• APAC stocks were mostly positive as regional bourses attempted to recover from the recent China COVID woes.
• European equity futures were modestly higher overnight with the Euro Stoxx 50 future +0.2% after cash markets closed lower by 0.4% yesterday.
• DXY has pulled back after topping out just shy of 108, USD/JPY Is back below 142 and EUR/USD remains stuck on a 1.02 handle.
• Saudi officials denied talk of an increase in OPEC+ oil output; said the current cut of 2mln BPD is to continue until the end of 2023.
• Looking ahead, highlights include EZ Consumer Confidence Flash, Australian PMIs Flash, Speeches from Fed's Bullard, George, Mester & ECB's Rehn, Supply from Germany & US.

US TRADE

• US stocks were lower amid broad dollar strength and commodity weakness as Chinese COVID woes hit the global demand outlook, while the new China lockdown restrictions also pressured industrial metals and activity currencies.
• SPX -0.39% at 3,950, NDX -1.06% at 11,554, DJIA -0.13% at 33,700, RUT -0.57% at 1,839.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Mester (2022 voter) said it makes sense to slow down a bit the pace of rate hikes and that they can now be very deliberate in setting policy, while she noted the Fed needs to be more judicious in balancing risks but added the Fed is not anywhere near to stopping rate hikes. Furthermore, Mester thinks they can slow down from 75bps at the December meeting and said that going forward, they need to let the economy tell them the pace of rate hikes, according to Reuters.
• Fed's Daly (2024 voter) said the real-world impact of Fed rate hikes is likely higher than what the current rate target implies and that financial markets are acting like the current target rate is at around 6%, not 3.75-4.00%, while she added that the Fed has more work to do when it comes to rate hikes but also must be mindful of the risk of tightening policy too much. Furthermore, Daly said she is not ready to say what hike the Fed should do in December although is not taking anything off the table and noted at some point it will be right for the Fed to slow the rate hike price but added the Fed can hike beyond 5% if inflation does not cool.
• White House official said a rail shutdown is unacceptable and the best option is still for the parties to resolve this themselves.

APAC TRADE

EQUITIES

• APAC stocks were mostly positive as the regional bourses attempted to recover from the recent China COVID woes but with price action contained amid quiet newsflow and a lack of fresh macro drivers.
• ASX 200 was positive amid strength in the commodity-related sectors in which energy led the advances after oil prices rebounded following Saudi’s denial that it was considering a production increase.
• Nikkei 225 higher and reclaimed the 28,000 level with early outperformance in Shionogi after its COVID-19 therapeutic drug was presumed effective by Japan’s PMDA.
• Hang Seng and Shanghai Comp traded mixed with Hong Kong pressured by weakness in the tech sector, while losses in the mainland were reversed after the latest policy support pledges by China including measures to sustain the recovery momentum of the industrial economy and with the PBoC to release CNY 200bln worth of loan support for commercial banks to ensure near-term delivery of homes.
• US equity futures were rangebound (ES flat) and largely ignored the mild improvement of risk appetite in Asia.
• European equity futures were modestly higher overnight with the Euro Stoxx 50 future +0.2% after cash markets closed lower by 0.4% yesterday.

FX

• DXY pared some of yesterday’s advances and continued to pull back after it hit resistance near 108.00, while the latest Fed rhetoric continued to point to a downward shift in gears next month as Fed’s Mester stated that the Fed is not anywhere near to stopping rate hikes but thinks they can slow down from 75bps at the December meeting.
• EUR/USD nursed some of its recent losses but remained firmly beneath the 1.0300 handle following yesterday's gains in the USD.
• GBP/USD continued its rebound amid light newsflow, although PM Sunak pushed back against plans for a Swiss-style EU deal and said the UK will not pursue any relationship with Europe that relies on alignment with EU laws.
• USD/JPY eased off the prior day’s highs to below 142.00 with price action at the whim of the greenback.
• Antipodeans found some reprieve alongside a bounce in the commodities complex and a mild improvement in risk appetites, with NZD also unfazed by a record annual trade deficit for New Zealand.
• PBoC set USD/CNY mid-point at 7.1667 vs exp. 7.1529 (prev. 7.1256)

FIXED INCOME

• 10yr UST futures lacked direction after the recent choppy performance owing to the oil-driven price volatility and following mixed 2yr and 5yr auctions stateside.
• Bund futures were subdued but with further downside cushioned by support at the 140.00 level.
• 10yr JGB futures conformed to the lacklustre trade in global counterparts, while improved demand at the enhanced liquidity auction for up to 20yr JGBs only provided brief support.

COMMODITIES

• Crude traded sideways overnight as price action calmed from the whipsawing seen during the prior day in which oil was initially notably lower on the account of a higher dollar and China COVID concerns, with heavy selling also seen after WSJ sources noted that Saudi Arabia and other OPEC members are considering a production increase, although a later denial by Saudi officials spurred a rebound with WTI back above the USD 80/bbl level.
• Saudi officials denied reports of talks regarding increasing OPEC+ oil output and said the current cut of 2mln BPD is to continue until the end of 2023. Saudi officials also stated they will always remain ready to intervene if there is a need to take further measures by reducing production to balance supply and demand, while they added that it is well known that OPEC+ does not discuss any decisions ahead of the meeting, according to Bloomberg.
• UAE Energy Minister tweeted that the UAE denies that it is engaging in any discussion with other OPEC+ members to change the last agreement which is valid until the end of 2023, while they remain committed to the OPEC+ aim to balance the oil market and will support any decision to achieve that goal.
• Russian Deputy PM reiterated Russia will not sell oil to price cap nations and that a price cap on Russian oil will trigger lower supply, while he stated Russia may cut oil output in the event of a price cap.
• European gas traders and exchanges warned of futures price cap risks and suggested they could create instability in European markets, according to FT.
• White House Press Secretary said President Biden is committed to further lowering gasoline prices.
• Spot gold eked mild gains with the precious metal helped as the dollar pared some of its recent advances.
• China is thought to be stockpiling gold to cut greenback dependence, according to Nikkei citing customs data that showed buying of the metal was at its fastest pace since the 1960s, although the report noted it was uncertain which central banks were behind most of the buying.
• Copper traded marginally higher after prices rebounded from Monday's intraday lows and amid the improved risk sentiment in Asia.

CRYPTO

• Bitcoin sat at 2-year lows beneath USD 16,000 with prices not helped by reports that crypto brokerage Genesis warned of bankruptcy without funding, although the firm stated there were no imminent plans to file for bankruptcy.
• Crypto firm Genesis reportedly warned of bankruptcy without fresh funding after the firm's talks for fresh cash over the weekend failed to materialise, although Genesis said it has no plans to file for bankruptcy imminently and it reportedly asked Binance and Apollo for cash, according to Bloomberg and WSJ.

NOTABLE ASIA-PAC HEADLINES

• US Defence Secretary Austin met with Chinese Defence Minister Wei Fenghe in Cambodia, according to a US official cited by Reuters. US Defence Secretary Austin discussed the need for dialogue on reducing risk and improving communication with his Chinese counterpart, according to a Pentagon spokesperson. Furthermore, Austin raised concern about increasingly dangerous behaviour by Chinese aircraft which increases the risk of an accident and he reiterated that the US remains committed to the longstanding Once China Policy.
• Chinese Defence Ministry spokesman said the main reason for the current situation faced by China and the US is because the US made the wrong strategic judgement. In relevant news, Global Times' Hu Xijin tweeted that the meeting between the two defence ministers must be supported and that no matter how many frictions, China and the US cannot fight militarily which is the bottom line and the two sides’ due responsibility to the world.
• EU is poised to renew sanctions on Chinese officials accused of human rights violations in Xinjiang for an additional year, according to SCMP.

DATA RECAP

• New Zealand Trade Balance (NZD)(Oct) -2.1B (Prev. -1.6B, Rev. -1.7B)
• New Zealand Annual Trade Balance (NZD)(Oct) -12.9B (Prev. -12.0B)
• New Zealand Exports (NZD)(Oct) 6.1B (Prev. 6.0B, Rev. 5.9B)
• New Zealand Imports (NZD)(Oct) 8.3B (Prev. 7.6B, Rev. 7.6B)

GEOPOLITICS

RUSSIA-UKRAINE

• IAEA said the expert team at Zaporizhzhia found key equipment remained intact after the shelling and there were no immediate nuclear safety or security concerns, according to Reuters.
• French President Macron condemned the shelling of the Zaporizhzhia nuclear plant following a call with Ukrainian President Zelensky and said that other nuclear plants at Rovno and Khmelnytsky, as well as the Nova Kakhovka dam were also targeted, according to Reuters.

OTHER

• Moscow considers a search necessary for a peaceful solution to the Kurdish issue after Turkey's strikes in Syria and believes Turkey should restrain from the use of excessive military force, according to RIA citing Moscow's Syria envoy.

EU/UK

NOTABLE EU/UK HEADLINES

• ECB's Centeno sees conditions for rate hikes to be less than 75bps in December and said they "really have to reverse" the trend of rising inflation to have greater visibility on monetary policy, according to Bloomberg.
• ECB's Holzmann said he supports a 75bps hike in December and noted there are no signs that price pressures are easing, according to FT
• ECB's Villeroy said inflation should peak in France and Europe in H1 2023, according to Reuters.
• Italy approved a EUR 35bln budget law for next year which plans to increase an energy windfall tax, according to Bloomberg.