Focus on FOMC Minutes from jumbo rate cut decision

EU mid-market update: Milton again intensifies to Cat 5 ahead of landfall tonight; TSMC sales accelerate; Focus on FOMC minutes from jumbo rate cut decision.

Notes/observations

- Another weak session for China stocks, Europe trades mixed as US dollar gains. Macro focus looks ahead to FOMC minutes, several Fed speakers and US CPI tomorrow. At the forefront of concern is incoming Hurricane Milton which is expected to make landfall within 24 hours and be ‘worst storm in a century’ for Florida. Analysts see notable impact from shipping port closures and oil production pauses.

- Volatility seen across the tapes in global assets on announcement that China Ministry of Finance (MOF) will hold a briefing on Sat Oct 12th about ‘intensifying’ fiscal policy. Traders read is that China acknowledges stimulus announcement before holiday was not enough.

- TSMC monthly sales again rose with annual growth pace accelerating from Aug, signalling still healthy AI chip demand.

- For US megacaps, DOJ outlined potential remedies in Google search antitrust case, including splitting off Chrome or Android; Elsewhere, Boeing IAM Union confirmed wage offer was withdrawn, company notes further talks do not make sense at this stage.

- In terms of upcoming election, according to most liquid betting markets, Trump's chances to win key swing states Pennsylvania, Michigan and Wisconsin keep increasing since early Oct.

- Asia closed mixed with Shanghai underperforming -6.6%. EU indices are -0.2% to +0.4%. US futures are -0.2%. Gold -0.2%, DXY +0.1%; Commodity: Brent +0.6%, WTI +0.5%; Crypto: BTC -0.4%, ETH +0.2%.

Asia

- New Zealand Central Bank (RBNZ) cut Official Cash Rate (OCR) by 50bps to 4.75% (as expected) for its 2nd straight cut under the current easing cycle. Statement noted it had discussed the respective benefits of either 25bps v 50bps cut. Future decisions to be data dependent. Saw CPI to be within 1-3% target range during Sept quarter.

- India Central Bank (RBI) left the Repurchase Rate unchanged at 6.50% (as expected); changes policy stance to neutral; seen preparing path to December rate cut.

- China's Finance Ministry is to hold a press briefing on fiscal policy and economic development on October 12th.

Global conflict/tensions

- US President Biden expected to speak to Israel PM Netanyahu on Wed

- Israeli senior official stated that its govt was going to respond to the Iranian attack but would not do it in a way that would start an all-out war with Iran.

Europe

- ECB's Stournaras (Greece) saw the case for two more 25bp cuts in Eurozone this year and further easing in 2025.

- UK Chancellor Reeves said to be pushing ahead with plans to borrow billions of pounds extra for infrastructure investment despite concerns about an increasing cost of UK government debt. 'Walking a tightrope' between correcting budget gap and spurring investment.

Americas

- Fed's Jefferson (voter) noted that the US labor market had cooled from its formerly overheated state. To watch incoming data, the outlook, and the balance of risks when considering further rate cuts.

Energy

- Weekly API Crude Oil Inventories: +10.9M v -1.5M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.19% at 517.64, FTSE +0.38% at 8,221.45, DAX -0.03% at 19,065.25, CAC-40 +0.06% at 7,525.72, IBEX-35 -0.23% at 11,707.93, FTSE MIB -0.08% at 33,708.00, SMI -0.01% at 12,013.80, S&P 500 Futures -0.19%].

Market Focal Points/Key Themes: European indices open generally lower and traded mostly mixed through the early part of the session; among sectors managing gains are communication servies and materials; sectors trending lower include energy and financials; oil & gas subsector under pressure following drop in Brent below $80/bbl and thr EIA cut its global demand forecasts for next year; Arcadium Lithium confirms to be acquired by Rio Tinto; Mondi acquires Schumacher Packaging's Western European Packaging Assets; Couche-Tard amends proposal to acquire Seven & I; focus on release of FOMC minutes later in the day; no major earnings expected in the upcoming US session.

Equities

- Financials: Deutsche Bank [DBK.DE] -2.0% (Deutsche Bank reportedly may hire Morgan Stanley on potential deal with Commerzbank).

- Healthcare: Zealand Pharma [ZEAL.DK] -4.0% (FDA issues Complete Response Letter), Sanofi [SAN.FR] +0.5% (New Beyfortus data featured at IDWeek reinforce real-world effectiveness against RSV disease and hospitalization in infants).

- Industrials: Varta [VAR1.DE] +26.5% (agreement with Porsche), Airbus [AIR.FR] -1.0% (Boeing halts talks with striking union, withdraws pay offer), Michelin [ML.FR] -1.5% (to pause production at several factories in France for three weeks due to slowing demand), Continental [CON.DE] +5.5% (pre-close call), Outokumpu [OUT1V.FI] -2.5% (Morgan Stanley cuts to equalweight), Aixtron [AIXA.DE] -2.5% (Deutsche Bank cuts to hold).

- Technology: ASML [ASML.NL] +0.5% (TSMC monthly sales growth accelerates).

- Materials: Rio Tinto [RIO.UK] -0.5% (to acquire Arcadium Lithium for $5.85/shr at $6.7B).

Speakers

- ECB's Villeroy (France) stated that a rate cut is very probable with more likely afterwards.

- ECB's Kazimir (Slovakia non-voter, hawk) stated that was not currently worried about ECB undershooting its 2% inflation target. Should not make decisions based upon one good inflation reading.

- ECB's Kazaks (Latvia, voter, hawk) stated that ECB rates could go to neutral if inflation was at 2% target in 2025.

- Hungary Fin Min Varga stated that FY budget deficit to be in line with govt target.

- India Central Bank (RBI) Gov Das post rate decision press conference noted that decisions to be based by growth and inflation dynamics. Had greater confidence that inflation was moderating. No evidence of interest rates were impacting growth.

- Moody's affirmed Australia sovereign rating at Aaa; outlook stable.

Currencies/fixed income

- FX price action was again listless as session was highlighted by absence of key market-moving data. Focus on FOMC Minutes due out later today and Thurs release of US CPI data. USD holding onto recent gains as market participants re-evaluate the pace of rate cuts among the key G7 central banks.

- EUR/USD at 1.0960 by mid-session as ECB members continued to keep an open mind on a possible Oct rate cut with more easing down the road.

- GBP/USD staying below the 1.31 level as recent BOE Gov Bailey continued to weight upon sentiment.

- USD/JPY nearing the 149 area as recent PM comments on BOJ rate path continued to weigh upon the yen currency.

Economic data

- (DE) Germany Aug Trade Balance: €22.5B v €18.5Be; Exports M/M: +1.3% v -1.0%e; Imports M/M: -3.4% v -2.0%e.

- (NO) Norway Sept PPI M/M: -1.9% v +1.9% prior; Y/Y: -2.9% v +3.6% prior.

- (DK) Denmark Aug Current Account Balance (DKK): 33.6B v 33.1B prior.

- (JP) Japan Sept Preliminary Machine Tool Orders Y/Y: -6.5% v -3.5% prior.

- (TW) Taiwan Sept CPI Y/Y: 1.8% v 2.0%e; CPI Core Y/Y: 1.8% v 1.8%e; PPI Y/Y: -0.3% v +1.6% prior.

- (IS) Iceland Sept Preliminary Trade Balance (ISK): -27.5BB v -32.8B prior.

Fixed income issuance

- (UK) DMO sold £3.75B in 4.25% July 2034 Gilts; Avg Yield: 4.170% v 3.757% prior; bid-to-cover: 3.25x v 2.84x prior; Tail: 0.9bps v 1.3bps prior.

- (SE) Sweden sold total SEK4.0B vs. SEK4.0B indicated in 2028 and 2035 bonds.

- (NO) Norway sold total NOK3.0B vs. NOK3.0B indicated in 2028 and 2034 Bonds.

Looking ahead

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

- 05:15 (CH) Switzerland to sell 2034, 2047 and 2058 Bonds.

- 05:30 (DE) Germany to sell combined €1.5B in 2036 and 2041 bunds.

- 05:30 (PL) Poland to sell bonds.

- 06:00 (IE) Ireland Aug Industrial Production M/M: No est v 9.2% prior; Y/Y: No est v 5.6% prior.

- 06:00 (CZ) Czech Republic to sell 2027 and 2035 Bonds.

- 06:30 (JP) Japan PM Kishida to hold press conference.

- 07:00 (US) MBA Mortgage Applications w/e Oct 4th: No est v -1.3% prior.

- 07:00 (UK) Weekly PM Question time in House.

- 08:00 (HU) Hungary Central Bank (MNB) Sept Minutes.

- 08:00 (BR) Brazil Sept IBGE Inflation IPCA M/M: 0.5%e v -0.0% prior; Y/Y: 4.5%e v 4.2% prior.

- 08:00 (MX) Mexico Sept CPI M/M: 0.1%e v 0.0% prior; Y/Y: 4.6%e v 5.0% prior.

- 08:00 (MX) Mexico Sept CPI Core M/M: 0.3%e v 0.2% prior; Y/Y: 3.9%e v 4.0% prior.

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

- 08:00 (US) Fed’s Bostic.

- 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 4.50%.

- 09:15 (US) Fed’s Logan.

- 10:00 (US) Aug Final Wholesale Inventories M/M: 0.2%e v 0.2% prelim; Wholesale Trade Sales M/M: 0.4%e v 1.1% prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 10:30 (US) Fed’s Goolsbee.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (FR) ECB’s Villeroy (France).

- 12:15 (US) Fed's Barkin.

- 12:30 (US) Fed's Jefferson.

- 13:00 (US) Treasury to sell 10-Year Notes Reopening.

- 14:00 (US) FOMC SeptMinutes.

- 17:00 (US) Fed’s Collins.

- 18:00 (US) Fed’s Daly.

- 19:01 (UK) Sept RICS House Price Balance: 10%e v 1% prior.

- 19:50 (JP) Japan Sept PPI (domestic CGPI) M/M: -0.3%e v -0.2% prior; Y/Y: 2.3%e v 2.5% prior.

- 19:50 (JP) Japan Sept Bank Lending Y/Y: No est v 3.0% prior; Bank Lending (ex-trusts) Y/Y: No est v 3.4% prior.

- 20:00 (AU) Australia Oct Consumer Inflation Expectation: No est v 4.4% prior.

- 20:00 (NZ) New Zealand NZ Government 12-Month Financial Statements.

- 21:00 (PH) Philippines Aug Trade Balance: -$4.4Be v -$4.9B prior; Exports Y/Y: -7.0%e v +0.1% prior; Imports Y/Y: -0.6%e v +7.2% prior.

- 22:00 (JP) Japan Sept Tokyo Avg Office Vacancies: No est v 4.8% prior.

- 22:00 (NZ) New Zealand to sell combined NZ$500M in 2028, 2034 and 2041 bonds.

- 23:35 (JP) Japan to sell 5-Year JGB Bonds.