US stocks and bonds declined following recent rate hikes - Newsquawk Asia-Pac Market Open

• US stocks and treasuries were lower while the dollar was bid with markets continuing to react to Wednesday's hawkish press conference from Fed Chair Powell, while there were also rate hikes from the BoE and Norges Bank in which the former raised rates by 75bps which was the largest rate increase in decades and was as expected, albeit with two dovish dissenters. Furthermore, participants digested several data releases including ISM Services PMI which fell by more than expected but prices paid rose and employment slipped into contractionary territory, while Initial Jobless Claims were marginally better than expected but Challenger layoffs saw the highest number of job cuts announced in a single month since February 2021 at 33.8k and with the focus now shifting to Friday's NFP report.
• USD extended on gains with the DXY briefly above 113.00 as Powell's hawkish comments continued to reverberate across markets and EUR slipped below 0.9800 against a strong dollar despite the hawkish rhetoric from several ECB officials, while GBP underperformed after the BoE decision to hike by 75bps as expected which was the biggest hike in 3 decades, but not without its dovish dissenters.
• Looking ahead, highlights include Australian Retail Sales, RBA Statement on Monetary Policy, Philippines CPI and Singapore Retail Sales.

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LOOKING AHEAD

• Australian Retail Sales, RBA Statement on Monetary Policy, Philippines CPI and Singapore Retail Sales.
• Click here for the Week Ahead preview

US TRADE

EQUITIES

• US stocks and treasuries were lower while the dollar was bid with markets continuing to react to Wednesday's hawkish press conference from Fed Chair Powell, while there were also rate hikes from the BoE and Norges Bank in which the former raised rates by 75bps which was the largest rate increase in decades and was as expected, albeit with two dovish dissenters. Furthermore, participants digested several data releases including ISM Services PMI which fell by more than expected but prices paid rose and employment slipped into contractionary territory, while Initial Jobless Claims were marginally better than expected but Challenger layoffs saw the highest number of job cuts announced in a single month since February 2021 at 33.8k and with the focus now shifting to Friday's NFP report.
• SPX -1.06% at 3,719, NDX -1.98% at 10,690, DJIA -0.46% at 32,001, RUT -0.53% at 1,779.
• Click here for a detailed summary.

NOTABLE HEADLINES

• White House Press Secretary is expecting job gains of 150k in the coming months. Furthermore, the White House also said they do not expect the US economy to go into a recession and sees the US economy heading to stable and steady growth, while White House official Klain said the US is not in a recession and data shows the economy is strong.

DATA RECAP

• US ISM Non-Manufacturing PMI (Oct) 54.4 vs. Exp. 55.5 (Prev. 56.7)
• US ISM Non-Manufacturing Price Paid Index (Oct) 70.7 (Prev. 68.7)
• US Factory Orders MM * (Sep) 0.3% vs. Exp. 0.3% (Rev. 0.2%)
• US S&P Global Services PMI Final (Oct) 47.8 (Prev. 46.6)
• US S&P Global Composite Final PMI (Oct) 48.2 (Prev. 47.3)
• US Initial Jobless Claims w/e 217k vs. Exp. 220.0k (Prev. 217.0k, Rev. 218k)
• US Continued Jobless Claims w/e 1.485M vs. Exp. 1.45M (Prev. 1.438M)
• US Challenger Layoffs (Oct) 33.843k (Prev. 29.989k)

FIXED INCOME

• Treasuries saw strong bear-flattening in continued post-FOMC fallout with two-way flows post-BoE.

FX

• USD extended on gains with the DXY briefly above 113.00 as Powell's hawkish comments continued to reverberate.
• EUR slipped below 0.9800 against a strong dollar despite the hawkish rhetoric from several ECB officials.
• GBP underperformed after the BoE decision to hike by 75bps but not without its dovish dissenters.
• JPY was firmer against most major peers aside from the greenback while USD/JPY oscillated around 148.00.
• Czech CNB Repo Rate N/A 7.00% vs. Exp. 7.0% (Prev. 7.0%). Czech National Bank said the board voted 5-2 for rate stability and two voted for 75bps, while it noted risks to its forecast are significant in both directions.
• Norges Bank hiked by 25bps to 2.50% (exp. evenly split between 25bp & 50bp) and said the policy rate will most likely be raised further in December. It noted inflation has increased more than projected and the labour market appears to be a little tighter than previously anticipated, while these developments could suggest raising the policy rate by more than 0.25 percentage points at this meeting. However, there are signs that some areas of the economy are cooling down and prospects for lower-than-expected freight and energy prices may curb inflation ahead.
• Israel election final tally sees Netanyahu-led bloc with a majority of 64 out of 120 seats in parliament, according to the election committee.

COMMODITIES

• Crude traded lower which was a function of the risk-off sentiment and a broad dollar bid, as opposed to any oil-specific newsflow.
• Iraq's SOMO seeks to expand its oil exports to Europe amid Russian exports decline to that market and need for alternative supplies, according to the state news agency.
• US Department of Energy sold around 15mln bbls of SPR oil in the latest tender with Valero (VLO) the largest buyer in the December sale in the final contract awards.
• UK Treasury announced legislation that introduces a ban on UK ships and services facilitating maritime transport of Russian crude oil from December 5th and will also pave the way for a cap on the price of seaborne Russian crude oil.
• Goldman Sachs forecasts crude oil demand rising around 5mln BPD into year-end as refineries ramp up just as supply tightens and it maintained the forecast of USD 115/bbl for Brent Q1 2023, with risks skewed to the upside.
• Chile's Escondida mine copper production rose 3.51% in September to 44.5k tonnes and the Collahuasi mine copper production fell 3.5% in September to 44.5k tonnes, according to Cochilco.

GEOPOLITICAL

• Russian-installed official in Kherson said Russian units will likely withdraw from the west bank of the Dnipro river.
• Russia's Kremlin said Russia's resumption of the grain agreement does not mean that it has been automatically extended and its results must be evaluated before a decision is made, via Al Jazeera.
• Russian Foreign Ministry said the UK's confrontational actions could result in unpredictable and dangerous consequences.
• Russian ambassador said Britain is 'too deep' into the Ukraine war and claims he has proof that UK special forces were involved in a Ukrainian drone attack on Russia's Black Sea fleet in Crimea and had handed evidence to the British ambassador, according to Sky News.
• A new nuclear-powered submarine that will enter service with the Russian navy has successfully fired a ballistic missile as part of final testing, according to Reuters citing the Defence Ministry.
• EU is reportedly studying the possibility of using billions of Euros worth of Russian Central Bank assets already frozen by member states to help with Ukraine’s reconstruction efforts, according to Bloomberg citing sources.
• Turkish Foreign Minister said they observed that the new Swedish government is decisive on fulfilling requirements for the NATO bid but added that neither Finland nor Sweden fulfilled all elements of the memorandum.
• US Treasury announced new Iran sanctions that target oil and shipping entities and vessels.
• North Korea said the US-South Korean decision to extend air drills is very risky and a wrong choice, while it added that the US and South Korea will realise they made an irrevocable mistake, according to KCNA.
• US and others asked the UN Security Council to meet publicly on Friday on North Korea, according to diplomats.
• US and South Korean Defence Chiefs pledged to seek new measures to demonstrate the alliance's determination and capabilities. Furthermore, US Defence Secretary Austin said North Korea is deterred from attacking South Korea and employing a nuclear device, while the South Korean Defence Minister said there was no consideration of redeploying tactical nuclear weapons to the Korean peninsula.
• South Korea said North Korea fired around 80 artillery rounds at waters off its eastern coast and it was also reported to have conducted another missile launch according to Yonhap.

ASIA-PAC

NOTABLE HEADLINES

• PBoC Governor Yi Gang said they should implement requirements for building a modern central bank system and should improve the monetary policy system, maintain the stability of currency value and promote economic growth. Furthermore, Yi added that they should strengthen the flexibility of the RMB exchange rate, as well as maintain the basic stability of the exchange rate at a reasonable and balanced level.
• US senior officials and aides have been wrangling over whether the US and China leaders will meet around the G20 summit of major economies in Indonesia in mid-November, according to WSJ.
• Chinese energy companies are accelerating issues of special-purpose bonds, in a move that experts say will help companies amid a volatile global energy market and ensure sufficient domestic energy supply during the upcoming winter season, according to GT.

EUROPEAN TRADE

• European equity markets were lower and the STOXX Europe 600 finished down by 0.9%.

NOTABLE HEADLINES

• BoE lifted rates by 75bps to 3.00%, as expected, through 7-2 vote in which Tenreyro voted for 25bps and Dhingra voted for 50bps. BoE stated that further increases in the Bank Rate may be required for a sustainable return of inflation to target, albeit to a peak lower than priced into financial markets, while it continues to judge that if the outlook suggests more persistent inflationary pressures, it will respond forcefully, as necessary.
• BoE Governor Bailey said inflation is too high and it is the BoE's job to bring it down, while he added it will be tougher later if the BoE does not act forcefully now, but also said the MPC should not increase Bank Rate too far. Furthermore, BoE Governor Bailey later said that nobody should read 75bps as the new norm for rate hikes and that there is some evidence that labour demand is beginning to slow, according to a Bloomberg interview.
• BoE's Mann said there is still a lot of momentum in drivers of inflation and repeated BoE guidance that rates do not need to be as high as the market suggests, while she added that they must defend against price increases.
• UK Chancellor Hunt said the UK Government wants limited interest rate rises.
• UK Chancellor Hunt reportedly asked officials to look at raising the dividend tax rate and cutting the tax-free allowance for dividends although no decision has been taken, according to FT citing sources.
• ECB's Lagarde said there's still a way to go on rates and inflation is way too high, while she added the ECB has to take action. Lagarde stated that they want a rate that delivers 2% mid-term inflation and will do whatever is required, while they will use all instruments and tools including reducing the size of the balance sheet.
• ECB's Centeno said policy will be clearer after inflation peaks and have definitely front-loaded rate hikes, while he added they must act to ensure price expectations are anchored.
• ECBs Kazaks said 50bps or 75bps hikes are possible in December and noted that determining the terminal rate is currently impossible, while he added that rates need to move into tightening territory.
• ECB's Nagel said not replacing maturing assets is one way for QT and there is a good chance Germany could enter a technical recession.
• ECB's Visco said the Italy-Germany spread is still too high and said market expectations for a 3.00% terminal rate are within the range the ECB could reach, while Visco said ECB is "relaxed" on PEPP reinvestments.
• ECB said the Spanish banking tax proposal does not take into account the full business cycle and does not include operational expenses and cost of credit risk, while Spanish banks could become less able to absorb the potential downside risks of an economic downturn.

DATA RECAP

• UK S&P Global/CIPS Services PMI Final (Oct) 48.8 vs. Exp. 47.5 (Prev. 47.5)
• UK Composite PMI Final (Oct) 48.2 vs. Exp. 47.2 (Prev. 47.2)
• EU Unemployment Rate (Sep) 6.6% vs. Exp. 6.6% (Prev. 6.6%, Rev. 6.7%)