• APAC stocks traded with a negative bias as several markets returned from the long weekend and reacted to the recent bearish themes.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.6% after the cash market closed with losses of 0.6% yesterday.
• DXY extended above 113, AUD lags G10 FX again, USD/JPY failed to make a YTD peak, EUR/USD retreated below 0.97.
• Fed Vice-Chair Brainard that easing prematurely is a risk but at some point, risks could become more two-sided.
• Looking ahead, highlights include UK Jobs, US IBD/TIPP, Speeches from ECB's Lane, Fed's Harker & Mester, BoE's Bailey & Cunliffe, SNB's Jordan, RBA's Ellis, Astana Summit, Auctions from the UK, Germany and the US.

US TRADE

• US stocks finished lower with price action choppy in thinned conditions on Columbus Day and with sentiment cautious amid geopolitical tensions and heading into earnings releases, although losses were contained with Fed speak somewhat of an olive branch for doves after Fed's Brainard and Evans provided two-way remarks.
• SPX -0.75% at 3,612, NDX -1.02% at 10,926, DJIA -0.32% at 29,202, RUT -0.59% at 1,689.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed Vice-Chair Brainard (voter) reiterated that monetary policy will be restrictive for some time and said it will take time for cumulative tightening to bring inflation down. Brainard also noted the Fed is very aware that unexpected interest rate or currency moves could interact with financial vulnerabilities, while she added that strong wage growth and high rental costs mean inflation from core services is expected to ease only slowly. Brainard later stated that easing prematurely is a risk but at some point, risks could become more two-sided, while she added that the Fed has indicated rates will increase and be restrictive, but the actual policy path will be data dependent.
• US railroad union rejected the tentative labour deal backed by US President Biden.

APAC TRADE

EQUITIES

• APAC stocks traded with a negative bias as several markets returned from the long weekend and reacted to the recent bearish themes with tech stocks hit due to the US’s chip tech curbs on China and with global sentiment not helped by the heightened geopolitical concerns after Russia’s missile assault on Ukrainian cities.
• ASX 200 was indecisive after mixed data and with the index subdued by underperformance in tech and energy.
• Nikkei 225 declined with the reopening of Japan’s borders overshadowed by tech sector woes which also saw heavy selling pressure on South Korean and Taiwanese chipmakers.
• Hang Seng and Shanghai Comp. were mixed with notable losses in tech and casino stocks in which the latter suffered after domestic trips in China during the National Day Golden Week holiday fell by 18% Y/Y, while sentiment was also dampened by increased lockdown concerns as China tightened COVID controls ahead of the Communist Party congress including the rollout of mandatory biweekly mass testing in Shanghai.
• US equity futures (e-mini S&P -0.5%) revisited yesterday's lows with looming earnings releases adding to the broad cautious mood.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.6% after the cash market closed with losses of 0.6% yesterday.

FX

• DXY extended on the gains above the 113.00 level with the dollar underpinned by the upside in yields and recent risk-aversion.
• EUR/USD retreated below the 0.9700 handle owing to the firmer greenback and geopolitical concerns.
• GBP/USD was subdued after the BoE’s recent measures failed to support the UK bond market and with recent price action also contained by resistance near the 1.1100 level.
• USD/JPY was stuck around 145.70 and near to the territory where the MoF intervened in September, with the Japanese currency not helped by the narrower than expected current account surplus,
• Antipodeans were lower amid the cautious mood and recent declines in commodities.
• PBoC set USD/CNY mid-point at 7.1075 vs exp. 7.1038 (prev. 7.0992)

FIXED INCOME

• 10yr UST futures declined as yields gained on reopening from the Columbus Day bond market closure with the 10yr yield around 4%, while the 30yr yield rose to levels last seen in around 9 years and the 2yr yield was at its highest since 2007.
• Bund futures remained subdued but were off the prior day’s lows after having found support at the 136.00 level and with the German government’s denying reports that it was backing joint EU debt for loans to ease the energy crisis.
• 10yr JGB futures were lower following the weakness in global counterparts but with downside stemmed amid the BoJ’s presence in the market for JPY 1.75tln of JGBs on top of its daily fixed rate operations.

COMMODITIES

• Crude was flat due to a lack of any major oil-specific catalysts and amid China lockdown concerns.
• UAE's Energy Minister will meet with Russian President Putin in Moscow, according to FT.
• Eastward gas flows via Yamal-Europe resumed, according to Gascade data.
• Ecuador's Energy Minister said they are beginning preparations to offer offshore gas blocks at the Gulf of Guayaquil in 2024 and are evaluating the availability of drilling rigs to secure equipment for output expansion, while he added that an oil-for-debt renegotiation with PetroChina will free millions of barrels of Ecuadorian crude per year for the spot market, according to Reuters.
• Petrobras (PBR) is to lower natgas prices to distributors by an average of 5% beginning November 5th, according to a statement.
• Spot gold slightly extended on the prior day's losses amid a firmer greenback and higher yields.
• Copper prices were lacklustre with price action contained amid the mostly risk-averse mood.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelensky said he spoke to US President Biden about air defences. It was also reported that President Biden expressed his condemnation of Russia's missile strikes across Ukraine in the call with President Zelensky and pledged to continue providing Ukraine with the support needed to defend itself including advanced air defence systems, according to Reuters.
• US President Biden said the US strongly condemns Russia's missile strikes on Monday across Ukraine and the US will continue to impose costs on Russia for its aggression, according to Reuters.
• US President Biden and G7 leaders will hold a virtual meeting today to discuss their commitment to support Ukraine, according to the White House.
• US Democrat Senator Menendez threatened to block US cooperation with Saudi amid its deepening ties with Russia, while he ripped into the decision to cut oil output and effectively accused Saudi of fuelling Russia's war machine, according to Business Insider.
• Russian Deputy Foreign Minister Ryabkov said direct conflict with the US and NATO is not in Moscow's interests but noted that Russia will take adequate countermeasures in response to the West's growing involvement in the Ukraine conflict, according to RIA.
• Russian Foreign Ministry spokeswoman said Russia is open to diplomacy and the more Washington encourages Ukraine's "bellicose mood", the harder it is to find diplomatic solutions, according to Reuters.

OTHER

• Iran began enriching uranium with the third of three cascades of advanced IR-6 centrifuges recently installed at the Natanz plant, while it plans to install an extra three cascades of advanced IR-2M centrifuges at the plant, according to the IAEA report cited by Reuters.
• Lebanon's top negotiator said they received the final version of the draft maritime border agreement with Israel from the US mediator, while the draft deal takes into consideration all of Lebanon's requirements and a historic deal could be imminent, according to Reuters. An Israeli official later said all of Israel's demands have been met on the maritime border deal with Lebanon and the National Security Council head said they are on the way to a historic deal.

CRYPTO

• Bitcoin traded marginally lower and made several attempts on the 19,000 level to the downside.

ASIA

NOTABLE APAC HEADLINES

• China Securities Daily suggested that China may cut RRR in Q4.
• People's Daily said China must stick to zero-COVID policy which is sustainable and key to stabilising the economy.
• Japanese PM Kishida said the BoJ needed to maintain policy until wages increase, while he urged companies that increase prices to raise pay also and said the government will prepare measures to help companies raise salaries, according to FT.
• Japanese Finance Minister Suzuki said they are closely watching FX moves with a strong sense of urgency and will respond to excess FX moves, according to Reuters.
• Japan's MOF top currency official Kanda said they are always ready to take necessary steps against FX volatility and said he can make a decision on FX intervention anywhere even from an aeroplane, according to TBS.
• RBNZ Governor Orr said in the Annual Report that there is more work to do and increasing the OCR is the most effective way we can reduce inflation and support maximum sustainable employment over the coming years, consistent with our monetary policy remit.

DATA RECAP

• Australian Westpac Consumer Sentiment Index (Oct) 83.7 (Prev. 84.4)
• Australian Westpac Consumer Sentiment MM (Oct) -0.9% (Prev. 3.9%)
• Australian NAB Business Confidence* (Sep) 5 (Prev. 10)
• Australian NAB Business Conditions* (Sep) 25 (Prev. 20, Rev. 22)
• Japanese Current Account (JPY)(Aug) 58.9B vs. Exp. 121.8B (Prev. 229.0B)
• Japanese Trade Balance BOP Basis (JPY)(Aug) -2124.7B (Prev. -1808.7B)

EU/UK

NOTABLE EU/UK HEADLINES

• Barclaycard UK consumer spending rose 1.8% Y/Y in September which was the slowest pace since February 2021.
• Germany's government rejected the report about Chancellor Scholz backing joint EU debt for loans to ease the energy crisis and said "such plans are not known in the government", according to a source cited by Reuters.
• UK Chancellor Kwarteng will need to plug a GBP 60bln hole in the public finances with either spending reductions or a tax raid, according to the IFS via the Telegraph.

DATA RECAP

• UK BRC Retail Sales YY (Sep) 1.8% (Prev. 0.5%)
• UK BRC Total Sales YY (Sep) 2.2% (Prev. 1.0%)