UK CPI back at 40-year highs

(TradeTheNews.com Staff)

EU Mid-Market Update: UK CPI back at 40-year highs; Russia-installed officials of occupied Kherson region announce more evacuations.

Notes/Observations

– UK political focus on weekly PM question time in House of Commons as press reports indicate Truss may remove ‘pension triple lock’ which is designed to increase state pension in line with highest of inflation, avg earnings or 2.5%..

– UK CPI came in at 40-year highs of 10.1% YoY while PPI also elevated at 20.0% y/y.

– Euro Zone CPI of 9.9% YoY confirmed highest annual pace since EUR launch back in 1990’s ahead of ECB rate decision next Thurs.

– Russia-installed officials of occupied Kherson region announced plans to leave Kherson city after new Russian army chief Surovikin warned that difficult decisions could lie ahead regarding Kherson in South Ukraine, as Ukrainian forces counteroffensive nears; Kherson is the only regional center Russian troops managed to occupy since Feb 24th.

– Multiple Japan officials decline to comment on FX as USD/JPY approaches psychological level of 150. Currently at 149.4.

– Asia closed mixed with Hang Seng underperforming at -2.4%. EU indices are also mixed between -0.9% and +0.3%. US futures are flat. Gold -0.7%, DXY +0.2%; Commodity: Brent -0.1%, WTI +0.1%, UK Nat Gas -6.2%, EU Nat Gas (TTF) -11.5%; Crypto: BTC -1.7%, ETH -1.7%.

Asia

– BOJ Gov Kuroda: Recent JPY currency (yen) weakening sharp and one-sided. Reiterated stance that monetary policy did not directly target forex.

– BOJ Board Member Adachi noted that monetary policy did not directly contribute to FX moves; there were times that FX rates move rapidly in the short-term. Reiterated stance that the best approach now was to maintain easy monetary policy. Reiterated tightening policy at this time would bring negative impacts.

– North Korea fired artillery shells into maritime buffer zones.

Europe

– ECB’s Nagel (Germany): ECB should begin rolling off its bond holdings soon.

– ECB said to have plans to warn about risks from Spain’s proposals to tax banks as part of its upcoming non-binding opinion.

– Bank of England (BOE) confirmed the first APF gilt sales operation to take place Nov 1st.Expects to conduct operations in Q4 at a similar size and frequency as had been previously announced.

– Chancellor of the Exchequer Hunt stated that the UK was a country that funds its promises and pays its debts. Gave give assurance that economic advisory council will not conflict with BoE, can give assurance Budget office and BoE will work in lockstep.

Americas

– Fed’s Kashkari (non-voter) reiterated that inflation was much too high; Fed on an aggressive campaign to bring inflation into check. Until saw some compelling evidence that core inflation had at least peaked, not ready to declare a pause in rate hikes.

– Fed’s Bostic (non-voter) stated that needed stable prices to achieve maximum employment growth.

Energy

– Weekly API Crude Oil Inventories: -1.3M v +7.1M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.26% at 398.82, FTSE -0.27% at 6,917.95, DAX -0.20% at 12,740.32, CAC-40 +0.04% at 6,069.64, IBEX-35 -0.78% at 7,551.82, FTSE MIB -0.23% at 21,470.00, SMI +0.05% at 10,583.60, S&P 500 Futures +0.03%].

Market Focal Points/Key Themes: European indices open generally higher but later turned around to trade with a downward bias; better performing sectors include technology and energy; underperofrming sectors include consumer discretionary and health care; chip firms supported after ASML raised outlook; beer firms tumble after profit warning from Royal Unibrew; Nestle acquires Seattle’s Best Coffee from Starbucks; reportedly MUFG expressed interest in Credit Suisse’s loan portfolios; reportedly Inditex looking to divest its Russia operations; earnings expected during the upcoming session include United Airlines, Alcoa, Tesla and Nasdaq.

Equities

– Consumer discretionary: Asos [ASC.UK] +9% (earnings), Just Eat Takeaway.com [TKWY.NL] -1% (orders).

– Consumer staples: Nestle [NESN.CH] -1% (earnings).

– Financials: Eastnine [EAST.SE] +27% (divestment), Credit Suisse [CSGN.CH] +1% (potential loan portfolio divestment).

– Industrials: Antofagasta [ANTO.UK] -1% (production).

– Technology: ASML [ASML.NL] +6.5% (earnings).

– Materials: BHP Group [BHP.UK] +1% (production).

Speakers

– France Energy Min stated that the govt to force strikers back to work at Feyzin Fuel Deport.

– Hungary Fin Min Varga stated that the country could avoid a recession in 2023 with economic growth slowing to around 1% from about 4% this year.

– Japan PM Kishida had no comment on FX rate but added that needed to take appropriate response to excessive moves. Excess FX volatility based on speculation could not be tolerated. Key to cooperate with international community on FX.

– Japan Fin Min Suzuki stated in testimony that he explained to G20 just how concerned Japan was on the FX front.

– Philippines Central Bank official stated that rate hikes and FX intervention were appropriate; could use other tools to combat FX volatility.

– South Korea Vice Fin Min Bang Ki-sun noted that the decision on whether South Korea would be added to FTSE Russell’s World Government Bond Index (WGBI) could come as early as March.

Currencies/fixed income

– EUR/USD at 0.9820 in quiet trading. The release of Euro Zone Sept Final CPI data was revised slightly lower but did confirmed the highest level of inflation since the Euro’s launch. Dealers noted that attention was now gradually shifting toward the ECB’s rate decision next week with a potential start of quantitative tightening soon.

– GBP/USD was softer despite UK Sept CPI annual pace matching a 40-year high at 10.1%. Markets pricing in a 100bps BOE rate hike in Nov as core inflation continued to rise, there are continued concerns about UK political uncertainty coupled with an uncertain economic outlook.

– The UK 10-year Gilt yield was higher by 5bps to move back above the 4.00% area. BOE’s confirmation of the start of gilt sales in the Asset Purchase Facility as of Nov. 1 appearing the have a limited market reaction.

– USD/JPY continued its march towards the 150 level despite continued rhetoric by Japanese offiicials that sharp, one-way FX moves are not desirable.

Economic data

– (UK) Sept CPI M/M: 0.5% v 0.4%e; Y/Y: 10.1% v 10.0%e (14th month above target and matched recent 40-year highs); CPI Core Y/Y: 6.5% v 6.4%e; CPIH Y/Y: 8.8% v 8.8%e.

– (UK) Sept RPI M/M: 0.7% v 0.5%e; Y/Y: 12.6% v 12.4%e; RPI-X (ex-mortgage Interest Payments) Y/Y:12.4% v 12.2%e; Retail Price Index: 347.6 v 347.0e.

– (UK) Sept PPI Input M/M: +0.4% v -0.4%e; Y/Y: 20.-% v 18.7%e.

– (UK) Sept PPI Output M/M: 0.2% v 0.4%e; Y/Y: 15.9% v 15.7%e.

– (AT) Austria Sept Final CPI M/M: 1.6% v 1.6% prelim; Y/Y: 10.5% v 10.5% prelim.

– (ZA) South Africa Sept CPI M/M: 0.1% v 0.1%e; Y/Y: 7.5% v 7.6%e (5th month above target range but stays off recent 13-year highs).

– (ZA) South Africa Sept CPI Core M/M: 0.5% v 0.5%e; Y/Y: 4.7% v 4.7%e.

– (PL) Poland Oct Consumer Confidence: -45.5 v -44.7e.

– (UK) Aug ONS House Price Index Y/Y: 13.6% v 16.0% prior.

– (EU) Euro Zone Sept Final CPI Y/Y: 9.9% v 10.0% advance; CPI Core Y/Y: 4.8% v 4.8% advance; CPI M/M: 1.2% v 1.2% advance.

– (EU) Euro Zone Aug Construction Output M/M: -0.6% v +0.3% prior; Y/Y: % v 2.1% prior.

– (CY) Cyprus Sept CPI EU Harmonized M/M: -1.0% v +0.5% prior; Y/Y: 9.0% v 9.6% prior.

Fixed income issuance

– (IN) India sold total INR220B vs. INR220B indicated in 3-month, 6-month and 12-month bills.

– (DK) Denmark sold total DKK4.15B in 2024 and 2031 DBG Bonds.

– (SE) Sweden sold total SEK2.0B vs. SEK2.0B indicated in 2025 and 2033 Bonds.

Looking ahead

– (IL) Israel Central Bank (BOI) Minutes.

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

– 05:30 (PT) Portugal Debt Agency (IGCP) to sell €0.5-0.75B in 12-month Bills.

– 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

– 06:00 (IL) Israel Q2 Final GDP (3rd reading) Y/Y: No est v 6.8% prelim.

– 06:00 (PT) Portugal Sept PPI M/M: No est v -1.0% prior; Y/Y: No est v 22.4% prior.

– 06:00 (RU) Russia OFZ Bond auction (if any).

– 06:00 (EU) EU Commission to sell combined €2.0B in 3-month and 6-month bills.

– 06:00 (CZ) Czech Republic to sell 2028, 2030 and 2031 Bonds.

– 06:30 (UK) DMO to sell £3.25B in 1.0% Jan 2032 Gilts.

– 06:45 (US) Daily Libor Fixing.

– 07:00 (US) MBA Mortgage Applications w/e Oct 14th: No est v -2.0% prior.

– 07:00 (ZA) South Africa Aug Retail Sales M/M: +0.4%e v -0.1% prior; Y/Y: 4.9%e v 8.6% prior.

– 07:00 (UK) Weekly PM Question time in House.

– 08:00 (RO) Romania Central Bank (NBR) Oct Minutes.

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

– 08:30 (US) Sept Housing Starts: 1.464Me v 1.575M prior; Building Permits: 1.530Me v 1.542M prior (revised from 1.517M).

– 08:30 (CA) Canada Sept CPI M/M: 0.0%e v -0.3% prior; Y/Y: 6.8%e v 7.0% prior; CPI Core- Common Y/Y: 5.6%e v 5.7% prior; CPI Core- Median Y/Y: 4.8%e v 4.8% prior; CPI Core- Trim Y/Y: 5.1%e v 5.2% prior; Consumer Price Index: 152.5e v 152.6 prior.

– 08:30 (CA) Canada Sept Industrial Product Price M/M: -0.8%e v -1.2% prior; Raw Materials Price Index M/M: -3.6%e v -4.2% prior.

– 10:00 (UK) BOE’s Cunliffe.

– 10:00 (PT) ECB’s Centeno (Portugal) at Event on Portugal’s 2023 Budget.

– 10:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Floden.

– 10:30 (US) Weekly DOE Oil Inventories.

– 11:00 (CO) Colombia Aug Trade Balance: -$1.9Be v -$0.5B prior; Total Imports: $7.0Be v $6.9B prior.

– 11:00 (UK) BOE’s Mann.

– 12:00 (RU) Russia Sept PPI M/M: +0.4%e v -1.0% prior; Y/Y: 5.4%e v 3.8% prior.

– 12:00 (CA) Canada to Sell 5 Year Bonds.

– 13:00 (US) Fed’s Kashkari.

– 13:00 (US) Treasury to sell 20-Year Bond Reopening.

– 14:00 (US) Federal Reserve Beige Book.

– 18:30 (US) Fed’s Evans.

– 18:30 (US) Fed’s Bullard.

– 19:50 (JP) Japan Sept Trade Balance: -¥2.154Te v -¥2.820T prior (revised -¥2.82T); Adj Trade Balance: -¥2.071Te v -¥2.37T prior; Exports Y/Y: 26.6%e v 22.1% prior; Imports Y/Y: 44.9%e v 49.9% prior.

– 20:30 (AU) Australia Q3 NAB Business Confidence: No est v 5 prior; Conditions: No est v 20 prior.

– 20:30 (AU) Australia Sept Employment Change: +25.0Ke v 33.5K prior; Unemployment Rate: 3.5%e v 3.5% prior; Full Time Employment Change: No est v 58.8K prior; Part Time Employment Change: No est v -25.3K prior; Participation Rate: No est v 66.6% prior.

– 21:00 (CN) China Sept Swift Global Payments (CNY): No est v 2.31% prior.

– 21:15 (CN) China PBOC Monthly Loan Prime Rate (LPR) Setting: Expected to leave 1-Year and 5-Year rates at 3.65% and 4.30% respectively.

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