Impact from BOE emergency gilt purchases fades, Germany Sept inflation accelerates

(TradeTheNews.com Staff)

Notes/Observations

– Market attention moves back to CPI readings; Germany States saw higher level while worst appeared to be over for Spain.

– UK PM Truss stays the course on mini-budget in 1st public appearance since its release; nagging doubts about Britain’s economic management remains and fading impact of recent BOE emergency Gilt purchases.

Asia

– Australia Aug CPI Y/Y: 6.8% v 7.0% prior (1st monthly stats on data).

– Taiwan Central Bank Gov Yang stated that its FX management measures were sufficient to maintain market if there were large FX outflows.

Europe

– Chancellor of the Exchequer Kwarteng would not be resigning and there will be no reversal of policy (**Note: Conservative MP shave called for PM Truss and Fin Min Kwarteng to resign after the fallout from the Chancellor’s mini-Budget.

– ECB’s Kazaks (Latvia, hawk) said to support 75bps hike at Oct meeting, followed by smaller hikes thereafter.

– Italy govt to cut 2023 GDP growth forecast from 2.4% to 0.6% due to rising energy costs.

Americas

– Fed’s Evans (non-voter) stated that needed to address inflation and expected to be at the peak Fed funds rate around March 2023.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -1.45% at 383.76, FTSE -1.54% at 6,897.62, DAX -1.40% at 12,012.62, CAC-40 -1.38% at 5,685.67, IBEX-35 -1.62% at 7,323.50, FTSE MIB -1.54% at 20,531.00, SMI -1.41% at 10,076.41, S&P 500 Futures -1.18%].

Market Focal Points/Key Themes: European indices open lower across the board and fell further into the red as the session wore on; better performing sectors include energy and industrials; sectors among those leading to the downside are consumer discretionary and utilities; Porsche opens for trade; Worldline acquires stake in BV; earnings expected in the upcoming US session include Bed, Back & Beyond, CarMax, and Rite Aid.

Equities

– Consumer discretionary: Rational [RAA.DE] +11% (raises outlook), Accor [AC.FR] +11.5% (raises outlook), H&M [HMB.SE] -3% (earnings), Next plc [NXT.UK] -10% (earnings)

– Healthcare: Valneva [VLA.FR] -9% (offering).

– Industrials: Volkswagen [VOW3.DE] -3.5% (Porsche IPO), Hella KGaA [HLE.E] -2.5% (earnings).

Speakers

– ECB’s De Guindos (Spain) stated that fscal policy should not stroke inflation.

– ECB’s Rehn (Finland): stated that the prospects of a recession i=was growing; Council task was to anchor price expectations. Gas supplies had clearly been weaponized by Russia. Stressed that spending more would not help the fight against inflation.

– ECB’s Centeno (Portugal) stated that Council was still far from the neutral rate; decisions must be measured and balanced. Monetary policy must ensure inflation expectations anchored.

– ECB’s Muller (Estonia, hawk) stated that inflation called for significant rate hike; Something similar to last two hikes was appropriate, but too early to say how much. Too early to say where neutral rate would be. Should discuss Quantitative Tightening (QT) relatively soon.

– ECB’s Simkus (Lithuania): 50bps is minimum for Oct, but my choice would be 75bps at Oct 27th’s meeting; 100bps move would be too much now.

– ECB’s Vasle (Slovenia, non-voter until Dec 2022) reiterates : Expect to raise rates at upcoming meetings; current pace is an appropriate response to inflation.

– Sweden Central Bank (Riksbank) Sept Minutes noted that inflation was too high. Gov Ingves noted that it could not let inflation become entrenched at a high level. Needed to be proactive and maintain a comfortable distance from ECB policy rate. Member Jansson noted that inflation to peak in early 2023 and then decline rapidly.

– UK PM Truss commented for the 1st time since the mini-budget. She noted that had to take decisive action; Was prepared to make difficult, controversial decisions.

– German Leading Economic Institutes updated its outlook.

– German gas price cap reportedly may cost €15-24B.

– EU official stated that member States expressed broad support on latest compromise on EU energy measures ahead of tomorrow’s Sept 30th energy council.

– OPEC+ said to be discussing a production cut at the Oct 5th’s meeting.

– China PBoC Q3 monetary policy meeting reiterated to step up efforts to consolidate the economic recover. It noted that the economic recovery continued but faced pressures from shrinking demand and supply shocks. Reiterated stance that CNY currency (Yuan) rate to be basically stable this year.

– China FX regulator (SAFE) reiterated it vow to keep FX market stable.

Currencies/fixed income

– USD holding on to the bulk of recent gains. Dealers noted that some govt officials have pushback against the greenback’s strength particularly in Asia where Japan, South Korea, India and Indonesia have been intervening.

– Plethora of hawkish ECB speak failed to aid the Euro currency. German inflation readings for the various States did spook the markets as the session began and prompted some risk aversion flows.

– GBP currency was softer after UK PM Truss stayed the course on mini-budget in 1st public appearance since its release. GBP/USD moved back below the 1.08 level while Gilt yields drifted higher. The impact of the recent BOE resumption of Gilt purchases faded during the session. Dealers noted that BoE was seen addressing the symptoms and not offering any cure.

Economic data

– (NL) Netherlands Sept Producer Confidence: 2.6 v 4.6 prior.

– (FI) Finland Aug House Price Index M/M: -1.4 v -0.2% prior; Y/Y: No est v 1.2% prior.

– (DE) Germany Sept CPI North Rhine Westphalia M/M: 1.8% v 0.3% prior; Y/Y: 10.1% v 8.1% prior.

– (ZA) South Africa Aug M3 Money Supply Y/Y: 8.2% v 7.8%e; Private Sector Credit Y/Y: 7.9% v 6.8%e.

– (ES) Spain Sept Preliminary CPI M/M: -0.6% v +0.3% prior; Y/Y: 9.0% v 10.1%e; CPI Core Y/Y: 6.2% v 6.6%e.

– (ES) Spain Sept Preliminary CPI EU Harmonized M/M: 0.0% v 0.6%e; Y/Y: 9.3% v 10.0%e.

– (TR) Turkey Sept Economic Confidence: # v 94.3 prior.

– ((HU) Hungary Central Bank raised the One Week Deposit Rate by 125bps to 13.00% (as expected).

– (DE) Germany Sept CPI Hesse M/M: 1.4% v 0.3% prior; Y/Y: 9.4% v 8.0% prior.

– (DE) Germany Sept CPI Bavaria M/M: 2.2% v 0.4% prior; Y/Y: 10.8% v 8.4% prior.

– (DE) Germany Sept CPI Brandenburg M/M: 1.8% v 0.4% prior; Y/Y: 9.9% v 7.9% prior.

– (DE) Germany Sept CPI Baden Wuerttemberg M/M: 2.0% v 0.3% prior; Y/Y: 9.5% v 7.3% prior.

– (IT) Italy Aug PPI M/M: 3.5% v 6.5% prior; Y/Y: 50.5% v 45.9% prior.

– (CN) China Q2 Final Current Account: $77.5B v $80.2B prelim.

– (PT) Portugal Sept Consumer Confidence: -32.7 v -31.6 prior; Economic Climate Indicator: 1.6 v 1.7 prior.

– (EU) Euro Zone Sept Economic Confidence: 93.7 v 96.0e; Industrial Confidence: -0.4 v -0.7e; Services Confidence: 4.9 v 7.0e; Consumer Confidence (final): -28.8 v -28.8 advance.

– (DE) Germany Sept CPI Saxony M/M: 1.8% v 0.2% prior; Y/Y: 9.2% v 7.3% prior.

Fixed income issuance

– (DK) Denmark sold total DKK380M in 3-month and 6-month bills.

– (SE) Sweden sold total SEK500M vs. SEK500M indicated in 2027 and 2030 I/L Bonds.

– (IT) Italy Debt Agency (Tesoro) sold total €5.25B vs. €4.25-5.25B indicated range in 5-year and 10-year BTP Bonds.

– Sold €2.75B vs. €2.25-2.75B indicated range in 2.65% Dec 2027 BTP bonds; Avg Yield: 4.12% v 3.09% prior; Bid-to-cover: 1.48x v 1.45x prior (Aug 30th 2022).

– Sold €2.5B vs. €2.0-2.5B indicated range in 2.50% Dec 2032 BTP; Avg Yield: 4.79% v 3.76% prior; bid-to-cover: 1.42x v 1.54x prior.

– (IT) Italy Debt Agency (Tesoro) sold €1.0B vs. €0.75-1.0B indicated range in 0.65% Apr 2029 Floating Rate Note (CCTeu); Avg Yield: 0.85% v 0.58% prior; Bid-to-cover: 1.94x v 1.86x prior.

Looking ahead

– 05:25 (EU) Daily ECB Liquidity Stats.

– 05:30 (ZA) South Africa Aug PPI M/M: 0.4%e v 2.2% prior; Y/Y: 17.5%e v 18.0% prior.

– 05:30 (BE) Belgium Sept CPI M/M: No est v 0.8% prior; Y/Y: No est v 9.9% prior.

– 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

– 06:45 (US) Daily Libor Fixing.

– 07:00 (CA) Canada Sept CFIB Business Barometer: No est v 53.5 prior.

– 07:00 (BR) Brazil Sept FGV Inflation IGPM M/M: -0.9%e v -0.7% prior; Y/Y: 8.3%e v 8.6% prior.

– 07:30 (UK) BOE’s Ramsden.

– 08:00 (DE) Germany Sept Preliminary CPI M/M: 1.5%e v 0.3% prior; Y/Y: 9.5%e v 7.9% prior.

– 08:00 (DE) Germany Sept Preliminary CPI EU Harmonized M/M: 1.5%e v 0.4% prior; Y/Y: 10.2%e v 8.8% prior.

– 08:00 (CL) Chile Aug Unemployment Rate: 8.0%e v 7.9% prior.

– 08:00 (UK) Daily Baltic Dry Bulk Index.

– 08:00 (UK) BOE’s Hauser.

– 08:30 (US) Q2 Final GDP Annualized (3rd reading) Q/Q: -0.6%e v -0.6% prelim; Personal Consumption: 1.5%e v 1.5% prelim.

– 08:30 (US) Q2 Final GDP Price Index (3rd reading): 8.9%e v 8.9% prelim; Core PCE Q/Q: 4.4%e v 4.4% prelim.

– 08:30 (US) Initial Jobless Claims: 215Ke v 213K prior; Continuing Claims: 1.385Me v 1.379M prior.

– 08:30 (CA) Canada July GDP M/M: -0.1%e v +0.1% prior; Y/Y: 4.1%e v 4.7% prior.

– 08:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave 2-week Repurchase Rate unchanged at 7.00%.

– 08:30 (US) Weekly USDA Net Export Sales.

– 09:00 (RU) Russia Gold and Forex Reserve w/e Sept 23rd: No est v $557.7B prior.

– 09:00 (LT) ECB’s Simkus (Lithuania).

– 09:30 (BR) Brazil Aug Total Formal Job Creation: +267.0Ke v +218.9K prior.

– 09:30 (US) Fed’s Bullard.

– (CZ) Czech Central Bank (CNB) post rate decision press conference.

– 10:30 (US) Weekly EIA Natural Gas Inventories.

– 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

– 13:00 (US) Fed’s Mester.

– 13:00 (IE) ECB’s Lane (Ireland, chief economist).

– 13:30 (BR) Brazil Aug Central Govt Budget Balance (BRL): -49.1Be v +19.3B prior.

– 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to raise Overnight Rate by 75bps to 9.25%.

– 14:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to raise Overnight Lending Rate by 150bps to 10.50%.

– 15:00 (AR) Argentina July Wages M/M: No est v 4.8% prior.

– (BR) Brazil Aug Central Govt Budget Balance (BRL): No est v 19.3B prior.

– (AR) Argentina Sept Consumer Confidence: No est v 37.1 prior.

– 16:45 (US) Fed’s Daly.

– 17:00 (NZ) New Zealand Sept Anz Consumer Confidence Index: No est v 85.4 prior; M/M: No est v 4.3% prior.

– 17:45 (NZ) New Zealand Aug Building Permits M/M: No est v 5.0% prior.

– 19:00 (KR) South Korea Aug Industrial Production M/M: -0.8%e v -1.3% prior; Y/Y: 1.0%e v 1.5% prior.

– 19:01 (UK) Sept Lloyds Business Barometer: No est v 16 prior.

– 19:30 (JP) Japan Aug Jobless Rate: 2.5%e v 2.6% prior; Job-To-Applicant Ratio: 1.30e v 1.29 prior.

– 19:50 (JP) Japan Aug Preliminary Industrial Production M/M: 0.2%e v 0.8% prior; Y/Y: +1.8%e v -2.0% prior.

– 19:50 (JP) Japan Aug Retail Sales M/M: 0.2%e v 0.8% prior; Y/Y: 2.8%e v 2.4% prior; Dept. Store, Supermarket Sales Y/Y: 4.8%e v 2.8% prior.

– 21:10 (JP) BOJ to buy 5-10-year; 10-25-year and over 25-years.

– 21:30 (CN) China Sept Manufacturing PMI (Govt Official): 49.7e v 49.4 prior;Non-manufacturing PMI: 52.4e v 52.6 prior; Composite PMI: No est v 51.7 prior.

– 21:30 (AU) Australia Aug Private Sector Credit M/M: 0.6%e v 0.7% prior; Y/Y: 9.0%e v 9.1% prior.

– 21:45 (CN) China Sept Caixin PMI Manufacturing: 49.5e v 49.5 prior.

– 22:00 (SG) Singapore Aug M2 Money Supply Y/Y: No est v 6.7% prior; M1 Money Supply Y/Y: No est v 0.6% prior.

– 22:30 (JP) Japan to sell 3-Month Bills.

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