• APAC stocks were mixed with early declines seen post-losses on Wall Street following disappointing earnings updates from ASML and LVMH.
• Fed's Daly (2024 voter) said if forecasts are met, she sees one or two more rate cuts this year.
• European equity futures are indicative of a negative cash open with the Euro Stoxx 50 future -0.7% after the cash market closed lower by 1.9% on Tuesday.
• DXY is holding above the 103 mark, EUR/USD is sub-1.09, Antipodeans lag peers.
• Israel reportedly briefed the Biden administration on the general goals of the planned attack on Iran but not on specific targets.
• Looking ahead, highlights include UK CPI, US Import/Export Prices, Comments from ECB’s Lagarde, Supply from UK & Germany, Earnings from Citizens Financial Group, US Bancorp, Abbott Laboratories, Morgan Stanley, Prologis & Whitbread

SNAPSHOT

US TRADE

EQUITIES

• US stocks predominantly closed lower with underperformance in the Nasdaq amid declines in tech as weak guidance from ASML added to the headwinds for semiconductors which were already on the back foot following reports that the US is looking to curb chip exports to some countries from Nvidia and AMD in the interest of national security. Furthermore, Energy was the worst-performing sector amid the recent fall in oil prices, while a woeful earnings report from LVMH added to the downbeat mood.
• SPX -0.76% at 5,815, NDX -1.37% at 20,160, DJIA -0.75% at 42,740, RUT +0.05% at 2,250.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed Discount Rate Minutes noted requests by five reserve banks to maintain the existing primary credit rate and requests by seven reserve banks to decrease the rate. Federal Reserve Bank directors commented on labour market conditions in which most noted improved labour availability overall, lower employee turnover, and moderate wage growth, while many directors said employers in their Districts were taking a more cautious approach to hiring, but there were few reports of widespread layoffs.
• Fed's Bostic (2024 voter) said the US economy is performing quite well and he is confident inflation will get back to the 2% target, while he doesn't have a recession in his outlook but expects inflation to be choppy and employment to stay robust. Bostic also noted his dot was for 25bps more in 2024 beyond the 50bps September cut and is keeping his options open.
• Fed's Daly (2024 voter) said Fed policy is still restrictive and working to lower inflation, while continued progress on the Fed’s goals is not assured and the Fed must remain vigilant. Furthermore, she said talk of gradual rate cuts means less than it appears and if forecasts are met, she sees one or two more rate cuts this year.
• Republican Presidential Candidate Trump said regarding tariffs that 10% is hundreds of billions of dollars and the tariff has to be higher than 10% if you want companies to come into the US, while he added that if they make it 50%, companies are going to come in. Furthermore, Trump said he has the right to tell the Fed what to do on interest rates, but not order it, while he also commented that Google (GOOGL) has a lot of power which is very bad to him and responded that he would do something when asked about breaking up the Co.

APAC TRADE

EQUITIES

• APAC stocks were ultimately mixed with early declines seen as the risk-off mood rolled over into the region after Wall St pulled back from record levels with global sentiment sapped by disappointing earnings updates from ASML and LVMH.
• ASX 200 was restrained as weakness in tech and consumer stocks overshadowed the gains in financials and real estate, while miners were also lacklustre with Rio Tinto shares pressured following its quarterly update.
• Nikkei 225 underperformed after slipping beneath the 40k level and amid disappointing Machinery Orders.
• Hang Seng and Shanghai Comp clawed back opening losses following the PBoC's firm liquidity efforts and with China to hold a press briefing tomorrow on promoting the steady and healthy development of the property sector.
• US equity futures (ES +0.1%, NQ +0.2%) attempted to nurse some losses after Wall St's recent slip from record highs.
• European equity futures are indicative of a negative cash open with the Euro Stoxx 50 future -0.7% after the cash market closed lower by 1.9% on Tuesday.

FX

• DXY traded little changed after yesterday's indecisive performance with the dollar not helped by the weak Empire Manufacturing data or the latest NY Fed Survey of Consumer Expectations, while the latest Fed speak did little to shift the dial as Bostic noted his dot was for another 25bps cut this year beyond the 50bps September move and he is keeping his options open.
• EUR/USD remained contained after having failed to hold on to the 1.0900 status despite mostly better-than-expected data, while the attention for the single currency this week remains on Thursday's ECB policy meeting.
• GBP/USD lacked direction after the recent pullback from resistance at the 1.3100 handle and as UK CPI data looms.
• USD/JPY was indecisive with pressure seen after BoJ Board Member Adachi noted that conditions are already in place for the BoJ to start normalising monetary policy and suggested they must take rate hikes in several stages, while the declines were then pared as Adachi also stated that BoJ will raise rates at a very moderate pace and warned against hiking rates at a rapid pace.
• Antipodeans were choppy with initial weakness seen amid the risk aversion and after mixed New Zealand Inflation data in which CPI YY matched estimates but the Q/Q figure printed softer than expected. Nonetheless, the currencies then bounced off their lows and returned to relatively flat territory.

FIXED INCOME

• 10yr UST futures sat around the prior day's best levels after benefitting from lower oil prices and soft Canadian inflation.
• Bund futures held on to most of the recent gains but with further upside capped heading into today's Bund issuances.
• 10yr JGB futures tracked the advances in global peers and returned to the 144.00 level, while prices also benefitted from the risk-off mood in Japan and disappointing Machinery Orders.

COMMODITIES

• Crude futures saw some mild reprieve after WTI rebounded from the USD 70/bbl level but with the recovery only marginal compared to the recent slump whereby prices fell on China demand concerns and with Israel reportedly to avoid targeting Iran oil and nuclear facilities, while the latest inventory data releases are delayed for a day owing to the recent federal holiday.
• Spot gold remained underpinned albeit with gains limited amid an uneventful dollar.
• Copper futures picked themselves up from this week's trough although price action was capped amid the mixed risk tone.

CRYPTO

• Bitcoin extended on gains overnight and climbed back above the USD 67,000 level.

NOTABLE ASIA-PAC HEADLINES

• Chinese President Xi said China is willing to be a partner and friend with the US, while he added the success of China and the US is an opportunity for each other and both countries should boost each other's development rather than be an obstacle, according to state media.
• Hong Kong Chief Executive Lee said in his annual policy address that they plan to reduce wait times for public housing and will streamline procedures for companies seeking to list in Hong Kong as they seek to attract international enterprises listings. Lee also announced to cut duties on liquor with an import price of more than HKD 200 to 10% from 100% for the amount above HKD 200, while it was later reported that Hong Kong is to relax mortgage rules for some homes.
• BoJ Board Member Adachi said conditions are already in place for the BoJ to start normalising monetary policy and it must take rate hikes in several stages, but added they must avoid drastic policy change that could stoke fear of a return to deflation. Adachi said the BoJ will raise rates at a very moderate pace and maintain an accommodative financial environment until underlying inflation stably and sustainably hits 2%, while he also stated that hiking rates at a rapid pace after the inflation target is met could cause a big shock to economy and the BoJ should raise rates in several stages to achieve smooth policy normalisation. Furthermore, he said the BoJ must avoid a premature rate hike, which means it should use conservative estimates in gauging Japan's natural rate of interest.

DATA RECAP

• Japanese Machinery Orders MM (Aug) -1.9% vs. Exp. -0.1% (Prev. -0.1%)
• Japanese Machinery Orders YY (Aug) -3.4% vs. Exp. 3.6% (Prev. 8.7%)
• New Zealand CPI QQ (Q3) 0.6% vs. Exp. 0.7% (Prev. 0.4%)
• New Zealand CPI YY (Q3) 2.2% vs. Exp. 2.2% (Prev. 3.3%)
• RBNZ Sectoral Factor Model Inflation (Q3) 3.4% (Prev. 3.6%)

GEOPOLITICS

MIDDLE EAST

• Israel's army presented PM Netanyahu and Defence Minister Gallant with a list of targets for a possible attack on Iran, according to Israel's Channel 12 cited by Al Jazeera.
• Israeli officials briefed on the planning noted that even if Israel avoids Iran’s nuclear enrichment and oil sites, Israel could still hit a wide array of military targets, as well as military bases and major government buildings, according to NYT.
• Israeli PM Netanyahu's government began disabling GPS in Tel Aviv in anticipation of the Iranian response to a possible Israeli attack, according to Al Arabiya.
• Israel reportedly briefed the Biden administration on the general goals of the planned attack on Iran but not on specific targets, while sources aware of the details said the goals can change even in the 90th minute, according to Kann News.
• Washington believes it has obtained guarantees that Israel will not target nuclear or oil sites in Iran, but warned these guarantees are not conclusively confirmed and circumstances may change. Officials also noted that Israel’s track record on fulfilling assurances is mixed and has often reflected politics that have upended Washington’s expectations, according to AP.
• IDF said it killed a large number of Hezbollah members in raids and exchanges of fire in southern Lebanon during the last day, while it added that it hit more than 140 targets in more than 50 locations including weapons stores.
• Israel targeted a site in the southern suburbs of Beirut for the first time since Friday.
• Israel's army said about 50 rockets were detected from Lebanon towards the Upper Galilee, and a number of them were intercepted, according to Sky News Arabia.
• Iranian Foreign Minister Araqchi is to visit Jordan, Egypt and Turkey as part of a diplomatic reach out to countries in the region 'to end genocide, atrocity and aggression', according to Iran's Foreign Ministry.

OTHER

• White House said reports of North Korean troops being used by Russia are concerning.

EU/UK

NOTABLE HEADLINES

• EU reportedly readies US trade targets if election brings Trump tariffs, according to Bloomberg.
• UK Chancellor Reeves is putting together plans for up to GBP 40bln worth of tax increases and spending reductions to fill the "GBP 22bln black hole" in her budget on October 30th, according to The Times.