Newsquawk European Market Wrap - 8th October 2024

• European stocks lower; basic resources and luxury hit on China disappointment


• USD broadly steady vs. peers; GBP outperformed, AUD lagged


• An attempted bid in core fixed income markets faltered as recent selling pressure extended

EQUITIES

• 
  European bourses, Stoxx 600 (-0.8%) began the session entirely in the red after China’s NDRC press conference, which disappointed the markets after failing to announce any new major stimulus measures. As the session progressed, sentiment gradually improved, with some indices managing to clamber modestly into the green.


• 
  European sectors were mostly negative with a clear defensive bias amid the risk aversion. Basic Resources was the clear laggard following the hefty losses across base metals after China's disappointing NDRC press conference, whilst Consumer Products and Services were dragged by the Luxury sector; Anglo American (-5%), Kering (-4.6%), LVMH (-3.5%). In terms of individual movers, Imperial Brands (+4.2%) topped the Stoxx 600 pile after it increased shareholder returns, whilst Vistry (-23%) sank at the open after its results.


• 
  US Equity Futures (ES +0.4%, NQ +0.4%, RTY -0.2%) are mixed and with futures dipping slightly off best levels at the cash open. In terms of stock specifics, NVIDIA (+2.4%) gains after Foxconn said it was building the world’s largest superchip manufacturing facility for NVIDIA and said the outlook for Q4 was strong. PepsiCo (U/C) is flat post-earnings, where it missed on Revenue and trimmed its FY annual sales view, whilst Roblox (-10%) sank amid a Hindenburg Research short.

FX

• 
  USD - USD net steady vs. peers after a recent run of gains that lifted DXY from a 100.17 low last week to a 102.68 post-NFP high. Today's US data calendar was light and therefore greater interest may gravitate towards today's list of Fed speakers after hours as markets try to assess the Fed's easing intentions with some market participants questioning whether the Fed actually needs to ease at all. In terms of levels for DXY, ahead of 102.68 is yesterday's high @ 102.62. To the downside, focus is on the psych 102 mark.


• 
  EUR - Marginally firmer vs. the broadly weaker USD but with EUR/USD unable to reclaim 1.10 status; topping out @ 1.0996. Despite some better data out of Germany this morning, the economic outlook for the Eurozone remains a bleaker one than that of the US and therefore it remains to see how much EUR/USD can rise.


• 
  GBP - A touch firmer vs. the USD after what has been a tough run for the pound on account of last week's dovish interjection by BoE Governor Bailey. Today's session lacked fresh UK catalysts and this could remain the case with nothing on the calendar this week until Friday's monthly GDP data. Cable remained within yesterday's 1.3060-1.3134 range throughout the session.


• 
  JPY - Marginally firmer vs. the USD. However, this appeared to be more a case of scaling back recent losses rather than outright bullishness on the JPY. As a reminder, USD/JPY has climbed around 8 handles since last Monday as markets reconsidered the relative rate paths of the Fed and BoJ. The next inflection point could come via the US CPI data later in the week.


• 
  Antipodeans - AUD was one of the laggards throughout the session on account of disappointment from the NDRC announcement overnight. Subsequently, AUD/USD extended losses for a fourth consecutive session with the pair falling further onto a 0.67 handle and briefly slipping below its 50DMA @ 0.6720. NZD/USD was softer but to a lesser extent than its antipodean peer counterpart ahead of the RBNZ overnight. NZD/USD went as low as 0.6108 but held above the September low @ 0.6106 and the psychological 0.61 level.

FIXED

• 
  Bunds - A choppy session for the German benchmark after initially being weighed on by German Industrial Production before attempting to recoup lost ground and then eventually slipping into the red. Fresh macro drivers for the Eurozone were lacking in today's session with focus on next week's ECB announcement. On which, ING is questioning the possibility of such a move given that soft data was already baked into the Bank's September projections. Dec'24 Bunds remained on a 133 handle throughout the session and slipped below yesterday's 133.40 low. The German 10yr yield went as high as 2.265%; highest since September 4th.


• 
  Gilts - Gilts initially followed suit to the pick-up in prices elsewhere before being dragged lower by the broad-based selling in USTs. Today's session lacked fresh UK catalysts and this could remain the case with nothing on the calendar this week until Friday's monthly GDP data. The Dec'24 contract failed to breach yesterday's peak @ 96.93. Today's peak in the UK 10yr yield @ 4.222% was the highest since July 3rd.


• 
  USTs - USTs looked as if they were going to attempt to recoup some lost ground in early European trade. However, the recovery attempt eventually faltered and the selling pressure resumed. As such, the Dec'24 contract extended below yesterday's 112.13+ low with a trough @ 112.10+. For now, the macro narrative surrounding the US is gripped by the fallout of Friday's hot NFP print. CPI and PPI later in the week could provide the next inflection point for US paper. The US curve bull steepened with the 2s10s spread widening to as much as 6.4bps vs. the brief inversion yesterday. The US 10yr yield advanced to a peak of 4.055%; highest since August 1st.


• 
  UK sells GBP 1bln 0.125% 2039 I/L Gilt: b/c 3.14x (prev. 3.0x) & real yield 1.044% (prev. 1.053%).


• 
  Germany sells EUR 0.95bln vs exp. EUR 1bln 2.30% 2033 Green Bund: b/c 2.4x (prev. 3.4x), average yield 2.16% (prev. 2.51%) & retention 5% (prev. 15.4%).

COMMODITIES

• 
  Crude Futures - Softer price action across the crude complex as a disappointing NDRC update (more below) kept prices subdued while the Israeli attack on Iran looms. The next catalyst will likely come from the extent of the attack and the scope this has to further escalate the tensions in the region - although reports suggest Israel is unlikely to hit Iran's nuclear sites but may focus on bases, intel or leadership targets. Aside from geopolitics, some of the downbeat sentiment likely emanated from the Chinese NDRC press conference - which fell short of expectations as no fiscal bazooka was announced. Meanwhile, NHC said Hurricane Milton rapidly intensified into a category 5 hurricane and is expected to make landfall on Wednesday. Ahead, the EIA STEO will be released today but is unlikely to provide much of an impact given the fluidity of fundamentals. WTI Nov resided towards the bottom of a USD 74.50-78.46/bbl range while Brent Dec sat in a USD 78.23-81.14/bbl parameter.


• 
  Precious Metals - Softer trade across the precious metals complex with hefty earlier underperformance in spot palladium trimming, whilst spot silver eventually became the laggard - likely from the fallout of China's NDRC, although spot gold (-0.1%) was more cushioned vs peers as the heightened geopolitical environment keeps losses limited. Spot gold sat in a USD 2,628.50-2,653.11/oz range and briefly dipped under Friday's low (USD 2,632/oz), with the next notable level to the downside the 30th Sep low (USD 2,624.78/oz).


• 
  Base Metals - Substantial losses across the board in base metals after China's NDRC expressed confidence in economic stability but announced no new major stimulus measures. ING emphasises that "China, the world’s biggest consumer of metals, has been a drag on metals demand for more than two years. A broad economic slowdown and, in particular, the crisis in the property sector has seen copper and other industrial metals prices slump." The complex however clambered off worst levels throughout the session as risk somewhat improved. Nonetheless, 3M LME copper looks to end the European day around USD 9,800/t after trading at extremes between 9,705.50-9,991.00/t.


• India's Oil Minister said India will be consuming 6mln bpd of crude oil in the foreseeable future from 5.4mln bpd now.


• Russian oil firms are discussing diesel export ban, according to IFX.


• 
  Libya NOC says daily production reached 1.133mln BPD of crude oil and condensate in the last 24 hours, according to a statement.


• Daily oil production in Kazakhstan reportedly decreased by 13% with start of repairs at Kashagan, according to the energy ministry.

EUROPEAN DATA

• 
  UK BRC Retail Sales YY (Sep) 1.7% (Prev. 0.8%); BRC Total Sales YY (Sep) 2.0% (Prev. 1.0%)


• 
  Swedish Flash CPIF (Sep) +1.1% Y/Y; CPIF-XE (Sep) 2.0% Y/Y; CPI (Sep) +1.6% Y/Y, according to the stats office


• 
  German Industrial Output MM (Aug) 2.9% vs. Exp. 0.8% (Prev. -2.4%)


• 
  French Trade Balance, EUR, SA (Aug) -7.371B (Prev. -5.884B, Rev. -6.042B); Imports, EUR (Aug) 57.028B (Prev. 55.682B, Rev. 55.508B); Exports, EUR (Aug) 49.657B (Prev. 49.798B, Rev. 49.466B); Current Account (Aug) -0.6B (Prev. -1.2B)


• 
  Kantar UK Grocery Market Share: Grocery price inflation increased slightly to 2.0% during the four weeks to 29 September, up from 1.7% last month.

CENTRAL BANKS

• 
  ECB's Elderson said many indicators show that the risks of lower economic growth are materializing; ECB is open-minded ahead of the October 17th meeting, ECB decisions are made on a meeting by meeting basis, via local press Delo.


• 
  ECB's Kazaks said "The data points to October rate cut".


• 
  ECB's Vasle said inflation risks abating but still some uncertainty, a rate cut in October is an option but this cut does not mean another in December; rates likely to be neutral by 2025 end.


• 
  ECB's Nagel says he is open to an October rate cut, via a podcast.


• 
  ECB's Centeno says inflation in the Euro Area has converged towards its goal.


• 
  Reuters poll says 68 out of 75 economists see the ECB cutting the deposit rate by 25bps in October and December; Median shows ECB to cut deposit rate to 2.0% by end-2025 (prev. 2.50% in Sept. poll).

GEOPOLITICS

• 
  "Israel army says a fourth Division joins operations in Southern Lebanon", according to Walla News' Elster.


• Iran's Foreign Minister is to visit Saudi Arabia and other countries in the region, starting on Tuesday.


• 
  Israeli source says "It is not possible to talk about specific geographical limits for operations in Lebanon" via Sky news Arabia.


• 
  "Israeli source to Sky News Arabia: Hezbollah still shows the ability to communicate and plan", via Sky News Arabia.


• 
  "Hezbollah's deputy leader has expressed openness to a deal with Israel", according to dpa citing an earlier televised interview.

NORTH AMERICAN DATA

• US NFIB Business Optimism Idx (Sep) 91.5 (Prev. 91.2)


• US International Trade (Aug) -70.4B vs. Exp. -70.6B (Prev. -78.8B, Rev. -78.9B)

NOTABLE APAC NEWS

• China announces provisional anti-dumping measures on EU brandy; from Oct 11th, importers shall provide security deposits to Chinese customs, according to MOFCOM


• 
  China's State Council held a special study session on economic policies on Thursday, via Chinese state media.


• 
  China's Premier Li says they will strengthen policy coordination, via State Media.

08 Oct 2024 - 15:00- MetalsEU Research- Source: Newsquawk