US stocks and treasuries surged after softer-than-expected US inflation - Newsquawk Asia-Pac Market Open

• US stocks and treasuries rallied, whilst yields were pressured and the dollar nosedived after US CPI data printed softer-than-expected across the board. This spurred firm advances for the major indices with the S&P 500 up nearly 2.0% although this was dwarfed by the small-cap Russell 2000 index which surged by over 5% for its largest gain in a year.
• USD was slammed and the DXY tested the 104.00 level to the downside after a cooler-than-expected US inflation report spurred a dovish repricing of Fed expectations in which the chance of a further rate hike was completely ruled out and with around 100bps of cuts now priced in for next year.
• Looking ahead, highlights include New Zealand Electronic Card Retail Sales, Japanese Q3 Preliminary GDP, Australian Wage Price Index, Chinese Industrial Production & Retail Sales, Supply from Australia.

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LOOKING AHEAD

• Highlights include New Zealand Electronic Card Retail Sales, Japanese Q3 Preliminary GDP, Australian Wage Price Index, Chinese Industrial Production & Retail Sales, Supply from Australia.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks and treasuries rallied, whilst yields were pressured and the dollar nosedived after US CPI data printed softer-than-expected across the board. This spurred firm advances for the major indices with the S&P 500 up nearly 2.0% although this was dwarfed by the small-cap Russell 2000 index which surged by over 5% for its largest gain in a year.
• SPX +1.91% at 4,496, NDX +2.13% at 15,812, DJI +1.43% at 34,828, RUT +5.39% at 1,798
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed Vice Chair Jefferson (voter) said some measures of economic uncertainty, particularly for inflation, are elevated and that uncertainty around inflation persistence may warrant stronger policy response than otherwise. Furthermore, he added that policy decisions taken under uncertainty may look different from those taken under optimal certainty.
• Fed's Goolsbee (voter) said inflation progress continues, economic growth has been strong and labour markets are vibrant, while he added that they still have a way to go before the Fed's 2% inflation goal is reached.
• Fed's Barkin (non-voter) said the Fed is making real progress on inflation and sees risks of both over and under-correcting on inflation, while he fears more needs to happen to curb demand and inflation.
• WSJ's Timiraos commented that the October payroll report and inflation report strongly suggest the Fed's last rate rise was in July, while he added the big debate at the next meeting is shaping up to be over whether and how to modify the post-meeting statement to reflect the obvious which is that the central bank is on hold.
• US left its 4-, 8-, and 17-week bill auction sizes unchanged at USD 95bln, 85bln, and 56bln, respectively, in which the 4- and 8-week bills are to be sold on November 16th and 17-week on November 15th with all settle to on November 21st.
• US House Speaker Johnson said he thinks there's a bipartisan agreement on a stopgap funding bill and believes a continuing resolution will be passed, according to CNBC.
• US Senate Majority Leader Schumer said the Senate would act quickly on the government funding bill.
• US House Freedom Caucus formally opposes House Speaker Johnson’s government funding bill, according to Politico.
• UAW President Fain said Detroit Three contract voting is trending in favour of approval with early results "very favourable".

DATA RECAP

• US CPI YY NSA (Oct) 3.2% vs. Exp. 3.3% (Prev. 3.7%)
• US Core CPI YY NSA (Oct) 4.0% vs. Exp. 4.1% (Prev. 4.1%)
• US Cleveland Fed CPI (Oct) 0.3% (Prev. 0.5%)

FX

• USD was slammed and the DXY tested the 104.00 level to the downside after a cooler-than-expected US inflation report spurred a dovish repricing of Fed expectations in which the chance of a further rate hike was completely ruled out and with around 100bps of cuts now priced in for next year.
• EUR benefitted from the dollar's demise with the single currency at a firm footing above 1.0800.
• GBP briefly reclaimed the 1.2500 status against the dollar with price action solely driven by the softer US inflation data, while the latest employment data from the UK also provided some encouragement.
• JPY strengthened and reverted to the 150.00 handle as yield differentials significantly narrowed.
• SNB's Jordan said they will not hesitate to tighten monetary policy further if necessary and will review at the next meeting whether measures taken to date are sufficient to keep inflation within the price stability range on a sustainable basis, while he is not sure if the terminal rate in Switzerland has been reached.
• Brazilian President Lula met with the economic team and Economy Minister Haddad to discuss a possible change in the fiscal target but the meeting was inconclusive over a new target ranging between 0-1%, according to Estadão sources.

FIXED INCOME

• Treasuries saw a massive rip higher led by the front and belly after the CPI data ramped up rate cut expectations.

COMMODITIES

• Oil prices were choppy with upside seen as the dollar weakened following a softer-than-expected US inflation report, although the advances eventually pared heading into the settlement and inventory data.
• IEA raised its 2023 global oil demand growth forecast by 100k BPD and raised its 2024 demand growth forecast by 50k BPD, while it said the oil market is less tight than expected as supply climbs and with oil demand growth set to slow, the market could shift into a surplus at the start of 2024.
• North Dakota said the October storm impacted production by 50-90k BPD for a few days and that the impact still lingering, while it sees October oil production flat to slightly down but above 1.2mln BPD.
• Libya rejected an oil tanker loading citing a prior Israel shipment, according to Bloomberg.

GEOPOLITICS

• Israeli PM Netanyahu said he instructed the army to prepare for all scenarios to deal with Hezbollah, according to Al Arabiya.
• Hamas leader Osama Hamdan said they tell the occupation that the battle is still in its beginning and the next is bigger and greater, according to Al Jazeera. It was separately reported that Hamas said it bombarded Tel Aviv with a new rocket barrage, according to Sky News Arabia.
• Israel and Hamas are reportedly close to reaching a hostage release agreement in exchange for a temporary truce, although talks are volatile and could still collapse, according to CNN.
• Yemen Houthi leader said they will continue attacks on Israel and are looking for Israeli ships in the Red Sea and Bab al Mandab.
• Jordanian Foreign Minister said there is no chance that joint Arab peacekeepers will play a role in Gaza after the war, while it was also stated that the West Bank is boiling and the danger of the expansion of the war is real, according to Al Arabiya.
• Iraqi armed factions targeted the US base in the "Konico" gas field north of Deir Ezzor with 7 missiles, according to Sky News Arabia.
• US renewed a 120-day waiver allowing Iraq to pay Iran for electricity with the latest waiver identical to the one in July. Furthermore, the move seeks to decrease Iran's leverage over Iraq, while US policy on Iran is unchanged and sanctions have not been eased, according to a US official.

ASIA-PAC

NOTABLE HEADLINES

• China is said to be mulling CNY 1tln of new market funding to boost the housing market in which the PBoC will inject funds in phases through policy banks and may take the first step as soon as this month, according to Bloomberg sources. Furthermore, officials are said to be mulling options including Pledged Supplemental Lending and special loans, while the final amount is subject to change.
• China asked local governments to halt PPP projects identified as being problematic and will eliminate the rule allowing municipalities to earmark as much as 10% of their annual budgets for such projects, while it is to move oversight responsibilities of projects from the Finance Ministry to the NDRC, according to Reuters citing sources.
• US President Biden said US and Chinese militaries need to be able to make contact and the US is trying to improve bilateral relations with China. It was separately reported that the US and China will likely set up a channel for talks on AI, according to Semafor.
• Japanese PM Kishida is to attend a meeting with Co. executives and labour unions on Wednesday, according to the PM’s office.

EU/UK

NOTABLE HEADLINES

• BoE's Pill said there is significant progress on inflation but added that 5% inflation would still be too high, while he stated they still have some work to do to curb inflation and that they don't necessarily need to raise rates further but are prepared to if needed.
• BoE's Dhingra said food inflation adds to the cost-of-living crisis.
• ECB's Villeroy said he is confident inflation will get towards the 2% target by 2025.
• EU is said to be mulling the possibility of temporarily extending the truce with the US with regards to steel and aluminium trade to avoid the return of tariffs on as much as USD 10bln of exports, according to Bloomberg sources.

DATA RECAP

• UK Employment Change (Sep) +54k vs. Exp. -198k (Prev. -82k)
• UK ILO Unemployment Rate (Sep) 4.2% vs. Exp. 4.3% (Prev. 4.2%)
• UK Average Earnings (Ex-Bonus)(Sep) 7.7% vs. Exp. 7.7% (Prev. 7.8%, Rev. 7.9%)
• EU GDP Flash Estimate QQ (Q3) -0.1% vs. Exp. -0.1% (Prev. -0.1%)
• EU GDP Flash Estimate YY (Q3) 0.1% vs. Exp. 0.1% (Prev. 0.1%)
• EU Employment Flash QQ (Q3) 0.3% (Prev. 0.20%)
• EU Employment Flash YY (Q3) 1.40% (Prev. 1.30%)
• EU ZEW Survey Expectations (Nov) 13.8 (Prev. 2.3)
• German ZEW Current Conditions (Nov) -79.8 vs. Exp. -76.9 (Prev. -79.9)
• German ZEW Economic Sentiment (Nov) 9.8 vs. Exp. 5.0 (Prev. -1.1)