– Changing of the guard and return of fiscal rectitude. Sunak will be appointed prime minister by King Charles III and replaces Liz Truss today and to form Govt. Pullback in UK Gilt yields seeming to suggest market approval of Sunak’s appointment and hope of future financial stability.
-Recession theme throughout Europe as both German IFO economists and Euro Zone bank lending survey warned of winter recession. JPMorgan and Goldman Sachs CEO’s noted seeing recession risk across US and Europe. German IFO survey slightly beat estimates but sentiment still following weak European PMI’s from yesterday.
-Asia closed mixed with NZX50 outperforming at +1.1%. EU indices are mixed between -0.6% and +0.8%. US futures are -0.2%. Gold -0.4%, DXY +0.1%; Commodity: Brent -1.0%, WTI -1.2%, UK Nat Gas -4.8%; Crypto: BTC -0.6%, ETH +0.5%.
– US President Biden team said to be still working to set up meeting with China President Xi.
– PBOC not using the daily fixing to turn around yuan depreciation Offshore Yuan (CNH) trades at a record low, follows weaker than expected yuan fixing (China PBOC set Yuan reference rate: 7.1668 v 7.1230 prior for its weakest level since 2008).
– China PBOC: To raise the cross-border macro prudential adjustment ratio for companies and financial institutions to 1.25 (prior 1.00) [**Note: move would allow Chinese companies to make more loans abroad].
– Japan Fin Min Suzuki reiterated that had no comment if Japan intervened in FX markets; Constantly communicating with US officials; Won’t comment on daily FX moves and added that market moves for various reasons.
– RBNZ Chief Economist Conway stated that expected inflationary pressures to ease. Early signs economy was cooling after rate increases.
– BoE Dep Gov Ramsden noted that MPC was are acutely aware of impact of rate rises so far. Going to get on Oct 31st, will be very important for sustaining credibility; Having clarity on fiscal plans by Oct 31st will be really important.
Fed’s Evans (non-voter) stated that needed to raise rates further and hold that stance for a while; Exact stance of policy will depend on outlook and risks.
Indices [Stoxx600 +0.25% at 402.86, FTSE -0.41% at 6,985.25, DAX -0.17% at 12,908.88, CAC-40 +0.34% at 6,152.24, IBEX-35 +0.49% at 7,730.73, FTSE MIB +0.10% at 22,004.00, SMI +0.89% at 10,690.10, S&P 500 Futures +0.02%].
Market Focal Points/Key Themes: European indices open generally higher but faded gains as the session wore on (UK and Germany trending into the red); sectors among those leading to the upside are consumer discretionary and technology; financials and materials sectors among those trending downwards; banking subsector under pressure following results from HSBC; software subsector boosted after earnings from SAP; earnings expected during the upcoming US session include General Motors, Coca-Cola, Michelin and Alphabet.
– Consumer discretionary: Remy Cointreau [RCO.FR] -7% (earnings), Adidas [ADS.DE] -3% (said to cease Kanye West partnership).
– Financials: UBS [UBSG.CH] +5% (earnings), HSBC [HSBA.UK] -6% (earnings; CFO to depart).
– Healthcare: Novartis [NOVN.CH] -1% (earnings).
– Telecom: Orange [ORA.FR] -3% (earnings).
– Technology: SAP [SAP.DE] +4.5% (earnings), Logitech [LOGN.CH] +5% (earnings; CFO to leave).
– Materials: Covestro [1COV.DE] -3% (earnings; outlook cut).
– Euro Zone Bank Lending Survey noted that Q3 credit standards tightened further. Euro Zone Bank Lending Survey: Q3 credit standards tightened further. Expect to tighten access to credit further in the fourth quarter and see a drop in loan demand as economic growth slows and interest rates rise.
– Ukraine President Zelenskiy commented at a reconstruction conference that his country needed $17B for fast recovery.
– German IFO Economists noted that a winter recession was coming with Q4 GDP seen at -0.6%.. Export expectations of industry had slightly improved while retailers expectations were at new record low.
– South Korea Fin Min Choo: To cut KTB bond issuance significantly into year-end (no details provided).
– Australia-Budget cut its GDP growth forecasts and raises inflation forecasts for current and next fiscal year (as anticipated). Cut the FY22/23 GDP from 3.5% to 3.25% and cut the FY23/24 GDP from 2.5% to 1.50%. It raised the FY22/23 inflation forecast from 3.0% to 5.75% and raised the FY23/24 inflation forecast from 2.75% to 3.75%.
– Philippines Central Bank (BSP) Gov Medalla stated that it would match Fed rate hikes point-by-point.
– IEA’s Birol stated that the price cap on Russian oil still had many issues to sort out. Still huge amount of SPR oil stocks but further release was not on the agenda.
– USD continued to see its recent rally staff as some speculation circulating since late last week the FED might slow the pace of its tightening.
– USD/JPY continued to hover around the 149 area after testing 145.50 earlier in the week on suspected BOJ FX intervention. Policy divergence unlikely to halt the weakening yen trend (BOJ is expected to stick to monetary stimulus at its upcoming decision (on Friday) while the Fed is likely to continue raising rates. (**Note: Yen hit a 32-year low last week at 151.94).
– Dealers noted that the China PBOC was not using the daily fixing to turn around yuan depreciation. The Offshore Yuan (CNH) traded at a record low, follows weaker than expected yuan fixing (China PBOC set Yuan reference rate: 7.1668 v 7.1230 prior for its weakest level since 2008).
– (FI) Finland Sept Unemployment Rate: 6.7% v 6.7% prior.
– (JP) Japan Sept Final Machine Tool Orders Y/Y: 4.3% v 4.3% prelim.
– (SE) Sweden Sept PPI M/M: 0.4% v 3.3% prior; Y/Y: 20.6% v 22.0% prior.
– (ZA) South Africa Aug Leading Indicator: 123.4 v 126.2 prior.
– (ES) Spain Sept PPI M/M: 0.0% v 2.7% prior; Y/Y: 35.6% v 42.9% prior.
– (TR) Turkey Oct Real Sector (Manufacturing) Confidence (seasonally adj): 102.0 v 100.2 prior; Real Sector Confidence NSA (unadj): 100.3 v 99.9 prior.
– (TR) Turkey Oct Capacity Utilization: 76.9% v 77.4% prior.
– (DE) Germany Oct IFO Business Climate Survey: 84.3 v 83.5e; Current Assessment Survey: 94.1 v 92.5e; Expectations Survey: 75.6 v 75.0e.
– (PL) Poland Sept Unemployment Rate: 5.1% v 4.8%e.
– (HK) Hong Kong Sept Trade Balance (HKD): -44.9B v -22.2Be; Exports Y/Y: -9.1% v -14.0%e; Imports Y/Y: -7.8% v -16.4%e.
Fixed income issuance
– (ID) Indonesia sold total IDR12.15T vs. IDR13.5 target in bills and bond.
– (UK) DMO sold £800M in 0.125% Mar 2039 Inflation-linked Gilts (UKi); Real Yield: -0.070% v -1.049% prior; bid-to-cover: 2.46x v 2.03x prior.
– (IN) India announces details of upcoming bond sale (held on Fridays).
– 05:25 (EU) Daily ECB Liquidity Stats.
– 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.
– 05:30 (DE) Germany to sell €4.0B in 1.30% Oct 2027 BOBL.
– 05:30 (GR) Greece Debt Agency (PDMA) to sell €750M in in Dec 2027 Floating Rate bonds (FRN).
– 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
– 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2030, 2040 and 2044 bonds.
– 06:00 (UK) Oct CBI Industrial Trends Total Orders: -12e v -2 prior; Selling Prices: No est v 59 prior; Business Optimism: No est v -21 prior.
– 06:45 (US) Daily Libor Fixing.
– 07:00 (BR) Brazil Oct FGV Consumer Confidence: No est v 89.0 prior.
– 07:00 (MX) Mexico Aug IGAE Economic Activity Index (Monthly GDP) M/M: 0.0%e v 0.4% prior; Y/Y: 3.0%e v 1.3% prior.
– 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 13.00%.
– 08:00 (BR) Brazil mid-Oct IBGE Inflation IPCA-15 M/M: 0.1%e v -0.4% prior; Y/Y: 6.8%e v 8.0% prior.
– 08:00 (UK) Daily Baltic Dry Bulk Index.
– 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).
– 08:30 (US) Oct Philadelphia Fed Non-Manufacturing Regional Index.
– 08:55 (US) Weekly Redbook LFL Sales data.
– 09:00 (BE) Belgium Oct Business Confidence: No est v -11.8 prior.
– 09:00 (US) Aug FHFA House Price Index M/M: -0.6%e v -0.6% prior.
– 09:00 (US) Aug S&P/Case-Shiller House Price Index (20-CITY) M/M: -0.80%e v -0.44% prior; Y/Y: 14.05%e v 16.06% prior; House Price Index (overall) Y/Y: No est v 15.77% prior.
– 09:00 (EU) Weekly ECB Forex Reserves.
– 09:00 (HU) Hungary Central Bank post rate decision statement.
– 10:00 (US) Oct Consumer Confidence: 106.0e v 108.0 prior.
– 10:00 (US) Oct Richmond Fed Manufacturing Index: -5e v 0 prior.
– 13:00 (US) Treasury to sell 2-Year Notes.
– 13:55 (US) Fed’s Waller.
– 15:00 (AR) Argentina Aug Shop Center Sales Y/Y: No est v 46.6% prior; Supermarket Sales Y/Y: No est v 5.3% prior.
– 16:30 (US) Weekly API Oil Inventories.
– 17:00 (KR) South Korea Nov Business Manufacturing Survey: No est v 75 prior; Non-Manufacturing Survey: No est v 81 prior.
– 19:50 (JP) Japan Sept PPI Services Y/Y: 2.1%e v 1.9% prior.
– 20:00 (NZ) New Zealand Oct Business Confidence: No est v -36.7 prior; Activity Outlook: No est v -1.8 prior.
– 20:30 (AU) Australia Q3 CPI Q/Q: 1.6%e v 1.8% prior; Y/Y: 7.0%e v 6.1% prior; CPI Trimmed Mean (core) Q/Q: 1.5%est v 1.5% prior; Y/Y: 5.5%e v 4.9% prior.
– 21:10 (JP) BOJ to buy 3-5-year, 5-10-year, 10-25-year and over 25-year via JGBs bond buying operation.