The nightmare on Wall Street may finally be over with markets getting a treat this Halloween...  but will the trick emerge during the usual last hour of trading?

It is a sea of green as stocks hope to end a turbulent month - which saw the biggest losses for global equity markets since 2012 - in an upbeat mood, with European stocks sharply higher following a rebound in Asia as US equity futures extended on their Thursday gains which saw the Dow soar by more than 400 points, while the dollar remained near one year highs as Treasury yields posted another day of modest increases.

A confluence of factors ranging from China-U.S. trade tensions to worries about global economic growth, corporate profits and higher U.S. interest rates have spurred volatility in financial markets in the past few weeks. But shares in Europe were expected to follow Asia’s lead higher on the last day of the month, while U.S. S&P mini-futures edged up 0.3 percent.

Every sector in Europe's Stoxx 600 Index rose, with miners and energy companies leading the way. France’s CAC 40 (+1.9%) outperformed peers with the index pushed higher by gains in heavyweights L’Oreal (+5.4%) and Sanofi (+5.0%) post-earnings. Energy names lead the gains as the complex retraced yesterday’s losses, while utility names underperformed. Tech stocks thanks to Dialog Semiconductor (+10.0%) which rose to the top of the Stoxx 600 amid optimistic earnings, while Nokian Tyres (-14.7%) plumbed the depths after cutting guidance due to currency impacts.

Earlier in Asia, the MSCI Asia-Pacific index rose 1%, with Japanese stocks the stand-out performers thanks to a 2.2% advance in the Nikkei, reassured by the Bank of Japan’s signal that it will keep its ultra-easy policy for some time to come. Even so, Asia was on track to fall around 11% this month, which would be its worst monthly performance since September 2011, dropping to its lowest level since February 2017 this week.

Hong Kong’s Hang Seng rose 1 percent on Wednesday and the Shanghai Composite Index climbed 1.4% as weaker-than-expected factory activity data reinforced views that Beijing will roll out more support measures for the economy.

In the latest economic disappointment out of Beijing, the latest official NBS manufacturing PMI fell to 50.2 in October, the lowest level since July 2016 as almost all sub-indexes showed weaker growth momentum. The non-manufacturing PMI missed expectations as well, printing at 53.9, below the 54.9 in September, due to the weaker services PMI.

In Beijing's ongoing attempt to stabilize the yuan, China's overnight repo rate surged by 84bps - the most in more than four years - to 2.39%, as authorities take aggressive steps to combat bets against the yuan, which held near the weakest level in a decade against the greenback.

Even so, hopes of boosting the Yuan have proven futile so far, with the USDCNH rising to the highest since January 2017, just shy of 6.800 and knocking on the door of the critical 7.00 level, with today's move largely a function of renewed dollar strength. The Chinese currency was on track for a loss of 1.4% in October, its seventh straight monthly loss — the longest such losing streak on record

Australian stocks ended 0.4 percent higher, South Korea’s KOSPI added 0.7 percent.

Today's gains will be a welcome respite in a month that has seen a near historic selloff: the broader MSCI All-Country World index was down 8.6% this month, its biggest monthly drop since 2012, losing $4 trillion in market value.

The narrower MSCI World Index was down 8.43% and has wiped out $4.5 trillion in October. The month-end gains followed a sharp bounce for Wall Street’s main indexes, which jumped more than 1% on Tuesday, helped by strong gains for chip and transport stocks as investors took advantage of cheaper prices following the steep recent pullback for equities.

Equity bulls will be hoping this rebound can last following a series of bounces in the past few weeks that quickly gave way to declines as late day algo selling put a dent on carbon-based BTFDing.

Corporate results will be key to sustaining the share gains: attention will next turn to earnings from Apple on Thursday. But trade risks continue to simmer in the background, with the U.S. jobs report is due Friday and US midterm elections are creeping closer, all of which have the potential to further roil markets.

"The recent slide in equities had gone to such an extent that it was bound to invite buyers, such as in the Japanese stock market," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo. Ichikawa said the U.S.-China trade row will likely remain a factor of concern beyond the U.S. midterm elections on Nov. 6.

In FX, the Bloomberg Dollar Spot index headed for its best month in two years amid supportive month-end flows that offset profit-taking by short-term investors. Price action in the euro was quiet while the pound rebounded, tracking trading in the options market. The yen was steady as the Bank of Japan left its monetary stimulus unchanged and kept its 10-year bond yield target at about zero percent as it updated price forecasts that confirm it won’t meet its inflation target for years to come. Australia’s dollar declined following a weaker-than-expected inflation reading and the abovementioned miss in China's PMIs. The Indian rupee fell as much as 0.6% on reports that the central bank governor may consider resigning amid growing tensions with the government.

In rates, the 10Y TSY yield climbed 2bps to 3.14%, the highest in more than a week. Germany’s 10-year yield advanced two basis points to 0.39%. Britain’s 10-year yield advanced 3 bps to 1.434%, the largest gain in more than a week. The spread of Italy’s 10-year bonds over Germany’s declined 9 bps to 3.0205%.

Oil prices recovered slightly after dropping to multi-month lows the previous day on signs of rising supply and concern that global demand for fuel will fall victim to the U.S.-China trade war. WTI futures were up 0.38% at $66.43 per barrel after dropping to $65.33 on Tuesday, the lowest since mid-August. Brent crude gained 0.62% to $76.38 after a decline of 1.8% on Tuesday. Gold declined and oil recovered from a two-month low.

Expected data include mortgage applications and Chicago Business Barometer. Air Canada, ADP, General Motors, Kellogg, Sprint, and AIG are among companies reporting earnings

Market Snapshot

• S&P 500 futures up 0.6% to 2,701.25
• STOXX Europe 600 up 1.4% to 360.66
• MXAP up 1.6% to 148.97
• MXAPJ up 1.4% to 469.62
• Nikkei up 2.2% to 21,920.46
• Topix up 2.2% to 1,646.12
• Hang Seng Index up 1.6% to 24,979.69
• Shanghai Composite up 1.4% to 2,602.78
• Sensex up 1% to 34,231.36
• Australia S&P/ASX 200 up 0.4% to 5,830.31
• Kospi up 0.7% to 2,029.69
• German 10Y yield rose 2.6 bps to 0.395%
• Euro up 0.09% to $1.1355
• Italian 10Y yield rose 13.6 bps to 3.103%
• Spanish 10Y yield unchanged at 1.567%
• Brent futures up 1.1% to $76.75/bbl
• Gold spot down 0.5% to $1,216.90
• U.S. Dollar Index down 0.1% to 96.91

Top Overnight News

• BBDXY rose for the third day to a fresh 2018 high even as the greenback traded mixed against Group-of-10 peers; Treasury yields crept steadily higher and the curve steepened
• An official gauge of activity in China’s manufacturing sector worsened in October as the effects of an ongoing trade war with the U.S. hit home. The non-manufacturing PMI also worsened. China’s manufacturing PMI fell to 50.2 this month, lower than projected in a Bloomberg survey of forecasters. A gauge of new orders for export fell to the lowest reading since early 2016
• Optimism in Britain’s economy slumped in October to the lowest level this year, with confidence falling in almost all parts of the country, Lloyds Bank said in a survey published on Wednesday
• Italy’s populists are insisting their plans to ramp up government spending will shield the nation from recession, brushing off warnings that their confrontational approach may already be hurting the economy
• Australia’s annual core inflation was weaker than forecast in the three months through September, suggesting the central bank’s prolonged interest-rate pause has further to run
• The Aussie dollar lead G-10 declines, weighed down by slowing inflation and deteriorating Chinese PMI data, though an options expiry helped limit the drop
• The Bank of Japan left its monetary stimulus unchanged as it updated price forecasts that confirm it won’t meet its inflation target for years to come
• Official figures released over the past few weeks suggest money is increasingly leaving China’s borders
• The euro held losses after inflation data matched estimates while the pound edged higher once London entered the market; Italian bonds extended bull steepening after a report that the government may see a deficit nearer to 2% than the 2.4% in the current budget draft for 2019
• The yen held losses after the BOJ left its monetary policy unchanged, and forecasts inflation to remain below its 2% target through until at least early 2021
• The rupee pared losses as India’s government sought to defuse growing tensions with its central bank, saying it respects the institution’s autonomy

Asian equity markets traded positive as the region sustained the momentum from Wall St where all majors finished with firms gains and in which both S&P 500 and DJIA moved back into profit for the year. ASX 200 (+0.4%) and Nikkei 225 (+2.2%) were higher from the open with financials the early outperformer in Australia after ANZ Bank earnings and with CBA to offload its funds unit for over AUD 4.1bln, while Japanese stocks were underpinned by a weaker currency and with focus on a slew of earnings releases. Hang Seng (+1.6%) and Shanghai Comp. (+1.4%) conformed to the overall risk appetite as investors digested earnings including big lenders ICBC and Agricultural Bank of China, but with early indecision seen following uninspiring Chinese PMI data in which both Official Manufacturing PMI and Non-Manufacturing PMI fell short of estimates. Finally, 10yr JGBs were lower with demand subdued by the strong performance in Japanese stocks and following an unsurprising BoJ policy announcement in which the central bank maintained all policy settings. PBoC skipped open market operations for a net daily drain of CNY 150bln, while it announced to sell CNY 10bln in 3-month and CNY 10bln in 1yr CNY-denominated bills in Hong Kong on November 7th.

Top Asian News

• BOJ Cuts Frequency, Tweaks Ranges for Short Bonds for November
• MUFG Buys Commonwealth Bank Asset Arm for $2.9 Billion
• Incredible Shrinking Australian Banks Shed $13 Billion of Assets
• HNA Is Said to Try Offloading Airbus Planes to Leasing Firms

European equities are higher across the board (Eurostoxx 50 +1.3%) as the region took impetus from the gains experienced in Asia and on Wall Street. France’s CAC 40 (+1.9%) outperforms its peers with the index fuelled by gains in heavyweights L’Oreal (+5.4%) and Sanofi (+5.0%) post-earnings. In terms of sectors, energy names lead the gains as the complex retraces yesterday’s losses, while utility names underperform. Elsewhere, Dialog Semiconductor (+10.0%) rose to the top of the Stoxx 600 amid optimistic earnings, while Nokian Tyres (-14.7%) plumbed the depths after cutting guidance due to currency impacts.

Top European News

• Telefonica Signals End to Decade of Weakness With Soccer Push
• Sanofi Lifts Forecast as Vaccines, Eczema Drug Provide Fuel
• Spanish Economy Proves Euro-Area Brightspot as Recovery Holds
• Casino Short Sellers Ask Board to Block Interim Dividend Payment
• L’Oreal Jumps as Luxury Cosmetics Get Another Boost From China

In FX, after breaching 97.00 to the upside overnight to hit its highest level since June 2017, the DXY initially paused for breath to sit on a 96.00 handle before extending gains back above 97.00 thereafter. USD will likely garner a bulk of the focus in the FX space today with month-end flows (as according to Barclays, Citi, Nordea and Credit Ag) said to be positive for the greenback. Furthermore, Nordea highlight that today is SOMA redemption day for the USD which will have a net USD -22.9bln impact on liquidity; Nordea explains that “On the ten SOMA days since the end of February, EUR/USD has always been lower at CET17:15 vs CET08:00, by an average of 0.25%”. In terms of where the majors stand vs. the USD, EUR/USD was unable to hold onto initial gains after Friday’s low at 1.1336 eventually gave way. As such, a test of 1.1300 to the downside could now well be on the cards. Option expiry activity for the pair could be a guiding force later on with 871mln due 1.1275-85, 2.2bln between 1.1300-25 and a further 1.47bln between 1.1340-50. EUR relatively unreactive to EZ inflation prints with headline Y/Y CPI in-line with Exp. at 2.2%, core and super-core metrics both slightly firmer than forecast. The AUD remains softer vs. the USD in the wake of domestic inflation metrics whereby all figures either missed or printed in-line with estimates and which was below the RBA’s 2%-3% target range. The data sent AUD/USD back below 0.7100 with Chinese PMI readings thereafter guiding the pair to session lows of 0.7073 before staging a mild recovery back towards the 0.71 handle. Elsewhere for the region, USD/JPY trades relatively unchanged as the risk environment outweighs mild USD softness; prices trade in close proximity to the 113.00 handle and just below 1.3bln in expiries at 113.10-20.0 Finally, focus during the Asia-Pac session also fell on the INR which faced some selling pressure amid a widening rift between the RBI and government with reports noting that Governor Patel may consider resigning; reports briefly pushed USD/INR above the 74.00 level. Turkish Central Bank Governor reiterates that the central bank will maintain a tight monetary policy decisively and further tightening will be delivered if needed with the use of all available instruments.

In commodities, WTI (+0.4%) and Brent (+0.8%) are both in the green amid a positive risk tone. This comes alongside markets preparing for Iranian sanctions coming into effect next week. Last night’s APIs showed a larger-than-expected crude stock build, although this was almost half of last week’s figure. Trader’s will be keeping an on US oil production numbers released later today with the weekly DoEs. Gold is trading in the red, albeit off lows amid safe-haven outflows as equity markets continue to trade positively following the momentum from Asia. In related news, the London Bullion Market Association predicts that gold is to reach USD 1532/oz by October of next year. Separately, disappointing Chinese manufacturing PMI has resulted in a fall in the price of both zinc and copper, as well as affecting the outlook for China metals demand.

Looking at the day ahead, there should be some focus on the Q3 employment cost index (+0.7% qoq expected) along with the October ADP employment change report and October Chicago PMI. Worth flagging today also is scheduled comments from Italian Finance Minister Tria this morning, along with comments from the ECB’s Nowotny, Hansson, and Nouy. Earnings wise today we’ve got Sanofi, GlaxoSmithKline, General Motors, Anthem, ADP, Estee Lauder, AIG, and Yum Brands.

US Event Calendar

• 7am: MBA Mortgage Applications, prior 4.9%
• 8:15am: ADP Employment Change, est. 187,000, prior 230,000
• 8:30am: Employment Cost Index, est. 0.7%, prior 0.6%
• 9:45am: Chicago Purchasing Manager, est. 60, prior 60.4

DB's Jim Reid concludes the overnight wrap

The tech sector had another wild ride yesterday, first tricking and then treating investors - especially into the US close. The NY FANG index reversed an early decline of as much as -2.33% to close up +1.88% – snapping a two-day run which saw the index lose nearly $250bn in market cap. After the close Facebook posted EPS of $1.76 versus expectations for $1.47, but revenues were softer at $13.73bn versus $13.80bn. Facebook shares initially fell but recovered to be up +3.37% after hours. After Facebook, fellow tech company eBay reported mixed earnings, beating profit forecasts and upgrading its fourth quarter guidance, but posting weaker free cash flow and sales growth.

Before all this, the S&P 500, DOW, NASDAQ and Russell 2000 closed +1.57%, +1.77%, +1.58% and +1.99% respectively last night – only the fifth time this month that all four bourses have closed higher. Markets had earlier pared their gains around US lunchtime and flirted with turning red, but ultimately rallied into the close, with the VIX ending the session -1.34pts at 23.36.

This morning in Asia positive sentiment from Wall Street has carried over with the Nikkei (+1.67%), Hang Seng (+0.60%), Shanghai Comp (+1.13%) and Kospi (+0.33%) all up along with most Asian markets. In terms of data, the official China October PMIs were released with the composite reading at 53.1 (vs. 54.1 in previous month) as both the manufacturing PMI (at 50.2 vs. 50.6 expected) and services PMI (at 53.9 vs. 54.6 expected) decelerated. The accompanying statement with the PMI release attributed the weakness to the long holiday in October but also admitted that the external environment is starting to drag manufacturing lower. In the details for the manufacturing PMI, the new export orders decelerated to 46.9 from 48.0 in September, marking the 5th consecutive month with a sub 50 reading. In the meantime, China's onshore yuan continues to attract attention and remains under pressure with it reaching the level of 6.9714 yesterday, the lowest since May 2008. It is currently trading
flattish in the Asian session at 6.9668, as we type.

Overnight, the BoJ left key interest rates and asset purchase targets unchanged while the BoJ's quarterly outlook report indicated that inflation will remain below its 2% target at least until early 2021 and lowered the 2018 GDP growth forecast to 1.4% from 1.5%. The BoJ also added a statement in its outlook report about the need to "pay close attention to future developments" regarding risks to the financial system, while saying that the risks are not currently significant thanks to sufficient capital bases. The BoJ is also seeing the current core-CPI rising to around 1% yoy from earlier range of 0.5%-1%, which was lowered at June meeting. The BoJ will release its schedule for JGB purchases next month at 5pm Tokyo time today (8am BST) which is likely to be closely watched given the recent news from Asahi that the BoJ might tweak the schedule and also BoJ Governor Kuroda's presser will likely be started by the time this reaches your inbox.

Outside of Facebook and eBay, other major earnings were a bit disappointing when you include guidance. GE stock fell 8.88% to a new 9-year low, and the company’s benchmark 2035 bonds dropped to a record low price, after the company cut its dividend to $0.01 per share from $0.12 and announced that the SEC is expanding an investigation into the company’s accounting practices. Mastercard and Pfizer also traded lower, despite beating earnings estimates, as the market continues to punish companies for moderating guidance of missing on revenues. Coca-Cola was a bright spot, gaining +2.54% after beating on most major metrics and maintaining strong guidance.

In contrast to the US yesterday Europe largely struggled for traction from the moment the Italy and Euro Area GDP figures hit early in the session. More on that shortly but by the close the STOXX 600 had finished +0.01% and the DAX -0.42%. Italy’s FTSE MIB also ended -0.22% after being up as much as +0.73% while 10y BTP yields rose +13.8bps. Bunds and Treasuries on the other hand were -0.9bps and +3.8bps respectively.

Oil prices fell -1.72% to a two-month low amid reports that China and India, the top two buyers of Iranian oil, will defy American sanctions and continue to buy imports from Iran. Europe and South Korea have also indicated some degree of unwillingness to accommodate US sanctions, and there could, therefore, be minimal downside for Iranian oil exports moving forward – though they are already down -500,000bpd to 1.6mmbpd as of September. With less pressure on the supply side of the global oil balance, there could be scope for oil prices to remain pressured.

The British pound was pressured in yesterday’s trading, dropping -0.64% versus the dollar as S&P indicated that the potential for a no-deal Brexit outcome is a factor in its ratings decision for the UK. They argued that such a scenario would result in a “moderate recession” and cautioned that the odds have risen, given the apparent impasse within the governing coalition over how to address the Irish border issue in the withdrawal treaty. Separately, however, the DUP agreed to support the autumn budget removing the tail risk of a near-term potential government crisis.

Back to the data. As noted earlier in Europe the big focus was on the Italian GDP preliminary print which disappointed at 0.0% qoq for Q3 compared to expectations for a +0.2% reading. That’s the first time the Italian economy has stalled since Q4 2014 with the last negative reading coming in Q2 2014. Our Italian economist Clemente De Lucia made the point yesterday that the focus will now turn to growth over the coming quarters as the fiscal expansionary plan put out by the government is largely based on the assumption that growth will surprise to the upside and converge to broader euro area levels. However with tighter financial conditions, elevated uncertainty, and softer Q4 data so far, the risks certainly appear to be to the downside for now. Post the data, Deputy PM Salvini stated that the government will push ahead with the budget regardless, while also blaming the weak quarter growth on the previous government.

That data - combined with a slightly softer than expected France reading (+0.4% qoq vs. +0.5% expected) - played a role in the broader Euro Area miss (+0.2% qoq vs. +0.4% expected) although there is likely to also be softness elsewhere in the region. Either the German economy must have contracted in the third quarter, Spain must have had a notable miss to our expectations for +0.6% qoq growth, or smaller countries like Ireland and the Netherlands must have had a marked slowdown. While the annual rate slipped to +1.7% yoy the previous quarter reading was revised up one-tenth to +2.2%. Also out yesterday was the preliminary October CPI reading in Germany which came in as expected at +0.1% mom and +2.4% yoy. That annual reading is actually the highest in over a decade now. German unemployment stayed steady at 5.1% as expected.

In the US the data was a bit more contrasting. The consumer confidence data for October was actually stronger than September, following downward revisions. The headline reading rose +2.6pts to 137.9 (vs. 135.9 expected) and marked a new post crisis high – in fact a new 18 year high. The present conditions index also rose 3.4pts to 172.8 and the expectations component 2.1pts to 114.6. The associated statement highlighted that employment growth continues to fuel sentiment, however, next month’s data should be more interesting in light of capturing the full market crash in October and also the midterm elections. Meanwhile, the latest housing market data was a tad softer in the US yesterday. The August S&P CoreLogic house price index fell to +5.5% yoy from +5.9% and is now at the lowest since December 2016.

To the day ahead now where the early focus in Europe this morning should be with the October CPI figures for the broader Eurozone. The consensus is for a lift in the YoY core rate to +1.1% yoy from +0.9% in September. Prior to this, we’ll get France’s CPI report while a little later on we also get the same data in Italy. The release of the Central Bank of Turkey’s inflation report could also be worth a watch in EM land while Brazil’s latest policy meeting is also due today. This afternoon in the US there should be some focus on the Q3 employment cost index (+0.7% qoq expected) along with the October ADP employment change report and October Chicago PMI. Worth flagging today also is scheduled comments from Italian Finance Minister Tria this morning, along with comments from the ECB’s Nowotny, Hansson and Nouy. Earnings wise today we’ve got Sanofi, GlaxoSmithKline, General Motors, Anthem, ADP, Estee Lauder, AIG, and Yum Brands.