• European equities/US futures in the red with sentiment sour ahead of a busy day of Fed speak
• Fixed benchmarks are back in bull-flattening mode, lifting from yesterday’s lows pre-supply
• DXY firmly above 105.50, whilst Antipodeans sink on weaker sentiment and post-RBA hike
• As expected, the RBA announced a 25bps hike, ensuing initial upside in the AUD before slipping on weaker forward guidance
• Crude benchmarks pare back yesterday’s gains, with base metals also in the red owing to the firmer Dollar and general market sentiment
• Looking ahead, highlights include US International Trade, IBD/TIPP, Manheim Index, NY Fed Q3 Household Debt & Credit Report, Speeches from Fed’s Goolsbee, Schmid, Williams, Logan, Barr, Waller, UK King's Speech and Earnings from CNH Industrial, Uber, eBay & Occidental Petroleum Corp

EUROPEAN TRADE

EQUITIES

• European bourses are in the red, Euro Stoxx 50 -0.2%, but have been fairly contained throughout the morning with specific catalysts light and the tone thus far largely emanating from APAC pressure.
• Sectors are mixed with outperformance in Retail names post-AB Foods while Banks derive support from UBS despite yield pressure; in M&A Telefonica's offer to purchase the remainder of Telefonica Deutschland has led to gains of circa. 40% for the German telecom name.
• Stateside, futures are in the red printing broad-based losses in a continuation of Monday's/APAC risk tone, ES -0.2%, docket today features notable data incl. Manheim and numerous Fed speakers before a handful of earnings.
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FX

• Aussie retreats as risk aversion and less hawkish RBA guidance outweigh the widely anticipated 25bp hike, AUD/USD closer to 0.6400 than 0.6500, AUD/NZD cross sub-1.0850 from just under 1.0900.
• Buck maintains recovery momentum almost across the board as DXY climbs to 105.63 from a 105.25 low awaiting US trade data and a slew of Fed speakers.
• Euro losing grip of 1.0700 handle, Pound probes 1.2300 and Yen back below 150.00 all over again.
• Loonie undermined by a slide in oil ahead of Canadian trade with USD/CAD closer towards the top of 1.3755-1.3691 range.
• PBoC set USD/CNY mid-point at 7.1776 vs exp. 7.2854 (prev. 7.1780)
• BCB Minutes: It was decided to maintain the recent communication, which already includes the appropriate conditionality in an uncertain environment; rate cuts of 50bps are appropriate to keep the necessary contractionary monetary policy for the disinflationary process.
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• Debt futures resurgent after further retracement and curves revert to a flatter trajectory ahead of US refunding.
• Bunds bounce from 129.35 to 130.20 and Gilts from 94.47 to 95.42 in the wake of solid demand for 2034 UK issuance.
• T-note back on 108-00 handle within 107-19+/108-03+ range.
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COMMODITIES

• Crude benchmarks remain under pressure after slipping during APAC trade in-fitting with the broader risk tone and have been unable to stage any form of recovery this morning, despite equity performance being much more contained in comparison.
• WTI Dec’23 and Brent Jan’23 lose the USD 80/bbl and USD 84/bbl handles respectively, an action which pushes the benchmarks to multi-month lows with support seen around USD 78/bbl mark in WTI from late-August.
• Metals feature marked pressure in spot gold with the stronger USD offsetting any potential haven demand that may typically have been expected from the current tone, a tone which is weighing on base metal peers.
• US DoE announced a supplemental solicitation for up to 3mln barrels of oil for delivery in January 2024 for US Strategic Reserve.
• OPEC Secretary General says oil demand continues to rise significantly; Oil demand to grow more than 2mln BPD in 2024.
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NOTABLE EUROPEAN HEADLINES

• ECB's de Guindos says low growth or economic standstill is expected to carry on into Q4 for the Eurozone.

EUROPEAN DATA

• UK BRC Retail Sales YY (Oct) 2.6% vs Exp. 2.4% (Prev. 2.8%)
• UK Halifax House Prices MM (Oct) 1.1% (Prev. -0.4%, Rev. -0.3%)
• German Industrial Output MM (Sep) -1.4% vs. Exp. -0.1% (Prev. -0.2%)
• EU HCOB Construction PMI (Oct) 42.7 (Prev. 43.6); German HCOB Construction PMI (Oct) 38.3 (Prev. 39.3)
• EU Producer Prices MM (Sep) 0.5% vs. Exp. 0.5% (Prev. 0.6%, Rev. 0.7%); YY (Sep) -12.4% vs. Exp. -12.5% (Prev. -11.5%)

NOTABLE US HEADLINES

• Fed's Kashkari (2023 voter) said he would err on the side of overtightening policy than not doing enough in order to bring inflation down, according to WSJ. He noted some prices and wage data indicate that inflation could be “settling somewhere north of 2%". Fed's Kashkari said the economy has proved to be very resilient and inflation has come down, according to Fox News. He added they are making progress on inflation and the job market is strong but has more work to do to get inflation under control. American consumers continue to spend. Need to finish the job of lowering inflation.
• Punchbowl News suggests that "the most obvious outcome" for the looming US government shutdown is a clean CR with some extraneous provisions that the Senate could accept. Leading options on that front include the creation of a statutory debt commission or new border-security provisions, according to sources close to the process. Says House Speaker Johnson's team accepts a clean continuing resolution is the most likely outcome.
• China's Middle East special envoy met with US ambassador to China.
• Click here for the US Early-Morning note.

GEOPOLITICS

• Israeli PM Netanyahu says Israel is open to "short pauses" in Gaza, but ruled out a ceasefire, according to Bloomberg.
• The Biden administration is reportedly planning a USD 320mln transfer of precision bombs for Israel, according to WSJ.
• Russian Defence Ministry says Russia destroyed 17 Ukraine-launched drones over Russian territory, according to RIA.

APAC TRADE

• APAC stocks were softer across the board following the prior day’s gains and the choppy/mixed lead from Wall Street. South Korea’s KOSPI is the notable underperformer - slumping over 2.8% - after surging yesterday on the back of the stock short-selling ban.
• ASX 200 saw its downside led by Financials, Energy, and Materials, although the index clambered off worst levels following the RBA's dovish hike.
• Nikkei 225 fell back under 32,500 as the index conforms to the losses across the region.
• Hang Seng and Shanghai Comp opened lower amid the broader market mood. Muted price action was seen after the narrower-than-expected October Chinese Trade Balance, although imports saw surprise growth, while China Vanke’s shares firmed after state shareholders showed signs of providing liquidity support.

NOTABLE HEADLINES

• RBA hikes its Cash Rate by 25bps as expected to 4.35% from 4.10%, and tweaked its forward guidance to say "Whether further tightening of monetary policy is required...will depend upon the data" (prev. "Some further tightening of monetary policy may be required"). The RBA also noted inflation in Australia has passed its peak but is still too high and is proving more persistent than expected a few months ago.
• China's Commerce Ministry has issued new rules to strengthen management of rare earth exports, effective Oct 31 2023 to Oct 31, 2025; issued new rules to strengthen import management of crude oil, iron ore, copper concentrate, potash, according to Reuters.
• PBoC Deputy Governor said he is not too worried about the Chinese economy, and added the overall debt level of the Chinese government is in the mid to lower range by international standards, according to Reuters.
• PBoC injected CNY 353bln via 7-day reverse repos with the rate at 1.80% for a CNY 259bln net daily drain.
• Japan ruling ally Kometo tax chief says should not pre-decide to limit income tax cuts to just a year, according to Reuters.
• South Korean Vice Finance Minister says FX authorities will continue to monitor currency markets as done now even after rule changes in licenses, according to Reuters.
• IMF upgrades China's GDP Growth forecasts: 2023 5.4% (prev. 5%), 2024 4.6% (prev. 4.2%); follows strong Q3 and growth policies.

DATA RECAP

• Chinese Trade Balance USD (Oct) 56.53B vs. Exp. 82.0B (Prev. 77.71B)
• Chinese Imports YY (Oct) 3.0% vs. Exp. -4.8% (Prev. -6.2%); Exports YY (Oct) -6.4% vs. Exp. -3.3% (Prev. -6.2%)
• Japanese Total Cash Earnings YY (Sep) 1.2% vs Exp.1.2% (prev. 1.1%, Rev 0.8%)
• Japanese All Household Spending YY (Sep) -2.8% vs. Exp. -2.7% (Prev. -2.5%); MM (Sep) 0.3% vs. Exp. -0.4% (Prev. 3.9%)
• Japanese Overtime Pay (Sep) 0.7% (Prev. 1.0%, Rev. 0.2%)