• APAC stocks traded mixed with some cautiousness seen amid heightened tensions in the Middle East after Iran conducted a missile attack on Israel.
• Israeli officials cited by Axios said Israel will launch a strong response within days, which could target oil production facilities inside Iran.
• European equity futures are indicative of a positive cash open with the Euro Stoxx 50 future +0.4% after the cash market closed lower by 0.9% on Tuesday.
• DXY is steady above the 101 mark, EUR/USD remains sub-1.11, USD/JPY briefly rose above 144.
• Looking ahead, highlights include EZ Unemployment Rate, ADP National Employment, NBP Policy Announcement, OPEC+ JMMC Meeting, ECB’s de Guindos, Lane, Elderson, Schnabel, Fed’s Hammack, Musalem, Bowman & Barkin. Supply from UK & Germany

SNAPSHOT

US TRADE

EQUITIES

• US stocks were pressured with risk-appetite spooked after a significant escalation of Middle Eastern tensions in which Iran launched an attack on Israel in what was 'double the size' of the April attack and said they targeted three Israeli military bases. The moves on Tuesday began alongside the cash equity open after Axios' Ravid reported that the "US has indications that Iran intends to carry out a ballistic missile attack against Israel in the immediate future", and then extended to extremes once the attack was carried out, although some of the declines were pared after Israel lifted restrictions on their population and signalled the end of the Iranian attack.
• SPX -0.93% at 5,709, NDX -1.43% at 19,773, DJIA -0.41% at 42,157, RUT -1.48% at 2,197.
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NOTABLE HEADLINES

• US Democratic VP candidate Walz said in the VP debate that they will continue to support Israel in defending itself and that former President Trump created the largest trade deficit between the US and China, while Walz admitted to misstating the timing of his visit to China in 1989.
• US Republican VP candidate Vance said in the VP debate that Harris's economic policies do not meet the interests of American workers and stated that Trump's economic policy focuses on the return of industry to the US.

APAC TRADE

EQUITIES

• APAC stocks traded mixed with some cautiousness seen amid heightened tensions in the Middle East after Iran conducted a missile attack on Israel.
• ASX 200 was rangebound as gains in the commodity-related industries offset the losses in the tech and consumer sectors.
• Nikkei 225 slumped at the open and retreated beneath the 38,000 level after the prior day's currency strength.
• Hang Seng resumed its China stimulus-spurred rally on return from the holiday with notable strength in tech and property.
• US equity futures (ES -0.2%) were uneventful with price action contained amid the geopolitical headwinds.
• European equity futures are indicative of a positive cash open with the Euro Stoxx 50 future +0.4% after the cash market closed lower by 0.9% on Tuesday.

FX

• DXY traded rangebound and remained above the 101.00 level after climbing yesterday on a haven bid.
• EUR/USD was uneventful and languished beneath the 1.1100 handle after posting a third consecutive daily loss.
• GBP/USD lacked direction after slipping to sub-1.3300 with very little in the way of pertinent events for the UK scheduled today.
• USD/JPY gradually edged higher and briefly reclaimed the 144.00 status as the yen faded some of the recent haven flows.
• Antipodeans rebounded overnight amid commodity gains and as the stock rally in Hong Kong pointed to a continuation of the China-related momentum.
• SNB's Chairman Schlegel said Swiss inflation was only driven by services and the reason for last week's interest rate cut was reduced inflationary pressure. Schlegel said without an interest rate cut, inflation forecasts would have been slower, while he added that they cannot rule out negative rates at the moment and that the SNB ruling nothing out.

FIXED INCOME

• 10yr UST futures took a breather following yesterday's advances as the Iranian strike on Israel spurred a flight to quality.
• Bund futures mildly pulled back from the recent peak with price action quiet overnight ahead of ECB speakers and Bund supply.
• 10yr JGB futures initially tracked the prior day's gains in global peers but with upside capped by a lack of key data and with resistance around the 145.00 level.

COMMODITIES

• Crude futures remained underpinned by the escalation in the Middle East following Iran's strikes on Israel and after private sector inventories showed a slightly larger-than-expected drawdown in headline crude stockpiles, while participants now await the JMMC meeting and the latest DoE inventory report.
• US Private inventory data (bbls): Crude -1.5mln (exp. -1.3mln), Distillate -2.7mln (exp. -1.5mln), Gasoline +0.9mln (exp. -0.1mln) Cushing +0.7mln.
• Spot gold traded indecisively but retained most of the prior day's spoils after benefitting from a haven bid.
• Copper futures edged higher despite the mixed risk appetite with tailwinds amid the resumption of trade in Hong Kong where stocks rallied to suggest the China stimulus euphoria remained intact.

CRYPTO

• Bitcoin steadily advanced during the session after reclaiming the USD 61,000 level.

NOTABLE ASIA-PAC HEADLINES

• Japan's new Economy Minister Akazawa said a complete exit from deflation is the top priority and he wants the BoJ to share their view that an exit from deflation is the top priority, while he commented that the BoJ should be careful about raising rates as it takes time to fully exit deflation. Akazawa also stated that it is not necessarily correct that PM Ishiba is positive about further rate hikes and that Ishiba's comment on the need for monetary policy normalisation has various conditions attached.

DATA RECAP

• South Korean CPI MM (Sep) 0.1% vs. Exp. 0.3% (Prev. 0.4%)
• South Korean CPI YY (Sep) 1.6% vs. Exp. 1.9% (Prev. 2.0%)

GEOPOLITICS

MIDDLE EAST

• IRGC announced they launched missiles towards Israel and warned that Israel will be targeted once more if it retaliates, while the missile launches are in retaliation for the killing of Hamas Chief Haniyeh, Hezbollah Chief Nasrallah and IRGC Commander Nilforousha. Iran's Revolutionary Guards also said they targeted three Israeli military bases in a missile attack and used hypersonic 'Fattah' missiles in the Israeli attack, according to state TV.
• Israeli army radio reported nearly 200 missiles were launched into Israel from Iran and the Israeli military said approximately 10mln civilians were targets of Iranian projectiles. The Israeli Red Cross cited by Kann News said no one was reportedly injured in the Iranian missile strike against Israel although a Jordanian government spokesman said there were 3 minor injuries from the Iranian missiles, while a Palestinian man was reportedly killed by shrapnel.
• Iranian news agency Fars said 80% of the rockets hit their targets in Israel, while IRGC said 90% of its missiles successfully hit targets in Israel. It was separately reported that Iranian missiles were intercepted as they flew over Jordanian airspace towards Jerusalem and Israeli air defences downed dozens of Iranian missiles that flew over Southern Syria.
• White House said US President Biden directed the US military to aid Israel's defence against Iranian attacks and shoot down missiles targeting Israel.
• US National Security Adviser Sullivan said Iran launched nearly 200 missiles towards targets in Israel and the Iranian attack was not effective as a result of Israeli air defences and US cooperation, while he added this is a significant escalation by Iran.
• Iranian state television reported that Tehran confirmed it fired 200 missiles in its attack on Israel, according to Sky News Arabia.
• Iran's President said on X that Iran does not seek war but will face any threat firmly.
• Iran's armed forces said if Israel responds to the Iranian attack it will be met with vast destruction of its infrastructure and if Israel's backers directly intervene against Tehran, their interests and bases in the region will face Iran's strong attack.
• Iran's Foreign Minister commented on X that Iran exercised self-defence under Article 51 of the UN Charter and Iran's action is concluded unless the Israeli regime decides to invite further retaliation, while he said Israel's enablers now have a heightened responsibility to rein in the warmongers in Tel Aviv. Iran's Foreign Minister also commented that there is a possibility that the confrontation with Israel will continue in the coming days and forces are on standby, as well as noted that Iran told the US not to get involved following the missile attack on Israel and warned that any new action by Israel or its supporters will face a more severe response.
• Iran's UN mission described the attack on Israel as legal, rational, and a legitimate response, while it warned if Israel 'dare to respond or commit further acts of malevolence, a subsequent and crushing response will ensue'. Iran's UN mission also said that no prior notice was given to the US of Iran's attack on Israel but a serious warning was issued afterwards.
• Iranian order to launch missiles at Israel was made by supreme leader Khamenei, according to a senior Iranian official via Reuters.
• Israel’s Home Front Command lifted restrictions on Israelis after the end of Iranian missile attacks and said it will defend the citizens of Israel and respond to Iranian missiles at the right time and place, according to Sky News Arabia. Israel's Home Front Command also said it eased restrictions on large gatherings in much of Israel including Tel Aviv and Jerusalem areas.
• Israeli PM Netanyahu said Iran made a big mistake tonight and they will pay for it, while he added that the Iranian missile attack on Israel failed.
• Israel's UN envoy said Israel will act and Iran will soon feel the consequences of their actions with the response to be painful.
• Israeli officials cited by Axios said Israel will launch a strong response within days to the major Iranian attack which could target oil production facilities inside Iran, according to Reuters and Al Jazeera.
• Israel warned Iran before today's attack that they would respond to any hit on Israeli territory, according to WSJ.
• Israeli Defence Minister Gallant spoke with US Defence Secretary Austin in which they discussed a joint preparation to repel the Iranian attack. Furthermore, Austin said they discussed 'severe consequences' for Iran in the event Iran chooses to launch a direct military attack against Israel.
• IDF spokesman told reporters that the Israeli Air Force continues to operate at full capacity and will also continue to strike powerfully in the Middle East on Tuesday night, as has been the case for the past year", according to Times of Israel.
• Israeli military sources said their air force will be operating in various places in the Middle East on Tuesday night, according to Sky News Arabia. Furthermore, the Israeli military called on residents to evacuate new areas in the southern suburbs of Lebanon's Beirut, while reports also noted a series of Israeli raids on southern Lebanon.
• Israeli military said it conducted strikes on Hezbollah targets in Beirut and it issued warnings to residents of the Chiyah neighbourhood and Hadath al-Gharb in the southern suburbs of Beirut, while a correspondent reported eight Israeli raids on southern suburbs of Beirut in about two hours.
• Hezbollah said it struck Israeli artillery in Beit Hille with rockets, according to Al Jazeera. Hezbollah separately announced that it confronted an Israeli force infiltrating the Lebanese town of Adaisseh and forced it to retreat, while the Israeli army also reported heavy fighting with Hezbollah operatives in southern Lebanon.
• Israeli military announced the assassination of Muhammad Jaafar Qasir on Tuesday who is the commander in charge of weapons transfer from Iran and its affiliates to Hezbollah.
• Explosions were reported near the Ain al-Assad base in Anbar, Iraq, according to Sky News Arabia citing sources. In relevant news, the Iraqi resistance group said US bases in Iraq will be a target if the US joins in the response to Iran or uses Iraqi airspace.

EU/UK

NOTABLE HEADLINES

• ECB's Kazaks said he very much agrees with market pricing on the ECB's October interest rate decision and said the ECB has a clear-cut case for cutting rates at the October meeting as the EZ economy may face a tipping point.