• APAC stocks traded predominantly higher albeit with upside capped as the region digested disappointing Chinese Caixin Manufacturing PMI
• Chinese Caixin Manufacturing PMI Final (Oct) 49.5 vs. Exp. 50.8 (Prev. 50.6)
• European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 +0.4% after cash markets closed up by 0.8% yesterday
• DXY is contained following yesterday's gains, JPY attempts to claw back lost ground but USD/JPY remains north of 151
• Looking ahead, highlights include US ADP, ISM Manufacturing, Construction Spending, JOLTS, BCB Policy Announcement, FOMC Policy Announcement & Chair Powell, US Treasury Quarterly Refunding Announcement, Speech from SNB’s Jordan, Supply from the UK & Germany

US TRADE

EQUITIES

• US stocks were firmer with a "real economy" bias in which the Russell 2k and equal-weighted S&P 500 outperformed the SPX and NDX, although all indices rose through the session into month-end after a choppy cash open. Nonetheless, the gains were capped on the eve of the FOMC and attention was also on data after better-than-expected Consumer Confidence while duration-sensitive names faced headwinds as yields climbed following the rise in Employment Costs.
• SPX +0.65% at 4,193, NDX +0.52% at 14,409, DJIA +0.38% at 33,052, RUT +0.91% at 1,662.
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NOTABLE HEADLINES

• White House said US President Biden would veto a House supplemental request for Israel aid which includes poison pill offsets and no aid for Ukraine, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded predominantly higher albeit with upside capped for some indices heading into the FOMC announcement and as the region digested another deluge of data releases including disappointing Chinese Caixin Manufacturing PMI which printed its first contraction in three months.
• ASX 200 was positive as outperformance in the mining and real estate sectors picked up the slack from defensives and helped shrug off the surprise contraction in building approvals data.
• Nikkei 225 was the biggest gainer amid reports that Japan’s new economic package is to total around JPY 17tln and after recent currency weakness in the aftermath of the BoJ’s modest YCC tweak.
• Hang Seng and Shanghai Comp were cautious as Chinese Caixin Manufacturing PMI data followed suit to the recent deterioration seen in the official release and amid some disappointment after the PBoC’s open market operations resulted in a net daily drain despite prior reports that the central bank is likely to add further liquidity.
• US equity futures were contained and lacked conviction with the FOMC conclusion on the horizon.
• European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 +0.4% after cash markets closed up by 0.8% yesterday.

FX

• DXY was rangebound as it took a breather following the prior day’s advances on the back of data releases in which the US Employment Cost Index topped forecasts and Consumer Confidence was also better than expected, while the attention now shifts to the looming FOMC announcement.
• EUR/USD was constrained alongside the dollar strength and was also not helped by the recent soft EU data.
• GBP/USD lacked direction after it whipsawed yesterday with momentum thwarted by resistance at 1.2200.
• USD/JPY sat above the 151.00 level following the BoJ tweak and with MOF data showing there was no FX intervention between late September to late October, while the moves spurred a renewal of the familiar jawboning.
• Antipodeans were lacklustre following weak data releases including the surprise contraction in Australian Building Approvals and softer-than-expected New Zealand Employment and Labour Cost data.
• PBoC set USD/CNY mid-point at 7.1778 vs exp. 7.3327 (prev. 7.1779)
• Japan's top currency diplomat Kanda said speculative FX moves seen cannot be explained by fundamentals and he is concerned that one-sided, sharp FX moves negatively affect the economy, while he added that authorities may or may not say when they conduct intervene, according to Reuters.
• Japanese Chief Cabinet Secretary Matsuno said it is important for FX to move stably reflecting economic fundamentals and rapid FX moves are undesirable, while he won't rule out any steps to respond to disorderly FX moves.

FIXED INCOME

• 10-year UST futures were subdued after yields climbed following the firmer-than-expected Employment Cost data from the US and with the moves sustained through to month-end and heading into the FOMC.
• Bund futures remained stuck near this week’s worst levels following yesterday’s capitulation.
• 10-year JGB futures tracked the losses in peers but are off intraday lows after the BoJ's unscheduled purchases.

COMMODITIES

• Crude futures were lacklustre amid headwinds from a firmer greenback and increased OPEC output, while the latest private sector inventory data showed a build in headline crude stockpiles which was in line with expectations.
• US Private Energy Inventories (bbls): Crude +1.3mln (exp. +1.3mln), Gasoline -0.4mln (exp. -0.8mln), Distillates -2.5mln (exp. -1.5mln), Cushing +0.4mln.
• Iraqi Oil Minister said investment in gas needs years and the plan for Iraq is to be a gas exporter within 5 or 6 years from now, according to Iraqi channel Al-Sharqiya.
• Spot gold extended on the prior day's lows after recent dollar strength and ahead of the FOMC.
• Copper futures were contained with demand hampered by disappointing Chinese Caixin PMI data.

CRYPTO

• Bitcoin was marginally lower and gradually trickled to beneath the USD 34,500 level.

NOTABLE ASIA-PAC HEADLINES

• White House said US President Biden is aiming to have a constructive conversation with Chinese President Xi in San Francisco in November.
• Japan's government is considering spending over JPY 17tln for a package of measures to ease the pain from rising inflation and will compile a supplementary budget for the current fiscal year of around JPY 13.1tln to fund part of the package, according to a draft cited by Reuters.
• RBNZ Financial Stability Report stated the full impact of rate hikes globally is still to be seen and that banks preparing for a deterioration in asset quality, while it noted that households and businesses continue to face higher debt servicing costs.

DATA RECAP

• Chinese Caixin Manufacturing PMI Final (Oct) 49.5 vs. Exp. 50.8 (Prev. 50.6)
• Australian Building Approvals (Sep) -4.6% vs. Exp. 1.3% (Prev. 7.0%, Rev. 8.1%)
• Australian Manufacturing PMI (Oct F) 48.2 (Prelim. 48.0)
• Australian AIG Manufacturing Index (Oct) -20.9 (Prev. -12.8)
• Australian AIG Construction Index (Oct) 18.5 (Prev. 7.1)
• New Zealand HLFS Job Growth QQ (Q3) -0.2% vs. Exp. 0.4% (Prev. 1.0%)
• New Zealand HLFS Unemployment Rate (Q3) 3.9% vs. Exp. 3.9% (Prev. 3.6%)
• New Zealand HLFS Participation Rate* (Q3) 72.0% vs. Exp. 72.5% (Prev. 72.4%)
• New Zealand Labour Cost Index QQ (Q3) 0.8% vs. Exp. 1.0% (Prev. 1.1%)
• New Zealand Labour Cost Index YY (Q3) 4.1% vs. Exp. 4.2% (Prev. 4.3%)

GEOPOLITICS

• Israeli Defence Minister said they have made achievements during the ground operation in Gaza but are paying a heavy price, according to Sky News Arabia.
• Israeli military spokesperson said the Houthis, backed by Iran, are trying to challenge Israel but the country will stay focused on Gaza. The spokesperson added that Israel is advancing in the ground operation in a way that serves its goals, including the elimination of Hamas.
• Hamas armed wing spokesperson said it told mediators that the group will release some foreign captives in the coming days. It was separately reported that the Rafah crossing is to be opened Wednesday for some people to complete their treatment in Egyptian hospitals, according to Palestinian and Egyptian sources cited by Reuters.
• US Secretary of State Blinken is to travel to Israel on Friday to meet with the Israeli government and will make other stops in the region, according to the State Department. Furthermore, Blinken held a call with Israel's President and emphasised the need to take precautions to minimise the harm to civilians.
• White House's Kirby said now is not the time for a general ceasefire but can consider a pause in fighting.
• US Pentagon said an additional 300 US troops will be heading to the Middle East but will not be going to Israel.
• Chilean President Boric said Chile recalled its ambassador to Israel for consultations given Israel's 'violations of international humanitarian law' in the Gaza Strip, according to Reuters.

EU/UK

NOTABLE HEADLINES

• ECB's de Guindos said yesterday's inflation number is good news and that deceleration in underlying inflation is an important element, while he added that ECB rates are at current levels to help bring prices to 2%.
• The Times' Shadow MPC voted 7-2 in favour of keeping rates on hold.