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US Market Open: Sentiment slips amid downbeat Ifo commentary and a resilient USD, key earnings ahead

  • European bourses are on the backfoot despite a firmer open as participants digest numerous heavyweight earnings and the latest Ifo ahead of key US prints
  • US futures in-fitting directionally ahead of numerous key releases, including Alphabet & Microsoft
  • DXY remains in proximity to 112.00, though off best, as Cable reclaims 1.13 while EUR shrugs off the Ifo
  • Yuan saw pronounced action amid the weakest fix since 2008 and the regulator reportedly surveying banks
  • Debt has resumed its recovery rally with Bunds unphased by a weak 5yr while USTs await a 2yr outing
  • Looking ahead, highlights include US Richmond Fed. Supply from the US. Earnings from Alphabet, Microsoft, Centene, UPS, ADM, Raytheon, 3M, Visa, and more.

As of 11:10BST/06:10ET

LOOKING AHEAD

  • US Richmond Fed, BoE's Pill, Supply from the US.
  • Earnings from Alphabet, Google, Microsoft, Centene, UPS, ADM, Raytheon, 3M, Visa, and more.
  • Click here for the Week Ahead preview.

EUROPEAN TRADE

EQUITIES

  • European bourses are on the backfoot despite a firmer open as participants digest numerous heavyweight earnings and the latest Ifo ahead of key US prints; Euro Stoxx 50 -0.3%.
  • Sectors post outperformance in Media and Tech following Apple's pricing update and SAP +4.0%, respectively, while Chemicals are pressured as heavyweight Linde considers a Frankfurt delisting.
  • Stateside, futures are pressured and having been moving in-tandem with European bourses as we look to heavyweight US names; ES -0.4%.
  • United Parcel Service Inc (UPS) Q3 2022 (USD): EPS 2.96 (exp. 2.84), Revenue 24.2bln (exp. 24.32bln).
  • Click here for more detail.

FX

  • DXY rangy around the 112.000 handle and Dollar mixed against major peers, Pound reclaims 1.1300+ status as new PM Sunak prepares to take the reins from Truss.
  • Loonie lagging ahead of BoC policy meeting on Wednesday as WTI retreats further.
  • Aussie hovers above 0.6300 vs the Buck post-as anticipated Budget.
  • Euro remains confined between tight 0.9899-52 lines against the Greenback with little reaction to mixed Ifo and ECB lending surveys.
  • PBoC set USD/CNY mid-point at 7.1668 vs exp. 7.1348 (prev. 7.1230); weakest since 2008
  • China's FX regulator surveyed banks regarding Yuan positioning as the currency tumbles, via Reuters citing sources.
  • Turkish Finance Minister held a meeting with the bank association and senior executives on Monday, via Reuters citing sources; subsequently confirmed.
  • Click here for more detail.

Notable FX Expiries, NY Cut:

  • EUR/USD: 0.9745-50 (1.2BN), 0.9775-85 (1.0BN)
  • USD/JPY: 147.00-05 (982M), 147.40-50 (1.1BN), 148.00 (726M), 149.50 (605M), 150.00 (1.3BN)
  • Click here for more detail.

FIXED INCOME

  • Bonds resume recovery rally as Bunds breach 137.00 and Bobls scale 119.00 irrespective of a weak 5 year auction.
  • Gilts establish firmer foothold above 100.00 as new UK PM takes over the helm and US Treasuries flip from bear-steepening to bull-flattening ahead of 2 year note supply.
  • German Finance Agency Diemer says volatility is making it harder for primary dealers to take risk in bidding within German auctions, via Reuters.
  • Click here for more detail.

COMMODITIES

  • Crude benchmarks are pressured amid the general risk tone with sentiment slipping throughout the morning amid a resilient USD and Ifo pointing to a German recession.
  • Currently, WTI and Brent Dec contracts are lower by just over 1% or USD 1/bbl and reside at session lows of USD 83.50/bbl and USD 92/bbl respectively.
  • IEA's Birol said the OPEC+ decision to cut output by 2mln BPD is a risky one especially as several economies are on the brink of recession; the Global LNG market to tighten further next year as European imports increase and China's appetite may rebound, via Reuters.
  • The European Commission is to discuss a proposal today for a permanent fix to decouple gas from electricity prices, according to Politico.
  • Spot gold is tarnished by ongoing USD strength with the DXY remaining resilient around the 112.00 mark after a brief move below. As such, the yellow metal remains below the 10-DMA.
  • Aluminium is faring better than the likes of copper at present and perhaps deriving some support from Norsk Hydro announcing it is to commence a partial curtailment of its Norwegian aluminium smelters
  • Click here for more detail.

NOTABLE EUROPEAN HEADLINES

  • Sky News sources suggest Jeremy Hunt is to remain UK Chancellor, while Penny Mordaunt wants the Foreign Secretary job.
  • BoE Chief Economist Pill says might have benefitted if "other institutions" had respected UK institutional framework in recent weeks.
  • EU has warned that a price cap on natural gas will need the involvement of the UK and Switzerland for it to be effective, according to Bloomberg citing sources.
  • German gov't increases tax revenue forecast for 2022-2026 by EUR 110bln, via Handelsblatt.

NOTABLE EUROPEAN DATA

  • German Ifo Business Climate New (Oct) 84.3 vs. Exp. 83.3 (Prev. 84.3, Rev. 84.4); expect German GDP to shrink by 0.6% in Q4.
  • German Ifo Current Conditions New (Oct) 94.1 vs. Exp. 92.4 (Prev. 94.5); Expectations New (Oct) 75.6 vs. Exp. 75.0 (Prev. 75.2, Rev. 75.3)
  • UK CBI Trends - Orders (Oct) -4 vs. Exp. -12.0 (Prev. -2.0)

NOTABLE US HEADLINES

  • White House said it's not true there is a national security review of Elon Musk.
  • UK FCA is launching an inquiry this week into moves by Apple (AAPL), Google (GOOG), Amazon (AMZN) and Meta (META) into retail financial services, FT reported; no regulatory changes are being proposed at this stage.

CRYPTO

  • Bitcoin is pressured but within a narrow USD 200 range that is itself a similar magnitude above the USD 19k mark.

GEOPOLITICS

RUSSIA-UKRAINE

  • Russia will regard the use of a "dirty bomb" by Kyiv as an act of nuclear terrorism; Russia said it has not intended nor intends to use nuclear weapons in Ukraine, according to a letter cited by Reuters.

OTHER

  • US DoJ said four Chinese nationals, including three intelligence officials, have been charged in a spy recruitment campaign, according to Reuters.
  • South Korean President Yoon said North Korea has completed preparations for a seventh nuclear test, via Yonhap.

APAC TRADE

EQUITIES

  • APAC stocks eventually traded higher following a firm lead from Wall Street, with the Chinese market experiencing a choppy session overnight.
  • ASX 200 held onto gains as the clock ticks down for the unveiling of the Australian Federal Budget (at around 09:30BST/04:30ET), with gains in the index led by financials, telecoms and healthcare.
  • Nikkei 225 remained above the 27,000 mark as its manufacturing stocks kept the index buoyed.
  • KOSPI was supported by the chip sector but gains were capped as South Korean President Yoon said North Korea has completed preparations for a seventh nuclear test, whilst South Korean consumer inflation expectations also ticked up from the prior month.
  • Hang Seng and Shanghai Comp were volatile throughout the session and both indices swung between gains and losses with the former dipping under the 15,000 mark at one point - desks pointed to continued angst following the CCP National Congress. The indices later surged whilst there were unconfirmed reports of Chinese intervention in the stock market.

NOTABLE APAC HEADLINES

  • US Treasury Secretary Yellen is unaware of Japan's FX intervention and Tokyo hasn't informed them.
  • PBoC relaxed cross-border funding by raising the macroprudential parameter to 1.25 from 1.
  • PBoC injected CNY 230bln via 7-day reverse repos at a maintained rate of 2.00% for a daily injection of CNY 228bln
  • China State Planner said China is to promote the expansion of foreign investments focusing on the manufacturing industry.
  • Japan kept its overall economic view unchanged that the economy is picking up moderately, and added that "full attention" must be paid to market volatility. Govt raised Capex view for the first time in eight months; downgrades view on imports.
  • Japanese Finance Minister Suzuki does not comment on daily forex moves, ready to take appropriate action on FX movements if necessary; watching FX with a high sense of urgency. Suzuki said they are in constant communication with US authorities and he is aware of US Treasury Secretary Yellen's comments that she did not know about Japan's intervention.
  • Japanese government official citing BoJ Governor Kuroda said sharp one-sided JPY weakening is not desirable for the economy; BoJ will work closely with govt to monitor financial and currency market moves and their impact on Japan's economy and prices
  • Japanese PM Kishida is to appoint former Health Minister Goto as the new economy minister to replace Yamagiwa, via NHK.
  • Japan FX intervention on October 24th has been estimated at JPY 700-900bln, according to calculation provided by a market source to Reuters.
  • South Korean Oct 12-month consumer median inflation expectation 4.3% (prev. 4.2% in Sep), according to the BoK.
  • RBNZ Chief Economist said the RBNZ anticipates that inflationary pressures will ease and notes that falling house prices are expected to slow consumption.
  • Australian Federal Budget: 2022/23 budget deficit seen at 1.5% of GDP, 2023/24 seen at 1.8% of GDP, 2024/25 seen at 2.0% of GDP. Click here for full details.
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