Markets shrugged off U.S. regional bank stock worries.

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Morning Bid U.S.

Morning Bid U.S.

A Reuters Open Interest newsletter

What matters in U.S. and global markets today

 

By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets, Reuters Open Interest 

 

Even as a global website and cloud outage disrupted Monday's activity, markets shrugged off U.S. regional bank stock worries from late last week and Asia shares surged on a Japan leadership breakthrough and Chinese GDP updates.

A softening of trade rhetoric between Washington and Beijing helped the mood as Asian equities rallied, led by a Tokyo surge to new records after a weekend coalition deal meant fiscal expansionist Sanae Takaichi was now set to become the next prime minister after a parliamentary vote on Tuesday. The yen firmed and Japanese bonds held steady. 

China's third-quarter annual GDP growth slowed as expected, but the quarterly growth rate was ahead of forecasts - as was September industrial output. Even though retail sales were as soft as forecast and house prices still in decline, there's some hope this week's new five-year plan from the ruling Communist Party will see fresh stimulus.

Even though the U.S. government remains in shutdown for the 20th day, Wall Street is now watching for the exceptional mandated release of U.S. inflation figures on Friday. Even though headline consumer price inflation is expected to join annual core rates back above 3%, dovish Federal Reserve speeches from last week and nerves about loan markets and banks mean two quarter-point rate cuts are priced over the next two meetings.

The S&P Composite 1500 Regional Banks index, however, recaptured about a third of Thursday's steep losses on Friday even though bad credit radars are now up everywhere. The U.S. earnings season kicks into high gear this week, meantime, with Netflix out on Tuesday and other large caps such as Tesla reporting later in the week.

Elsewhere, French bond yields and risk spreads ticked back higher after Friday's sovereign credit rating cut by S&P Global to A+ undermined last week's markets rally on the survival of the latest French government. In a newsy weekend there that included a major jewel theft at the Louvre, Gucci-owner Kering agreed to sell its beauty business to L'Oreal for 4 billion euros ($4.66 billion).

The CAC-40 French stock benchmark was lower and the euro was steady.

  •  China GDP surprises to the upside: China’s economy grew 1.1% in Q3, beating forecasts despite ongoing property sector woes. Annual growth slowed to 4.8%, the weakest in a year, but still on track to meet Beijing’s 5% target. Industrial output jumped 6.5%, and retail sales rose 3.0%. The data suggests China is weathering U.S. tariff pressure slightly better than some had expected, with analysts pointing to Beijing’s commitment to its development goals. The Aussie dollar rose 0.3% to $0.6504 on the news.
  • Trade tensions ease — for now. President Trump dialed back his tariff threats, calling a proposed 100% levy on Chinese goods "not sustainable" and confirming plans to meet President Xi in two weeks. Markets welcomed the de-escalation, with analysts noting a “mutually assured destruction” dynamic that’s keeping both sides from pushing too far. Offshore yuan held steady at 7.1235 per dollar, while the euro edged up to $1.1665 and sterling dipped to $1.3431.
  • Japan’s leadership deal lifts Nikkei: Japan’s Nikkei surged over 3% to a record high as Sanae Takaichi secured backing to become the country’s first female prime minister. Her pro-stimulus stance boosted equities and weakened the yen early, though hawkish BOJ board member Hajime Takata later tempered rate hike expectations. The LDP’s new alliance with the Japan Innovation Party sets the stage for Takaichi’s confirmation on Tuesday. BOJ rate hike odds for October stand at just 23

I’d love to hear from you, so please reach out to me at mike.dolan@thomsonreuters.com. 

 
 

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Today's Market Minute

  • President Trump said on Sunday night he would raise tariffs on Colombia and stop all payments to the South American nation, escalating a feud that stems from the U.S. military's strikes on vessels allegedly transporting drugs in the region.
  • China's exports of rare earth magnets fell in September, reigniting fears that the world's top supplier could wield its dominance over a component key for U.S. defence firms and makers of items from cars to smartphones as leverage in trade talks.
  • Gucci owner Kering said on Sunday it has agreed to sell its beauty business to L'Oreal for 4 billion euros ($4.66 billion), in a major shift in strategy by new CEO Luca de Meo as he moves to tackle the luxury group's high debt and refocus on its core fashion business.
  • Trump putting more pressure on India to slash its Russian oil purchases could deprive Moscow of vital revenue, but, writes ROI energy columnist Ron Bousso, it will mostly just push more Russian oil into an increasingly large shadow market.
  • China's crude oil stockpile flows dropped sharply in September as lower imports and higher refinery processing cut the surplus that was available for storage. Read the latest from ROI Asia commodities columnist Clyde Russell. 
 

Today's key chart  
 

Graphics are produced by Reuters.

Japan's Nikkei share gauge surged to a record high on Monday as fiscal expansionist Sanae Takaichi was set to become the country's next prime minister at Tuesday's parliamentary vote, with a new political coalition put in place over the weekend. Takaichi and the LDP sealed a coalition deal with the right-leaning Japan Innovation Party, known as Ishin. The yen firmed and 30-year Japanese government bond yields held steady. The Nikkei stock benchmark is now up 23% for the year to date.

 

Today's events to watch

  • Canada September producer prices (8:30 AM EDT), Q3 Bank of Canada business survey (10:30 AM EDT)
  • European Central Bank board member Isabel Schnabel speaks
  • U.S. corporate earnings: Steel Dynamics, WR Berkley
  • U.S. President Donald Trump meets Australian Prime Minister Anthony Albanese in Washington
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