Newsquawk

Europe Market Open: Asian stocks were pressured amid rising global yields, with a light calendar ahead

26 Sep 2023, 06:26 by Newsquawk Desk

APAC stocks were mostly lower with headwinds from the rising global yield environment.
US Senate Republican and Democrat negotiators are nearing a deal on a short-term spending measure, according to Blomberg.
European equity futures are indicative of a softer open with Euro Stoxx 50 future -0.2% after the cash market closed down 1.0% yesterday.
DXY lingers around the 106 mark, EUR/USD sits on a 1.05 handle, USD/JPY has taken a breather after stopping just short of 149.
10yr UST futures remained subdued as the 10yr yield reached its highest level since October 2007.
Looking ahead, highlights include US Building Permits & New Home Sales, NBH Policy Announcement, ECB’s Lane & Fed's Bowman, Supply from Italy, Germany, UK & US.

US stocks were marginally firmer in what was a choppy session in the face of massive Treasury bear-steepening momentum despite the absence of any fresh major catalyst, while the data releases were light with the Chicago Fed's national activity index and Dallas Fed's manufacturing survey both worsening.
SPX +0.40% at 4,337, NDX +0.46% at 14,769, DJIA +0.13% at 34,007, RUT +0.44% at 1,784.
Click here for a detailed summary.

NOTABLE US HEADLINES

Fed's Kashkari (voter) said there is still more work to do on services inflation but added that they can definitely get back to 2% inflation, while he also stated that they may need higher rates for longer if the economy is too strong but added that they may need to cut rates if real rates are tightening. Furthermore, Kashkari said falling inflation next year could justify backing off the federal funds rate to stop it from getting tighter and noted he is one of the Fed policymakers who see one more rate hike this year.
US Senate Republican and Democrat negotiators are nearing a deal on a short-term spending measure intended to keep the government open after October 1st, according to Blomberg.
Moody's said a US government shutdown would be credit negative for the US sovereign, while it was separately reported that a government shutdown would delay the release of key economic data.
Ford (F) paused construction of the Marshall EV battery plant, while the UAW called Ford's decision to pause the Michigan battery plant construction a shameful, barely-veiled threat by Ford to cut jobs. In relevant news, Canadian union Unifor said General Motors (GM) will be the next target company in negotiations with the Detroit Three automakers with talks set to start this Tuesday.

APAC stocks were mostly lower with headwinds from the rising global yield environment.
ASX 200 was subdued by underperformance in real estate and tech as domestic yields climbed.
Nikkei 225 was pressured following the acceleration in Services PPI data and as recent currency moves keep participants on their toes regarding FX intervention.
Hang Seng and Shanghai Comp declined with sentiment not helped by trade frictions after the US imposed restrictions on additional Chinese and Russian companies related to supplying Russia with components to make drones, although losses in the mainland were stemmed by another substantial liquidity operation and hopes that the approaching Mid-Autumn Festival and National Day Golden Week holidays would provide a boost to consumption and economic activity.
US equity futures were mildly pressured (ES -0.3%) after the recent choppy performance and upside in yields.
European equity futures are indicative of a softer open with Euro Stoxx 50 futures -0.2% after the cash market closed down 1.0% yesterday.

DXY held on to the prior day’s gains and lingers around the 106.00 level following an uplift from higher US yields and comments from Fed officials including Kashkari who was one of the policymakers that see one more hike this year, while Barclays recently noted its model suggested strong month-end USD buying.
EUR/USD remained lacklustre after falling beneath the 1.0600 handle.
GBP/USD was uninspired and retested support at the prior day's lows around the 1.2200 level.
USD/JPY took a breather after climbing to just shy of the 149.00 handle which spurred another round of the familiar jawboning from Japan’s Finance Minister Suzuki.
Antipodeans traded flat with price action uneventful in the absence of any relevant data releases.
PBoC set USD/CNY mid-point at 7.1727 vs exp. 7.3174 (prev. 7.1727).

10yr UST futures remained subdued as the 10yr yield reached its highest level since October 2007 owing to the ongoing higher for longer rate expectations for the Fed.
Bund futures extended on losses below 129.00.
10yr JGB futures tracked the downside in global peers with prices not helped by an acceleration in Services PPI data and mixed results at the 40yr JGB auction.

Crude futures marginally declined with WTI crude futures beneath the USD 90/bbl level amid a lack of energy-related catalysts and with headwinds from the negative risk tone and a firmer dollar.
Natural Gas Pipeline Co declared a force majeure for remediation work on the AM#2 mainline.
Spot gold remained constrained alongside the recent strength in the greenback.
Copper futures struggled for direction amid the mostly subdued picture in Asia.

Bitcoin eked mild gains but with upside capped and price action kept to within a tight range.

NOTABLE ASIA-PAC HEADLINES

China's MOFCOM said China and the EU reached agreements on supply chain cooperation in which the agreements also include WTO reform and financial opening, while China urged the EU to exercise prudence in trade remedy.

DATA RECAP

South Korean President Yoon warned if North Korea uses nuclear weapons, the overwhelming response by South Korea and the US is to bring its regime to an end, while he added that only a strong military can ensure peace, according to Reuters.
Chinese Foreign Minister Wang said China opposes 'wanton' expansion of military alliances and squeezing the security space of other countries, according to Reuters.
China MOFCOM said China firmly opposes the US inclusion of some Chinese companies and individuals in the Iran list, according to Reuters.
Philippines Coast Guard said four Chinese Coast Guard vessels were nearby prior to the Philippines cutting the barrier at the South China Sea shoal and China removed the remnants of the barrier, while China's Coast Guard was not that aggressive and saw media on board the Philippines vessel, according to Reuters.

NOTABLE HEADLINES

UK will sign a trade pact with Washington state aimed at facilitating aerospace deals with the US, according to Bloomberg.
EU member states discussed the UK's request for a 3yr postponement to delay tariffs on EV sales between the UK and EU, while Berlin received some support from other members in backing the tariff delay but France and the EU Commission are holding out, according to FT sources.
Italy is to target the 2024 budget deficit at between 4.1% to 4.3% of GDP vs 3.7% goal set in April, according to Reuters sources.

Source: Newsquawk