• APAC stocks were mostly lower amid headwinds from the US, while the region also digested softer-than-expected inflation and mixed trade data from China.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.3% after the cash market closed down 0.1% yesterday.
• DXY remains on a 106 handle, EUR/USD lingers around 1.0550, GBP reclaimed 1.22 vs. the USD.
• US eyes closing loophole that gives Chinese companies access to American AI chips via units located overseas, according to Reuters sources.
• Looking ahead, highlights include EZ Industrial Production, US Trade Balance & University of Michigan Inflation Prelim, Fed’s Harker & ECB’s Lagarde, Earnings from UnitedHealth, JPMorgan, BlackRock, Wells Fargo, Citi, PNC Financial Services & Progressive Corp.

US TRADE

EQUITIES

• US stocks and bonds were hit as the dollar and yields climbed in the aftermath of the firmer-than-expected headline US inflation data and with headwinds exacerbated following a dismal 30yr auction.
• SPX -0.62% at 4,349, NDX -0.37% at 15,184, DJIA -0.51% at 33,631, RUT -2.20% at 1,734.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed's Collins (non-voter) said the Fed is at or near the peak of the rate hike cycle and the bond yield rise likely reduces the need for a near-term Fed hike but added it is too soon to take the prospect of an additional rate hike off the table. Collins also commented that the latest CPI data underscores uneven progress towards the 2% target and current monetary policy phase calls for patience, while she also stated that CPI data reiterates it will take time to get inflation back down and it is too soon to say inflation is on a sustainable path to the 2% target.
• US Rep. Scalise is reportedly dropping out of the US House Speaker race.

APAC TRADE

EQUITIES

• APAC stocks were mostly lower amid headwinds from the US where headline CPI data topped forecasts, while the region also digested softer-than-expected inflation and mixed trade data from China.
• ASX 200 was pressured with underperformance in real estate and tech alongside rising yields and as markets reflected on the latest gauges into the economic health of Australia’s largest trading partner.
• Nikkei 225 traded negatively but with price action choppy and downside stemmed as Japan plans to release an economy security plan to protect vital industries like semiconductors and with index heavyweight Fast Retailing boosted by earnings.
• Hang Seng and Shanghai Comp. were lower with tech the worst hit in Hong Kong amid broker downgrades and as the US reportedly eyes closing a loophole that gives Chinese companies access to American AI chips via units located overseas. Furthermore, Chinese inflation data underwhelmed with consumer inflation flat and factory gate prices at a deeper-than-forecast decline, while participants digested mixed trade data in which exports beat expectations but remained in contractionary territory.
• US equity futures (ES +0.1%) traded sideways as the attention now shifts to big US bank earnings.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.3% after the cash market closed down 0.1% yesterday.

FX

• DXY was rangebound and took a breather after it recently rose back above 106.00 in the aftermath of the firmer-than-expected headline CPI data and as yields climbed following a dismal 30yr bond auction.
• EUR/USD attempted to nurse some of its losses although the recovery lacked any meaningful strength after yesterday’s slide to beneath the 1.0600 handle.
• GBP/USD mildly rebounded from the prior day's lows and just about reclaimed the 1.2200 status.
• USD/JPY plateaued after advancing closer towards the 150.00 level on yield differentials.
• Antipodeans were uneventful amid the mixed Chinese data releases and ahead of tomorrow’s New Zealand election where polls suggest a change in government.
• PBoC set USD/CNY mid-point at 7.1775 vs exp. 7.3179 (prev. 7.1776).

FIXED INCOME

• 10yr UST futures moved off the prior day’s low with some reprieve from the prior day’s selling although have far to go to clawback the losses triggered by the US CPI data and dismal 30yr auction.
• Bund futures remained subdued and languished near yesterday’s trough beneath the 129.00 level.
• 10yr JGB futures tracked recent selling from global peers and with prices not helped by the lack of additional BoJ purchases.

COMMODITIES

• Crude futures kept afloat but with gains limited by the risk-off mood and after recent price swings.
• Russian Deputy PM Novak said restrictions on fuel exports will be further eased if necessary and that Russian gas supplies to Europe fell by around two-thirds.
• G7 Communique said they will closely monitor price caps on Russian crude oil and petroleum products and take necessary enforcement measures.
• Spot gold partially nursed some of the post-CPI losses which were mostly due to dollar strength.
• Copper futures were contained after yesterday's selling pressure and mixed Chinese data.

CRYPTO

• Bitcoin traded flat in which prices languished beneath the USD 27,000 level.

NOTABLE ASIA-PAC HEADLINES

• PBoC Governor Pan met with Fed Chair Powell in Morocco on October 12th and exchanged views on cooperation, according to Reuters citing the PBoC.
• Chinese Vice Premier Zhang called for efforts to vigorously develop advanced manufacturing and accelerate new industrialisation, according to Chinese press.
• China is said to weigh a new stabilisation fund to prop up the stock market with the plan calling for the fund to have access to up to hundreds of billions of yuan in capital, according to Bloomberg.
• US eyes closing loophole that gives Chinese companies access to American AI chips via units located overseas, according to Reuters sources
• China's Customs said China's trade still faces many difficulties and challenges, while it added that China's trade also faces a complex and severe external environment.
• Monetary Authority of Singapore maintained the width, centre and slope of the SGD NEER policy band, as expected, while it announced to shift to a quarterly schedule of policy reviews. MAS said it will closely monitor global and domestic economic developments amid uncertainty on inflation and growth, as well as noted that prospects for the Singapore economy are muted in the near term but should improve gradually in H2 2024.

DATA RECAP

• Chinese Trade Balance (USD)(Sep) 77.71B vs. Exp. 70.0B (Prev. 68.36B)
• Chinese Exports YY (USD)(Sep) -6.2% vs. Exp. -7.6% (Prev. -8.8%)
• Chinese Imports YY (USD) (Sep) -6.2% vs. Exp. -6.0% (Prev. -7.3%)
• Chinese Trade Balance (CNY)(Sep) 558.7B (Prev. 488.0B)
• Chinese Exports YY (CNY)(Sep) -0.6% (Prev. -3.2%)
• Chinese Imports (CNY)(Sep) -0.8% (Prev. -1.6%)
• Chinese CPI YY (Sep) 0.0% vs. Exp. 0.2% (Prev. 0.1%)
• Chinese PPI YY (Sep) -2.5% vs. Exp. -2.4% (Prev. -3.0%)
• Singapore GDP QQ (Q3 P) 1.0% vs Exp. 0.5% (Prev. 0.3%)
• Singapore GDP YY (Q3 P) 0.7% vs Exp. 0.4% (Prev. 0.5%)

GEOPOLITICAL

• Israeli military called for an evacuation of all civilians in Gaza City from their homes southwards and said Gaza City is an area where military operations take place, while it will operate significantly in Gaza City in the coming days, according to Reuters.
• Israeli military informed the UN that all Palestinians north of Wadi Gaza should relocate to southern Gaza in the next 24 hours which amounts to approximately 1.1mln people, while the UN strongly appealed for any such order to be rescinded to avoid a calamitous situation, according to a UN spokesman. Furthermore, a Hamas official said the Gaza relocation warning is fake propaganda and it urged its citizens not to fall for it, according to Reuters.
• UK PM Sunak spoke with Israeli PM Netanyahu and reaffirmed the UK support for Israel following the Hamas attack, while he confirmed the UK had authorised sending a significant support package including a surveillance aircraft. Furthermore, the UK is sending two Royal Navy ships to patrol in the eastern Mediterranean, three Merlin helicopters and a detachment of Royal Marines, according to Reuters.
• US and Qatar agreed to stop Iran from tapping USD 6bln of funds, according to Washington Post sources. It was separately reported that US Secretary of State Blinken said they have strict oversight of Iranian funds and retain the right to freeze them, while he added that none of Iran's funds that were sent to Qatar have been spent or accessed. However, Iran's FourNews which is affiliated with its top security body, noted that Iran's funds in Qatar are fully accessible.
• Iran's Foreign Minister said the continuation of war crimes will receive a response from the rest of the axes and 'the Zionist entity' will be responsible for that, while he added that the displacement of tens of thousands of Palestinians and cutting off water and electricity is considered a war crime.
• US, Japanese and South Korean officials are to discuss North Korean matters on October 17th in Jakarta, Indonesia, while it was separately reported that North Korea warned of consequences of US drills in South Korea, according to KCNA.