• APAC stocks took impetus from the aggressive rebound on Wall St (SPX +2.6%) where stocks made a remarkable comeback from the initial CPI-related selling.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 future +1.8% after the cash market closed with gains of 0.9% yesterday.
• DXY remains on the backfoot, Cable sits on a 1.13 handle, EUR/USD lingers around 0.98 and antipodeans outperform.
• UK PM Truss could face a leadership challenge if Chancellor Kwarteng's economic statement on October 31st fails to end the turbulence in financial markets.
• Looking ahead, highlights include US Retail Sales, US University of Michigan Prelim Survey, Speeches from BoE's Bailey, Fed's George, Cook & Waller.

US TRADE

• US stocks finished with firm gains after staging a remarkable comeback from the early selling that was triggered by the hotter-than-expected US CPI data, while there were several theories cited for the bounce back in stocks including reports that an ECB staff model sees a target-consistent terminal rate of 2.25% which is beneath the 3.0% level that markets are currently pricing in. Furthermore, there was speculation of a potential fiscal U-turn in the UK, while some desks attributed the stock rebound to a short squeeze and some also suggested that the sell-off was overdone.
• SPX +2.60% at 3,670, NDX +2.30% at 11,034, DJIA +2.83% at 30,039, RUT +2.41% at 1,728.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US President Biden's administration renewed the COVID-19 emergency status, according to WSJ.
• US President Biden met with his economic team on the global economy and markets, while he directed staff to remain in contact with key market actors, according to The White House.
• US Treasury Secretary Yellen said CPI data shows more work is needed to address elevated inflation and said the Fed has the primary inflation responsibility but added the Biden administration is committed to doing what it can to bring down prices, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks took impetus from the aggressive rebound on Wall St where stocks made a remarkable comeback from the initial CPI-related selling with several factors attributed to the turnaround including a dovish ECB staff model view, speculation of a major U-turn in the UK’s fiscal plans and a touted short squeeze.
• ASX 200 was lifted in which energy led the broad strength across sectors and after Australian Treasurer Chalmers recently ruled out scrapping tax cuts in the budget.
• Nikkei 225 outperformed and breached the 27,000 level amid some earnings encouragement with index heavyweight Fast Retailing boosted after it posted a record annual profit.
• Hang Seng and Shanghai Comp. benefitted from the heightened risk appetite as the PBoC reiterated support pledges, while participants digested relatively inline inflation numbers and now await the latest Chinese trade data.
• US equity futures marginally extended on the prior day's rebound with the E-mini S&P (+0.6%) back above 3,700.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 future +1.8% after the cash market closed with gains of 0.9% yesterday.

FX

• DXY was softer overnight as it extended on the post-CPI reversal amid the elevated risk appetite.
• EUR/USD briefly reclaimed the 0.9800 handle amid the weaker dollar, while ECB-related headlines were mixed as ECB’s Simkus and Kazaks provided a hawkish tone with both looking for a 75bps hike at the next meeting and with Kazaks also eyeing "another big hike" in December. However, sources also noted that an ECB staff model put the target-consistent terminal rate at 2.25% which is lower than the 3% markets are pricing in.
• GBP/USD held on to the spoils from yesterday’s outperformance and sits on a 1.13 handle amid speculation regarding another major fiscal U-turn from the UK government which could include an increase in corporation tax.
• USD/JPY marginally extended above 147.00 with price action calm after the recent volatility and with Japanese officials so far unwilling to divulge whether they intervened or not in the aftermath of the US inflation data.
• USD/SGD was pressured after the Monetary Authority of Singapore continued with its FX-based monetary policy tightening and Singapore GDP data for Q3 topped forecasts.
• Antipodeans were lifted by the upbeat risk tone and softer greenback.
• PBoC set USD/CNY mid-point at 7.1088 vs exp. 7.1071 (prev. 7.1101)
• Japanese MOF official said there will be cases where they will or will not disclose whether they intervened, when asked if the JPY's jump on Thursday was due to intervention, according to Reuters.

FIXED INCOME

• 10yr UST futures traded rangebound around the 111.00 level after price action quietened down from yesterday’s post-CPI whipsawing where the hotter-than-expected inflation data triggered a sell-off in bonds before bouncing off lows.
• Bund futures were boosted on the back of the dovish ECB staff model which pointed to a lower terminal rate of 2.25% vs market pricing of 3.00%, although policymakers were mixed on this and feared it could include errors.
• 10yr JGB futures remained afloat after the rebound in global peers and with BoJ Governor Kuroda sticking to the dovish script, while results of the 5yr JGB auction mostly improved from the prior month.

COMMODITIES

• Crude traded sideways but held on to most of the gains from yesterday's dramatic risk reversal.
• US President Biden will have more to say about lowering gas prices next week, according to Reuters.
• US administration senior official said the US-Saudi meeting scheduled for October 17th has been cancelled which was to “send a message” to Saudi Arabia after the OPEC cuts, according to a Fox reporter.
• White House Spokesman Kirby said the US is still working with the EU on a Russian oil price cap including the implementation, while he added that the US is going to look at future OPEC+ meetings as a gauge of Saudi's stance on Russian aggression.
• German natgas storage facilities hit the 95% November target three weeks early, according to Reuters.
• Spot gold was uneventful and only marginally benefitted from the softer dollar.
• Copper was underpinned by the risk tone but with upside capped by resistance around USD 3.50/lb.
• Chile's Codelco offered European clients physical copper at around USD 235/tonne for next year which is an 84% increase Y/Y, according to sources.
• Alcoa (AA) said it is lobbying the White House to block US imports of Russian aluminium and it asked the London Metal Exchange to delist Russian aluminium which it said disproportionately affects the aluminium contract, according to Reuters.

GEOPOLITICS

OTHER

• North Korea launched a short-range ballistic missile which was fired from near Pyongyang, while North Korea said it took strong military countermeasures after South Korean artillery fire, according to KCNA.
• South Korea scrambled F-35s in response to a North Korean aircraft, while it was reported that nearly a dozen North Korean military aircraft were identified near the inter-Korean air boundary, according to Yonhap.
• South Korean military issued a warning to North Korea and called for a stop to provocations, while it said it will maintain overwhelming capability to counter any North Korean provocations, according to Yonhap
• Japan's Chief Cabinet Secretary Matsuno said North Korea's repeated ballistic missile launches are unacceptable and he believes North Korea will take further provocative action including a possible nuclear test. Matsuno added it is getting more difficult to detect North Korea's missiles early and react, while they are considering all options including counterattack capabilities, according to Reuters.

CRYPTO

• Bitcoin traded with firm gains amid the heightened risk appetite and eyed the 19,900 level.

ASIA

NOTABLE APAC HEADLINES

• PBoC Governor Yi reiterated to step up the implementation of prudent monetary policy and will provide stronger support for the real economy, while he added they will put emphasis on supporting infrastructure construction and will support financial institutions to issue equipment upgrade loans to key sectors including the manufacturing sector. Furthermore, they will quicken the pace of utilisation of loans to deliver home projects and promote the stable development of the real estate market, according to Reuters.
• China may issue specials bonds early to support growth, according to China Securities Journal.
• BoJ Governor Kuroda said the pace of Japan's economic recovery is still slow so they must continue supporting the economy, while he added that raising rates now is inappropriate in light of Japan's economic and price conditions, according to Reuters.
• IMF official Panth said Japan's JPY buying was likely a signalling action and the impact of such intervention does not last long, while Panth added that it is not the time for the BoJ to tweak YCC, according to Reuters.
• Monetary Authority of Singapore announced to tighten its FX-based policy in which it re-centred the mid-point of the SGD NEER policy band up to its prevailing level, but kept the width and slope of the band unchanged. MAS said inflation should moderate in the quarters ahead but will remain high for some time, while its policy stance will help dampen inflation in the near term and ensure medium-term price stability.

DATA RECAP

• Chinese CPI MM (Sep) 0.3% vs. Exp. 0.4% (Prev. -0.1%)
• Chinese CPI YY (Sep) 2.8% vs. Exp. 2.8% (Prev. 2.5%)
• Chinese PPI YY (Sep) 0.9% vs. Exp. 1.0% (Prev. 2.3%)
• Singapore GDP QQ (Q3 A) 1.5% vs. Exp. 0.7% (Prev. -0.2%)
• Singapore GDP YY (Q3 A) 4.4% vs. Exp. 3.5% (Prev. 4.4%)

EU/UK

NOTABLE EU/UK HEADLINES

• BoE fix to ease pension schemes' cash crunch by getting banks to assume the role of rescue lender is being shunned by some of the biggest banks as the returns on offer do not reward the risks involved, according to sources.
• UK Tory whips warned that UK PM Truss could face a leadership challenge if Chancellor Kwarteng's economic statement on October 31st fails to end the turbulence in financial markets, according to the Daily Mail front page.
• UK senior Tories are reportedly holding talks about replacing PM Truss with a joint ticket of Rishi Sunak and Penny Mordaunt, according to The Times.
• UK Chancellor Kwarteng responded "let's see" when asked if markets have improved because they are expecting a U-turn on corporation tax, according to The Telegraph.
• ECB's Kazaks said rates should be raised by 75bps in October and another big hike in December, while the ECB should then slow down but complement via other measures like balance sheet tightening.
• ECB discussed the timeline for the balance sheet reduction at the Cyprus meeting earlier this month and it may tweak language on reinvestments at the October meeting and then may outline plans for a balance sheet reduction in December or February meetings, according to sources cited by Reuters.
• USTR and EU VP agreed to increase the pace of global steel arrangement talks, according to a USTR statement.