Morning Bid: Let the doves sing

The announcement that the Monetary Authority of Singapore (MAS) would keep interest rates unchanged has stunned the markets, defying expectations of a tightening move. Analysts had unanimously predicted a policy hike, but the MAS decided to maintain the dovish stance, citing signs that economic growth and inflation would ease. This suggests that the energy shock to prices may not be as severe as initially feared, or perhaps more data is needed to make a more definitive assessment.

The main economic data expected for Wednesday is the US Labor Department's reading for the September Consumer Price Index (CPI). Economists had estimated a 0.6% month-on-month increase in September, up from 0.4% in August, with annual inflation surging to 3.6% from 3.4%. The Federal Reserve (Fed) is set to release its Beige Book report, offering insights into how various US regional economies are faring, as policymakers deliberate on the need for further rate hikes.

The consensus among traders is that the Fed will hold its policy rate steady at its October 27-28 meeting, with only a 77% probability of this outcome, up from 51% a month ago. However, there is anticipation of a gradual tightening trend, with about 75 basis points of rate increases expected by late 2027, according to CME Group’s FedWatch Tool.

Speakers from the Federal Reserve will share their perspectives in the coming days. Richmond Fed President Thomas Barkin will participate in a fireside chat in Virginia, while Fed Vice Chair for Supervision Michelle Bowman is set to appear in Bangkok. Meanwhile, the International Monetary Fund (IMF) and World Bank continue their annual meetings in Thailand, where IMF’s Rodrigo Valdes emphasized the urgency of addressing governments' debt concerns, particularly in France.

European markets have been mixed overnight, with Citigroup and other major financial groups reporting mixed earnings results. The key earnings announcements on Wednesday include BlackRock, Morgan Stanley, and Bank of America, all expected to show quarter-over-quarter growth. Oil prices have risen in Asian trading following further attacks by Yemen’s Iran-allied Houthis on Saudi Arabia, prompting Iranian officials to describe new tactics to keep oil prices high.

As for China, the country's export growth surpassed market predictions in September, buoyed by robust overseas demand despite weak domestic consumption.

Preliminary results in European trading sessions include gains in pan-European Euro Stoxx 50 futures (up 0.36%), German DAX futures (up 0.38%), and FTSE futures (up 0.07%). US stock futures, the S&P 500 e-minis, also climbed 0.22%. Upcoming developments expected to influence markets on Wednesday include Germany's reopening of auctions for 21-year and 30-year government debt, and the UK's reopening of a 4-year government debt auction.