Mixed trade in US stocks with tech leading the charge - Newsquawk Asia-Pac Market Open

• US stocks were mixed on Tuesday with the tech-heavy NDX leading the gains, aided by the lower yield environment, while the real economy-levered Russell 2k index felt the brunt of weakening global economic data.
• The Dollar was firmer on Tuesday, with DXY printing a high of 105.770, on broad-based gains and benefitting off the frailty of its peers such as the AUD and GBP. 
• Treasuries bull-flattened Wednesday amid softening global economic data and well-received supply
• Oil prices tumbled on Tuesday with weak Chinese activity data weighing on sentiment in the backdrop of a firmer US Dollar and hawkish Fed Speak. 
• US Treasury said no trade partners manipulated currencies; China remains on the monitoring list due to lack of transparency for its foreign exchange practices.
• Looking ahead, highlights include Australian Auction, Australian Building Approvals, New Zealand Inflation Expectations, and Japanese Leading Index.

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8th November 2023

• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks were mixed on Tuesday with the tech-heavy NDX leading the gains, aided by the lower yield environment, while the real economy-levered Russell 2k index felt the brunt of weakening global economic data
• SPX +0.28% at 4,378, NDX +0.93% at 15,296, DJIA +0.17% at 34,152, RUT -0.28% at 1,733.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Logan (2023 voter, hawk) said inflation remains too high and the core question is if financial conditions today are sufficiently restrictive; all of them have been surprised with the resiliency of the US economy. She said the labour market is still too tight, and they have seen some important cooling in the labour market. She said the US had a string of better data on inflation, but the most recent reading was high. She still looks like trending toward 3% inflation, and her expectation is that growth will start to slow, but the Fed has been wrong before. She said the Fed will need to forecast tight financial conditions to bring inflation to 2%, and since July there has been a tightening in financial conditions driven by the climb in long-term rates. She said the key question is what is driving the increase in long-term rates, and if long rates are climbing on the back of strong economic growth, FOMC would have to deliver on those expectations. She said if the climb in long rates is driven by term premiums, it could do some of the Fed's work, and at the recent meeting, they thought a hold was appropriate to give time to look at financial conditions. She said she will watch to forecast if the retracement of long rates continues, while energy price shocks are an important risk that needs focus.
• Fed's Bowman (voter, hawk) said she continues to expect the Fed will need to increase the FFR further; the Fed rate currently appears restrictive and financial conditions have tightened since September. She said some tightening is due to higher longer-term bond yields, which can be volatile. Don't yet know the effects of tightened financial conditions on economic activity and inflation. She said monetary policy is not on a preset course, and she remains willing to support raising the policy rate at a future meeting. She's seen considerable progress on inflation, but it remains high, and the continued risk that core services inflation remains stubbornly persistent. She said there is also a risk that higher energy prices could reverse some progress on inflation, and the US economy has remained strong; labour market supply and demand may be coming into better balance, according to a released speech.
• Fed's Goolsbee (2023 voter, dove) said you have to look through two-week movements of long-term yield rates; reiterates that if long rates are sustained at high levels, that is most likely tightening, via a CNBC interview. As long as we are making progress on inflation, the topic is then only how long we keep rates at this level. Don't like pre-committing what rates will be at the next meeting, still a lot of data to parse before then. His conditions for the Fed being done with rates are that the Fed is clearly back on a path to get inflation back to 2%.
• Fed's Kashkari (2023 voter, hawkish) says have to let inflation data and economy guide the Fed; committed to 2% inflation target, via Bloomberg TV interview. No discussion among him or his colleagues about when they will cut rates. The labour market continues to be quite robust, not a lot of evidence the economy is weakening.
• US Senate Minority Leader McConnell said he spoke with President Biden and Treasury Secretary Yellen on Monday; says will be difficult to get a supplemental spending bill across the floor with a credible border solution, according to Reuters.
• CFPB proposes rules to regulate big tech's payments and digital wallets like banks; it will examine tech firms to ensure compliance with funds transfer, privacy, and other consumer protection laws Companies subject to proposal would be the likes of Alphabet (GOOGL), Apple (AAPL), and PayPal (PYPL), or any companies handling more than 5mln transactions a year. The proposal is now subject to a notice-and-comment period expected to conclude in early 2024.

DATA RECAP

• US Consumer Credit* (Sep) 9.06B vs. Exp. 10.0B (Prev. -15.63B)
• US International Trade $ * (Sep) -61.5B vs. Exp. -59.9B (Prev. -58.3B, Rev. -58.7B)
• US Goods Trade Balance (R) * (Sep) -86.84B (Prev. -85.78B)
• Canadian Imports C$* (Sep) 64.99B CA (Prev. 63.84B CA, Rev. 64.33B CA)Canadian Exports C$* (Sep) 67.03B CA (Prev. 64.56B CA, Rev. 65.28B CA)
• Canadian Trade Balance C$* (Sep) 2.04B CA vs. Exp. 1.0B CA (Prev. 0.72B CA, Rev. 0.95B CA)
• Atlanta Fed GDPnow (Q4): 2.1% (prev. 1.2%)
• Manheim Used Vehicle Value Index SA (Oct): -2.3% M/M (prev. Sep. +1.0%, mid-month Oct. -2.2%), -4.0% Y/Y (prev. Sep. -3.9%, mid-month Oct. -5.5%).

FX

• The Dollar was firmer on Tuesday, with DXY printing a high of 105.770, on broad-based gains and benefitting off the frailty of its peers such as the AUD and GBP.
• AUD was the clear laggard against the Buck, and was weighed on post-RBA decision, as the less hawkish RBA guidance outweighed the widely anticipated 25bps hike to 4.35%.
• CAD and GBP both saw similar weakness vs. the Greenback, with the former weighed on oil prices tumbling over 4% and the latter by desks touting Chief Economist Pill’s remarks late on Monday where he spoke about the prospect of rate cuts from mid-2024, with money markets now pushing towards 75bps worth of cuts priced by the end of next year.
• CHF, EUR, and JPY were all lower, but not to the degree of the activity currencies as they all fell foul to the resurgent Greenback, albeit to varying extent, with the Yen keeping afloat of its MTD trough nearer 151.00 having lost touch with another decent clip of option expiries at 150.00.
• Scandis were lower with the NOK clearly underperforming as it was rocked by Brent almost unwinding its entire Middle East conflict safe haven premium as Norwegian manufacturing production recoiled as well.

FIXED INCOME

• Treasuries bull-flattened Wednesday amid softening global economic data and well-received supply.
• US sold USD 48bln 3yr notes at 4.701%; stops-through by 0.1bps.

COMMODITIES

• Oil prices tumbled on Tuesday with weak Chinese activity data weighing on sentiment in the backdrop of a firmer US Dollar and hawkish Fed Speak.
• Saudi Aramco CFO sees global oil demand recovery on track; forecasts Q4 oil demand improving in China and India, according to Reuters.
• Copper and cobalt, produced by the likes of Glencore (GLEN LN) and CMOC (3993 HK), is being stranded in Kolwezi, DRC due to a truckers strike that started in late October, according to Reuters sources
• EIA STEO: 2023 world oil demand growth forecast cut by 300k BPD (M/M) to a 1.46mln BPD Y/Y increase, 2024 forecast raised by 80k BPD to a 1.40mln BPD Y/Y increase. Click here for the full release.

GEOPOLITICS

• US President Biden told Israeli PM Netanyahu that a 3-day fighting pause could help secure the release of some hostages, according to Axios.
• Israeli Defence Minister Gallant says IDF forces are in the heart of Gaza City; hostages must return before any humanitarian pause, according to

ASIA-PAC

NOTABLE HEADLINES

• Chinese President Xi to meet US business executives for dinner in San Francisco, according to Bloomberg.

GLOBAL

• US Treasury said no trade partners manipulated currencies; China remains on the monitoring list due to lack of transparency for its foreign exchange practices. Vietnam is back on the monitoring list; removing Switzerland and South Korea from the same scrutiny.

EU/UK

NOTABLE HEADLINES

• ECB's Nagel (hawk) said lively wage growth and falling labour supply will keep up pressure on inflation; still face risks that inflation outlook could turn out higher than expected. He said it's imperative to remain vigilant, according to Reuters.
• ECB's Enria said the current higher interest rate interest rate environment could put further downward pressure on office and house prices; banks should account for these risks in provisional practices and capital planning, according to Reuters.
• ECB's Stournaras said if inflation is below 3% on a permanent basis by August 2024, then the ECB could cut rates by a small amount, speaking to Kyklos Ideon.

LATAM

-Brazilian Economic Policy Secretary Mello said Brazil will not raise spending if the fiscal target changes, and sees the Brazilian economy growing 3% in 2023, and growth rebounding in Q4 after stagnating in Q3, according to Reuters.

• Brazilian President Lula says FX reserves are very important to maintain economic stability, "even when a lunatic is governing the country", according to Reuters.
• BCB Minutes: It was decided to maintain the recent communication, which already includes the appropriate conditionality in an uncertain environment; Rate cuts of 50bps are appropriate to keep the necessary contractionary monetary policy for the disinflationary process. The global outlook has been volatile and adverse.