US EARLY MORNING: US equity futures are firmer, in fitting with APAC/European lead, ahead of Fed speak

SNAPSHOT: APAC markets were firmer and took impetus from the Wall St. rally on Monday, while the European open saw a continuation of the risk-on theme, highlighted by strength across the board. Following on, US equity futures are seeing similar broad-based gains of around 1.5%. In terms of stocks specifics, it has been light, but Foxconn (2317 TW/FXCOF) had a positive update as it noted Q3 revenue was better than expected, and looking ahead maintained FY22 guidance, as stated in August, while the Q4 outlook is cautiously positive. Elsewhere, the Dollar is lower and briefly dipped beneath 111.00, although it now resides well off session lows but still in the red to the benefit of G10 peers with GBP and EUR the outperformers. Overnight, RBA made a dovish 25bps hike (exp. 50bps) to 2.60%, with the Board committed to returning inflation to the 2–3% range over time and expects to increase interest rates further over the period ahead. Looking at fixed income, prices have seen minor retreat from overnight recovery peaks before a lengthy extension of recovery highs from late September cycle lows. Lastly, the crude complex is slightly firmer, although it is moving pretty sideways as market participants will be cognizant of the OPEC+ meeting on Wednesday. In terms of metals, both precious and base are benefitting from the aforementioned broader pullback in the Dollar.

DAY AHEAD: There is not much in the immediacy in terms of scheduled risk events, but the central bank speaker docket is very heavy on Tuesday, with highlights from Fed’s Logan, Williams, Daly (twice), and Jefferson, as well as ECB’s Lagarde, Centeno, and Enria. On top of this, UK Chancellor Kwarteng is also on the wires. On the Fed, whilst there has been a lot of rhetoric recently, in the last couple of days there has been some chatter, particularly from FBN's Gasparino, talking about a Fed Pivot due to risks of financial stability and although it is something the Fed is keeping an eye on, commentary has remained focused on inflation and officials have suggested the risk of inflation being too high is greater than the Fed doing too much. Lastly, US data comes via factory orders, JOLTS, and durable goods revisions.

WEEK AHEAD: The US jobs report on Friday is the stand out event, but before then there is the RBNZ rate decision, which follows on from the dovish RBA hike, with the bank expected to hike 50bps to 3.5% (Newsquawk preview here). Moreover, ECB minutes and European summit on Thursday, and OPEC policy meeting on Wednesday, where an output cut of somewhere between 0.5-1.5mln is expected, with sources pointing more towards the top end of the range (Newsquawk preview here). Our Full week ahead briefing can be accessed here.

CENTRAL BANKS:

RBA: Surprised markets with a smaller-than-expected rate hike of 25bps, instead of the market expectations of a 50bps. Follows the central bank's hints throughout the past month of a future slowdown in pace of rate hikes. Nonetheless, the central bank has suggested further upcoming hikes with the Board committed to returning inflation to the 2–3% range over time and it expects to increase interest rates further over the period ahead. RBA reiterated that the size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market, while the Board remains resolute in its determination to return inflation to the target.

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04 Oct 2022 - 09:34- Research Sheet- Source: Newsquawk

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