S&P 500 and DJIA notched fresh record closes ahead of US CPI data - Newsquawk Asia-Pac Market Open

• US stocks gained in which both the S&P 500 and Dow notched fresh record closes with outperformance in the latter and the small-cap Russell 2000 lagged but still finished in the green, while sectors were predominantly firmer with Healthcare, Technology and Industrials leading the advances and Financials also saw decent gains ahead of the start of earnings season. Nonetheless, macro catalysts were light as the latest Fed rhetoric and FOMC Minutes did little to spur a reaction with the latest CPI data on the horizon.
• USD resumed its recent rally which saw the DXY climb to just shy of the 103.00 level despite the lack of macro drivers while comments from Fed officials and FOMC Minutes were the main highlights but had little effect on the dollar with the attention now turning to the upcoming US CPI data.
• Looking ahead, highlights include Japanese PPI & Bank Lending, Australian MI Inflation Expectations & Building Approvals, Comments from Fed's Collins & Daly, Supply from Japan, Taiwan Holiday Closure.

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LOOKING AHEAD

• Highlights include Japanese PPI & Bank Lending, Australian MI Inflation Expectations & Building Approvals, Comments from Fed's Collins & Daly, Supply from Japan, Taiwan Holiday Closure.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks gained in which both the S&P 500 and Dow notched fresh record closes with outperformance in the latter and the small-cap Russell 2000 lagged but still finished in the green, while sectors were predominantly firmer with Healthcare, Technology and Industrials leading the advances and Financials also saw decent gains ahead of the start of earnings season. Nonetheless, macro catalysts were light as the latest Fed rhetoric and FOMC Minutes did little to spur a reaction with the latest CPI data on the horizon.
• SPX +0.71% at 5,792, NDX +0.80% at 20,269, DJIA +1.03% at 42,512, RUT +0.26% at 2,201
• Click here for a detailed summary.

FOMC MINUTES

• FOMC Minutes stated a substantial majority backed a half-point rate cut but some officials would have preferred a quarter-point cut. The participants that backed a 50bp cut generally observed that such a recalibration of the stance of monetary policy would begin to bring it into better alignment with recent indicators of inflation and the labour market. They also emphasized that such a move would help sustain the strength in the economy and the labour market while continuing to promote progress on inflation, and would reflect the balance of risks. Conversely, some participants noted they would have preferred a 25bps cut at September's meeting and a few others indicated they could have supported that, while several participants discussed the importance of communicating quantitative tightening could continue for 'some time' even as rates are reduced.

NOTABLE HEADLINES

• Fed Vice Chair Jefferson said the underlying trend is inflation dropping towards 2% and cooling of the US labour market has been orderly, while he reiterated the past statement that risks to the mandate remain roughly in balance.
• Fed's Logan (2026 voter) said a more gradual path on rate cuts is likely appropriate from here and upside risks to inflation mean the Fed should not rush to reduce rates, while she continues to see a meaningful risk inflation could get stuck above the Fed's 2% goal. Furthermore, she said lowering the policy rate gradually would allow time to judge how restrictive monetary policy may or may not be.

DATA RECAP

• US Wholesale Sales MM (Aug) -0.1% vs. Exp. 0.5% (Prev. 1.1%)
• US Wholesale Inventories MM (Aug) 0.1% vs. Exp. 0.2% (Prev. 0.2%)

FX

• USD resumed its recent rally which saw the DXY climb to just shy of the 103.00 level despite the lack of macro drivers while comments from Fed officials and FOMC Minutes were the main highlights but had little effect on the dollar with the attention now turning to the upcoming US CPI data.
• EUR was mildly pressured amid the firmer dollar, while there were mixed ECB comments as Stournaras sees the case for two more rate cuts this year and Kazimir said he's not as convinced as media reports on an October cut.
• GBP gradually softened amid light UK-specific catalysts and after a failed attempt at the 1.3100 handle.
• JPY continued to weaken in which USD/JPY extended above the 149.00 level owing to a firmer dollar and upside in US yields.

FIXED INCOME

• T-notes were sold across the curve heading into supply in which the results of the 10yr auction were mixed, while there was little reaction seen from the FOMC Minutes which revealed that some officials would have preferred a 25bp cut and that a few others could have supported it.

COMMODITIES

• Oil prices declined but settled off their lows after DoE inventory data showed a narrower build than what was seen in the private sector inventory data, while geopolitics remains in focus as participants continue to await Israel's response to Iran.
• US EIA Weekly Crude Stocks w/e 5.8M vs. Exp. 2.0M (Prev. 3.9M)
• Russian Deputy PM Novak said it is too early to assert if the global market is ready to digest additional OPEC+ oil barrels in December, while he added there is no change to the OPEC+ deal currently being discussed and OPEC+ will later decide on December 1st summit format.
• North Dakota pipeline authority said oil production is estimated to be down 70k-100k BPD as of October 9th morning due to wildfires.

GEOPOLITICAL

MIDDLE EAST

• US President Biden and Israeli PM Netanyahu held a call which took place in a positive atmosphere and focused on the Israeli response to Iran, while Biden said Israel should start planning for the next phase of fighting on the Lebanon front, according to Israel's Channel 12.
• White House said Biden’s call with Israel's Netanyahu was direct and productive, while it added that discussions on the Iran attack continued and the call lasted 30 minutes. It was separately reported that Washington does not yet know the timing of the strike against Iran, nor the nature of the objectives, while Israel's US envoy said the Biden-Netanyahu call was positive and Israel appreciates the support of the US.
• Members of the Biden administration were still relatively satisfied with the level of detail that was shared in the call with Israeli PM Netanyahu, according to ABC News citing a US official.
• Israel PM Netanyahu will ask the security cabinet to give him and Defence Secretary Galant the mandate to decide on the attack on Iran, according to Israeli press. It was also previously reported that PM Netanyahu asked to understand the American position and get support, according to Israel's Channel 12.
• Israeli Defence Minister said the attack on Iran will be fatal, accurate and surprising, according to Al Arabiya.
• Israeli response to Iran as of now, will likely focus on military targets, but that could still change, while the US wants to make sure the response doesn't lead to further escalation, according to Times of Israel.
• An Israeli warship was spotted at sea off the city of Tyre, southern Lebanon, according to Sky News Arabia.
• Iran’s Foreign Minister said stopping Israeli attacks on Gaza and Lebanon is necessary to prevent escalation of tension and the outbreak of a full-scale conflict, according to Al Jazeera.
• An adviser to IRGC’s chief commander Salami said they are prepared to launch thousands of missiles at Israel and they'll hit Israeli military and economic sites if attacked, while Iran said there will not be a war but it will hit back if Israeli strikes, according to Iran's state-run IRNA.
• Iranian National Security Committee said their response to any Israeli attack would "not be limited to striking military sites”.
• Iran has told Gulf Arab states that it would be unacceptable if they allowed the use of their airspace or military bases against Iran, and warned any such move would draw a response, according to a senior Iranian official cited by Reuters.
• Pro-Iranian militias in Iraq evacuated some of their sites in Baghdad due to a fear of an Israeli attack, according to a Kann News correspondent citing Saudi TV sources.
• US and Israeli officials believe that tit-for-tat exchanges of fire will continue between Iran and Israel, even after the Israeli retaliatory strike soon against Iran, according to OSINTDefender on X.

OTHER

• EU envoys agreed to contribute up to EUR 35bln towards the G7 loan to Ukraine that would total EUR 45bln and the loan is to be backed by frozen Russian central bank assets and secured by EU budget headroom, according to Reuters citing diplomats.
• Taiwan's President will in a national day speech say that China has used every possible means to cause chaos, according to Reuters sources.
• US senior official said Beijing is increasingly using normal political events as a pretext for military pressure on Taiwan, while the US is prepared for China using the October 10th celebration as a pretext for military pressure on Taiwan and sees no justification for it doing so.

ASIA-PAC

NOTABLE HEADLINES

• China may issue additional special government bonds and may issue the special bond quota before year-end, according to a PBoC paper cited by Bloomberg.
• WSJ article cited analysts that suggested investors might be disappointed again if they were betting on hearing concrete numbers from the Chinese Ministry of Finance’s press conference on Saturday and stated that the National People’s Congress would first need to approve the kind of big new government bond issuance needed to fund a stimulus package.
• China recently engaged in 'intensive communications' with the US and EU on trade issues related to EVs, according to Chinese state media.
• China’s Foreign Minister said China appreciates the positive signals from the new cabinet of Japan and Foreign Minister Iwaya, that they are willing to steadily develop bilateral relations.
• India extended bond market trading by 30 minutes till 5:30 PM IST, according to traders cited by Reuters.

EU/UK

NOTABLE HEADLINES

• ECB's Kazimir said he is not worried about the ECB undershooting the 2% goal and is not as convinced as media reports on an October cut, while he added key information will be available in December.
• ECB's Makhlouf said they remain on track to hit 2% inflation in Q4-2025, while service inflation and wage growth present some uncertainty.
• ECB's Patsalides said there seems to be room for a rate cut but added that all data should be discussed as usual and Middle-East implications should be assessed.
• ECB's Wunsch said if the increase in oil prices accelerates, the central bank runs the risk of having to recalibrate interest rate policy in the short term.

DATA RECAP

• German Trade Balance (EUR)(Aug) 22.5B vs. Exp. 18.4B (Prev. 16.8B)
• German Exports MM (Aug) 1.3% vs. Exp. -1.0% (Prev. 1.7%)
• German Imports MM (Aug) -3.4% vs. Exp. -2.5% (Prev. 5.4%)