• APAC stocks were lower as the region followed suit to the weak performance seen in global counterparts (S&P 500 -1.02%)
• European equity futures are indicative of a softer open with the Euro Stoxx 50 future -0.4% after the cash market closed with losses of 0.4% yesterday.
• FX markets were contained overnight, DXY held onto 112 status, EUR/USD lingers around 0.98, Cable sits on a 1.11 handle.
• Fed officials continued to push back against the notion that any policy pivot is forthcoming.
• Looking ahead, highlights include German retail sales, US & Canadian jobs reports, BoE's Ramsden, Fed's Williams, Kashkari, Bostic

US TRADE

• US stocks and bonds were sold on Thursday ahead of NFP on Friday with the hawkish rhetoric from the Fed, higher yields and a firmer dollar weighing on the equity complex.
• SPX -1.02% at 3,744, NDX -0.76% at 11,485, DJIA -1.15% at 29,926, RUT -0.58% at 1,752.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Cook (voter) said restoring price stability will likely require ongoing rate hikes and then restrictive policy for some time, while she added that they need to keep restrictive policy until confident inflation is firmly on the path to 2%.
• Fed's Mester (2022, 2024 voter) said the focus right now is on the inflation part of the Fed's mandate and they have to be singularly focused on inflation. Mester also suggested that getting inflation down is the first priority and that they will keep at it until they do so, while she added that they will not be cutting rates at all next year.
• Fed's Waller (voter) said he supports continued rate hikes until they see meaningful and persistent progress on US inflation, while he added that monetary policy can and must be used aggressively to bring down inflation. Waller also anticipates additional rate hikes into early next year and said they will have a very thoughtful discussion about the pace of tightening at the next meeting. Furthermore, he said they are not considering slowing rate increases or halting them due to financial stability concerns.
• Fed's Evans (2023 voter, departing) said inflation is very high at the moment and that is the top issue for the Fed, while he noted there is a good amount of strength in the US economy. Evans suspects unemployment rates will creep up and said they will bring inflation down by making policy restrictive. Furthermore, he said the discussion will be on whether to hike by 50bps or 75bps at the next Fed meeting and believes the balance sheet reduction will be completed within three years, as well as noted that policymakers are looking for 125bps of rate hikes over the next two meetings.
• US President Biden will take executive action to end the US approach to marijuana and President Biden is to pardon all prior federal offences of simple marijuana possession.
• Elon Musk said he is willing to close the Twitter (TWTR) deal at USD 54.20 on October 28th and requested a stay of Twitter litigation, while the Delaware judge halted Twitter litigation against Elon Musk until 17:00ET on October 28th to permit a deal to close, according to a court filing cited by Reuters.

APAC TRADE

EQUITIES

• APAC stocks were lower as the region followed suit to the weak performance seen in global counterparts with risk appetite sapped amid the slew of hawkish Fed rhetoric and with participants awaiting the key US jobs data.
• ASX 200 was subdued by underperformance in the real estate sector and after the RBA Financial Stability Review noted financial stability risks have increased globally and that some households are already feeling the strain from higher rates which is likely to persist for some time.
• Nikkei 225 was pressured and briefly dipped below the 27,000 level after disappointing data in which Household Spending showed a surprise M/M contraction and with wage growth softer than previous.
• Hang Seng declined amid weakness in property and tech stocks with sentiment also not helped by reports that the US is to announce new measures that will effectively halt some exports of US equipment to Chinese firms making advanced NAND and DRAM memory chips.
• US equity futures lacked direction (e-mini S&P -0.2%) with participants bracing for the looming NFP report.
• European equity futures are indicative of a softer open with the Euro Stoxx 50 future -0.4% after the cash market closed with losses of 0.4% yesterday.

FX

• DXY was marginally softer overnight as markets awaited the key US jobs data but held on to most of the prior day’s gains and 112.00 status after the slew of hawkish rhetoric from Fed officials.
• EUR/USD moved off its lows and briefly reclaimed the 0.9800 handle but with the rebound in the single currency muted by energy woes and recessionary fears in Europe, as well as recent soft EU data releases.
• GBP/USD remained lacklustre in the aftermath of yesterday’s underperformance and renewed stress in UK debt.
• USD/JPY was indecisive and traded on both sides of the 145.00 level after soft data releases and with FX Reserves falling to their lowest since December 2015 following recent FX intervention.
• Antipodeans were uneventful amid the risk aversion and lack of pertinent data releases.
• BoC's Macklem said they need further information before considering moving to a more finely balanced decision-by-decision approach, while he added more rate hikes will be needed and more is to be done on inflation. Macklem also said that normally when they raise rates, CAD appreciates and so that does part of the work for them, although that is not happening this time.

FIXED INCOME

• 10yr UST futures were lacklustre beneath the 112.00 level as Fed officials remained resolute in their stance of tackling inflation and continued to push back against the prospects of a policy pivot.
• Bund futures were stuck near yesterday’s low after a retreat to beneath the 139.00 level.
• 10yr JGB futures suffered amid spillover selling and with the BoJ only in the market under fixed-rate operations which haven’t attracted any takers lately.

COMMODITIES

• Crude was uneventful and held on to post-OPEC gains amid thin oil-specific newsflow and with the rhetoric mostly a continuation of recent themes.
• Iraq Oil Minister said the OPEC+ decision to cut oil production was a result of a production surplus and that an average price of USD 93/bbl is still reasonable compared to gas prices, according to Reuters.
• UAE's ADNOC set November Murban crude OSP at USD 92.45/bbl.
• US Secretary of State Blinken said the US will not do anything that infringes upon its interests and is reviewing a number of response options when asked about ties with Saudi Arabia and OPEC+ cuts, according to Reuters.
• US Republican Senator Grassley will seek to add the NOPEC bill to the defence policy bill, according to Reuters.
• Spot gold traded rangebound as markets braced for the pivotal US jobs report.
• Copper remained pressured owing to the risk-averse mood and hawkish Fed speak.
• LME confirmed a discussion paper on Russian metal and it is aware that an increasing number of consumers may be unwilling to accept Russian metal from 2023.

GEOPOLITICS

RUSSIA-UKRAINE

• US President Biden said the nuclear 'Armageddon' threat is back for the first time since the Cuban Missile Crisis, according to AFP News Agency.
• Russia's Kremlin said Ukrainian President Zelensky’s comments in an address to Australia's Lowy Institute on preventive strikes against Russia are a call to begin a world war, according to Reuters.
• Ukrainian President Zelensky’s adviser said Zelensky said nothing about a preventive nuclear strike on the Russian Federation, while the adviser said Zelensky reminded about Russian nuclear blackmail and suggested pre-emptively outlining the consequences for Russia and intensifying strikes against it.
• IAEA Chief said the agency's position is that the Zaporizhzhia nuclear power plant is a Ukrainian facility.
• Japanese government spokesperson Kihara said Japan is to impose additional sanctions against Russia and will freeze assets of more Russians after the annexation of parts of Ukraine, according to Reuters.

OTHER

• US and South Korea are to conduct joint maritime drills involving the US aircraft carrier off the east coast on October 7th-8th, while the South Korean military said it will continue to strengthen its abilities to respond against North Korean provocation through joint drills, according to Yonhap.
• US issued new Iran-related sanctions, according to the Treasury website.
• US forces conducted an airstrike in northern Syria on Thursday which killed Islamic State leader Abu-Hashum Al-Umawi and another IS official, according to Reuters.

CRYPTO

• Bitcoin traded within a tight range and oscillated back and forth of the 20,000 level.

ASIA

NOTABLE APAC HEADLINES

• US is to announce new measures that will effectively halt some exports of US equipment to Chinese firms making advanced NAND and DRAM memory chips, while the US rules are expected to spare Chinese-based operations of South Korean memory chip makers Samsung and SK Hynix from the brunt of curbs, according to Reuters sources.
• BoK said it will maintain its stance of raising interest rates going forward to combat inflation which is expected to remain in the 5-6% range for a considerable period of time, according to Yonhap.
• RBA Financial Stability Review stated that financial stability risks have increased globally and markets are stressed by synchronised policy tightening, geopolitical tension, higher USD and rising energy prices. RBA also stated that stability risks would be magnified by further substantial tightening in global markets and some households are already feeling the strain from higher rates which is likely to persist for some time.

DATA RECAP

• Japanese All Household Spending MM (Aug) -1.7% vs. Exp. 0.2% (Prev. -1.4%)
• Japanese All Household Spending YY (Aug) 5.1% vs. Exp. 6.7% (Prev. 3.4%)
• Japanese Average Cash Earnings YY (Aug) 1.7% (Prev. 1.8%)
• Japanese Foreign Reserves (Sep) 1238B (Prev. 1292B)
• Chinese FX Reserves (USD)(Sep) 3029B vs. Exp. 3000B (Prev. 3055B)

EU/UK

NOTABLE EU/UK HEADLINES

• UK PM Truss is watering down former UK PM Johnson's plans to cut 91k civil service jobs, according to FT.
• UK PM Truss and French President Macron agreed to hold the next UK-France summit in 2023 in France to take forward a renewed bilateral agenda, according to a joint statement.
• S&P affirmed Credit Suisse (CSGN SW) at 'A/A-1' amid weaker economic forecasts and pending strategic review, while the outlook remains negative. It was also reported that Moody's forecasts further losses for Credit Suisse in H2 '22 and a USD 3bln loss in 2022.