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MNI US OPEN - USTs Fail to Benefit From Geopolitics, 10Y North of 5%


Figure 1: Argentine Presidential election first-round results (45% or 40% with 10% margin required for outright win in first-round)


US (WaPo): Biden Team Looks at Buying More Ads Amid Ongoing Polling Concerns

The Biden campaign has drawn up options for expanding its unconventional $25 million early advertising effort this year, as the president continues to express frustration in private conversations about the state of his polling in battleground states, according to people familiar with the discussions. Biden signed off on the initial fall television and digital campaign despite concerns from some advisers who felt that the money could be better allocated for other priorities like building up staff sooner or growing cash reserves.

US/ISRAEL (BBG): US, Allies Hold Talks On Concerns Israel-Hamas War Will Spread

US President Joe Biden and the leaders of France, Germany, the UK and Canada spoke on Sunday about strategies to prevent the Israel-Hamas war from spreading to the wider Middle East. The talks come as efforts continue to try to get Hamas to release more hostages held in Gaza. Israel’s supporting diplomatic attempts to get people released quickly and in large numbers, a move that could delay and possibly alter a ground assault on the Palestinian enclave, according to people familiar with the negotiations.

ISRAEL (RTRS): Israel Bombards Gaza as War Spreads to Other Fronts

Israel bombarded Gaza with more air strikes on Monday ahead of an anticipated ground operation into the besieged Palestinian enclave as the United Nations warned that civilians were running out of places to seek shelter. In signs that the conflict was spreading, Israeli aircraft also struck southern Lebanon overnight and Israeli troops clashed with Palestinians in occupied West Bank, residents said. More aid crossed the border into Gaza on Sunday but the U.N. humanitarian agency said it was just a fraction of the amount needed to help a desperate population short of food, water, medicine and fuel.

GERMANY (MNI): German Banks Pulling Back on Corporate Lending: Ifo

Germany's corporates are finding it more difficult to obtain financing, a suvery for the Ifo Institute shows, suggesting there could be a more negative Eurozone-wide picture painted in the ECB Bank Lending Survey due for publication on Tuesday. “Banks are gradually increasing interest rates on loans and are more reluctant to grant them,” Klaus Wohlrabe, Head of Surveys at ifo said.

SWITZERLAND (MNI): Voters Shift to the Right, Support for Greens Drops Sharply

Switzerland held federal elections on Sunday for its National Council and first round for the Council of States (runoffs will be held through November). The anti-EU and anti-immigrant Swiss People's Party (SVP) won the election again increasing its share of the vote by 3.3pp to 28.6%. The Social Democrats were second increasing their share by 1.1pp to 18% but both Green parties saw a drop in support.

CHINA (MNI): China to Reach Target of 5% GDP Growth - Lou Jiwei

MNI (Beijing) China can achieve its annual economic growth target of about 5% set at the beginning of the year despite headwinds, while the financial sector should enhance support to the economy to better serve global economic resilience and stability, said China's former Minister of Finance Lou Jiwei during the 2023 Shanghai Suhewan Conference on Sunday.

CHINA (MNI): China Financial Sector to Boost Tech Innovation

MNI (Beijing) China should guide long-term funds to invest in technological innovation, increase the equity financing and support for eligible tech companies engaged in cross-border financing with Belt and Road Initiative countries, said Shang Fulin, former head of the China Securities Regulatory Commission and China Banking Regulatory Commission on Sunday during the 2023 Shanghai Suhewan Conference.

JAPAN (BBG): Japan’s Kishida Touts Tax Cuts After Special Election Loss

Japanese Prime Minister Fumio Kishida underscored his plan to return some tax revenues to the public, fund more handouts for those on low incomes and extend energy subsidies in a speech a day after his party lost a special election. “By returning part of the extra tax revenue gained through growth, we will ease the burden of rising prices on the people,” he told parliament Monday, adding that he had ordered ruling party officials to consider the details quickly.

JAPAN (MNI): FY25 Prices Key to BOJ Policy Change - Sekine

Future policy adjustments by the Bank of Japan will rest on whether it becomes more confident in coming board meetings of achieving its forecast for fiscal 2025 median core-core inflation of 1.8%, former BOJ chief economist Toshitaka Sekine told MNI, adding that a further move away from ultra-easy settings could come this year.

JAPAN (MNI): Japan Corp. Loan Demand Rises - BOJ Survey

Demand for financing by Japanese corporates via banks rose from three months ago, reflecting the increase of capital investment and internal reserves, according to the Bank of Japan's senior loan officer opinion survey on bank lending practices. 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 +5 in October from +4 in July.

AUSTRALIA/CHINA (BBG): Australian PM to Visit China After Reaching Deal Over Wine Spat

Australia’s Prime Minister Anthony Albanese will visit China next month in the latest sign of thawing ties after a years-long dispute, with the two sides signaling a deal toward ending Chinese tariffs on Australian wine exports. Albanese will travel to China from Nov. 4-7, the first by an Australian leader since 2016. The government has been working with Beijing to remove obstacles on trade, including on wine, and has “reached an agreement with China to move forward to resolve this dispute,” Albanese’s office said in a statement Sunday.

ARGENTINA (MNI): Massa Overperformance Sets Up Markets' "Worst-Case Scenario" Runoff

The Argentine presidential election failed to deliver a first-round winner yesterday. Economy Minister Sergei Massa, of the governing Peronist Unity for the Homeland, registered a significant overperformance to lead populist libertarian Javier Milei ahead of the November 19 runoff. In defiance of polling and betting markets, Massa won around 37% of the vote with Milei in second with 30%. Patricia Bullrich of the centre-right opposition bloc, Juntos por el Cambio, received 23.9%.

CORPORATE (BBG): Chevron to Buy Hess for $171 per Share

Chevron Corporation announced today that it has entered into a definitive agreement with Hess Corporation to acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron's closing price on October 20, 2023. The transaction has been unanimously approved by the Boards of Directors of both companies and is expected to close in the first half of 2024.

RATINGS: No Change for Italy at S&P, Moody’s Move UK to Stable Outlook

Sovereign credit rating reviews of note from after hours on Friday include:

  • Fitch affirmed Slovenia at A; Outlook Stable
  • Moody's affirmed the United Kingdom at Aa3; outlook changed to stable from negative
  • S&P upgraded Greece to BBB-; Outlook Stable
  • S&P affirmed Italy at BBB; Outlook Stable
  • S&P affirmed the Netherlands at AAA; Outlook Stable
  • S&P affirmed the United Kingdom at AA; Outlook Stable

FOREX: Yield Pressure Limits EUR/USD Gains, Focus on Tail-End of the Week

  • The single currency is modestly the best performer, with EUR/USD narrowing in on the post-Powell highs posted on Thursday. 1.0616 marks the first upside level, a break above which opens 1.0640 and the 50-dma of 1.0684. The renewed run higher in US yields is helping limit gains in the pair. The US 10y yield is narrowing in on 5.00% again, pressure that's underpinning the USD index and limited losses toward recent lows of 105.975.
  • High beta, growth-tied currencies are the poorest performers, suffering alongside equities to prompt EURSEK and USDSEK to both trade around 0.4% higher on the day, while NOK pairs are around 0.3% higher. EURNOK approaches the Jul 6 high at 11.7770 while EURSEK eyes the 50-day EMA at 11.6906 (having breached the 100-day EMA at 11.6584 already).
  • Focus remains on USD/JPY's ability to sustain gains north of Y150.00. Upon resumption of trade after the weekend, USD/JPY surged to briefly print Y150.11 - but gains were limited and swiftly reversed back below the handle. The price action reinforces the cautious nature that markets have adopted to the Japanese authorities' ability to limit gains in the pair.
  • The quiet Monday docket should keep the focus on geopolitical risks - the conflict in Israel remains a key focus, with the Israeli military making limited incursions into the Gaza Strip in attempts to secure hostages and cut off Hamas operatives from access to aid. Datapoints pick up from tomorrow, with global PMI numbers crossing ahead of the ECB decision and advance Q3 GDP data on Thursday.

BONDS: Core FI Yields Push Higher and Curves Steepen, Peripheral Europe Tightens on Ratings

As we have covered all morning, there hasn’t been much in the way of headline counter to the lack of meaningful escalation in the Israel-Hamas conflict and latest BoJ sources piece.

  • That has allowed the Asia-Pac cheapening in core global FI markets to extend.
  • 10-Year U.S. Tsy yields have topped 5% for the first time since ’17, with core global FI markets following suit.
  • Bund futures move towards last week’s lows, while German cash yields are 2.5-7.5bp higher as the curve steepens. 10-Year yields are still ~5bp off 3%, with (participants seemingly less willing to challenge YtD highs in Bund yields when compared to U.S. Tsys and gilts.
  • Peripheral outperformance has been noted, with BTPs and GGBs benefitting from Friday’s well-documented ratings updates (no change in rating/outlook for Italy at S&P and Greece attaining IG status at S&P).
  • Gilt futures have registered fresh ’23 lows given the weakness seen elsewhere, with any sustained break below 91.00 set to switch technical focus to the Oct ‘22/LDI crisis lows. Benchmark 20+-Year gilt yields have hit fresh ’23 highs, with wider yields sitting 4-8.5bp higher on the day as the curve steepens. Friday’s rating news did little for gilts (Moody’s outlook tweak to stable from negative represented a removal of a legacy issue from the Truss era).
  • Lower tier U.S. and Eurozone data is due as the day wears on, while EU & Belgian supply, along with BoE long end gilt sales, provide points of interest elsewhere.

EQUITIES: Move Lower in Eurostoxx 50 Futures Last Week Reinforces Current Bearish Theme

A bearish theme in Eurostoxx 50 futures remains in play and last week’s move lower reinforces current conditions. The contract has traded through support at 4082.00, the Oct 4 low and a bear trigger. This break confirms a resumption of the downtrend and maintains the bearish price sequence of lower lows and lower highs. The focus is on 4034, the Mar 24 low (cont). Initial firm resistance is at 4166.00, the 20-day EMA. S&P e-minis maintain a softer tone. Attention is on 4235.50, the Oct 4 low and bear trigger. A break of this support would confirm a resumption of the downtrend and open 4197.75, the May 24 low. The contract continues to trade below resistance at the 50-day EMA, at 4410.92. A clear breach of this average is required to strengthen bullish conditions and this would open 4479.38, trendline resistance drawn from the Jul 27 high.

  • Japan's NIKKEI closed lower by 259.81 pts or -0.83% at 30999.55 and the TOPIX ended 16.84 pts lower or -0.75% at 2238.81.
  • Across Europe, Germany's DAX trades lower by 46.99 pts or -0.32% at 14751.08, FTSE 100 lower by 16.09 pts or -0.22% at 7384.63, CAC 40 up 4.95 pts or +0.07% at 6821.38 and Euro Stoxx 50 up 0.12 pts or +0% at 4024.83.
  • Dow Jones mini down 57 pts or -0.17% at 33201, S&P 500 mini down 5 pts or -0.12% at 4243.75, NASDAQ mini down 19.25 pts or -0.13% at 14646.25.

COMMODITIES: Bullish Gold Targets Resistance at $2003.4 Next

WTI futures traded higher last week and the contract remains in bull-mode condition. The latest recovery has highlighted a key support at $80.20, the Oct 6 low. The medium-term trend condition is bullish and an extension higher 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, would instead highlight a short-term top. Gold traded higher last week, extending the reversal from $1810.5, the Oct 6 low. The yellow metal has breached key resistance at $1953.0, the Sep 1 high, and $1987.5, the Jul 20 high. The break strengthens a bullish theme and opens $2003.4, a Fibonacci retracement point. Initial firm pivot support lies at $1907.7, the 50-day EMA. Clearance of this level is required to signal a short-term top and a potential reversal.

  • WTI Crude down $0.21 or -0.24% at $87.67
  • Natural Gas up $0.01 or +0.38% at $2.91
  • Gold spot up $0.66 or +0.03% at $1981.65
  • Copper down $1.55 or -0.44% at $354.85
  • Silver down $0.1 or -0.42% at $23.2725
  • Platinum down $3.88 or -0.43% at $896.15

23/10/20231400/1600**EUConsumer Confidence Indicator (p)
23/10/20231530/1130*USUS Treasury Auction Result for 13 Week Bill
23/10/20231530/1130*USUS Treasury Auction Result for 26 Week Bill
24/10/20232200/0900***AUJudo Bank Flash Australia PMI
24/10/20230030/0930**JPJibun Bank Flash Japan PMI
24/10/20230600/0800*DEGFK Consumer Climate
24/10/20230600/0700***UKLabour Market Survey
24/10/20230715/0915**FRS&P Global Services PMI (p)
24/10/20230715/0915**FRS&P Global Manufacturing PMI (p)
24/10/20230730/0930**DES&P Global Services PMI (p)
24/10/20230730/0930**DES&P Global Manufacturing PMI (p)
24/10/20230800/1000EUECB Bank Lending Survey (Q3 2023)
24/10/20230800/1000**EUS&P Global Services PMI (p)
24/10/20230800/1000**EUS&P Global Manufacturing PMI (p)
24/10/20230800/1000**EUS&P Global Composite PMI (p)
24/10/20230830/0930***UKS&P Global Manufacturing PMI flash
24/10/20230830/0930***UKS&P Global Services PMI flash
24/10/20230830/0930***UKS&P Global Composite PMI flash
24/10/20230900/1000*UKIndex Linked Gilt Outright Auction Result
24/10/20230900/0500*USBusiness Inventories
24/10/20231000/1100**UKCBI Industrial Trends
24/10/20231230/0830**USPhiladelphia Fed Nonmanufacturing Index
24/10/20231255/0855**USRedbook Retail Sales Index
24/10/20231345/0945***USIHS Markit Manufacturing Index (flash)
24/10/20231345/0945***USS&P Global Services Index (flash)
24/10/20231400/1000**USRichmond Fed Survey
24/10/20231530/1130*USUS Treasury Auction Result for Cash Management Bill
24/10/20231700/1300*USUS Treasury Auction Result for 2 Year Note

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