APAC stocks were predominantly higher following the tech rebound stateside, where the S&P 500 and NDX notched fresh record levels.
Participants were encouraged by an agreement on the first phase of a Gaza ceasefire deal, and with Chinese traders returning from the National Day Golden Week holiday.
Israel’s Channel 14 reported the Israel-Hamas ceasefire will come into effect today at 12:00 noon (10:00BST/05:00EDT), according to Al Arabiya.
FOMC Minutes stated participants judged that a cautious approach to future policy was warranted, while a majority of participants emphasised upside risk to their outlooks for inflation – no notable reaction seen in markets on the release.
China’s government announced export controls on rare earth materials.
Looking ahead, highlights include German Trade Balance (Aug), Atlanta Fed GDP, New Zealand Manufacturing PMI, (Suspended: US Jobless Claims (4 Oct w/e), Wholesale Sales (Aug), ECB Minutes (Sep), Eurogroup Meeting, Banxico Minutes, Speakers including BoE’s Mann, ECB’s Lane, BoC’s Rogers, Fed Chair Powell, Bowman, Barr & Kashkari, Supply from US, Earnings from Delta Air & PepsiCo
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LOOKING AHEAD
Highlights include German Trade Balance (Aug), Atlanta Fed GDP, New Zealand Manufacturing PMI, (Suspended: US Jobless Claims (4 Oct w/e), Wholesale Sales (Aug), ECB Minutes (Sep), Eurogroup Meeting, Banxico Minutes, Speakers including BoE’s Mann, ECB’s Lane, BoC’s Rogers, Fed Chair Powell, Bowman, Barr & Kashkari, Supply from US, Earnings from Delta Air & PepsiCo.
Click for the Newsquawk Week Ahead.
US TRADE
EQUITIES
US stocks were bid on Wednesday with upside led by the Nasdaq as tech stocks, namely NVDA, outperformed while the Dow lagged. There was a continued lack of progress on ending the government shutdown, although there was some optimism on the political situation in France and hopes regarding a Gaza deal, which appears to be very close to an agreement. Meanwhile, in the US, the Fed minutes were hawkish, and the 10-year T-note auction was weak.
SPX +0.58% at 6,754, NDX +1.19% at 25,137, DJI +0.00% at 46,602, RUT +1.04% at 2,484.
Click here for a detailed summary.
FOMC MINUTES
FOMC Minutes stated that most judged it would likely be appropriate to ease policy further over the rest of the year and almost all participants supported a 25bps cut to the Fed funds rate at the September meeting. Participants generally noted their judgments about appropriate policy action at the September meeting reflected a shift in the balance of risks, while some noted financial conditions suggested policy may not be particularly restrictive, and those participants judged that a cautious approach to future policy was warranted. A few participants also saw merit in keeping the Fed funds rate unchanged at the September meeting, or that they could have supported such a decision, while one participant preferred a 50bps rate cut at last month’s meeting (This was Miran, although there were no non-voters that supported a 50bps rate cut). Furthermore, most participants judged that the downside risks to employment had increased and upside risks to inflation had either diminished or not increased, while a majority of participants emphasised upside risk to their outlooks for inflation.
TARIFFS/TRADE
US President Trump’s administration is reportedly planning to exclude generics from the big pharma tariff plan, although the decision isn’t final and could change, according to WSJ.
Canadian PM Carney said that he and US President Trump had a meeting of minds on the future of the steel and auto sectors, while Carney also commented that there will be some bilateral deals alongside the USMCA
China’s government announced export controls on rare earth materials with MOFCOM stating that foreign firms and individuals must obtain a dual-use items export license regarding rare earth exports, while domestic exporters exporting some dual-use items shall declare the final destination country or region as required, with requirements taking effect from December 1st. Furthermore, it stated that exports of items for design, development, production or use of weapons of mass destruction will not be approved and export applications to overseas military users, as well as to importers and end-users on watch lists, shall not be approved in principle.
Vietnam said negotiators are to travel to the US in October and November to continue trade talks.
NOTABLE HEADLINES
US President Trump said most workers will get back pay and noted they want to make Obamacare better, while he stated that military personnel will probably be paid during the shutdown. Furthermore, it was separately reported that White House officials said President Trump is mulling shifting funds to pay troops, according to POLITICO.
Democratic bill to end US government shutdown failed to win enough votes to pass in the Senate, while the Republican bill to end the US government shutdown also failed to win enough votes to pass in the Senate.
US House Minority Leader Jeffries said he supports an effort to pass a standalone bill to pay military troops.
US IRS is to furlough 34k employees as part of the government shutdown.
APAC TRADE
EQUITIES
APAC stocks were predominantly higher following the tech rebound stateside, where the S&P 500 and NDX notched fresh record levels, while participants were encouraged by an agreement on the first phase of a Gaza ceasefire deal, and with Chinese traders returning from the National Day Golden Week holiday.
ASX 200 eked mild gains with strength in mining and materials, while tech and the top-weighted financial industry lagged.
Nikkei 225 resumed its recent rally with the ascent spearheaded by tech advances following the strength in US counterparts.
Hang Seng and Shanghai Comp were somewhat mixed as the Hong Kong benchmark took a backseat to the Mainland Chinese markets, which reopened for the first time this month, while there were also divergences between some banks as Hang Seng Bank was the biggest gainer after jumping more than 26% and with HSBC in the red after proposing to take the former private.
US equity futures were contained following the prior day’s tech-led advances on Wall Street.
European equity futures indicate a lower cash market open with Euro Stoxx 50 futures down 0.3% after the cash market closed with gains of 0.6% on Wednesday.
FX
DXY took a breather after the recent strengthening trend despite the continued absence of data and lack of breakthrough regarding the shutdown impasse. Nonetheless, the FOMC Minutes offered further details on the September meeting and confirmed Governor Miran was the sole dissenter who sought a larger 50bps cut but failed to gather any support from any voters or non-voters, while a few participants saw merit in keeping the FFR unchanged at the meeting.
EUR/USD mildly rebounded from the prior day’s trough after finding a floor around the 1.1600 level and following comments from French caretaker PM Lecornu, who noted there is a majority in parliament against the dissolution of parliament and that they could have a new PM in 48 hours.
GBP/USD recouped some lost ground after recovering from a brief dip beneath the 1.3400 territory, while rhetoric yesterday from BoE’s Pill had little impact as he noted monetary policy should be resolutely focused on price stability and policymakers should make a clear and credible commitment to achieve price stability.
USD/JPY traded rangebound and paused from the recent Takaichi-related advances with her economic measures and PM nomination said to likely be delayed.
Antipodeans strengthened amid the constructive mood in which NZD/USD gradually recovered the entirety of the previous day’s RBNZ-triggered losses.
PBoC set USD/CNY mid-point at 7.1102 vs exp. 7.1484 (Prev. 7.1055)
FIXED INCOME
10yr UST futures remained indecisive with demand hampered following an ultimately weak 10yr auction and hawkish-leaning FOMC minutes.
Bund futures traded rangebound near the 129.00 level following recent issuances and as German Trade Data and ECB Minutes loom.
10yr JGB futures kept afloat but with the upside limited after the 5yr auction results were relatively in line with the previous.
COMMODITIES
Crude futures were marginally lower following reports that Israel and Hamas agreed on the first phase of the Gaza ceasefire deal, which includes a hostage-prisoner release and troop withdrawal.
Britain’s energy grid operators are confident of sufficient electricity and gas supply this winter, while peak British day gas demand is seen at 182 MCM this winter vs. peak supply of 565 MCM.
Spot gold eased back from record highs amid Gaza peace hopes, but with downside stemmed by support around the USD 4,000/oz level.
Copper futures eventually gained with some support seen as the Chinese commodities trade got underway following a week-long-plus hiatus.
CRYPTO
Bitcoin retreated overnight and briefly reverted to beneath the USD 122k level.
NOTABLE ASIA-PAC HEADLINES
Former BoJ Deputy Governor Wakatabe said the BoJ can raise interest rates if inflation expectations heighten and push up underlying inflation, but added the BoJ will likely find it hard to justify raising rates this year due to prospects of weak Q3 GDP. Furthermore, he said the BoJ has not committed to a set timing for raising rates and has not dropped any signals, while he stated the BoJ must coordinate policy with the government, but does not need to keep rates low solely to fund government spending.
GEOPOLITICS
MIDDLE EAST
US President Trump announced that Israel and Hamas have both signed off on the first phase of the peace plan which means that all of the hostages will be released very soon, and Israel will withdraw their troops to an agreed upon line as the first steps towards a strong, durable, and everlasting peace. Trump also said he believes Iran will be part of the peace situation and that he spoke with Israeli PM Netanyahu, while he thinks Gaza will be rebuilt and that hostages will probably be released on Monday. In relevant news, Trump told Axios’s Ravid in a phone call that he is likely going to Israel in the coming days and would possibly speak in front of the Knesset, which he will definitely do if they want him to.
Israeli PM Netanyahu’s office confirms that PM Netanyahu will convene the government on Thursday to approve the Gaza agreement, while an Israeli government spokesperson said they expect hostages to start being released on Saturday. Furthermore, Yedioth Ahronoth quoted Israeli officials stating that the Gaza agreement will be signed on Thursday and the first release will be either Saturday or Sunday, while it was later reported that the ceasefire will come into effect today at 12:00 noon (10:00BST/05:00EDT).
Hamas said an agreement was reached to end the Gaza war, secure an Israeli withdrawal and for a hostage-prisoner swap, while it called on US President Trump and guarantor states to ensure Israel implements the Gaza ceasefire deal.
Qatar Foreign Ministry spokesperson noted that mediators said an agreement was reached on all terms of the first phase of the Gaza ceasefire, while the Gaza ceasefire is to include an end of the war, the release of Israeli hostages and Palestinian prisoners, as well as entry of aid. Furthermore, the spokesperson said the details of the Gaza ceasefire agreement are to be announced later.
Gaza deal could be signed in next 24-36 hours if things continue as they are, and after that point, phases of agreement would be implemented, including ceasefire and hostages being released, according to Sky News citing sources.
US President Trump previously said he may go to the Middle East by the end of the week, maybe on Sunday, while he separately commented that he will most likely be going to Egypt. It was also reported that the White House said President Trump will get a routine yearly check-up on Friday and is considering going to the Middle East shortly thereafter.
US Secretary of State Rubio will not participate in the foreign ministers’ meeting organised on Thursday by France to discuss the post-war plan for Gaza, according to Axios citing sources.
OTHER
Taiwan Defence Ministry report stated that China is using hybrid warfare to weaken people’s trust in the government and support for defence spending, while it added that China is increasing its grey zone attacks and frequency of military activities. Furthermore, it stated that China has been using AI tools to scan weak points in Taiwan’s critical infrastructure and steal and analyse intelligence, as well as noted that China is using botnet cyber attacks with AI to weaken Taiwan’s digital infrastructure and cybersecurity.
UN is to slash a quarter of peacekeepers globally due to lack of funding, according to a senior UN official.
EU/UK
NOTABLE HEADLINES
French Caretaker PM Lecornu said as of Wednesday evening, he considers the mission finished and there is a majority in parliament that is against the dissolution of parliament, while he added they could have a new PM in 48 hours. Furthermore, he told French President Macron the prospect of dissolution is becoming more remote, and the situation with France’s pension system remains one of the biggest blocking points. It was later reported that French President Macron will name a new PM in the next 48 hours and said there is a possible path to a budget by December 31st.
DATA RECAP
UK RICS Housing Survey (Sep) -15.0 vs. Exp. -18.0 (Prev. -19.0, Rev. -18)
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