corp. gave a fourth-quarter revenue forecast slightly above estimates, sparking optimism that it’s capable of reclaiming some lost market share. Fourth-quarter revenue will be $13.3 billion to $14.3 billion, the Santa Clara, California-based company said in a statement. That compares with the $13.6 billion analysts estimated on average. The company is projecting a profit of 12 cents a share compared with the 6 cents Wall Street projected.
CORPORATE (BBG): Amazon Reassures Investors With Cloud Growth, Cost-Cutting
Amazon.com Inc. reported strong results that showed a company humming on all cylinders, a testament to its efforts to cut and reallocate costs and put the cloud computing and e-commerce giant on sounder footing. The Amazon Web Services cloud division, which suffered record low sales growth last year, continued to regain momentum during the third quarter. The online retail operation, which sputtered coming out of the pandemic, grew unit sales by double digits. So did revenue at Amazon’s fast-growing advertising business.
CORPORATE (BBG): Samsung Signals Progress With Nvidia on AI Memory Chips
Samsung Electronics Co. declared progress in supplying its most advanced AI memory chips to Nvidia Corp., seeking to reassure to investors who fear the company is falling further behind SK Hynix Inc. in a red-hot market. Samsung has made “meaningful” progress during key stages of the qualification process with a major customer, a senior executive told analysts, referring to Nvidia. The Korean company now expects to sell its most advanced HBM3E memory chips in the fourth quarter, Jaejune Kim, executive vice president of Samsung’s memory business, said on an earnings call Thursday.
DATA
SWITZERLAND DATA (MNI): Swiss Oct CPI Drop Appears Broad-Based
- SWISS OCTOBER CPI +0.6% Y/Y; -0.1% M/M
Swiss CPI inflation printed below consensus at 0.6% in October (vs 0.8% cons; 0.8% prior), and 0.0% M/M (vs 0.0% cons; -0.3% prior). Core CPI also printed significantly below consensus, at 0.8% Y/Y (vs 1.0% cons and prior) and +0.1% M/M. Looking at the Swiss October inflation data in more detail underpins the narrative that this month's drop was very broad-based, with lower contributions to headline from all services-heavy subcategories vs September.
SWISS SEP RETAIL SALES -0.5% M/M, +2.2% Y/Y (MNI)
UK OCT FINAL MANUF PMI 49.9 (FLASH: 50.3); SEP 51.5 (MNI)
RATINGS: Updates on EFSF, ESM & Turkey Due This Evening
Rating reviews of note scheduled for after hours on Friday include:
- Moody’s on the EFSF (current rating: Aaa; Outlook Stable) & the ESM (current rating: Aaa; Outlook Stable)
- S&P on Turkey (current rating: B+; Outlook Positive)
FOREX: NFP Provides Final Market Hurdle Ahead of Election Results
- GBP is firmer so far Friday, recouping a small part of the sharp losses suffered into the Thursday close. Markets continue to digest the technicalities and background pressures on the budget and Reeves' spending plans outlined on Wednesday, with the currency likely receiving some support from higher inflation expectations for next year, twinned with more muted pricing for the BoE's easing cycle across 2025.
- Despite GBP's intraday strength, EUR/GBP remains much firmer on the week, with the cross having shown above the reversal trigger and back above 0.8400 - leaving next week's BoE decision as a critical driver of the cross that's broken major resistance.
- The JPY is softer against all others as markets pare a small part of the post-BoJ rally. This has kept USD/JPY clear of the 200-dma on the daily charts, with 151.55 undercutting as support.
- Lastly, the greenback is mixed-to-higher, with US 10yr yields holding inside yesterday's range, with NFP seen as the last market hurdle before focus shifts wholly to the election due next week. Polling still sees the election as too-close-to-call, providing further support for vols at these levels.
- Focus for the Friday session rests on the US Nonfarm Payrolls release for October, within which markets will be watching closely for the magnitude of the impact from both Hurricanes across the South-eastern states as well as strike action hitting staffing at major firms including Boeing over the course of the month.
EGBS: Bund Futures Softer Ahead of NFP
Bund futures are -34 ticks to 131.46 but remain within yesterday’s range. Markets await the US labour market report at 1230GMT/1330CET, with public holidays across the Eurozone helping contain activity this morning.
- A bearish theme in Bund futures remains intact, with initial support seen at 131.13 (corresponding to the 2.45% 10-year yield level), shielding round number support at 131.00.
- On the upside, initial key resistance has been defined at 132.65, the Sep 2 low.
- The German curve has twist steepened, with 2-year yields 1bp lower and 30-year yields almost 5bps higher.
- The 10-year BTP/Bund spread is 1bp wider at 127bps, after reaching a high of almost 130bps yesterday. PGBs underperform, despite the 2025 budget bill passing its first reading in Parliament yesterday.
GILTS: Weakness Resumes as Ratings Agencies Comment on Budget, Lows Intact
Gilts under pressure this morning after Moody’s warned on fresh fiscal challenges stemming from the Budget, alongside limited headroom to absorb adverse shocks.
- S&P also identified a constrained fiscal position but haven’t altered their budgetary forecasts.
- Futures trade as low as 93.45, bearish technical theme intact.
- Next support at yesterday’s low (93.18), last 93.63.
- Yields 2.5-4.0bp higher, curve a touch steeper. Yesterday’s yield highs intact across the curve.
- Long-dated swap spreads continue to look heavy as yesterday’s late uptick fades alongside this morning’s gilt weakness.
- 10 and 30-Year swap spreads trade ~1bp off yesterday’s cycle lows.
- BoE-dated OIS shows 22bp of cuts for next week, 28bp through Dec, 54bp through March and 73bp through June.
- That compares to 21bp, 30.5bp, 58.5bp and 77.5bp late yesterday.
- BMO the only sell-side name (that we have seen) to move their call to favour no change at next week’s BoE decision. The 18 that have currently submitted their view to BBG look for a 25bp cut.
- SONIA futures unwind yesterday’s post-settlement uptick. Last +0.25 to -2.5.
- Final manufacturing PMI at 49.9 vs. flash 50.3. The survey reaffirmed the idea of uncertainty ahead of the Budget (next month’s survey will provide colour on post-Budget reaction) and "positive signs on the price front".
- Continued digestion of the Budget and spill over from the U.S. NFP release are set to dominate ahead of the weekend.
EQUITIES: E-Mini S&P Trading Below 20- and 50-Day EMAs
Eurostoxx 50 futures have traded lower this week. The move down has 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. S&P E-Minis traded sharply lower Thursday. The contract 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 5831.57, the 20-day EMA. Key resistance and the bull trigger is 5927.25, the Oct 17 high.
- Japan's NIKKEI closed lower by 1027.58 pts or -2.63% at 38053.67 and the TOPIX ended 51.25 pts lower or -1.9% at 2644.26.
- Elsewhere, in China the SHANGHAI closed lower by 7.81 pts or -0.24% at 3272.014 and the HANG SENG ended 189.1 pts higher or +0.93% at 20506.43.
- Across Europe, Germany's DAX trades higher by 71.25 pts or +0.37% at 19148.6, FTSE 100 higher by 43.85 pts or +0.54% at 8153.39, CAC 40 up 40.13 pts or +0.55% at 7390.5 and Euro Stoxx 50 up 22.51 pts or +0.47% at 4850.14.
- Dow Jones mini up 81 pts or +0.19% at 42028, S&P 500 mini up 17.5 pts or +0.31% at 5756.25, NASDAQ mini up 85.75 pts or +0.43% at 20107.5.
Time: 08:50 GMT
COMMODITIES: Latest Recovery in WTI Futures Deemed Technically Corrective
A bearish theme in WTI futures remains intact and the latest recovery appears to be a 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 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 Thursday’s 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 $2707.3, the 20-day EMA. A clear break of this EMA would highlight a short-term top.
- WTI Crude up $2.09 or +3.02% at $71.33
- Natural Gas up $0 or +0.04% at $2.709
- Gold spot up $9.45 or +0.34% at $2753.36
- Copper up $1.85 or +0.43% at $435.75
- Silver up $0.16 or +0.5% at $32.8285
- Platinum up $0.68 or +0.07% at $994.85
Time: 08:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 01/11/2024 | - | *** |  US | Domestic-Made Vehicle Sales |
| 01/11/2024 | 1230/0830 | *** | US | Employment Report |
| 01/11/2024 | 1345/0945 | *** | US | S&P Global Manufacturing Index (final) |
| 01/11/2024 | 1400/1000 | *** | US | ISM Manufacturing Index |
| 01/11/2024 | 1400/1000 | * | US | Construction Spending |