• APAC stocks were mostly positive as key markets reopened from the long weekend and following the recovery seen on Wall Street.
• Stocks in the US recovered following dovish-leaning Fed rhetoric which acknowledged the impact of higher Treasury yields on financial conditions.
• Israeli PM Netanyahu said air strikes against Hamas in Gaza are just the beginning, while he added that Hamas sought war and Hamas will get war.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 future +1.0% after the cash market closed down 0.8% yesterday.
• DXY is back above the 106 mark, JPY marginally lags, EUR/USD trades just above the 1.0550 level.
• Looking ahead, highlights include US NFIB Business Optimism, Wholesale Inventory & Sales, NY Fed Survey of Consumer Expectations, Chinese Aggregate Financing & M2 Money Supply, ECB's Lagarde, Fed’s Bostic, Waller, Kashkari & Daly, Supply from UK, Germany & US.

US TRADE

EQUITIES

• US stocks finished higher as the initial reaction to the geopolitical risks following the attack in Israel was later unwound by dovish-leaning Fed rhetoric which acknowledged the impact of higher Treasury yields on financial conditions, meaning the Fed may not have to do as much. This brought forward the market pricing for the first rate cut to June 2024 from the previous pricing of July earlier in the day, while the odds of a November rate hike diminished further to around 12% from 22% initially.
• SPX +0.63% at 4,335, NDX +0.49% at 15,047, DJIA +0.59 at 33,604, RUT +0.60% at 1,755.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed's Vice-Chair Jefferson (voter) said the Fed needs to move carefully to balance risks of tightening too much or too little and it may be too soon to say confidently that they have tightened enough. Furthermore, he said the Fed can 'proceed carefully' amid better risk balance and will keep in mind the tightening impact of higher yields.
• US President Biden was voluntarily interviewed as part of the classified documents investigation being led by Special Counsel Robert Hur, according to the White House.
• Several House GOP sources told CBS that McCarthy was approached several times over the weekend to consider standing for Speaker if Scalise and Jordan fail to get the necessary votes this week.

APAC TRADE

EQUITIES

• APAC stocks were mostly positive as key markets reopened from the long weekend and following the recovery seen on Wall Street owing to a bout of dovish-leaning Fed commentary.
• ASX 200 was lifted as utilities and tech led the broad-based gains across sectors and with the index unfazed by the mixed consumer and business confidence data releases.
• Nikkei 225 outperformed on return from holiday and got its first opportunity to react to the key market themes including last week’s US jobs data, the Israel-Hamas conflict and recent Fed rhetoric.
• KOSPI gained with chipmakers boosted after reports that Samsung Electronics and SK Hynix will be allowed to supply US chip equipment to their China factories indefinitely without separate US approvals.
• Hang Seng and Shanghai Comp. were mixed with Hong Kong lifted by strength in tech and property, while the mainland lagged amid underwhelming holiday spending and lingering debt concerns after Country Garden flagged it will not be able to meet all offshore obligations.
• US equity futures traded rangebound following yesterday's notable intraday recovery.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 future +1.0% after the cash market closed down 0.8% yesterday.

FX

• DXY was rangebound but briefly tested the 106.00 level to the downside following the recent dovish Fed commentary which suggested the recent gains in yields could mean there is less for the Fed to do.
• EUR/USD took a breather amid a lack of fresh catalysts and after the prior day’s intraday rebound.
• GBP/USD was flat with price action contained following a return journey from sub-1.2200 territory.
• USD/JPY nursed some losses after having retreated yesterday on narrowing yield differentials.
• Antipodeans were initially underpinned amid the mostly positive risk tone and firmer-than-expected CNY reference rate setting, but then gave back nearly all of their gains.
• PBoC set USD/CNY mid-point at 7.1781 vs exp. 7.2758 (prev. 7.1789).

FIXED INCOME

• 10yr UST futures were uneventful but held on to most of their recent spoils after momentum was initially spurred by a flight to safety and with support also seen following the latest bout of Fed rhetoric which brought forward money market pricing for the first rate cut by a month to June next year.
• Bund futures tested yesterday’s best levels albeit with upside capped by resistance near 129.50.
• 10yr JGB futures tracked the gains in global counterparts and with the BoJ in the market for JPY 1.4tln of JGBs on top of its fixed-rate operations.

COMMODITIES

• Crude futures were rangebound but held on to the majority of the prior day's gains owing to geopolitical risk premium following that attack on Israel and its subsequent siege on Gaza.
• US and Venezuela reportedly progress in talks that could lead to additional oil sanctions relief, according to Reuters citing sources.
• Spot gold traded sideways and plateaued near its highest level in more than a week.
• Copper futures failed to sustain early gains amid the subdued risk appetite in China.

CRYPTO

• Bitcoin was little changed with price action choppy but remained above the USD 27,500 level.

NOTABLE ASIA-PAC HEADLINES

• China's Commerce Minister Wang said in talks with the delegation of US senators that the US-China economic and trade relationship is very important to the two countries and China will not avoid competition but it should be fair and based on international rules. Wang said both sides had rational and pragmatic discussions and China hopes the US is to specify the boundaries of security accurately, as well as avoid politicising and generalising security issues, according to Reuters.
• Country Garden (2007 HK) said it took various measures to alleviate liquidity pressure to minimise the impact on project construction and operations, while its liquidity position is expected to remain very tight in the short to medium term. Co. also said it had not made a due payment in the principal amount of HKD 470mln under certain of its indebtedness and expects that it will not be able to meet all offshore obligations when due or within relevant grace periods.
• EU is planning an anti-subsidy probe into Chinese steelmakers, according to FT.

DATA RECAP

• Australian Westpac Consumer Confidence Index (Oct) 82.0 (Prev. 79.7)
• Australian Westpac Consumer Confidence M/M (Oct) 2.9% (Prev. -1.5%)
• Australian NAB Business Confidence (Sep) 1 (Prev. 2)
• Australian NAB Business Conditions (Sep) 11 (Prev. 13)

GEOPOLITICAL

• Israeli PM Netanyahu said air strikes against Hamas in Gaza are just the beginning, while he added that Hamas sought war and Hamas will get war.
• Israel's government said it decided to continue bombing Gaza even if it kills Israeli prisoners unless their whereabouts are known, according to Sky News Arabia.
• Hamas official said they are open to discussions over a truce with Israel and said Israeli captives include tens with dual citizenships, while captives also include Russians and Chinese. However, it was separately reported that Hamas said it would start executing an Israeli civilian captive in return for any new Israeli bombing of civilian houses without pre-warning.
• US Pentagon said Chairman of Joint Chiefs of Staff Brown spoke with Israeli counterpart Halevi and discussed steps to strengthen US military posture in the region and bolster deterrence efforts. It was also reported that General Brown said the message to Iran is not to get involved in the crisis in Israel and he does not want the conflict to broaden.
• White House joint statement from the US, UK, France, Italy and Germany states their countries will support Israel in its efforts to defend itself, while they will remain united and coordinated to ensure Israel is able to defend itself, according to Reuters.
• White House's Kirby said there is no intention to put US boots on the ground after the Israel attack, while he added the US expects additional security requests from Israel and that they will try to fulfil those needs as fast as possible. Kirby also stated they have not seen hard tangible evidence that Iran was directly involved in the Hamas attacks on Israel and cannot corroborate the report in WSJ about specific Iranian involvement in the Hamas attack on Israel.
• Hezbollah said they will respond to Israel if any of their men are killed and it later fired on north Israel in response to four of its members being killed, according to two security sources cited by Reuters.
• UAE warned the Assad regime in Syria not to intervene in the Hamas-Israel war or to allow attacks on Israel from Syrian soil, according to Axios citing two sources briefed on the Emirati diplomatic effort.
• Senior UN official met with Russian officials in Moscow to discuss Russian and Ukrainian food and fertiliser exports, while talks are aimed at facilitating unimpeded access to global markets for food and fertilisers from Russia and Ukraine.
• Turkish President Erdogan said Turkey is ready for a mediator role in the Israeli-Palestinian conflict.
• North Korean state media said an important report is coming up but didn't provide details, while an official said the military spy satellite is an indispensable option to counter the US, according to Yonhap.
• China's Coast Guard said a Philippines navy boat illegally intruded into waters around the Scarborough Shoal and it took measures to drive away the Philippines vessel, according to Reuters.

EU/UK

NOTABLE HEADLINES

• BoE's Mann said wage and price inflation are 'sticky downwards' and noted that going forward, the length of time inflation remains above target will be important given inflation expectations tend to drift, while she added that the possible drift in expectations implies that policy has to be more aggressive.

DATA RECAP

• UK BRC Retail Sales YY (Sep) 2.8% (Prev. 4.3%)
• UK BRC Total Sales YY (Sep) 2.7% (Prev. 4.1%)
• UK Barclaycard Consumer Spending YY (Sep) 4.2% (Prev. 2.8%)