• US stocks ultimately suffered notable losses after markets saw a dovish reaction to the Fed statement but a hawkish one during Powell’s presser
• FOMC hiked rates by 75bps as expected and noted the Fed will take into account "the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments"
• Fed Chair Powell during the presser suggested they still have some ways to go and data suggests the ultimate level of rates will be higher than previously expected
• APAC stocks were mostly lower; US equity futures eked mild gains overnight but with the recovery insignificant compared to the sell-off triggered by Fed Chair Powell
• Overnight, DXY retreated beneath the 112.00 level following the tumultuous post-FOMC fluctuations, 10yr UST futures were stuck around the prior day’s lows
• Looking ahead, highlights include Swiss CPI, EZ Unemployment, US IJC, Composite/Services PMI (Final), Factory Orders & ISM Services, Norges Bank & BoE Policy Announcements, Speeches from BoE's Bailey & Mann, ECB's Lagarde, de Cos, Panetta & Elderson, Supply from Spain & France
• Earnings from Rolls-Royce, Sainsbury's, ING, BNP, Stellantis, Euronext, ConocoPhillips, Starbucks, PayPal & Moderna
• Click here for the Week Ahead preview

US TRADE

• US stocks ultimately suffered notable losses as the focus centred on the FOMC where markets saw two-way price action during the Fed announcement and press conference.
• SPX -2.50% at 3,759, NDX -3.39% at 10,906, DJIA -1.55% at 32,147, RUT -3.36% at 1,789.
• Click here for a detailed summary.

FOMC

FOMC STATEMENT

• FOMC hiked rates by 75bps as expected to lift the FFR to 3.75-4.00% in a unanimous decision. Fed maintained its language that ongoing rate hikes will be appropriate but added that "in determining the pace" of future rate hikes, the Fed will take into account "the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments".

FOMC PRESS CONFERENCE

• Fed Chair Powell said the Fed is strongly committed to bringing inflation back to its 2% goal and will likely need a restrictive stance of policy for some time, while they think ongoing rate hikes will be appropriate to get policy sufficiently restrictive and noted that financial conditions have tightened significantly. Powell also stated that they still have some ways to go and data suggests the ultimate level of rates will be higher than previously expected.
• Fed Chair Powell said during the Q&A that as they get closer to the terminal rate, speed is becoming less important and the time for slower rate hikes may come as soon as December or February but added that their principle is to keep rates restrictive. Powell also said they have not over-tightened and had a discussion at this meeting about slowing rate hikes, but also stated they have no sense that they moved too fast and there is still a need for ongoing rate hikes with ground left to cover.
• Furthermore, Powell said shorter-term inflation expectations moved up since the last meeting and although they don't think they are as indicative, it is still very concerning and may affect wages, while he also stated it is very premature to think about a pause and will update in December on the sense of where rates will need to go.

MARKET REACTION

• There was two-way price action in wake of the FOMC rate decision with the statement leaning dovish by adding in language about the size of future rate hikes will be determined by policy lags and the cumulative effect of policy on the economy, implying a slowdown is among us.
• The hawkish commentary in the press conference saw the post-statement stock and bond bid completely unwind with stocks closing at lows for the session while T-Notes settled unchanged, with the curve flatter as the front-end sold off. The Dollar completely reversed any losses and was firmer on the session with DXY briefly rising above 112.00.

APAC TRADE

EQUITIES

• APAC stocks were mostly lower with the global risk appetite subdued in the aftermath of the FOMC, while the risk tone was also not helped by a deterioration in Chinese Caixin PMI data and the absence of Japanese participants for Culture Day holiday.
• ASX 200 was pressured as underperformance in the mining-related sectors led the broad declines in the index and after the New South Wales Chief Health Officer warned of a looming wave of COVID infections.
• KOSPI was contained amid geopolitical concerns after North Korea's recent record number of missile launches, while it continued firing missiles again today.
• Hang Seng and Shanghai Comp were negative after Chinese Caixin Services and Composite PMI data worsened and with China’s National Health Commission reiterating adherence to zero-COVID policy, while the HKMA also raised rates by 75bps in lockstep with the Fed.
• US equity futures eked mild gains overnight but with the recovery inconsequential compared to the sell-off triggered by Fed Chair Powell's hawkish rhetoric.
• European equity futures were lower overnight with the Euro Stoxx 50 future -0.7% after cash markets closed up down 0.8% yesterday.

FX

• DXY retreated beneath the 112.00 level as it gave back some of the prior day’s gains following the tumultuous post-FOMC fluctuations.
• EUR/USD bounced off its lows but remained subdued after its recent failure to sustain the 0.9900 handle.
• GBP/USD attempted to nurse some of its losses after it briefly slipped below 1.1400 but with the rebound limited as the attention shifts to the upcoming BoE rate decision.
• USD/JPY was lacklustre after pulling back from resistance at the 148.00 level and with Japan on holiday.
• Antipodeans were rangebound with price action contained amid the negative risk tone, softer commodity prices and disappointing Chinese data.
• PBoC set USD/CNY mid-point at 7.2472 vs exp. 7.2523 (prev. 7.2197)

FIXED INCOME

• 10yr UST futures were stuck around the prior day’s lows after the selling pressure from Fed Chair Powell’s hawkish remarks in which he suggested a higher terminal rate than projected in the SEPs and with a lack of overnight trade in US treasuries owing to the holiday closure in Tokyo.
• Bund futures languished near a floor around the 138.00 level for most of the session in the aftermath of the Fed-induced volatility.

COMMODITIES

• Crude traded rangebound with mild losses alongside the pressure in stocks but with downside stemmed after the recent bullish inventory data and as the greenback slightly eased overnight.
• Spot gold remained subdued owing to the hawkish rhetoric by Fed Chair Powell.
• Copper was marginally lower amid the risk aversion and after the post-FOMC volatility.

CRYPTO

• Bitcoin faded most of the prior day's losses after bouncing off a floor near USD 20,100, while Ethereum rose around 2.5% and extended above USD 1,500.

NOTABLE ASIA-PAC HEADLINES

• Hong Kong Monetary Authority raised the base rate by 75bps to 4.25%, as expected, while the Macau Monetary Authority also raised its base rate for the discount window by 75bps to 4.25%.
• RBNZ said there is high confidence that they can get inflation under control and that the labour shortage is the single most constraining factor for businesses in New Zealand, while Governor Orr also noted a laser-like focus on returning inflation to the 1%-3% target.

DATA RECAP

• Chinese Caixin Services PMI (Oct) 48.4 vs. Exp. 49.0 (Prev. 49.3)
• Chinese Caixin Composite PMI (Oct) 48.3 (Prev. 48.5)
• Australian Trade Balance (AUD) (Sep) 12.4B vs. Exp. 8.9B (Prev. 8.3B)
• Australian Exports MM (Sep) 7% (Prev. 3%)
• Australian Imports MM (Sep) 0% (Prev. 4%)

NOTABLE US HEADLINES

• Elon Musk is planning to eliminate half of Twitter jobs in a cost-cutting drive, according to Bloomberg.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelensky said a Russian plane fired cruise missiles on Wednesday which flew across the Black Sea corridor used to export grain, according to Reuters.
• Russia failed in a bid to set up an inquiry at the UN into biological weapons accusations against Ukraine and the US, according to Reuters.

OTHER

• South Korean military detected that North Korea fired one long-range and two short-range missiles, while it was reported that the North Korean missile went through a stage of separation but may have failed after the second stage separation, according to Yonhap.
• US condemned North Korea's ICBM launch and called on North Korea to refrain from further provocations and engage in sustained and substantive dialogue, according to Reuters.

EU/UK

NOTABLE EU/UK HEADLINES

• UK PM Sunak and Chancellor Hunt are planning to extend the windfall taxes on oil and gas companies to raise an estimated GBP 40bln over 5 years, according to The Times.
• ECB's de Cos sees a higher probability of recession in the Euro area and said the ECB's push to rein in inflation will require further rate hikes, according to Reuters.
• ECB's Kazaks said inflation is very high in the eurozone and it is clear we need to raise interest rates, according to Bloomberg.