Copyright ZeroHedge
European bourses are broadly lower, but FTSE 100 outperforms after UK inflation; US equity futures are modestly weaker. USD is flat & GBP hit after region's softer-than-expected inflation report, which has boosted bets for a cut in December. USTs are flat/slightly firmer ahead of supply, Gilts gap higher after CPI, Bunds marginally pressured after yet another poor auction. Initial morning bounce back in gold has faded with XAU now lower on the session; crude complex is on a firmer footing. Looking ahead, CCP 4th Plenum (20th-23rd), Speakers including ECB’s de Guindos, Lagarde & Fed's Barr, Supply from the US, Earnings from SAP, Tesla, IBM, Kinder Morgan, Alcoa, Lam Research, GE Vernova, Hilton, AT&T & Thermo Fisher. Newsquawk in 3 steps: 1. Subscribe to the free premarket movers reports 2. Listen to this report in the market open podcast (available on Apple and Spotify) 3. Trial Newsquawk’s premium real-time audio news squawk box for 7 days TARIFFS/TRADE US President Trump reiterated that the November 1st tariffs on China will be about 155% and that higher tariffs on China won't be sustainable for them, while Trump also said he spoke with India's PM Modi on Tuesday and talked about trade. South Korean chief presidential policy aide said South Korea and the US stand apart on a couple of matters in tariff talks. South Korea Minister for Trade Yeo expressed concern in a call with China's Li Chenggang regarding Beijing's shipbuilding curbs, while he asked Li to swiftly lift sanctions on South Korea shipbuilder Hanwha Ocean and discussed China’s rare earths export restrictions. India and the US are closing in on a long-pending trade deal that could slash current tariffs from Indian exports to between 15-16% from 50%, according to Mint citing three people aware of the matter. EUROPEAN TRADE EQUITIES European equities (STOXX 600 -0.2%) are mostly lower today, but with outperformance in the FTSE 100 (+0.4%) after the UK's inflation report, which has boosted bets around a cut in December. European sectors hold a negative bias. Energy and Utilities lead the pile, with the former benefiting from strength in oil prices today. To the downside, Consumer Products is pressured by post-earning losses in L'Oreal (-6.2%), Hermes (-4.4%) and Adidas (-2%). Beauty name L'Oreal is pressured after a notable quarterly sales miss, Hermes was more-or-less in-line, yet still disappointed investors after recent resilience; Adidas is seemingly swept away with the sectoral losses, given it reported a beat on its headline metrics, and lifted guidance. US equity futures are modestly incrementally lower today, continuing similar price action seen in the prior session. Key pre-market movers today include; Netflix (-7.1%, Q3 profit miss, hit by a Brazilian tax dispute, but sales were in line), Texas Instruments (-8%, co. issued a soft forecast for the next quarter). Apple (AAPL) is reportedly drastically cutting iPhone Air production orders but boosting other 17 models, via Nikkei citing sources; reflecting lukewarm Air demand ex-China and unexpectedly robust 17 & 17 Pro demand. Click for the sessions European pre-market equity newsflow Click for the additional news Click for a detailed summary FX USD is mildly firmer/flat. Nothing really driving things at the moment, but traders are mindful of trade/shutdown developments, and as some begin to position themselves ahead of Friday’s inflation report. For context, some of the recent upside seen in the dollar has been attributed to; a) reversal of debasement trade, b) steep correction in gold, c) easing credit concerns. DXY is currently trading at the upper end of the day’s 98.84-99.05 range EUR is essentially flat and trades in an incredibly tight 1.1590-1.1615 range; nonetheless, the bias for today’s price action has been mildly downward. Lacklustre price action, which comes amidst a lack of pertinent newsflow. Some focus on reports that several EU leaders have called for the bloc to review, reduce and restrain legislation to reduce the burden on business, via Reuters. JPY is essentially flat/mildly lower vs USD, and currently trades in a 151.48-151.95 range, just shy of the 152.00 mark. On trade, Reuters reported that PM Takaichi is to tell US President Trump that the country will buy US soybeans, pickups and LNG, though may not commit to a new defence spending target. As a reminder, the POTUS will visit Japan from October 27-29. On economic policy, Takaichi is reportedly readying an economic stimulus which is set to top JPY 13.9tln; Reuters suggested measures are to counter inflation, investment in growth industries and national security. Elsewhere, Japan’s Finance Minister Katayama echoed her PM’s recent remarks, pushing back on the government’s involvement with the BoJ. Katayama said it is up to BoJ on specifics on monetary policy but should work together to have effective economic policies. GBP is the clear underperformer vs USD today, following the region’s soft inflation report. In detail, headline Y/Y was unchanged from the prior at 3.8% (exp. 4%), with the Services components also softer-than-expected. In an immediate reaction, GBP/USD fell from 1.3384 to 1.3343, before extending to a trough of 1.3314 where the pair currently resides. Further levels to the downside include the low from October 15th and then last week's worst at 1.3248. Following the release, market pricing has shifted dovishly, with markets now assigning a 74% chance of a cut by year-end vs 44% pre-release; the first full 25bps cut is priced in by Feb 2026. Antipodeans are the marginal G10 performers today, benefiting from a recent bounce back in metals prices as spot gold and base metals clamber off from the hefty pressure seen in the prior session. PBoC set USD/CNY mid-point at 7.0954 vs exp. 7.1225 (Prev. 7.0930) Click for a detailed summary Click for NY OpEx Details FIXED INCOME USTs are flat. In a very thin 113-21 to 113-25 band. Focus thus far has been on the mixed trade rhetoric out of the US yesterday with Trump previewing his potential meeting with China’s Xi saying he expects the negotiation to be good. However, he then added that maybe the meeting will not occur. Otherwise, the US docket is limited owing to the shutdown and Fed blackout; note, Barr is scheduled. On the shutdown, Trump overnight poured some cold water on the situation by saying he won’t be meeting with Dem. leaders until the gov’t reopens. Bunds are contained, but has experienced a slightly choppy morning. Picked up to a 130.38 peak with gains of c. 15 ticks on the discussed UK inflation report before paring and falling back to a 130.16 low, with downside of around five ticks at most. Ahead, ECB’s de Guindos and Lagarde due, though recent comments from officials have not changed the narrative into the end-October meeting. A weak German auction (b/c 1.2x) sparked some very marginal pressure in Bunds. OATs trade broadly in-line with EGB peers in a 123.19 to 123.44 band while the OAT-Bund 10yr yield spread remains steady around the 80bps mark. For OATs, Amova’s Williams spoke to Bloomberg and outlined that they added to their overweight position on French debt in September, and believes OATs are still at attractive levels despite recent sovereign downgrades. On the spread, he believes a move above 100bps would cause the ECB to step in. Gilts are the clear outperformer today following the region's inflation report. CPI for September remained at 3.8% Y/Y, cooler than the market and BoE forecast of 4.0%; pertinently, September represented the peak in the BoE’s inflation forecast horizon. Accompanying measures were also cooler-than-expected and while there were some slightly more mixed internals behind the headline figure and somewhat unusual moves in some subset components, the overall narrative is clearly a dovish one vs. consensus. As such, Gilts gapped higher by 54 ticks to 93.45 and then extended further to a 93.78 peak, notching a contract high. Action that pushed the UK 2yr yield down to 3.77% and below the 3.80% mark that desks have been attentive to recently, the 10yr also moderated to 4.4%, convincingly taking out 4.45%. Germany sells EUR 2.284bln vs exp. EUR 3.0bln 2.50% 2032 Bund: b/c 1.2x (prev. 1.5x), average yield 2.33% (prev. 2.52%), retention 23.87% (prev. 23.88%) Click for a detailed summary COMMODITIES Crude benchmarks extended on Tuesday’s high during the APAC session as Mint citing sources reported that a US-India trade deal is near, that could see India cut Russian oil imports for a lower export tariff to 15-16% from 50%. WTI and Brent peaked at USD 58.50/bbl and USD 62.62/bbl respectively following the trade news but are currently trading slightly off best levels at USD 58.20/bbl and USD 62.30/bbl. Spot XAU began the European morning firmer, bouncing back from Tuesday’s 5% selloff, which was its biggest selloff since November 2020. Although, XAU was then pressured once again to currently trade around USD 4,065/oz - trough for today's session was made overnight at USD 4,005.98/oz. Base metals have rebounded from Tuesday’s selloff following a trade deal near its completion between India and the US. 3M LME Copper dipped to a low of USD 10.54k/t before reversing a trending back through Tuesday’s range and is currently trading near session highs at USD 10.66k/t. US Private Inventory Data (bbls): Crude -3.0mln (exp. +1.2mln), Distillate -1.0mln (exp. -1.9mln), Gasoline -0.2mln (exp. -0.8mln). Russian overnight attack on Ukraine's Poltava region damaged oil and gas industry facilities. Click for a detailed summary NOTABLE DATA RECAP UK CPI YY (Sep) 3.8% vs. Exp. 4.0% (Prev. 3.8%); MM (Sep) 0.0% vs. Exp. 0.2% (Prev. 0.3%) UK Core CPI YY (Sep) 3.5% vs. Exp. 3.7% (Prev. 3.6%); MM (Sep) 0.0% vs. Exp. 0.2% (Prev. 0.3%) UK CPI Services YY (Sep) 4.7% vs. Exp. 4.90% (Prev. 4.70%); MM (Sep) -0.3% (Prev. 0.20%) NOTABLE EUROPEAN HEADLINES UK Chancellor Reeves targets tax partnerships in crackdown on UK’s wealthy with Reeves preparing a crackdown on lawyers, accountants, doctors and other professionals who use tax partnerships, according to FT. Politico reports that a decision on whether to postpone the French Social Affairs Committee's examination of the Social Security Budget will be taken this morning; in the context of a "rectifying letter" re. pensions likely being adopted on Thursday. SNB's Schlegel says inflation is expected to rise slightly in the coming quarters Planned US tariffs on some pharma products could increase downside risk for the economy. Uncertainty in the economy remains high. Will continue to observe the situation and adj. monetary policy where necessary. NOTABLE US HEADLINES US President Trump said he won't meet with Democratic leaders unless the government is reopened. US President Trump's administration plans to release over USD 3bln in aid to US farmers previously frozen due to government shutdown, according to WSJ. US has offered energy companies access to nuclear waste that they can convert into fuel for advanced reactors in an attempt to break Russia’s stranglehold over uranium supply chains, according to FT. China's Trade Remedy and Investigation Bureau published questionnaires to gather intelligence for an anti-dumping investigation on some US-made analog IC chips, via Bloomberg. GEOPOLITICS RUSSIA-UKRAINE Russia obtained security guarantees from Ukraine to restore power to the Zaporizhia nuclear power plant, according to RIA. US President Trump said he has not made a determination yet regarding a meeting with Russian President Putin and doesn't want to have a wasted meeting, while he still sees a chance for a Russia-Ukraine ceasefire. Russia's Special Economic Envoy said 'preparations continue' for a Trump-Putin meeting. Russia's Deputy Foreign Minister Ryabkov says preparations for a Russia-US summit is ongoing and there has been no agreement on a Lavrov-Rubio meeting; sees no major obstacles for a Trump-Putin meeting via RIA. Russia's Kremlin says their position is well known with nothing else to add in regard to reports of a non-paper passed to USA on Ukraine. Preparation is necessary for Putin-Trump summit. Ukraine's President Zelensky calls US President Trumps' idea a good compromise in regards to the concept of stopping at the current lines. OTHER NEWS North Korea fired a missile, which the South Korean military said was a ballistic missile, while Japanese PM Takaichi later confirmed there was no damage to Japan's exclusive economic zone and waters from the North Korean missile. US is reportedly trying to drive a wedge between Argentina and China with the Trump administration pushing officials in Argentina to limit China’s influence over the distressed South American nation, according to WSJ. China's Defence Ministry said it is strongly dissatisfied with Australia's statement about military aircraft around the Paracel Islands, while it added that organised troops are to resolutely block and drive away Australian military aircraft that 'invaded' China's airspace. "Israel's Channel 12: The security establishment warns that accelerating the implementation of the Trump plan may harm Israel's security interests", via Sky News Arabia CRYPTO Bitcoin is a touch firmer today and trades just shy of the USD 108k mark. APAC TRADE APAC stocks were mostly subdued following the mixed handover from the US, where participants digested a mixed bag of earnings releases, and precious metals slumped, with a historic drop seen in gold following the recent record-setting rally. ASX 200 retreated with heavy losses in the mining sector after gold prices fell by the most since 2013 and which was its largest one-day dollar value drop on record. Nikkei 225 briefly dipped beneath the 49,000 level with early pressure seen following mixed trade data, although the index gradually pared its early losses as participants also reflected on the new Takaichi-led government, with the PM instructing the cabinet to compile a package of steps to cushion the blow from the rising cost of living. Hang Seng and Shanghai Comp were subdued following a slew of recent trade-related rhetoric, including from US President Trump, who reiterated 155% tariffs on China from November 1st and that he will meet with Chinese President Xi in two weeks, but then also commented that maybe that meeting won't happen. NOTABLE ASIA-PAC HEADLINES Japanese PM Takaichi is preparing economic stimulus expected to exceed last year's JPY 13.9tln, with the package to be built around three main pillars which are measures to counter inflation, investment in growth industries and national security, according to sources cited by Reuters. Japanese PM Takaichi is to meet with US President Trump on October 28th and will discuss national defence. It was later reported that Japanese Chief Cabinet Secretary Kihara said US President Trump is to visit Japan from October 27th to 29th and is to meet Japan’s Emperor and PM Takaichi during the visit. Japanese Minister for Economic Security Kiuchi says it is important that the government and the BoJ continue to cooperate and carry out responsible macroeconomic policies, while he hopes the BoJ will closely coordinate with the government to achieve the 2% inflation target, and stated that the economy needs to be supported until strong real wage growth is achieved. Japan's Finance Minister Katayama announces that Prime Minister Takaichi will proceed with fiscal reform both in terms of spending and revenue. Says weak JPY boosts food costs, so there needs to be a quick measurement to cushion impact. "Takaichi Trade" has somewhat calmed down. DATA RECAP Japanese Trade Balance Total Yen (Sep) -234.6B vs. Exp. 22.2B (Prev. -242.8B) Japanese Exports YY (Sep) 4.2% vs. Exp. 4.6% (Prev. -0.1%) Japanese Imports YY (Sep) 3.3% vs. Exp. 0.6% (Prev. -5.2%) Loading...
