EXECUTIVE SUMMARY
- FED’S DALY EXPECTS MORE RATE CUTS AHEAD
- ECB OFFICIALS SEE RATE EXPECTATIONS AS STRETCHED – MNI SOURCES
- US SEEKS TO CALM MIDEAST AS ISRAEL AND HEZBOLLAH TRADE MORE FIRE
- UK PUBLIC FINANCES SHOW STRAIN AHEAD OF BUDGET
Figure 1: Presidental election forecast model
Source: The Hill/DDHQ
Figure 2: Trump extends lead over Harris in betting markets
Source: electionbettingodds.com
NEWS
MNI US Presidential Election Policy Tracker
See our full analysis on the policies proposed by both the potential Harris and Trump administrations including our views on costings, bipartisan support and potential routes for legislation.
FED (MNI): Fed’s Daly Expects More Rate Cuts Ahead
The Federal Reserve will keep cutting interest rates as inflation continues trending lower, San Francisco Fed President Mary Daly said Monday. “I expect additional cuts going forward to continue as inflation comes down,” she said during a Q&A with The Wall Street Journal. She said the Fed’s 50 basis point rate cut last month was an effort to “right size” policy that was a too tight. The Fed’s goal now is to “create the conditions for a durable expansion,” Daly said.
FED (BBG): Fed’s Schmid Favors Slower Pace for Interest-Rate Reductions
Federal Reserve Bank of Kansas City President Jeffrey Schmid said he favors a slower pace of interest-rate reductions given uncertainty about how low the US central bank should ultimately cut rates. Schmid, in his first public remarks since August, said he hoped for a “more normalized” policy cycle where the Fed makes “modest” adjustments to sustain economic growth, stable prices and full employment. He said a slower pace of rate reductions will also allow the Fed to find a so-called neutral level - where policy neither weighs on nor stimulates the economy.
US/MIDEAST (BBG): US Seeks to Calm Mideast as Israel and Hezbollah Trade More Fire
The US’s top diplomat landed in Israel on Tuesday, with Joe Biden trying to bring cease-fires in Lebanon and Gaza closer before American elections in a fortnight. Antony Blinken’s trip comes as Israel and Hezbollah continued to trade heavy fire. An Israeli overnight attack near Beirut’s Rafik Hariri University Hospital killed four people including a child, according to Lebanese officials. They added the strike caused major damage to the hospital, one of the biggest in Lebanon. Israel said it did not hit the hospital itself and was instead targeting a close by “terrorist target.”
US (WaPo): Trump Flips Stance on Making Voting Easier After Storm Batters North Carolina
Former president Donald Trump's years-long effort to restrict mail balloting and early voting has skidded into reverse in North Carolina, with the Republican presidential nominee demanding the kind of easier voting access that he labeled fraudulent when Democrats pushed similar measures during the coronavirus pandemic in 2020. Trump's about-face comes after Hurricane Helene left dozens dead and thousands temporarily pushed out of their communities after widespread destruction of homes, roads and water supplies when the storm deluged the western part of the state in late September.
ECB (MNI SOURCES): ECB Officials See Rate Expectations as Stretched
MNI speaks to ECB sources - On MNI Policy MainWire now, for more details please contact sales@marketnews.com
ECB (MNI): ECB September Projections Still Valid - BOS Escriva
The base case outlined in the European Central Bank’s September projections remains the most likely scenario, with inflation set to return to 2% by 2025 and medium-term interest rates expected to be lower than current levels but still higher than before the pandemic, Bank of Spain Governor Jose Luis Escriva said on Tuesday.
EUROPE (BBG): Carmakers Are Mired in First Europe Sales Slump in Two Years
Car sales in Europe fell in September for the first consecutive monthly decline in more than two years as the region’s economy continued to stagnate and consumers trimmed spending. New-car registrations fell 4.2% compared to a year ago, to 1.12 million units, the European Automobile Manufacturers’ Association said Tuesday. Gains in electric-vehicle sales weren’t enough to offset declines for combustion-engine models.
UK (FT): Bank of England Chief Economist Criticises Statistics Agency Over Poor Jobs Data
The chief economist of the Bank of England criticised the UK’s statistics agency in a private letter in May for failing since last year to produce reliable figures on unemployment and other aspects of the labour market. Huw Pill told the Office for National Statistics its efforts to fix the UK’s labour market data “have not yet led to an improvement” and that it “remains uncertain whether the credibility” of the figures will improve.
BRICS (BBG): Russia Hosts BRICS Leaders, Signaling Putin Is Far From Isolated
President Vladimir Putin will play host to Russia’s biggest gathering of world leaders since the invasion of Ukraine and use the BRICS summit to show the US and its allies that he’s no pariah. With Russian troops advancing in eastern Ukraine and evidence of growing war fatigue among some of Kyiv’s allies, the Kremlin is seizing its opportunity to cast Putin as standing up to the West in attempting to reshape the global order. The US and its Group of Seven partners dismiss the argument, though it’s a message that resonates with some countries of the emerging world.
CHINA (MNI): Bond Market Inflow Pushes Up China's External Debt
MNI (Beijing) Foreign investors are increasingly buying yuan-denominated bonds, officials at the State Administration of Foreign Exchange told reporters on Tuesday, noting China’s onshore stock and bond markets will remain attractive thanks to new economic stimulus measures and further relaxations of the fixed-income market. The net inflow into the onshore bond market increased over USD80 billion in the first three quarters, while the net purchase of foreign investors contributing about USD90 billion in bond-related external debt in H1, pushing China’s external debt balance to USD2.54 trillion, up 4% from the end of 2023, officials said.
CHINA (MNI): Chinese Firms Increasingly Hedging Currency Risk
MNI (Beijing) Chinese firms are increasingly hedging their forex risk via derivatives, with 27% of companies using the instruments since the start of the year, an historical high, according to Li Hongyan, deputy director general at the State Administration of Foreign Exchange. Li added the number of enterprises using the yuan for cross-border trade reached 30% this year, also a record.
MNI NBH PREVIEW - OCTOBER 2024: Steady as Hawkish Guidance Picks Up
The National Bank of Hungary is expected keep its base rate unchanged at 6.50%, in-line with guidance from Deputy Governor Virag that a pause in the rate cut cycle will be considered beyond October. Rising oil prices and a re-pricing of Fed rates helped EUR/HUF rally to and above 400.00, which will invite caution from policymakers given the NBH’s sensitivity to deteriorating investor sentiment. Among sell-side, calls for another rate cut before year-end are being made with far less conviction.
DATA
UK DATA (MNI): UK Public Finances Show Strain Ahead of Budget
- UK SEP CGNCR GBP 13.2BLN
- UK SEP PSNCR GBP-20.48 BN
- UK SEP PSNB GBP+16.61 BN
- UK SEP PSNB-X GBP+16.61 BN
UK debt-to-GDP stood at 98.5% in September, slightly improved on the revised 98.8% figure seen at the end of August, the Office for National Statistics reported Tuesday. Debt-to-GDP (including the Bank of England) was revised lower following the end-Q2 revisions to GDP rather than and material change in the overall debt levels, and stands 4.0 percentage points higher than at the end of September 2023, remaining at levels last seen in the early 1960s. The figure ex-BOE was 91.2% though end-September following the growth revisions, 5.0 percentage points more than at the end of September 2023 but 7.3 percentage points lower than the wider debt measure.
EUROPE DATA (MNI): EZ Debt to GDP Ratio Rises For First Time Since Q1 2021
Overall euro area general government gross debt to GDP ratio rose in Q2 on a sequential comparison, to 88.1%, vs 87.8% Q1 - its first increase since Q1 2021. The seasonally-adjusted general government deficit to GDP ratio meanwhile stood at 3.0% in Q2, unchanged from Q1. The figures reinforce the narrative that fiscal sustainability remains a concern in the Eurozone. "Compared with the first quarter of 2024, nine [EU] Member States registered an increase in their debt to GDP ratio at the end of the second quarter of 2024, seventeen a decrease, and the ratio remained stable in one", Eurostat adds.
JAPAN DATA (MNI): Japan's Sept Trimmed Mean Rises 1.7% Vs. 1.8%
Japan’s trimmed mean measure of underlying inflation rose 1.7% in September, slowing from August’s 1.8%, indicating the pace of pass-through of cost increases caused by the weak yen is slowing, data released by the Bank of Japan showed on Tuesday. The trimmed mean followed data last Friday that showed Japan's annual core consumer inflation rate rose 2.4% y/y in September, down from August’s 2.8%, the first drop in five months, but above the Bank's 2% target for the 30th straight month.
JAPAN DATA (MNI): Japan Corp Loan Demand Rises - BOJ Survey
Demand for financing by Japanese corporates via banks rose over Q3 amid sales and capital investment increases, and the drop of internally-generated funds, according to the senior loan officer opinion survey on bank lending practices released by the Bank of Japan Tuesday. The index for corporate fund demand, calculated by subtracting the number of banks reporting a decline in lending from the number of those reporting an increase, rose to +9 in October from +6 in July.
FOREX: Trump Odds Continue to Dictate Sentiment
- The JPY is weaker for a second session, with AUD/JPY breaking through last week's highs to narrow the gap with 101.42 - the next notable resistance at the Oct07 high. The US yield curve remains a defining factor, with the short-end providing the lever for risk-on/risk-off. Yesterday's pushing through 4.00% for the 2yr yield has spilled over into Tuesday trade, pressing to a new high of 4.0516% this morning.
- Positioning for the two key risk events in the coming weeks - the US Presidential election and the UK Budget - is playing a key part here, with Kashkari's comments late yesterday ("If the deficit goes to the moon, then rates will be higher") neatly summarising the market's views of the expansionary policies from both the potential Harris and Trump administrations when the victor takes office next year.
- Pressure on EUR/USD present into the Monday close has abated somewhat, with the pair off lows and aided higher by an ECB sources report from the MNI Policy team, which reported that ECB officials currently view market pricing for six consecutive cuts as slightly exaggerated barring a change in circumstances. As a result, EUR/USD has neared 1.0850 resistance, but progress through the 1.0872 200-dma will be needed to signal any near-term reversal.
- Tuesday trade will remain characterised by sentiment, with the data schedule again quieter. The speaker calendar if far busier, with appearances due from ECB's Centeno, Knot, Lagarde, Villeroy, Rehn and Panetta all on the docket, as well as Fed's Harker, BoE's Bailey & Breeden.
BONDS: Bund and Gilt Futures Under Pressure Again
Bund and Gilt futures have extended yesterday’s selloff.
- Bund futures have tested the Oct 10 low and bear trigger at 132.75, clearance of which would expose key support at 132.65 (Sep 2 low).
- The MNI Policy Team’s latest sources piece reported that ECB officials currently view market pricing for six consecutive cuts as slightly exaggerated barring a change in circumstances.
- This elicited a light hawkish reaction in EUR STIRs, spilling over into Bunds and the Euro.
- The German cash curve has bear steepened, with yields flat to 4bps higher. Impending Schatz supply will be limiting any recoveries in the run-up to the 1030BST bidding deadline.
- 10-year peripheral spreads to Bunds are mixed, with BTP/Bund little changed and SPGBs and PGBs 1bp tighter.
- Demand at today’s 7/30-year dual tranche Italian syndication appears strong, with combined books in excess of E150bln.
- Several ECB speakers are scheduled today, including two appearances from President Lagarde at 1500BST/1600CET and 2015BST.
- Gilts have largely followed Bunds this morning, with futures -46 at 96.76. September public finance data was not a market mover.
- BoE Governor Bailey’s speech at 1425BST/1525CET headlines today’s UK calendar.
- We note that increasing odds of a Trump election victory has applied an additional layer of pressure to core FI through October.
EQUITIES: Bear Threat in Eurostoxx 50 Futures Remains Present
A bear threat in Eurostoxx 50 futures remains present. The contract traded sharply lower on Oct 15 and has recently pierced support around the 50-day EMA, at 4947.57. A clear break of this average would undermine a recent bullish theme and highlight a stronger reversal. This would open 4884.06, a Fibonacci retracement. Key resistance and the bull trigger is unchanged at 5106.00, the Sep 30 high. Clearance of this level resumes the uptrend. S&P E-Minis trend conditions are unchanged and signals remain bullish. Fresh cycle highs confirm a resumption of the primary uptrend and maintain the bullish price sequence of higher highs and higher lows. Note that moving average studies are in a bull-mode setup, highlighting a dominant uptrend. Sights are on 5961.00, a Fibonacci projection. Initial support to watch is 5824.43, the 20-day EMA.
- Japan's NIKKEI closed lower by 542.64 pts or -1.39% at 38411.96 and the TOPIX ended 28.44 pts lower or -1.06% at 2651.47.
- Elsewhere, in China the SHANGHAI closed higher by 17.757 pts or +0.54% at 3285.867 and the HANG SENG ended 20.49 pts higher or +0.1% at 20498.95.
- Across Europe, Germany's DAX trades higher by 61.77 pts or +0.32% at 19526.94, FTSE 100 lower by 38.56 pts or -0.46% at 8279.1, CAC 40 down 18.86 pts or -0.25% at 7516.6 and Euro Stoxx 50 up 7.14 pts or +0.14% at 4948.48.
- Dow Jones mini down 133 pts or -0.31% at 43046, S&P 500 mini down 18.75 pts or -0.32% at 5877.5, NASDAQ mini down 76 pts or -0.37% at 20444.25.
Time: 09:55 BST
COMMODITIES: Gold Conditions Firmly Bullish After Hitting Fresh Record High
WTI futures remain softer following last week’s sell-off. A continuation lower would threaten the recent bullish theme and expose support at $66.33, the Oct 1 low, and $64.61, the Sep 10 low and a key support. For bulls, a resumption of gains would instead refocus attention on the key short-term resistance at $78.46, the Oct 8 high. Clearance of this level would resume to the recent uptrend. Initial resistance is at $72.07, the 50-day EMA. Gold bulls remain in the driver’s seat. Last week’s climb resulted in a break of $2685.6, the Sep 26 high, confirming a resumption of the primary uptrend. The yellow metal has also cleared $2700.0, reinforcing current trend conditions. Sights are on $2767.1 next, a Fibonacci projection. Firm support is $2652.2, the 20-day EMA. A clear break of this EMA would signal scope for a deeper retracement.
- WTI Crude down $0.2 or -0.28% at $70.36
- Natural Gas up $0.03 or +1.25% at $2.339
- Gold spot up $15.65 or +0.58% at $2735.6
- Copper up $2.65 or +0.61% at $438.2
- Silver up $0.44 or +1.31% at $34.2305
- Platinum up $14.04 or +1.39% at $1021.92
Time: 09:55 BST
| Date | GMT/Local | Impact | Country | Event |
| 22/10/2024 | 1230/0830 | * |  CA | Industrial Product and Raw Material Price Index |
| 22/10/2024 | 1230/0830 | ** |  US | Philadelphia Fed Nonmanufacturing Index |
| 22/10/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 22/10/2024 | 1325/1425 |  GB | BOE's Bailey address at Bloomberg Global Regulatory Forum | |
| 22/10/2024 | 1345/1445 | GB | BOE's Greene fireside chat with Josh Lipsky | |
| 22/10/2024 | 1400/1000 | ** | US | Richmond Fed Survey |
| 22/10/2024 | 1400/1600 |  EU | ECB's Lagarde in conversation with Francine Lacqua | |
| 22/10/2024 | 1500/1700 | EU | ECB's Lane in fireside chat at Seminar of Bank of New York | |
| 22/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 22/10/2024 | 1915/2115 | EU | ECB's Lagarde in panel discussion on cross border payments | |
| 22/10/2024 | 2000/2200 | EU | ECB's Lane at Columbia University seminar | |
| 22/10/2024 | 2015/2115 | GB | BOE's Breeden panellist at G20 cross-border payments event | |
| 23/10/2024 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 23/10/2024 | 1100/0700 | ** | US | MBA Weekly Applications Index |
| 23/10/2024 | - | EU | ECB's Lagarde and Cipollone in G20 FMs and CB Governors meeting | |
| 23/10/2024 | 1300/1400 | GB | BOE's Breeden panellist at IIF meeting | |
| 23/10/2024 | 1300/0900 | US | Fed Governor Michelle Bowman | |
| 23/10/2024 | 1345/0945 | CA | BOC Monetary Policy Report | |
| 23/10/2024 | 1345/0945 | *** | CA | Bank of Canada Policy Decision |
| 23/10/2024 | 1400/1600 | ** | EU | Consumer Confidence Indicator (p) |
| 23/10/2024 | 1400/1000 | *** | US | NAR existing home sales |
| 23/10/2024 | 1400/1600 | EU | ECB's Lane participates in growth talk at IIF Meeting | |
| 23/10/2024 | 1400/1600 | EU | ECB's Lagarde Speech at Atlantic Council event | |
| 23/10/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 23/10/2024 | 1430/1030 | CA | BOC Governor Press Conference | |
| 23/10/2024 | 1430/1630 | EU | ECB's Cipollone in panel by Bretton Woods Committee | |
| 23/10/2024 | 1600/1200 | US | Richmond Fed's Tom Barkin | |
| 23/10/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 23/10/2024 | 2030/2130 | GB | ECB's Bailey at IIF meeting | |
| 24/10/2024 | 2200/0900 | *** |  AU | Judo Bank Flash Australia PMI |