– Risk appetite reversed course from prior two days of trading as risk aversion re-entered markets when Europe opened. Positive momentum did hold on from US to Asia sessions, which saw a sharp gain in Hang Seng of +5.8% but the movement did not translate to Europe as major indices turn lower, bond yields move higher, USD pushes higher and US futures are in the red. Potentially fears are percolating of Russia escalation as unconfirmed rumors mount that Putin will address the nation in regard to that ‘status’ of the Ukraine special operation.
– EU Commission Pres Von der Leyen confirmed agreement on 8th sanctions package against Russia.
– European final services PMI’s contract for Euro Zone, Germany, Italy and Spain. Expansions for France and UK (although UK services read 50.0 with composite still contracting).
– Bond yields move notably higher, being led by the UK’s longer term maturities with 10Y passing 4.00% and 30Y passing 4.24%. Worth reminding that the BOE recently announced plans to purchase bonds until Oct 14th for up to £5B a day but are yet to accept substantial bids for the program.
– Asia closed higher with Hang Seng outperforming at +5.9%. EU indices are -0.4% to -1.6% lower, with bond yields mostly higher. US futures -0.7%. Gold -0.4%, DXY +0.5%; Commodity: Brent -0.5%, WTI -0.6%, UK Nat Gas +1.2%; Crypto: BTC +1.2%, ETH -0.4%.
– RBNZ raised Official Cash Rate (OBR) by 50bps to 3.50% (as expected) noting that it remained appropriate to keep tightening at pace. Did considered options whether to increase the OCR by 50 or 75 basis points. Lower NZD currency (Kiwi) if sustained poses further upside risks to CPI.
– South Korea Sept CPI M/M: 0.3% v 0.4%e; Y/Y: 5.6% v 5.7%e; CPI Core Y/Y: 4.5% v 4.4%e (core at 14 year highs).
– Japan Sept Final PMI Services: 52.2 v 51.9 prelim (confirms move back into expansion).
– Australia Sept Final PMI Services: 50.6 v 50.4 prelim (confirms 8th month of expansion).
– Ukraine forces advancing near the southern city of Kherson Russian troops said to be abandoning positions.
– US senior Pentagon official had no information to corroborate reports suggesting Russia might be moving nuclear weapons by rail.
– UK Treasury stated that since BOE started using reserves to purchase long-dated UK govt bonds on Sep 28th, BOE has bought less than £4B (BOE purchased £0M (nil) in APF Gilt purchase operation on Tuesday).
– Fed’s Daly (non-voter): Inflation is causing pain in economy for many Americans. have to understand the impact of rising rates and USD strength has one global economy so we don’t overtighten policy. Saw job market vacancies fall and pace of hiring should likely slow.
– Fed’s Jefferson stated that inflation was central bank’s most worrisome problem.
– Weekly API Crude Oil Inventories: -1.8M v +4.2M prior.
– EU ambassadors said to have reached an outline agreement on new sanctions on Russia, including a price cap on Russian oil sales.
– Saudi Arabia and Russia said to be pushing for reduction between 1.0- 2.0M barrels a day or more and could be phased in over several months.
Indices [Stoxx600 -0.93% at 399.26, FTSE -1.09% at 7,009.40, DAX -0.69% at 12,583.68, CAC-40 -0.62% at 6,002.26. IBEX-35 -1.40% at 7,588.65, FTSE MIB -1.47% at 21,372.00, SMI -0.31% at 10,558.40, S&P 500 Futures -0.71%].
Market Focal Points/Key Themes: European indices open lower across the board and fell further through the early part of the trading day; better performing sectors include health care and utilities; sectors leading to the downside industrials and materials; Arcadis acquires DPS; EU regulators approve Philip Morris acquisition of Swedish Match; reportedly Volkswagen considering spinning off Lamborghini unit; focus on upcoming OPEC+ meeting later in the day; no major earnings expected in the upcoming US session.
– Consumer discretionary: Vertu Motors [VTU.UK] +11% (earnings; buyback), Ferguson [FERG.UK] +0.5% (buyback), Shop Apotheke [SAE.DE] +4% (prelim results).
– Consumer staples: Tesco [TSCO.UK] -3% (earnings; freezes some prices; raises dividend), Hyve Group [HYVE.UK] +13% (trading update).
– Financials: Credit Suisse [CSGN.CH] -2.5% (speculation on SNB plan on potential Credit Suisse merger), Craneware [CRW.UK] -8.5% (block sale).
– EU Commission Pres Von der Leyen stated that would step up to tackle rising energy costs; Needed to come to an agreed gas price corridor; Russia pipeline gas supplies to EU were now 7.5% from 40% pre-Ukraine war.
– EU Commission Pres Von der Leyen confirmed agreement on the 8th sanctions package against Russia.
– EU Foreign Policy Chief Borrell confirmed EU council would reach Russian sanctions deal today (Oct 5th).
– Iceland Central Bank Policy Statement noted it would ensure that monetary policy stance was tight enough to bring inflation back to target within an acceptable time frame. Underlying inflation had risen since last meeting. Recent rate hikes had appeared to slow overall demand growth and housing.
– President Biden said to have sent letter to South Korea President expressing willingness to be open-minded on talks regarding the US Inflation Reduction Act.
– Thailand Fin Min Arkhom stated that saw 2022 GDP growth between 3.0-3.5% as the weak THB currency (Baht) was helping exports.
– Thailand PM Prayuth stated that had no plan to interfere with central bank operations.
– UAE Energy Min Mazrouei stated that today’s meeting was very important; and that OPEC+ would take the right measures.
– Unverified chatter that Russia Pres Putin might address the nation on Wed (Oct 5th) ‘on change of the status of the special military operation in Ukraine’.
– Russia Finance Ministry stated that it had made a coupon payment on 2042 eurobond.
– USD remains on some soft footing as growing speculation that the Fed might soon be able to slow the pace of rate increases. Focus on key economic releases later this week included Sept Non-farm payroll report on Friday.
-.EUR/USD hovered near parity as the session began but drifted away by mid-day.
– (DE) Germany Aug Trade Balance: €1.2B v €4.7Be; Exports M/M: +1.6% v +1.5%e; Imports M/M: +3.4% v +1.1%e.
– (RU) Russia Sept Services PMI: 51.1 v 49.3e; Composite PMI: 51.5 v 50.2e.
– (SE) Sweden Sept PMI Services: 55.1 v 58.6 prior; PMI Composite: 53.5 v 56.3 prior.
– (FR) France Aug Industrial Production M/M: 2.4% v 0.0%e; Y/Y: +1.2% v -1.5%e.
– (FR) France Aug Manufacturing Production M/M: +2.7% v -0.6%e; Y/Y: +3.1% v 0.2% prior.
– (ES) Spain Sept Services PMI: 48.5 v 49.8e (1st contraction in 8 months); Composite PMI: 48.4 v 49.8e.
– (ZA) South Africa PMI (whole economy): 49.2 v 49.9e (1st contraction in 8 months).
– (IT) Italy Sept Services PMI: 48.8 v 49.0e (moved back into contraction); Composite PMI: 47.6 v 48.4e.
– (FR) France Sept Final Services PMI: 52.9 v 53.0 prelim (confirmed 18th straight expansion); Composite PMI: 51.2 v 51.2 prelim.
– (DE) Germany Sept Final Services PMI: 45.0 v 45.4 prelim (confirmed 3rd straight contraction); Composite PMI: 45.7 v 45.9 prelim.
– (EU) Euro Zone Sept Final Services PMI: 48.8 v 48.9 prelim (confirmed 2nd straight contraction); Composite PMI: 48.1 v 48.2 prelim.
– (IT) Italy Q2 YTD Budget Deficit to GDP Ratio: 6.0% v 9.0% prior.
– (UK) Sept New Car Registrations Y/Y: 4.6% v 1.2% prior.
– (TW) Taiwan Sept Foreign Reserves: $541.1B v $545.5B prior.
– (UK) Sept Final Services PMI: 50.0 v 49.2e (avoids contraction); Composite PMI: 49.1 v 48.4e.
– (UK) Sept Official Reserves Changes: -$2.4B v -$1.8B prior.
– (IS) Iceland Central Bank (Sedibanki) raised the 7-Day Term Deposit Rate by 25bps to 5.75%.
Fixed income issuance
– (DK) Denmark sold total DKK3.2B in 2024 and 2031 DGB Bonds.
– (UK) DMO sold £3.0B in 1.00% Jan 2032 Gilts; Avg Yield: 4.123% v 3.088% prior; bid-to-cover: 2.50x v 2.40x prior; Tail: 0.3bps v 0.9bps prior.
– (SE) Sweden sold total SEK2.0B vs. SEK2.0B indicated in 2029 and 2033 Bonds.
– OPEC+ Oil Ministers meet.
– (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to raise Base Rate by 25bps to 7.00%.
– (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to raise Interest Rates by 50bps to 6.00%.
– 05:25 (EU) Daily ECB Liquidity Stats.
– 05:30 (DE) Germany to sell €1.5B in 1.0% May 2038 Bunds.
– 05:30 (GR) Greece Debt Agency (PDMA) to sell €625M in 13-week Bills.
– 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).
– 06:00 (IE) Ireland Sept Unemployment Rate: No est v 4.3% prior.
– 06:00 (CZ) Czech Republic to sell 2026, 2030 and 2032 Bonds.
– 06:00 (EU) EU Commission to sell combined €2.5B indicated in 3-month and 6-month bills.
– 06:00 (RU) Russia will not hold weekly OFZ Bond auction.
– 06:45 (US) Daily Libor Fixing.
– 07:00 (US) MBA Mortgage Applications w/e Sept 30th: No est v -3.7% prior.
– 07:00 (CO) Colombia Sept CPI M/M: 0.8%e v 1.0% prior; Y/Y: 11.3%e v 10.8% prior.
– 07:00 (CO) Colombia Sept CPI Core M/M: No est v 0.8% prior; Y/Y: No est v 7.8% prior.
– 07:00 (MX) Mexico Sept Consumer Confidence: 40.2e v 40.9 prior.
– 07:00 (UK) Weekly PM at Tory conference.
– 08:00 (BR) Brazil Aug Industrial Production M/M: -0.5%e v +0.6% prior; Y/Y: +2.3%e v -0.5% prior.
– 08:00 (UK) Daily Baltic Dry Bulk Index.
– 08:15 (US) Sept ADP Employment Change: +200Ke v +132K prior.
– 08:30 (US) Aug Trade Balance: -$67.7Be v -$70.7B prior.
– 08:30 (CA) Canada Aug Int’l Merchandise Trade: C$3.5Be v 4.1B prior.
– 08:30 (CA) Canada Aug Building Permits M/M: -0.5%e v -6.6% prior.
– 09:00 (BR) Brazil Sept Services PMI: No est v 53.9 prior; Composite PMI: No est v 53.2 prior.
– 09:00 (EU) Weekly ECB Forex Reserves.
– 09:45 (US) Sept Final Services PMI: 49.2e v 49.2 prelim; Composite PMI: No est v 49.3 prelim.
– 09:45 (UK) BOE Gilt buyback operation.
– 10:00 (US) Sept ISM Services Index: 56.0e v 56.9 prior.
– 10:30 (US) Weekly DOE Oil Inventories.
– 12:00 (RU) Russia Q2 Final GDP (3rd reading) Y/Y: -4.1%e v -4.1% prelim.
– 12:00 (CA) Canada to sell 10 Year Bonds.
– 16:00 (US) Fed’s Bostic.
– (MX) CitiBanamex Survey of Economists.
– 17:00 (KR) South Korea Sept Foreign Reserves: No est v $436.4B prior.
– 20:00 (NZ) New Zealand Sept Commodity Price M/M: No est v -3.3% prior.
– 20:30 (HK) Hong Kong Sept PMI (whole economy): No est v 51.2 prior.
– 20:30 (AU) Australia Aug Trade Balance: A$10.0Be v A$8.7B prior; Exports M/M: +2%e v -10% prior; Imports M/M: -1%e v +5% prior.
– 21:00 (PH) Philippines Aug Unemployment Rate: No est v 5.2% prior.
– 22:00 (JP) Japan Sept Tokyo Avg Office Vacancies: No est v 6.49 prior.
– 22:00 (SL) Sri Lanka Central Bank (CBSL) Interest Rate Decision: Expected to leave Key rates unchanged: Standing Deposit Rate currently at 14.50%; Standing Lending Rate currently at 15.50%.
– 23:30 (JP) Japan to sell 6-Month Bills.
– (JP) BOJ Gov Kuroda at the Branch Managers’ Meeting (Sakura quarterly regional report).