US stocks declined amid crypto contagion - Newsquawk Asia-Pac Market Open

• US stocks declined throughout the session amid broad risk aversion and a firmer dollar with contagion from a further sell-off in the crypto space as Binance pulled out of the FTX buyout deal after "looking at the books". Meanwhile, the fate of midterm elections remains undecided with the Georgia Senate race going to a run-off in December and the focus now shifts to Thursday's inflation data.
• USD was firmer with the DXY back above the 110.00 level with the greenback underpinned amid the broad risk aversion and alongside a further sell-off in the crypto, while positioning ahead of Thursday's CPI was also seen as a factor. In terms of the US Midterm Elections, the results remain up in the air with Republicans in a strong position to take control of the House although the fate of the Senate race could be dragged into next month owing to the Georgia run-off.
• Looking ahead, highlights include Australian MI Inflation Expectations, Japanese Machine Tool Orders & Philippines GDP.

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LOOKING AHEAD

• Australian MI Inflation Expectations, Japanese Machine Tool Orders & Philippines GDP.
• Click here for the Week Ahead preview

US TRADE

EQUITIES

• US stocks declined throughout the session amid broad risk aversion and a firmer dollar with contagion from a further sell-off in the crypto space as Binance pulled out of the FTX buyout deal after "looking at the books". Meanwhile, the fate of midterm elections remains undecided with the Georgia Senate race going to a run-off in December and the focus now shifts to Thursday's inflation data.
• SPX -2.08% at 3,748, NDX -2.37% at 10,797, DJIA -1.95% at 32,513, RUT -2.68% at 1,760.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Williams (voter) noted that stable long-term inflation expectations are good news and is surprised by how much of the public expects deflation.
• Fed's Barkin (2024 voter) said whether Fed actions lead to a recession depends on how malleable inflation is to things like improvement in supply and other factors, while his hypothesis is that the US is on the back end of inflation and that it is coming down.
• Fed's Evans (departing) said he is worried that much higher rates risk the Fed's jobs mandate and sees benefits to adjusting the pace of Fed moves soon, while he is hopeful inflation will start slowing soon.
• US Senate Republican Johnson won re-election in Wisconsin, according to CNN. It was also reported that a Georgia election official said it is "safe to say" that there will be a run-off for its Senate seat on December 6th, while incumbent Democrat Maloney conceded in the race for the US House seat in New York's 17th district and said it is too early to know the outcome in a couple dozen other races or who will hold the House majority.
• Edison Research projects that Republicans have picked up a net 9 US House seats previously held by Democrats with 43 out of 435 races not yet called.

DATA RECAP

• US Wholesale Sales MM * (Sep) 0.4% (Prev. 0.1%)
• US Wholesale Inventories MM * (Sep) 0.6% vs. Exp. 0.8% (Prev. 0.8%)

FIXED INCOME

• Treasuries steepened amid risk aversion and duration pressure after the awful 10yr auction.

FX

• USD was firmer with the DXY back above the 110.00 level with the greenback underpinned amid the broad risk aversion and alongside a further sell-off in the crypto, while positioning ahead of Thursday's CPI data was also seen as a factor. In terms of the US Midterm Elections, the results remain up in the air with Republicans in a strong position to take control of the House although the fate of the Senate race could be dragged into next month owing to the Georgia run-off.
• EUR weakened against the buck and briefly dipped beneath parity, while the single currency has since moved off its lows but remains in close proximity for another retest of the aforementioned key level.
• GBP underperformed amid the broad pressure across activity currencies and despite a lack of pertinent newsflow, although it was reported that UK Chancellor Hunt is looking to cut the surcharge on UK bank profits to 3% from 8% as he seeks to shield UK banks from the bulk of a corporate tax increase.
• JPY softened and USD/JPY rose back above the 146.00 level with advances driven by the broad dollar gains.

COMMODITIES

• Crude trundled lower throughout the session and oil futures settled at lows amid the broader risk aversion and dollar strength with prices also weighed amid the overhang from China's COVID woes, bearish inventory data and amid comments from IEA's Birol who suggested that OPEC+ might need to rethink its output cut decision.
• US EIA Weekly Crude Stocks w/e 3.925M vs. Exp. 1.36M (Prev. -3.115M); SPR -3.6M; overall +0.4M.
• IEA's Birol said OPEC+ might need to rethink its output cut decision. Birol also said that the OPEC+ production cut could place additional upward pressure on inflation and weaken the global economy, while he added that oil prices flirting with USD 100/bbl is a "real risk" for the global economy.
• Iraq set December OSP for Basrah Light to Asia at USD +0.90 vs Oman/Dubai average (prev. +1.70), while it set OSP for Europe at USD -8.20 vs dated Brent (prev. -9.20) and set OSP to North/South America at -1.70 vs ASCI (prev. -2.00).
• Qatar set December Marine Crude OSP at Oman/Dubai plus USD 4.00/bbl and Land Crude OSP at Oman/Dubai plus USD 4.80/bbl.

GEOPOLITICAL

• Russian President Putin is to skip the G20 summit in Indonesia next week.
• Russian General Surovikin said there is a danger of flooding and isolation of Russian troops on the right bank of the Dnipro river, while he ordered a withdrawal of troops from the West bank of the Dnipro river including Kherson city.
• Ukrainian Presidential Adviser said it is too early to talk of a Russian withdrawal from Kherson, while some Russian forces remain in Kherson and further Russian manpower is being pulled into the region, according to Reuters.
• UN officials are to discuss the grain deal with a Russian delegation on November 11th.
• Russian Foreign Ministry spokeswoman said there is still no progress on the Russian part of the Black Sea grain deal and that the US and the EU continue to obstruct exports of Russian fertilisers and grain.
• Russian Foreign Ministry said reports of North Korea supplying weapons to Russia are false.
• Iran's top security official called for deeper ties in energy, trade and banking with Russia, according to Nour News.
• Israel carried out airstrikes in eastern Syria targeting a convoy of vehicles suspected of smuggling Iranian weapons after it crossed the border from Iraq, according to WSJ sources.

CRYPTO

• Binance walked away from the FTX deal due to diligence and reports on the mishandling of FTX customer funds, while Binance said issues are beyond their control or ability to help, according to WSJ. This follows an earlier report that Binance is highly unlikely to go through with the purchase of FTX "after glancing at the crypto exchange's books", while it was also reported that FTX CEO Sam Bankman-Fried reached out to exchange OKX on Monday about a possible deal before approaching Binance but OKX declined and expressed concern about crypto exchange consolidation, according to an OKX spokesperson.

ASIA-PAC

NOTABLE HEADLINES

• China's Guangzhou locked down another district due to COVID.
• RBA's Bullock reiterated that further rate hikes will be needed and that they will be data-dependent, while Bullock added that inflation is too high and increasingly broad-based. Furthermore, she believes they can bring inflation down over time and keep gains made on employment.

EUROPEAN TRADE

• European equity markets were mostly subdued and the STOXX Europe 600 finished down by 0.3%.

NOTABLE HEADLINES

• UK Chancellor Hunt is reportedly looking to cut the surcharge on UK bank profits to 3% from 8% as he seeks to shield UK banks from the bulk of a corporate tax rise.
• ECB Consumer Expectations Survey stated that although consumers’ inflation expectations have reacted to higher inflation and heightened uncertainty, the term structure of inflation expectations remains strongly downward sloping.
• EU Commission proposed under the fiscal rules review that debt reduction paths should be agreed on an individual basis and EU nations would have four years to get debt on a robustly downward path which could be extended to 7 years.
• German Finance Minister said the government does not plan to raise taxes and will raise the threshold for taxation, while they have raised child benefit payments, according to Reuters. He also said they should not heighten inflation through fiscal policy and that EU rules so far have not been realistic, as well as suggested that there should not be a one-sided loosening of fiscal rules.
• Polish NBP Base Rate* (Nov) 6.75% vs. Exp. 7.00% (Prev. 6.75%). NBP reiterated it could intervene in the FX market and that upcoming decisions of the MPC will depend on inflation and economic activity.