• APAC stocks mostly declined following the losses on Wall St post-Powell and as geopolitical tensions remain high.
• Fed Chair Powell suggested that policy was not too tight but also noted that higher bond yields at the margin could reduce the need for the Fed to tighten.
• Israel's military received the 'green light' to move into Gaza, according to ABC News citing an Israeli official.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.7% after the cash market closed down 0.4% yesterday.
• DXY heads into the European session broadly firmer vs. peers, USD/JPY continues to eye 150.
• Looking ahead, highlights include German Producer Prices, UK Retail Sales, Ratings Including Moody's on France & UK, S&P on UK, Italy, Greece & Netherlands, Fed's Harker & Mester, Earnings from Kering, Schlumberger & American Express.

US TRADE

EQUITIES

• US stocks finished lower with two-way trade seen in reaction to the various comments from Fed Chair Powell who noted the Fed is proceeding carefully and is attentive to the move higher in bond yields, while he suggested that policy was not too tight but also noted that higher bond yields at the margin could reduce the need for the Fed to tighten. Nonetheless, stocks eventually dipped as the attention then turned to the geopolitical headlines including reports that Israel's military received the green light to enter Gaza, while a US warship intercepted missiles fired by Iranian-backed Houthis which were said to be aimed at Israel.
• SPX -0.85% at 4,277, NDX -0.85% at 14,783, DJIA -0.75% at 33,414, RUT -1.51% at 1,702.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed Chair Powell said the policy-setting committee is ‘proceeding carefully’ and significant tightening in financial conditions with higher bond yields can have implications for policy, while they remain attentive and policy stance is restrictive. Powell added that the extent of additional policy firming and how long to keep policy restrictive will depend on the data, outlook and balance of risks, while he noted that the task of balancing too much tightening vs too little is complicated by uncertainties and given the fast pace of the tightening, there may still be meaningful tightening in the pipeline. Powell said during the Q&A that the economy is very resilient and growing strongly with growth running above its long-run trend and is a surprise, while he added that it does not feel like policy is too tight and evidence says it is not. Furthermore, Powell said the rise in bond yields is driven by term premiums and that markets may be responding to deficits and Fed balance sheet actions, as well as noted that higher bond yields at the margin could reduce the need for the Fed to tighten.
• Fed's Vice Chair for Supervision Barr said a single stress test scenario cannot capture all 'plausible risks' faced by large banks and the Fed is developing additional scenarios for the 2024 stress tests for large banks.
• Fed's Goolsbee (voter) said they have not seen a recession and hopefully they can avoid it.
• Fed's Logan (voter) has seen welcome progress on inflation but it is still too high and she is not yet convinced they are moving to 2% inflation, while she added the economy continues to outperform and labour markets are still tight. Logan said it is important to have restrictive financial conditions broadly speaking and the Fed has time to watch the economy and markets before deciding on monetary policy. Furthermore, she said some part of the bond yield rise is tied to term premiums and some part of the rise is also tied to the strength of economic data, as well as noted that the persistent rise in bond yields could mitigate the need for Fed rate hikes.
• Fed's Bostic (non--voter) said cooling inflation remains the Fed's main mission, while he added they have not seen a wage-price spiral take place and that wages are a lagging indicator in the current economy. Furthermore, he believes the Fed can control inflation without causing large damage to the job market.
• US House is to vote again on GOP Rep. Jordan's speaker bid at 10:00EST on Friday, according to a Jordan staffer.

APAC TRADE

EQUITIES

• APAC stocks mostly declined after the losses on Wall St where the curve steepened as markets digested various comments from Fed Chair Powell and with sentiment pressured by the escalating geopolitical situation.
• ASX 200 was dragged lower with broad weakness seen across all sectors aside from energy which is kept afloat by the geopolitical risk premium uplift in oil prices.
• Nikkei 225 retreated at the open but then gradually pared its losses amid reports of potential temporary income tax cuts and with participants also digesting the latest Japanese CPI data which printed mostly firmer than expected but softened from the previous month’s pace.
• Hang Seng and Shanghai Comp. were subdued albeit with the downside cushioned after the PBoC’s actions in which it unsurprisingly maintained its benchmark lending rates but boosted liquidity in the interbank market with its largest-ever open market operation net daily injection.
• US equity futures were contained following the prior day's selling pressure and amid geopolitical risks.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.7% after the cash market closed down 0.4% yesterday.

FX

• DXY kept afloat but with price action rangebound after the two-way moves seen at the whim of somewhat mixed comments from Fed Chair Powell who suggested policy was not too tight but also acknowledged that higher bond yields at the margin could reduce the need for the Fed to tighten.
• EUR/USD traded uneventfully with price action contained after the recent brief foray into 1.0600 territory.
• GBP/USD was lacklustre with the currency not helped by weaker UK GFK Consumer Confidence and the ruling Conservative party's scathing defeat in the Tamworth and Mid-Bedfordshire by-elections.
• USD/JPY remained confined to a tight range and in proximity for a test of the 150.00 level.
• Antipodeans were marginally lower alongside the risk-averse conditions.
• PBoC set USD/CNY mid-point at 7.1793 vs exp. 7.3055 (prev. 7.1795).

FIXED INCOME

• 10yr UST futures nursed some of their recent losses as yields gradually eased back after the 10yr yield briefly climbed above 5% for the first time since 2007, while there had been notable steepening amid Powell’s mixed messaging.
• Bund futures gradually ticked higher and found some composure after yesterday's choppy performance.
• 10yr JGB futures bounced off 2-week lows but with upside capped by a lack of additional BoJ purchases and after mostly firmer-than-expected Japanese inflation data.

COMMODITIES

• Crude futures continued to edge higher amid the escalating geopolitical situation in the Middle East.
• Spot gold was steady and held on to recent spoils which were spurred by a haven bid.
• Copper futures remained subdued after recent fluctuations and amid a cautious mood.
• US and EU reportedly stalled on a steel accord although both sides are seeking a deal to avoid the return of Trump-era levies, according to Bloomberg.

CRYPTO

• Bitcoin strengthened overnight and climbed back above the USD 29,000 level.

NOTABLE ASIA-PAC HEADLINES

• PBoC 1-Year Loan Prime Rate (Oct) 3.45% vs. Exp. 3.45% (Prev. 3.45%)
• PBoC 5-Year Loan Prime Rate (Oct) 4.20% vs. Exp. 4.20% (Prev. 4.20%)
• PBoC injected CNY 828bln via 7-day reverse repos with the rate kept at 1.80% for a CNY 733bln net daily injection.

DATA RECAP

• Japanese National CPI YY (Sep) 3.0% vs. Exp. 3.0% (Prev. 3.2%)
• Japanese National CPI Ex. Fresh Food YY (Sep) 2.8% vs. Exp. 2.7% (Prev. 3.1%)
• Japanese National CPI Ex. Fresh Food & Energy YY (Sep) 4.2% vs. Exp. 4.1% (Prev. 4.3%)
• New Zealand Trade Balance (NZD)(Sep) -2329.0M (Prev. -2291.0M, Rev. -2273M)
• New Zealand Exports (NZD)(Sep) 4.87B (Prev. 4.99B, Rev. 4.97B)
• New Zealand Imports (NZD)(Sep) 7.2B (Prev. 7.28B, Rev. 7.24B)

GEOPOLITICAL

• Israel's military received the 'green light' to move into Gaza, according to ABC News citing an Israeli official.
• US Navy warship near Yemen reportedly intercepted multiple missiles which were said to have been fired by Iranian-backed Houthi militants, according to CNN citing officials. It was later reported that Israel estimates that the missiles launched from Yemen and intercepted by the Americans were aimed at Israeli territory.
• Drones and rockets reportedly attacked Iraq's Ain Al-Asad airbase which hosts US and international forces with multiple blasts heard inside the base, while it was reported there was a rocket attack that targetted an Iraqi military base near Baghdad Airport which also hosts US forces, according to Reuters citing security sources and the police.
• US President Biden said they are facing an inflection point in history and the US is pursuing every avenue to bring hostages home, while he added the assault on Israel echoes the brutality inflicted on Ukraine and that Hamas and Putin share a want to annihilate neighbouring democracies. Furthermore, Biden said making sure Israel and Ukraine succeed is vital for US national security and they will continue to hold Iran accountable, while he confirmed he is sending an urgent budget request to Congress today.
• US President Biden's supplemental spending request to Congress will include USD 60bln for Ukraine, USD 14bln for Israel, USD 10bln for humanitarian aid, USD 14bln for border security and USD 7bln for the Indo-Pacific, according to sources cited by Reuters.
• US is to send two Iron Dome systems back to Israel to defend itself against incoming missiles.
• EU Commission President von der Leyen said 93% of Hamas's equipment comes from Iran and it is important to step up sanctions on Iran and crackdown on evasion, while she added that Western sanctions on Russia are crippling the economy but ongoing pressure is necessary.
• China's Middle East envoy met with the Russian President's Special Representative for Middle East and African Countries on Thursday and said China is saddened by the large number of civilian casualties from the Israeli-Palestinian conflict. China's envoy added that China and Russia share the same position on the Palestinian issue and China is ready to maintain communication and coordination with Russia in order to cool down the situation.
• North Korean leader Kim met with Russian Foreign Minister Lavrov and expressed resolve to fulfil commitments made at the summit with Russian President Putin, while they discussed expanding cooperation to actively respond to regional and global issues. It was also reported that North Korea said it has already enacted action plans to be triggered when signs of an imminent nuclear attack are detected, according to KCNA.

EU/UK

NOTABLE HEADLINES

• UK PM Sunak's Conservatives lost the by-elections in Tamworth and Mid-Bedfordshire to the Labour Party where the Conservatives previously had a large majority.

DATA RECAP

• UK GfK Consumer Confidence (Oct) -30.0 vs. Exp. -20.0 (Prev. -21.0)