• APAC stocks traded mixed, Hong Kong underperformed and its tech stocks slumped
• Chinese President Xi secured a third term as CCP leader as expected; the delayed Chinese economic data was released
• In FX, DXY reclaimed a 112.00 handle, Japan is touted to have intervened in FX markets on Monday, GBP outperformed
• UK former PM Boris Johnson has pulled out of the Conservative Party leadership contest
• North Korea and South Korea exchanged warning shots overnight, according to Yonhap and KCNA
• Looking ahead, highlights include EZ, UK, US Flash PMIs, UK Conservative Party Leadership Election

US TRADE

• US stocks caught a hefty bid and inflation breakevens bounced Friday thanks to dovish Fed developments after Fed whisperer Timiraos at the WSJ suggested the November meeting will be used to discuss a slowdown of Fed tightening.
• SPX +2.36% at 3,752, NDX +2.39% at 11,310, DJIA +2.47% at 31,082, RUT +2.26% at 1,741
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Bullard (2022 voter) said he wants rates that put meaningful pressure on inflation, and what that level is a key debate for November and December meetings. He said at that point the Fed can make minor adjustments, he would not call lower equity prices financial stress, via Reuters.
• Fed's Daly (2024 voter) said interventions to stabilise dislocated market is very different from QE. She added that if we had a dislocation in markets we could solve it even as we raise rates and roll off balance sheet, via Reuters. Daly said rental price inflation is starting to slow, the Fed does not want to be too reactive and can easily find yourself over-tightening; want to avoid an "unforced downturn" by over-tightening. Daly said don't want to just keep going up at 75bps increments, will do a step-down, not to pause, but to 50 or 25bps increments, and added the Fed may have another 75bps rate hike, but it's not 75bps forever.
• Fed's Evans (departing) said we will need to raise rates further and hold stance there for a while, exact stance of policy will depend on the outlook and risks, via Reuters.
• White House Economy Advisor Deese said the US is strong enough to avoid recession.
• Elon Musk’s Twitter (TWTR) takeover debt to be held by banks due to turbulent markets; banks may sell some of the USD 13bln of Twitter debt around year-end, according to WSJ sources. Elon Musk-Twitter (TWTR) deal ‘still on track’ despite national security report, according to NY post citing sources.
• Tesla (TSLA) cut Model 3 and Model Y prices in China; Model 3 cut from CNY 279.9k to CNY 265.9k, Model Y cut from CNY 316.9k to CNY 288.9k, via Reuters.
• US President Biden does not support a permanent repeal of the debt limit, via Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded mixed after the initial optimism from Wall Street on Friday began to fade.
• ASX 200 was boosted by its commodities sector as the rise in underlying metals supported mining names in the region.
• Nikkei 225 was also firmer but lagged behind peers (ex-China) following the touted FX intervention on Friday and again on Monday.
• KOSPI was led by gains in its IT names, but the region felt some jitters following an exchange of fire between North and South Korea after a North Korean boat crossed the South Korean maritime border.
• Shanghai Comp. initially traded flat after Chinese President Xi secured an unprecedented third term as the party leader, as expected. Chinese President Xi also suggested China's economy has high resilience and sufficient potential. The index also saw some brief upside after China released a myriad of delayed economic data, with Q3 GDP Y/Y topping forecasts and Trade Balance printing a larger surplus than expected, whilst exports also increased more than forecast, although these gains pared back.
• Hang Seng buckled as Xi’s leadership overhaul could prove to result in prolonged oversight and less autonomy for Hong Kong, with the Hang Seng Tech Index slumping over 5% and Alibaba, Tencent, JD.com, Baidu and Meituan shedding as much as 7-10%.
• US equity futures opened higher and extended on Friday’s gains as electronic trade resumed, with the ES and NQ briefly topping 3,800 and 11,500 respectively before giving up gains heading into the European session.
• European equity futures kicked off trade on a firmer footing amid tailwinds from the US, although the FTSE 100 future lagged as the Sterling outperformed vs the USD. Euro Stoxx 50 holds onto gains of 0.7% after cash markets closed -0.5% on Friday.
• Click here for a detailed summary.

FX

• DXY reclaimed a 112.00 handle after briefly dipping under 111.50 amid touted JPY intervention on Monday.
• USD/JPY saw a sudden drop of around 200 pips in one minute before extending on losses, with traders flagging potential Japanese intervention on Monday on top of the touted intervention on Friday, although the pair trimmed losses as the session continued.
• GBP/USD was the top G10 performer overnight as the British currency cheered the high probability of market-friendly Rishi Sunak becoming the next UK PM after Boris Johnson dropped out of the leadership race.
• EUR/USD saw some resistance near the 0.9900 mark while its 50 DMA resides at 0.9897.
• NZD/USD fell back under 0.5750 throughout the session and New Zealand's markets observed Labor Day holiday.
• AUD/USD pulled back under 0.6400 in early trade, with no reaction seen to commentary from RBA's Kent, whilst Morgan Stanley remains bearish on the AUD and looks for it to go lower against the NZD.
• PBoC set USD/CNY mid-point at 7.1230 vs exp. 7.1173 (prev. 7.1186); weakest fix since June 1st 2020.
• Click here for a detailed summary.

FIXED INCOME

• 10yr UST futures opened relatively flat but then extended on gains after Treasuries experienced pronounced steepening on Friday.
• Bund futures were relatively contained for most of the session but then extended on upside as sentiment became less constructive, whilst European participants await the start of Gilt trade.
• 10yr JGB futures were also on a firmer footing as the contracts took the lead from their western counterparts.
• Click here for a detailed summary.

COMMODITIES

• Crude futures opened modestly firmer overnight but thereafter pared back gains and fell into the red as the earlier optimism faded and as China tightened COVID restrictions in a district in manufacturing-hub Guangzhou.
• QatarEnergy head said the Co. is open to discussing working with Shell (SHEL LN) in all energy sectors, via Reuters.
• Spot gold remained north of USD 1,650/oz and was contained in early hours as the firmer Dollar kept a lid on gains, although a sudden move lower in the DXY on suspected Japanese intervention took the yellow metal to a fresh session peak of USD 1,670/oz before pulling back.
• CME copper traded with gains throughout most of the session despite the firmer Dollar.
• China sold 100% of wheat offered at auction of state reserves on Oct 19th, according to Reuters citing the traded centre; sold at an average price of CNY 2,829/t.
• Click here for a detailed summary.

CRYPTO

• Bitcoin spiked higher on Sunday and briefly topped the USD 19,500 mark, whilst Ethereum also gained to levels above USD 1,350.

CCP NATIONAL CONGRESS

• Chinese President Xi secured an unprecedented third term as Chinese Communist Party (CCP) leader, as expected.
• The CCP amended its constitution to include "two establishes" and "two safeguards" to "cement" Xi Jinping's status as the core of the party, according to Reuters.
• Chinese President Xi is to head the communist party's central commission for discipline inspection, according to state media.
• The new CCP Politburo Standing Committee includes Li Qang, Li Xi, Ding Xuexiang, Cai Qi, Zhao Leji, Wang Huning, according to state media. The new Central Committee (comprising of 171 alternate members) does not include Liu He, Han Zheng, Sun Chunlan, Yi Gang, Guo Shuoing,
• Chinese President Xi said China's economy has high resilience, sufficient potential and has room for manoeuvre. Xi said China will open its doors even wider. Xi said China must ensure the CCP continues to be the backbone people can lean on, according to state media.

OTHER NOTABLE HEADLINES

• China suspended in-person schooling and dining-in at restaurants in a district in Guangzhou, "stoking concerns about the potential for disruption in the southern Chinese manufacturing hub that’s home to about 19mln people", Bloomberg reported.
• PBoC injected CNY 10bln via 7-day reverse repos at a maintained rate 2.00% for a daily injection of CNY 8bln.
• Japan's Top Currency Diplomat Kanda will not comment on whether they intervened in FX markets and said there is no change in stance that "we are ready to take action 24/7" and will continue to take appropriate action, via Reuters. Japan's Top Currency Diplomat Kanda offered no comments on intervention on Monday morning.
• Japanese Finance Minister Suzuki said no comment on FX intervention; currently trying to confront speculators; monitoring FX with a high sense of urgency.
• USD/JPY drop on Monday likely due to intervention, according to market participants cited by Reuters.
• Japanese government urges the BoJ to remain vigilant to the impact of sharp market moves, according to a draft document cited by Reuters.
• The Japanese government and the BoJ decided to intervene in FX on Friday by buying the Yen and selling the Dollar, according to Nikkei sources citing sources.
• BoJ Governor Kuroda said CPI growth beyond next FY likely to fall below 2%, will continue to put all effort into achieving price target along with rise in wages.
• Japan is to ease rules in relation to brokerages offering investment advice, according to reports citing Nikkei.
• South Korea is to expand its corporate-bond buying program, according to the finance minister cited by Reuters.
• RBA's Kent reiterated the Board expects to increase interest rates further in the period ahead; size and timing of rate increases in Australia will depend on incoming data.

DATA RECAP

• Chinese GDP (Q3) Y/Y 3.9% (Exp. 3.3%, Prev. 0.4%); Q/Q 3.9% (Exp. 3.5%, Prev. -2.6%)
• Chinese Trade Balance (Sep) (USD) Y/Y 84.7bln (Exp. 80.3bln, Prev. 79.39B); Exports +5.7% (Exp. +4.0%, Prev. 7.1%), Imports +0.3% (Exp. 1.0%, Prev. 0.3%)
• Chinese Retail Sales (Sep) Y/Y 2.5% (Exp. 3.0%, Prev. 5.4%); YTD Y/Y 0.7% (Exp. 0.9%, Prev. 0.5%)
• Chinese Industrial Output (Sep) Y/Y 6.3% (Exp. 4.8%, Prev. 4.2%); YTD Y/Y 3.9% (Exp. 3.7%, Prev. 3.6%)
• Chinese Fixed Investments (Jan-Sep) 5.9% (Exp. 6.0%)
• Australian Composite PMI (Oct) 49.6 (Prev. 50.9)
• Australian Services PMI (Oct) 49.0 (Prev. 50.6)
• Australian Manufacturing PMI (Oct) 52.8 (Prev. 53.5)
• Japanese Jibun Manufacturing PMI (Oct) 50.7 (Prev. 50.8)
• Japanese Jibun Services PMI (Oct) 53.0 (Prev. 52.2)
• Japanese Jibun Composite PMI (Oct) 51.7 (Prev. 51.0)

GEOPOLITICS

RUSSIA-UKRAINE

• US Secretary of State Blinken said he has seen no evidence that Russia is interested in ending its aggression toward Ukraine, according to Reuters.
• Russian Defence Minister held phone calls with the US Pentagon Chief, UK Defence Minister, and the French Armed Forces Minister, according to Interfax and Reuters.
• French Armed Forces Minister has confirmed Russian Defence Minister told him Russia fears that Ukraine may use a "dirty bomb" on Russian territory. Russia's Shoigu warns of 'uncontrolled escalation' in Ukraine conflict, via Reuters.
• Ukraine's Foreign Minister spoke with US Defence Secretary Blinken and said they both agreed the Russian rhetoric on "dirty bombs" is aimed at creating a pretext for a false flag operation. They also discussed further practical steps to boost Ukraine’s air defense.
• Russian forces continued to target Ukraine's energy and military infrastructure over the weekend, according to the Russia Defence Ministry cited by Interfax.
• Russian authorities said two pilots died in a military plane crash into a residential building in Irkutsk, Russia, according to Interfax.
• Russian Deputy Foreign Minister said Russia completely reject any demilitarized zones in the vicinity of the Zaporozhye station, Via Al Jazeera.
• Russia continues to use Iranian uncrewed aerial vehicles (UAVs) against targets throughout Ukraine, according to the UK Ministry of Defence.

OTHER

• South Korea fired warning shots after North Korean boat crossed the maritime border, according to South Korean Military. North Korea said it fired multiple rocket launchers in response to the warning shot from South Korea, according to KCNA. South Korean military has strengthened its readiness posture in case of contingency while tracking and monitoring related movements of the North Korean military in close cooperation between the ROK and the US, according to Yonhap.
• US Navy said earlier reports from Iran that it has recently seized two US Navy unmanned surface vessels are not true, via Reuters.
• Iran's atomic energy organization said e-mail servers were hacked, according to state media.
• Nasdaq has quietly halted listings of small-cap Chinese companies as approvals were being subjected to additional reviews, according to WSJ.
• USTR Tai will speak on US-China relations at an event on Wednesday.

EU/UK

NOTABLE EU/UK HEADLINES

• UK's Boris Johnson has pulled out of the Conservative Party leadership contest, according to The Times' Swinford. UK's Boris Johnson and Rishi Sunak failed to strike a deal in talks on Saturday, according to the Times.
• UK leadership candidate Rishi Sunak so far received support from 147 MPs vs 24 for Penny Mordaunt. The deadline to reach the 100 threshold is at 14:00BST/09:00EDT on Monday.
• UK leadership candidate Penny Mordaunt will stay in the race as she reportedly sees a route to 100 nominations now Boris Johnson is out, according to sources cited by Bloomberg's Wickham.
• UK Chancellor Hunt backs Rishi Sunak for PM, via The Telegraph.
• UK Chancellor Hunt is said to be mulling up to GBP 20bln of tax rises in the October 31st budget, according to The Telegraph. The October 31st fiscal statement could be delayed after PM Truss' resignation, according to the FT.
• UK Chancellor Hunt is expected to extend the current freeze in income tax and allowances into the next parliament, according to FT citing sources.
• BoE's Mann said bond purchases for financial stability were targeted and temporary, and the start of bond selling on Nov 1st shows the BoE does not feel like its hands are tied. Mann said it is the BoE's job to address financial stability risks.
• Moody's affirmed UK's rating at Aa3; revised outlook to "Negative" from "Stable.
• S&P affirms Greece at BB+/B; outlook stable.