• APAC stocks were ultimately mixed after the negative lead from Wall St; China's NDRC press conference was met with disappointment.
• European equity futures are indicative of a negative cash open with the Euro Stoxx 50 future -0.8% after the cash market closed higher by 0.3% on Monday.
• DXY is steady on a 102 handle, EUR/USD remains sub-1.10, USD/JPY sits just above the 148 mark.
• New York Times cited officials that stated Israel is likely to target Iranian military bases and possible intelligence sites.
• Looking ahead, include German Industrial Output, US NFIB Business Optimism Index, RCM/TIPP Economic Optimism, International Trade, EIA STEO, ECB’s Schnabel, BoE’s Breeden, Fed’s Kugler, Bostic & Collins, Supply from Netherlands, UK, Germany & US.

SNAPSHOT

US TRADE

EQUITIES

• US stocks were pressured amid rising yields and higher oil prices with macro newsflow quiet and geopolitics in focus as participants await Israel's response to Iran which information cited by the US indicated to be imminent. All major indices finished in the red and underperformance was seen in the Nasdaq while Utilities, Communication Services and Consumer Discretionary led the declines seen across nearly all sectors aside from Energy which was underpinned by the oil surge.
• SPX -0.96% at 5,969, NDX -1.17% at 19,801, DJIA -0.94% at 41,954, RUT -0.89% at 2,193.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Williams (voter) said the US economy is well positioned for a soft landing and the current monetary policy stance is well positioned to both keep maintaining strength in the economy and labour market. Willaims said the rate decision was right in September and right today, while he added that the half-point rate cut in September was not the rule of how we will act in the future, according to FT.
• Fed's Musalem (2025 voter) said more rate cuts are likely given the economic outlook and his personal rate outlook is above the Fed's median view, while he won't predict the timing or size of future Fed easing. Musalem commented that the costs of easing too much outweigh easing too little and he supported the Fed’s decision last month to cut rates by 50bps. Furthermore, he said the September jobs report was very strong and the labour market is strong and healthy, as well as noted there is no emergency in the job market right now and the jobs report didn't cause a change in the outlook
• Fed's Kashkari (2026 voter) said the balance of risks has shifted away from higher inflation towards maybe higher unemployment and noted the US economy is resilient overall, while he also stated that balance sheet shrinking has a ways to go yet.

APAC TRADE

EQUITIES

• APAC stocks were ultimately mixed after the negative lead from Wall St amid firmer yields and higher oil prices, while geopolitical concerns lingered as participants braced for Israel's response to Iran and China's NDRC press conference was met with disappointment.
• ASX 200 slightly weakened amid losses in the commodity-related sectors but with downside limited by the improvement in consumer and business surveys.
• Nikkei 225 retreated amid a firmer currency while the data was varied as Household Spending topped forecast and Labour Cash earnings slowed.
• Hang Seng and Shanghai Comp diverged in which the Hong Kong benchmark suffered heavy losses as it took a back seat to the return of mainland bourses, while price action was volatile for the mainland index with a double-digit percentage gain seen at the open on return from the National Day Golden Week holiday. However, the index nearly gave back all of its gains after the NDRC press conference was met with disappointment with very little new announced regarding stimulus, although mainland stocks then caught a second wind again but are well off their opening highs.
• US equity futures (ES U/C) were uneventful after their recent declines and amid the mixed risk appetite in Asia.
• European equity futures are indicative of a negative cash open with the Euro Stoxx 50 future -0.8% after the cash market closed higher by 0.3% on Monday.

FX

• DXY remained contained after the prior day's uneventful performance in the absence of tier-1 data, while comments from Fed officials provided little to shift the dial in which Kashkari noted that balance sheet shrinking has a ways to go yet and Musalem said more rate cuts are likely given the economic outlook.
• EUR/USD kept to within tight parameters beneath the 1.1000 handle after largely ignoring the recent rhetoric from ECB officials.
• GBP/USD attempted to reclaim the 1.3100 status after retreating yesterday in tandem with weakness in other activity currencies.
• USD/JPY was choppy and initially trickled beneath the 148.00 level before staging a gradual rebound.
• Antipodeans were varied with NZD flat ahead of tomorrow's RBNZ decision, while AUD/USD was initially indecisive following the somewhat balanced tone from the RBA minutes which noted the Board discussed scenarios for lowering and raising interest rates in the future, although the pair was then later pressured as commodity prices retreated amid disappointment regarding the NDRC's press conference.

FIXED INCOME

• 10yr UST futures nursed some losses after suffering as the 10yr yield climbed above 4.00% in a continuation of the recent bond sell-off and as oil prices surged.
• Bund futures rebounded from Monday's worst levels but with the recovery limited ahead of German Industrial Production data and Bund supply.
• 10yr JGB futures traded rangebound and were unreactive to several data releases, while price action was also not helped by the mostly weaker results of the 30yr JGB auction.

COMMODITIES

• Crude futures pulled back after the recent geopolitically-driven advances and Brent crude gradually returned to beneath the USD 80/bbl, while there was a brief early uplift seen amid a rumour of explosions in Iran although this was refuted shortly after.
• NHC said Milton is rapidly intensifying into a category 5 hurricane.
• Spot gold lacked demand following yesterday's indecisive performance and as participants await this week's key events.
• Copper futures failed to benefit from the return of Chinese buyers and the early rise in Shanghai commodity futures with pressure seen amid China volatility.

CRYPTO

• Bitcoin marginally softened overnight after failing to sustain the USD 63,000 status.

NOTABLE ASIA-PAC HEADLINES

• China's NDRC Chairman said China's economy is largely stable but is facing a more complex internal and external environment, while he added that new policies will improve the health of economic actors and he is fully confident of achieving full-year economic and social development targets. The state planner head said they will promote a sustained, stable and healthy economic development in 2024 and 2025, as well as expand domestic demand and prioritise consumption, promote an economic rebound and quicken fiscal spending to support the economy. Furthermore, they will speed up the implementation of additional measures, release an updated foreign investment negative list, speed up local government special bond issuance and plan to issue CNY 200bln in advance budget spending and investment projects from next year.
• China's regulator urged financial institutions to strengthen internal control over leverage and said Chinese bank loans are banned from entering China's stock market, according to Financial News.
• RBA Minutes stated the Board discussed scenarios for lowering and raising interest rates in the future and members felt not enough had changed from the previous meetings that the current Cash Rate best balanced risks to inflation and the labour market, while it stated that future financial conditions might need to be tighter or looser than at present to achieve the board's objectives and that scenarios lowering, holding and raising rates are all conceivable given the considerable uncertainty about the economic outlook. RBA noted that policy could be held restrictive if consumption growth picks up materially or could be tightened if present financial conditions are insufficiently restrictive to return inflation to target, while policy could be eased if the economy proves significantly weaker than expected and it is not necessary for the cash rate to evolve in line with policy rates in other economies. Furthermore, it stated that underlying inflation is still too high and policy will need to remain restrictive until board members are confident inflation is moving sustainably towards the target range, as well as noted that it is not possible to rule in or out future changes in the cash rate target at this time.

DATA RECAP

• Japanese All Household Spending MM (Aug) 2.0% vs. Exp. 0.5% (Prev. -1.7%)
• Japanese All Household Spending YY (Aug) -1.9% vs. Exp. -2.6% (Prev. 0.1%)
• Japanese Overall Labour Cash Earnings (Aug) 3.0% vs. Exp. 3.0% (Prev. 3.6%, Rev. 3.4%)
• Australian Westpac Consumer Sentiment Index (Oct) 89.8 (Prev. 84.6)
• Australian NAB Business Confidence (Sep) -2.0 (Prev. -4.0)
• Australian NAB Business Conditions (Sep) 7.0 (Prev. 3.0)

GEOPOLITICS

MIDDLE EAST

• There was an initial unconfirmed report on X regarding explosions heard in Isfayah and Tehran in Iran. However, Iraqi Sabreen News, which is close to Iran, shortly denied that there was an attack on Iran and Iranian media also denied any violation of Iran’s airspace by hostile aircraft.
• Israel’s cabinet is in permanent session to discuss the response to Iran and choose the location, according to Al Jazeera citing an Israeli delegate to the UN.
• New York Times cited officials that stated Israel is likely to target Iranian military bases and possible intelligence sites in its response, while Israel seems to have postponed after a long discussion the targeting of Iranian nuclear sites to a later date, according to Al Jazeera.
• Israel's army said their fighter jets bombed Hezbollah intelligence headquarters in Beirut, while it was later reported that Israel's military said it eliminated Hezbollah HQ commander Suhail Hussein Husseini in Beirut.
• Israeli Home Front announced sirens sounded in western Galilee, while the IDF later stated that about 175 rockets were fired from Lebanon into Israel in the past 24 hours.
• Hezbollah announced that it shelled with rockets a gathering of enemy forces in the settlement of Shlomi and it targeted a military intelligence unit in the suburbs of Tel Aviv in a missile launch operation.
• Israel's army issues an urgent warning to beachgoers and boat users from Lebanon's Awali river southward and said it is easing some protective guidelines for residents in some areas of Galilee in northern Israel and Golan Heights.
• Israel's military issued new evacuation warnings on specific buildings in Beirut's southern suburbs on Monday evening.
• Israel’s military shut access to areas around several towns in northern Israel after a security assessment.
• Israel’s navy will soon begin to operate against Hezbollah from the sea, according to Kann news.
• US State Department said Israeli ground operations in Lebanon so far continue to be limited in the US's assessment. However, it was separately reported that IDF sources said the invasion force is likely to grow significantly in the near future, according to Jerusalem Post.

OTHER

• Ukraine announced that a Russian missile hit a grain ship in the Odesa region which killed one person onboard the grain ship.
• Russian and Chinese ships conducted a joint practice of anti-submarine missions in Asia-Pacific, according to RIA.
• North Korean leader Kim said they are to speed up steps towards military superpower and strong nuclear power, while Kim also said they are to further strengthen Russia-North Korea cooperation in a birthday message to Russian President Putin, according to News1 and KCNA.

EU/UK

NOTABLE HEADLINES

• UK launched the Regulatory Innovation Office in an effort to speed up approvals for new technology, according to FT.
• UK homes are reported to be offered payments to reduce electricity use all year round, according to FT. In relevant news, Britain's energy grid operators are confident of sufficient electricity and gas supply this winter, according to Reuters.
• Barclaycard said UK September consumer spending rose 1.2% Y/Y vs. prev. 1.0% growth in August and it cited a boost from discretionary spending but noted that essential spending fell 1.7% which was the steepest drop since April 2020.
• ECB's Elderson says many indicators show that the risks of lower economic growth are materializing; ECB is open-minded ahead of the October 17th meeting, ECB decisions are made on a meeting by meeting basis, via local press Delo

DATA RECAP

• UK BRC Retail Sales YY (Sep) 1.7% (Prev. 0.8%)
• UK BRC Total Sales YY (Sep) 2.0% (Prev. 1.0%)