ECB keeping October rate cut an option as traders eye US CPI on Thursday

 EU mid-market update: China return sees Hang Seng drop ~10%; ECB keeping Oct rate cut an option as traders eye US CPI on Thurs.

Notes/observations

- Mainland bourses reopened after Golden Week holiday; China State Planner NDRC's press conference on recent stimulus measures fell short of expectations; Hang Seng tumbled and logged. heaviest single-day loss since 2008

- Quiet session as absence of any major data releases out of Europe. European materials and luxury retail names pressured by lack of additional stimulus announced by China NDRC.

- Samsung’s earnings preannouncement came weaker than expected, while PepsiCo’s Q3 results set to kick off US earnings season. According to Tier1 analysts, nobody expects US Q3 earnings season to be great as consensus expects +4% y/y in EPS (v +11% in Q2; biggest deceleration since Q1 2022).

- In terms of macro data, focus was turning to upcoming US CPI data set to be released on Thursday.

- Cat 5 Hurricane Milton still heading towards Tampa Florida. It said to be the strongest storm so far in US history coming this late in the season (note: in July 2024, Hurricane Beryl become the earliest Category 5 on record). NHC’s forecast shows Milton’s hurricane and tropical-storm-force winds roughly doubling in size by the time it makes landfall. Milton has the potential to be one of the most destructive hurricanes on record for west-central Florida. Some analysts see it likely that Hurricane Milton will be a major event, potentially on par with 2022's Hurricane Ian, a $50-65B insured loss event.

- Asia closed mixed with Hang Seng underperforming -9.4%. EU indices are -1.3% to -0.3%. US futures are +0.1-0.3%. Gold -0.2%, DXY -0.2%; Commodity: Brent -2.2%, WTI -2.3%; Crypto: BTC -1.9%, ETH -2.5%.

Asia

- Mainland China markets open sharply higher then faded, extending stimulus rally after weeklong break.

- China Planning Agency NDRC officials gave details on implementation of stimulus measures, stressed that domestic economy faced increasing downward pressure; market expectations had improved a lot recently after new policy adoption; maintained confidence govt could fully achieve 2024 economic goals.

- Australia Sept RBA Minutes reiterated stance that all options were on the table.

- RBA Dep Gov Hauser reiterated stance that must remain resilient in fight against inflation; CPI was proving sticky.

- Australia Sept NAB Business Confidence -2 v -4 prior.

- Australia Oct Westpac Consumer Confidence: 89.9 v 84.6 prior.

- Japan Aug Labor Cash Earnings Y/Y: 3.1% v 3.2%e; Real Cash Earnings Y/Y: -0.6% v -0.5%e.

- Japan Aug Household Spending Y/Y: -1.9% v +0.1% prior.

- Japan Aug Current Account Balance: ¥3.804T v ¥2.975Te.

- Japan Econ Min Akazawa stated that decline in real wages was not good news. Govt would create environment where real wages continue to rise.

Europe

- UK Sept BRC Sales Like-For-Like Y/Y: 1.7% v 0.8%e.

Americas

- Fed's Williams (voter) noted that the US economy was 'well-positioned' for a soft landing; 50bps cut in Sept was not 'the rule of how we act in the future'.

- Fed's Musalem (non-voter) noted that personal rate outlook was 'slightly' above median view of Fed. Would not predict future timing or size of Fed rate cuts.

- US Aug Consumer Credit: $8.9B v $12.0Be.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.84% at 515.14, FTSE -1.34% at 8,192.57, DAX -0.58% at 18,983.25, CAC-40 -1.07% at 7,495.24, IBEX-35 -0.40% at 11,670.80, FTSE MIB -0.48% at 33,652.00, SMI -0.30% at 11,960.10, S&P 500 Futures +0.27%].

Market focal points/key themes: European indices opened lower across the board and remained under pressure through the early part of the session; loss of risk appetite attributed to volatility among Chinese stocks following holiday; among sectors managing to hold on to gains are real estate and telecom; sectors leading the way lower include consumer discretionary and materials; luxury subsector under pressure on China growth concerns; Holcim to acquire OX Engineered Products; corporate events expected in the upcoming US session include earnings from PepsiCo, Boeing delivery numbers, and General Motors investor day.

Equities

- Consumer discretionary: LVMH [MC.FR] -4.5%, Burberry [BRBY.UK] -6.5% (China NDRC press conf lack details on upcoming stimulus), Delivery Hero [DHER.DE] +5.5% (CMD), Greencore Group [GNC.UK] +7.5% (trading update) - Consumer staples: Imperial Brands [IMB.UK] +4.5% (trading update; buyback).

- Real Estate: Vistry Group [VTY.UK] -29.0% (trading update).

- Telecom: Vodafone [VOD.UK] -0.5% (agreement with Google) - Industrials: Continental [CON.DE] -1.5% (reportedly hired Goldman, JPMorgan for spinoff of Automotive group unit), Senior plc [SNR.UK] -13.5% (trading update) - Technology: ASML [ASML.NL] +0.5% (Samsung prelim earnings miss expectations) - Materials: Antofagasta [ANTO.UK] -5.5% (China NDRC press conf lack details on upcoming stimulus).

Speakers

- ECB's Elderson (Netherlands) stated that had an open mind before October meeting; Economic growth risks already materializing. ECB to make decisions meeting-by-meeting.

- ECB’s Vasle (Slovenia) noted that an October rate cut did not necessarily mean another cut in Dec;; sees rates being cut to neutral by end-2025. arkets are not dictating ECB moves.

- Inflation risks are abating but uncertainty remains.

- ECB's Kazaks (Latvia) stated that data pointed to an Oct rate cut.

- Fed's Kugler (voter) stated that would back more cuts if inflation kepts easing; Support shifting attention to the maximum-employment side of the FOMC's dual mandate as well.

- China Commerce Ministry (MOFCOM) said to be studying raising tax on imported EU large engine vehicles.

Currencies/fixed income

- Quiet session as absence of any major data releases out of Europe. Focus was turning to upcoming US CPI data set to be released on Thursday to gain insights on the possible path of the Fed’s interest-rate path.

- EUR/USD at 1.0980 area. ECB members continue to hint that easing would continue at the upcoming Oct meeting. Markets currently pricing almost 90% change of a cut next week.

Economic data

- (SE) Sweden Sept Maklarstatistik Housing Prices Y/Y: 3.9% v 0.5% prior.

- (NL) Netherlands Aug Consumer Spending Y/Y: 0.7% v 0.8% prior.

- (NL) Netherlands Sept CPI M/M: -0.5% v +0.3% prior; Y/Y (final): 3.5% v 3.5% prelim.

- (NL) Netherlands Sept Final CPI EU Harmonized M/M: -0.9% v -0.9% prelim; Y/Y: 3.3% v 3.3% prelim.

- (DE) Germany Aug Industrial Production M/M: 2.9% v 0.8%e; Y/Y: -2.7% v -3.9%e.

- (SE) Sweden Sept Preliminary CPI M/M: 0.2% v 0.2%e; Y/Y: 1.6% v 1.6%e.

- (SE) Sweden Sept Preliminary CPIF M/M: 0.3% v 0.3%e; Y/Y: 1.2% v 1.1%e.

- (SE) Sweden Sept Preliminary CPIF (ex-energy) M/M: 0.4% v 0.3%e; Y/Y: 2.0% v 1.9%e.

- (FR) France Aug Trade Balance: -€B v -€6.0B prior; Current Account: -€0.6B v €0.0B prior.

- (CZ) Czech Aug Retail Sales (ex-auto) Y/Y: 5.3% v 4.3%e.

- (CZ) Czech Sept Unemployment Rate: 3.9% v 3.8%e.

- (TW) Taiwan Sept Trade Balance: $7.1B v $10.5Be; Exports Y/Y: 4.5% v 10.9%e; Imports Y/Y: 17.3% v 12.4%e.

- (CZ) Czech Sept International Reserves: $154.6B v $152.8B prior.

- (HU) Hungary Sept YTD Budget Balance (HUF): -2.624T v -2.858T prior.

Fixed income issuance

- (ID) Indonesia sold IDR7.75T vs. IDR8.0T target in Islamic bills and bonds (sukuk).

- (NL) Netherlands Debt Agency (DSTA) sold €2.49B vs. €1.5-2.5B indicated range in 2.5% July 2034 DSL bonds; Avg Yield: 2.540% v 2.983% prior.

- (ES) Spain Debt Agency (Tesoro) sold total €1.889B vs. €1.5-2.5B indicated range in 3-month and 9-month bills.

- (UK) DMO sold £1.0B in 0.125% Mar 2039 Inflation-linked Gilts (UKTi); Real Yield: 1.044% v 1.051% prior; bid-to-cover: 3.14x v 3.16x prior.

- (AT) Austria Debt Agency (AFFA) sold €1.725B vs. €1.725B indicated in 2034 and 2053 RAGB bonds.

Looking ahead

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

- 05:25 (CH) Switzerland to sell 3-month Bills.

- 05:30 (DE) Germany to sell €1.0B in 2.3% Feb 2033 Green Bunds.

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

- 05:30 (BE) Belgium Debt Agency (BDA) to sell combined €3.0B in 3-month and 12-month bills.

- 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2033, 2035 and 2038 bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 06:00 (US) Sept NFIB Small Business Optimism: 92.0e v 91.2 prior.

- 06:00 (FI) Finland to sell combined €2.0B in 6-month and 9-month bills.

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

- 06:30 (TR) Turkey to sell Bonds (2 tranches).

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 07:00 (CL) Chile Sept CPI M/M: 0.3%e v 0.3% prior; Y/Y: 4.4%e v 4.7% prior.

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

- 08:30 (US) Aug Trade Balance: -$70.5Be v -$78.8B prior.

- 08:30 (CA) Canada Aug Int’l Merchandise Trade (CAD): -0.5Be v +0.7B prior.

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

- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills.

- 12:45 (US) Fed’s Bostic.

- 13:00 (US) Treasury to sell 3-Year Notes.

- 15:00 (AR) Argentina Aug Industrial Production Y/Y: No est v -5.4% prior; Construction Activity Y/Y: No est v -20.4% prior.

- 16:00 (US) Fed’s Collins.

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

- 20:00 (AU) RBA's Kent.

- 21:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to cut Official Cash Rate (OCR) by 50bps to 4.75%.

- 22:35 (CN) China to sell 3-year and 7-year bonds.

- 23:30 (JP) Japan to sell 6-Month Bills.

- (TH) Thailand Finance Ministry (MOF) to sell combined THB74B in bonds.