• A surprise multi-front attack by Hamas on Israel resulted in at least 700 Israeli deaths and prompted Israel to declare war on Hamas.
• Crude futures have seen intraday gains of more than 5% after Hamas' attack on Israel which Iranian officials reportedly helped to plan.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.3% after the cash market closed up 1.1% on Friday.
• DXY is marginally firmer, EUR/USD hovers around 1.0550, USD/JPY trades on a 149 handle, antipodeans narrowly lag.
• APAC stocks were mostly lower in holiday-quietened conditions and US equity futures were pressured amid geopolitical concerns
• Looking ahead, highlights include German Industrial Output, EZ Sentix Index & US Employment Trends, Fed’s Logan, Barr, Jefferson, ECB’s De Guindos & Knot.

US TRADE

EQUITIES

• US stocks finished positive on Friday after reversing the initial selling pressure seen in stocks in the aftermath of the stronger-than-expected NFP jobs report which printed its highest reading since January and momentarily lifted the 30yr bond yield to its above 5%. However, stocks then gradually recovered from lows.
• SPX +1.18% at 4,308, NDX +1.70% at 14,973, DJI +0.87 at 33,408, RUT +0.81% at 1,746.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed’s Bowman (voter) said it is likely appropriate to raise interest rates further and hold them restrictive for some time, while she added the frequency and scope of recent data revisions complicate economic projections. Furthermore, Bowman said the most recent US employment data showed a labour market with solid gains and she also stated that inflation progress is likely to be slow which suggests further policy tightening will be needed.
• Fed's Mester (non-voter) said on Friday that the job market is very strong and the latest job report is consistent with the existing view of the job market, while she added that it is a strong market but is getting less tight and will make a decision on further hikes at the next Fed meeting.
• US Treasury official said giving more value to callable capital in balance sheets could unlock significantly more financing power for multilateral development banks, while the US Treasury is driving the World Bank and others to finalise plans for callable capital by April.

APAC TRADE

EQUITIES

• APAC stocks were mostly lower in holiday-quietened conditions and US equity futures were pressured amid geopolitical concerns after a surprise multi-front attack by Hamas on Israel which resulted in at least 700 Israeli deaths and prompted Israel to declare war on Hamas with air strikes conducted on Gaza where 400 have been killed. This spurred a flight to safety which underpinned T-note futures and gold although the biggest moves were seen in oil prices which jumped amid the heightened geopolitical risk as a report also claimed that Iranian security officials helped Hamas plan the attack.
• ASX 200 kept afloat with gains led by strength in the energy and mining-related sectors as underlying commodity prices were lifted owing to the conflict in the Middle East and the return of Chinese buyers to the market.
• Shanghai Comp. was pressured as participants returned from the Mid-Autumn Festival and National Day Golden Week holidays, while Hong Kong trade was delayed for most of the day due to a typhoon no. 8 signal and black rainstorm warning which further added to the already thinned markets caused by holiday closures in Japan, South Korea and Taiwan.
• US equity futures (ES -0.7%) gapped lower in reaction to the large-scale attack by Hamas on Israel.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.3% after the cash market closed up 1.1% on Friday.

FX

• DXY eked slight gains amid an early haven bid and following last week’s better-than-expected headline jobs report, while there were comments over the weekend from Fed’s Bowman that it is likely appropriate to raise interest rates further and hold them restrictive for some time.
• EUR/USD was softer and continued on the recent pullback from resistance at the 1.0600 level.
• GBP/USD weakened amid the mostly negative mood to test support at a floor near 1.2200.
• USD/JPY traded rangebound amid the absence of Japanese participants although the yen was firmer against other major peers owing to its haven status.
• Antipodeans declined as geopolitical concerns offset the tailwinds from higher commodity prices.
• Israeli Shekel slumped to its lowest in nearly 8 years following the deadliest day of violence in Israel in 50 years since the Yom Kippur War.
• Bank of Israel has announced programme to sell up to USD 30bln in FX, Bloomberg reports, will provide liquidity to the market via swap mechanism of up to USD 15bln as necessary, according to Reuters
• PBoC set USD/CNY mid-point at 7.1789 vs exp. 7.2945 (prev. 7.1798)

FIXED INCOME

• 10yr UST futures gapped higher at the open in response to the Israeli-Hamas conflict although moved off intraday highs with further upside limited amid the closure of cash treasuries trade due to the market closure in Tokyo and with bond trade in the US shut on Monday for Columbus Day.
• Bund futures rose above the 128.00 level with prices lifted amid the geopolitical risks.

COMMODITIES

• Crude futures were boosted from the open and saw intraday gains of more than 5% after Hamas' deadliest attack on Israel which Iranian officials reportedly helped to plan.
• Saudi Arabia, Iraq, Kuwait, UAE, Oman and Bahrain reaffirmed commitment to collective and individual voluntary adjustments to oil production, according to Saudi state news agency.
• Iraq set the November 2023 Basrah medium crude price to Asia at +USD 2.10/bbl vs Oman/Dubai and to Europe at -USD 1.15/bbl vs Dated Brent, while it set the price to North and South America at -USD 0.25/bbl vs ASCI, according to SOMO.
• Iraq’s Oil Minister said demand for oil would increase by around 2mln bpd next year and that the world still needs fossil fuels, while its Deputy PM for Energy Affairs said Baghdad shifted its focus to using natural gas for power generation. Furthermore, Iraq said it had not received formal notification from Turkey that the oil pipeline bringing crude from Iraq is operational, according to two senior officials cited by Reuters.
• Chevron (CVX) continues to work with all parties to draft a final agreement based on the recommendation of the Australian Fair Work Commission in response to new strike threats.
• China released the 4th batch of 2023 crude oil import quota totalling 9.54mln tons.
• Finland’s Gasgrid said it is preparing an operation to investigate the cause of a suspected gas pipeline leak and locate the possible leak point, while pipeline repair work may take at least several months depending on the nature of the damage, according to Reuters.
• Spot gold rose back above USD 1850/oz with early support amid a flight to safety.
• Copper futures were underpinned with demand helped by the return of the metal's largest buyer.
• Copper producers warned of a lack of mines to meet the demand for the metal, according to FT.

CRYPTO

• Bitcoin was rangebound with price action capped by resistance near the USD 28,000 level.

NOTABLE ASIA-PAC HEADLINES

• China's MOFCOM extended the investigation of Taiwan's trade barriers against China by 3 months.
• US Senate Majority Leader Schumer led a bipartisan US Senate delegation to China which arrived in Shanghai on Saturday. It was separately reported that Chinese Foreign Minister Wang Yi called on the US to 'manage existing differences more rationally' in a meeting with US Senate Majority Leader Schumer, according to AFP News Agency.

DATA RECAP

• Chinese Foreign Reserves (USD)(Sep) 3.115T (Prev. 3.160T)

GEOPOLITICAL

• Palestinian militant group Hamas launched a surprise multi-front attack on Israel in which militants stormed Israeli towns and claimed to have launched up to 5,000 rockets, while Israeli news reports stated that at least 700 Israelis were killed with more than 2,000 wounded and dozens taken captive. It was separately reported that 232 Palestinians were killed in Israeli air strikes in Gaza, while Israel’s Foreign Ministry said two Israeli tourists and their Egyptian guide were killed in a shooting attack in Alexandria, Egypt.
• Israeli PM Netanyahu said Israel is now at war with Hamas and that their enemy will pay a price it has never known before. It was separately reported that US President Biden said the US stands with Israel and will never fail to have their back. Furthermore, Biden added that Israel has the right to defend itself and its people, while he directed additional support for Israel, according to the White House.
• US Defense Secretary Austin said they have directed the movement of the USS Gerald R. Ford carrier strike group to the eastern Mediterranean and the US will be providing Israel's defence forces with additional equipment and resources including munitions, according to Reuters.
• Iranian President Raisi said Iran supports the legitimate defence of the Palestinian nation and that the Zionist regime and its supporters are responsible for instability in the region, according to Tasnim.
• Iranian security officials reportedly helped plan Hamas’s surprise attack on Israel and gave the green light for the assault at a meeting in Beirut last Monday, according to senior Hamas and Hezbollah members cited by WSJ. However, CNN reported the US is still seeking to determine Iran's connection to the attack.
• Turkish military conducted air strikes against Kurdish militant targets in northern Syria and destroyed targets including an oil facility, shelters and depots with many militants neutralised, according to the Defence Ministry cited by Reuters.
• Ukraine said it expects a record number of drone attacks this winter, according to its air force cited by Reuters.

EU/UK

NOTABLE HEADLINES

• UK Prudential Regulation Authority approached a number of large UK lenders in the past week to see if they were interested in Metro Bank (MTRO LN), according to FT. It was later reported that Metro Bank secured a GBP 325mln capital raise which includes GBP 150mln of new equity and GBP 175mln of new MREL issuance, alongside GBP 600mln of debt refinancing, while it is in discussions regarding an asset sale of up to GBP 3bln in residential mortgages, according to Reuters.
• ECB President Lagarde said they are not seeing a wage-price spiral for the moment but are monitoring it closely, while she reiterated the stance that rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target, according to an interview published by La Tribune Dimanche on Sunday which was conducted on October 2nd.