Stocks jump and oil flumps on lack of Middle East escalation

REAR VIEW: Geopolitical concerns ease somewhat amid no major escalation; Mixed ECB speak; MCD earnings impress; Hawkish BoJ sources; ON guidance disappoints; Detroit 3 automakers reach tentative…


: Equities up, Treasuries down, Crude down, Dollar down.


On guidance disappoints, Detroit 3 automakers come to tentative agreements with UAW. META will offer subscriptions in Europe without ads.

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Highlights include FOMC and BoJ. Also, PMIs from the US, EZ GDP & CPI. Please click here to download the report.

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On Monday, the geopolitical premium was unwinding. The Israeli invasion on the ground is only described as a "gradual invasion", the Friday sharp rise in oil prices has completely reversed, and much more. The major US indices also outperformed, although the Russell was a relative laggard. However, the indices were still stronger on the session as the large-cap stocks boosted the indices and helped to offset some of the last week's weakness. General Motors, Stellantis, and Ford have reached a tentative deal with the UAW. Meta announced that it will offer subscriptions without ads in Europe. McDonald's reported strong earnings. T-Notes fell across the curve, with lows seen following hawkish BoJ sources reports before the rate decision announcement after-hours. (Preview below). Futures settled off their lows in response to the release of quarterly financing estimates ahead of Wednesday's refunding announcement. The calendar for the next few days is packed with events, including the BoJ overnight and the FOMC meeting on Wednesday. BoE will be on Thursday. And the NFP will take place on Friday.

Central Banks


On Tuesday, the Bank of Japan is expected to conclude its two-day meeting where it is expected to keep its negative rate policy. However, there are growing speculations about the possibility of a change to the YCC. Bloomberg has reported that the BoJ may be considering a tweak to its YCC because of US yield concerns, and how that will impact Japanese yields. Sources also stated that officials do not see the need to remove its reference that it would not hesitate to implement additional monetary easing if needed. Sources via Nikkei on October 30th suggested that the BoJ was reportedly planning to make a further adjustment in its YCC framework. This could allow 10yr JGBs yields to go above 1%, and the BoJ would likely conduct its JGB purchases more flexibly. The central bank will also release its latest Outlook Report, which contains board members' median predictions for Real GDP (Gross Domestic Product) and Core CPI. To read the complete Newsquawk Preview,

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Fixed Income


T-Notes are selling across the curve as a result of a haven unwind, and several corporate announcements made ahead of major events.

At settlement: 2s +2.3bps, 3s+2.6bps, 5s+3.2bps, 7s+2.8bps, 10s+2.8bps, 20s+1.1bps, 5.227% and 30s+0.7bps, 5.030%.


5yr BEI +1bps at 2,417%; 10yr BEI +1bps at 2,433%; 30yr BEI +1bps at 2.529%.


T-Notes fell throughout the day despite an initial rise in EZ counterparts due to lower-than-expected inflation data from Spain and Germany ahead of EZ CPI Tuesday. The US curve was also weighed down by a slew of corporate issuance before key events. On Monday, there was a de-risking of the havens as the fears about Israel's ground assault on Friday did not materialize. The invasion is now framed as "gradual". Gold and the dollar were lower, while stocks rose and the 10-yr T-Note wiped out all the Friday gains. The yield on the 10yr note pushed back towards 5%, reaching a new high of 4.92%. T-Notes were at their lowest levels in the wake of BoJ sources who are hawkish ahead of the overnight decision. Nikkei reports suggest that the BoJ may allow the yield on the 10-year GFB to go above 1% and will be more flexible with its JGB purchases.

Newsquawk Preview is available here

There was very little US data on Monday other than the Dallas Fed Manufacturing Business Index, which moved further into contractionary territory in advance of the Treasury refinancing estimate (see below). The BoJ rate announcement and forecasts will be released overnight. On Wednesday, along with the ISM Manufacturing Report, the FOMC will make its rate decision. Apple's (AAPL), BoE, and US NFP data on Friday.

Estimates for Treasury Refinancing

The US Treasury announced that it expected to borrow USD 776bln of net marketable debt during the period October-December, a decrease of USD 76bln compared to the estimate for July 2023. The Q4 estimate is based on an end-December balance of USD750bln. It expects to borrow 816bln for Q1 (Jan - March), assuming a cash balance at the end of March of USD 750bln. For Q3 (July - September), it reported that it borrowed USD 1,01tln, and ended the quarter having a cash account of USD 657bln. The Treasury will release the refunding announcement on Wednesday, 1st of November. It is expected that it will increase the coupon auction sizes as it did last time. However, many analysts are expecting a slower pace due to the recent increase in term premia.



SR3Z3 -1.5bps at 94.570, H4 -1.5bps at 94.660, M4 -2.0bps at 94.880, U4 -3.0bps at 95.140, Z4 -3.0bps at 95.405, H5 -2.5bps at 95.640, M5 -2.0bps at 95.795, U5 -1.5bps at 95.870, Z5 -2.0bps at 95.880, Z6 -0.5bps at 95.795, Z7 -0.5bps at 95.630.

Volumes fell from USD 1.506tln to USD 1.496tln, with SOFR remaining unchanged at 5.31%.

Demand for NY Fed RRP Ops at USD 1,138tln. (prev. Demand for NY Fed RRP op at USD 1.138tln (prev. 100)

As of October 27th, EFFR was flat at 5.33%. Volumes fell from USD 100bln to USD 94bln.

US sold USD 83bln of 3-month bills for 5.235% and covered 2.78x. US sold USD 75bln of 6-month bills for 5.320% and covered 2.90x.



After a reversal of geopolitical risks that were baked into the crude complex, it was down on Monday.

Concerns in the Middle East have eased over the weekend due to the lack of major regional escalation following Israel's slower than expected incursion into Gaza. WTI and Brent both fell for the entire session, reaching lows of USD 81.82/bbl and USD 85.81/bbl respectively. However, they are now moving away from their troughs and towards settlement. The last news came from Israeli PM Netanyahu, who said that the Israeli army had expanded its ground access into the Gaza Strip. He added later that it would not accept a cessation in fighting with Hamas following the October 7th attacks and will not stop fighting until Israel wins, suggesting the war will continue. Bloomberg reports that Saudi Arabia is unlikely to raise its oil prices for Asian customers, for the first six months, as refinery margins are weakening in the region, which reduces the demand for physical cargoes. The news flow on Monday was relatively light, with few oil-related headlines, as the market awaited the week's major risk events, including the BoJ, FOMC and BoE meetings, along with US data, such as NFPs and PMIs.



: SPX +1.20% at 4,166, NDX +1.09% at 14,335, DJIA +1.58% at 32,928, RUT +0.63% at 1,647.


Communication Services (+2.06%), Financials (+1.71%), Consumer Staples+1.55%, Consumer discretionary+1.26%, Industries+1.23%, Tech +1.19% Materials +0.98% Utilities+0.68% Health +0.55% Real Estate+0.31% Energy+0.31%


: DAX -0.30% at 14,687.41, FTSE 100 -0.86% at 7,291.28, CAC 40 -1.28% at 6,800.47, Euro Stoxx 50 -0.86% at 4,014.65, IBEX 35 -0.50% at 8,918.30, FTSE MIB -0.80% at 27,287.45, SMI -0.45% at 10,321.00.



Stellantis (STLA)

The UAW and Unifor have reportedly agreed to a tentative deal. Unifor announced earlier that strike action would begin at all Stellantis Canada facilities. Separately, it was reported that UAW tentative agreement with

Ford (F)

Includes a USD 5,000 bonus for ratification, a voucher of USD 1,500 towards the purchase of a vehicle and all temporary employees will convert to in-progress after nine months. UAW originally broadened the scope of its strike to include

GM (GM).

GM and the UAW reached a tentative deal to end strikes.



McDonald's (MCD)

Sales and US comp. The company also increased its quarterly dividend by 10%, to 1.67/hr.

Meta's (META)

Facebook and Instagram will offer subscriptions in Europe that do not include ads. The new subscription model was incorporated into the latest business outlook and guidance.

ON Semiconductor

The earnings exceeded expectations, but the revenue forecast for the next quarter was low.

Western Digital (WDC),

Revenue exceeded expectations, and the forecast for the next quarter's EPS shows a smaller loss per share. Plans to split its HDD business and Flash business into two separate public companies.

SoFi Technologies (SOFI).

The Q3 results were better than expected, and the FY23 forecast was raised.

CommScope - CommScope

The company issued a negative announcement for the third quarter; both revenue and EBITDA fell short, along with reducing its FY EBITDA forecast.

Real Estate Income (O)

It is possible to acquire

Spirit Realty Capital (SRC),

For approximately USD 9.3bn.

L3 Harris

Raymond James upgraded the stock citing improved fundamentals and mean reversion.


The Dollar

The ten-year Treasury yield was at a low of 106.060 to begin the week. This was due to the fact that some of Friday's geopolitical concerns had eased by the weekend, amid the lack of a major regional escalation involving Israel and Hamas. It was a quiet start to the week with little news as the market waited for the key risk events of the week, which include the FOMC, NFP and BoJ.


The Kiwi was the G10's best performer as it rode the Aussie gains after the data. The AUD/USD pair and the NZD/USD pair both reached highs of 0.6383 versus 0.5844 respectively. This was due to the tailwinds generated by the Australian retail sales data for September, which were revised up from 0.3% to 0.9%. These higher than expected inflation numbers and the acceleration of producer prices in Q3 have increased the likelihood of a RBA rate hike of 25bps next week. New Zealand ANZ's business outlook for October and its own activity are expected to be released overnight, ahead of the labour data on Wednesday.


The Yen gained against the Dollar and managed to break 149.00 on the downside, to lows at 148.81 before regaining the round level. Nikkei reports attributed the Yen's strength to BoJ sources in advance of this evening's meeting.

Newsquawk Preview is available here

Sources noted that the BoJ was reportedly planning to make a further adjustment in its YCC framework. This could allow yields on 10yr JGBs to go above 1%. It is also expected to conduct its JGB purchases with more flexibility.


All saw the Dollar weakening to varying degrees, and all profited from the general risk-on mood and the weaker Buck. EUR/USD fluctuated between 1.0548 and 0624 after a slew of data, mixed ECB talk. Simkus reiterated, in response to a question about December, that current restrictions are sufficient unless there is a sudden surge of data. De Guindos said the risks to the growth are skewed to the downside, and the policy is being implemented with force. In the meantime, in terms of data, both Spanish CPI and German CPI were lower than expected. Cable is now at highs of around 1,2170, while USD/CAD is down at lows of 1.3815. This is despite the lower oil price after a de-risking of geopolitical risks that were baked in. The week ahead will focus on the EZ CPI & GDP (Tuesday) and the BoE (Thursday), followed by Canadian jobs on Friday.


The G10 was the relative underperformer Monday, and saw 'only" marginal gains against Greenback. The SNB announced that it would lower the threshold for remuneration to sight deposit account holders who are subject to minimum reserves requirements, from 28 to 25, as of December 1, but this had no effect on current monetary policies. This announcement weighed heavily on the Swissy. The USD/CHF rate only reversed from 0.9048 down to 0.9009 after the Dollar weakened. EUR/CHF bounced off 0.9526 despite a better than expected Swiss KOF.


The results were mixed. BRL and TRY were down, but the ZAR and COP were flat. The COP, MXN and RUB also firmed up on the backs of a weakening Dollar, which boosted sentiment. Rand has largely taken in stride the conflicting SA private credit and M3 supply, while Gold remains on either side USD 2k/oz psychological mark. Haddad, the Brazilian Finance Minister, spoke on behalf of Lula and said that he was concerned about several factors, including the lower tax revenues. One of the reasons for this is the current level of interest rates. Haddad added that Lula, on the basis of numbers, saw that tax expenses were greatly exaggerated, and revenue for this year was not growing as quickly as expected. The Yuan was not much different from the buck, and the Yuan was largely satisfied with a meeting that was held between Chinese Foreign Ministry Wang Yi and US Secretary of State Blinken to set the stage for President Xi's and Biden's meet-up.