• Bourses across Europe have been dipping with sentiment initially sullied by a marked and unexpected acceleration in German PPI
• US equity futures have slipped into negative territory, but the breadth of the market remains shallow as the clock ticks down to the FOMC tomorrow
• DXY remains towards the top of today's intraday band but under the 110.00 mark, JPY failed to gain impetus from hotter-than-expected Japanese CPI
• Debt futures continue to plunge amidst fleeting bouts of consolidation and lame rebounds; US 10yr yield topped 3.55%
• Looking ahead, highlights include Canadian CPI, ECB's Lagarde, and US 20yr Supply

20th September 2022

LOOKING AHEAD

• Canadian CPI, ECB's Lagarde and US 20yr Supply.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian forces carried out a missile strike which narrowly missed the Pivdennoukrainsk nuclear power plant in southern Ukraine, according to Kyiv officials cited by the FT.
• UK is to spend at least GBP 2.3bln on the Ukraine war effort next year, according to FT.
• Turkish President Erdogan says Russia must return the occupied territories to Ukraine as part of a peaceful settlement. Adding, "What prompted us to mediate is my belief that Putin is ready to end this as soon as possible", via AJABreaking citing PBS.

OTHER

• US Secretary of State Blinken hosted Armenian and Azerbaijan foreign ministers for the first direct talks since recent fighting and Blinken encouraged Armenia and Azerbaijan leaders to meet again before month-end, according to Reuters.

EUROPEAN TRADE

CENTRAL BANKS

• WSJ's Timiraos writes "Fed’s Third Straight 0.75-Point Interest-Rate Rise Is Anticipated" and signaling intentions to raise and hold the benchmark above 4.0% in the months ahead, via WSJ.
• Riksbank hikes its Rate by 100bps to 1.75% (exp. 75bps hike to 1.50%); Forecast indicates rate will be raised further in the coming six months. Full details, reaction & newsquawk analysis available here.
• ECB's Muller says rates are far from the level that would slow the economy; rates are still low in the historical context.
• PBoC set USD/CNY mid-point at 6.9468 vs exp. 6.9483 (prev. 6.9396).
• PBoC 1-Year Loan Prime Rate (Sep) 3.65% vs. Exp. 3.65% (Prev. 3.65%)
• PBoC 5-Year Loan Prime Rate (Sep) 4.30% vs. Exp. 4.30% (Prev. 4.30%)
• RBA September meeting minutes stated members saw the case for a slower pace of rate increase as becoming stronger as the level of the Cash Rate increases, while the board expects to increase rates further over months ahead but is not on a pre-set path. RBA Board is committed to doing what is necessary to ensure inflation returns to target over time and members noted that inflation in Australia was at its highest level in several decades which was expected to increase further over the months ahead with inflation expected to peak later this year and then decline back towards the 2-3% target range. Furthermore, the Board acknowledged that monetary policy operates with a lag and interest rates had been increased quite quickly and were getting closer to normal settings.

EQUITIES

• Bourses across Europe have been dipping from best levels, with sentiment somewhat sullied by a marked and unexpected acceleration in German PPI, coupled with a larger-than-forecast Riksbank rate hike to kick off the myriad of G10 central banks this week.
• The bias across sectors has titled more towards the defensive side, with Food & Beverages, Personal Goods, and Healthcare making their way up the ranks.
• US equity futures have slipped into negative territory, but the breadth of the market remains shallow as the clock ticks down to the FOMC tomorrow.
• German Gov't draft law re. gas levy says Co's receiving it may not see any notable profits, manager slaries must be limited. Restriction on profits to those with a market share above 1.0%, via Reuters sources.
• Click here for more detail.

FX

• DXY remains towards the top of today's intraday parameter but under the 110.00 mark.
• SEK was flagging near recent lows against the Euro and Dollar before the Riksbank delivered a hawkish surprise by raising rates a bigger than expected 100 bp (vs +75 bp consensus).
• NZD remained under pressure and extended its decline against the Greenback to the low 0.5900 zone, while sliding through 1.1300 vs the Aussie.
• JPY failed to glean much impetus from firmer than Japanese inflation metrics on the premise that the BoJ is unlikely to budge from its accommodative stance this week.
• Click here for more detail.

FIXED INCOME

• Debt futures continue to plunge amidst fleeting bouts of consolidation and lame rebounds - the latest catalyst came via Sweden's Riksbank.
• Bunds have been down to 141.08 for a 154 tick loss on the day, Gilts to 104.33, 91 ticks below par.
• US 10-year T-note fell to 114-01+, with corresponding yields soaring towards 3.55%.
• Click here for more detail.

COMMODITIES

• WTI and Brent front-month futures hold onto modest gains, but the upside remains capped by the cautious risk tone in early European trade. Overnight, the complex was relatively uneventful as it took a breather from the recent volatility.
• Russia's government wants to collect about RUB 1.4tln from raw material exporters next year to cover the budget deficit and proposed to raise the export duty on gas to 50% among other measures, according to Kommersant.
• Gazprom says it will halt power of Siberia gas pipeline to China on Sept 22-29, citing maintenance, via Reuters.
• Aramco CEO says the response to the global energy crisis thus far shows a deep misunderstanding of how we got there, increases in oil/gas investment are "too little too late" in the short term; when the global economy recovers, can expect demand to rebound further - eliminating the little spare oil production capacity available.
• Spot gold is subdued by the Dollar but in recent ranges after hitting multi-year lows last week as the yellow metals look ahead to the Fed.
• LME futures resumed trade following the long weekend, with 3M copper flat at the time of writing under the USD 7,800/t, mimicking the risk tone and awaiting the next catalyst.
• Click here for more detail.

CRYPTO

• Bitcoin is subdued but just about holds onto a USD 19,000 handle whilst Ethereum meanders around 1,350.
• Wintermute, cryptocurrency market maker, has been hacked for USD 160mln according to the CEO, remains solvent.

NOTABLE EUROPEAN HEADLINES

• EU Affairs Ministers meeting today are to discuss proposals to remove/limit the unanimity rule on foreign affair matters, via Politico.

NOTABLE EU DATA

• German Producer Prices YY (Aug) 45.8% vs. Exp. 37.1% (Prev. 37.2%), MM (Aug) 7.9% vs. Exp. 1.6% (Prev. 5.3%)
• Swiss Government sees 2022 GDP (Sport Event Adj.) growth at +2.0% (prev. +2.6%), sees 2023 GDP (Sport Event Adj.) growth At +1.1% (prev. +1.9%). Sees 2022 CPI +3.0% (prev. +2.5%), 2023 CPI seen at +2.3% (prev. +1.4%)

NOTABLE US HEADLINES

• World Bank's Malpass said a strong dollar is part of the resilience underpinning US financial markets, according to Reuters.

APAC TRADE

• APAC stocks followed suit to the improved risk appetite stateside but with the advances capped ahead of this week’s risk events.
• ASX 200 was led higher by strength in the commodity-related sectors and with resilience in nearly all industries aside from healthcare, while the RBA minutes provided little in the way of new information but continued to point to a future slowdown in the hiking cycle.
• Nikkei 225 gained on return from the extended weekend but was off its highs after the mostly firmer-than-expected Japanese inflation data.
• Hang Seng and Shanghai Comp conformed to the upbeat mood with Hong Kong boosted by outperformance in tech stocks and as authorities consider adjusting COVID restrictions, while the advances in the mainland were contained after the PBoC maintained its 1-Year and 5-Year Loan Prime Rates as expected.
• "Investors should not be pessimistic about the (Chinese) stock market, as multiple signs emerge that bode well for equities", according to the Securities Daily cited by SCMP.

NOTABLE APAC HEADLINES

• China's Shanghai unvels RMB 1.8trln (around USD 257bln) worth of inftrastructure investments, has launched eight of them.
• Hong Kong Chief Executive Lee said they are exploring further adjustments to COVID policy and aim to make an announcement soon with the details to be announced in one go. Lee added they would like to facilitate events for Hong Kong and bring back activities to the city, while they would want to stay connected with the world and allow an orderly opening up.
• Japan's Ministry of Finance said the government is to spend JPY 3.48tln in budget reserves to manage price hikes and COVID-19, while Finance Minister Suzuki said they will create an additional budget in addition to the reserve fund and for the time being, reserve money will be used for essential output. There were also comments from LDP Secretary-General Motegi that a stimulus package of at least JPY 15tln is needed to fill the output gap.

NOTABLE APAC DATA

• Japanese National CPI YY (Aug) 3.0% vs Exp. 2.6% (Prev. 2.6%)
• Japanese National CPI Ex. Fresh Food YY (Aug) 2.8% vs Exp. 2.7% (Prev. 2.4%)
• Japanese National CPI Ex. Fresh Food & Energy YY (Aug) 1.6% vs Exp. 1.7% (Prev. 1.2%)