Newsquawk

Europe Market Open: BoJ maintained NIRP & 0% 10yr target, but widened the reference range to 100bps

31 Oct 2023, 06:35 by Newsquawk Desk

APAC stocks traded mixed amid a deluge of data releases at month-end including disappointing Chinese official PMIs
BoJ maintained NIRP and the 10yr JGB yield target at 0% but widened the reference range to 100bps up or down from target
European equity futures are indicative of a slightly softer open with the Euro Stoxx 50 -0.2% after cash markets closed higher by 0.4% yesterday
DXY is firmer and just below the 106.50 mark, JPY lags post-BoJ, EUR/USD has pulled back beneath 1.06
Looking ahead, highlights include German GDP Flash, French Flash CPI, EZ Flash CPI & Flash-Prelim. GDP, US Employment Costs & Consumer Confidence, Speech from ECB’s de Guindos, Supply from Italy.
Earnings from AB InBev, BASF, Stellantis, BP, Marathon, Caterpillar, Pfizer, SYSCO, AMD.

US stocks were underpinned and oil prices slumped amid an unwinding of the geopolitical risk premium following the lack of a major escalation in the Israel-Hamas conflict, while the attention turned to the looming risk events.
SPX +1.20% at 4,166, NDX +1.09% at 14,335, DJIA +1.58% at 32,928, RUT +0.63% at 1,647.
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NOTABLE HEADLINES

US Treasury quarterly financing estimates showed the US expects to borrow USD 776bln in net marketable debt for the October-December period which is down USD 76bln from the July 2023 estimate.
Apple (AAPL) announced a new family of chips with the M3, M3 Pro and M3 Max, while the chips will use 3-nanometer technology and it also introduced the new Macbook Pro which will have up to 22 hours of battery life. Furthermore, the M3 Max and M3 Pro Macbook models will come in a new colour called Space Black with prices of the 14-inch Macbook Pro models beginning at USD 1,599 and the 16-inch Macbook Pro models beginning at USD 2,499.

APAC stocks traded mixed amid a deluge of data releases at month-end including disappointing Chinese official PMIs, while participants also digested a slew of earnings releases and the conclusion of the BoJ’s live meeting.
ASX 200 finished flat as strength in real estate, financials and the consumer sectors was offset by underperformance in mining stocks and after the weak factory activity data from Australia’s largest trading partner.
Nikkei 225 was initially choppy after Industrial Production and Retail Sales missed estimates although the index was later supported following the BoJ policy announcement in which the central bank announced a less aggressive than anticipated tweak to YCC.
Hang Seng and Shanghai Comp were pressured following disappointing PMI data which showed China’s factory activity returned into contractionary territory for October, while there were also plenty of earnings releases including from the likes of Bank of China, BYD and PetroChina.
US equity futures were softer (ES -0.4%) amid the cautious mood and soft data releases in Asia.
European equity futures are indicative of a slightly softer open with the Euro Stoxx 50 -0.2% after cash markets closed higher by 0.4% yesterday.

DXY eventually strengthened and partially atoned for yesterday’s selling pressure which had coincided with an unwinding of the geopolitical risk premium, although further upside was capped heading into the upcoming risk events.
EUR/USD eased from the prior day’s best levels and retreated beneath 1.0600 after the latest rhetoric from ECB officials continued to point to no more rate hikes.
GBP/USD pulled back amid the cautious mood and after a softening in the UK Shop Price Index.
USD/JPY clawed back the prior day’s losses and reclaimed the 150.00 status after the BoJ policy announcement in which the central opted for a modest tweak to its yield curve control.
Antipodeans were pressured amid headwinds from disappointing Chinese PMI data and the cautious mood.
PBoC set USD/CNY mid-point at 7.1779 vs exp. 7.3024 (prev. 7.1781)

10-year UST futures traded indecisively after the recent haven unwind and corporate issuances.
Bund futures remained afloat after yesterday's bout of Eurozone data releases and ECB rhetoric.
10-year JGB futures were pressured ahead of the BoJ announcement owing to a hawkish source report which noted a potential tweak to YCC and underpinned the 10yr JGB yield to near the 1.0% cap. 10yr JGB futures were then choppy and momentarily pared all their losses after the central bank opted for a modest tweak and switched to an even more flexible approach on yield curve control.

Crude futures traded rangebound after yesterday's geopolitical risk unwind and with prices contained overnight by the overall cautious risk sentiment and the disappointing Chinese official PMI data.
Spot gold was lacklustre following its recent failure to sustain the USD 2,000/oz status.
Copper futures were subdued with prices not helped by the contraction in China's factory activity.

Bitcoin was mildly pressured and steadily retreated beneath the USD 34,500 level.

NOTABLE ASIA-PAC HEADLINES

BoJ maintained NIRP at -0.10% and the 10yr JGB yield target at 0% but widened the reference range to 100bps up or down from the target from 50bps and made YCC more flexible with the decision on YCC made by 8-1 vote in which board member Nakamura dissented. BoJ said it will regard the upper bound of 1% for the 10yr JGB yield as a reference in market operations and will guide market operations nimbly, while it will flexibly increase JGB buying, fixed-rate operations and collateral fund-supplying operations. Furthermore, it will determine the offer rate for fixed-rate JGB buying operations each time by taking into account market rates and other factors.
China's Foreign Minister Wang met with the French Foreign Affairs Adviser to the President and the sides had friendly, in-depth exchanges regarding China-France and China-EU relations, as well as international and regional issues. Furthermore, Wang said he hopes the EU will adopt a more pragmatic and rational attitude in cooperation with China and avoid external interference, ensure mutual openness and promote stable bilateral relations.
US is to send its strongest-ever delegation to the China import expo amid improving relations, according to SCMP

DATA RECAP

Chinese NBS Manufacturing PMI (Oct) 49.5 vs. Exp. 50.2 (Prev. 50.2)
Chinese NBS Non-Manufacturing PMI (Oct) 50.6 vs. Exp. 51.8 (Prev. 51.7)
Chinese Composite PMI (Oct) 50.7 (Prev. 52.0)
Japanese Industrial Production MM (Sep P) 0.2% vs. Exp. 2.5% (Prev. -0.7%)
Japanese Retail Sales YY (Sep) 5.8% vs. Exp. 5.9% (Prev. 7.0%)
Japanese Unemployment Rate (Sep) 2.6% vs. Exp. 2.6% (Prev. 2.7%)
New Zealand ANZ Business Confidence (Oct) 23.4 (Prev. 1.5)
New Zealand ANZ Activity Outlook (Oct) 23.1 (Prev. 10.9)

Israel PM Netanyahu said Iran is working to finance Hamas and that Israel will not agree to a cessation of fighting with Hamas after the October 7th attack.
White House National Security Adviser Sullivan met with the Saudi Defence Minister and confirmed President Biden's commitment to support the defence of US partners against threats from state and non-state actors including those backed by Iran.
US VP Harris will meet with UK PM Sunak to discuss the Israel-Hamas conflict and Russia's war in Ukraine.

NOTABLE HEADLINES

ECB's Enria said ECB’s track record in fixing some issues at banks has in some cases been disappointingly slow, while he added there is no banking rule that can remove the need for effective supervision.

DATA RECAP