• European bourses trade on a firmer footing in an extension of yesterday’s gains; US futures are more contained
• DXY hovers around 113.00; GBP sits as the laggard as it unwinds some of the prior day's gains, USD/JPY topped yesterday's high of 147.67
• Gilts are back above 97.00 amidst further reports that some economic plans may be reversed by the UK PM later today who to hold a press conference today at 14:00BST/09:00EDT
• North Korea fires artillery shells off sea, according to South Korean military; into the buffer zones in the east and west seas during the afternoon
• Looking ahead, highlights include US Retail Sales, US University of Michigan Prelim Survey, Speeches from BoE's Bailey, Fed's George, Cook & Waller, earnings from JP Morgan, Wells Fargo, Morgan Stanley, Citigroup

14th October 2022

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EUROPEAN TRADE

EQUITIES

• European bourses trade on a firmer footing in an extension of yesterday’s gains.
• There hasn’t been a clear factor behind today’s moves with some desks continuing to cite oversold conditions, evidence of disinflationary impulses in more timely indicators (e.g. NY Fed survey) and hopes of a policy u-turn in the UK.
• Sectors in Europe mostly firmer, with outperformance in Real Estate and Utilities. To the downside but still in positive territory, Tech, Autos and Telecom names lag peers.
• Stateside, Stateside, US futures are showing a more contained performance with the e-mini S&P back below 3700 as pausing for breath from yesterday’s rally.
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FX

• DXY attempts to claw back some of yesterday's losses and briefly reclaimed 113.00 to the upside vs yesterday's 113.92 peak.
• GBP sits as the laggard as it unwinds some of the prior day's gains.
• USD/JPY topped yesterday's high of 147.67 whilst BoJ Kuroda reiterated the need to maintain stimulus.
• HUF strengthened following an unexpected NBH hike to the Overnight Collateral Loan Rate.
• Hungarian Central Bank unexpectedly hikes the Overnight Collateral Loan Rate to 25% from 15.5%. NBH will launch a new one-day deposit tender from today with an 18% interest rate.
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FIXED INCOME

• Bunds are well within a 136.75-138.52 range vs their prior 136.22 prior close.
• Gilts are back above 97.00 between from yesterday’s 94.52 Liffe settlement amidst further reports that some economic plans may be reversed by the PM later today.
• T-note towards the top of its 111-14/110-27 overnight extremes ahead of US retail sales and Fed speakers.
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COMMODITIES

• WTI and Brent front-month futures are modestly softer on the day as the Dollar picked up in early European hours, but the contracts hold onto most of yesterday's gains.
• Turkish President Erdogan has ordered the energy minister to build a gas hub in Turkey following talks with Russian President Putin; says both countries will immediately work on Putin's proposal to transport Russian gas, via NTV cited by Reuters.
• Spot gold found resistance at it is 21 DMA (USD 1,671.50/oz) with the yellow metal edging lower as the USD extends on intraday highs.
• LME futures are mixed/contained with 3M copper holding onto levels above USD 7,500/t, but LME aluminium dips following the recent rise.
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NOTABLE EUROPEAN HEADLINES

• UK PM Truss is to reverse some economic plans later today, according to Bloomberg sources.; UK PM Truss is to hold a press conference today (timing TBC), according to Bloomberg.
• No announcements are expected today on the UK mini-Budget, according to Sky News' Beth Rigby.
• UK Trade Department Minister Hands said there are absolutely no plans to change anything; there is no change to plans on corporation tax, according to Reuters.
• UK PM Truss and Chancellor Kwarteng are weighing up whether to announce corporation tax rise today after chancellor's early flight back from the US, according to Times' Swinford; no decision has yet been taken.
• UK Tory whips warned that UK PM Truss could face a leadership challenge if Chancellor Kwarteng's economic statement on October 31st fails to end the turbulence in financial markets, according to the Daily Mail front page.
• UK senior Tories are reportedly holding talks about replacing PM Truss with a joint ticket of Rishi Sunak and Penny Mordaunt, according to The Times.
• The 1922 Committee is ready to suspend the rule that prevents a vote to oust the Conservative leader within a year of taking office, according to the New Statesman.
• ECB's Lagarde said inflation in the EZ is far too high, and likely to stay above the ECB's target for an expected period of time; governing council expects to raise the interest rate further over the next several meetings
• ECB's Kazimir said 75bps hike in October is appropriate; Deposit Rate must rise above Neutral but start of balance sheet reduction can wait until next year

NOTABLE EUROPEAN DATA

• EU Eurostat Trade NSA, Eur (Aug) -50.9B EU (Prev. -34.0B EU, Rev. -33.9B EU)

NOTABLE US HEADLINES

• US President Biden's administration renewed the COVID-19 emergency status, according to WSJ.
• Twitter (TWTR) said it is seeking correspondence between Elon Musk and federal authorities over federal probe into Musk's conduct, while it sought correspondence between Musk and investigators 'months ago'.
• US President Biden is to sign an order seeking new prescription drug cost savings, according to an official.

CRYPTO

• Bitcoin posts modest gains after yesterday's rebound, with the crypto above USD 19,500, whilst Ethereum holds a USD 1,300+ handle.

GEOPOLITICS

• Japan's Chief Cabinet Secretary Matsuno said North Korea's repeated ballistic missile launches are unacceptable and he believes North Korea will take further provocative action including a possible nuclear test. Matsuno added it is getting more difficult to detect North Korea's missiles early and react, while they are considering all options including counterattack capabilities, according to Reuters.
• North Korea fires artillery shells off sea, according to South Korean military; into the buffer zones in the east and west seas during the afternoon, Yonhap reported

APAC TRADE

EQUITIES

• APAC stocks took impetus from the aggressive rebound on Wall St where stocks made a remarkable comeback from the initial CPI-related selling with several factors attributed to the turnaround including a dovish ECB staff model view, speculation of a major U-turn in the UK’s fiscal plans and a touted short squeeze.
• ASX 200 was lifted in which energy led the broad strength across sectors and after Australian Treasurer Chalmers recently ruled out scrapping tax cuts in the budget.
• Nikkei 225 outperformed and breached the 27,000 level amid some earnings encouragement with index heavyweight Fast Retailing boosted after it posted a record annual profit.
• Hang Seng and Shanghai Comp. benefitted from the heightened risk appetite as the PBoC reiterated support pledges, while participants digested relatively inline inflation numbers and now await the latest Chinese trade data.

NOTABLE APAC HEADLINES

• PBoC Governor Yi reiterated to step up the implementation of prudent monetary policy and will provide stronger support for the real economy, while he added they will put emphasis on supporting infrastructure construction and will support financial institutions to issue equipment upgrade loans to key sectors including the manufacturing sector. Furthermore, they will quicken the pace of utilisation of loans to deliver home projects and promote the stable development of the real estate market, according to Reuters.
• China may issue specials bonds early to support growth, according to China Securities Journal.
• BoJ Governor Kuroda said the pace of Japan's economic recovery is still slow so they must continue supporting the economy, while he added that raising rates now is inappropriate in light of Japan's economic and price conditions, according to Reuters.
• IMF official Panth said Japan's JPY buying was likely a signalling action and the impact of such intervention does not last long, while Panth added that it is not the time for the BoJ to tweak YCC, according to Reuters.
• Japanese MOF official said there will be cases where they will or will not disclose whether they intervened, when asked if the JPY's jump on Thursday was due to intervention, according to Reuters.
• Monetary Authority of Singapore announced to tighten its FX-based policy in which it re-centred the mid-point of the SGD NEER policy band up to its prevailing level, but kept the width and slope of the band unchanged. MAS said inflation should moderate in the quarters ahead but will remain high for some time, while its policy stance will help dampen inflation in the near term and ensure medium-term price stability.

DATA RECAP

• Chinese CPI MM (Sep) 0.3% vs. Exp. 0.4% (Prev. -0.1%)
• Chinese CPI YY (Sep) 2.8% vs. Exp. 2.8% (Prev. 2.5%)
• Chinese PPI YY (Sep) 0.9% vs. Exp. 1.0% (Prev. 2.3%)
• Singapore GDP QQ (Q3 A) 1.5% vs. Exp. 0.7% (Prev. -0.2%)
• Singapore GDP YY (Q3 A) 4.4% vs. Exp. 3.5% (Prev. 4.4%)