Oil down on belief Israel's response will not be sensitive enough to trigger more conflict

EU mid-market update: Oil down on belief Israel's response will not be sensitive enough to trigger more conflict; 3 weeks to US election as Trump mostly leads polls.

Notes/observations

- Crude dips >4.5% as Israel PM said strike plan will not include nuclear or oil targets.

- China-related retail names in Europe slump ahead of LVMH results after WSJ report that China's new support measures intended by Pres Xi "to put a floor under growth", but not do "a full U-turn".

- Sterling rises and FTSE underperforms as UK unemployment data was mixed with lower ILO unemployment rate but higher jobless claims, while weekly wages were above estimates but at slowest annual pace since Q2 2022. Gilt yields are flat.

- EU bond yields decline ~5bps as France and Spain final CPI remains in line for ECB to cut rates on Thurs.

- EU Earnings Summary: UK homebuilder Bellway +7% after prelim FY results beat on top and bottom line, guidance for FY shows margin and home completion improvement YoY; Ericsson +6.5% with top and bottom line beat for Q3, notes signs overall market is stabilizing but pressure remains in short term for Enterprise.

- Upcoming US Premarket Earnings: UNH, PNC, BAC, WBA, PGR, JNJ, GS, STT, C, SCHW.

- Asia closed mixed with Hang Seng underperforming -3.7%. EU indices are -0.8% to +0.2%. US futures are -0.2% to +0.1%. Gold +0.2%, DXY -0.2%; Commodity: Brent -4.5%, WTI -4.7%; Crypto: BTC +1.8%, ETH +3.3%.

Asia

- China banks said to consider cuts to deposit rates as early as this week; expected to impact CNY300T in deposits.

- Japan PM Ishiba said to be looking to compile FY25 supplementary budget exceeding prior FY24.

- South Korea Sept Import Price Index M/M: -2.2% v -3.5% prior; Y/Y: -3.3% v +1.8% prior; Export Price Index M/M: -2.3% v -2.8% prior; Y/Y: 1.2% v 5.5% prior.

Global conflict/tensions

- Israel PM Netanyahu said to have told US officials that Israel would strike Iran military and not nuclear or oil targets.

- Israel PM Netanyahu's Office stated that it had listened to the opinions of the US, but would make our final decisions based on our national interests.

- Iran said to have conveyed a message to US through a third country that if Israeli response to the missile attack was limited, then Iran would see this round as closed.

Americas

- Fed's Kashkari (non-voter for 2024 and 2025) stated that had made a lot of progress on inflation; The labor market was strong; There was a lot of evidence that inflation would fall further from here.

- Fed's Waller (voter) stated that saw considerable room for cutting above neutral rate; Should proceed with more caution on pace of cuts; Data warranted moving to neutral at 'deliberate pace'.

- US government is considering placing restrictions on a country specific basis for the export of high-end chips that can be used for AI centres.

- Canada expelled six Indian diplomats after police collected evidence that they were a part of an Indian Govt 'Campaign of Violence'. India Foreign Ministry then announced it would expel 6 Canadian diplomats.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.11% at 524.16, FTSE -0.42% at 8,257.93, DAX +0.31% at 19,560.95, CAC-40 -0.75% at 7,545.37, IBEX-35 +0.38% at 11,896.15, FTSE MIB -0.16% at 34,626.00, SMI -0.06% at 12,256.30, S&P 500 Futures -0.05%].

Market focal points/key themes: European indices opened mixed but quickly took on a decidedly positive bias in early trading; risk sentiment seen buoyed a bit after S&P 500 scored a new record high; among sectors pulling into the green are telecom and consumer discretionary; sectors mired in the red include energy and materials; tech sector supported by gains in Nvidia yesterday; oil & gas subsector dragged by demand concerns and easing worries about supply disruptions from Iran; de la Rue sells its authentication unit to Crane; NLFI to cut stake in ABN AMRO; earnings expected in the upcoming US session include Unitedhealth, Bank of America, Goldman Sachs, Citigroup and Johnson & Johnson.

Equities

- Consumer discretionary: Robert Walters [RWA.UK] -2.5% (trading update), Delivery Hero [DHER.DE] -2.5% (Citi cuts to neutral) - Consumer staples.

- Energy: TotalEnergies [TTE.FR] -3.5% (Q3 trading update; Israel PM Netanyahu reportedly tells US officials that Israel will strike Iran military and not nuclear or oil targets) - Financials: Wise [WISE.UK] +6.5% (trading update), Bellway [BWY.UK] +9.0% (prelim FY24 results, above estimates, initial FY25 guidance), Deutsche Bank [DBK.DE] -1.5% (placement) - Healthcare: Adocia [ADOC.FR] +6.0% (files patents of stable formulations of hormone combinations for the treatment of obesity and diabetes, which "would have the advantage of targeting fat mass, while preserving muscle mass") - Industrials: Etteplan [ETTE.FI] -6.0% (cuts FY guidance) - Technology: Fastned [FAST.NL] +11.5% (Q3 results, affirms guidance), De La Rue [DLAR.UK] +17.0% (sells authentication unit to Crane NXT for £300M) - Telecom: Ericsson [ERICB.SE] +7.5% (Q3 results beats estimates; comments on AT&T deployments).

Speakers

- ECB Bank Lending Survey noted that Euro zone firms' loan demand rose for first time since 2022; Credit standards remained unchanged for firms.

- Sweden Central Bank (Riksbank) Gov Thedeen reiterated view that inflation had stabilized close to target and interest rates were about to fall further. Inflation was on the way down but needed a broad fall to achieve sustainably low and stable CPI.

- Italy PM Meloni stated that was still working to implement loan agreement to Ukraine backed by Russian asset.

- Turkey Fin Min Simsek commented that the current account shortfall was almost below 1% of GDP.

- IEA Monthly Oil Report (OMR) 2024 global oil demand growth from 903K bpd to 862K bpd while raising the 2025 global oil demand growth from 950K bpd to 998K bpd. Report maintained Maintains 2024 global oil supply growth at 660K bpd and maintained 2025 global oil supply growth at 2.1M bpd.

Currencies/fixed income

- USD was steady but remained near two-month highs. Greenback continued to be supported by expectations that the Fed would shift to cutting interest rates gradually.

- GBP/USD drifted higher as UK labor stats continued to improve with the ILO Unemployment Rate improving to 4.0%. Wage growth slowed while other gauges suggested some loosening in the jobs market. Dealers noted that further fall in wage growth added support to expectations that the BOE would cut interest rates at its next meeting in November.

- EUR/USD remaining around the 1.09 level as markets continued to expect ECB to cut its key rates at this week’s meeting and continue to do so for the next couple of meetings afterwards.

Economic data

- (SE) Sweden Sept PES Unemployment Rate: 3.6% v 3.7% prior.

- (FI) Finland Aug GDP Indicator Y/Y: 1.9% v 0.2% prior.

- (UK) Sept Jobless Claims Change: +27.9 v +0.3K prior; Claimant Count Rate: 4.7 v 4.6% prior; Payrolled Employees (monthly change): -15K v -3Ke.

- (UK) Aug Average Weekly Earnings 3M/Y: 3.8% v 3.7%e; Weekly Earnings (ex-bonus) 3M/Y: 4.9% v 4.9%e.

- (UK) Aug ILO Unemployment Rate: 4.0% v 4.1%e; Employment Change 3M/3M: +373K v +240Ke.

- (DE) Germany Sept Wholesale Price Index M/M: -0.3% v -0.8% prior; Y/Y: -1.6% v -1.1% prior.

- (SE) Sweden Sept Final CPI M/M: 0.2% v 0.2% prelim; Y/Y: 1.6% v 1.6% prelim; CPI Level: 414.57 v 413.78 prior.

- (SE) Sweden Sept Final CPIF M/M: 0.3% v 0.3% prelim; Y/Y: 1.1% v 1.1% prelim.

- (SE) Sweden Sept Final CPIF (ex-energy) M/M: 0.4% v 0.4% prelim; Y/Y: 2.0% v 2.0% prelim.

- (NO) Norway Sept Trade Balance (NOK): 42.8B v 63.4B prior.

- (FR) France Sept Final CPI M/M: -1.2% v -1.2% prelim; Y/Y: 1.1% v 1.2% prelim; CPI Ex-Tobacco Index: 118.50 v 118.58e.

- (FR) France Sept Final CPI EU Harmonized M/M: -1.3% v -1.2% prelim; Y/Y: 1.4% v 1.5% prelim.

- (ES) Spain Sept Final CPI M/M: -0.6% v -0.6% prelim; Y/Y: 1.5% v 1.5% prelim.

- (ES) Spain Sept Final CPI EU-Harmonized M/M: -0.1% v -0.1% prelim; Y/Y: 1.7% v 1.7% prelim.

- (ES) Spain Sept Final CPI Core M/M: -0.4% v +0.2% prior; Y/Y: 2.4% v 2.4% prelim.

- (PL) Poland Sept Final CPI M/M: 0.1% v 0.1% prelim; Y/Y: 4.9% v 4.9% prelim.

- (TR) Turkey Sept Central Gov’t Budget Balance (TRY): -100.5B v -129.6B prior.

- (IT) Italy Aug General Government Debt: €2.963T v €2.951T prior (record high).

- (DE) Germany Oct ZEW Current Situation Survey: -86.9 v -84.0e; Expectations Survey: 13.1 v 10.0e.

- (EU) Euro Zone Oct ZEW Expectations Survey: 20.1 v 9.3 prior.

- (EU) Euro Zone Aug Industrial Production M/M: 1.8% v 1.8%e; Y/Y:+0.1 % v -1.0%e.

- (IS) Iceland Sept International Reserves (ISK): 899B v 912.3B prior.

Fixed income issuance

- (UK) DMO sold £2.25B in 4.375% July 2054 Gilts; Avg Yield: 4.735% v 4.329% prior; bid-to-cover: 3.08x v 2.89x prior; Tail: 0.3bps v 0.9bps prior.

- (ZA) South Africa sold total ZAR3.75B vs. ZAR3.75B indicated in 2033, 2038 and 2053 bonds.

Looking ahead

- (CO) Colombia Sept Consumer Confidence: -13.0e v -15.3 prior.

- (NG) Nigeria Sept CPI Y/Y: 32.1%e v 32.2% prior.

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

- 05:30 (ZA) South Africa Sept Sacci Business Confidence: No est v 109.1 prior.

- 05:30 (CH) Switzerland to sell 3-month Bills.

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

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) (prior €6.840 with 33 bids recd).

- 06:00 (IL) Israel Q2 Final GDP Annualized (3rd reading): No est v 0.7% prelim.

- 06:00 (IE) Ireland Aug Trade Balance: No est v €6.1B prior.

- 06:00 (FI) Finland to sell combined €1.5B in 2030 and 2034 RFGB bonds.

- 06:30 (EU) ESM to sell €1.1B in 6-month Bills.

- 08:00 (BR) Brazil CONAB Crop Report.

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

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:30 (US) Oct Empire Manufacturing: 3.6e v 11.5 prior.

- 08:30 (CA) Canada Sept CPI M/M: -0.3%e v -0.2% prior; Y/Y: 1.8%e v 2.0% prior; CPI Core-Median Y/Y: 2.3%e v 2.3% prior; CPI Core-Trim Y/Y: 2.5%e v 2.4% prior; Consumer Price Index: 161.5e v 161.8 prior.

- 08:30 (CA) Canada Aug Wholesale Sales (ex-petroleum) M/M: -1.1%e v +0.4% prior.

- 09:00 (CA) Canada Sept Existing Home Sales M/M: No est v 1.3% prior.

- (US) Sept NY Fed 1-Year Inflation Expectations Survey: % v 3.0% prior.

- 11:00 (PE) Peru Aug Economic Activity Index (Monthly GDP) Y/Y: No est v 4.5% prior.

- 11:00 (PE) Peru Sept Unemployment Rate: 6.3%e v 6.1% prior.

- 11:00 (CO) Colombia Aug Industrial Production Y/Y: -1.5%e v +0.7% prior; Manufacturing Production Y/Y: -1.4%e v +2.0% prior.

- 11:00 (CO) Colombia Aug Retail Sales Y/Y: 2.3%e v 1.6% prior.

- 11:30 (IL) Israel Sept CPI M/M: 0.0%e v 0.9% prior; Y/Y: 3.8%e v 3.6% prior.

- 11:30 (US) Fed’s Daly.

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

- 13:00 (US) Fed’s Kugler.

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

- 17:45 (NZ) New Zealand Q3 CPI Q/Q: 0.7%e v 0.4% prior; Y/Y: 2.2%e v 3.3% prior; CPI Tradeable Q/Q: -0.1%e v -0.5% prior; CPI Non-Tradeable Q/Q: 1.3%e v 0.9% prior.

- 18:00 (AU) RBA's Hunter.

- 18:45 (NZ) RBNZ Assistant Gov Silk on Policy Transmission.

- 19:00 (KR) South Korea Sept Unemployment Rate: 2.6%e v 2.4% prior.

- 19:30 (AU) Australia Sept Westpac Leading Index M/M: No est v -0.05% prior.

- 19:50 (JP) Japan Aug Core Machine Orders M/M: +0.2%e v -0.1% prior; Y/Y: 3.8%e v 8.7% prior.

- 21:30 (JP) BOJ’s Adachi.

- 22:00 (NZ) New Zealand Sept Non Resident Bond Holdings: No est v 60.0% prior.

- 22:35 (CN) China to sell Special 50-year ultra-long Special bonds; Avg Yield: % v 2.53% prior (Jun 13th 2024).

- 23:00 (KR) South Korea Aug M2 Money Supply M/M: No est v 0.4% prior; “L” Money Supply M/M: No est v 0.0% prior.