• FOMC kept rates unchanged as expected and Chair Powell downplayed the September dot plots.
• APAC stocks mostly followed suit to the gains on Wall St which were spurred by soft data and Powell comments.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.7% after cash market closed up by 0.8% yesterday.
• DXY remains softer post-FOMC, EUR/USD pivots around the 1.06 mark, USD/JPY continues to pull back from 151.
• Looking ahead, highlights include US IJC, Factory Orders, BoE & Norges Bank Policy Announcements, Speeches from BoE’s Pill, ECB’s Lane & Schnabel, Supply from Spain & France
• Earnings from Fresenius, Hugo Boss, ING, Lufthansa, BT, Sainsbury’s, Shell, Apple.

US TRADE

EQUITIES

• US stocks and bonds gained heading into the Fed after soft data releases in which ADP and Manufacturing ISM missed expectations while the Treasury also announced a smaller than previous pace of increases at the quarterly refunding announcement. Focus then turned to the FOMC where the Fed unsurprisingly kept rates unchanged and Fed Chair Powell's comments at the press conference spurred a dovish reaction as he downplayed the September dot plots, which had pointed to another hike this year, and noted they are proceeding carefully, but also stressed that the Fed is not confident that monetary policy is sufficiently restrictive. Furthermore, the Chair also noted the Fed attentive to increases in longer-term yields which can have implications for monetary policy.
• SPX +1.05% at 4,237, NDX +1.77% at 14,664, DJIA +0.67% at 33,274, RUT +0.45% at 1,669.
• Click here for a detailed summary.

FOMC

• Federal Reserve left rates unchanged as expected at 5.25-5.50% via a unanimous decision and repeated it is prepared to adjust the policy stance as appropriate if risks emerge to achieving its goals. Fed reiterated that in determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the Committee will take into account the cumulative tightening of monetary policy and the lags with which monetary policy affects economic activity and inflation, as well as economic and financial developments. Furthermore, it stated that recent indicators suggest economic activity expanded at a strong pace in the third quarter, while job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low.
• Fed Chair Powell repeated during the presser that the Fed remain squarely focused on the dual mandate and that policy is "restrictive" with the full effects of tightening yet to be felt. Powell said the restrictive stance of policy is putting downward pressure on inflation and economic activity, while he is attentive to recent data showing economic resilience and demand for labour. Furthermore, these could put further progress on inflation and could warrant further interest rate hikes.
• Fed Chair Powell said during the Q&A that they are not confident policy is sufficiently restrictive and are attentive to the increase in longer-term yields which can have implications on monetary policy. Powell stated they have not made any decisions on future meetings and have not decided regarding the December meeting, as well as noted that the idea it would be difficult to raise again after pausing is not right. Furthermore, he said the dot plot is a "picture in time" of appropriate policy in light of policymakers' personal views and efficacy of dot plot decays during the inter-meeting period, while he stated that wage increases have really come down significantly over the last 18 months and are much closer to being consistent with inflation at 2%, as well as noted that the September reading on Employment Cost Index was very close to internal expectations and that wages are not the principal driver of inflation so far.

NOTABLE HEADLINES

• WSJ's Timiraos posted on X "To my ear, Powell did little to talk up the projection of one more hike from the median SEP submission in September. He said simply they'd submit new projections in December".
• US Senate passed three appropriation bills laying out funding plans for agriculture, military and veterans affairs and transportation for the fiscal year ending 30th September 2024.

APAC TRADE

EQUITIES

• APAC stocks mostly followed suit to the gains on Wall St where the major indices were lifted by soft data releases and after Fed Chair Powell’s post-FOMC press conference spurred a dovish reaction as he poured cold water over the September dot plots which had pointed to one more hike by year-end.
• ASX 200 was higher with gains led by notable outperformance in tech and real estate amid a drop in yields.
• Nikkei 225 briefly climbed above 32,000 with the biggest movers driven by earnings and automaker updates.
• Hang Seng and Shanghai Comp were mixed with the Hong Kong benchmark boosted by a surge in tech and strength in property, while the mainland lagged after another substantial PBoC liquidity drain.
• US equity futures traded sideways overnight and held on to their post-FOMC gains.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.7% after cash markets closed up by 0.8% yesterday.

FX

• DXY softened post-FOMC as yields declined following Powell’s comments in which he poured cold water over the September dot plots as he noted the efficacy of the dot plot decays during the inter-meeting period and acknowledged the Fed is close to the end of the cycle, while he stated that they are proceeding carefully but also stressed the Fed is not confident that monetary policy is sufficiently restrictive.
• EUR/USD gained amid the softer buck which helped the single currency briefly reclaim the 1.0600 status.
• GBP/USD eventually snapped out of the prior day’s choppy mood and approached closer to the 1.2200 status with the attention now shifting to the BoE policy decision.
• USD/JPY continued to pull back from the 151.00 level after US-Japan yield differentials narrowed post-FOMC although some of the downside was stemmed after finding support around its 200-hour MA.
• Antipodeans were underpinned by their high-beta statuses and amid a slight reprieve for commodity prices.
• PBoC set USD/CNY mid-point at 7.1797 vs exp. 7.3055 (prev. 7.1778)
• Brazil Central Bank cut the Selic rate by 50bps to 12.25%, as expected, while committee members unanimously anticipate similar reductions in the next meetings. BCB added that this pace is appropriate to keep the necessary contractionary monetary policy for the disinflationary process and noted the external environment is adverse due to higher long-term interest rates in the US.

FIXED INCOME

• 10-year UST futures extended on yesterday’s gains which were spurred by soft US data releases and dovish comments from Fed Chair Powell, as well as the slowing pace of Treasury auction size increases.
• Bund futures held on to their recent spoils but have plateaued near resistance around the 130.00 level.
• 10-year JGB futures steadily edged higher as they took impetus from global peers but are off today's best levels after weaker metrics from the latest 10yr JGB auction.

COMMODITIES

• Crude futures nursed some of the prior day's losses after having whipsawed in the build-up to the FOMC.
• Spot gold was rangebound as tailwinds from a softer dollar were offset by a lack of haven demand.
• Copper futures were underpinned as risk assets benefitted from the dovish aspects of Powell's rhetoric.

CRYPTO

• Bitcoin notched marginal gains and climbed back above USD 35,500 amid the constructive mood.

NOTABLE ASIA-PAC HEADLINES

• HKMA kept its base rate unchanged at 5.75%, as expected, following the Fed rate decision.

DATA RECAP

• South Korean CPI MM (Oct) 0.3% vs. Exp. 0.2% (Prev. 0.6%)
• South Korean CPI YY (Oct) 3.8% vs. Exp. 3.6% (Prev. 3.7%)
• Australian Trade Balance (AUD)(Sep) 6.8B vs. Exp. 9.4B (Prev. 9.64B)
• Australian Exports MM (Sep) -1.4% (Prev. 4.0%)
• Australian Imports MM (Sep) 7.5% (Prev. 0.0%)

GEOPOLITICS

ISRAEL-HAMAS

• Israeli Defence Minister said they are not interested in an additional war but are ready for any development on the northern front with Lebanon. Furthermore, the Defence Minister said they will respond to any aggression directed at Israel from Lebanon, while he added the battle will not be short and that they are advancing day by day.
• Lebanon's Hezbollah said it destroyed an Israeli drone with a surface-to-air missile in the airspace of two border villages, according to Reuters.
• Iran's Foreign Minister warned of 'harsh consequences' if an immediate ceasefire in Gaza doesn't take place and "rapid attacks by US and the Zionist Regime continue", according to Reuters.
• UK PM Sunak and Egyptian President El-Sisi discussed urgent work to increase the flow of humanitarian aid into Gaza, while they discussed diplomatic efforts to secure the release of hostages held by Hamas and prevent an escalation in the wider Middle East, according to Reuters citing PM Sunak's office.
• US President Biden and top aides discussed the likelihood that Israeli PM Netanyahu’s political days are numbered, while the president conveyed that sentiment to the Israeli PM in a recent conversation, according to Politico.
• White House's Kirby said there are no plans to put US troops on the ground in Gaza.

OTHER

• US President Biden’s administration is preparing to hold a rare discussion with China on nuclear arms control as the US seeks to head off a destabilizing three-way arms race with Beijing and Moscow, according to WSJ.
• US military said a US destroyer and Canadian frigate transited through the Taiwan Strait yesterday, while the Chinese military said it followed the bilateral naval transit of the US and Canada in the Taiwan Strait, according to Reuters.
• Ukrainian army chief said the war in Ukraine is moving to the next stage of positional warfare of static and attrition fighting, while the army needs new key military capabilities and technology, such as air power, to break out of this kind of war.

EU/UK

NOTABLE HEADLINES

• UK housebuilding in Q3 was the weakest since the start of the pandemic, according to surveyors cited by FT.