Middle East and Oil in focus as market digests US Payrolls beat ahead of Fed speak this week

Notes/observations

- Quiet start to the week brings marginal weakness to European trade and US futures after strong US Nonfarm Payrolls on Friday which lifted stocks on bets Fed has orchestrated a soft landing.

- Oct 7th marks one-year anniversary of initial attacks in Israel/Gaza that triggered wider regional conflict. Over weekend, Biden noted that Israel has not decided yet on how to respond to Iranian strike. Crude bidding ~$80/bbl on Brent since EU open as reports circulate Hamas launched missile salvo into Tel Aviv, Israel.

- Notable EU takeover news: Ubisoft did not deny recent media speculation that Tencent is considering takeover of co. Ubisoft had dropped ~50% YTD on back of failed game releases and delays. Rio Tinto confirmed they approached Arcadium Lithium in Australia for acquisition. Rio did not provide any details but speculation suggests $4-6B offer for the $3.3B valued co.

- Asia closed mixed with Nikkei225 outperforming +2.1%. EU indices are -0.4% to +0.3%. US futures are -0.4% to -0.6%. Gold -0.1%, DXY 0.0%; Commodity: Brent +1.7%, WTI +2.0%; Crypto: BTC +2.2%, ETH +2.3%.

Asia

- China Beige Book's Miller stated that stimulus was short term put option on the economy; Trying to put floor in economy rather than raise the ceiling.

- Japan Top FX Diplomat Mimura: Reiterates stance to monitor FX moves including speculative moves.

- BOJ Quarterly Regional Economic Report (Sakura) raised its assessment for 2 out of 9 regions. It maintained assessment of 7 of 9 regions unchanged.

- China Sept Foreign Reserves $3.316T v $3.308Te; Gold reserves stayed steady for the 5th straight month at 72.8M troy oz.

Global conflict/tensions

- Israel continued to engage in a multi-front war. It continued aerial strikes and ground operations in northern Gaza and Lebanon, while monitoring threats from Iran.

- All flights in Iranian airports had been cancelled from 9pm Sunday until 6am Monday local time.

Europe

- ECB Villeroy (France) stated that ECB would quite probably cut rates in Oct due to rising risk of inflation undershooting 2.0% target.

- Germany Econ Min Habeck stated that expected GDP to contract by 0.2% in 2024.

- UK PM Starmer's Chief of Staff Sue Gray steps down amid Cabinet reshuffle.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.3% at 517, FTSE 0.0% at 8,281, DAX -0.4% at 19,045, CAC-40 -0.2% at 7,525, IBEX-35 +0.2% at 11,679, FTSE MIB -0.3% at 3,263, SMI -0.2% at 11,981, S&P 500 Futures -0.4%].

Market focal points/key themes: European indices opened mixed and turned modestly lower through the early part of the session; markets seen assessing impact of less monetary policy easing likely from the Fed following Friday’s strong jobs report; among gaining sectors are consumer discretionary and financials; real estate and utilities among the sectors showing stronger declines; Italgas to acquire 2i Rete Gas; Richemont teams up with Mythersea to acquire YNAP; FD Technologies to divest First Derivatives unit to EPAM;Rio Tinto confirms made approach to Arcadium Lithium to acquire the company; reportedly Heidelberg in talks to sell its India unit to Adani; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Ubisoft [UBI.FR] -2.0% (speculation of takeover by Tencent, company acknowledges press but does not confirm).

- Consumer staples:

- Energy: Italgas [IG.IT] -1.0% (presents 2024-2030 strategic plan).

- Financials:

- Healthcare: AstraZeneca [AZN.UK] -0.5% (positive high-level results from the BATURA Phase IIIb trial).

- Industrials: ThyssenKrupp [TKA.DE] -4.0% (fundamental review of ongoing multi-billion dollar flagship project to convert steel mills to green steel using hydrogen).

- Technology: Atos [ATO.FR] +1.5% (update on ongoing talks with French Govt concerning BDS).

- Telecom:

Speakers

- France Fin Min Armand stated that the French budget to meet EU rules

- Japan PM Ishiba stated in Parliament that saw no need to amend accord with BOJ; to continue policy to ensure an end to deflation

Currencies/fixed income

- USD consolidated its post payroll gains. Fed futures now price 0% chance (v 38% w/w) of 50bps rate cut at Nov 7th's meeting (following strong jobs report) and 93.2% chance for 25bps rate cut (v 62% w/w). Market continued to price in several more 25 basis-point rate cuts afterwards. US 10-year yield edging back towards the 4.00% level and helping to keep the greenback supported.

- EUR/USD steady at 1.0970.

- GBP/USD dipping below the 1.31level during the session.

- USD/JPY off the Asian session highs of 149.11 to trade at 148.25 by mid-session.

Economic data

- (DE) Germany Aug Factory Orders M/M: -5.8% v -2.0%e; Y/Y: -3.9% v -1.6%e.

- (UK) Sept Halifax House Price Index M/M: 0.3 v 0.3% prior; Y/Y: 4.7% v 4.3% prior.

- (SE) Sweden Sept Budget Balance (SEK): -29.4B v +34.9B prior.

- (NO) Norway Aug Industrial Production M/M: -1.1% v -3.6% prior; Y/Y: 6.0% v 10.1% prior.

- (NO) Norway Aug Manufacturing Production M/M: -1.1% v +2.1% prior; Y/Y: 3.2% v 6.6% prior.

- (FI) Finland Aug Preliminary Trade Balance: -€0.3B v €0.0B prior.

- (DK) Denmark Aug Industrial Production M/M: -4.8 v +7.6% prior.

- (ZA) South Africa Sept Gross Reserves: $63.3B v $63.21B prior; Net Reserves: $61.0B v $60.8Be.

- (HU) Hungary Aug Retail Sales Y/Y: 4.1% v 2.8%e.

- (HU) Hungary Aug Preliminary Trade Balance: €0.7B v €0.3Be.

- (CH) Swiss Sept Foreign Currency Reserves (CHF): 715.6B v 693.9B prior (1st rise since April).

- (AT) Austria Sept Wholesale Price Index M/M: -0.7% v -0.9% prior; Y/Y: -3.1% v -1.2% prior.

- (CZ) Czech Aug Industrial Output Y/Y: -1.5% v -2.2%e ; Construction Output Y/Y: 0.4% v 2.0% prior.

- (CZ) Czech Aug Trade Balance (CZK): +14.3B v -3.8Be.

- (MY) Malaysia Foreign Reserves w/e Sept 30th: $119.7B v $117.6B prior.

- (CH) Swiss weekly Total Sight Deposits (CHF): 471.4B v 472.2B prior; Domestic Sight Deposits: 460.3B v 463.6B prior.

- (EU) Euro Zone Oct Sentix Investor Confidence: -13.8 v -15.4e.

- (HK) Hong Kong Sept Foreign Reserves: $422.8B v $423.4B prior.

- (EU) Euro Zone Aug Retail Sales M/M: 0.2% v 0.2%e; Y/Y: 0.8% v 1.0%e.

- (SG) Singapore Sept Foreign Reserves: $389.8B v $384.59B prior.

Fixed income issuance

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3-month Bills; Avg Yield: 4.46% v 4.44% prior; Bid-to-cover: 2.95x v 2.18x prior.

Looking ahead

- (IL) Israel Sept Foreign Currency Balance: No est v $217.4B prior.

- (UR) Ukraine Sept Official Reserve Assets: No est v $42.3B prior.

- (EG) Egypt Sept Net Reserves: No est v $46.6B prior.

- (MX) Mexico Citi Survey of Economists.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell combined €5.0B in 3-month and 9-month BuBills.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month bills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (RO) Romania to sell 6.3% Apr 2028 bond.

- 06:00 (IL) Israel to sell combined ILS2.2B in 2027, 2029, 2034 and 2035 bonds.

- 06:00 (NO) Norway announcement on upcoming bond issuance (held on Wed).

- 06:30 (TR) Turkey to sell TLREF Indexed Bonds.

- 07:00 (BR) Brazil Sept FGV Inflation IGP-DI M/M: No est v 0.1% prior; Y/Y: No est v 4.2% prior.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 07:30 (CL) Chile Sept Trade Balance: No est v $1.1B prior; Exports: No est v $8.0B prior; Imports: No est v $6.9B prior; Copper Exports: No est v $4.3B prior.

- 07:30 (CL) Chile Sept International Reserves: No est v $46.3B prior.

- 07:45 (ES) ECB's Escriva (Spain).

- 08:00 (PL) Poland Sept Official Reserves: No est v $213.1B prior.

- 08:00 (CL) Chile Aug Nominal Wage Y/Y: No est v 8.1% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 09:00 (FR) France Debt Agency (AFT) to sell €6.4-8.0B in 3-month, 6-month and 12-month bills (4 tranches).

- 09:00 (RU) Russia Sept Official Reserve Assets: No est v $613.7B prior.

- 09:30 (TR) Turkey Sept Cash Budget Balance (TRY): No est v -194.6B prior.

- 10:00 (BR) Brazil Sept Vehicle Production: No est v 259.6K prior; Vehicle Sales: No est v 237.4K prior; Vehicle Exports: No est v 38.2K prior.

- 11:00 (CO) Colombia Aug Exports: $4.0Be v $4.6B prior.

- 11:30 (EU) European Finance Ministers (Eurogroup) meeting (**Note: ECB's Lagarde and Cipollone attend).

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 13:50 (US) Fed's Kashkari participates in Q&A.

- 15:00 (US) Aug Consumer Credit: $13.4Be v $25.5B prior.

- 16:00 (US) Weekly Crop Progress Report.

- 18:00 (US) Fed's Bostic moderates conversation with Steve Koonin.

- 19:00 (KR) South Korea Aug Current Account Balance: No est v $9.1B prior; Balance of Goods (BOP): No est v $8.5B prior.

- 19:00 (CO) Colombia Sept CPI M/M: 0.3%e v 0.0% prior; Y/Y: 5.9%e v 6.1% prior.

- 19:00 (CO) Colombia Sept CPI Core M/M: 0.3%e v 0.2% prior; Y/Y: 6.5%e v 6.8% prior.

- 19:01 (UK) Sept BRC Sales Like-For-Like Y/Y: No est v 0.8% prior.

- 19:30 (AU) Australia Oct Westpac Consumer Confidence: No est v 84.6 prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 82.0 prior.

- 19:30 (JP) Japan Aug Labor Cash Earnings Y/Y: 3.0%e v 3.4% prior (revised from 3.6%); Real Cash Earnings Y/Y: -0.5%e v +0.3% prior (revised from 0.4%); Same Sample Base Y/Y: 3.2%e v 4.7% prior (revised from 4.8%); Scheduled Full-Time Pay - Same Base Y/Y: 3.0%e v 3.0% prior.

- 19:30 (JP) Japan Aug Household Spending Y/Y: No est v 0.1% prior.

- 19:50 (JP) Japan Aug Current Account Balance: ¥2.975Te v ¥3.193T prior; Adj Current Account: No est v ¥2.802T prior; Trade Balance (BOP Basis): No est v -¥482.7B prior.

- 20:30 (AU) Australia Sept RBA Minutes.

- 20:30 (AU) Australia Sept NAB Business Confidence No est v -4 prior; Business Conditions No est v 3 prior.

- 21:00 (AU) Australia Sept ANZ-Indeed Job Advertisements M/M: No est v -2.1% prior.

- 21:00 (PH) Philippines Aug Unemployment Rate: No est v 4.7% prior.

- 21:00 (AU) RBA's Hauser.

- 23:00 (ID) Indonesia Sept Consumer Confidence: No est v 124.4 prior.

- 23:35 (JP) Japan to sell 30-Year JGB Bonds.