• European bourses and US equity futures have been tilting lower since the cash open despite a lack of major headlines, with traders cognizant of geopolitical risks heading into the weekend.
• Dollar loses some inflation momentum as DXY slips from a double top into a softer 106.510-280 range; T-note is nudging new peaks amidst a return to bull-flattening regardless of a poor long bond auction to continue the run of weak sales this week.
• Crude futures are on the grind higher on Friday despite a lack of fresh fundamentals, with traders likely wary to bet against crude heading into the weekend as geopolitical risk remains at the forefront for the complex
• US eyes closing a loophole that gives Chinese companies access to American AI chips via units located overseas, according to Reuters sources.
• Israel's ground military is building up on the Gaza Strip border; Iran's Foreign Minister said the continuation of war crimes will receive a response from the rest of the axes.
• Looking ahead highlights include US Trade Balance & University of Michigan Inflation Prelim, Speeches from Fed’s Harker & ECB’s Lagarde, Earnings from JPMorgan, Wells Fargo, Citi, PNC Financial Services & Progressive Corp.

13th October 2023

• Click here for the Newsquawk Week Ahead summary.

EUROPEAN TRADE

EQUITIES

• European bourses have been tilting lower since the cash open despite a lack of major headlines during the European morning, with traders cognizant of geopolitical risks heading into the weekend.
• Sectors in Europe are mostly in the red with clear outperformance in energy as crude prices continue marching higher, while Banks, Financials and Healthcare lag.
• US futures have tilted lower alongside the European equity markets as broader sentiment deteriorates, albeit losses across US futures are modest.
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FX

• Dollar loses some inflation momentum as DXY slips from a double top into a softer 106.510-280 range.
• The Pound rebounds around the 1.2200 pivot vs Buck and the Euro steadies on the 1.0500 handle amidst massive EUR/USD option expiries.
• Franc holds above 0.9100 as yields retreat and the Loonie is over 1.3700 as oil recovers.
• Yen still defending 150.00 and the Kiwi in danger of losing 0.5900 on the eve of New Zealand election.
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FIXED INCOME

• Bonds futures have extended their recovery from post-US CPI lows in what could be described as a risk revival given a marked downturn in equities.
• Bunds have reclaimed more than half of yesterday’s heavy losses to suggest more than a technical correction.
• Gilts have overcome a few wobbles to track their Eurozone counterpart.
• T-note is nudging new peaks amidst a return to bull-flattening regardless of a poor long bond auction to continue the run of weak sales this week.
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COMMODITIES

• Crude futures are on the grind higher on Friday despite a lack of fresh fundamentals, with traders likely wary to bet against crude heading into the weekend as geopolitical risk remains at the forefront for the complex.
• Dutch TTF is firmer intraday as prices for the Nov contract eye USD 54/MWh to the upside, potentially partially buoyed by action in the crude complex.
• Spot gold edged higher to eventually top yesterday’s USD 1,884.79/oz high, while the 50 DMA today coincides with the USD 1,900/oz psychological mark. Spot silver also benefits and is back on a USD 22/oz handle.
• Base metals are mixed with little reaction seen to the release of Chinese inflation and trade data overnight, with the data showing iron ore and copper imports fell in September.
• Australia union official said progress has been made with Chevron (CVX) in LNG labour talks, but there is no deal yet; further talks are planned for Monday, according to Reuters.
• Russian Deputy PM Novak says there are no discussions about an OPEC-like cartel for natural gas; says settlements in USD and EUR for Russian oil trade remain but have declined significantly. Discount to Russian oil on the global market to international benchmarks stabilised at USD 11-12/bbl from USD 35-38/bbl in early 2023, according to Reuters. Novak added that there is limited potential for further narrowing of the Urals prices discount.
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NOTABLE EUROPEAN HEADLINES

• German Chancellor Scholz reportedly faces renewed pressure to stem the property rout in a standoff with the industry, according to Reuters sources. Germany's building industry will present the chancellor with a new set of proposed measures this month to cushion the downside in the property sector.
• European Foreign Policy Commissioner Borrell says European investments in China have seen a sharp downturn and today they are at the lowest level since 2018, according to Reuters.
• Italian Economy Minister, when asked about a potential rating downgrade, said they have had discussions with rating agencies and cannot rule anything out, according to Reuters.
• ECB's Kazaks said he is quite happy with where rates currently are, via CNBC; would not close the door on further rate increases.
• ECB's Nagel said inflation has peaked in Germany, the labour market remains strong, and expects consumer demand to increase, according to Reuters.
• ECB's Visco said there are no signs that Italian spreads will be reaching levels for the ECB to take action, according to Bloomberg.
• BoE Governor Bailey said he is seeing progress that inflation is being tackled but there is work left to do, and added policy is restrictive and it needs to be, according to Reuters.
• UK Chancellor Hunt said the Autumn Budget statement will be "balanced with caution about the international situation"; needs to show in the statement that there is a path to lower taxation. He added the Autumn statement will lay out a plan to get out of the low growth trap, according to Reuters.

EUROPEAN DATA RECAP

• EU Industrial Production YY (Aug 2023) -5.1% vs. Exp. -3.5% (Prev. -2.2%)
• EU Industrial Production MM (Aug 2023) 0.6% vs. Exp. 0.1% (Prev. -1.1%, Rev. -1.1%)
• Riksbank sold USD 390mln (between September 25-29th), sold EUR 0 in its currency FX reserve hedging.
• Swedish CPIF YY (Sep 2023) 4.0% vs. Exp. 3.8% (Prev. 4.7%)
• Swedish CPIF MM (Sep 2023) 0.4% vs. Exp. 0.2% (Prev. -0.1%)
• Swedish CPI YY (Sep 2023) 6.5% vs. Exp. 6.3% (Prev. 7.5%)
• Swedish CPI MM (Sep 2023) 0.5% vs. Exp. 0.3% (Prev. 0.1%)

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.
• UK CMA clears the deal for Microsoft (MSFT) to acquire Activision Blizzard (ATVI) without conditions, said Ubisoft (UBI FP) acquiring rights instead of Microsoft addressing its concerns. The new deal for Microsoft to buy Activision without cloud gaming rights has been cleared after the CMA concluded it would preserve competitive prices and better services.
• US Rep. Scalise is reportedly dropping out of the US House Speaker race.
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GEOPOLITICS

• Israel's ground military is building up on the Gaza Strip border, Sky News Arabia reports.
• The 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.
• 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 the consequences of US drills in South Korea, according to KCNA.
• Indian Trade Secretary said a Free Trade Agreement with the UK is in an advanced stage of negotiations, according to Reuters.
• Russian President Putin proposes hosting peace talks between Azerbaijan and Armenia in Moscow, according to Reuters.

CRYPTO

• Bitcoin is steady under the USD 27,000 mark while Ethereum sees modest gains above USD 1,550.

APAC TRADE

• 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.

NOTABLE ASIA-PAC HEADLINES

• PBoC set the USD/CNY mid-point at 7.1775 vs exp. 7.3179 (prev. 7.1776).
• PBoC Governor Pan met with Fed Chair Powell in Morocco on October 12th and exchanged views on cooperation, according to Reuters citing the PBoC.
• PBoC official said stable CNY has a solid foundation; and will resolutely prevent the risk of CNY overshooting; China will maintain a current account surplus, according to Reuters.
• PBoC said it will implement monetary policy in a precise and forceful manner. The official said the central bank still has ample room to support the economy. PBoC said recent interest rate reductions for the property sector have achieved significant results, and expects total social finance and credit to maintain steady growth in Q4, according to Reuters.
• China's NPC Standing Committee is to hold a meeting between Oct 20-24th; to discuss offer for new local government debt quota, according to Xinhua.
• 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.
• S&P said Japan is robust enough for rising JPY rates, expects a gradual increase in Japan's interest rates, and added that rates will rise from 2024, according to Reuters.
• IMF said BoJ's YCC tweak led to spillover in global bond market; could become larger in event of more substantial policy normalisation, according to Reuters.

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%)
• Looking ahead, highlights include US Trade Balance & University of Michigan Inflation Prelim, Speeches from Fed’s Harker & ECB’s Lagarde, Earnings from JPMorgan, BlackRock, Wells Fargo, Citi, PNC Financial Services & Progressive Corp.