• APAC stocks notched firm gains as the region took impetus from the strong performance on Wall St (SPX +2.59%, NDX +2.36%).
• European equity futures are indicative of a higher open with the Euro Stoxx 50 future +1.5% after the cash market closed with gains of 0.7% yesterday.
• The RBA slowed down the pace of rate hikes with a surprise 25bps increase instead of the expected 50bps move.
• DXY remains sub-112, AUD lags post-RBA, cable sits on a 1.13 handle and USD/JPY remains below 145.
• North Korea fired a missile which flew over Japan and landed in the Pacific Ocean outside of Japan’s exclusive economic zone.
• Looking ahead, highlights include US Factory Orders Speeches from Fed's Williams, Logan, Daly, Mester & Jefferson, ECB's Lagarde, UK Chancellor Kwarteng, Supply from UK & Germany

US TRADE

• US stocks gained and bonds were bid after the September decimation for both assets and perhaps on oversold conditions, while the dollar and yields declined following weaker than expected US ISM data which pared some of the aggressive Fed hike bets and added to the speculative murmurings of investors bracing for a Fed pivot.
• SPX +2.59% at 3,678, NDX +2.36% at 11,229, DJIA +2.66% at 29,490, RUT +2.65% at 1,709.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Williams (voter) said inflation remains too high and the Fed's job is not done, while he added that the Fed is cooling inflation but underlying pressures are still strong. Williams also stated that persistently high inflation undermines the economy's potential and that broad underlying inflation will take time to decline, according to Reuters.
• Fed's Barkin (2024 voter) said the post-pandemic era may spell more inflationary headwinds which suggest tighter monetary policy but added it is premature to say the US faces an era of more inflation and they do not need to make these judgements now, while he also stated the Fed must consider global developments, but the focus is the US, according to Reuters.
• IMF MD Georgieva said a global recession can be avoided if fiscal policies are consistent with monetary policy tightening and that the responsibility is on the Fed to be mindful that the spillover impact on the rest of the world is "very high., according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks notched firm gains as the region took impetus from the strong performance on Wall St where stocks rallied amid a decline in the dollar and yields, while equities were unfazed by North Korea's latest launch.
• ASX 200 gained at the open as the commodity-related sectors led the broad gains across the index after recent strength in oil and precious metals, while stocks were further boosted after the RBA opted for a smaller than expected rate increase of 25bps.
• Nikkei 225 advanced closer to the 27k level after the latest Tokyo CPI data printed in line with expectations.
• KOSPI strengthened despite North Korea's missile launch which flew over Japan for the first time since 2017 and prompted Japan to issue a warning for residents to take shelter, before landing outside of Japan’s EEZ.
• US equity futures (e-mini S&P +0.9%) tended on gains overnight after the recent paring of hawkish Fed bets.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 future +1.5% after the cash market closed with gains of 0.7% yesterday.

FX

• DXY attempted to nurse some of yesterday's losses but remained below the 112.00 level in the aftermath of the weaker than expected ISM Manufacturing report and amid the positive risk appetite.
• EUR/USD was kept afloat at the 0.9800 handle but with further upside capped amid a lack of pertinent drivers.
• GBP/USD marginally eased from its best levels in over a week but remains on a 1.13 handle following recent outperformance in activity currencies and after the UK government's policy U-turn on the plan to abolish the 45p top tax rate.
• USD/JPY eked marginal gain but with price action rangebound following in-line Tokyo CPI data.
• Antipodeans took a breather from the prior day’s gains as participants awaited the RBA rate decision with AUD later pressured after the RBA slowed down the pace of rate hikes with a surprise 25bps increase instead of the expected 50bps move.

FIXED INCOME

• 10yr UST futures remained afloat after yesterday's bull steepening in which the fixed income rally began with Gilts after the UK government's tax cut reversal and with buying also spurred by weaker than expected ISM data which unwound some of the hawkish Fed bets.
• Bund futures were off their highs but held on to most of the spoils from the recent bond rally.
• 10yr JGB futures were inspired by their major counterparts and after firmer demand at the 10yr auction.

COMMODITIES

• Crude futures were steady but held on to the prior day's gains which were helped by the heightened risk appetite and reports of potential OPEC+ production cuts.
• Spot gold marginally eased overnight after recent advances with prices back below USD 1700/oz.
• Copper trade rangebound amid the continued absence of Chinese buyers and as the dollar nursed losses.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian President Putin is reportedly set to demonstrate his willingness to use weapons of mass destruction with a nuclear test on Ukraine’s borders, according to The Times citing defence sources.
• Ukrainian President Zelensky said the Ukrainian army's advances continue and new population centres were liberated in several regions, according to Reuters.
• US defence official said the US has not yet seen a large-scale reinforcement by Russian forces into Ukraine, according to Reuters.
• US will reportedly announce it will send four more Himars Launchers (LMT) in a new USD 625mln arms package for Ukraine, according to an official cited by Reuters.
• IMF Executive Board is to consider Ukraine's request for USD 1.3bln in emergency funding under a new food shock window on October 7th, while IMF staff will meet with Ukrainian authorities in Vienna for technical discussions on economic plans, according to a source cited by Reuters.

OTHER

• North Korea fired a missile which flew over Japan and landed in the Pacific Ocean outside of Japan’s exclusive economic zone, while the missile was the first North Korean missile launch to fly over Japan since 2017 and prompted Japan to issue a warning for residents to take shelter. Furthermore, North Korea's missile reportedly flew 4,500km to an altitude of 970km and at speed of Mach 17, according to Yonhap.
• South Korean President Yoon warned of a resolute response after North Korea's missile launch, while South Korea's National Security Council condemned North Korea's missile test which it said was a serious provocation and that North Korea's constant provocations cannot be tolerated and will bring consequences, according to Reuters.
• Japanese Defence Minister Hamada says North Korea's missile was likely at least an intermediate-range ballistic missile, while they decided not to deploy missile destruction action after determining there was no danger to Japan and they are continuing with the defence build-up without ruling out options including counter-attack capabilities. Furthermore, Japanese Chief Cabinet Secretary Matsuno said it is possible that North Korea takes further provocative acts including conducting a nuclear test, according to Reuters.
• US warned about Russia and China attempting to sway American voters ahead of the upcoming mid-term elections, according to Associated Press.
• US President Biden said he remains gravely concerned about reports of the intensifying violent crackdown on peaceful protestors in Iran and the US will be imposing further costs this week on perpetrators of violence against peaceful protestors, according to Reuters.

CRYPTO

• Bitcoin traded marginally lower and tested the 19,500 level to the downside.

ASIA

NOTABLE APAC HEADLINES

• China is demanding that foreign diplomats provide floor plans of Hong Kong missions, according to FT.
• Taiwan is to open its border and lift quarantine rules in 10 days, according to the Ministry of Foreign Affairs.
• RBA hiked the Cash Rate Target by 25bps to 2.60% (exp. 50bps hike). RBA stated that the Board is committed to returning inflation to the 2–3% range over time and expects to increase interest rates further over the period ahead. RBA added that today’s increase in interest rates will help achieve this goal and that the Cash Rate had been increased substantially in a short period of time, while 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.

DATA RECAP

• Tokyo CPI YY (Sep) 2.8% vs Exp. 2.8% (Prev. 2.9%)
• Tokyo CPI Ex. Fresh Food YY (Sep) 2.8% vs Exp. 2.8% (Prev. 2.6%)
• Tokyo CPI Ex. Fresh Food & Energy YY (Sep) 1.7% vs Exp. 1.6% (Prev. 1.4%)
• Australian Building Approvals MM (Aug) 28.1% vs. Exp. 5.0% (Prev. -17.2%, Rev. -18.2%)
• Australian Home Loans MM (Aug) -3.4% vs Exp. -3.0% (Prev. -8.5%)

EU/UK

NOTABLE HEADLINES

• BoE's Mann said UK inflation expectations are not de-anchored but she is concerned about the medium-term upward drift, while Mann added that she voted for a 75bps rate hike in September due to inflation expectations, sterling depreciation, the impact of the energy cap and other factors, according to Reuters.
• BoE reiterated it will purchase long-dated UK government bonds until October 14th and it stands ready to purchase up to GBP 5bln on gilts at each auction, according to Reuters.
• UK PM Truss said abolishing the 45p top rate of tax was a tiny part of the plan and had become an unnecessary distraction, according to The Telegraph.
• UK Chancellor Kwarteng is to bring forward the publication of the UK's medium-term fiscal plan to later this month from November 23rd, which will set out a five-year plan to put debt on a downward path, including a tight squeeze on public spending, according to FT.
• London Heathrow Airport told airlines it will lift a cap on passenger numbers at its terminals later this month, according to WSJ sources.