US stocks finished mixed as participants digested firm data, earnings releases and geopolitical headlines - Newsquawk Asia-Pac Market Open

• US stocks traded mixed and yields climbed following stronger-than-expected US Retail Sales and Industrial Production data, while participants also digested earnings releases, US chip restrictions and the latest geopolitical headlines including news of a strike on a hospital in Gaza which saw the sides point the blame at each other.
• USD was choppy and gradually faded the initial boost from the stronger-than-expected retail sales data, while above-forecast industrial production and a higher yield environment did little to spur the dollar.
• Looking ahead, highlights include Australian Westpac Leading Index, Chinese GDP, Industrial Production & Retail Sales, Speech from RBA Governor Bullock.

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LOOKING AHEAD

• Highlights include Australian Westpac Leading Index, Chinese GDP, Industrial Production & Retail Sales, Speech from RBA Governor Bullock.

US TRADE

• US stocks traded mixed and yields climbed following stronger-than-expected US Retail Sales and Industrial Production data, while participants also digested earnings releases, US chip restrictions and the latest geopolitical headlines including news of a strike on a hospital in Gaza which saw the sides point the blame at each other.
• SPX -0.01% at 4,373, NDX -0.33% at 15,122, DJIA +0.04% at 33,987, RUT +1.09% at 1,766.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Barkin (non-voter) said the Fed has time to see data before making the next rate move call and the path for inflation is not yet clear but sees clear progress. Barkin said policymakers will have a good debate when asked if the Fed will keep rates unchanged at the November 1st meeting, while he added that the recent inflation report was only one report, coming after several good ones. Furthermore, Barkin stated longer-term yields have moved up which has tightened financial conditions and that the challenge with depending on yields is that they can move and they don't know where they will be three weeks from now given what's happening globally.
• Fed Discount Rate Minutes showed Cleveland Fed directors wanted a Discount Rate hike in September.
• US President Biden reportedly plans to ask Congress for roughly USD 100bln in Ukraine, Israel, and border supplemental aid, according to Bloomberg.
• Atlanta Fed GDPNow for Q3 was hiked to 5.4% from 5.1%.

DATA RECAP

• US Retail Sales MM (Sep) 0.7% vs. Exp. 0.3% (Prev. 0.6%, Rev. 0.8%)
• US Industrial Production MM (Sep) 0.3% vs. Exp. 0.0% (Prev. 0.4%, Rev. 0.0%)
• US Manufacturing Output MM (Sep) 0.4% vs. Exp. 0.1% (Prev. 0.1%, Rev. -0.1%)
• US NAHB Housing Market Index (Oct) 40 vs. Exp. 44 (Prev. 45, Rev. 44)
• US Retail Inventories Ex-Auto Rev (Aug) 0.5% (Prev. 0.6%)
• US Business Inventories MM (Aug) 0.4% vs. Exp. 0.3% (Rev. 0.1%)

FIXED INCOME

• US Treasuries were pressured and yields broke to new cycle peaks at the front and belly after hot US retail sales and industrial production data.

FX

• USD was choppy and gradually faded the initial boost from the stronger-than-expected retail sales data, while above-forecast industrial production and a higher yield environment did little to spur the dollar.
• EUR eked mild gains but is off intraday highs after momentum waned just shy of 1.0600 territory.
• GBP swung between gains and losses but ultimately weakened following softer wages and labour data.
• JPY eventually weakened after reversing an initial knee-jerk surge on the back of a source report that the BoJ is mulling raising its FY23 price view closer to 3% and FY24 price view to 2% or above, with the move swiftly faded after many pointed to a similar report in Japanese press earlier this month.
• Canadian CPI Inflation YY (Sep) 3.8% vs. Exp. 4.0% (Prev. 4.0%)

COMMODITIES

• Crude traded in thin ranges and closed little changed amid prolonged uncertainty around Israel in the backdrop of strong US data, but strengthened after hours following bullish inventories.
• US Energy Inventory Data (bbls): Crude -4.4mln (exp. -0.3mln), Gasoline -1.6mln (exp. -1.1mln), Distillates -0.6mln (exp. -1.4mln), Cushing -1mln
• Saudi Aramco CEO said H2 2023 global demand is seen at 103mln BPD and the oil market is balanced and reasonable, while the plan to increase output capacity to 13mln BPD by 2027 remains on track.
• Russian Deputy PM Novak said it is still too early to talk about the OPEC+ decision in November, according to a Bloomberg interview.
• Russia's Central Bank said OPEC+ will discuss at its next meeting a possible oil output increase in early 2024 in the event the global oil deficit widens and noted that oil output in Iran and Venezuela, which are exempt from OPEC+ quotas, may significantly slow down.
• Freight rates for Russian oil shipments from the Baltic to India jumped over 50% W/W, according to sources cited by Reuters.
• Australia's Offshore Alliance members at Chevron (CVX) endorsed draft enterprise agreements and Australia union said members agreed to suspend protected industrial action at Chevron's LNG facilities.
• India cut the windfall tax on petroleum crude from INR 12.2k to 9.05k per ton, while it cut tax on aviation fuel to INR 1 per litre from 3.5 per litre and on diesel to INR 4 per litre from 5 per litre with effect from October 18th.

GEOPOLITICAL

• Al Jazeera TV reported that at least 200 were killed in an Israeli air strike on a hospital in Gaza and an IDF spokesperson said they don't know yet what's the reason for the explosion at the hospital in Gaza and are checking what happened there. Israeli military later stated that intelligence shows Palestinian Islamic Jihad Group is responsible for the hospital attack and that a Gaza rocket barrage towards Israel passed near the Gaza hospital when it was hit although a Palestinian Islamic Jihad spokesman denied Israeli allegations that the militant group is responsible for the strike.
• Palestinian Hamas Leader Haniyeh said the hospital massacre is a new turning point. It was separately reported that Russia and UAE requested an urgent meeting of the UN Security Council on October 18th after the strike on the hospital in Gaza, according to TASS.
• Israel's national security headquarters told Israelis in Turkey to leave the country immediately.
• Palestine President Mahmoud Abbas cancelled his planned meeting with US President Biden, according to AP citing a Palestinian official.
• Iranian Supreme Leader Khamenei said if Israel's crimes continue then no one can stop "Muslims around the world and resistance forces", while he added that Gaza bombardments must stop immediately.
• Iran’s IRCG deputy chief said "another shockwave" is on the way if Israel does not end atrocities in Gaza, according to Fars News.
• Israeli official said a large number of strikes were called off to avoid civilian casualties and the campaign to eliminate Hamas could take months or years, while the official said every Gaza target is approved at the highest level of the military.
• Israeli National Security Council said they will return Lebanon to the Stone Age if they attack, according to Al Jazeera.
• Hezbollah is intensifying military preparations including an escalation in rocket fire and a pending decision from Tehran will determine whether the group will proceed with full-scale military actions, according to an i24 news journalist citing sources. It was earlier reported that Hezbollah announced an attack on 5 new Israeli positions with "direct weapons", according to Sky News Arabia.
• White House has been discussing the possibility of using military force if Hezbollah joins the war in Gaza and attacks Israel with its huge arsenal of rockets, according to Axios citing US and Israeli officials.
• US is reportedly sending sailors and marines towards Israel with over 4,000 sailors and Marines, while it will include two aircraft carriers and their associated escort ships, according to defence officials cited by WaPo. It was separately reported that US Defense Department reiterated around 2,000 US military personnel were placed on a heightened state of readiness but no decision was made yet.
• Ukraine fired ATACMS missiles at Russian forces which is the first time that US-provided weapons were used in the Ukraine-Russia conflict, according to WSJ.
• Finland's National Bureau of Investigation is probing several ships that were present in the area at the time of the Baltic Connector pipeline incident on October 8th, while the ships under investigation include Russian Sevmorput and Chinese NewNew Polar Bear.
• Swedish Civil Defence Minister said they have received information that a telecoms cable between Estonia and Sweden was damaged which occurred at a similar time to the Finland-Estonia pipeline damage occurring.
• Armenia is ready to sign a peace treaty with Azerbaijan by the end of the year, according to TASS citing the Armenian PM.

ASIA-PAC

NOTABLE HEADLINES

• PBoC instructed state banks to roll over local government loans with longer term and lower rates, while the PBoC is to set up an emergency liquidity tool with banks in which loans made via the tool should be repaid in two years, according to Reuters sources.
• US Assistant Secretary of Defense Ratner said China is stepping up coercive and risky behaviour in the South China Sea, while he added that China is seeking to intimidate the international community.
• US official confirmed a new rule expanding license requirements for chipmaking equipment to 21 countries other than China and restricts the sale of Nvidia (NVDA) made-for-China chips, with more chips and equipment covered by the new restrictions.
• China said it firmly opposes export restrictions imposed by the US on advanced AI chips, according to the Chinese embassy in Washington.
• BoJ reportedly mulls raising its FY23 price view closer to 3% and mulls raising FY24 price view to 2% or above, while the inflation outlook for FY25 is to be kept around 1.6%, according to Bloomberg sources.

EU/UK

NOTABLE HEADLINES

• BoE's Dhingra said average weekly earnings data appear to give a more inflated picture of the wage outlook vs other measures and she expects some letting-up of wage growth.
• ECB's de Guindos said economic activity remains subdued and is expected to stagnate until year-end, while financial stability outlook is fragile as the system adapts to a higher rate environment.
• ECB's Holzmann said not out of the woods yet on inflation and that further shocks may require additional ECB rate hikes.
• EU countries agreed to a deal on power market reform, resolving a standoff between France and Germany, while Hungary was the only bloc member to vote against it, according to Reuters sources.

DATA RECAP

• UK HMRC Payrolls Change -11k (prev. 0k. rev. -8k)
• UK Average Weekly Earnings 3M YY (Aug) 8.1% vs. Exp. 8.3% (Prev. 8.5%)
• UK Average Earnings (Ex-Bonus)(Aug) 7.8% vs. Exp. 7.8% (Prev. 7.8%, Rev. 7.9%)
• EU ZEW Survey Expectations (Oct) 2.3 (Prev. -8.9)
• German ZEW Current Conditions (Oct) -79.9 vs. Exp. -80.8 (Prev. -79.4)
• German ZEW Economic Sentiment (Oct) -1.1 vs. Exp. -9.3 (Prev. -11.4)