• European bourses are once again underwater; US futures are also on the backfoot with the ES Dec'22 contract dipping below 3600
• DXY is firmer on the day with a current intraday high of 113.50, G10s are mixed vs the USD with the CAD and AUD the laggards
• Schatz and Bund futures both retreated to new intraday lows, 10yr UK debt future also recoiled to a deeper Liffe low, and US Treasuries are narrowly mixed 
• BoE said it intends to purchase index-linked Gilts effective from Oct 11-14, and announced a temporary pause to corporate bond sales
• Taiwan said that two US Congressional delegations are to visit this week, according to a statement
• Looking ahead, highlights include US IBD/TIPP, speeches from ECB's Lane, Fed's Harker & Mester, BoE's Bailey & Cunliffe, SNB's Jordan, RBA's Ellis, Astana Summit, auction from the US

11th October 2022

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EUROPEAN TRADE

EQUITIES

• European bourses are once again underwater as the selling pressure from yesterday has bled through into today’s session.
• Sectors in Europe are mostly softer but Retail is the standout outperformer.
• Stateside, US futures are also on the backfoot with the e-mini S&P Dec contract dipping below 3600 in a continuation of yesterday’s losses.
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FX

• DXY is firmer on the day with a current intraday high of 113.50 (vs a 112.95 low)
• G10s are mixed vs the USD with the CAD and AUD the laggards, in-fitting with losses across oil and base metals respectively.
• USD/JPY held within a 145.86-50 range (vs YTD high of 145.90) following more jawboning from Japanese Chief Cabinet Secretary Matsuno.
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FIXED INCOME

• Schatz and Bund futures both retreated to new intraday lows and the latter is just under Monday’s 135.83 session base, at 135.81.
• The 10yr UK debt future also recoiled to a deeper Liffe low (92.06) before bouncing and thereby remaining ‘comfortably’ off yesterday’s 91.46 trough.
• US Treasuries are narrowly mixed and side-lined awaiting the return of cash traders, more Fed speakers and USD 40bln 3 year issuance.
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COMMODITIES

• WTI and Brent front-month futures are weaker intraday amid several factors including technicals, a firmer Dollar, alongside further bearish COVID-related headlines emanating from China.
• Spot gold is relatively flat despite the firmer Dollar, but remains under its 21 DMA (1,674/oz) as the clock ticks down to US CPI on Thursday.
• LME metals meanwhile are mostly lower with 3M copper softer on the day amid the stronger Buck, sullied risk tone, and with the Chinese COVID restrictions an ongoing tail risk with the metal moving on either side of USD 7,500/t.
• Iranian State News Agency denied reports of worker strikes at Abadan refinery, according to Reuters.
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NOTABLE EUROPEAN HEADLINES

• Barclaycard UK consumer spending rose 1.8% Y/Y in September which was the slowest pace since February 2021.
• Germany's government rejected the report about Chancellor Scholz backing joint EU debt for loans to ease the energy crisis and said "such plans are not known in the government", according to a source cited by Reuters.
• German Chancellor Scholz said Germany will discuss inflation reduction act with the US; there must be no customs war, via Reuters.
• EU trade commissioner said it is working on a new temporary state aid framework which will allow countries to support firms hit by high energy bills; adds that decoupling from China is not an option for EU companies, via Reuters.
• UK Chancellor Kwarteng will need to plug a GBP 60bln hole in the public finances with either spending reductions or a tax raid, according to the IFS via the Telegraph.
• BoE said it intends to purchase index-linked Gilts, effective from Oct 11-14, and announced a temporary pause to corporate bond sales. Linker purchases will act as a backstop to restore order; purchases are time limited.
• Many pension funds feel that the BoE intervention in gilts market should be extended to October 31st "and possibly beyond", according to the Pension Fund Trade Body cited by Reuters.

NOTABLE EUROPEAN DATA

• UK Avg Earnings (Ex-Bonus) (Aug) 5.4% vs. Exp. 5.3% (Prev. 5.2%)
• UK Avg Wk Earnings 3M YY (Aug) 6.0% vs. Exp. 5.9% (Prev. 5.5%)
• UK ILO Unemployment Rate (Aug) 3.5% vs. Exp. 3.6% (Prev. 3.6%)
• UK Claimant Count Unem Chng* (Sep) 25.5k (Prev. 6.3k, Rev. 1.1k)

CRYPTO

• Bitcoin hovers around the USD 19,000 mark whilst Ethereum remains under 1,300.

GEOPOLITICS

RUSSIA-UKRAINE

• US President Biden and G7 leaders will hold a virtual meeting today to discuss their commitment to support Ukraine, according to the White House.
• US Democrat Senator Menendez threatened to block US cooperation with Saudi amid its deepening ties with Russia, while he ripped into the decision to cut oil output and effectively accused Saudi of fuelling Russia's war machine, according to Business Insider.
• Russian Deputy Foreign Minister Ryabkov said direct conflict with the US and NATO is not in Moscow's interests but noted that Russia will take adequate countermeasures in response to the West's growing involvement in the Ukraine conflict, according to RIA.
• Russian Deputy Foreign Minister said Russia does not threaten anyone with the use of nuclear weapons, via Al Jazeera

OTHER

• Taiwan said that two US Congressional delegations are to visit this week, according to a statement.
• Iran began enriching uranium with the third of three cascades of advanced IR-6 centrifuges recently installed at the Natanz plant, while it plans to install an extra three cascades of advanced IR-2M centrifuges at the plant, according to the IAEA report cited by Reuters.
• Lebanon and Israel have reached a historic agreement regarding the maritime border.

APAC TRADE

EQUITIES

• APAC stocks traded with a negative bias as several markets returned from the long weekend and reacted to the recent bearish themes with tech stocks hit due to the US’s chip tech curbs on China and with global sentiment not helped by the heightened geopolitical concerns after Russia’s missile assault on Ukrainian cities.
• ASX 200 was indecisive after mixed data and with the index subdued by underperformance in tech and energy.
• Nikkei 225 declined with the reopening of Japan’s borders overshadowed by tech sector woes which also saw heavy selling pressure on South Korean and Taiwanese chipmakers.
• Hang Seng and Shanghai Comp. were mixed with notable losses in tech and casino stocks in which the latter suffered after domestic trips in China during the National Day Golden Week holiday fell by 18% Y/Y, while sentiment was also dampened by increased lockdown concerns as China tightened COVID controls ahead of the Communist Party congress including the rollout of mandatory biweekly mass testing in Shanghai.

NOTABLE APAC HEADLINES

• China Securities Daily suggested that China may cut RRR in Q4.
• People's Daily said China must stick to zero-COVID policy which is sustainable and key to stabilising the economy.
• China's Xi'an announced on Tuesday to suspend onsite classes for some students amid the COVID-19 flare-ups, other areas including culture venues, tourist attractions and cinemas also suspended services on Tuesday, according to Global Times.
• PBoC set USD/CNY mid-point at 7.1075 vs exp. 7.1038 (prev. 7.0992)
• Japanese PM Kishida said the BoJ needed to maintain policy until wages increase, while he urged companies that increase prices to raise pay also and said the government will prepare measures to help companies raise salaries, according to FT.
• Japanese Finance Minister Suzuki said they are closely watching FX moves with a strong sense of urgency and will respond to excess FX moves, according to Reuters.
• Japan's MOF top currency official Kanda said they are always ready to take necessary steps against FX volatility and said he can make a decision on FX intervention anywhere even from an aeroplane, according to TBS.
• Japanese Chief Cabinet Secretary Matsuno said they are closely watching FX moves with a high sense of urgency; to take appropriate steps on excess FX moves, via Reuters.
• Japan is to draw up economic measures before the end of October, according to NHK.
• RBI likely sold USD in spot and received forwards via state-run banks, according to traders cited by Reuters.
• RBNZ Governor Orr said in the Annual Report that there is more work to do and increasing the OCR is the most effective way we can reduce inflation and support maximum sustainable employment over the coming years, consistent with our monetary policy remit.

DATA RECAP

• Australian Westpac Consumer Sentiment Index (Oct) 83.7 (Prev. 84.4)
• Australian Westpac Consumer Sentiment MM (Oct) -0.9% (Prev. 3.9%)
• Australian NAB Business Confidence* (Sep) 5 (Prev. 10)
• Australian NAB Business Conditions* (Sep) 25 (Prev. 20, Rev. 22)
• Japanese Current Account (JPY)(Aug) 58.9B vs. Exp. 121.8B (Prev. 229.0B)
• Japanese Trade Balance BOP Basis (JPY)(Aug) -2124.7B (Prev. -1808.7B)