(TradeTheNews.com Staff)
Notes/Observations
-Theme of political and financial backtracking among officials as UK Govt, BOE and Poland Central Bank debate changes or reversals in policy.
– UK PM Truss and Chancellor of Exchequer reportedly consider to make an announcement on corporation tax later today, amid political turmoil and financial instability in domestic markets. A reversal in the scrapping of planned corp tax increase is expected following the announced measure on Sept 23rd’s ‘Mini Fiscal Event’.
– BOE bond-purchasing program to calm Gilt market officially ends today, although financial press indicated the size of today’s purchasing is not finalized until 06:00ET
– Major US banks, such as JPMorgan, Citigroup, Morgan Stanley and Wells Fargo scheduled to report quarterly results later in the US morning session to provide signals on the global economy; Some focus will be on the loan growth figure and loan-loss provisions by the banks.
– Hungary Central Bank Dep Gov stated appropriateness of current Base Rate level (indicating pause to tightening cycle) while launching new one-day facility to ensure FX liquidity cover for energy imports.
– Conversely, Poland Central member Kotecki stated rates should be several ppts higher. Comments followed a pause in Poland’s tightening cycle on Oct 5th.
– In general, bullish momentum continued into European stocks following US and Asia rally. Second day of major pullback in UK bond yields.
– Spain and France confirmed Sept CPI’s readings moved off recent cycle highs.
– Asia closed higher with Nikkei 225 outperforming at 3.3%. EU indices are modestly higher between 0.6-0.9%. US futures are -0.3% to -0.7%. Gold -0.8%, DXY +0.4%; Commodity: Brent -0.4%, WTI -0.5%, UK Nat Gas -5.8%; Crypto: BTC +3.1%, ETH +3.7%.
Asia
– China Communist Party Congress to begin on Sunday.
– China Sept CPI Y/Y: 2.8% v 2.9%e (highest level since April 2020); PPI Y/Y: 0.9% v 1.0%e.
– Singapore Q3 Advanced GDP Q/Q: 1.5% v 0.7%e; Y/Y: 4.4% v 3.5%e.
–Monetary Authority of Singapore (MAS) Bi-annual policy decision: To recenter midpoint upwards to prevailing level but no change to slope or width [5th consecutive tightening move in order to tackle rising inflation]
China PBOC Gov Yi Gang reiterated stance that domestic CPI was basically stable. Added that its prudent monetary policy would better support economy and pledged to step up implementation of prudent monetary policy.
– BOJ Gov Kuroda reiterated stance that was not appropriate to raise rates at this time given the economic and price conditions.
– Japan Finance Ministry (MOF) Official stated that there would be cases when would disclose or don’t disclose on intervention; Communicating closely with many countries.
– Japan Fin Min Suzuki reaffirmed Japan’s FX commitment; noted that G20 shared understanding on FX volatility.
Europe
– UK Chancellor of the Exchequer Kwarteng said to have left IMF meeting early to fly back to London; more speculation that govt was preparing a reversal of corporate tax plan (**Reminder: reports circulated that UK govt officials were discussing which part of mini budget might be dropped but no decision would be made before Chancellor Kwarteng returned the IMF meetings being held in Washington.
– ECB reportedly discussed a potential timeline for balance sheet reduction at its Cyprus meeting earlier in Oct; Presentation saw QT beginning in Q2’23 but some called for earlier and later timelines.
Americas
– Treasury Sec Yellen stated that the recent US CPI report showed more work was needed on the inflation front; Needed to see sustained progress in bringing down prices.
Energy
– President Biden stated that gasoline prices remained too high and would have more to say about lowering gas prices next week.
Speakers/fixed income/FX/commodities/erratum
Equities
Indices [Stoxx600 +1.19% at 393.80, FTSE +0.78% at 6,903.60, DAX +0.66% at 12,436.43, CAC-40 +0.88% at 5,930.92, IBEX-35 +1.18% at 7,435.50, FTSE MIB +0.95% at 20,984.00, SMI +1.03% at 10,333.30, S&P 500 Futures -0.40%].
Market Focal Points/Key Themes: European indices open broadly higher across the board, but moderated gains through the early part of the session; all sectors start the day in the green; sectors among those leading to the upside are materials and real estate; while lagging sectors include health care and telecom; Danone to transfer control of Russia business; unofficial start of earnings season; Diageo to take stake in East African Breweries; focus on summary of EMA decisions later in the day; earnings expected during the upcoming US session include major banks, United Health.
Equities
– Consumer discretionary: International Distributions Services [IDS.UK] -15% (trading update; job cuts; potential spin offs).
– Consumer staples: Danone [BN.FR] +2% (Russia unit transfer).
– Energy: TotalEnergies [TTE.FR] +3% (Q3 metrics).
– Financials: Barclays [BARK.UK] +3% (more speculation on UK corporate tax plan u-turn), Ashmore Group [ASHM.UK] +1% (trading update).
– Industrials: Airbus [AIR.FR] +4% (potential deal with United).
– Technology: Temenos Group [TEMN.CH] -21% (prelim results; outlook cut), TomTom [TOM2.NL] +1.5% (earnings).
Speakers
– ECB De Guindos (Spain) stated that rate normalization could curb demand increase; region faced the possibility of a technical recession.
– ECB’s Kazimir (Slovakia, hawk) stated that was appropriate for ECB to raise rates by 75bps in Oct; ECB deposit rate must rise above neutral and won’t stop there.
– UK PM Truss and Chancellor of the Exchequer said to consider making statement on corporation tax later in session.
– UK Trade Dept Min Hands stated that there was no change to plans on corporation tax; There were absolutely no plans to change anything.
– Germany Economic Ministry stated that saw a recession occurring and expecting it to last three quarters from Q3.
– Sweden Central Bank (Riksbank) Dep Gov Ohlsson stated that needed to act now because inflation is high.
– Sweden’s Kristersson: Reached agreement on a new govt; Cabinet will work closely with Democrats.
– Hungary Central Bank Dep Gov Virag stated that the current Base Rate level of 13.00% was appropriate to handle fundamental CPI trends; To ensure FX liquidity to cover energy imports until end of 2022.
– Poland Central Bank member Kotecki stated that its tightening cycle was not likely over.
– Pres Biden to sign an executive order on Oct 14th pushing federal officials to drive prescription drug costs down.
Currencies/fixed income
– A surge in risk appetite on Thursday sent the USD on softer footing. Move came despite US CPI data that suggested more policy tightening was likely by the Fed. FOMC was expected to deliver another 75-basis-point rate hike in Nov. The greenback recently rallied aided by soaring inflation, recession fears and worries over central bank policies across the globe that hindered risk appetite.
– GBP/USD remained volatile as markets continued to speculate a possible U-turn by the UK government on its fiscal plans. Dealers also watch price action as BOE emergency bond buying scheme was poised to end on Friday. UK Gilts opened lower after BOE hinted it could increase the size of the final emergency gilt buying operation on Friday.
– USD/JPY remained above 147.50 with some continued prospect of potential intervention in the yen.
Economic data
– (FI) Finland Sept CPI M/M: 0.8% v 0.1% prior; Y/Y: 8.1% v 7.6% prior.
– (FI) Finland Aug GDP Indicator Y/Y: 0.8% v 1.5% prior.
– (FI) Finland Aug Final Retail Sales Volume Y/Y: -4.1% v -4.8% prelim.
– (DE) Germany Sept Wholesale Price Index M/M: 1.6% v 0.1% prior; Y/Y: 19.9% v 18.9% prior.
– (NO) Norway Q3 House Price Index Q/Q: 0.0% v 1.6% prior.
– (IN) India Sept Wholesale Prices (WPI) Y/Y: 10.7% v 11.3%e.
– (FR) France Sept Final CPI M/M: -0.6% v -0.5% prelim; Y/Y: 5.6% v 5.6% prelim; CPI (ex-tobacco) Index: 111.99 v 112.01e.
– (FR) France Sept Final CPI EU Harmonized M/M: -0.5%e v -0.5% prelim; Y/Y: 6.2%e v 6.2% prelim.
– (ES) Spain Sept Final CPI M/M: -0.7% v -0.6% prelim; Y/Y: 8.9% v 9.0% prelim.
– (ES) Spain Sept Final CPI EU Harmonized M/M: -0.2%e v 0.0% prelim; Y/Y: 9.0% v 9.3% prelim.
– (ES) Spain Sept CPI Core M/M: 0.2 v 0.4% prior; Y/Y (final): 6.2%e v 6.2% prelim.
– (TR) Turkey Central Bank TCMB Oct Inflation Expectation Survey: Next 12 Months: 37.4% v 36.7% prior.
– (CN) Weekly Shanghai copper inventories (SHFE): 63.8K v 30.5K tons prior.
– (PL) Poland Sept Final CPI M/M: 1.6% v 1.6% prelim; Y/Y: 17.2% v 17.2% prelim.
– (RU) Russia Narrow Money Supply w/e Oct 7th (RUB): 15.45 v 15.27T prior.
– (IT) Italy Aug General Government Debt: €2.758T v €2.771T prior (moves off recent record high).
– (EU) Euro Zone Aug Trade Balance (seasonally adj): -€47.3B v -€45.0Be (record deficit); Trade Balance NSA (unadj): -€-50.9B v -€34.0B prior.
Fixed income issuance
– (IN) India sold total INR300B vs. INR300B indicated in 2024, 2029, 2036 and 2062 bonds.
Looking ahead
– 05:25 (EU) Daily ECB Liquidity Stats.
– 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2033, 2038 and 2046 Bonds.
– 06:00 (UK) DMO to sell £4.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £2.5B respectively).
– 06:45 (US) Daily Libor Fixing.
– 07:00 (IN) India announces upcoming bill issuance (held on Wed).
– 07:00 (IL) Israel Sept CPI M/M: +0.1%e v -0.3% prior; Y/Y: 4.5%e v 4.6% prior.
– 07:00 (UK) BOE Quarterly Bulletin.
– 07:30 (IN) India Weekly Forex Reserve w/e Oct 7th: No est v $532.7B prior.
– 08:00 (PL) Poland Aug Current Account: -€1.6Be v -€1.7B prior; Trade Balance: -€1.4Be v -€1.5B prior; Exports: €26.3Be v €26.0B prior; Imports: €27.8Be v €27.5B prior.
– 08:00 (BR) Brazil Aug IBGE Services Volume M/M: 0.2%e v 1.1% prior; Y/Y: 6.8%e v 6.3% prior.
– 08:00 (UK) Daily Baltic Dry Bulk Index.
– 08:00 (ES) Spain Debt Agency (Tesoro) announcement on upcoming bond issuance.
– 08:30 (US) Sept Advance Retail Sales M/M: 0.2%e v 0.3% prior; Retail Sales (Ex-Auto) M/M: -0.1%e v -0.3% prior; Retail Sales (ex-auto/gas): 0.2%e v 0.3% prior; Retail Sales (control group): 0.3%e v 0.0% prior.
– 08:30 (US) Sept Import Price Index M/M: -1.1%e v -1.0% prior; Y/Y: 6.3%e v 7.8% prior; Import Price Index (ex- petroleum) M/M: -0.4%e v -0.2% prior.
– 08:30 (US) Sept; Export Price Index M/M: -1.0%e v -1.6% prior; Y/Y: No est v 10.8% prior.
– 08:30 (CA) Canada Aug Manufacturing Sales M/M: -1.8%e v -0.9% prior; Wholesale Trade Sales M/M: +0.8%e v -0.6% prior.
– 09:00 (CA) Canada Sept Existing Home Sales M/M: -1.0%e v -1.0% prior.
– 09:45 (UK) BOE APF Gilt purchase operation.
– 10:00 (US) Aug Business Inventories: 0.9%e v 0.6% prior.
– 10:00 (US) Oct Preliminary University of Michigan Confidence: 58.8e v 58.6 prior.
– 10:30 (US) Fed’s Cook.
– 11:00 (CO) Colombia Aug Retail Sales Y/Y: 7.0%e v 7.7% prior.
– 11:00 (CO) Colombia Aug Manufacturing Production Y/Y: 5.0%e v 5.2% prior; Industrial Production Y/Y: No est v 4.3% prior.
– 11:00 (EU) Potential sovereign ratings after European close (S&P on Czech Republic).
– 13:00 (US) Weekly Baker Hughes Rig Count.
