Weekend News Round Up - Newsquawk Asia-Pac Market Open

• US stocks were sold on Friday with the Nasdaq leading the losses among the major US indices with mixed earnings and geopolitical angst into the weekend the touted catalysts.
• Hamas spokesperson on Friday said they have released two US hostages for humanitarian reasons in response to Qatari efforts; a second convoy of 17 aid trucks entered the Egyptian side of the Rafah crossing towards Gaza.
• US Secretary of State Blinken said the US sees potential for escalation of the war in the Middle East due to actions of Iran's proxies and the US does not want escalation; Israeli PM Netanyahu said if Hezbollah goes to war with Israel, it would bring unimaginably devastation upon it and Lebanon.
• BoJ officials are reportedly mulling tweaking the settings of YCC; The topic will be discussed at the next two-day meeting that ends on October 31st, "but there are differences of opinion within the Bank of Japan, according to Nikkei sources. 
• Looking ahead, highlights include Singapore CPI and holidays in New Zealand and Hong Kong.

More Newsquawk in 2 steps:

1. Subscribe to the free premarket movers reports

2. Trial Newsquawk’s premium real-time audio news squawk box for 7 days

23rd October 2023

• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks were sold on Friday with the Nasdaq leading the losses among the major US indices with mixed earnings and geopolitical angst into the weekend the touted catalysts.
• SPX -1.26% at 4,224, NDX -1.50% at 14,561, DJI -0.86% at 33,127, RUT -1.29% at 1,681
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Mester (2024 voter, hawkish) said the Fed is at or near the peak of the rate hike cycle, and reiterated her outlook aligns with the Fed forecast in eyeing one more rate hike. She added Fed rate decisions will be driven by incoming economic data, and if sustained, higher bond yields will help moderate economic activity. She said the Fed needs to be "nimble" with monetary policy right now, and inflation is cooling but still too high, while risks are tilted to the upside. She said the labour markets showing moderation and resilience and data shows signs of moderating wage gains. She added that the Fed must not be complacent about getting inflation back to 2% and that recent developments could slow move down in inflation. Mester said she looks at lots of data about monetary policy, including money supply, and said the Fed has underestimated inflation levels until only recently, while she can't say for sure monetary policy is definitely at its peak. She noted the balance sheet drawdown should happen regardless of interest rate moves and the Fed still has perhaps a couple more years of balance sheet cuts.
• Fed's Logan (2023 voter, hawk) said she has seen welcome progress on inflation but it is still too high and she is not yet convinced they are moving to 2% inflation, noting the economy continues to outperform and labour markets are still tight. Logan said it is important to have restrictive financial conditions broadly speaking, and the Fed has time to watch the economy and markets before deciding on monetary policy (code for no hike in November). Logan added that some part of bond yield rise is tied to term premiums and some part of the rise is also tied to the strength of economic data, suggesting the rise in bond yields has been pretty orderly and bond markets are functioning, but she is still watching for trouble. Logan stressed she is not thinking about when the Fed might cut rates but reiterated that a persistent rise in bond yields could mitigate the need for Fed rate hikes.
• Fed's Bostic (2024 voter, dove) said he does not know if the neutral rate has changed, but suggested that it could be higher. He also repeated his view that late 2024 is possibly a time when the Fed would cut rates. Bostic noted that business contacts say a slowdown is coming, and they are bracing for the slowdown, although he notes we are not going to see a recession and inflation will go to 2%. Bostic added that as many businesses still have cash, it will blunt the rise in market yields. Meanwhile, on the economy, he said it has been resilient, inflation has come down a lot and it should continue.
• Fed's Harker (2023 voter, dove) reiterated that now is the time to hold rates steady, noting the Fed cannot allow inflation to reaccelerate. The Philadelphia Fed President added that the US jobs market remains "surprisingly strong" and the economy is quite remarkable and resilient. Harker is hearing that inflation is easing faster than thought and contacts are asking for time to adjust to policy.
• Fed Financial Stability Report: Persistent inflation, monetary tightening, and potential losses in CRE are the most cited near-term risks to financial stability. Risks posed by economic weakness in China is increasingly cited as near-term risk. Russia-Ukraine war is seen as a diminishing risk, ranked no. 11 in the latest report, vs no. 1 in the Spring 2022 report. Corporate bond performance remains solid, and signs of deterioration have been emerging since May. Banks reporting lending standards are now on the tighter end of historical ranges for all loan categories.

DATA RECAP

• Canadian Retail Sales Ex-Autos MM* (Aug) 0.1% (Prev. 1.0%, Rev. 1.1%)
• Canadian Retail Sales MM* (Aug) -0.1% vs. Exp. -0.3% (Prev. 0.3%, Rev. 0.4%); StatsCan said Sept Retail Sales expected to be unchanged

COMMODITIES

• Baker Hughes US Rig Count (w/e Oct 20th): Oil +1 at 502, Nat Gas +1 at 118, Total +2 at 624.
• Russia is considering an extra gas tax to finance subsidies for oil refiners, according to Bloomberg.
• Russia's Gazprom is to supply an extra 600mln cubic meters of gas to China this year, exceeding its contractual obligations, according to Tass.
• Russia's Gazprom is to supply extra volumes of gas to Hungary this winter, according to Tass.
• The EU is reportedly mulling extending the emergency gas price cap introduced in February amid fears the Middle Eastern tensions and the sabotage of the Baltic pipeline could push gas prices higher this winter, according to the FT.

GEOPOLITICAL

ISRAEL-HAMAS

• Hamas spokesperson on Friday said they have released two US hostages for humanitarian reasons in response to Qatari efforts, according to Reuters. Israel confirmed the release of two hostages, according to Israel's Channel 13 news. Hamas' release of two hostages is a "first step", there are discussions ongoing for more releases, according to Reuters sources.
• A second convoy of 17 aid trucks entered the Egyptian side of the Rafah crossing towards Gaza, according to security and humanitarian sources cited by Reuters. It was also reported that 14 trucks carrying aid for Gaza entered the region, according to Reuters.
• Blasts and sounds of ambulances were reportedly heard near the Rafah crossing between Egypt and Gaza, according to Reuters witnesses.
• The Israeli army told Gazans to move south or risk being seen as "terrorist organisation partners" if they stay put, according to Reuters citing Gaza residents.
• US Secretary of State Blinken said the US sees potential for escalation of the war in the Middle East due to actions of Iran's proxies and the US does not want escalation, according to NBC News. **He added the US sees a prospect of a significant escalation of attacks on US troops and people throughout the region. **
• US Defense Secretary Austin placed additional forces on prepare-to-deploy orders without offering a number. US Pentagon said the US is deploying THAAD batteries and additional battalions to the Middle East in response to the escalations in the region, according to Reuters.
• US Secretary of State Blinken said there are still 10 additional Americans who remain unaccounted for in this conflict and every single one of the remaining hostages should be released, according to Reuters.
• The Israeli Military said they have killed the Deputy Chief of Hamas with rocket force, according to Reuters.
• The US is pressing Israel to delay the Gaza invasion to win hostage release, according to Bloomberg reports on Friday, which added that after initially resisting, Israel agreed under US pressure to hold off, according to the sources.
• Israeli PM Netanyahu said if Hezbollah goes to war with Israel, it would bring unimaginably devastation upon it and Lebanon and added that he cannot yet say if Hezbollah will decide to fully enter the war, according to Reuters citing a statement from the PM's office.
• Israeli PM Netanyahu said French President Macron and Dutch PM Rutte are to visit Israel on Monday and Tuesday, according to Reuters.
• The Israeli President told Sky News that Hamas terrorists who broke into Israel were carrying instructions on how to make chemical weapons, according to Sky News.
• Israeli Defence Forces said an IDF tank accidentally fired and hit an Egyptian post adjacent to the border in the area of Kerem Shalom. The IDF said it expressed sorrow regarding the incident, according to a statement via Telegram. An Egyptian army spokesperson said border watchmen sustained minor injuries after being hit by fragments of a shell from an Israeli tank, according to a statement cited by Reuters.
• Israeli strikes reportedly hit and damaged both Damascus and Aleppo airports in Syria, according to AFP citing Syrian state media.
• A statement from the Department of National Defence and the Canadian armed forces on the recent strikes at Al-Ahli Hospital in Gaza on the 17th of October suggested the strikes were more likely caused by an errant rocket fired from Gaza, according to Reuters.

OTHER

• The White House said it is assessing the China graphite curbs and their potential effects, and said the actions underscore the need to diversify supply chains, according to Reuters.
• A US official confirmed that the US is mulling measures to restrict China's access to US cloud and computing services, according to Nikkei.
• Clashes have reportedly erupted between the Iraqi army and Kurdish Peshmerga forces in Northern, with two fatalities, according to security sources cited by Reuters.
• Russian Foreign Minister Lavrov is to visit Iran on October 23rd, according to Ria.
• Rocket attacks have reportedly targeted Iraq's Ain Al-Asad airbase housing US forces; at least one blast was heard inside the army base, according to army sources cited by Reuters.
• The Philippines has accused China's coast guard of colliding with a Filipino supply boat in the South China Sea, according to the BBC. China said the Philippines "deliberately stirred up trouble".
• Six people have been killed and at least 14 injured in a Russian missile attack that hit a postal distribution centre in Kharkiv Ukraine, according to Ukrainian officials cited by Sky News.
• EU-US Summit Joint Statement: We have made progress toward a targeted critical minerals agreement for the purpose of expanding access to sustainable, secure, and diversified high-standard critical mineral and battery supply chains. We have made substantial progress in identifying the sources of non-market excess capacity of steel, according to the Commission statement.
• Finnish police said Baltic Sea pipeline investigation is now focused on the role of the vessel "NewNew Polar Bear" (Hong Kong-flagged); will cooperate with Chinese authorities in order to establish the role of the vessel, according to Reuters.

ASIA-PAC

NOTABLE HEADLINES

• Chinese Commerce Minister said China seeks to encourage joint industrial collaboration with Gulf nations and wants to deepen the oil and gas cooperation model. Commerce Minister added that China wants to promote the stability and smoothness of the industrial and supply chains, and seeks cooperation on potential new energy vehicles industries such as power batteries and smart charging, according to Reuters.
• PBoC Governor Gongsheng said prudent monetary policy will be more precise and forceful, and added that they will steer countercyclical and cross-cyclical adjustments and maintain appropriate money supply and credit with a steady pace. Gongsheng added that they will enhance the stability of financial support for the real economy, and effectively support the expansion of domestic demand. He added they will guide financial institutions to cut real lending rates and reduce the financing costs for enterprises and individuals. Gongsheng added they will implement policy measures to activate the capital market and boost investor confidence. He added the PBoC will prudently resolve the default risk of bonds and of large real estate firms while strengthening the monitoring, warning and prevention of Local Government Financing Vehicle (LGFV) bond risks. Gongsheng added they will prevent the risk of contagion in stock, bond and FX markets and ensure stable operation of financial markets, according to Reuters.
• BoJ officials are reportedly mulling tweaking the settings of YCC "because domestic long-term interest rates are also rising as U.S. interest rates rise, and are approaching the de facto upper limit of 1% set in the July revision." The topic will be discussed at the next two-day meeting that ends on October 31st, "but there are differences of opinion within the Bank of Japan. Many say they want to carefully monitor trends in wage increases", according to Nikkei sources.

DATA RECAP

• Chinese FDI (YTD)* (Sep) -8.4% (Prev. -5.1%)

EU/UK

NOTABLE HEADLINES

• S&P said most European countries will see a sustained correction in nominal house prices as Eurozone growth softens considerably into next year, and expects European housing market prices to remain under pressure until 2025, according to Reuters.
• S&P affirmed the United Kingdom's 'AA/A-1+' rating; outlook stable.
• S&P raised Greece to BBB- from BB+, taking it to investment grade.
• S&P affirmed Italy's 'BBB/A-2' rating; outlook stable.