• APAC stocks were higher after the positive momentum rolled over from global peers owing to dovish Fed rhetoric and China stimulus hopes.
• Hezbollah said it targeted an Israeli tank with missiles and that Israel struck a number of observation posts.
• European equity futures are indicative of a weaker open with the Euro Stoxx 50 future -0.6% after the cash market closed up 2.3% yesterday.
• DXY languishes beneath 106, EUR/USD hovers around 1.06, whilst USD/JPY and Cable sit below 149 and 1.23 respectively.
• Looking ahead, highlights include German CPI (Final), US MBA & PPI, ECB Consumer Expectations Survey, FOMC Minutes, Fed’s Bowman, Waller, Collins & Bostic, Supply from UK, Germany & US.

US TRADE

EQUITIES

• US stocks traded higher with sentiment underpinned amid the latest bout of Fed rhetoric which suggested the recent increase in yields lessens the need for the Fed to hike rates again, although the major indices finished off their best levels with a pullback seen early in the New York afternoon which coincided with reports that Lebanon's Hezbollah announced it had targeted an Israeli tank with missiles.
• SPX +0.52% at 4,358, NDX +0.56% at 15,131, DJIA +0.40 at 33,739, RUT +1.14% at 1,775.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed's Kashkari (voter) said inflation is headed down and it is 'possible' that higher bond yields could leave less for the Fed to do, but added that if long-term yields are higher because of expectations about Fed actions, they may need to follow through and deliver. Kashkari had also commented the Fed may have to hike further if the economy is more resilient and that the reason for the rise now in the 10yr yield is a bit perplexing although one story is higher-growth expectations.
• Fed's Waller (voter) said the Fed will stay on the job to achieve the 2% inflation target.
• Fed's Daly (non-voter) said the decline in goods inflation has been an easy win and is not largely due to the Fed's rate hikes, while she said they are just starting to see an improvement in non-housing services inflation and need more of it. Daly also commented that they have more work to do and inflation is still high but noted that if bond yields are tight, it could be equivalent to another rate hike.
• WSJ's Timiraos said higher bond yields are likely to extend the Fed rate pause and officials are signalling that a run-up in long-term interest rates might substitute for a further central bank rate hike.
• US annual deficit surpassed USD 1.7tln amid rising interest rates, according to the CBO.

APAC TRADE

EQUITIES

• APAC stocks were higher after the positive momentum rolled over from global peers owing to the latest bout of dovish Fed rhetoric and amid China stimulus hopes.
• ASX 200 was led by outperformance in tech and mining-related industries, while the index was unfazed by comments from RBA's Kent who reiterated some further policy tightening may be required.
• Nikkei 225 advanced and briefly breached the 32,000 level to the upside.
• KOSPI was the biggest gainer as shares in index heavyweight Samsung Electronics were boosted after its preliminary Q3 results which showed oper. profit topped forecasts despite declining by 78% Y/Y.
• Hang Seng and Shanghai Comp. conformed to the broad constructive mood amid stimulus hopes with China to boost financial assistance to expand consumption and is weighing new stimulus, as well as a higher budget deficit this year to meet its growth target.
• US equity futures traded sideways and took a breather after the prior day's advances.
• European equity futures are indicative of a weaker open with the Euro Stoxx 50 future -0.6% after the cash market closed up 2.3% yesterday.

FX

• DXY lacked direction and languished at a sub-106.00 level after the latest bout of Fed rhetoric continued to suggest the recent moves in yields meant there was less for the Fed to do, while the attention for the dollar turns to the FOMC Minutes due later followed by US CPI data on Thursday.
• EUR/USD was steady and held on to most of yesterday’s gains after climbing back above 1.0600.
• GBP/USD traded marginally higher and tested the 1.2300 level where it met with resistance.
• USD/JPY saw two-way trade as headwinds from the narrowing of yield differentials and recent BoJ sources were counterbalanced by haven outflows.
• Antipodeans were lacklustre in the absence of tier-1 data releases and after comments from RBA’s Assistant Governor Kent provided little to shift the dial.
• PBoC set USD/CNY mid-point at 7.1779 vs exp. 7.2842 (prev. 7.1781)

FIXED INCOME

• 10yr UST futures were kept afloat following the latest bout of dovish Fed rhetoric, albeit with the upside limited following recent advances and poor demand at the 3yr auction.
• Bund futures were indecisive heading into incoming German inflation data.
• 10yr JGB futures traded marginally higher after recent gains in global counterparts although further upside was capped following mostly softer results from the 5yr JGB auction.

COMMODITIES

• Crude futures were marginally higher but with gains capped in quiet trade amid a lack of pertinent catalysts and with this week's inventory reports delayed owing to the recent federal holiday.
• US and Venezuela are near a deal on sanctions relief for fair elections in which some individual sanctions on Maduro’s entourage would be lifted, according to Bloomberg sources.
• Spot gold traded sideways amid an uneventful dollar ahead of the FOMC Minutes release.
• Copper futures were rangebound and failed to benefit despite the China stimulus hopes.

CRYPTO

• Bitcoin was pressured and approached closer to the USD 27,000 level as the constructive mood saw crypto assets shunned in favour of stocks.

NOTABLE ASIA-PAC HEADLINES

• China will hold the Belt and Road Forum on October 17th-18th with President Xi to attend the opening ceremony and will deliver a keynote speech, according to Reuters citing state media.
• RBA Assistant Governor Kent says monetary policy is slowing the growth of demand and inflation, while he added that policy lags mean some further effects of past rate hikes are still to be felt through the economy and repeated that some further policy tightening may be required.

GEOPOLITICAL

• An Israeli attack helicopter conducted a strike on a Hezbollah observation post in southern Lebanon, while Hezbollah said it targeted an Israeli tank with missiles and that Israel struck a number of observation posts
• Israel's military said soldiers are responding to Syrian launches with artillery and mortar shells, while it also announced that the first plane carrying US ammunition landed in Israel.
• Egyptian official said Israel is telling Cairo it's readying for a months-long ground campaign in Gaza and wants to deal a knock-out blow to Hamas before entertaining the idea of a ceasefire, according to Times of Israel.
• US President Biden and VP Harris held a call with Israel's Prime Minister Netanyahu to discuss support for Israel, according to the White House. Furthermore, President Biden said he discussed "coordination to support Israel, deter hostile actors, and protect innocent people" with Israel's PM.
• US Secretary of State Blinken spoke with Israel's President and reaffirmed US support for Israel's right to defend itself. Furthermore, Blinken will travel to Israel and Jordan on October 11th-13th where he will meet with senior officials, while he will discuss measures to bolster Israel's security and underscore US support for Israel's right to defend itself, according to the State Department.
• US Defence Secretary Austin spoke to his Israeli counterpart and reaffirmed commitment to expedite air defence capabilities, according to the Pentagon.
• White House's Sullivan said they are engaged in contingency planning for all scenarios regarding Israel and do not have confirmation of Iran's link to attack on Israel yet but are looking back at intelligence holdings.
• US was reportedly looking at deploying a second aircraft carrier near Israel, according to WSJ. However, a Pentagon official later said the US has not yet decided to deploy two aircraft carriers simultaneously in the eastern Mediterranean.
• A bipartisan bill in the US to appropriate USD 2bln for Israel was introduced by Democrats which will be used to restock Israel's iron dome.
• Russian Press Secretary Peskov said the situation in Israel is "more than worrying" and has the potential to grow and spill over outside the region, according to Russian press.
• Germany announced a Ukraine air-defence package worth EUR 1bln.

EU/UK

NOTABLE HEADLINES

• Germany will have room for EUR 5bln more in federal net debt and is to lower its 2023 GDP forecast to a contraction of 0.4%, according to Bloomberg.
• EU Industry Chief Breton is reportedly likely to propose a strategy next year requiring big tech to help fund the rollout of 5G and broadband across Europe but any legislation will be up to the next European Commission to decide, according to Reuters sources.