• APAC stocks traded cautiously with the region lacking firm direction following the weak lead from Wall Street (S&P -0.8%).
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -1.0% after the cash market closed with gains of 0.6% yesterday.
• DXY reclaimed 113, cable is back below 1.12, USD/JPY remains on a 150 handle, NZD lags.
• US government is reportedly mulling a security review regarding Elon Musk's deal to acquire Twitter (TWTR).
• Looking ahead, highlights include UK Retail Sales, Sovereign Debt Ratings for the UK, Germany and Italy, Speech from Fed's Williams.

US TRADE

• US stocks finished lower after a choppy session with the initial strength across major indices fading alongside a sharp move higher in yields which supported the Dollar off its lows to the unchanged mark, while the data releases were mixed stateside and attention was also on the UK where PM Truss announced her resignation.
• SPX -0.80% at 3,665, NDX -0.51% at 11,046, DJIA -0.30% at 30,333, RUT -1.24% at 1,704.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Cook (voter) said inflation is unacceptably high and rate hikes are required to get it under control, according to Bloomberg.
• Fed's Harker (2023 voter) said the Fed is to keep hiking "for a while" and can pause sometime next year to assess, while rates are likely to be well above 4% by year-end. Harker added that the Fed has made disappointing progress in lowering inflation and he expects Fed policy to stay restrictive for a while.
• US government is reportedly mulling a security review regarding Elon Musk's deal to acquire Twitter (TWTR) with Biden administration officials discussing whether the US should subject some of Musk's ventures to security reviews, according to Bloomberg. It was also reported in the Washington Post that Elon Musk told prospective investors that he planned to cut almost 75% of Twitter workers and that the current management had reportedly planned to cut payroll by about USD 800mln by the end of next year, although an internal memo from Twitter later stated that there were no plans for any company-wide layoffs.

APAC TRADE

EQUITIES

• APAC stocks traded cautiously with the region lacking firm direction following the weak lead from Wall Street where stocks reversed initial gains amid mixed data releases and continued upside in yields.
• ASX 200 was dragged lower by underperformance in industrials and the top-weighted financials sector, while the Australian Treasurer also flagged a 25bps hit to Q4 GDP from recent floods.
• Nikkei 225 was slightly softer after mostly inline inflation data which showed Core CPI at its fastest pace of increase since 2014 and as participants remained on alert for intervention after the JPY weakened beyond the 150.00 level for the first time since 1990.
• Hang Seng and Shanghai Comp. were indecisive heading towards the conclusion of the Communist Party Congress and pending release of delayed key data. Furthermore, Chinese press reports noted analysts see room for an LPR cut by year-end, although there was also the threat of further tech restrictions with the US eyeing expanding its China tech ban to quantum computing and A.I. products.
• US equity futures remained subdued (e-mini S&P -0.4%) with underperformance in Nasdaq futures as Snap shares slumped by more than 25% following its earnings and slowest-ever revenue growth which weighed on the likes of Meta, Alphabet & Pinterest.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -1.0% after the cash market closed with gains of 0.6% yesterday.

FX

• DXY traded marginally higher and reclaimed 113.00 status after having recovered from yesterday’s early losses, with the turnaround helped by the risk aversion, higher yields and as central bank officials continued to echo the calls for further policy tightening.
• EUR/USD was subdued after the prior day’s early momentum petered out.
• GBP/USD remained lacklustre on a 1.11 handle following PM Truss’s resignation.
• USD/JPY continued on its upward trend after climbing above the 150.00 level for the first time since 1990.
• Antipodeans were subdued amid the cautious risk tone and expectations for a 25bps impact on Australia's Q4 GDP from floods.
• PBoC set USD/CNY mid-point at 7.1186 vs exp. 7.1372 (prev. 7.1188)

FIXED INCOME

• 10yr UST futures extended on the prior day’s lows after the recent upside in yields that lifted the US 10yr yield above 4.25% for the first time since 2008 and with Fed officials continuing to sing from the hawkish hymn sheet.
• Bund futures dipped beneath 135.00 as prices remain pressured in the aftermath of the recent hot German PPI data.
• 10yr JGB futures were pressured as the 10yr yield sat above the upper end of the BoJ’s target range which prompted the BoJ to up the amount and include unscheduled purchases for today’s bond-buying operations, while selling pressure was later exacerbated as USD/JPY continued its ascent which further stoked intervention expectations.

COMMODITIES

• Crude eked mild gains but with price action uneventful amid headwinds from the subdued risk appetite and dollar rebound, while EU leaders also agreed to work on measures to contain energy prices.
• EU Council President Michel said the European Council reached an agreement on energy and agreed to work on measures to contain energy prices, according to Bloomberg.
• Hungary's PM Orban said an agreement was reached that even if the EU imposes a gas price cap, long-term supply agreements will be exempt, according to a Facebook post.
• Spot gold was slightly pressured by a firmer dollar and gains in yields.
• Copper traded marginally lower amid the overall cautious risk tone.
• US senators Warren and Booker are urging the CFTC to probe rising commodity prices.
• Commodities trader Trafigura warned the world is running low on copper and expects further shortages as demand rises in the energy transition, according to the FT.

CRYPTO

• Bitcoin traded rangebound and remained above the 19,000 level.

GEOPOLITICS

RUSSIA-UKRAINE

• US Secretary of State Blinken said they take the Russian threat to use nuclear weapons seriously but have not yet seen a reason to change our nuclear status, according to Al Jazeera.
• White House defence spokesperson Kirby said Russian military based in Crimea have been piloting Iranian drones for attacks on Ukraine and Russia has received dozens of Iranian drones so far and will likely get more, while Russia may seek surface-to-surface missiles from Iran due to weapons shortages. Kirby added the US is not focussed on Iran nuclear deal at the moment due to Iranian supplies of weapons to Russia and is exploring new sanctions to impose on Iran and potential air defence solutions for Ukraine.
• US State Department said it is no secret that a nuclear deal with Iran does not appear imminent and Iranian military personnel were on the ground in Crimea helping Russia with its drones.

CHINA-TAIWAN

• US Secretary of State Blinken said they place great emphasis on making sure the differences between China and Taiwan are resolved peacefully and not through coercion or force, according to Al Jazeera.

ASIA

NOTABLE APAC HEADLINES

• US is reportedly eyeing expanding its China tech ban to quantum computing and AI products, according to Bloomberg.
• Australian PM Albanese said he is concerned about a delay to the implementation of the UK-Australia trade agreement amid UK political instability, according to Reuters.
• Australian Treasurer Chalmers said the latest floods are to cut 25bps from GDP growth in the December quarter, while floods will add 10bps to inflation in December and March quarters, according to Reuters.

DATA RECAP

• Japanese National CPI YY (Sep) 3.0% vs Exp. 2.9% (Prev. 3.0%)
• Japanese National CPI Ex. Fresh Food YY (Sep) 3.0% vs Exp. 3.0% (Prev. 2.8%)
• Japanese National CPI Ex. Fresh Food & Energy YY (Sep) 1.8% vs Exp. 1.8% (Prev. 1.6%)
• New Zealand Trade Balance (Sep) -1615M (Prev. -2447.0M, Rev. -2625M)
• New Zealand Exports (Sep) 6.03B (Prev. 5.48B, Rev. 5.29B)
• New Zealand Imports (Sep) 7.64B (Prev. 7.93B, Rev. 7.92B)

EU/UK

NOTABLE EU/UK HEADLINES

• BoE said Q4 gilt sale operations will be distributed evenly across the short and medium maturity sectors only which will start November 1st and end on December 8th, while it is conducting 8 sale operations across each of the short and medium maturity sectors at a planned GBP 750mln per auction.
• UK 1922 Committee Chairman Brady said the UK Tory leadership contest is to conclude by October 28th and candidates will need at least 100 nominations from Conservative MPs.

DATA RECAP

• UK GfK Consumer Confidence* (Oct) -47 vs. Exp. -52.0 (Prev. -49.0)