• Euro-bourses see the deepest losses whilst the FTSE 100 is cushioned by the slide in the Pound
• GBP extended losses in wake of significantly weaker than forecast ONS retail sales data, with Cable sliding to the lowest level since 1985
• 10yr T-note is almost flat ahead of preliminary Michigan sentiment which will be watched closely for inflation expectations
• China will impose sanctions on CEO of Raytheon Technologies (RTX) and CEO of Boeing (BA) Defense, Space & Security
• Looking ahead, highlights include US University of Michigan Prelim., Quad Witching

16th September 2022

LOOKING AHEAD

• US University of Michigan Prelim., Quad Witching.
• Click here for the Shanghai Cooperation Organization (SCO) Summit primer.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian President Putin says "We are ready to work to solve many problems in the world, the most important of which are energy and food", via Al Jazeera.

CHINA-TAIWAN

• China will impose sanctions on Gregory Hayes, CEO and chairman of Raytheon Technologies (RTX), and Ted Colbert, Boeing (BA) Defense, Space & Security president and CEO, following recent US arms sales to China’s Taiwan region, according to Chinese FM, according to Global Times.

ARMENIA-AZERBAIJAN

• Kazakhstan energy ministry expects to stick to its oil production plans of 85.5mln tonnes this year; says Kashagan oilfield will resume output "in October at best"

EUROPEAN TRADE

EQUITIES

• Euro-bourses see the deepest losses whilst the FTSE 100 is cushioned by the slide in the Pound
• European sectors are all lower and portray a clear defensive bias, with Healthcare at the top of the bunch.
• Stateside, US equity futures have been trundling lower with the NQ underperforming vs the ES, YM and RTY.
• Click here for more detail.

FX

• GBP extended losses in wake of significantly weaker than forecast ONS retail sales data, with Cable sliding to the lowest level since 1985.
• DXY reclaimed 110.00-status as Sterling continued sliding, and now oscillates around the round figure.
• JPY stands as the outperformer, as USD/JPY hold within yesterday’s extremes amid the risk aversion and recent verbal jawboning.
• Chinese FX regulator says it is hard to predict short-term volatility in exchange rate, and urges companies not to bet on the exchange rate, according to state media
• South Korean Authorities are reportedly suspected of "smoothing operations" in USD/KRW trading, according to Reuters citing South Korean FX dealers.
• Click here for more detail.

FIXED INCOME

• Bunds have staved off pressure on 142.00 within a 142.15-143.04 range.
• Gilts traded above par briefly between 104.93-105.50 extremes (+17 ticks at one stage).
• 10yr T-note is almost flat ahead of preliminary Michigan sentiment which will be watched closely for inflation expectations.
• Click here for more detail.

COMMODITIES

• WTI and Brent are oscillating around the unchanged mark with the complex initially under pressure from the overall risk aversion.
• Kazakhstan energy ministry expects to stick to its oil production plans of 85.5mln tonnes this year; says Kashagan oilfield will resume output "in October at best"
• Spot gold is flat after the yellow metal took out the 2021 low (USD 1,676/oz) yesterday with clean air seen below until the COVID low of USD 1,450/oz.
• Base metals meanwhile are softer across the board as the Dollar remains firm, but LME nickel bucks the trend with reports via Bloomberg also suggesting LME is being sued by hedge funds, including AQR, in the London High Court
• Click here for more detail.

CRYPTO

• Bitcoin is flat around USD 19,750 whilst Ethereum remains pressured under USD 1,500.

NOTABLE EUROPEAN DATA

• UK Retail Sales MM (Aug) -1.6% vs. Exp. -0.5% (Prev. 0.3%, Rev. 0.4%)
• UK Retail Sales YY* (Aug) -5.4% vs. Exp. -4.2% (Prev. -3.4%)
• EU HICP Final YY (Aug) 9.1% vs. Exp. 9.1% (Prev. 9.1%)
• EU HICP Final MM (Aug) 0.6% vs. Exp. 0.5% (Prev. 0.1%)
• EU HICP-X F, E, A, T Final MM (Aug) 0.5% vs. Exp. 0.5% (Prev. 0.5%)
• EU HICP-X F,E,A&T Final YY (Aug) 4.3% vs. Exp. 4.3% (Prev. 4.3%)

NOTABLE EU HEADLINES

• ECB President Lagarde says absolutely want to avoid second round effects; hikes should send signal that we will meet price goal. ECB actions may weigh on growth, but it is a risk that needs to be taken because price stability is priority.
• ECB's de Guindos says we do not have any estimates of the terminal rate, via an interview from Sept 9th. TPI is ready to be used.
• ECB's Villeroy says the ECB is attentive about the exchange rate.

APAC TRADE

• APAC stocks fell despite better-than-expected Chinese activity data as the region took its cue from the losses in the US after mixed data and as markets continued to adjust to a more aggressive Fed rate path.
• ASX 200 was pressured as energy and miners led the broad retreat after recent losses in commodity prices.
• Nikkei 225 suffered from the downbeat mood and with the 10yr JGB yield stuck at the top of the BoJ’s target.
• Hang Seng and Shanghai Comp conformed to the risk aversion with the latest Industrial Production and Retail Sales data failing to spur risk appetite despite both surpassing estimates.

NOTABLE APAC HEADLINES

• Chinese NBS said China is to coordinate economic development and COVID control, while it added that the economy continued a recovery trend in August and some factors exceeded expectations but also noted that the recovery in domestic demand still lags behind the recovery in production and that the property market faces downward pressure despite some positive changes. China's stats bureau also commented that the economy was affected by COVID flare-ups in August but the flare-ups impact was limited and that policies to stabilise growth are gaining traction although noted that China's economy faces more difficulties this year than in 2020.
• Chinese President Xi says China's economy remains resilient and full of potential
• Japanese Finance Minister Suzuki reiterated it is important for FX to move stably reflecting economic fundamentals and that sharp FX moves are undesirable, while he is concerned about sharp, one-sided JPY weakening and they will take necessary action without ruling out any options if sharp yen moves persist.
• Japan is to use JPY 3.5tln in reserve funds for economic measures, according to Kyodo News
• RBA Governor Lowe said the RBA is committed to returning inflation to the 2-3% target range over time and is seeking to do this in a way that keeps the economy on an even keel, while the Board expects further increases will be required to bring inflation back to target but they are not on a pre-set path. Lowe stated that with inflation as high as it is, they need to make sure that inflation returns to target in a reasonable time and will do what is necessary to make sure that higher inflation does not become entrenched. Furthermore, Lowe said at some point will not need to hike by 50bps and they are getting closer to that point, while they will consider hiking by 25bps or 50bps at the next meeting but also stated that rates are still too low right now.
• South Korean President Yoon and US President Biden are expected to discuss currency swap during a summit, according to Yonhap.
• South Korean Parliament Speaker Kim says need to promptly advance South Korean and Chinese trade negotiations

DATA RECAP

• Chinese Industrial Production YY (Aug) 4.2% vs. Exp. 3.8% (Prev. 3.8%)
• Chinese Retail Sales YY (Aug) 5.4% vs. Exp. 3.5% (Prev. 2.7%)
• Chinese House Prices YY (Aug) -1.3% (Prev. -0.9%)