• European bourses post modest losses whilst the NQ & ES teeter around the unchanged mark, RTY lags slightly.
• Bonds extended gains with Gilts outpacing counterparts though ultimately fell short of 96.00 level, with the complex now off best levels & USTs lower.
• USD bid with the index printing a 105.87 high, putting downward pressure on G10 peers; GBP bearing the brunt & largely attributed to outperformance in Gilts.
• Crude continues to crumble but has lifted from lows most recently amid a magnitude 5 earthquake in western Texas
• Looking ahead, highlights include US Wholesale Prices, NBP Policy Announcement; BoC Minutes, Speeches from Fed’s Powell, Williams, Barr & Jefferson; BoE’s Bailey; Supply from US. Earnings: Telecom Italia, Ralph Lauren, Kellogg, Disney, BlackRock, Warner Bros Discovery & Disney.

EUROPEAN TRADE

EQUITIES

• European bourses are in the red, Euro Stoxx 50 -0.1%, in what has been a relatively choppy but ultimately contained session thus far with the focus firmly on earnings and upcoming speakers.
• Sectors are similarly mixed with Retail outperforming post-M&S while Banking is torn between Commerzbank and ABN AMRO; to the downside, Personal Care, Drug & Grocery lags after Ahold Delhaize's Q3 numbers.
• Stateside, futures are slightly softer with very modest underperformance in the RTY -0.2%, but with overall action similarly contained pre-Powell and others, ES -0.1%.
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
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FX

• Greenback continues to grind higher and claw back losses, DXY edged closer to 106.00 within firmer 105.51-87 range.
• Pound extends post-Pill declines as Cable probes 1.2250 and EUR/GBP pops back above 0.8700.
• Euro and Yen unable to evade Dollar recovery, with EUR/USD down towards base of 1.0660-1.0700 range and USD/JPY closer to 151.00 than 150.00.
• Loonie undermined by the ongoing plunge in oil as USD/CAD approaches 1.3800 head of Canadian building permits and BoC minutes.
• PBoC set USD/CNY mid-point at 7.1773 vs exp. 7.2839 (prev. 7.1776)
  • Brazilian government will not ask Congress to alter fiscal target for now, according to Reuters sources.
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FIXED INCOME

• Bonds mixed after a broad-based bounce on Tuesday, Bunds and Gilts remain above par within 130.73-25 and 95.96-42 respective ranges.
• T-note lags between 107-26+/108-06 + bounds awaiting Fed Chair Powell at a panel discussion and USD 40bln 10 year auction.
• 2033 German supply snapped up and PGBs regain some poise after PM resignation.
• Japan gov't bond issuance to total circa. JPY 44.5tln in FY23/24, via Reuters citing a draft; 9tln in second supplementary budget for FY23/24. Additionally, to maintain calendar-based annual JGBs to market unchanged at JPY 190.3tln following the FY23/24 second extra budget.
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COMMODITIES

• Crude benchmarks have recently slumped further into the red, in a continuation of the price action that was in play during yesterday’s session; slumping to current session troughs of USD 76.51/bbl and USD 80.87/bbl with fresh fundamentals limited but the move occurring alongside a further bout of USD upside.
• Most recently, it is worth pointing out that a magnitude 5 earthquake has occurred in western Texas, according to the EMSC. We are yet to see any updates as to what, if any, commodity activity in the region has been affected, but it is worth highlighting that the crude futures lifted slightly from the mentioned session lows on this update.
• Spot gold has similarly slipped to fresh lows, occurring alongside a fresh bout of USD upside with the DXY at session bests and moving ever closer to 106.00.
• Finally, base metals are slightly mixed but for the most part have not strayed significantly from relatively contained levels.
• US Private Energy Inventories (bbls): Crude +11.9mln (exp. -0.3mln), Gasoline -360k (exp. -0.8mln), Distillates +980k (exp. -1.5mln), Cushing +1.1mln.
• Nornickel says some clients who previously rejected purchasing from us are discussing metals purchases in 2024, via Ifx.
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NOTABLE EUROPEAN HEADLINES

• BoE's Bailey says the big shocks of last year and a bit before the unwinding; expects next inflation read to be quite a bit lower; expect it to be quite a bit lower by year-end, not down to 2%. We think policy is now restrictive and economic growth is very subdued. Basic message is that we believe policy will need to be restrictive for extended periods and there are upside risks.
• Norges Bank FSR: The financial system is marked by higher interest rates; Households draw on savings; Households draw on savings; Norwegian banks are well equipped to absorb higher losses.

ECB

• ECB Consumer Inflation Expectations survey (Sep) - 12-months ahead 4.0% (prev. 3.5%); 3-year ahead 2.5% (prev. 2.5%)
• ECB's Lane says they are seeing some progress on underlying inflation, but not enough. In-fitting with the initial slide release.
• ECB's Makhlouf says the economy and financial system are still adjusting to the change in interest rates by central banks. "far far too early" to start talking about when we are going to start cutting rates; too early to declare that we have reached the top of the ladder on interest rates.
• ECB's Wunsch says the Eurozone is set for a soft landing in the short term. Inflation has been rapidly falling. Risks for inflation are tilted to the upside.
• ECB's Kazaks cannot exclude the possibility that further rate hikes may needed.
• ECB's Vujcic says inflation will decline toward our target in 2025.
• ECB's Nagel says the last mile before we reach our inflation target may well be the hardest; firms need to absorb some of the recent strong increases in wages.

EUROPEAN DATA

• US Consumer Credit (Sep) 9.06B vs. Exp. 10.0B (Prev. -15.63B)
• German CPI Final MM (Oct) 0.0% vs. Exp. 0.0% (Prev. 0.0%); YY (Oct) 3.8% vs. Exp. 3.8% (Prev. 3.8%)
• EU Retail Sales MM (Sep) -0.3% vs. Exp. -0.2% (Prev. -1.2%, Rev. -0.7%); YY (Sep) -2.9% vs. Exp. -3.1% (Prev. -2.1%, Rev. -1.8%)

NOTABLE US HEADLINES

• US Treasury said no trade partners manipulated currencies; China remains on the monitoring list due to lack of transparency for its foreign exchange practices. Vietnam is back on the monitoring list; removing Switzerland and South Korea from the same scrutiny.
• Fed's Cook (Neutral, Voter) says persistent inflationary pressures and unexpected policy rate increases abroad are among risks to global financial system. Further slowdown in China could worsen financial stresses with possible international spill overs. Must remain vigilant to potential shocks that could exacerbate global financial system vulnerabilities. Escalation of global geopolitical tensions could also lead to negative international spill overs.
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GEOPOLITICS

• US President Biden told Israeli PM Netanyahu that a 3-day fighting pause could help secure the release of some hostages, according to Axios.
• Saudi Arabian investment minister says that discussions aimed at normalising ties with Israel will continue despite KSA's criticism of Israeli military actions in Gaza, according to Bloomberg. Adds will be contingent on a peaceful resolution to the Palestinian conflict.

APAC TRADE

• APAC stocks traded mixed following a similar lead from Wall Street, with the breadth of the markets in early APAC hours particularly narrow.
• ASX 200 saw the tech sector leading the gains following a similar yield-driven sectoral performance on Wall Street.
• Nikkei 225 was initially supported by the Electronics sector with Nintendo shares rising over 6% post-earnings, whilst the Oil sector limited gains and the index eventually fell into losses as BoJ governor Ueda said the Bank doesn't necessarily need to wait until real wages actually turn positive in exiting YCC and negative rates, and if the BoJ thinks there is a strong chance real wages will turn positive in the future, that may be sufficient in making a decision on whether to continue with YCC and negative rate.
• Hang Seng and Shanghai Comp moved between modest gains and losses with little action seen despite a slew of comments from the PBoC governor, while markets braced for next week’s Biden-Xi meeting in San Francisco, although no major breakthrough is expected.

NOTABLE HEADLINES

• Chinese Vice Premier reiterated that the domestic economy is rebounding and improving as a whole, according to Bloomberg.
• PBoC Governor said PBoC will resolutely guard against overshooting risks of yuan exchange rate, and will resolutely deal with behaviours that disrupt market order, whilst preventing the formation of one-sided and self-reinforced mark, according to a Central Bank publication;
• PBoC Governor said shifting economic growth model is more important than pursuing high growth rate, via Securities Times. He added China's economy continues to improve, with the 5% growth target expected to be successfully achieved, and economic growth momentum has improved recently in China, production and consumption have recovered steadily, and employment and consumer prices are stable. He said monetary policy will pay more attention to cross-cyclical and counter-cyclical adjustments in the next stage, and the PBoC will always keep prudent monetary policy, and support stable growth of the real economy. He said they will strictly control new government-invested projects in areas with high debt burdens and will guide financial institutions to resolve debt risks through debt extension and replacement.
• China's top securities regulator vows to prevent excessive leverage, via state media.
• PBoC injected CNY 474bln via 7-day reverse repos with the rate at 1.80% for a CNY 83bln net daily injection.
• BoJ Governor Ueda said the BoJ doesn't necessarily need to wait until real wages actually turn positive in exiting YCC and negative rates, and if BoJ thinks there is a strong chance real wages will turn positive in the future, that may be sufficient in making a decision on whether to continue with YCC and negative rate, according to Reuters. Governor Ueda said it is desirable for FX to move stably reflecting fundamentals, according to Reuters. Governor Ueda says BoJ is continuing to buy huge amounts of govt bonds via market operations. Ueda said there is no statistical evidence that interest rate levels have a direct correlation with wage moves. BoJ Governor Ueda says the fact the central bank stands ready to step in to buy ETFs in times of market turbulence could be underpinning recent stock prices, and it may be possible to end ETF buying when there's no concern over the risk of a sharp rise in risk premia, according to Reuters.
• Japanese Finance Minister Suzuki sees June next year as the critical point where Japan can see inflation-adjusted real wages turn positive, according to Reuters.
• Japan is to reportedly include JPY 1.9tln in chip subsidies in its draft budget, according to NHK.
• Moody's affirms Japan's sovereign rating at A1; outlook stable, according to Reuters.
• Magnitude 6.8 earthquake strikes Banda Sea region near Indonesia; no tsunami warning, according to EMSC and PTWC.

DATA RECAP

• Japanese Foreign Reserves (Oct) 1.238T (Prev. 1.237T)
• Japanese Leading Indicator (Sep) -0.5 (Prev. 1.0); Coincident Index (Sep) 0.1 (Prev. 0.1, Rev. 0.4)
• New Zealand Monetary Conditions Current* (Q4) Q1 91.89% (Prev. 90.0%)
• New Zealand Inflation Forecast 1 Year (Q4) Q1 3.6% (Prev. 4.17%); 2 Years (Q4) Q1 2.76% (Prev. 2.83%)