• European bourses are mixed as the initial positive bias faded amid downward PMI revisions and increasing geopolitical tensions
• US futures similarly contained and less reactive to the above factors pre-FOMC
• DXY under modest pressure to the benefit of G10 peers with antipodeans and JPY outpacing, EGBs/USTs contained with a slight negative bias
• Crude benchmarks have given up their USD and China induced APAC upside amid downbeat commentary from Maersk and the EZ Final Manufacturing PMIs.
• North Korea has reportedly fired at least 23 missiles in total from the east and west coasts on Wednesday
• Ags in focus amid two-way commentary from Russian and Turkish officials
• Looking ahead, highlights include Australian Services & Composite PMI (Final), FOMC Policy Announcement & Press Conference.
• Click here for the Week Ahead preview.

EUROPEAN TRADE

EQUITIES

• European bourses are mixed as the initial positive bias faded amid downward PMI revisions and increasing geopolitical tensions, Euro Stoxx 50 +0.2%.
• Health Care is the outperforming sector after Q3 earnings from GSK (+1.6%) and Novo Nordisk (+4.5%), more broadly sectors are mixed with no overarching bias.
• US futures are similarly contained but have been less reactive to the geopolitical and PMI developments as participants remain firmly affixed on the Fed, ES Unch. & NQ +0.2%.
• A.P. Moeller-Maersk (MAERSK DC) expect a slowdown of the global economy to lead to softer market in ocean. Cuts FY22 global container demand forecast to -2% to -4%. Freight rates have begun normalising during Q3; Maersk -5.0%.
• Moody's downgrades the outlook for the banking sector in Germany, Italy, Hungary, Poland, Slovakia, to negative from stable; citing energy crisis, high inflation, and rising rates, via Reuters.
• Click here for more detail.

FX

• USD is under modest pressure as we count down to the FOMC, action which is benefiting peers across the board with the antipodeans and JPY currently the main beneficiaries.
• DXY has slipped to a 111.12 low from earlier highs above the 111.50 mark, with brief respite for the USD occurring alongside the NY Times article re. Russia.
• EUR/USD relatively unreactive to the morning's PMI revisions, downbeat commentary and numerous surveys out of Germany featuring a similar narrative, single currency holding around 0.9900.
• NZD outpaces and has lifted to a test of the 0.59 mark, where the current WTD peak resides, following domestic data which seemingly keeps hawkish impulses in focus.
• JPY is the next best performer given its haven status and after BoJ Minutes noted several members said a weak yen could hurt; USD/JPY probing but yet to lose 147.00.
• BoC Governor Macklem said they expect the policy rate will need to rise further and how much further rates will go up depends on how monetary policy is working, how supply chains are resolving and how inflation is responding to tightening. Macklem added that there are no easy outs to restoring price stability and reiterated the tightening phase will draw to a close and they are getting close but are not there yet.
• Click here for more detail.

Notable FX Expiries, NY Cut:

• EUR/USD: 0.9700 (1.1BN), 0.9725 (702M), 0.9790-00 (1.12BN), 0.9820-25 (1.0BN), 0.9850-60 (755M), 0.9870 (290M), 0.9900 (862M), 1.0000 (2.05BN), 1.0050 (438M), 1.0075 (647M)
• Click here for more detail.

FIXED INCOME

• EGBs are modestly pressured with yields a touch higher as such, though the complex is currently relatively contained ahead of a busy PM docket incl. the FOMC.
• USTs are essentially flat with yields incrementally steeper but similarly contained as such; note, the pre-FOMC docket is busy and features ADP alongside Quarterly Refunding.
• Back to Europe, Bunds and peers haven't been too reactive to the downbeat PMI releases/commentary, with Bunds also conscious of upcoming Green supply; 10yr yield continues to lift from 2.10%.
• Click here for more detail.

COMMODITIES

• Crude benchmarks have given up their USD and China induced APAC upside amid downbeat commentary from Maersk and the EZ Final Manufacturing PMIs.
• Currently, the benchmarks are incrementally softer on the session and in proximity to the USD 88/bbl and USD 94/bbl handles for WTI and Brent respectively.
• Spot gold is deriving support from the USD's pullback and renewed geopolitical focus on both N.Korea and Russia, with the yellow metal having surpassed its 10-DMA but currently capped by the 21-DMA at USD 1659/oz; base metals similarly firmer on the USD action and overnight trade.
• Russia's Kremlin exports of Russian fertiliser was an integral part of grain deal, but difficulties remain; says Russia's participation in the deal remains suspended, via Reuters; prior to this, Turkish President Erdogan said the Russian Defence Minister told his Turkish counterpart the the grain deal will resume; grain deal will resume on mid-day Wednesday.
• Most recently, Russia is to resume participation in the Black Sea grain deal, according to Reuters citing the Defence Ministry; it was possible to obtain written guarantees from Kyiv not to use grain corridor for military operations against Russia.
• Click here for more detail.

NOTABLE EUROPEAN HEADLINES

• Germany's DIHK says German companies are bracing for another economic slump in the next 12 months; 52% of firms see business worsening in the next 12 months; says German GDP should be +1.2% in 2022 and -3% in 2023,
• Germany's VDMA engineering orders in Sep -5% Y/Y (Domestic -4%, Foreign Orders +8%); in first 9M orders +1% Y/Y (Domestic -3%, Foreign +2%)

NOTABLE EUROPEAN DATA

• UK BRC Shop Price Index YY (Oct) 6.6% (Prev. 5.7%)
• German Trade Balance, EUR, SA (Sep) 3.7B vs. Exp. 0.7B (Prev. 1.2B); Unemployment Rate SA (Oct) 5.5% vs. Exp. 5.5% (Prev. 5.5%)
• EU S&P Global Manufacturing Final PMI (Oct) 46.4 vs. Exp. 46.6 (Prev. 46.6); "The eurozone goods-producing sector moved into a deeper decline at the start of the fourth quarter. The PMI surveys are now clearly signalling that the manufacturing economy is in a recession."

NOTABLE US HEADLINES

• Click here for the US Early Morning Note.

CRYPTO

• Bitcoin is in very tight parameters just above the USD 20k mark as broader market focus is firmly on the FOMC announcement later today.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelensky said they need reliable, long-term defence for the grain corridor and that Russia must be told it will receive a firm world response if it takes steps to disrupt Ukrainian food exports, according to Reuters.
• Senior Russian military leaders recently had conversations to discuss when and how Moscow might use a tactical nuclear weapon in Ukraine, according to NYT citing sources, President Putin was not part of the conversations; "The intelligence about the conversations was circulated inside the U.S. government in mid-October.".

OTHER

• North Korea has reportedly fired at least 23 missiles in total from the east and west coasts on Wednesday the initial rounds of which prompted South Korea to place its Ulleung Island under an air raid warning and was the first time North Korean missiles fell near the South's territorial waters, according to Yonhap and YTN.
• South Korean President Yoon ordered a swift and firm response and South Korea launched air-to-ground missiles which were fired towards the north of the maritime border, while South Korea closed some air routes off the east coast of the Korean peninsula after North Korea's missile launches, according to the Transport Ministry cited by Reuters.

APAC TRADE

EQUITIES

• APAC stocks were mixed with the region cautious and price action mostly rangebound after the lacklustre handover from the US where strong JOLTS data spurred a more hawkish Fed terminal rate pricing and as markets await the FOMC.
• ASX 200 was kept afloat by strength in the commodity-related sectors but with upside capped after PM Albanese rejected providing cash handouts and with the property industry pressured after home loans and building approvals fell.
• Nikkei 225 was indecisive as earnings releases remained in focus and officials continued their currency jawboning.
• KOSPI wiped out nearly all its early gains amid geopolitical concerns after North Korea reportedly fired at least 10 missiles and which was the first time its missiles fell near South Korea’s territorial waters.
• Hang Seng and Shanghai Comp eventually extended their recent rumour-driven surge regarding China reopening despite the denial by a Foreign Ministry spokesperson and with officials pledging policy support measures, while Hong Kong markets were closed after half-day due to a storm signal 8.

NOTABLE APAC HEADLINES

• PBoC Governor Yi said China's economy is broadly on track and potential growth is to remain in a reasonable range, and noted that inflation remains subdued and accommodative monetary policy is to support the economy. PBoC Governor Yi added that they will continue to improve the business environment, while they will deepen supply-side reforms and step up targeted support for key and weak sectors, according to Reuters.
• China state planner official said China's foreign investment increased steadily so far this year and will encourage more foreign investment in the manufacturing industry, according to Reuters.
• China locked down the area around the world's largest iPhone factory, according to Bloomberg.
• BoJ September Meeting Minutes stated a few members said they need to be vigilant to the impact monetary tightening by some central banks could have on global markets, while several members said a weak yen could hurt households, small firms and non-manufacturers. Members agreed that Japan's economy is picking up and several members said the BoJ must communicate to the public its monetary policy does not directly target FX moves.
• RBNZ Financial Stability Report noted that the financial system remains resilient but added some households and businesses will be challenged by the rising interest rate environment, while it also stated that there are increasing downside risks to the global economic outlook and the extent to which the economic activity will slow due to monetary policy tightening remains uncertain. Furthermore, the RBNZ later stated it will consider tightening policy faster or slower at the Monetary Policy Statement.
• Chinese Commerce Ministry says it will expand the imports of advanced technology, key equipment and components, and increase imports of energy and agricultural products in short supply, via a Party Congress supplementary reading cited by Reuters.

DATA RECAP

• Australian Building Approvals (Sep) -5.8% vs. Exp. -7.0% (Prev. 28.1%, Rev. 23.1%); Home Loans MM (Sep) -8.2% vs Exp. -3.0% (Prev. -2.7%)
• New Zealand HLFS Job Growth QQ (Q3) 1.3% vs. Exp. 0.5%; Unemployment Rate (Q3) 3.3% vs. Exp. 3.2% (Prev. 3.3%)
• New Zealand Labour Cost Index - YY (Q3) 3.8% vs. Exp. 3.8% (Prev. 3.4%)