Newsquawk

Europe Market Open: Risk sentiment spurred by multiple factors heading into Quad Witching

15 Sep 2023, 06:40 by Newsquawk Desk

US stocks rallied with risk sentiment spurred by several factors including strong US data, a dovish ECB hike, the PBoC RRR cut, and a blockbuster Arm IPO.
APAC stocks gained after global risk was fuelled by the upside in Europe and the US; Hang Seng and Shanghai Comp were both initially underpinned by the encouraging Chinese activity data.
DXY marginally softened but held on to most of the prior day’s gains above the 105.00 level while EUR/USD languished around a 6-month low.
China’s NBS said the economy saw accelerated demand, but domestic demand remains insufficient, while the PBoC maintained its MLF rate.
Several of the ECB's more hawkish rate-setters believe that rates could rise again in December, in the scenario of hot wages and inflation, via FT citing sources.
Looking ahead, highlights include French & Italian CPI (Final), EZ Labour Costs, Italian Trade Balance, US UoM Sentiment, NY Fed Manufacturing, Import & Export Prices, BoE/IPSOS Inflation Attitude Survey, ECB TLTRO Repayment Publication, Speeches from ECB’s Lagarde & CBR’s Nabiullina and Quad Witching.

US stocks rallied with risk sentiment spurred by several factors including strong US data, a dovish ECB hike, the PBoC RRR cut, and a blockbuster Arm IPO.
SPX +0.84% at 4,505, NDX +0.82% at 15,474, DJIA +0.96% at 34,907, RUT +1.4% at 1,867.
Click here for a detailed summary.

NOTABLE US HEADLINES

UAW President announced workers' strikes at the Stellantis (STLA) Toledo Jeep plant, Ford's (F) Bronco assembly plant in Michigan and GM's (GM) Wentzville mid-size truck plant from midnight, while Ford said the UAW made a counterproposal but showed little movement from initial demands.

APAC stocks gained after global risk was fuelled by the upside in Europe and the US, while sentiment was also bolstered by better-than-expected Chinese activity data.
ASX 200 was boosted with miners leading the advances seen across all sectors following the reserve ratio cut in China which is expected to release over CNY 500bln of liquidity for Australia’s largest trading partner and with recent comments from RBA watcher McCrann that there will likely be no more rate hikes.
Nikkei 225 extended its gains amid notable outperformance in power companies and with SoftBank boosted after shares in its Arm unit climbed 25% in its US debut.
Hang Seng and Shanghai Comp were both initially underpinned by the encouraging Chinese activity data in which Industrial Production and Retail Sales both topped forecasts, while attention was also on the PBoC which recently cut the RRR by 25bps but maintained its 1-year MLF rate at 2.50%, although Shanghai Comp later faded into the red.
US equity futures were marginally higher but with further upside capped ahead of quad witching.
European equity futures are indicative of a higher open with Euro Stoxx 50 future +0.7% after the cash market closed up 1.3% yesterday.

DXY marginally softened but held on to most of the prior day’s gains above the 105.00 level after it benefitted from strong US data and weakness in its transatlantic counterparts.
EUR/USD languished around a 6-month low in the aftermath of the dovish ECB rate hike where the central bank's language suggested that it could be at the end of its hiking cycle.
GBP/USD was uneventful although is off worse levels after rebounding off a floor at the 1.2400 level.
USD/JPY traded rangebound after it held its ground against the recent dollar strength.
Antipodeans were underpinned by the constructive mood and improved Chinese activity data.
PBoC set USD/CNY mid-point at 7.1786 vs exp. 7.2849 (prev. 7.1874)

10yr UST futures were contained after the recent strong US data releases and the heightened risk appetite.
Bund futures traded quietly but retained the majority of the spoils following the ECB's dovish rate hike.
10yr JGB futures eked mild gains with price action uneventful amid the lack of data or fresh catalysts for Japan and the absence of additional BoJ purchases.

Crude futures continued to climb after WTI crude futures recently rose back above USD 90/bbl to their highest level YTD amid expectations for tight supply, with tailwinds from the risk appetite and better-than-expected Chinese data.
US President Biden said he is going to get gas prices down again.
US Presidential Energy Security Adviser Hochstein said they are seeing record oil production in the US and will continue to refill the SPR, while he added that Libyan floods are impacting oil production there.
Qatar set November-loading Al-Shaheen crude term price at about USD 2.73/bbl above Dubai quotes.
Spot gold was supported in tandem with the upside across the commodities complex.
Copper futures were supported by China's improved activity data and recent RRR cut.

NOTABLE ASIA-PAC HEADLINES

PBoC announced CNY 591bln (CNY 400bln maturing) through 1-year MLF with the rate maintained at 2.50%.
China reportedly told brokers to cut FX trading to shore up a weak yuan, according to Bloomberg.
PBoC injected CNY 105bln via 7-day reverse repos with the rate kept at 1.80% and CNY 34bln via 14-day reverse repos with the rate at 1.95% (prev. 2.15%).
China's NBS said the economy saw accelerated demand but domestic demand remains insufficient and the foundation of the economic recovery needs to be consolidated. Furthermore, the stats bureau stated the domestic economy is recovering but still faces difficulties and that China should focus on expanding domestic demand.
US senior House Republicans urged the US Commerce Department to toughen export controls against Huawei and SMIC citing the new advanced smartphone from Huawei.
Sino-Ocean Group (3377 HK) announced the suspension of trading of offshore USD securities and said the group has been in talks with creditors, while it noted that the optimal path forward is holistic restructuring and payments under all of its offshore debts will be suspended until holistic restructuring and/or extension are implemented.

DATA RECAP

Ukrainian President Zelensky is to attend the United Nations General Assembly next week and meet with US President Biden, according to a Ukrainian official via NBC.
Russia seeks to expand its naval presence in the Mediterranean in which it wants access for its warships to a Mediterranean port in Libya, according to WSJ.
EU's Borrell said he received a letter from France, Britain and Germany announcing the intention not to lift Iran sanctions on October 18th.
Iran is ready to implement a Qatar-mediated prisoner trade and funds deal with Washington.

Several of the ECB's more hawkish rate-setters believe that rates could rise again in December, in the scenario of hot wages and inflation, via FT citing sources. Three individuals involved in the September meeting said if EZ inflation were above forecast the door remains open to a hike in December, when the next set of projections are provided.
French Finance Minister Economic Forecasts maintained 2023 growth estimate at 1% and cut 2024 growth forecast to 1.4% (prev. 1.6%), while inflation is seen at 4.9% for 2023 and 2.6% for 2024.