Crude benchmarks firmer amidst ongoing tensions in the Middle East; EUR digests poor PMI metrics - Newsquawk US Market Open

US President Trump says the US crushed Iran, and may want to do it a "little more".
Crude benchmarks firmer on ongoing tensions in the Middle East; recent bout of strength comes after the Houthis launched another missile towards Saudi interests.
European bourses are in the red following a few dire results from Kering and Volvo Cars; US equity futures are mixed.
USD is firmer vs most G10 peers; CHF is the laggard, whilst the EUR digests poor French PMI metrics.
Fixed benchmarks are mixed; USTs are down by a handful of ticks, whilst Bunds hold steady.
Looking ahead, highlights include Global Flash PMIs (Oct), Canadian Retail Sales (Sep), CBR Policy Announcement (Oct). Earnings from American Express, SLB, Autoliv. Credit Ratings Updates including Moody's on France, S&P on Germany & Scope on Italy.

SNAPSHOT

LOOKING AHEAD

Looking ahead, highlights include Global Flash PMIs (Oct), Canadian Retail Sales (Sep), CBR Policy Announcement (Oct). Earnings from American Express, SLB, Autoliv. Credit Ratings Updates including Moody's on France, S&P on Germany & Scope on Italy.
Click for the Newsquawk Week Ahead.

EUROPEAN TRADE

EQUITIES

A softer start for much of Europe. Euro Stoxx 50 -0.7% and Stoxx 600 -0.5%, as the US tech-led (SOX -6.7%) pressure reverberated into the region, before pressure in European bourses was then exacerbated by a set of dismal French PMI data and poor earnings from several pertinent names.
Following earnings, Kering, -11.8%, after missing marginally on overall revenue, but more pertinently as they highlighted traffic as an ongoing constraint and particularly within China, not expecting a H/H margin performance improvement and Q4 thus far has been in-line with Q3. Sticking in France, L’Oreal, +4.5%, gains after Q3 sales topped expectations, and the Chinese market only slowed a bit. Also hit, and at their lowest ever share price, Volvo Car, -26.7%, pressured by a dire set of earnings where China revenue fell near 50% Y/Y.
European sectors hold a strong negative bias. Unsurprisingly, Energy takes the top spot, given the strength in underlying oil prices; Construction & Materials, and Real Estate complete the top three. To the downside, Telecoms is the clear underperformer, weighed by the SpaceX update (see below), with Industrials following closely behind.
US equity futures (ES -0.1% NQ U/C RTY -0.5%) are trading mixed; the tech-heavy NQ is faring a little better vs peers, whilst the RTY lags. The relative outperformance comes as tech rebounds a touch from the hefty losses seen in the prior session, with focus on SK Hynix (+5.2% pre-market), after the Co. has paused its Solidigm IPO.
SpaceX (SPCX) in talks to access 80,000 cell sites for new network.
OpenAI is raising up to USD 30bln in funding round at a USD 1.25tln valuation, led by UAE investors, according to CNBC, citing sources; OpenAI is negotiating a commercial deal that would secure more computing capacity from the UAE.

FX

G10s were initially mixed against the USD, but now display a negative bias as the USD gradually moved higher alongside upside in energy prices. The Kiwi outperforms vs peers after hawkish RBNZ calls from analysts at ANZ; the Swiss Franc is the relative underperformer, as yield differentials widen once again. EUR was mildly pressured following a very poor French PMI reading, whereby all components surprisingly fell into contractionary territory.
DXY currently holds within a 101.48 to 101.85 range, a touch firmer this morning, but net-weaker since the start of the week. The data docket lacked any Tier-1 US data and Fed speak, so USD action was largely dictated by credit-related woes, which hampered sentiment in the US. Next week, attention will be on the FOMC Policy Decision, where rates are expected to be kept on hold.
The Kiwi is the mild outperformer this morning, and holds towards the upper end of a 0.5679 to 0.5699 range. Strength which comes after analysts at ANZ expect the RBNZ to deliver rate hikes at the next three meetings, citing Q3 core inflation data.
The CHF is the slight laggard this morning, paring some of the strength seen in the prior session, as US yields rebound a touch today. Similarly, JPY holds towards the bottom of the pile, but faring a touch better vs its haven-counterpart. This comes after a source report which suggested that the BoJ is set to keep rate hikes on a fast track, adding that interest rates are still far from neutral. Only very mild strength was seen in JPY following this report, given it does not shift market expectations; money markets assign c. 80% chance of a hike in December. USD/JPY currently trades towards the upper end of a 156.07-157.16 range.

FIXED INCOME

A mixed start for benchmarks, as the complex takes a bit of a breather from the recent rally in core counterparts as growth concerns dominated the narrative for debt that is not dominated by domestic political and fiscal concerns.
USTs are lower by a few ticks, in a pullback from the 106-16 high which printed on Thursday, rather than in reaction to a fundamental development, though energy continues to tick higher and the risk tone is gradually improving, Currently, holds at the base of a 106-05 to 106-14 band.
Bunds essentially flat, just off lows in a 122.13-54 band. Upside was seen through the morning’s first Flash PMI from France, with Bunds peaking on the German series but then waning and proving relatively unreactive to the EZ-wide figure. For the EZ, the series points to growth of 0.3% in the period, a touch slower than September’s implied pace, but still robust enough to keep the ECB on track to tighten, and perhaps more so than currently assumed by desks, particularly as inflationary pressures mount; a dynamic that may explain the pullback in Bunds following the German data and into the EZ print.
OATs are, of course, the focus for today. This morning’s Flash PMIs were dire. All three main components fell into contractionary territory. A finding that does not bode well, as recent civil unrest and spread widening will not have been fully accounted for by the respondents. Further, we still await Moody’s verdict on the sovereign tonight, with a downgrade a real possibility given recent events and price action, and then further protest action on the weekend.
As it stands, OATs are firmer by around 30 ticks, in a bit of a rebound from the c. 50 ticks of pressure seen on Thursday, but still set to end the week with downside of over 120 ticks as things stand. Given this, the OAT-Bund 10yr yield spread has narrowed by a handful of bps on the session overall, but it did commence it at a fresh high of 176bps; at wides since 2011, when 191bps printed.
Gilts are flat and marginally lag European peers within 85.01-36 parameters in a modest reversal of the prior day's action. Overnight focus showed Chancellor Healey continues to underscore a pro-business approach, and was absent of anything which changes the majority view of the budget passing without trouble. The morning's retail sales data contracted at a greater pace than expected, October Flash PMIs were particularly strong, and chime with expectations for a November BoE hike.
UK DMO said it is to hold a tender for up to GBP 1bln of 0.25% Treasury Gilt 2031 on October 29.
China's Finance Ministry auctions 30-year bonds at 2.06% yield.
Australia sold AUD 1.0bln in 1.0% November 2031 bonds, avg. yield 4.8708%, bid-to-cover 4.32.

COMMODITIES

Crude is firmer this morning, with WTI and Brent up by 1.6% and 1%, respectively. Benchmarks eased a touch off earlier highs, but then reversed this following reports that the Houthis fired missiles at Saudi interests. WTI currently holds within a USD 98.84-101.30/bbl range, whilst Brent sits at the upper end of a USD 112.74-114.72/bbl band.
Strength today comes as the geopolitical environment remains tense and rhetoric remains punchy. Starting with US-Iran, the IRGC continues to strike ships traversing the “illegal” route, with little fresh indications of diplomacy. President Trump suggested that Iran was fabricating reports of these attacks, whilst warning that they may want to “crush” Iran a little more. On the Saudi-Houthi front, the risk of further supply disruptions remain, given that tit-for-tat strikes continue. Over in Israel, PM Netanyahu held an emergency meeting to discuss a recent attack on five IDF soldiers in the West Bank; he eventually decided to close off the area. This decision will only bolster speculation that the PM would like to postpone the election; a former Israeli premier had previously accused Netanyahu of this, arguing that preparing infrastructure to go to war is a way to delay the Knesset election.
Spot gold is flat and trades around the USD 4k/oz mark, currently holding within a USD 3,986-4,032/oz range. The yellow metal is net-lower since the start of the week, with pressure facilitated by inflationary concerns, related to elevated energy prices. It seems as if the gold remains worried about the inflationary implications of the war, whilst haven counterparts (USTs/JPY) have recently been focusing on AI funding concerns and potential hits to growth.
Base metals are mixed this morning; 3M LME copper currently trades firmer by around a percent, and holds within a USD 14,059.2-14,270/t range.
UAE Environment Ministry said a tanker oil spill is impacting beaches in Umm al-Quwain.
Japan government considers cutting gasoline subsidies from December, according to officials.
US President Trump said he will release USD 150 mln to increase US refining capacity.
US President Trump invokes Defense Production Act for petroleum capacity and waives Section 303 rules to expand oil capacity.

TRADE/TARIFFS

French Trade Minister has requested a US tariff exemption covering cognac and champagne.
German President Steinmeier to visit China on the 27th of October.
US Trump Admin is looking to restrict US investment in Chinese biotech companies.
China's Commerce Ministry urges the US to correct its approach on research ties between the two nations.

NOTABLE EUROPEAN HEADLINES

UK is expected to make a pre-budget announcement on an AI package on the weekend, Politico reported; Housing Secretary Rayner is booked for the Sunday media rounds, potentially indicating a Housing, Communities & Local Government related update.

NOTABLE EUROPEAN DATA RECAP

UK Retail Sales (Sep MM) -0.4% vs. Exp. -0.1% (Prev. 0.7%).
UK Retail Sales ex Fuel (Sep MM) -0.7% vs. Exp. -0.1% (Prev. 0.9%).
UK Retail Sales ex Fuel (Sep YY) 0.8% vs. Exp. 1.5% (Prev. 2.9%).
UK Retail Sales (Sep YY) 0.8% vs. Exp. 1% (Prev. 2.7%).
UK GfK Consumer Confidence (Oct) -24 vs. Exp. -15 (Prev. -13).
UK S&P Global Services PMI Flash (Oct) 53.1 vs. Exp. 51.8 (Prev. 52.1).
UK S&P Global Manufacturing PMI Flash (Oct) 52.8 vs. Exp. 51.7 (Prev. 51.9).
UK S&P Global Composite PMI Flash (Oct) 53.1 vs. Exp. 51.8 (Prev. 52.0).
European S&P Global Services PMI Flash (Oct) 51.7 vs. Exp. 52.5 (Prev. 53.0).
European S&P Global Manufacturing PMI Flash (Oct) 52.4 vs. Exp. 52.7 (Prev. 52.9).
European S&P Global Composite PMI Flash (Oct) 51.9 vs. Exp. 52.7 (Prev. 53.1).
German S&P Global Services PMI Flash (Oct) 51.7 vs. Exp. 52.5 (Prev. 52.9).
German S&P Global Manufacturing PMI Flash (Oct) 54.2 vs. Exp. 53.5 (Prev. 53.9).
German S&P Global Composite PMI Flash (Oct) 52.8 vs. Exp. 53.3 (Prev. 53.8).
French S&P Global Composite PMI Flash (Oct) 48.4 vs. Exp. 50.5 (Prev. 51.1).
French S&P Global Services PMI Flash (Oct) 48.4 vs. Exp. 50.7 (Prev. 51.2).
French S&P Global Manufacturing PMI Flash (Oct) 49.3 vs. Exp. 50.5 (Prev. 50.6).

CENTRAL BANKS

BoJ is expected to continue rapid rate hikes, with focus on December, sources suggest; report suggests that interest rates are still far from neutral, adding that inflation needs to stabilise.
BoJ Financial Stability Report: Japan's financial system has been maintaining stability on the whole.
European ECB Consumer Inflation Expectations (Sep) 3.1% (Prev. 3%).
Former German Finance Minister Kukies is said not to succeed Schnabel at the ECB.
ANZ sees RBNZ raising rates at next three meetings, citing the Q3 core inflation data.
PBoC injected CNY 258bln in overnight reverse repos, while 7-day reverse repo volume is at zero.
PBoC set USD/CNY midpoint at 6.7180 vs exp. 6.6758 (prev. 6.7195).
Indonesia's central bank official said rupiah movement still manageable following MSCI announcement last week and said it will respond if needed to ensure supply and demand in the FX market.
Monetary Authority of Singapore, Malaysia Central Bank and Bank of Thailand are partnering on cross-border digital money settlement.

NOTABLE US HEADLINES

US President Trump will deliver remarks in Florida on Friday, Georgia on Saturday and Michigan on Sunday, according to The White House.
US President Trump posted "Senator Roger Marshall of Kansas has done an incredible job in representing his Great State! Because of him....Bombardier is investing 270 MILLION DOLLARS, creating THOUSANDS of American Jobs in Kansas, Texas, and Indiana".
US President Trump posted "Getting ready to land in Iowa. Big Rally happening. Inflation and Prices coming down, FAST!"

GEOPOLITICS

RUSSIA-UKRAINE

Russia's Defence Ministry said Russia hit a railcar depot in the Poltava region in Ukraine and a cargo vessel in the Black Sea, while it also hit the Port of Vilkovo in the Odesa region.
Ukraine energy company DTEK said a Russian attack hit one of its power stations.
Ukraine seeks to move customs checks inside the EU to avoid Russian drones, with Kyiv in discussions with Poland and Slovakia about moving customs checks into their territories to try and make trucks safer, according to FT.
Ukraine Air Force reported guided bombs striking Donetsk and Dnipropetrovsk.
EU considers sanctions reprieve for Chinese fabric-maker accused of aiding Russia, according to SCMP.

MIDDLE EAST

US-IRAN

US President Trump said regarding Iran that they have crushed the Islamic Republic and may want to do it a little bit more.
US President Trump's ambassador to the UN Waltz said the US is prepared for long stand-off with Iran and acknowledged that the US could still be mired in a stalemate with Iran a year from now, according to FT.
Iran's IRGC threatens to target US bases if commercial ships continue transiting Strait of Hormuz, according to Fox News.
IRGC official said "today we not only possess power but also the will to use power"; "if the enemy wants to commit the slightest folly again, we will deliver an unprecedented blow", Al Mayadeen reported.
IRGC official said "traffic of violating vessels in the Strait of Hormuz has been completely stopped", Fars reported. "An informed official close to the IRGC Navy announced that after the destruction of the navigational aid systems used by the violating vessels, the hitting of 3 oil tankers yesterday and the destruction of another violating oil tanker last night, the traffic of violating vessels has been completely stopped". "This informed official warned that if oil smuggling resumes, the dealing with violating vessels and their supporting technical systems will be carried out with much greater severity". "He also emphasized that the renewed air intervention of the US military and support for oil smuggling will be met with a more direct and decisive response, and the US military will be responsible for the consequences".
Iran's Foreign Minister Araghchi called out French President Macron regarding his JCPOA stance contradictions.
BeamTracker reported sound of an explosion was heard in Strait of Hormuz area, with cause and origin not yet known, although the site of the explosion is a location that has previously been the passage point of violating ships in the strait.

SAUDI-HOUTHI

Saudi Arabia has launched a "raid" on eastern Taiz within Yemen, Sabereen reported.
Two Saudi airstrikes targeted the water authority building in Al Hazm district of Al Jawf province, Yemen.
Saudi‑led coalition said air defences intercepted and destroyed ballistic missile launched by Houthi militia towards Riyadh.
"Missile launch by the Yemeni Armed Forces towards Saudi interests", via Sabereen.
Saudi sources report loud explosions heard in Riyadh, according to Al Masirah.
Yemeni forces warned airlines again not to enter Saudi airspace or airports, according to Nour News.

OTHERS

Israeli PM Netanyahu said "I have instructed the security forces to impose a siege on the city of Hebron and to completely close off the West Bank".
US State Department spokesperson said there is no US-Turkey proposal regarding Lebanon and no US-backed proposals to change Lebanon's political structure.

CRYPTO

Bitcoin is a touch lower this morning and hovers around the USD 82k mark.

APAC TRADE

APAC stocks were mostly negative following the weak lead from Wall St, where a deepening of the tech rout had spurred a flight to quality, while geopolitical concerns linger following reports that the US and Israel have drawn up plans for renewed strikes on Iran, which could be implemented following the US midterm election.
ASX 200 was dragged lower by weakness in mining, materials, resources and tech stocks, although the downside was stemmed by some resilience in consumer discretionary, financials, real estate and utilities, while preliminary PMI data was uninspiring, with all main figures in contraction territory.
Nikkei 225 briefly retreated beneath the 62,000 level with notable weakness in tech and mining stocks, while the latest inflation data from Japan mostly matched estimates and showed an acceleration from the previous, with headline and core readings back above the 2% price target.
KOSPI underperformed as the tech sell-off rolled over into Asia, and with SK Hynix also not helped after it pulled the plug on plans to list its Solidigm unit on the Nasdaq due to regulatory and market volatility concerns.
Hang Seng and Shanghai Comp were mixed as the Hong Kong benchmark rebounded from an early dip with the help of resilience in China's top EV makers, while the mainland initially conformed to the mostly downbeat mood.
Note, the Taiwan session was suspended amid the approaching typhoon; potentially pushing pressure onto regional peers.

NOTABLE ASIA-PAC HEADLINES

China is to accelerate the development of new roles within the AI space, Xinhua reported.
Japanese Prime Minister Takaichi told reporters that she would instruct the Minister of Economy, Trade and Industry to consider subsidies for gasoline and other fuel, JiJi reported.
China's Politburo held a meeting today and said it is to maintain a high-pressure posture against corruption and will continue to deepen reform efforts and conscientiously implement reform tasks, according to Xinhua. Emphasises effectively strengthening leadership building and enhancing cohesion.
Japan's Economy Minister Kiuchi said government decision whether to declare official end to deflation will be made looking comprehensively at CPI, GDP deflator and background behind moves in underlying inflation. Don't think conditions met for the government to declare an official end to deflation. Hope the BoJ guides policy appropriately based on joint statement with the government stipulating need for stable and sustainable price stability.
Japan's Finance Minister Katayama said she believes Japanese financial institutions handled PHP issue relatively smoothly and expect them to continue to take necessary action. Cannot comment on revival of gasoline subsidies and will take household situation into consideration.

NOTABLE APAC DATA RECAP

China YTD Fiscal Revenues (Sep) +5.1% (prev. +5.7%).
Japanese Global Services PMI Flash (Oct) 52.0 (Prev. 51.3).
Japanese S&P Global Manufacturing PMI Flash (Oct) 53.3 vs. Exp. 54.5 (Prev. 54.1).
Japanese Global Composite PMI Flash (Oct) 52.30 (Prev. 52.3).
Australian S&P Global Services PMI Flash (Oct) 47.8 (Prev. 51.9).
Australian S&P Global Manufacturing PMI Flash (Oct) 49.7 (Prev. 49.6).
Australian S&P Global Composite PMI Flash (Oct) 47.7 (Prev. 51.3).
Japanese CPI (Sep MM) 0.0% (Prev. 0.1%).
Japanese CPI Ex-Food and Energy (Sep YY) 2.4% vs. Exp. 2.3% (Prev. 1.9%).
Japanese CPI (Sep YY) 2.1% vs. Exp. 2.1% (Prev. 1.9%).
Japanese Core CPI (Sep YY) 2.1% vs. Exp. 2.1% (Prev. 1.7%).

NOTABLE APAC EQUITY HEADLINES

Australia proposes to raise the cap on banks covered bond issuance and opens consultation on financial sector competition.
SK Hynix (000660 KS) cancels its plans to list Solidigm on the Nasdaq with an announcement expected soon, according to Korean press.