Risk on for US futures and crypto, while EU bond yields fall after flash PMIs

EU mid-market update: Risk on for US futures and crypto, while EU bond yields fall after flash PMIs; Israel said to delay Gaza invasion 'by few days'.

Notes/observations

- Bond market remains at forefront of market focus, with declining yields across Europe.

- Flash PMIs across Europe continued to be lackluster, particularly with services sector. Specifically, German Services PMI miss triggered a fall in bond yields and EUR currency.

- EU Earnings Recap: Novartis (healthcare) raised FY23 guidance, with CEO later saying sales could be within higher end of range; Barclays (bank) net interest margin guidance cut seen weighing on stock; Puma (apparel) affirmed guidance, seeing strong improvement in profitability for Q4; Anglo American (miner) cut FY23 copper guidance, while maintaining diamond and platinum production.

- Asia closed mixed with KOSPI out-performing at +1.1%. EU indices are -0.3% to +0.1%. US futures are +0.2-0.4%. Gold -0.1%, DXY +0.1%; Commodity: Brent +0.2%, WTI +0.1%, TTF +3.0%; Crypto: BTC +11.0%, ETH +7.9%.

Asia

- Australia Oct Preliminary PMI Manufacturing registered its 5th month of contraction (48.0 v 48.7 prior).

- Japan Oct Preliminary PMI Manufacturing registered its 5th month of contraction (48.5 v 48.5 prior).

- Further press speculation that BoJ said to consider whether to tweak YCC over US yields concerns; See little need to change forward guidance and said to watch yields to the last minute before next week’s decision.

- BOJ announced an unscheduled bond buying operation: offered to buy ¥100B in 10-25 year JGBs, ¥300B in 5-10 year JGBs.

- Japan said to consider cutting income tax by ¥40,000 per person, plans to extend the gasoline subsidy to the end of Apr.

- China Pres Xi reportedly made 'unprecedented' PBOC visit - press [**Note: first known visit of Xi to PBOC since he became China Pres a decade ago].

- China Foreign Min Wang Yi said to be planning to visit Washington during the week of Oct 23rd (this week) to meet US Sec of State Blinken and make preparations for summit next month; Later, China confirmed Foreign Min Wang Yi to visit US on Oct 26-28th.

- US and China economic working groups hold video meeting on Oct 24th (Tues); discussed macro-economic situation and policies.

- PM Kishida said to face growing political headwinds after the ruling LDP lost one of two parliamentary by-elections over the past weekend.

Mid-East

- US intelligence suggested Iranian-backed militias are preparing to step up attacks against US forces in the Middle East.

- White House Kirby stated that did not believe this was the time for a cease fire in the Israel-Hamas conflict.

Europe

- HSBC CEO said he sees potential for persistently high rates in Europe - Riyadh.

- Euro Area quarterly bank lending survey noted that credit standards have tightened as economy weakens.

Americas

- UAW noted that 6,800 autoworkers go on strike at Stellantis' largest and most profitable plant, the Sterling Heights, MI assembly facility.

- Blackrock CEO Fink said we are going to see higher interest rates for longer; Red will have to raise interest rates further.

Energy

- IEA Head Birol said current crisis in Middle East could shock oil market deeply.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.21% at 432.28, FTSE -0.29% at 7,353.53, DAX +0.01% at 14,802.15, CAC-40 +0.22% at 6,865.37, IBEX-35 -0.08% at 8,988.69, FTSE MIB -0.41% at 27,446.00, SMI -0.35% at 10,295.80, S&P 500 Futures +0.30%].

Market focal points/Key themes: European indices opened mixed; sectors among those leading higher are materials and consumer; while sectors trending lower include industrials and telecom; retail subsector supported after Puma earnings beat; ScS receives takeover offer from Poltronesofa; MAM looking to take minority stake in Norks Hydro’s Rein; earnings expected in the upcoming US session include Danaher, Spotify, General Electric and Michelin.

Equities

- Consumer discretionary: Puma [PUM.DE] +4.0% (earnings), Hermes [RMS.FR] +1.5% (earnings), ScS Group [SCS.UK] +60.0% (offer to be acquired).

- Consumer staples: Interparfums [ITP.FR] -4.0% (earnings).

- Financials: Unicredit [UCG.IT] -1.5% (earnings; raised outlook; initial FY24 outlook).

- Healthcare: Novartis [NOVN.CH] -1.0% (earnings), Sandoz [SDZ.CH] -3.0% (earnings), Orange [ORA.FR] -1.5% (earnings).

- Technology: Logitech [LOGN.CH] +10.5% (earnings; raised outlook), FD Technologies [FDP.UK] -39.0% (earnings; outlook cut).

Speakers

-Japan PM Kishida reiterated that the domestic economy was recovering but household consumption and investments remain fragile amid the inflation.

-Thai Dep Fin Min said govt still open to issue foreign-currency bonds and that Thailand has no problems with domestic liquidity.

-Poland Central Bank (NBP) Litwiniuk said he thinks there are no grounds to lower interest rates further.

-Philippines Central Bank (BSP) Gov Remolona said off-cycle rate changes may be on the table as early as Thurs, Oct 26th.

-Reserve Bank of Australia (RBA) Gov Bullock said there are risks inflation would prove more stubborn than expected and interest rates might have to rise further.

-ECB’s Makhlouf (Ireland) said closely watching middle east conflict; Do not want to jump to any conclusions on economic or policy impact.

-Sweden Central Bank (Riksbank) Gov Thedeen said Riksbank needs to restore capital; Need capital injection of ~SEK80B.

Currencies/fixed income

- USD remained on soft footing with focus on key economic data ahead of central bank rate decisions. Fed was expected to resume its pause at the upcoming Oct meeting.

- EUR/USD was approaching the 1.07 handle ahead of the ECB rate decision on Thursday. ECB is expected to pause for the 1st time in the current tightening cycle.

- USD/JPY staying below the pivotal 150 level after being tested the past few session. Market remain wary of potential BOJ FX intervention. Recent press recents have circulated that the BOJ could again tweak its Yield Control policy due to the recent surge in global interest rates.

- Bitcoin was trading above $35K for its highest level since spring 2022 as the price action continued to rise on speculation that the United States could soon approve a bitcoin exchange-traded fund.

Economic data

- (FI) Finland Sept PPI M/M: -0.1% v +1.8% prior; Y/Y: -8.2% v -8.4% prior.

- (FI) Finland Sept Unemployment Rate: 7.0 v 6.7% prior.

- (DE) Germany Nov GfK Consumer Confidence: -28.1 v -27.0e.

- (UK) Sept Jobless Claims Change: +20.4K v -9.0K prior; Claimant Count Rate: 4.0% v 3.9% prior.

- (UK) Aug ILO Unemployment Rate:4.2% v 4.3%e.

- (HU) Hungary Aug Average Gross Wages Y/Y: 15.3% v 14.8%e.

- (ES) Spain Aug House transactions Y/Y: -14.4% v -10.5% prior.

- (ZA) South Africa Aug Leading Indicator: 110.9 v 110.4 prior.

- (CZ) Czech Oct Business Confidence: 92.8 v 89.4 prior; Consumer Confidence: 92.7 v 88.3 prior; Composite Confidence (Consumer & Business): 92.8 v 89.2 prior.

- (FR) France Oct Preliminary Manufacturing PMI: 42.6 v 44.5e; Services PMI: 46.1 v 45.0e; Composite PMI: 45.3 v 44.6e.

- (DE) Germany Oct Preliminary Manufacturing PMI: 40.6 v 40.1e; Services PMI: 48.0 v 50.0e; Composite PMI: 45.8 v 46.6e.

- (EU) Euro Zone Oct Preliminary Manufacturing PMI: 43.0 v 43.7e; Services PMI: 47.8 v 48.6e; Composite PMI: 46.5 v 47.4e.

- (PL) Poland Sept Unemployment Rate: 5.0% v 5.0%e.

- (TW) Taiwan Sept M2 Money Supply Y/Y: 6.0% v 6.5% prior; M1 Money Supply Y/Y: 2.8% v 2.9% prior.

- (UK) Oct Preliminary Manufacturing PMI: 45.2 v 44.7e; Services PMI: 49.2 v 49.3e; Composite PMI: 48.6 v 48.5e.

- (UK) Q2 Final Output Per Hour Y/Y: 0.3% v 0.1% prelim.

Fixed income issuance

- (ID) Indonesia sold total IDR2.0T vs. IDR9.0T target in Islamic bills and bonds (sukuk).

- (NL) Netherlands Debt Agency (DSTA) sold €1.995B vs. €2.5B indicated in 2.5% July 2033 DSL Bonds; Avg Yield: % v 3.104% prior.

- (UK) DMO sold £1.5B in 0.75% Nov 2033 Inflation-linked Gilts; Real Yield: 0.831% v 0.977% prior; bid-to-cover: 2.94x v 2.33x prior.

Looking ahead

- (CO) Colombia Sept Retail Confidence: No est v 12.4 prior; Industrial Confidence: No est v 3.7 prior.

- 05:15 (CH) Switzerland to sell 3-month Bills.

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

- 05:30 (DE) Germany to sell €4.0B in 2.4% Oct 2028 BOBL.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2035, 2048 and 2053 bonds.

- 06:00 (UK) Oct CBI Industrial Trends Total Orders: -16e v -18 prior; Selling Prices: No est v 14 prior; Business Optimism: No est v 6 prior.

- 06:00 (IE) Ireland Aug Property Prices M/M: No est v 0.3% prior; Y/Y: No est v 1.5% prior.

- 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to cut Base Rate by 50bps to 12.50%.

- 08:00 (CL) Chile Sept PPI M/M: No est v 2.2% prior.

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

- 08:30 (US) Oct Philadelphia Fed Non-Manufacturing Regional Index: No est v -16.6 prior.

- 08:30 (EU) ECB chief Lagarde.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 (HU) Hungary Central Bank post rate decision press conference.

- 09:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 09:30 (BR) Brazil Sept Tax Collections (BRL): 174.7Be v 172.8B prior.

- 09:45 (US) Oct Preliminary S&P Manufacturing PMI: 49.5e v 49.8 prior; Services PMI: 49.9e v 50.1 prior; Composite PMI: 50.0e v 50.2 prior.

- 10:00 (US) Oct Richmond Fed Manufacturing Index: 2e v 5 prior; Business Conditions: No est v -5 prior.

- 13:00 (US) Treasury to sell 2-Year Notes.

- 15:00 (AR) Argentina Aug Economic Activity Index (Monthly GDP) M/M: No est v 2.4% prior; Y/Y: -2.2%e v -1.3% prior.

- 16:30 (US) Weekly API Oil Inventories.

- 17:00 (KR) South Korea Oct Consumer Confidence: No est v 99.7 prior.

- 20:30 (AU) Australia Q3 CPI Q/Q: 1.1%e v 0.8% prior; Y/Y: 5.3%e v 6.0% prior; CPI Weighted Median Q/Q: 1.0%e v 1.0% prior; Y/Y: 5.1%e v 5.5% prior; CPI Trimmed Mean Q/Q: 1.1%e v 0.9% prior; Y/Y: 5.0%e v 5.9% prior.

- 20:30 (AU) Australia Sept CPI Y/Y: 5.3%e v 5.2% prior.

- 23:00 (TH) Thailand to sell combined THB29B in 2033 and 2047 bonds.