• European bourses & US futures reside in the green despite initial PMI-pressure, focus turns to US mega-caps
• DXY in the green and aided by EUR downside to the modest detriment of peers though AUD outperforms post-Bullock
• EGBs bolstered by the PMIs with yields pressured as such while USTs remain more contained pre-data/supply
• Two-way commodity action on data and subsequent geopolitical/macro updates, crude currently in the green
• Israel reportedly willing to delay its Gaza ground invasion by a few days for hostage talks, via Axios
• Looking ahead, highlights include US Flash PMIs, NBH Policy Announcement, supply from the US. Microsoft, Alphabet, Visa, Coca-Cola, Texas Instruments, Verizon

EUROPEAN TRADE

EQUITIES

• European bourses were initially pressured from soft PMIs and as EZ credit standards continued to tighten. Since then, the space has recovered back into the green as newsflow slows somewhat but has featured favourable updates that Israel is willing to delay its Gaza ground invasion by a few days, Euro Stoxx 50 +0.5%.
• Within Europe, sectors are being dictated by earnings with Basic Resources outperforming after favourable reports from sector heavyweights while Banking names lag post-Barclays.
• US futures have been directionally in-fitting but with magnitudes slightly more contained than those in Europe, ES +0.4% and above 4250; NQ +0.7% continues to outperform ahead of numerous mega-cap corporate updates incl. Microsoft & Alphabet.
• General Electric Co (GE) Q3 2023 (USD): Adj. EPS 0.82 (exp. 0.56), Adj. Revenue 16.50bln (exp. 15.7bln). Raises FY Adj. EPS view 2.55-2.65 (prev. 2.10-2.30; exp. 2.36), FY organic Revenue view "low teens" (prev. "low double digits"). +6.0% in pre-market trade.
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FX

• Aussie and Euro flank G10 ranks as AUD/USD rebounds through 0.6350 with incentive from hawkish RBA rhetoric, but EUR/USD loses 1.0650+ status after disappointing EZ PMIs.
• DXY regains poise between 105.350-780 parameters as US Treasuries top out pre-PMIs and 2 year supply.
• Yen pivots 149.50 vs Dollar amidst more BoJ source reports touting the potential for YCC tweak.
• Sterling straddles 1.2250 in wake of roughly in line UK PMIs and dip in ILO jobless rate.
• RBA's Bullock says the Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation. It is possible that the inflation goal can be achieved with the cash rate at its current level but there are risks that could see inflation return to target more slowly than currently forecast.
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FIXED INCOME

• Bonds extend bull-flattening correction before petering out.
• Bunds reach 129.12 from 128.22, Gilts climb from 92.71 to 93.34 and T-note fades at 106-22 compared to 106-08+ overnight low ahead of US PMIs and 2 year note auction.
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COMMODITIES

• Commodities have experienced some modest divergence with crude benchmarks initially firmer but slipping in the wake of another batch of soft PMIs from the EZ; price action which was exacerbated by PMI-induced EUR pressure and associated USD strength as a result, pushing the contracts to eventual session lows of USD 85.09/bbl and USD 89.46/bbl for WTI & Brent Dec'23 respectively.
• Thereafter, the crude complex has moved back marginally into the green amid reports around China's Xi and details within the latest Axios piece.
• Spot gold has dipped marginally into the red amid the EUR-driven bout of USD strength. Though, the yellow metal remains comfortably above technical figures with the 10-DMA closest at USD 1935/oz compared to the current USD 1965/oz session trough which itself is just USD 1 above Monday’s base.
• Base metals are similarly supported after Monday's marked pressure and perhaps deriving support from the Chinese-driven APAC session, the mentioned PBoC/Xi visit and numerous well-received European earnings in the space.
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EUROPEAN HEADLINES

• German Economy Minister has promised industry EUR 50bln in tax relief over the coming four years, according to Handelsblatt. Additionally, Habeck is reportedly planning industrial policy which is geared towards state support and is looking to loosen the debt brake to attain this, via Welt & Suddeutsche Zeitung.
• REUTERS POLL: BoE to hold the Bank Rate at 5.25% on Nov 2nd, according to 61 out of 73 economists; 12 expect 25bps rise to 5.50%; first BoE rate cut to 5.0% to come in Q3 2023 (unch. from Sept poll).

EUROPEAN DATA

• German GfK Consumer Sentiment (Nov) -28.1 vs. Exp. -26.6 (Prev. -26.5, Rev. -26.7)
• UK Claimant Count Unemployment Change (Sep) 20.4k (Prev. 0.9k, Rev. -9.0k)
• UK ILO Unemployment Rate (Aug) 4.2% vs. Exp. 4.3% (Prev. 4.3%); Employment Change (Aug): -82k vs Exp. -198k (prev. -207k)
• EU HCOB Composite Flash PMI (Oct) 46.5 vs. Exp. 47.4 (Prev. 47.2); "We wouldn’t be caught off guard to see a mild recession in the Eurozone in the second half of this year with two back-to-back quarters of negative growth."
• EU HCOB Manufacturing Flash PMI (Oct) 43.0 vs. Exp. 43.7 (Prev. 43.4); Services Flash PMI (Oct) 47.8 vs. Exp. 48.7 (Prev. 48.7)
• German HCOB Composite Flash PMI (Oct) 45.8 vs. Exp. 46.7 (Prev. 46.4); " If these nowcasts hit the mark, this would result in a -0.8 percent overall growth rate for 2023."
• German HCOB Manufacturing Flash PMI (Oct) 40.7 vs. Exp. 40.0 (Prev. 39.6); Services Flash PMI (Oct) 48.0 vs. Exp. 50.0 (Prev. 50.3)
• UK Flash Composite PMI (Oct) 48.6 vs. Exp. 48.7 (Prev. 48.5); "The overall pace of decline remains only modest, signalling a mere 0.1% quarterly rate of GDP decline, but gloom about the outlook has intensified in the uncertain economic climate".
• UK Flash Services PMI (Oct) 49.2 vs. Exp. 49.3 (Prev. 49.3); Manufacturing PMI (Oct) 45.2 vs. Exp. 44.7 (Prev. 44.3)

NOTABLE HEADLINES

• US House Democrats tell Punchbowl they find Tom Emmer the least objectionable GOP speaker candidate.

GEOPOLITICS

ISRAEL-HAMAS

• Israel confirmed two hostages released by Hamas were handed over to the Israeli military, according to a statement.
• US President Biden, when asked about a ceasefire, said we should have hostages released, according to Reuters.
• IDF said it has "attacked several Hezbollah targets, including a surveillance and monitoring post in southern Lebanon", according to Al Arabiya.
• "Israeli occupation forces storm the village of Burqa, north of Nablus in the West Bank, amid gunfire", according to Al Jazeera.
• US official said Iran is seeking to escalate the conflict in the region, according to Bloomberg, adding Iranian fingerprints are all over the uptick in attacks while adding US presence in the Middle East includes intel sharing.
• Russian Foreign Minister says "US reinforcements in the Middle East threaten to escalate tensions, according to Al Arabiya.
• China's Foreign Minister had a call with the Israeli Foreign Minister on Monday, according to Chinese state media.
• US President Biden spoke with Israeli PM Netanyahu on Monday and discussed the war in Gaza, according to Axios citing a White House official.
• Israel is willing to delay its ground invasion of Gaza by a few days to allow for talks on releasing a large number of hostages that Hamas is holding, via Axios citing officials. Though, officials add that even if a hostage deal is attained they will not drop plans for a ground assault into Gaza.

OTHERS

• Russian President Vladimir Putin suffered a cardiac arrest in the presidential bedroom on Sunday, an insider group revealed; he regained consciousness, according to Sky News Australia citing unverified Telegram reports. Subsequently, Russian Kremlin says President Putin is fine, reports of ill-health are fake. Adds, talks of a Putin body double is an absurd hoax.
• "Iran-backed militants have launched a drone attack against the al-Omar oil field, which hosts the largest US base in Syria, causing two explosions in the area", according to Iran International citing Syrian press.
• US Navy announces interception of missiles and drones launched by the Houthis across the Red Sea days ago", according to Al Arabiya.
• US Secretary of State Blinken is to host China's top diplomat Wang Yi in Washington between Oct 26-28th, according to a senior admin official cited by Reuters, adding that the US is concerned over China's recent destabilising actions in the South China Sea.
• The EU still lacks "very clear evidence" of unfair practices to launch a formal probe into China's wind power industry, according to Reuters sources.

CRYPTO

• Bitcoin continues to climb and posts gains of almost 10%, though it has backed away marginally from the USD 35k handle and its USD 35.187k session peak; action which has been attributed to ETF optimism.

APAC TRADE

• APAC stocks traded mixed following a similar lead from Wall Street with Mainland China leading the gains overnight.
• ASX 200 traded in the green with the upside led by Metals & Mining following the prior session’s gains in the complex, although gold names lag after the precious metal unwound some geopolitical risk premium after the weekend.
• Nikkei 225 gave up the 31k level in early trade as the prior day’s firming of the JPY weighed on the export-heavy index.
• Hang Seng and Shanghai Comp opened mixed with the former playing catch-up following its long weekend, whilst the latter gained as reports also suggested US and China held the first working group meeting.

NOTABLE ASIA-PAC HEADLINES

• The US Treasury Department said the US and China held the first meeting of the economic working group which serves as a channel to discuss bilateral economic policies, according to Reuters.
• Former Chinese Vice Premier Liu He has retained his position as office director for a key economic policymaking body headed by Chinese President Xi, according to SCMP sources.
• Japan aims to set shared standards with the US and Europe on subsidies for EVs, chips and other "critical fields", according to Nikkei citing the Japanese Minister of Economy, Trade and Industry.
• Japan will extend until Spring 2024 subsidies to curb utility bills and will extend until April 2024 subsidies to curb fuel prices, according to a draft economic package cited by Reuters.
• BoJ unscheduled bond purchases: offered to buy JPY 100bln in 10-25yr JGBs and JPY 300bln in 5-10yr, according to Reuters.
• PBoC injected CNY 593bln via 7-day reverse repos with the rate at 1.80% for a CNY 522bln net daily injection.
• PBoC set USD/CNY mid-point at 7.1786 vs exp. 7.2992 (prev. 7.1792).
• BoJ is said to see little need to change forward guidance, according to Bloomberg citing officials; adds is considering whether to tweak YCC given US yield concerns. Discussion over YCC is reportedly not due to the growing risk of upward price fluctuations but the impact on Japanese yields from the upside in US rates. Officials see there being little need to remove the following line from its guidance "If necessary, we will not hesitate to take additional monetary easing measures.''
• Chinese President Xi has made an unprecedented visit to the PBoC in a "sign of focus on the economy", according to Bloomberg.

DATA RECAP

• South Korean PPI Growth YY (Sep) 1.3% (Prev. 1.0%); MM (Sep) 0.4% (Prev. 0.9%)
• Australian Manufacturing PMI (Oct P) 48.0 (Prev. 48.7)
• Australian Services PMI (Oct P) 47.6 (Prev. 51.8); Composite PMI (Oct P) 47.3 (Prev. 51.5)
• Japanese JibunBK Manufacturing PMI Flash (Oct) 48.5 (Prev. 48.5); Services PMI Flash (Oct) 51.1 (Prev. 53.8)
• Japanese JibunBK Composite PMI Flash (Oct) 49.9 (Prelim. 52.1)