ASX 200 to rise, US yields surge to 17-year highs, China data in focus

ASX 200 futures are trading 20 points higher, up 0.28% as of 8:30 am AEST.

S&P 500 SESSION CHART

MARKETS

• Major US benchmarks finished around breakeven, near the midpoint of intraday ranges
• Technology underperformed, with Nvidia (-4.7%) a notable drag after new US export restrictions on advanced AI chip exports to China
• Consumer staples underperformance brings sector to “extreme oversold” levels, Goldman Sachs notes short selling in sector was the largest in three months
• US 2-year yield up 11 bps, topping the recent high to the highest level since July 2006
• US 10-year yield up 13 bps, marking the highest close since August 2007
• Upward pressure on rates driven by much stronger-than-expected US retail sales, up 0.7% month-on-month in September vs. 0.3% consensus
• Good news is bad news theme back in play after the strong retail sales data
• BofA fund survey shows bearish investors increasingly expect hard landing (Bloomberg)
• Companies scramble to file IPOs ahead of potential government shutdown (Bloomberg)

STOCKS

• GM to delay all-electric truck production to make EVs more profitable (CNBC)
• Nvidia hit by US curbs on AI chip exports to China (Reuters)
• Wyndham rejects US$9.8bn takeover bid, calling it "underwhelming" (Bloomberg)

EARNINGS

• "Our Q3 results were at or above our expectations across the board, generating US$2.5bn of FCF, with ~100% returned to shareholders … Our backlog remains robust at US$156bn as both domestic and international orders were strong.” – CEO James D. Taiclet

CENTRAL BANKS

• ECB chief economist says quite some distance from rate cuts (Reuters)
• ECB watching oil for inflation risks (Bloomberg)
• RBA saw upside risks to inflation at October meeting, discussed hike (Reuters)

CHINA

• China data likely to show fragile economy in need of support (Bloomberg)
• China tells banks to roll over local gov't debt as risks mount (Reuters)
• Country Garden on brink of default as payment deadline nears (Reuters)

ECONOMY

• US retail sales top forecasts in September, up for 6th straight month (Bloomberg)
• US homebuilder sentiment drops to 10-month low, third straight monthly fall (CNBC)
• Canada’s inflation slows in September, likely heading off rate hike (Reuters)
• German ZEW economic sentiment jumps in October (Reuters)
• New Zealand consumer inflation slows but still above central bank target (Reuters)
  
  

Messy Market Dynamics

Retail sales account for approximately a third of total US consumer spending. The strong data and jump in bond yields suggests that the pace of retail sales growth might be a little too healthy.

The likelihood of another 25 bp hike from the Fed (by year end) edged higher to 38.7% from 32.7%, according to CME's Fedwatch Tool.

The market's recent bounce from oversold levels (and extreme fear) was supported by factors such as dovish Fedspeak, declining yields and positive third-quarter earnings. But the rise in yields makes it a rather murky comeback.

You have buyers trying to get ahead of the Fed's dovish pivot, still-solid earnings and seasonality tailwinds. But yields are saying 'not so fast'. With the 10-year surpassing the September high and real yields pushing positive against their breakevens, we might find ourselves once again asking "is something going to break?".

KEY EVENTS