Stocks across the board, and US equity futures are broadly in the green this morning as markets shrug off the terror-related events in the NYC area over the weekend. There wasn’t a single positive “reason” for the green price action but the bond “tantrum” that caught the attention of stocks beginning back on 9/8 is increasingly fading and investors are hopeful this week’s central bank decisions (BOJ and FOMC both on Wed 9/21) will further ease yield anxieties.

One of the catalysts for the rebound in stocks was today's rise in oil, which rebounded from Friday's lows as renewed clashes halted what would be the first crude shipment from one of Libya’s largest export terminals since 2014. The tanker Seadelta suspended loading after fighting started Sunday between local Petroleum Facilities Guard units and forces loyal to eastern-based military commander Khalifa Haftar. Brent added 1.3 percent to $46.36. OPEC may call an extraordinary meeting if ministers reach consensus at an informal gathering next week, Secretary General Mohammed Barkindo said, according to Algerian Press Service.

“Sentiment is being boosted by a rebound in oil,” Vasu Menon, VP at Oversea-Chinese Banking Corp. in Singapore told Bloomberg. “Investors are also hoping the BOJ will do something more dramatic though I don’t think that’s going to make a lot of difference. With inflation numbers picking up a little bit in the U.S., the market will start worrying about the Fed again at some stage down the road.”

Major oil producers will meet next week in Algiers to discuss cooperating to shore up prices amid a global oversupply that has hurt state budgets. Before that, the Bank of Japan will undertake a review of its monetary policy and the Federal Reserve will meet to determine whether to raise rates. Volatility has picked up in financial markets over the past two weeks amid concern central banks are becoming reluctant to loosen monetary policy, while at least three bombs discovered in New York and New Jersey over the weekend may increase political turmoil.

The MSCI All-Country World Index climbed 0.4 percent at 11:16 a.m. in London as U.S. crude added 1.6 percent to $43.73 a barrel. The Bloomberg Dollar Spot Index declined 0.3 percent.

The Stoxx Europe 600 Index climbed 0.9% after its biggest weekly slide in three months. Rio Tinto Group (RIO) and BHP Billiton Ltd. (BHP) rose at least 2.8 percent, contributing the most to gains among miners. Total SA (TOT) and BP Plc (BP) were among those that led oil-related stocks higher. Weir Group Plc added 3.1 percent after JPMorgan Chase & Co. recommended buying shares of the maker of fracking pumps for oil companies, citing improving prospects. U.K. builders gained, with Barratt Development Plc and Berkeley Group Holdings Plc adding 1.2 percent or more, as a report showed London house prices rebounded from their post-Brexit drop in September. HSBC Holdings Plc was among banks that gained the most. Deutsche Bank AG, which sparked a selloff on Friday after rebuffing a U.S. Justice Department claim to settle a probe tied to mortgage-backed securities, bucked the trend on Monday, with a 0.3 percent drop. 

Emerging-market shares and currencies rallied with developed markets, led by a 2.8 percent gain in Taiwan’s Taiex Index and a 0.8 percent advance in Taiwan’s dollar. HTC surged 10 percent in Taiwan, the biggest gain since May 25, on reports the company will unveil a new mobile-phone handset.

S&P 500 Index (SPY) futures added 0.5%, indicating U.S. equities will recover from Friday’s 0.4 percent retreat.

The yield on Treasuries due in a decade was little changed at 1.69 percent. It erased a three basis point decline on Friday following the release of the American inflation data, which boosted the probability of an interest-rate hike this year by five percentage points in the futures market to 55 percent. Spanish and Italian securities led gains in Europe. The yield on 10-year Spanish bonds slipped three basis points to 1.05 percent, while that on similar-maturity Italian debt fell two basis points to 1.32 percent, after adding nine basis points last week. Portugal’s 10-year bond yield was steady at 3.39 percent, after surging 26 basis points last week. The nation’s debt rating was affirmed on Friday by S&P, which forecast the economy will lose momentum this year.

Market Wrap

• S&P 500 futures up 0.5% to 2142
• Stoxx 600 up 1% to 341
• FTSE 100 up 1.5% to 6810
• DAX up 0.8% to 10357
• German 10Yr yield up less than 1bp to 0.01%
• Italian 10Yr yield down 1bp to 1.33%
• Spanish 10Yr yield down 2bps to 1.06%
• S&P GSCI Index up 0.8% to 350.7
• MSCI Asia Pacific up 0.9% to 138
• Hang Seng up 0.9% to 23550
• Shanghai Composite up 0.8% to 3026
• S&P/ASX 200 down less than 0.1% to 5295
• US 10-yr yield up less than 1bp to 1.69%
• Dollar Index down 0.27% to 95.85
• WTI Crude futures up 1.5% to $43.69
• Brent Futures up 1.2% to $46.33
• Gold spot up 0.4% to $1,316
• Silver spot up 1.7% to $19.13

Global Headline News

• More Guns to Greet New York as Another Suspicious Package Found: 1,000 more police blanket NYC, videos of Chelsea street sought
• Stiglitz Grades Trump F on Economics, Cites China Trade Risk: Nobelist says more American jobs would be lost than created
• Market Resilience Post-Brexit Masks Underlying Risks, BIS Says: Rally in stocks as bond yields plunged signals ‘dissonance’
• EU’s Vestager Signals Apple Just the Start of U.S. Tax Probes: Competition chief will meet in Washington with Lew, lawmakers
• Merkel Dealt Berlin Defeat With Worst Result Since World War II: Voters punish two biggest German parties in capital city vote
• U.K. Business Confidence Drops to Four-Year Low, Lloyds Says: Economic uncertainty, U.K. demand seen as biggest threats, according to Lloyds’ Business in Britain report
• Global Investors Bet $7.3b on Australia’s No. 1 Port: Port of Melbourne handles 2.6m containers a year
• Saudi Telecom Said to Mull Options for Stake in Malaysia’s Maxis: Gulf carrier owns indirect holding valued at $1.8b
• Noble Group Eyes Investor as Profit Seen Up to 2 Years Away: Strategic partner ‘still very possible,’ founder Elman says
• Oracle’s (ORCL) Ellison Takes Shot at Amazon (AMZN) With New Cloud Services: co. unveiled new services that help customers take advantage of cloud computing
• Oracle Buys Palerra to Boost ‘Security Stack’: TechCrunch: Terms weren’t disclosed, TechCrunch reports

Looking at regional markets, we start in Asia, where stock markets began the week relatively quiet with Japan away for public holiday, while a glitch in ASX interrupted trade in Australia. Nonetheless, the region's bourses were mostly higher amid a rebound across the commodities complex, with Shanghai Comp (+0.8%) and Hang Seng (+0.9%) also lifted following a firm injection by the PBoC and continued strength in the property sector. Elsewhere, TAIEX (+2.8%) outperformed following recent advances in tech names with Apple suppliers boosted by record breaking demand for the iPhone 7. Chinese House Prices soared (Aug) Y/Y 9.2% (Prey. 7.9%). House prices rose M/M in 64 out of 70 cities (Prey. 51) and Y/Y in 62 cities (Prey. 58). The monthly jump was the biggest increase in more than six years. PBoC set mid-point at 6.6786 (Prey. 6.6895) and injected CNY 180bIn via 7-day reverse repo and CNY 70bIn via 28-day reverse repos. As noted earlier, Hong Kong overnight funding rates soared to over 23%, the second highest on record as the PBOC continued its onslaught against Yuan shorts.

Top Asian News

• Yuan Interbank Rate Surges in Hong Kong in Sign of Intervention: Overnight Hibor increases 15.7 ppts on Monday
• Warning Indicator for China Banking Stress Climbs to Record: Credit-to-GDP “gap” exceeds all other nations in BIS study
• China’s Home Prices Rise Most in Six Years as Sales Gain: New-home prices gained in 64 cities in August vs 51 in July
• Hanjin Reduces Fleet by Returning Chartered Carriers to Owners: Returned 4 box movers, 3 bulk carriers to charterers
• Samsung Exploding Battery Crisis Began With Rush to Beat IPhone: Korean company recalls 2.5m phones weeks after launch
• ASX Closes Stock Market for Rest of Monday on Technical Problem: No closing price auction that normally takes place at end of trading day

In Europe, stocks trade higher as the much anticipated Fed/BoJ week begins, with Eurostoxx 50 trading higher by 1.1% and the Energy/Materials heavy FTSE 100 (+1.3%) outperforming. It is worth noting that Japanese Silver Week has kept some participants away from market for the European morning, as such volumes have been marginally lighter than usual. Fixed income markets have been uneventful so far with German 10y hovering around 0% yield with Portuguese paper reversing Friday's S&P inspired caution and the periphery generally benefiting from the modest return of risk to the market with Spanish and Italian yields tighter to the German benchmark.

Top European News:

• Permira Said Near Deal to Buy German Payroll Provider P&I: Owner HgCapital said to fetch more than $900m for firm
• EDF Cashes In on U.K. Heatwave That Made Power Prices Jump: Aurora Energy estimates EDF plants made $152m early September
• Deutsche Bank Needs $14b Even Without an RMBS Fine, SocGen Says: Lender is “significantly undercapitalized” by about EU12.5b, Societe Generale says in note
• London Asking Prices Picked Up in September as Lull Ended: Prices rose 1.9% from the previous month, Rightmove says
• Siemens CEO Says Geopolitical Upheaval Could Crimp Orders: Kaeser speaks in interview with Bloomberg TV in Singapore
• Rolls-Royce Cuts 200 Managers to Extend Savings Push: Restructuring adds to earlier plans to trim 400 senior roles

In FX, the Bloomberg Dollar Spot Index fell back after a 0.7 percent advance on Friday, when data showed the U.S. consumer-price index climbed 0.2 percent after being little changed in July. Economists predicted a 0.1 percent increase, a Bloomberg survey showed. The Japanese yen gained 0.4 percent and the British pound rose 0.4 percent. Australia’s dollar strengthened 0.8 percent versus the greenback, buoyed by the pickup in oil prices and the A$9.7 billion ($7.3 billion) sale of a 50-year lease in Australia’s busiest port to a group of global investors. Among the currencies of other crude-exporting nations, the Mexican peso and the Canadian dollar rose at least 0.4 percent, while the Norwegian krone was up 0.3 percent. The offshore yuan was one of the few currencies to lose ground against the dollar, weakening 0.3 percent to 6.6702 per dollar. Its overnight borrowing costs in Hong Kong almost tripled to 23.7 percent on Monday, spurring speculation China was mopping up liquidity to deter bets on depreciation before the yuan joins the International Monetary Fund’s basket of reserve currencies next month. “The result is to support the currency at a time when 6.70 suddenly seems a very important line in the sand,” said Michael Every, Hong Kong-based head of financial markets research for Asia-Pacific at Rabobank Group. “You’d almost think it was a pegged currency.”

In commodities, oil rose as renewed clashes halted what would be the first crude shipment from one of Libya’s largest export terminals since 2014. The tanker Seadelta suspended loading after fighting started Sunday between local Petroleum Facilities Guard units and forces loyal to eastern-based military commander Khalifa Haftar. Brent added 1.3 percent to $46.36. OPEC may call an extraordinary meeting if ministers reach consensus at an informal gathering next week, Secretary General Mohammed Barkindo said, according to Algerian Press Service. Nickel rebounded from the biggest weekly slump in ten months after the Philippines said more mine closures were possible. The metal used in stainless steel gained 1.9 percent to $9,910 a metric ton. Copper dropped 0.7 percent, declining from a four-week high as Anglo American Plc restarted operations after a strike at its Los Bronces mine in central Chile, bolstering supply from the world’s largest producer. Gold climbed 0.3 percent to $1,314.35 an ounce and silver jumped 1.7 percent.

It’s a fairly quiet start datawise today with nothing particularly interesting in Europe this morning and just the NAHB housing market index reading in the US to highlight.

US Event Calendar

• 10am: NAHB Housing Market Index, Sept., est. 60 (prior 60)

Bulletin Headline Summary From RanSquawk and Bloomberg

• European equities start the week off on the front-foot with the FTSE 100 outperforming alongside gains in energy and mining names
• Early FX trade on Monday pretty thin, with 2-way flow seeing some moderation in the USD against most of its counterparts
• Looking ahead, highlights include the US NAHB Housing Market Index
• Treasuries little changed in overnight trading with global equities and commodities higher, U.S. dollar lower, FOMC rate decision on Wednesday afternoon followed by BOJ in the evening. Japan closed for holiday today.
• Time and again, Fed officials have tried to jawbone investors into believing they were finally ready to raise interest rates. Yet time and again, whether it was because of Brexit, a slowing Chinese economy or just lackluster growth at home, they lost their nerve
• If the BOJ wants to increase price pressure in a sustainable manner and weaken the yen the central bank will have to come up with something new, Commerzbank strategist Thu Lan Nguyen writes in a client note
• Norway’s central bank is predicted to leave its key policy rate unchanged at a record low 0.5% as the economy of western Europe’s biggest oil producer fights off the biggest slump in crude prices in a generation
• Chancellor Angela Merkel’s party was dealt another blow in a regional election, posting its worst result in Berlin since the end of World War II as the anti-immigration Alternative for Germany extended its challenge to the political establishment by siphoning off voters
• Deutsche Bank AG extended losses as analysts signaled that the German lender’s capital position will be eroded by mounting legal costs such as charges for a U.S. penalty tied to faulty securities
• A warning indicator for banking stress rose to a record in China in the first quarter, underscoring risks to the nation and the world from a rapid build-up of Chinese corporate debt
• Hitting forecasts for next year would require S&P 500 Index companies to increase profits by 13%, something that hasn’t happened since 2011. Failing to do so would risk inflating equity valuations that at 20 times annual income are already the highest since the financial crisis
• Homeland security and terror threats are back on the front burner for the presidential campaign after an explosive device blew up in New York City on Saturday night, injuring 29 people, following incidents in New Jersey and Minnesota earlier in the day

* * *

DB's Jim Reid concludes the overnight wrap

Perhaps the more interesting and market moving event will now be the BoJ meeting which concludes earlier that morning with BoJ Governor Kuroda due to speak after 7.30am BST. To say I've no idea what they are going to do is an understatement. Last week's press speculation hasn't helped as it’s suggested a split in the committee. Do they really have time to build a consensus if these reports are true? However a lot is up for discussion. Will we see a small rate cut, will we see an adjustment of long-end purchases, will policy be skewed towards steepening the curve? Difficult to tell. Overall our economists expect them to keep powder dry at this meeting. Indeed they maintain their view that the BoJ is unlikely to cut rates further (or deepen NIRP) and will do little more than indicate its intent to base its policy implementation on the yield curve. A strengthening of forward guidance would theoretically encourage a downward shift in intermediate yields, thus realizing a steepening effect in the long sector, so the adoption of this measure is therefore a possibility. That said they also highlight that the effect is likely to be minimal since few market participants consider the 2% price stability target achievable. As it stands the wider market is also leaning towards the BoJ holding the current -0.10% policy rate as is, albeit by a narrow margin.

In terms of the interesting snippets from the weekend, the latest round of regional elections took place in Germany yesterday, this time in Berlin. Wires are dominated by the news that the populist Alternative for Germany (AfD) party has secured a foothold in the city having taking 12% of the votes, although it’s worth highlighting that this is less than what the pre-election opinion polls had suggested (15% according to the FT) and also the party’s lofty 20% target. Merkel’s Christian Democratic Party secured 18% which is the party’s lowest ever tally in Berlin and down 5% from the 2011 elections and means that the party will possibly lose its position as junior partner in the coalition in Berlin. The governing Social Democrats’ share also tumbled 5% to 23%.

Elsewhere, the rest of the headlines are dominated by the news of the bomb blast in New York which has put the city on high alert. Despite the news risk appetite appears to be fairly decent this morning with US equity index futures currently up +0.30% and emerging market currencies also off to a decent start. Bourses in Asia are also trading with a relatively positive tone with the Hang Seng (+0.51%), Shanghai Comp (+0.54%) and Kospi (+0.55%) all up, with bourses in China reopening following a public holiday. Markets in Japan are closed today for the same reason. The August home prices data has also been released in China this morning. Prices were reported as gaining in 64 of the 70 cities tracked by the government, compared with 51 in July. Prices fell in only 4 cities as opposed to 16 in July.

Also of significance in markets this morning is the huge spike in the overnight offshore yuan interbank rate. The CNH-HIBOR has jumped 15.7ppts to 23.7% and so putting it at the highest level since January. This follows a number of similar moves in the last week or so with speculation mounting that the PBoC has been intervening to make it more expensive to short the yuan.

A quick run through Friday’s session now. Markets concluded a fairly volatile and choppy week with a pretty soft day on Friday. The S&P 500 finished -0.38% and in the process pared its weekly gain to just +0.53%. Energy and financials were most under pressure and it was the same in Europe where the Stoxx 600 closed -0.74%, and down -2.23% over the five days. WTI finished a shade above $43/bbl following a -2% decline on Friday as expectations rose that the supply glut would be back in focus with the resumption of exports from the Ras Lanuf port in Libya following the country’s civil strife. However the news this morning that the country has been forced to halt loading from the port following further fighting has seen WTI rally back +1.60% in early trading. With the OPEC meeting just 8 days away now and an expected informal sideline meeting of major producers’, it wouldn’t be a surprise to see plenty of jawboning on the topic this week.

Meanwhile, Friday’s slightly higher than expected inflation numbers in the US helped to support the Greenback (Dollar index +0.86%) and also send 2y Treasury yields up nearly 4bps. Headline CPI printed at +0.2% mom last month, ahead of the +0.1% expected and helped to send the YoY rate up three-tenths to +1.1%. The core (+0.3% mom vs. +0.2% expected) was also ahead of the market although it’s worth noting that the unrounded number was +0.252%. That also helped lift the annual rate up to +2.3% from +2.2%. Prices did however benefit from a massive surge in medical costs (+0.9% mom) which was in fact the largest since 1990 so it’ll be interesting to see if there is any payback next month. Interestingly that inflation data was in contrast to the preliminary University of Michigan September survey where 1y inflation expectations declined two-tenths to 2.3% from August. 5-10y inflation expectations did stay put at 2.5%. The headline sentiment reading was unchanged at 89.8 (vs. 90.6 expected) while the current conditions index slumped to 103.5 from 107.0 which puts it at the lowest reading since October last year. There was better news in the expectations component which rose 2.4pts to 81.1 and a three month high.

The other big mover on Friday came in currency markets where Sterling (-1.79%) had its worst day since June 27th. The move appeared to come as a result of comments from Chancellor Hammond who said that the UK is ready to accept that it will have to give up membership of the EU’s single market in order to achieve immigration restrictions. Reports suggest that Treasury staff are drawing up plans which they hope will allow Britain’s financial services firms to retain similar levels of access to the continent.

Turning now to what looks set to be a pivotal week ahead in markets. It’s actually a fairly quiet start datawise today with nothing particularly interesting in Europe this morning and just the NAHB housing market index reading in the US tonight to highlight. Tomorrow we have PPI data for Germany in the morning, before we get the August housing starts and building permits data in the US in the afternoon. The key day is of course Wednesday. During Asia time we’ll have the all important BoJ meeting, while the latest Japan trade data for August will also be released. In the UK we then get the latest public sector net borrowing data. That’s before we turn focus over to the Fed in the evening when we’ll get the outcome of the two-day FOMC meeting and also the latest economic projections from the committee members. Kicking things off on Thursday will be France with September confidence indicators, while in the UK the CBI trends data for this month is released. In the US on Thursday there’s a bunch of second tier data including initial jobless claims, Chicago Fed national activity index, existing home sales, leading index and Kansas City Fed’s manufacturing survey. The Euro area consumer confidence reading (for September) also gets released on Thursday afternoon. Friday is all about the PMI’s where we’ll firstly get the flash September manufacturing print in Japan, followed by the flash services, manufacturing and composite readings for the Euro area, Germany and France. The US will also release the flash manufacturing print. Away from that we get the final Q2 GDP revisions in France.

Away from the data the key speakers will of course come after the two Central Bank meetings on Wednesday with BoJ Governor Kuroda and Fed Chair Yellen both due to speak. Also of note is the scheduled speech from ECB President Draghi on Thursday at a conference in Frankfurt, with the BoE’s Cunliffe also scheduled to speak. The Fed’s Harker, Mester and Lockhart are also due to take part in a conference on Friday evening.