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USDCAD TECHS

Heading North

GLOBAL POLITICAL RISK

Modi, AMLO Top Major Economy Leader Poll, Macron Last

AUDUSD TECHS

Under Pressure

EURJPY TECHS

Trend Condition Remains Bearish

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EXECUTIVE SUMMARY:

  • UK TAKES ONE STEP CLOSER TO CPTPP MEMBERSHIP WITH NEW ZEALAND FTA
  • ECB'S VISCO SAYS EU SHOULD CONSIDER SINK FUND TO PURCHASE NATIONAL BOND OFFERS
  • POSITIVE S&P500 CLOSE WOULD BE SEVENTH CONSECUTIVE SESSION OF GAINS
  • JPY RECOVERS OFF LOWS, PRESSES USD/JPY BACK BELOW 114
  • FOCUS TURNS TO IJC DATA AND SPEECHES FROM FED'S WALLER, RBA'S LOWE

Figure 1: Alltime highs in view for S&P 500 as index eyes longest winning streak since August

NEWS

UK/NEW ZEALAND (MNI): FTA Completed As UK Eyes CPTPP Membership
Late last night in London/early this morning in Wellington, it was announced that the UK and New Zealand had come to an agreement on a free trade deal between the two countries. The imminent agreement had been signaled earlier in the day.
The deal sees tariffs on many exports removed, although there will be a phasing out of tariffs on NZ lamb exports to the UK over 15 years to avoid undue shock for Welsh lamb farmers. As has been widely noted, the deal will provide only a marginal boost to the UK economy given the small percentage of trade the UK does with New Zealand.

ECB (REUTERS): The European Union should consider creating a sinking fund to manage public debt accumulated by member states during the COVID-19 pandemic in the last two years, European Central Bank governing council member Ignazio Visco said on Thursday.

HONG KONG (MNI): Hong Kong To Increase Offshore Yuan Liquidity
Hong Kong will improve offshore yuan liquidity, facilitate the circulation of yuan between offshore and onshore markets and promote RMB internationalization, said Paul Chan Mo-po, Financial Secretary of Hong Kong during the Financial Street Forum on Thursday.

JAPAN (MNI): BOJ's FSR 'Heat Map' Sees Red, But No Overheating
The Bank of Japan's Financial System Report said on Thursday that its "Heat Map" showed five "red" signals but no overheating of financial activities. "Depending on the pace of economic recovery going forward, there will be an adverse impact on the quality of loans extended to firms that have been severely affected by the pandemic or those that had vulnerable financial bases before the pandemic," the FSR said.

INDONESIA (MNI): MNI INSIGHT: Indonesia Builds Resilience Against 'Tantrum'
Indonesia's central bank expects currency pressure in 2022 as the U.S. Fed is likely to tighten, but MNI understands it has confidence in a more resilient balance sheet and national economy than in 2013 when it felt a hard impact of the U.S. 'taper tantrum' under less robust economic fundamentals.

CHINA (MNI): MNI INTERVIEW: Top Excavator Maker Tracks China Property Slump
China's economy is notably slower after a rapid recovery from the Covid-19 pandemic as property market concerns shake investor confidence, executives at a top construction equipment maker told MNI, adding the slump comes as manufacturers are dealing with a transition to "carbon neutral" processes and equipment by 2060.

DATA

MNI BRIEF: UK Sept Borrowing Rises in Sept, YTD Down 48% y/y
UK public sector borrowing rose to GBP21.778 billion last month, from a downwardly-revised GBP16.824 billion in August (originally reported at GBP20.014 billion), according to data reported by the ONS on Thursday. That's still the second highest September on record, and remains sharply above the GBP6.067 billion recorded in the same month of 2019. Public sector debt steadied at 95.5% of GDP, matching the August outcome.

**MNI: FRANCE OCT BUS CLIM INDICATOR 113; SEP 111
- OCT MFG SENTIMENT 107; SEP 107R
- OCT SERVICES SENTIMENT 114; SEP 110

FOREX: JPY Recovers Off Lows, But Trend Remains Down

  • JPY is the firmest currency on the day, recovering off recent lows as markets book profits on the recent downtick. USD/JPY has shown back below the 114.00 handle, and sits either side of the mark ahead of the NY crossover. Despite the modest bounce in the currency, the outlook remains bearish JPY, with USD/JPY tilted higher while the price holds above 113.38 support.
  • Elsewhere, AUD and NZD are softer, falling against most others in a moderation of strength earlier in the week. Some weight has crossed through commodity-tied currencies after China's NDRC warned of a crack down on commodities speculation, headlines that have led to a sharp pullback in China listed metals and coal contracts.
  • The USD index is generally firmer, but holds south of the 94.00 and therefore well off recent highs. A modestly flatter yield curve (10y yield lower by 2bps, 30y yields lower by 3bps) is containing dollar strength at these levels.
  • Weekly US jobless claims data takes focus going forward, with speeches also due from Fed's Waller and RBA's Lowe. Earnings season continues, with reports from Intel and AT&T among the highlights Thursday.

BOND SUMMARY: Supply been the talking point in relatively calm markets

  • STIR markets have taken a bit of a breather today with the biggest move across the Eurodollar / short sterling / Euribor strips being 3 ticks on the day so far. Gilts and Bunds have reversed some early weakness to trade almost flat on the day with little movement in curves. Treasuries, meanwhile, have seen a flattening of the curve with 2-year yields 0.8bp higher but 10-year yields 1.8bp lower on the day.
  • There has been no market-moving data in the European morning session with focus instead on supply with a green 30-year gilt being launched via syndication for GBP6bln, while Spain has sold E5.1bln of Bonos/Oblis, France sold E7.5bln of MT OATs and a French linker auction still to close. The US will hold a 5-year TIPS auction later, too.
  • There were some interesting comments from Banca d'Italia's Visco who suggested that a common EU sink fund should be created to buy excess debt issued by EU national governments due to the pandemic in order to help put national debt sustainability on a better track. It's unlikely we would see anything on this scale retrospectively, however.
  • Looking ahead we have US claims and existing home sales as well as an appearance from Fed's Waller.
  • TY1 futures are down -0-3+ today at 130-17 with 10y UST yields down -1.8bp at 1.640% and 2y yields up 0.8bp at 0.395%.
  • Bund futures are down -0.02 today at 168.69 with 10y Bund yields up 0.4bp at -0.123% and Schatz yields up 0.4bp at -0.682%.
  • Gilt futures are up 0.08 today at 124.17 with 10y yields down -0.4bp at 1.142% and 2y yields down -0.5bp at 0.669%.

EQUITIES LEVELS UPDATE: A little lower outside of China

  • Japan's NIKKEI down 546.97 pts or -1.87% at 28708.58 and the TOPIX down 26.86 pts or -1.32% at 2000.81.
  • China's SHANGHAI closed up 7.782 pts or +0.22% at 3594.783 and the HANG SENG ended 118.49 pts lower or -0.45% at 26017.53.
  • German Dax down 18.78 pts or -0.12% at 15504.65, FTSE 100 down 22.84 pts or -0.32% at 7200.25, CAC 40 down 25.67 pts or -0.38% at 6679.81 and Euro Stoxx 50 down 12.71 pts or -0.3% at 4158.89.
  • Dow Jones mini down 106 pts or -0.3% at 35373, S&P 500 mini down 10.75 pts or -0.24% at 4517.25, NASDAQ mini down 27.75 pts or -0.18% at 15349.5.

COMMODITIES LEVELS UPDATE: Copper leading commodities lower

  • WTI Crude down $0.42 or -0.5% at $83.06
  • Natural Gas down $0.05 or -0.93% at $5.121
  • Gold spot up $2.96 or +0.17% at $1785.19
  • Copper down $8.7 or -1.84% at $464.7
  • Silver down $0.08 or -0.33% at $24.2274
  • Platinum down $2.97 or -0.28% at $1051.2