Marketsforu Morning Markets

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ASIA

Asian equity markets traded mixed following the weak close on Wall St. where commodity weakness and prospects for a December rate hike weighed on sentiment. This saw pressure in the ASX 200 (-1.2%) with financials among the underperformers, after earnings from CBA. Nikkei 225 (+1.0%) was lifted as JPY remains weak, following strong results from Japan Tobacco and Fast Retailing’s Uniqlo. Chinese markets were higher with the Shanghai Comp. (+2.2%) in bull-market territory, having gained over 20% from August lows amid strength in brokerages, while telecoms soared on reports that China was mulling reforms and mergers in the sector. 

PBoC injected CNY 10bln via 7-day reverse repos for a net flat position this week vs. CNY 25bln net drain last week

EUROPE

ECB’s Smets (N/A) says that inflation in the Eurozone is too low, adding that there has be an increase in downside risks for growth prospects, inflation and inflation expectations. (Handelsblatt)

UK 

City A.M. shadow MPC votes 6-3 in favour of holding interest rates at current level. (CityAM)

FX

USD-index remained firm against counterparts after Fed’s Chair Yellen said the FOMC thinks it may be appropriate to lift rates in December, as such FFR futures are now pricing in a 58% chance of a hike next month. Commodity-linked currencies remained weak, as losses in energy prevented any significant rebound.  

RBA Governor Stevens said that accommodative policy would be appropriate for some time and if policy were to change, it would be easing rather than tightening. Stevens also commented that he doesn’t see a significant effect of the bank mortgage increases which so far is equal to around a half of a 25bps rate reduction. 

COMMODITIES

WTI crude futures traded sideways near its lows after DOE crude inventories showed a larger than expected build, which also surpassed the API build a day earlier, while gold (+0.26%) remained near 1-month lows after Fed Yellen kept the prospects of a December rate lift-off firmly on the table. 

GEOPOLITICAL

US officials said ISIS most likely had a bomb on the Russian plane that crashed in Egypt. (BBG)

US 

Fed's Dudley (Voter, Dove) said he 'completely agrees' with Fed Chair Yellen that December is a live meeting for a potential rate hike. 

Fed Vice Chair Fischer (Voter, Dove) said that Fed monetary policy is very transparent and independence of the Fed assisted in anchoring inflation expectations. He also said that the Fed are not too far from their 2% inflation target once the declines in oil stops and USD halts its gains.